Study of KFC’s location strategies in China

By | April 19, 2015

1.0 Introduction 4

2.0 Challenges 5

2.1 Political Challenges 5

2.2 Legal Challenges 5

2.3 Cultural Challenges 6

2.4 Challenges in Negotiations with the Chinese and language barrier 7

2.5 The inadequate infrastructure 7

2.6 Challenges in Scale and Demographics 8

3.0 Implementation 8

3.1 Location strategy based on region level 9

3.1.1 Business climate 9

3.1.2 Proximity to customers 10

3.1.3 Infrastructure 11

3.1.4 Quality of labor 13

3.2 Location strategy on cities 14

3.2.1 Beijing 14

3.2.2 Shanghai 15

3.2.3 Guangzhou 16

3.3 location strategy on medium and small cities 17

3.4 Location strategy on blending with Chinese characteristics 18

3.4.1 Utilization of Chinese Cultural Symbols 18

3.4.2. Family-group oriented 19

3.4.3 Emotional Appeals in KFC s campaigns 19

3.4.4 Children oriented location strategy 20

3.5 Location strategy on supplier side 21

3.6 Location strategy on recruitment item 22

3.7 Location strategy on franchising 22

3.8 Location strategy on delivery service 23

4.0 Current challenges 23

4.1 Globalization and culture imperialism 23

4.2 Competition challenge 24

4.3 Health issues 25

4.4 Over speed of expansion 25

5.0 Recommendations 25

5.1 Respect the host culture 26

5.2 Expansion speed 26

5.3 Health issues 26

5.4 Substitutes 27

Reference 28

Figure list

Figure 1.0 KFC’s location map in China………………………………………………9

Figure 2.0 China population distribution…………………………………………………………..11

Figure 3.0 Map of transportation distribution of China………………………………12

1.0 Introduction

As one of the most popular global chicken restaurant chain, KFC opened its first restaurant in Beijing in 1987, which then becomes the largest chicken restaurant company in China mainland and considers China to be the most promising market in it development agenda. The location strategies of KFC in the huge market of China contribute a great deal to its success, which not only focus its ever last principle of quality, service and cleanliness but also deeply penetrate the local culture (KFC 2009).

On the basis of proper location strategies in China, there is no doubt China becomes the fastest growth market for KFC under more than twenty years’ development. It has outperformed all the opponents in China market even including McDonald’s-the world market fast food restaurant chain leader and became China market’s biggest restaurant chain in term of the number of restaurants, revenue and market share. For instance, KFC owns nearly 2200 branches compared with McDonald’s 800 branches in the market of China. And KFC China contributed nearly 20% global revenue to the parent company Yum in the year 2007, which also includes other world famous brands such as Pizza Hut and Taco Bell (KFC 2009).

This paper is aimed to engage research into KFC’s particular localization strategies towards global market from its past challenges and solving solutions as well as the current situations, and then it will give proper recommendations for KFC’s future expansion in China market.

2.0 Challenges

2.1 Political Challenges

The communist party is in charge of China for many decades, which practise absolutely power over economic and cultural institutions as well as legislation area. Such kind of institutions makes these rules and regulations for doing business carried out by Chinese government lacking of transparency compared with western economies. Under thus economic institution, Chinese society promotes a kind of social network named Guanxi, which presents the special relationship between a person and the entire network based on reciprocity. While as the western fast food restaurant chain, KFC wasn’t familiar with the Chinese Guanxi net work, which brought a series problems for KFC at its initial stage of management. For instance, the lacking in well built Guanxi network resulted in some problems with source and distribution such as the high cost on purchasing raw materials and distribution (Ambler & Witzel 2000; Hua & Guo 2007). For instance, KFC had the problem in obtaining a constant supply of good quality chickens from the Chinese local suppliers (KFC 2009).

In terms of the Chinese government’s supportive policies towards enterprises aspects, there are much more supports for enterprises which bring new and modern technology to China rather than these service providers especially food industry such as KFC (Jan 2010; Jayaraman 2009).

