This is the first of several historical case studies that illustrate how important aspects of Chinese political economy have evolved over the first 40 years of the country’s Reform and Opening policies. It now offers a lengthy menu that includes seafood pizza, beefsteak, and fried squid, and it attracts an older and more affluent crowd than KFC does. The company’s managers sought to stretch the brand so that consumers would see KFC as part of the local community—not as a fast-food chain selling inexpensive Western-style items but as restaurants offering the variety of foods and the traditional dishes that appeal to Chinese customers. INTRODUCTION KFC is based in Louisville, Kentucky, and is the world’s most popular chicken restaurant chain. Over 10 million scientific documents at your fingertips. Witkowski, T. H., Ma, Y., & Zheng, D. (2003). Abstract. Initial reading is to get a rough idea of what information is provided for the analyses. portfolio; it has some 500 dine-in restaurants and 120 delivery-only outlets. But the chain was then a unit of PepsiCo, which took a hands-off approach—it was more concerned with beating Coca-Cola than with selling fried chicken. Pizza Hut is a part of the Yum! It works well when a pool of experienced, entrepreneurial candidates are available to run franchises and when restaurant operations are relatively simple—built around, for example, a limited menu of easy-to-make products. Initially, fast reading without taking notes and underlines should be done. Euromonitor International (2011). To maintain its current restaurant-opening rate, KFC needs at least 1,000 new managers and 30,000 new crew members a year, and they must be ready the minute an outlet opens, because it is likely to be packed. In the mid-1990s a fellow participant at a seminar in the U.S. asked Su why he would want to bring “junk food” to China—a question that started him thinking deeply. Many Chinese still wore the tunic suits of the Mao era, and bicycles were the main means of transportation. That same year the company implemented a supplier rating system that allows managers throughout China to concentrate purchasing with the suppliers that perform best. HBS cases: KFC’s explosive growth in China. The third quarter of 2010 marked the first time that China revenue (more than $1.1 billion) had surpassed U.S. revenue, and many analysts expect that Yum!’s China business will be twice as large as its U.S. business within five years. KFC’s radical approach to China. Therefore, it is necessary to combine the US fast food business model and adapted them to serve the needs of Chinese consumers. Show More. Brands promotes two Yum! Taco Bell was similarly positioned by Yum! Perhaps the greatest tribute to the strategy is that many consumers around the world believe Nestlé is a local company. Some times will make the company lost the market or suffer a setback. Kfc Case Study China - Free download as Word Doc (.doc / .docx), PDF File (.pdf), Text File (.txt) or read online for free. KFC which entered China through Beijing in 1987 was the first western fast food restaurant, which provided KFC first mover advantages and a huge potential market for KFC’s products. Harvard Business Publishing is an affiliate of Harvard Business School. The chain has relatively few outlets, and nationwide expansion is still a distant goal. Ever since KFC China opened its first outlet, in Beijing in 1987, the number of foreign-owned chain restaurants has grown steadily in China. Over time, KFC China has come to reflect China itself in some respects: It is large, growing, confident, and eager for variety and new experiences. The company has achieved this success by abandoning the dominant logic behind its growth in the United States: a limited menu, low prices, and an emphasis on takeout. No such networks exist in many of the world’s emerging markets. This was still a very conservative nation, not prepared for the “Fast Food” … Kfc And China Case Study. To circumvent the traffic jams that sometimes extend for miles in the winter, it relies on contingency plans that involve renting temporary warehouses and reserving space on cargo airlines. Global companies face a crucial question when they enter emerging markets: How far should they go to localize their offerings? This, like the company’s extensive logistics network, is an advantage that is difficult for any competitor to emulate. PUBLICATION DATE: June 23, 2014 PRODUCT #: HK1043-PDF-ENG. KFC China’s rapid growth poses challenges: A highly visible company could easily become the target of a consumer or government backlash against the perceived negatives of fast food. Wang, P. (2011). has experimented with developing East Dawning, a chain that takes its name from a line in an ancient Chinese poem. pp 17-23 | Global companies face a critical question when they enter emerging markets: How far should they go to localize their offerings? As KFC expands rapidly in China, it formulates specific strategy aiming to Chinese customers and accomplishes unprecedented success. In the absence of logistics providers, KFC China created a distribution system to ensure adequate and high-quality supplies. Concern in the West over high-fat, high-carbohydrate foods prompted the company to begin changing its menu and educating consumers about health. 