Xi Chen Jiaqi Guo Liuyi Pei
Table of Contents
Introduction Background Information Analysis of KFC’s Success in China Porter’s Six Forces Analysis Entry Buyer/Supplier Bargaining Powers Substitutes and Complements Rivalry Competitive Analysis Customer Identification and Customer Base Product Range Marketing Strategy Branding Appealing to the Younger Customers Organization KFC’s Testing Strategies Strategies for the Future Marketing Localization Localization of Food Localization with Respect to Life Style Employing Value/Cost Strategies Expanding Geographically Price Discrimination Conclusion References Appendix A 3 3 3
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Within the fast food industry, KFC has always been second to McDonald’s both in terms of the number of branches that it has in various countries and its total sales and profits. In the United States, the sales performance of McDonald’s summed up to over twenty billion US dollars in 2003, whereas KFC’s only total slightly over five billion1-2. Strangely, it is in China, one of the more conservative and traditional countries, that we find KFC overwhelming McDonald’s as the most popular and the most profitable fast food restaurant. Having both developed fourteen years in China, KFC had 1200 restaurants nationwide and a sales volume of 9.3 billion US dollars in 2004, while McDonald’s only opened 600 restaurants and had a miserable sales volume of 5.3 billion1-2. It is not surprising that with increased globalization and westernization of Asian countries, fast food restaurants have found their way into such a juicy market as the rapidly expanding China, but it is surprising that KFC should have had obtained a stronger foothold than McDonald’s in the infusion of Western culture into China. Thus, our paper will examine the factors that resulted in KFC’s success in China, analyze the market situation KFC is currently in using Porter’s Five Forces, competitive analysis and by comparison with similar markets such as Singapore and Hong Kong, and lastly, propose strategies that KFC should adopt to maintain its number one position in China.
Boasting a secret recipe of numerous spices and “finger licking good” chicken meals, KFC was started by Harland Sanders as a tiny restaurant – called “Sander’s Court and Café” – at a gas station3. Now, managing more than 11000 restaurants in 85 countries, KFC is the world’s largest chicken fast-food restaurant and one of the top fast-food chains worldwide. It was also one of the first fast food restaurants to go international4 and is popular in many countries. After having gone through many different hands, KFC is now under Yum! Brands, Inc., with A&W All-American Food Restaurants, Long John Silvers, Pizza Hut and Taco Bell3. It is primarily operating in the United States (domestic market) and is focused on developing chains in some rapidly expanding and thus financially appealing countries (international market) such as Canada, Australia, China, and Mexico4.
Analysis of KFC’s Success in China
China is home to 1.2 billion people, one fifth of the world’s total population, and within the past few decades, China has been eagerly taking in and experimenting with as many western products and ideas as it can digest, including technology, entertainment, and of course, dining. KFC was smart enough to seize this opportunity before any other fastfood restaurants, and therefore has the advantage of being the first of its kind in this new 3
market. As early as 1985, KFC already had its eyes on this market.5 After a great deal of research, the first KFC restaurant opened in Beijing in 1987. It was the first western style fast food restaurant in mainland China, and benefited from a free reputation and no similar competitors for customers. Less than 10 years later, KFC managed to open 100 restaurants throughout China. By the end of 2004, KFC stores has...