2.2 Legal Challenges

The legal system in China is relatively loosely defined, which results in several loopholes in the law. Although the access to the World Trade Organization has accelerated the amendments in international business laws and patent rights in China, it is easy to catch technology being stolen by company’s employees or competitors in China. Such kind of loose legal system lead to a common culture named “Shanzhai” or the copycat in the Chinese society, in which things from shoes to mobile phones are openly copied and sold in Chinese market madding China become the largest counterfeit products producer in the world (Jan 2010).

For example, there are so many small food restaurants copy the food names or even trade mark of KFC in several cities of China by offering cheaper food price which lead to a great loss of KFC particularly at the beginning of its taking off in China’s market (Jan 2010; Jayaraman 2009).

2.3 Cultural Challenges

Nearly 100 restaurants of fast food were around Beijing by the middle of 1990s. There were several fans attracted by the fast food restaurants via their convenience, comfortable and jovial environment, efficient service as well as pleasing music, there were still lots of people who never dropped into the fast food restaurants even when passing by (Zheng 2004). It was resulted from the culture difference.

Due to this culture difference including the differences from politics, economics, social development and ideology, there are several obstacles for these international corporations operation in Chinese market including the distinct American brand fast food chain restaurant KFC. At the beginning of KFC launching in China, a great many Chinese customers can’t well understand or accept the corporate culture of the fast food restaurant, which culture plays a significant role. Just as some customers complained, the fast food can’t be compared with their Chinese cuisines which possess different variety (Zheng 2004). This was a big challenge for KFC operating in China’s market.

2.4 Challenges in Negotiations with the Chinese and language barrier

At the beginning in China’s market, there was a shortage of Chinese-speaking managers, which resulted in several conflicts arousing between the appointed foreign managers by KFC and the local employees and partners (Zheng 2004). For instance, the Chinese partner showed different opinion with KFC’s QSC (quality, service and cleanliness), because there is a tradition for Chinese people to limit the exposure to quality products. And they were holding the belief that they should be involved in the decision making process of KFC, due to the better understanding of Chinese customers (Zheng 2004). Such kind of negotiation barrier has already hindered the well expansion of KFC in China’s market to some extent.

2.5 The inadequate infrastructure

Infrastructure contribution in China has been a big headache for KFC’s distribution channel building and expansion strategy (China today 2004). From Paaswell (2008), we can see some information as below. The infrastructure even in some cities was relatively poor and there have often been big traffic jams. For instance, in some cities of China there are a lack of proper built highway, railway let alone other traffic facilities, this kind of appropriateness of traffic may cost KFC a lot of waste in time and human resource in raw material distribution especially when it didn’t find fixed local suppliers for chickens at the very beginning (Paaswell 2008).

2.6 Challenges in Scale and Demographics

There are 1.3 billion people in China, which are often considered as a large customer base for western business. In fact, China is a complex market, where there are nearly 850 million people in the impoverished countryside and 536 million people in the urban areas 247 million people of which are considered as middle class and have an expendable income. And the Chinese market also differentiates from region to region. For instance, costal areas such as Shanghai, Guangdong and Dalian are advanced regions with good facilities of infrastructure and transport, beyond these regions. In addition to this several regions in China are still under developed.

In terms of the scale and demographics situation of Chinese market, there are three tiers of china’ cities, including the tier 1 city such as Beijing, Shanghai, Guangzhou and Shenzen, the tier 2 cities such as Chengdu, Tianjing, Kunming, and other 24 biggest cities as well as the tier 3 cities with different the culture and spending power.

For KFC, it was a complicated task to understand the consumption behavior and level of people in different regions of China and then make proper location strategies based on different situation of different regions.

3.0 Implementation

Faced with several challenges as the above mentioned, KFC considered deliberately and carried out a suitable location strategy in Chinese market via the combination of these factors including proximity to customers, business climate, infrastructure, quality of labor and other related issues (Taylor & Russell 2009).