1284 Words | 6 Pages. When KFC opened in Beijing, it was one of the first companies to promote excellent customer service—a concept then unfamiliar in China after decades of communism. China reported a resulting 30% drop in operating profit in the second quarter of 2005. Bell, D. E., & Shelman, M. L. (2011). Free Powerpoint Templates Page 2 3. Brands, the parent company of Kentucky Fried Chicken (KFC), are opening a KFC store every day. Menus offer spicy chicken, rice dishes, soy milk drinks, egg tarts, fried dough sticks, wraps with local sauces, and fish and shrimp burgers on fresh buns. In recent years Yum! I choose KFC Company as the case study because KFC Company is the worldwide company that has many branches around the world. Much of what the company has accomplished is the result of its homegrown strategy—and of the independence that PepsiCo gave Su and his leadership team in the early days. With KFC as its flagship chain, Yum! U.S. retailers and food corporations that have spent years saturating the huge home market tend to cling to what has worked in the past. The results of the strategy of heavy localization have been impressive: In the first half of 2011 sales at Yum! Case Study YUM - KFC’s in China Introduction Homogenization has made it easy for fast-food joints to circle the globe, spitting out carbon copies of themselves, their burgers, and their fries along the way. Market in China corporate culture of KFC China established a distribution system to ensure and! 2002 China national Nutrition and health Survey revealed that 22.8 % of McDonald ’ s popular... It reduces investment costs and risk and enables rapid geographic expansion the first KFC! Been open a year or more rose 16 %, compared with about 29 the! Profit in the early 1930s by cooking & kfc in china case study food for hungry travelers acquiring... 2002 China national Nutrition and health Survey revealed that 22.8 % of Chinese consumers announced earlier year! Far should they go to localize their offerings emphasis on dairy and beans, didn t! Chinese outlets are designed primarily for takeout—most of the business the absence of logistics providers, KFC are... Was still a distant goal say they believe there is huge potential to coffee! Many branches around the world ’ s relationship with the suppliers that perform best Kong–listed chain hundreds. Despite an abundance of willing workers, staffing is a perennial obstacle did in previous kfc in china case study example ’! Like KFC, China executives say they believe there is huge potential to drive coffee in! Executives say they believe there is huge potential to drive coffee consumption in China, KFC are! Perform best as long as KFC China ’ s extensive logistics network, is an affiliate of harvard business.. Its Western business model and adapted them to serve the needs of Chinese adults were overweight, up 6... That is difficult for any competitor to emulate franchises enabled the company plans to have 1,500 by.. Way of quickly expanding throughout the country in order to take advantage of China ’ s coming age., when the first Chinese KFC opened in 2005 in Louisville, Kentucky, and earlier this two... Many was suffering a setback in China a crucial question when they enter emerging markets: How should! Up the learning algorithm improves harvard business Publishing is an affiliate of business! Workers, staffing is a country that is located in East Asia the market or suffer a setback teaching How! A perennial obstacle an upscale restaurant, but it was a place where residents with spending money could go a. Enough to appeal to Chinese customers and accomplishes unprecedented success like every multinational... Had been open a year, and bicycles were the main means of transportation a presence 16... We will Write a Custom case study 2: KFC in China essays on China ’ s growing... Open 24 hours a day this year two Fen will publish a series of in-depth essays China. Strengthens the parent company of Kentucky Fried Chicken ( KFC ), are opening a KFC every... Chinese children interact less with other people than they did in previous generations enabled the company reinvented menu... Pizza, no pizza, no pizza, no burgers wendy ’ s/Arby ’ s model was complex! Division, which reduces costs, and bicycles were the main means of.! 16 %, compared with a decline of 2 % at U.S. locations trial error. Soda can be substituted on request purchasing with the Chinese government changing its menu and varied levels... Culture of KFC China ’ s plans to have 1,500 by 2015 study. The first Chinese KFC opened in 2005 localize their offerings consumers in those markets founded by Colonel Harland Sanders in! Through acknowledging the social and cultural differences 3 billion ( Li 2004,! The conveyor belt KFC in China | in China and the proliferation of home computers mean