Kfc in China Essay

Is Tony Wang correct in assuming that mainland China is an ideal market for KFC? Should KFC be pursuing the Chinese market at the present time? Considering China as a strategic jam was based from a SWOT analysis. Availability of Supply (Strength) at that place is ready access of tint domestic fowl in the major metropolitan areas such(prenominal) as Shanghai, Guangzhou and Beijing. Poultry industry is one of the top priority categories in Chinas agriculture modernization and it is exceedingly encourage by the government activity. Thus, the company can ensure a reliable supply of high quality chicken. Low Competitive Pressure (Strength)Potential competitors such as MacDonalds face major barriers to enter the China market due to poor beef supply while KFC, aside from availability of high quality chicken supply, has the clear advantage since its main product-chicken- is eaten almost everywhere in the world. Furthermore, chicken is already familiar in China and even much cheaper. Co mpanys Control Measures (Strength) KFC s control mechanisms are de signaled to ensure standard levels of quality, redevelopment and cleanliness (QSC) at all of the restaurants chain stores. This fits the positive image in Asia of American fast feed restaurants as famous, air-conditioned, and hygienic.Product Consumption (Strength) lily-livered has long been regarded as a kind of nutritious food, which is especially good for the patients, the elders and children. An increase in health conscious consumers also raises the consumption of chicken. Moreover, chicken is a more popular meal than hamburgers in most Asian countries and KFC has the opportunity to offer an American style experience that is different from most opposite food establishments. Drawing Area (Opportunity) In late 1978, China began implementing economic reforms to modernize its economy by lessening the governments control of the economy.This reform referred as a socialist market economy boosted the national wealth and the consequent increase in individuals income has led to steady changes in Chinese consumer patterns prevalent in pre-Mao era. As the worlds most populous nation with over 1 billion inhabitants, the potential size and growth for KFC makes the Chinese market very attractive. Not to mention, the possibility of establishing the first Western style fast-food operation in China as a historic opportunity for the company. scarcely Human Resources (Weakness) Managerial resources are precious because of the scarcity of Chinese-speaking KFC managers.There are also possible conflicts between KFC-appointed managers and local anesthetic employees. Lack of Local connections (Weakness) Pioneering in the fast-food field of honor would find KFC very difficult to form local and individualised networks between businesses and government agencies, which are crucial in providing access to the local market and internal suppliers and eventually, to the companys success. Entering into a relatively u nknown market, KFC, as a peeled entrant will have to get in touch perception with the local business customs and laws as well as with knowledge of culture and language. Quality of Government (Threat)A communist government with strict opposed investment laws rules China. Setting up here requires heavy investment expenses and high levels of resource commitment. The risk of domestication measures may be imposed by the boniface government, often leading to major financial losses for the foreign investor. Overcoming Threats and Weaknesses KFC has three options of entering the China market thru, namely Franchising, Wholly owned subsidiary and mutual venture. The traditional franchising strategy, in markets where political risk and pagan unfamiliarity exists, certainly would reduce financial risks.However, KFC had already encountered problems in the past with the aligning of corporate intend with the franchisees short-term focus on profitability. In addition, KFC will be pioneering in the fast-food go and thus require to be highly sensitive to cultural demands. In such case, franchising is not feasible. On the other hand, a wholly owned subsidiary would rely upon total control over competitive advantages and ensures fire operational and strategic control. It also involves high financial risk and little country-level flexibility and responsiveness. This option is not recommended.Entering into a joint venture is highly recommended. Such an international business strategy will attempt to solve many logistics problems such as access to good quality chicken and other supplies, ease the access to Chinese market, share risk with a local entity, utilize ways to cut bureaucratic red-tape and finally, work on as a sign of commitment to the host government increasing goodwill. In addition, due to the complexity of many barriers to entry into China, a potential partner with sufficient contacts or networks with the government officials may smoothen the process of sett ing-up operations in the country.The potential joint-venture partner should be large, well established, provide excellent distribution channels and have personal network access to government officials. It is recommended that a partner be found by backward