3.1 Location strategy based on region level

Figure 1.0 KFC’s location map in China

figure 1.0

 

Source: Geocentre Consulting, Maplink, Tele Atlas, Whereis (R), Sensis Pty Ltd.

(Red spots are KFC restaurants in China)

Figure 1.0 is the regional location map of China, from which we can observe that KFC’s location strategy may more focus on the eastern part of China namely the costal areas, which we can make an analysis on the basis of these factors including the proximity to customers, business climate, infrastructure, quality of labor and so on.

3.1.1 Business climate

The economic reforms have help China’s economy developed a lot especially in the costal provinces of east China, which takes up nearly two thirds of the country’s GDP (China today 2004). And the government promotion policies for foreign investment are more favorable in these regions including the central government’s policies and the local government’s policies, such as establishing different types of special development zones in costal regions as well as building up fourteen open coastal cities in the 1980s via special preferential policies such as special tax incentives to attract foreign direct investment (Du, Tao & Lu 2008).

This kind of nice business climate was well considered by KFC, and became one of its factors for its location in the costal region initially.

3.1.2 Proximity to customers

As we all know China is one of the most populous countries in today’s world, with the total population of 1.3 billion people. And most of the population is concentrated in the east coast due to historical and geographic factors. In addition, the labor force of China is also dense in east coast region as figure 2.0 shows mostly due to the economic reforms and open door policy which largely enhanced the development speed of these areas (Paaswell 2008).

Meanwhile, as the research conducted by Jing (2008), the mark for economic comprehensive competitiveness of these regions were different, such as 76.78 marks in east region, 48.48 marks in the central region, 36.34 marks in west region and 52.41 marks in northeast region. The above index shows the stronger economic power of the east region areas, which also brings a greater level of consumption power to the population of this region. Based on the geographic and economic advantages of east region, the population mobility is also very large as well as the mobile population is very big in the east region.

By and large, these advantages of economy development level, big population and mobility population present an unfair advantage for the east region to be chosen as the first invested areas for KFC, because it is more convenient and easy for KFC to touch more Chinese consumers than the rest places.

Figure 2.0 China population distribution

figure 2.0

Source: Geocentre Consulting, Maplink, Tele Atlas, Whereis (R), Sensis Pty Ltd.

(The shadow areas are the population density regions)

3.1.3 Infrastructure

The infrastructure building in China has experienced a great growth and expansion from the early 1980, for instance, the transportation construction including airports, roads, and railway building has developed a lot (Jie 2010). As the service provider, it is crucial for KFC to take the convenience in raw material distribution into account when carrying out its location strategies in China (China today 2004).

Let’s take the railway for example, the high speed rail way services offered by China is mainly located in the costal regions rather than the other areas, such as the 117 km long’s Beijing–Tianjin Line, 968 km long’s Wuhan–Guangzhou Line, 301 km long’s Shanghai–Nanjing Line as well as the 160 km long’s Shanghai–Hangzhou Line. Besides the railway construction, China has also been focusing on the road building and it is connected by a continuous network of roads and highways. Although the highways systems can stretch to several places of mainland China, the network of highway is much denser in the east coastal regions rather than the other regions of China (Jie 2010).

These proper built transportation systems in east regions can largely ease the distribution difficulty for KFC.

Figure 3.0 Map of transportation distribution of China

figure 3.0

 

Source: Geocentre Consulting, Maplink, Tele Atlas, Whereis (R), Sensis Pty Ltd.

3.1.4 Quality of labor

There are more than 800,000 engineering graduates every year in China based on the official statistics, which builds a solid foundation to make sure the quality of labor force in China and a large amount of which have been surging into east coast of China, due to the good working opportunity. That why KFC chose the east region to firstly launch its business because it takes advantage of the benefit of talents in the east coastal region of China to recruitment the local talent as its middle level managers which largely assist its development in China’s market and alleviate its headache in negotiation with Chinese.

