Kfc in China Essay

Is Tony Wang correct in assuming that china is an ideal viandsstuff for KFC? Should KFC be pursuing the Chinese marketplace at the present time? Considering mainland china as a strategic location was based from a SWOT analysis. Availability of Supply (Strength) there is ready penetration of type poultry in the major metropolitan argonas such(prenominal) as Shanghai, Guangzhou and Beijing. Poultry industry is one of the top antecedence categories in Chinas agriculture modernization and it is highly march on by the regime. Thus, the company can train a reliable lend of high part yellow(a). Low Competitive Pressure (Strength)Potential competitors such as MacDonalds face major barriers to enter the China market due to poor beef supply while KFC, aside from accessibility of high quality chicken supply, has the clear utility since its main product-chicken- is eaten well-nigh everywhere in the world. Further much, chicken is already familiar in China and even much cheape r. Companys Control Measures (Strength) KFC s run into mechanisms are designed to ensure standard levels of quality, do and exonerated credit liness (QSC) at distributively(prenominal) of the restaurants chain stores. This fits the positive image in Asia of American fast nutrient restaurants as famous, air-conditioned, and hygienic.Product Consumption (Strength) Chicken has grand been regarded as a kind of nutritious food, which is especially good for the patients, the elders and children. An subjoin in health conscious consumers too raises the consumption of chicken. Moreover, chicken is a more popular meal than hamburgers in most Asian countries and KFC has the luck to offer an American style experience that is different from most different food establishments. Drawing Area (Opportunity) In late 1978, China began implementing scotch reforms to modernize its economy by lessening the policy-making relations hold in of the economy.This reform referred as a socialist ma rket economy boosted the guinea pig wealth and the consequent increase in individuals income has take to steady changes in Chinese consumer patterns prevalent in pre-Mao era. As the worlds most populous nation with over 1 one million million inhabitants, the electric potential size and growth for KFC makes the Chinese market very attractive. non to mention, the possibility of establishing the first Western style fast-food operation in China as a historic opportunity for the company. Scarce Human Resources (Weakness) managerial resources are precious because of the scar urban center of Chinese-speaking KFC managers.There are in like manner realizable conflicts between KFC-appointed managers and local employees. Lack of Local connections (Weakness) Pioneering in the fast-food field would queue KFC very difficult to form local and personal networks between transmission linees and government agencies, which are crucial in providing access to the local market and municipal supp liers and eventually, to the companys success. Entering into a relatively unknow market, KFC, as a new entrant will have to get in touch with the local business customs and laws as well as with knowledge of culture and language. Quality of Government (Threat)A communist government with strict impertinent investment laws rules China. Setting up here requires lowering investment expenses and high levels of resource commitment. The assay of home(prenominal)ation measures may be imposed by the host government, often leading to major pecuniary losses for the foreign investor. Overcoming Threats and Weaknesses KFC has three options of entering the China market thru, to wit Franchising, Wholly owned subsidiary and Joint post. The traditional franchising scheme, in markets where political risk and cultural unfamiliarity exists, certainly would reduce financial risks.However, KFC had already encountered problems in the past with the aligning of corporate planning with the franchisee s short focus on profitability. In addition, KFC will be pioneering in the fast-food service and thus needs to be highly sensitive to cultural demands. In such case, franchising is not feasible. On the other hand, a wholly owned subsidiary would rely upon total control over competitive advantages and ensures make out operational and strategic control. It also involves high financial risk and short country-level flexibility and responsiveness. This option is not recommended.Entering into a joint think is highly recommended. Such an international business strategy will guarantee to solve many logistics problems such as access to good quality chicken and other supplies, ease the access to Chinese market, share risk with a local entity, utilize ways to cut bureaucratic red-tape and finally, hang as a sign of commitment to the host government change magnitude goodwill. In addition, due to the complexity of many barriers to entry into China, a potential partner with sufficient conta cts or networks with the government officials may smoothen the make of setting-up operations in the country.The potential joint-venture partner should be large, well established, contribute excellent distribution channels and have personal network access to government officials. It is recommended that a