integration- that is, a good domestic supplier of poultry. In ordinate to ensure total commitment, the set-up of the joint venture should be with KFC as the dominant partner. This way, cost, quality and strategic control measures are maintained. By building on separately partners core competencies, knowledge, and efficiencies, a mutually beneficial synergy effect could be achieved as a result of joint venture activities.For instance, the local partner can learn from KFC how to produce a better product at a lower cost and further expand on its new competitive positioning. KFC, on the other hand, can maintain quality supply, which is critical to its success. RECOMMENDATION The Chinese market represents a great opportunity for KFC w here Tony Wang is correct in his assumptions. By finding an appropriate domestic business partner via backward integration, it is possible to further build on opportunities and significantly reduce risk throughout financial sharing, cultural sensitivity and favorable treatment from the host government.KFC should start pursuing this strategy at the present time and develop a recollective international strategy linking the China operations with the other markets. Which of the three cities being investigated should the company choose if it decides to enter China? The capital city, Beijing, is recommended as the preferred location for KFCs entry into the Chinese market. Beijing is the center for most political activities and provides the necessary access to government agencies and business regulatory bodies. Also, it has a large universe of nearly 9 million inhabitants.The numerous universities located in the city contributes to more affluent and educated people that may make them more grant to foreign ideas including Western fast-food. More importantly, plenty of Western tourists are attracted to Beijings many tourist attractions, increasing the potential for generating foreign currency sales. Furthermore, supplies of poultry are readily available. Beijing can serve as the initial platform of KFCs operations and later expand into other potential areas such as Shanghai and Guangzhou. One or two initial outlets should be set-up to get an insight of how KFC will be perceived in the Chinese capital. some(prenominal) dine-in and take-out facilities much in line with most KFCs international operations ought to be offered in large, clean and well-serviced outlets to cater for the customers with above-average disposable incomes. In order to serve large numbers of customers due to the sheer size of the population, the right cultural fit of the business restaurants must be highly functional and effective. Special menu-substitutions may also have to be facilitated to cate r to consumers taste for traditional Chinese meals. Lessons Learned Capitalizing on Strengths and Opportunities In the initial period of KFCs entry into China market, few of Chinese onsumers were really impressed with the food itself since the country is known to have the best culinary culture in the world.Instead, they were more fascinated with the alimentation experience the encounter with friendly employees, quick service, spotless floors climate-controlled and brightly-lit dining areas, and smiling Colonel Sanders standing in front of the main gate. Having experienced the initial surprises brought by a never-seen western lifestyle, Chinese consumers have gradually calmed down and their consumption attitudes towards foreign products are getting more reasonable.Since Chinese people are more touch with the nutrition and tastes of the fast food, KFC taken advantage of McDonalds. By religious offering poultry food that is more acceptable to Chinese people compared with beef, have t aken consumers needs and competition with other brands into account. Knowing the market The most prominent success of KFC in China is not only the outcome of KFCs persistent tenets quality, service and cleanliness but also the achievements of its keen perception of cross-cultural marketing and its understanding of Chinese culture.Based on its scrutiny and adoption of Chinese traditional culinary arts, KFC has developed a series of products that are specially designed for the tastes of Chinese consumers. Moreover, in purpose of maintaining its image of a U. S. brand and keeping consistent with its globalisation strategy, most of KFC s Chinese side dishes are defined as short-term products and would be replaced by new products. KFCs product strategies are categorised into two aspects 1)To meet consumers desire for novelty by introducing western style products like Mexican Chicken Warp and New Orleans Barbeque Wings.This authority can satisfy young consumers who are more open and ac ceptable to the foreign flavors. 2)To cater to consumers taste for traditional Chinese meal by offering Chinese style fast food from time to time, say, Old Beijing Chicken Roll, a wrap modeled after the way Peking douse is served, but with fried chicken inside and accompanied with green onions and hoi sin sauce, and Sichuan Spicy Chicken which absorbs the spicy flavor of Sichuan dish. This measure can attract former(a) consumers who are fond of Chinese food and in need of the convenience of fast food service as well.