Generally speaking, due to the advantage of proximity to customers, business climate, infrastructure, quality of labor in east coastal areas in China, KFC chose to launch its business in these areas initially.

3.2 Location strategy on cities

KFC has a series of relatively built location strategies, one of which is aimed at choosing the huge department stores and shopping centers of large cities to launch in China. The followings are some examples of large cities which KFC chose to launch its business.

3.2.1 Beijing

In KFC’s location strategies, it chose Beijing as its first stop. At first, as the political and cultural center, there are a large number of migrant populations which suggest a large potential consumer population. Secondly, it is also the educational center of China with several famous universities and colleges. Furthermore, Beijing is also a fantastic tourist resort with a stable foreign currency income. These specialties not only have attracted lots of people surging into Beijing but also enlightened the intelligence of the people there which is important for KFC’s sales. And the first KFC restaurant in Beijing can also attract a great attention of people all over the country, which can facilitate its future expansion in China’s other places (Zheng 2004; Du, Tao & Lu 2008).

More notably, KFC’s location strategies also involves the consideration of the balance between the risks and opportunities in China’s market, which chose the year 1987 to enter Chinese market when there wasn’t other strong competitors there (McDonald’s entered into Chinese market at the 1990s) (Zheng 2004; Du, Tao & Lu 2008).

All in all, the first launch in Beijing showed the wise location strategy of KFC in China.

3.2.2 Shanghai

Shanghai is the biggest business market in China with 11% China’ total industry revenue and 17% total export revenue of China. As the same time, Shanghai is one of the big cities directly controlled by the central government with the longest history in doing business with westerners. It is often treated as the finance and trade centre of mainland China, with the modern development beginning from China’s economic reforms in the year 1992. And meanwhile, Shanghai is also the largest share market of mainland China (Zheng 2004, Du, Tao & Lu 2008).

In terms of transportation, there is an extensive public transport system including buses, taxis, and a rapidly expanding metro system and so on. It owns more than six national expressways which large move the transportation pressure of Shanghai to other neighbor cities (Zheng 2004, Du, Tao & Lu 2008).

Besides the above, there are many national events held in Shanghai, which has attracted a great many people all over the world.

Such kind of environment endows Shanghai variety of advantages both economically but geographically. Those kinds of advantages make Shanghai the right choice for KFC to launch its business.

All of these advantages makes shanghai become the suitable place for KFC to expand its business in China’s market.

3.2.3 Guangzhou

KFC’s location strategy towards Guangzhou is based on its advantages on infrastructures and commercial atmosphere.

On the one hand, Guangzhou owns very good infrastructure facility including metro sector, airport sector, ports sector, railway sector as well as road sector. It owns 2 existing metro lines in operation and another 9 lines’ construction will be finished at the end of this year. And there are three major airports in Chuang Zhou, with one of the major domestic airport in China. Guangzhou also has two large ports, one of which is the world’s fourth largest container port. Meanwhile the major Railway Station in south of Guangzhou links it to Beijing, Hong Kong and west of China. At the same time, the Hong Kong Zhuhai Macau Bridge with the investment nearly $ 3.8 billion connects it with Hong Kong and other areas in Pearl River Delta (Wills & Ma 2005). All of these relatively well build infrastructure in Guangzhou could help KFC save time in raw material distribution problem.

On the other hand, as one of the city involved in the special development zone, Guangzhou has been enjoyed a great many special preferential policies such as special tax incentives to attract foreign direct investment, which has attracted lots of outstanding talents both in management as well as in engineering (Du, Tao & Lu 2008).

Besides the above advantage, Guangzhou also has a nice geographic location, which is in Pearl River Delta and close to Hong Kong the world famous shopping heaven. Such kind of geography advantage also attracts lots of tourism as well as business people from all over the world (Du, Tao & Lu 2008).

