Kentucky Fried Chicken’s Market Entry in China
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 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. 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...