Case Study 2
KFC China is a quick service restaurant that’s has dominated the local fast-food market. Marketing has significantly contributed to its success. This report covers KFC-China’s current localized marketing strategy consisting of product, promotion price and placement strategies. It will also discuss the potential issues that may affect business operations in the near future, these include; increasing costs, emerging seniors market, economic slowdown and supplier issues. Analysis
KFC’s products include a large variety of mainly food-items which have been localized and diversified to differentiate from its competitors (Yum!2012). China’s mass-consumer market encapsulates traditionalist-tastes (Shen2008) for which, taking into account the sociocultural-factors, KFC includes a larger menu, consisting of western and Chinese dishes such as rice pudding and custard tarts (Bell2011). Presumably to ensure KFC’s products meet the changes to consumer-tastes, it frequently undertakes new product-development to enhance its localized product-line, which in turn creates product-differentiation. This is evident in the fact the KFC introduces up to 50 new localized-items to its menu annually (Bell2011). Nevertheless there are high-costs associated with the research and development and the opportunity-cost of not using the money for (example) expanding operations (Zwicker1976). Those who argue against KFC’s strategy recommend it to start focusing more on the ‘pricing’ of the food-items rather than the ‘frequency of new product-introduction’ as high prices may encourage consumers to purchase a substitute (Cho2009), a component of Porter’s five-forces. However critics cannot disagree that KFC-China contributes roughly 40% of Yum! Groups’ profits (BBC). Furthermore, KFC-China is a well-established brand thus has an existing brand-loyalty with a strong-reputation and brand-equity. In fact, by adding new items on the menu, KFC encourages repeated sales and widens its appeal to a larger consumer-market thus increasing market share (Bell2011). Furthermore, because it already has high markups on its products, it is able to easily fund for the research needed. Thus KFC’s regular amendments to its localized-menu ensure its success over its competitors. Promotion:
KFC-China uses a variety of promotional tools in its integrated marketing communication (ICM) to promote its localized products. Two tools used include advertising and public relations (PR). Advertising assists KFC-China with informing local customers of new products, persuading potential customers to choose its products over substitutes and reminding consumes of KFC as a quick service restaurant which maintains quality and hygiene (Newsweek1999) through mass communication mediums such as television and billboards; usually depicting traditional Chinese values such as a family gatherings (O’Barr2007). Concerning PR, according to Taylor (2010), KFC has tended to focus more on Chinese youth, which are entering the mass consumer market. The China Youth Development Foundation was established by KFC to help Chinese students with their cost of education by offering a share of $5.43million. Taylor suggests that this program enabled KFC-China to showcase its Corporate-Social-Responsibility (CSR) as well as have a more personal means of communication with its younger consumers. Through KFC’s CSR, good publicity was generated which resulted in increased sales (Tian et al 2011) – evidenced by the 7.3% increase in Yum’s 2011 quarterly -profit to $383million (Patton2011). Nevertheless critics of KFC-China’s current promotional strategy could argue that it should focus advertising more on the growing seniors market as these are usually people with higher incomes and greater marginal propensity to consume (Orr et al 2004). However because KFC’s main target market include young individuals and families (Jing2010) its promotional strategies should be customized to...
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