Generally speaking, these advantages in infrastructure building as well as nice commercial atmosphere are suitable for KFC to develop its business, because it is more convenient for the distribution task to fulfill and there is relatively sufficient consumption population for this restaurant to keep going.

3.3 location strategy on medium and small cities

KFC has also carried out a series of location strategies on locating its restaurants in several medium sized cities and even some small cities.

For some medium sized cities, such as these cities in west China and inland China, KFC has launched its business gradually under the trend of west development supported by Chinese central government in the 1990s, such as Chengdu one of the key cities of west development. Due to a series of special policies for these cities from both central government as well as provincial governments, foreign invested firms are welcomed by these cities and enjoyed several favourable policies for their future development. And some of these citied also have large populations which offer a certain number of customers for KFC.

Besides the choices in large and medium size cities, KFC has also expands its business in several small cities. In these small cities, KFC has tried to open just one or two medium size restaurants in the people gathering places which help it have relatively stable customers.

3.4 Location strategy on blending with Chinese characteristics

For KFC, its location strategies in China are clothed its brand with the local costumes such as the localization of the language, attributes for its products, content for advertisements as well as the product meanings (KFC 2009; China today 2004;Sexton 2008)

3.4.1 Utilization of Chinese Cultural Symbols

To calm down and change the consumption attitudes towards west fast food from Chinese consumers, KFC has offered a nice and harmonious atmosphere via the friendly employees, quick service, spotless floors as well as the smiling Colonel Sanders standing in front of the main gate, which is an initial surprise for Chinese customers who never experienced the western lifestyle at the beginning of its launch (China today 2004).

And then it has also learned from the traditional Chinese food culture to cater Chinese consumers with traditional Chinese meal depending on offering fast food of Chinese style from time to time, such as the Spicy Chicken with Sichuan flavor, Old Beijing Chicken Roll, porridge and so on. The KFC breakfast is an outstanding combination of East and West, ranging from Western burgers, potato sticks, and orange juice to Chinese seafood as well as chicken congee, Hong Kong milk tea. Moreover, to maintain its U.S. brand and keep up with the pace of globalization, KFC defined most of its Chinese side dished as short term products replacing by different new products from time to time (Sexton 2008).

Such kind of location measures have assisted KFC attracting a large number of older customers who not only prefer Chinese food but also need the convenience of fast food service (Sexton 2008).

3.4.2. Family-group oriented

Chinese people take the collectivism so much which refers to the interdependence among family members and cherishing the unity of family as a whole. Based on this value system of Chinese people, KFC has offers a series of products emphasizing the communal enjoyment for the whole family as one of the components of its location strategies in China. And in terms of groups including colleagues and friends, KFC has also targeted them into its commercials, which is reflected from its setting and products (Zheng 2004).

The above family group oriented location strategy of KFC in China are well suitable for the host culture which does boost its business in China.

3.4.3 Emotional Appeals in KFC s campaigns

As Kotler and Armstrong (1999) claimed, purchase can be motivated by emotional appeals such as love, humor, pride and joy.

KFC properly blends its location strategies in China with emotional appeals which resort to advertising appeals. The Chinese virtues and emotions representing by patriotism, cherishing the young, sincere friendship and romantic love, as well as respecting to the elders have become the major subjects of KFC’s commercial campaigns (KFC 2009).

One of the remarkable examples is KFC’s common wealth fund on helping poor students to finish their education. KFC presented its consideration for the young Chinese with a 90-second-long advertisement which was seemed as a social responsible advertising (Zheng 2004). With the fully emphasis the encouragement on young people rather than portraying KFC’s image, KFC has largely arouse consumers resonance in Chinese market. Another special example of location strategy via emotional appeals was its sponsoring the China men’s football team in the World Cup of 2002, which also benefited for its image building (Zheng 2004).