partner be found by retrospective integration- that is, a good domestic supplier of poultry. In order to ensure total commitment, the set-up of the joint venture should be with KFC as the dominant partner. This way, cost, quality and strategic control measures are corroborateed. By building on each partners core competencies, knowledge, and efficiencies, a mutually beneficial synergism effect could be achieved as a result of joint venture activities.For instance, the local partner can learn from KFC how to produce a meliorate product at a lower cost and further set off on its new competitive positioning. KFC, on the other hand, can maintain quality supply, which is critical to its success. RECOMMENDATION The Chinese market represents a gravid opportunity for KFC where Tony Wang is correct in his assumptions. By finding an appropriate domestic business partner via backward integration, it is possible to further build on opportunities and significantly reduce risk throughout financial sharing, cultural aesthesia and favorable treatment from the host government.KFC should start pursuing this strategy at the present time and develop a coherent international strategy linking the China operations with the other markets. Which of the three cities being investigated should the company take in if it decides to enter China? The capital city, Beijing, is recommended as the preferred location for KFCs entry into the Chinese market. Beijing is the center for most political activities and provides the requirement access to government agencies and business regulatory bodies. Also, it has a large nation of nearly 9 million inhabitants.The numerous universities loca ted in the city contributes to more affluent and educated hoi polloi that may make them more open to foreign ideas including Western fast-food. More importantly, plenty of Western tourists are attracted to Beijings many tourist attractions, increasing the potential for generating foreign currency sales. Furthermore, supplies of poultry are readily available. Beijing can serve as the initial platform of KFCs operations and later develop into other potential areas such as Shanghai and Guangzhou. One or two initial outlets should be set-up to get an insight of how KFC will be perceived in the Chinese capital.Both dine-in and take-out facilities much in line with most KFCs international operations ought to be offered in large, clean and well-serviced outlets to cater for the customers with above-average disposable incomes. In order to serve large poem of customers due to the sheer size of the population, the right cultural fit of the business restaurants must be highly functional an d effective. Special menu-substitutions may also have to be facilitated to cater to consumers taste for traditional Chinese meals. Lessons knowledgeable Capitalizing on Strengths and Opportunities In the initial period of KFCs entry into China market, few of Chinese onsumers were really impressed with the food itself since the country is known to have the best culinary culture in the world.Instead, they were more interest with the eating experience the encounter with friendly employees, quick service, spotless floors climate-controlled and brightly-lit eat areas, and smiling Colonel Sanders standing in front of the main gate. Having experienced the initial surprises brought by a never-seen westward lifestyle, Chinese consumers have gradually calmed deplete and their consumption attitudes towards foreign products are getting more reasonable.Since Chinese people are more concerned with the nutrition and tastes of the fast food, KFC taken advantage of McDonalds. By offering poultr y food that is more acceptable to Chinese people compared with beef, have taken consumers needs and competition with other brands into account. knowing the market The most prominent success of KFC in China is not only the outcome of KFCs persistent tenets quality, service and cleanliness but also the achievements of its keen perception of cross-cultural marketing and its understanding of Chinese culture. base on its scrutiny and adoption of Chinese traditional culinary arts, KFC has positive a series of products that are specially designed for the tastes of Chinese consumers. Moreover, in purpose of maintaining its image of a U. S. brand and keeping consistent with its globalisation strategy, most of KFC s Chinese side dishes are defined as short-term products and would be replaced by new products. KFCs product strategies are categorized into two aspects 1)To meet consumers desire for novelty by introducing western style products like Mexican Chicken Warp and New siege of Orleans Barbeque Wings.This means can satisfy young consumers who are more open and acceptable to the foreign flavors. 2)To cater to consumers taste for traditional Chinese meal by offering Chinese style fast food from time to time, say, Old Beijing Chicken Roll, a wrap imitate after the way Peking duck is served, but with fried chicken inside and accompanied with green onions and hoi sin sauce, and Sichuan Spicy Chicken which absorbs the dark flavor of Sichuan dish. This measure can attract older consumers who are cranky of Chinese food and in need of the convenience of fast food service as well.