Among the last two decades of entering, KFC, shorten from Kentucky Fried Chicken, a once lack-luster American fast food brand, outperformed all other competitors and rapidly became the biggest restaurant chain in China. No matter considering the number of restaurants, profit or market shares, KFC dominants the Chinese food market with 2200 branches over China and a speed of 300 new branches annually, unmatched by its arch rival and world market leader McDonald (John, 2008). The successful expansion of KFC China has been one of the mysteries of modern marketing. The success of a company always results from its choice of strategy with regard to low cost and value creation and its ability to configure the internal operations to strategic emphasis (Hill, 2011). This essay will first focus on the main competitive strategy KFC chooses and why it is chosen, and then analyze the architecture choose of KFC China in four aspects and lastly discuss the key functional strategy implemented in KFC China.
As Hill (2011) pointed, when pursuing its competing strategy, a multinational company would face two types of pressure that affect their ability to maintain profitability and ensure profit growth, the one is cost reductions and the other locally responsiveness. Intensive cost reduction pressure will rise when companies compete in the industry where products are indifferent and the main competitive weapon for the producers is price. On the other hand, pressure of local responsiveness come from national differences, such as consumer tastes and preferences, which requires companies to provide different products and conduct value adding activities.
Among several strategies for multinational companies, KFC China to a large degree rooted in localization strategy, with relative high pressure in local responsiveness and less in cost reduction. Mainly there are two aspects of reasons towards KFC’s relatively low cost reduction pressure. On one hand, it is impossible that KFC compete with its rivals mainly by reducing the price. Even though major fast food outlets in United State have provided a model of “the cheapest dining option” for the world, KFC has different poisoning in China (David and Mary, 2001). As the first Western-style restaurant entering into China of the Mao era, it provided its customers about an exotic environment and a taste of America (David and Mary, 2011).For the other reason, being the biggest restaurant chain in China, KFC enjoys advantages in scale economy, which minimize its cost in office rent and supply chain (Warren, 2008). Moreover, as quoted by David and Mary (2011), firms that tend to focus on one process often become more effective. KFC, with its slogan of doing only “chicken right”, is possible to specialize, including considerable bargaining power with suppliers due to the large quantities purchased and so on. Therefore, KFC have less cost reduction pressure when competing with other rivals.
On the other hand, KFC China faces with relative high pressure on local responsiveness. “An American Brand with Chinese Characteristics”, KFC China positions itself as a special occasion for residents but not only a cheap dining place (Warren, 2008). It is because that China, other developing countries as well, treats food as the very heart of their society, inextricable from national and regional cultures (David and Mary, 2011). In these countries, local responsiveness is very important and the key element to win over consumers in a great deal is an abundance of flavors with an inviting ambience (ibid, 2011). Thus instead of a purely Western one, Chinese consumers drawn to this mixed brand position due to the situation in China of 19th century. That is why KFC China competes on the ability to customize their products or services to meet the needs in the particular Chinese market. Take some example, the packages provided in China are smaller in size than that in U.S.A; some really spicy hamburger are provided in...
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