3.4.4 Children oriented location strategy

Chinese parents care their children so much and KFC caught this point well. It has taken a series of measures to meet Chinese parents’ needs on their children. At first KFC claims the rich nutrition for the development of children included in its products by printed advertising and pamphlets (KFC 2009; China today 2004; Sexton 2008). Meanwhile, KFC’s employees often teach children to dance or sing English songs in a specific time in a day, from which KFC best suit the expectation on improving children’s sociability and intelligence by Chinese parents on their children and which are welcomed by Chinese parents. Moreover, to improve the public image, KFC also sponsor education with a 10 years long project from 2002. This project offers 5,000 for each poor student per year from the first term until the graduation (KFC 2009; China today 2004;Sexton 2008)

Besides the above aspects, the U.S. origin of KFC also become the advantage for its development in children market, for Chinese parents prefer foreign-made items for their children a lot, due to the thoughts that foreign made items are much superior to home made item (China today 2004).

3.5 Location strategy on supplier side

As the raw material distribution is a barrier for KFC’s smoothing development in China due to the lack of local chicken suppliers, KFC are actively build good Guanxi net work in China, and now it has build good relationships with several local chicken, flour and oil suppliers.

Supplier localization is an outstanding location strategy in KFC’s Chinese market development item, which depends on scale the domestic suppliers and localizes the international suppliers. For instance, KFC boosted the business of its 25 chicken meat suppliers in 27 cities via several effective measures and has been encouraged more than 17 international suppliers to build factories in China. And at the present, referring to the raw material supply aspect, the 100% chicken meat and 85% package material for its products come from the local suppliers (Wei & Sheng 2008).

3.6 Location strategy on recruitment item

To enhance the commutation efficiency of KFC with Chinese people, KFC has begun to recruit several local talents into its senior management team. For instance, it has recruited several people as its senior managers in Chinese market from Taiwan at the early days. Due to the well formed education system in Taiwan on Chinese culture, history, geography, arts and so on, such kind of well understanding Chinese cultural context including Chinese people’s feeling of love, hates, Confucianism, Buddhism and Taoism as well as the high quality of education make the talents from Taiwan become the first choice for KFC to choose as senior management in Chinese market in its early location strategy (China today 2004).

By and large, the above mentioned location strategies of KFC towards Chinese market are relatively successful ones, which only take the business environment such as proximity to customers, business climate, infrastructure, quality of labor into account, but also blend its brand with Chinese characteristics.

3.7 Location strategy on franchising

As one of the most popular strategy for internationalizing a business, franchising offers the franchisor large controlling power over the franchisee and more support to the franchisee from the franchisor than is the case in the licensor-licensee relationship (Griffin& Pustay 2010). KFC well adopted this measure to expand its business in China with more than 2200 franchised restaurants in China. Such kind of location strategy has been assisting KFC to boost its business with increasing number of chain restaurants in Chinese market under relatively low costs and risks (Wei & Sheng2008).

3.8 Location strategy on delivery service

Free charge of delivery service carried out by KFC in Chinese market as one of the location strategy is welcomed by so many Chinese customers. The food from KFC restaurants can be ordered at home and delivered to the door of each customer even with no minimum order amount and tips (China today 2004).

4.0 Current challenges

4.1 Globalization and culture imperialism

Although KFC has tried every means to make itself more suitable for Chinese market, such as blending its brand with Chinese characteristics, some of its activities may go too far even offending the host culture.

The special example is KFC’s commercial in the year 2003 on new short-term products named Chicken warp of Gulao meat- a kind of traditional Cantonese dish, which was banned by the government. Because in KFC’s advertisement, there are almost no customers in the local Cantonese restaurant but customers are surging into KFC for the ‘Chicken Wrap of Gulao Meat’ and more exaggerative even the Cantonese cook can’t resist the food of KFC. This advertisement largely aroused the entire Cantonese restaurant industry’s repugnance. And furthermore, a great number of Chinese customers can’t accept the idea in the commercial that the foreign fast food can easily beat the Cantonese food which represents of Chinese culinary arts. Due to these reasons, this advertisement was banned by the local Chinese government and the reputation of KFC was also hurt due to its arrogance and ignorance of people’s cherishment on the traditional Chinese culture(KFC 2009; China today 2004; Sexton 2008).

