Entry Strategies Final Paper Kentucky Fried Chicken’s Market Entry in China Company Background KFC, the largest fried chicken chain and the second largest restaurant chain in the world, currently has more than 17,000 outlets in 115 countries worldwide. The chain primarily sells fried chicken pieces, chicken related products such as sandwiches and wraps, and other side dishes such as fries, desserts and soft drinks. KFC’s fried chicken pieces and related products are made with special ingredients and the exact composition of these ingredients is an unknown secret and also a key of KFC’s special flavor.
KFC was founded by Harland Sanders in 1930. Sanders was one of the first few who applied restaurant franchising concept into restaurants management. The first KFC franchise was opened in Utah in the early 1950s. KFC grew rapidly and Sanders found that the rapid growth made it difficult to manage. Thus, he sold the company to a group of investors in 1964 for $2MM. Then, in the early 1970s, the investors sold KFC to Heublein Spirits, who were later taken over by the R. J. Reynolds group. After few years of business, R. J. Reynolds sold the KFC chain to Pepsi Co.
KFC was one of the pioneer US fast food chains that went international. In the 1960s, it first opened outlets in England, Mexico and Puerto Rico. Throughout the 1970s and 1980s, KFC was successful in US and continued to aggressively expand its oversea markets. In 1987, foreseeing China as greatest restaurant market, KFC entered China and became the first large western fast food chain in China. By 2012, KFC is the number one fast food brand in China with more than 4,200 restaurants in more than 850 cities. KFC’s huge success in China is not because of luck but well-established enter strategies.
The Business plan on Problem encounter by the fast food chain or restaurants
CHAPTER 1 THE PROBLEM Introduction Problems are inevitable part of life. Each individual is facing many challenges or problems at different points of his/her life. These problems may help a person in different ways based on the perception of an individual or otherwise, may have negative impact on the person’s totality. According to Wikipedia, a problem is an obstacle, impediment, difficulty or ...
The entry had several potential uncertainties. First of all, KFC didn’t know whether the current company policies would work in the new market or not. For example, KFC stressed importance on QSC (quality, service, and cleanness) in the US market. This policy might not be valued in China since Chinese consumers did not care about quality so much at that time. Secondly, consumer behaviors varied a lot in different cities, leading more difficulties to assess the expansion decisions. Thirdly, the legal system and the unstable Chinese government would be main concern for KFC.
Additionally, it would be more difficult for global companies to establish stable relationship with local suppliers. Moreover, KFC only had little local management expertise at that time. More international competitors also target China as the most promising market to entry. The competition would become fierce soon. Last but not the least, one emerging threat for all fast food chain in China, not only for KFC, is that people are starting to be aware of healthy issue. Fast food is notorious for being junk food and the sales will definitely be influenced by the healthy eating trend.
In this paper, we would like to analyze KFC’s market entry decisions and its factors of successful entry and development in China. We will also discuss difference between McDonald’s and KFC’s market entry strategy in China. Analysis of Successful Entry and Development of KFC in China KFC pioneered western-style fast food in mainland China when it opened its first outlet in Beijing in 1987. Seventeen years after opening the first KFC outlet in China, KFC has celebrated its 1000th restaurant milestone in Beijing on January 2004.
The Review on Kfc Market
As part of our exploratory research, we have conducted a great deal of secondary research, in analyzing and understanding the limited available literatures or articles related to our research topic. Literature Review International restaurants like- KFC, Pizza hut etc. are becoming more popular in Bangladesh for a many years as well as these restaurants are also famous outside the Bangladesh. But ...
In US and the rest of the world, KFC is struggling to compete with McDonald’s, the world’s largest chain of hamburger fast food restaurants. However, in China, KFC dominants the fast food market and have much better brand image compared with McDonald’s and its local competitors. The followings are several key factors that contribute to KFC’s success in China. * First Mover, Right Timing and Location KFC entered China with perfect timing and right location, thus, has the first mover advantages compared with its western competitors. KFC has a pioneer strategy and is the first western fast food chain in China.
