KFC-location-strategy-in-China

KFClocationstrategyinChinaKentuckyFriedChickenhasbeenoneofthemosthouseholdinternationalbrandsinurbanChinasinceitopeneditsfirstWestern-stylequickservicerestaurantinBeijingin1987.Asthepresentlargestfriedchickenrestaurantcompanyintheworld,KFCaimsChinaasthemostpromisingmarketandsucceedsinitslocalizationstrategiesinthehugeChinamarket.ThemostprominentsuccessofKFCinChinaisnotonlytheoutcomeofKFCspersistenttenetsquality,serviceandcleanlinessbutalsotheachievementsofitskeenperceptionofcross-culturalmarketinganditsunderstandingofChineseculture.ThisessayaimstoinvestigatetheprocessofKFCsentryintoChinasmarketandanalyzeitsparticularlocalizationstrategiestowardsChina.AseriesofKFCcommercialsinChinawouldbeanalyzedfromtheperspectiveofculturalvalues.Relatedissuesanddebateswouldbediscussedaswell.1.IntroductionThereisnodoubtthatChinahasbecomethehighest-growthmarketofKentuckyFriedChicken.SeventeenyearsafteropeningthefirstKFCoutletinChina,KFChascelebratedits1000threstaurantmilestoneinBeijingonJanuary16,2004(businesswire,2004).AstheYum!Brands,Inc.,theparentcompanyofKFC,statesinthe2003annualcustomermaniareport,ChinacontinuestobeourRisingStar,drivingdoubledigitsalesgrowthforthefifthconsecutiveyearandrecordoperatingprofitupover42%in2003.Thenumberisthebestannotationfortheannouncement--intheyearof2003Chinahasaccountedfor$157millioninKFCsoperatingprofit.TheprominentsuccessofKFCinChinasmarketcanbeattributedtoitsfranchisepolicyandscientificmanagerialoperations,wellknownasCHAMPS,whichmeasuresoperationalbasicslikeCleanliness,Hospitality,Accuracy,Maintenance,ProductQualityandSpeed.Moreover,theaccomplishmentsaretherewardtowardsKFCscomprehensiveunderstandingofChinesecultureanditsexcellentlocalizationstrategiesspecificallymanipulatedtomeetthecharacteristicrequirementsoftheestimated450millionurbanChineseconsumers.IntheanalysisofKFCssuccessinChina,severalquestionsweregenerated.HowdidKFCgrabtheopportunitytopenetrateahugemarketknownasthefastestgrowingeconomyintheworld?HowdoesKFCfindthebalancepointbetweenthequickservicerestaurantandtheancientChineseculinarytraditionwithmorethan5,000yearshistory?HowdoesKFCadaptitsinherentindividualism-drivenAmericanculturetoChinesecollectivecommunity?IwouldanalyzethelocalizationstrategiesofKFCfromaculturalperspectiveandtrytoanswertheabovequestions.2.KFCsEntryintoChinaInthissection,IwillpresentanoverviewofKFCsoverallprocessofentryintoChinamarket.ExternalandinternalenvironmentofChinawouldbediscussed.2.1.OpenChina,NewOpportunitiesTheeconomicreformopenedChinamarkettotheoutsideworldandimprovedthestandardoflivingofaverageChinesepeople.Inlate1978Chinabeganimplementingeconomicreformstodevelopandmodernizeitseconomy.Thereformshavegraduallyrebuiltaneweconomicsystem,whichisreferredasasocialistmarketeconomy,bylesseningthegovernmentscontroloftheeconomy,allowingsomeaspectsofamarketeconomyandencouragingforeigninvestment.Asaresultofthereforms,Chinaseconomygrewatanaverageannualrateof10.2%inthe1980sandby10%annuallyintheperiodof1990-2001.Thiswasamongthehighestgrowthratesintheworld.TheboostofnationalwealthandtheconsequentincreaseinindividualsincomehasledtosteadychangesinChineseconsumerpatternsprevalentinpre-Maoera.Putinaconcreteway,theincreaseindisposableincome(nearlytripledfrom1985to1992)hasawakenedpeoplesdesiresforconsumptionandmaterialpleasure(Wang,2000).Lessstaplefoodisconsumed,whereasmoreconsumergoodsandservicesarepurchased.Unlikestaplefood,consumertasteandthebreadthofproductassortmentsareimportantconsiderationswhenconsumergoodsandservicesarepurchased(Chow&Tsang,1994).China,theworldsmostpopulouscountrywithapopulationofmorethan1.3billion,hasbecomethelargestpotentialconsumermarketonmultinationalcompaniesblueprintsforglobalexpansionthuscanneverbeignored.Responsively,theevolutionofserviceindustrywouldbethebestexampletoexaminetheeffectofopen-doorpolicy.Beforetheeconomicreformmovement,Chinasservicesectorwasmostlyunderdeveloped,andsomeserviceswereevennonexistent.Thedownturnofserviceindustrycanbereasonedbythestringentquotasystemindistributionofnecessityoflife,inwhichdistributingconsumergoodsandserviceswasconductedbybureaucraticfiatratherthanthroughmarkets.(Davis,2000)However,economicandsocialdevelopmentinthe1980sand1990screatedahugedemandforservices.Retailtradeusedtobeconductedonlyinstate-ownedshops,buttodayprivatelyownedshopsandvendorsstallslinestreetsincitiesandtowns.Bigcitieshavehugedepartmentstoresandshoppingcenters.ForeigninvestorsalsoareenteringChinasretailtrade,andWesternfast-foodcompaniessuchasMcDonalds,PizzaHut,andKentuckyFriedChickennowhavemanyrestaurantsinChina.AsDavis(2000)pointsoutinherinvestigationoftherevolutionindomesticconsumptioninChina,thegainsattributedtotherevolutioninconsumptioncanbesummarizedintofouraspects:food,spendingforchildren,housing,familyritualsandcelebrations.ThreeofthefouraspectscanbetakenintoaccountwhenanalyzingthemarketingstrategiesofKFCinChinaandwillbediscussedrespectivelylater.2.2.ExternalandinternalenvironmentanalysisInthissection,IwouldmakeabriefreviewonexternalandinternalenvironmentanalysisinChinaconduc