Case Study 1
KFC China should continue its strategy of rapid expansion through China, as there are an increasing number of female workers in the workforce and they should expand particularly in developing and affluent cities to take advantage of increasing incomes of Chinese residents. However, KFC China will face challenges such as risks of backlash by residents and the government, increasing operation costs and increasing strength of competitors in the future and thus will have to strategise against them to remain successful. Graph 1
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 there will be future competitive pressure from businesses in the industry, KFC’s localised menu appeals to consumers and will differentiate them from international competitors who haven’t redesigned their business model for Chinese business. Thus, KFC has a unique opportunity to offer an American style experience that is different from most other food establishments (Li 2004). By expanding, KFC China can increase the likelihood of long-term success. ‘KFC China will experience diminishing returns if it continues to expand into areas with lower spending power.’ (Li 2012) Rather than expand through China in lower socioeconomic areas, graph 1 (adapted from Foster Partners Group 2012) suggests that KFC should focus on expansion into both advanced and developing cities where there will exist the highest percentage increase in mainstream consumers by 2020. There will be higher levels of disposable income in these cities particularly, thus facilitating an increase in consumers participating in the market and increasing profits....
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