It opened its first store in Beijing in 1987, three years ahead of McDonald’s first store in Shenzhen in 1990. In late 1978, China reformed its economy and opened its market to international. When KFC entered China, it was just few years after China starting to open its market to the world. The reforms lessened the government’s control and slightly transformed China’s economy to a socialist market economy. It encouraged foreign investors to enter China and boosted China’s economy. China’s economy showed average annual growth rate of 10.2% in the 1980s and 1990s, which were the highest growth rates in the world at that period. The reforms created a huge demand for services. During that period, foreign investors grasped opportunities to enter China’s market. The increase in individual’s income changed Chinese consumer behaviors. Consumers spend more and require better goods and services. KFC entered China right after these changes and caught the opportunity to grow with China’s economy. It’s important that right after the reforms people in China had strong curiosity toward western things and started to learn to embrace western cultures.
Therefore, since KFC is the first western fast food chain that Chinese faced with, the brand image of KFC as a premium western fast food chain deeply rooted into their mind. Even though when McDonald’s entered China after three years, KFC didn’t yet penetrate China market well and had only four stores, McDonald’s still cannot replace KFC’s image in Chinese mind because of this first mover advantage. This brand image became a sustainable first mover advantage that KFC has and really impacts consumer’s behavior afterwards. Till now, Chinese still first think of KFC when they talk about western fast food.
The Essay on Fast Food Popularity in China
Examine the reasons for the popularity of fast food restaurants in your country. When, why, and how have these restaurants become so popular? (Cause) Demonstrate the impact of this popularity on your country’s culture, i. e. , food, health, economy, lifestyle. (Effect) You will need to do some research on the fast food chains growth, menus, nutritional background, business models, and perhaps ...
It is also worthwhile to mention that KFC entered China market in the right timing basing on experience it accumulated from other Asia markets instead of basing on luck. Before entering to China market, it had accumulated abundant experience, either successful or failure, in Hong Kong, Singapore, and other Asia countries. By having this experience, it picked the right enter timing and moved faster than its competitors. McDonald’s played a fast follower strategy in its entry to China market. The strategy gives it ability to free ride on KFC’s investment in growing Chinese acceptance to fast food.
It is also a less risky strategy because before KFC, no one knows whether western fast food can success in China or not. Even though McDonald’s is a bigger company and has more resource than KFC, its fast follower strategy didn’t work well because KFC’s first mover advantage from brand image is pretty sustainable and McDonald’s didn’t really leverage its existing capabilities well. The strategy it used, which we will discuss about later, also contributes to its failure now. When KFC chose its first entry location, it considered several different locations include Beijing, Shanghai, and Guongzhou.
It’s important to have the right location for the first site since it will directly influence its future profit, penetration, and growth in China. After taking risks, supply chain, pollution, and local condition in terms of politics, education and other important issues into consideration, it chose Beijing as its first site. Beijing is the political and high education center in China and thus KFC might have more interruptions from government. However, it also has higher average education level and people’s acceptance to the new things is higher than other cities. It is also an important city for travel, giving KFC a stable income.
If KFC can success in Beijing, it will be helpful for KFC to move to other cities in China. The outcome now shows that KFC had the right choice for the first site and established the basis for its future success. * Replication core strategies in China As a major player in the global fast food industry, KFC has established a core value and standard procedure for production and service. The main idea of entry to China was to bring the concept of western fast food service. KFC is the first global fast food company that introduced “standard logo, standard uniform, and standard production/ delivery” to China.
The Research paper on Kfc China Case Study
Expansion should be progressed in order to take advantage of China’s increasingly growing economy. Having an average growth rate of 8% in GDP and a population of 1. 3 billion (Li 2004), the China presents an increasingly large buying force. KFC China can take full advantage of this by introducing more franchises to increase growth and profits. In reference to Porter’s ‘Five Forces’ model, although ...
In order to communicate the value of this global fast food company, KFC stressed it core value on QSC (quality, service, and cleanliness).
This standardized procedure ensured the quality, enabling KFC build strong positive brand image in China. Besides, under the core concept of fast food service, KFC believed speed would be essential element to succeed in this industry. In order to realize the goal of speed service, KFC introduced team work concept in to workplace. This team work system enabled KFC to show high flexibility and great efficiency. Originally, there were no training and education concepts in Chinese companies.
