KFC: Strategies for Successful Entry to China

Introduction

In the 21st century, each and every business must have a good management team that will propel such firm to greater heights by its core business. Competition is one of the challenges facing most of the operating businesses today and the corporate governing the firm must come up with the strategies of how to overcome all these problems and emerge agile in the face of the competitors. Strategies, whether long-term or short-term are the only way a firm can withstand all the challenges that are being faced in today’s business world. This has to be accompanied by solid and consistent implementation because whether the strategies have been put into place or not, implementation of these strategies will always remain a key determinant of a well-performing firm (Cheng 2001). Constant review is of greater importance here to ensure that changes are made to those strategies that become obsolete due to changes that are their infirm, s operations. It is also important to consider and counter the forces that deter the business to succeed in its undertakings. Examples include entry of new competitors into the market, consumers’ bargaining power, Suppliers’ bargaining power and substitutes (Zhang 2006). This essay will discuss the strategies that were used by the KFC firm in China to make its story successful in the face of its biggest competitor McDonalds which is its rival company (Yang 2003). Factors that led to its establishment will also be discussed in this essay including the strategies being employed currently.

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Discussion

KFC which is a management company has been involved mostly in outsourcing functions as far restaurant services are concerned. It is improvement of such functions that have seen its success up to this far mainly because of its good management. It has also realized that by franchising its brands all over the world, it would achieve more and that is what is happening today. This strategy has not been proved to work or to be quite effective because it was not launched long time ago hence the management is still monitoring to see its actual effect. On top of that, what has been put under close scrutiny is the supply chain. The main reason is that the management wants to control every aspect of supply chain to ensure that there is reduced cost in the course of doing such operation and also make sure that they are more efficient and effective. This has been a result of the expansion of the firm that is happening very fast. The management also has not been left behind in implementing the strategy of localizing both staff and menu. This strategy has therefore enabled it to gain loyalty when dealing with local suppliers, landlords, clients and also the local government (Warren 2008). This has been considered as one of the keys to the success story of the KFC. By doing this it has managed to deliver fare that is more interesting than it would offer in other countries.

There has been introduction of foodstuffs which since then has seen the success story of KFC in China. For instance the decision to introduce a type of food that is commonly served along the road as breakfast is a move towards localization of KFC. It is called youtiao which is simple and deep-fried dough. This was a good idea that was embraced by the consumers as their favorite breakfast. Apart from this it ensured that it offered this breakfast at a lower price than the competitors hence winning the customers. This can also be looked at as product differentiation whereby it decided to introduce a new type of breakfast other than what the other firms were offering and at the same time sold it at a slightly lower price. It also went an extra mile to open a store which was located in Beijing and was another move towards its success. By doing so, it enhanced the government relation which has a very big impact on the success of its operations. This is very different from what is seen in first store of McDonald which is not important politically in Shenzhen.

In 1990s, KFC centralized its management as far as its supply management was concerned (McGregor 2003). From this, high-quality products could be realized, supplier relations and brand management which were all centralized and which were much better as compared to that of McDonald and also it was in apposition to enjoy economies of scale due to its operation in large scale. This is given a closer look assisted this company to operate at reduced cost while at the same time achieving more profits as a result of this large scale operation.

The idea to have most of its employees paid hourly also was a good idea, which in other words means that most of the money spent on them was much lower than that which is spent on the formal workers and they are not as many as those who are paid wages hence saving a lot of money (Arthur 1954). The money saved was used to expand its operations. Most Chinese prefer chicken to beef which KFC is concentrating on as opposed to McDonald which does not concentrate on chicken. China has also an expansive and massive market of about 200 million people along the coast and therefore if only KFC can manage to produce enough foodstuff for them, they will definitely make a substantial step ahead of their rivals. Also the changing customer behavior in China has been realized by the KFC and they are using this as a tool to conquer McDonald’s by producing what is not already in the market (Minxin 2007). Its capability to deal with corruption is enhancing its operations and also they are using this as a strategy to ensure that the future of its success is not compromised by corrupt government officials (Roberta 2008). It has therefore decided not to give up in the fight against corrupt government officials (Johnston 2001).

KFC has been investing much on market campaigns than McDonald’s in china. On the other hand, more Chinese people do not prefer hamburgers to fried chicken which KFC concentrates too much on ( Luo 2002). McDonald’s has also responded with a strategy that will see it targeting Chinese people especially the young that will see it make a greater step toward becoming more preferred than KFC. The menu of KFC is more specific to Chinese choices than that of McDonald and also they have the best coupon deals which are preferred by more than half of the Chinese as opposed to beef produced by McDonald’s.

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Conclusions

To avoid becoming a second player in china’s economy, other restaurants like McDonald’s have to come up with strategies on how to compete with this company that is leading in china as far as foodstuff is concerned. They need to consider management, supply chain management, Identifying a market segment and also concentrate on satisfying that segment before trying other options (Farkas 2005). By doing this it will be much easier to achieve a competitive edge and eliminate the idea that they will always be operating as second players.

Reference

Arthur, W.(1954) Economic Development with Unlimited Supplies of Labor, The Manchester School, vol. 22, no. 2, pp. 139-191.

Cheng, T. (2001) Price of modernization of China. Circulation 2001;103:e131.

Farkas, D. (2005) Chain Leader; ABI/INFORM Trade & Industry pg. 20.

Johnston, M. (2001) Corruption in China: Old ways, new realities and a troubled future, Department of Political Science Colgate University.

Luo, Z. (2002) Obesity warning to Chinese children. Beijing Review; 45:14–6.

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McGregor, R. (2003) China swallows fast food at an ever more rapid rate. Financial Times, p. 12.

Minxin, P. (2007) Corruption threatens China’s future, Policy Brief 55, Carnegie Endowment for International Peace.

Roberta, A. (2008) Corruption: Dare we compare the United States and China, San Diego, California.

Warren, K. (2008) KFC in China: Secret recipe for success, John Wiley & Sons, Singapore.

Yang, P. (2003) The history and civilization of China, Central Party Literature Press, Beijing.

Zhang, Z. (2006) How and why Chinese firms excel, in the art of price war, Wharton.

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NerdyTom. (2022, January 1). KFC: Strategies for Successful Entry to China. Retrieved from https://nerdytom.com/kfc-strategies-for-successful-entry-to-china/

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NerdyTom. 2022. "KFC: Strategies for Successful Entry to China." January 1, 2022. https://nerdytom.com/kfc-strategies-for-successful-entry-to-china/.

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NerdyTom. (2022) 'KFC: Strategies for Successful Entry to China'. 1 January.

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