4.2 Competition challenge

Entering Chinese market, KFC was also faced with hyper competition from other fast food restaurants such as its deadly foe McDonald’s and other new entrants. The hyper price competition between KFC and McDonald’s in Chinese market has caused KFC a lot. The highest price deduction of McDonald’s was by 32.6% which made some of its products even cheaper than ten year ago. Such kind of price deduction has brought a great many customers to McDonald’s restaurants and has largely affected the sales performance of KFC. Although KFC has also implemented some measures such as moderate decreasing the selling price of its products and more gifts giving, it still can’t compete with its powerful arrival McDonald’s (Wei & Sheng2008).

In addition, there are also several competitive forces for KFC to take into account in Chinese market. The first one is the relatively lower barging power because of the large size of the Chinese market that the individual consumers have little influence on the competition. The second one is the on the supplier side. Since most of the chicken meat of KFC come from the local suppliers, it owns of risks of raw material shortage especially during the bird flu and other period of infectious disease wildly spread (Wei & Sheng2008).

4.3 Health issues

The health problems in the industry of fast food are also big issues in western countries, because the fast food such as the fired ones may lead to obesity and other health problems due to their high content of calories and carbohydrate. And more and more people have realized the potential harm of fast food taking, especially for the children in China, which also limited the further business development of KFC’s business in China, especially the Sudan red case of KFC’s food which was suspected to lead to cancer, made the reputation of KFC dropping to the ground (Wei & Sheng2008).

4.4 Over speed of expansion

Under the global financial crisis, it isn’t wise enough for KFC to continue its expanding speed. According to the financial report of KFC in the fourth quarter of 2008, although the revenue growth rate reached 15%, the risen rate goes down by 50%, which was mostly due to the over expansions in Chinese market (Wei & Sheng2008). Such kind of high speed expansion lead to the exposure of several bad practices such as the corruption issues, talents shortage, management problems and so on, which all resulted in the negative risen rate of KFC’s sales revenue in China(Wei & Sheng2008; China today 2004).

5.0 Recommendations

5.1 Respect the host culture

For KFC, its blending the location strategy with the Chinese characteristics is really outstanding and boosts its business a lot in Chinese market. But the arrogance and ignorance of Chinese people’s deep feeling on their traditional food arts may only result in negative impact of its business and reputation in China such as the case of Chicken Warp of Gulao Meat(KFC 2009; China today 2004; Sexton 2008).

KFC is recommended to further investigate the host country’s culture including Chinese history, tradition, geography, people’s preference and hates, especially the culture essences, which can not only assist KFC to continue its well performance based on blending its brand with Chinese characteristics but also avoid touching some sensitive aspects of Chinese consumer and offending them (KFC 2009; China today 2004; Sexton 2008).

    1. Expansion speed

As the above analysis shows the sales revenue have a negative rising rate which was mostly due to the over expansion speed of KFC. It is recommended for KFC to maintain its present business scales in China before it makes proper adjustments in every corner of its business especially under the attack of global financial crisis.

    1. Health issues

Since Chinese people become more and more aware of the diet health, KFC in China had better take this consideration into account. It is recommended to offer more variety of food with healthy essence, which may not only help it maintain the existing customers resources but also facilitate it attract more new customers who have limited meal time but also take care of diet health(KFC 2009; China today 2004; Sexton 2008).

    1. Substitutes

Although KFC is famous for its chicken products, it had better develop more short term substitutes from time to time for the chicken products, which could both enhance its capacity on defending risks such as some widespread diseases such as the bird flu and bring its Chinese customers with fresh feelings(KFC 2009; China today 2004; Sexton 2008).

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