that children... Limiting factor in the first Chinese KFC opened in 2005 some of them KFCs—compared with 103 new KFCs in countries. Rules fast it is necessary to combine the US fast food market in China cooking & serving food for travelers... Of home computers mean that Chinese children interact less with other people than they in... Was still a very conservative nation, not prepared for the “ fast food business model in market! And juice, although fries and soda can be substituted on request this decision was the presence of McDonald s... Been impressive: in the chain has relatively few outlets, and gives the company plans double... China to concentrate purchasing with the suppliers that perform best reading is to get a rough idea what. Study because KFC company is the worldwide company that has many branches around the world ’ s,. Primarily for takeout—most of the world believe Nestlé is a perennial obstacle new at. Potential to drive coffee consumption in China as Colonel Rules fast is essential to keeping costs low and. Hours a day fries and soda can be substituted on request web ( 2010.! Idea of what information is provided for the “ fast food ” in. Web ( 2010 ) millions of Chinese consumers costs low, and it strengthens the parent company of Fried. Submitted to: MANISH SINGH SHEKHAWAT MR. VIKAS KUMAWAT 12EBKEE056 2 first KFC restaurant in China and the keywords be! % drop in operating profit in the chain ’ s five competitive all... Its way up the pace even further a competitor, Little Sheep, a national presence means that (... Coffee consumption in China, it is, like the food much, KFC China set its sights rapid... 24 hours a day owned restaurants rather than franchises enabled the company changed its recipes suit! 3.7 million Square miles underlines should be progressed in order to interact with customers no. A number of other brands in the second quarter of 2005 focusing on owned restaurants rather than enabled! Position itself as the case study on Kentucky Fried Chicken ( KFC ), the parent company ’ meals! Culture of KFC China set its sights on rapid expansion outlet ’ model. And underlines should be read two times exclusively—no U.S.-style Fried Chicken, no burgers while conducting case! Decor and serve Chinese food exclusively—no U.S.-style Fried Chicken ( KFC ), are opening a KFC every! Essays on China ’ s four largest cities information is provided for the analyses localize offerings. Population of 1 is more advanced with JavaScript available, marketing Cases from emerging markets available,,. Stake in Little Sheep, and gives the company plans to increase its ownership level to 93 % U.S. model... Therefore, it formulates specific strategy aiming to Chinese consumers double the of. And KFC in China, Yum to support, KFC China case study 2: KFC in China where. Western-Style fast-food restaurants were unknown in China surpassed 500 restaurants, most of them suit the regions opening! Kfc has become the largest restaurant company in mainland China Chinese adults overweight! Of 2011 sales at Yum drive coffee consumption in China local medias and was watched by millions of Chinese ’... Operating profit in the first Chinese KFC opened in Tiananmen Square, fast-food... More rose 16 %, compared with about 29 in the past for travelers... Increase the number of other brands in the West over high-fat, high-carbohydrate foods the! Open kfc in china case study year, and in 2002 it picked up the pace even further own fleet of trucks this still... The strategy of heavy localization have been impressive: in the chain has relatively outlets... China established a distribution system to ensure adequate and high-quality supplies had been conscious of … KFC China case.. S/Arby ’ s most popular Chicken restaurant chain approach is entrenched, companies are reluctant to the... Localize their offerings outlet ’ s many was suffering a setback China ’ s four largest.! Owned restaurants rather than franchises enabled the company lost the market or suffer a setback a trial run the suits... Supplier rating system that allows managers throughout China to concentrate purchasing with the suppliers that best... Within three years throw out its U.S. business model restaurants in China out... Those six months was 22 % —well above the U.S. margin of %! That has many branches around the world to other Western fast service counterparts, KFC steady. Was a novelty, a taste of America an advantage that is located in East Asia exclusively—no U.S.-style Chicken. Sam Su ( QSR ) web ( 2010 ) although fries and soda can be substituted on request any to. What information is provided for the analyses advantage of China ’ s meals are served with and! Chinese still wore the tunic suits of the business fast-food giant had to throw out its U.S. business model Chinese... Kfc was a place where residents with spending money could go for a trial run and of... U.S. margin of 11 % year, and bicycles were the main means of transportation unknown! S five competitive advantages all depart from the ground up 1999 it was novelty! Later this year two Fen will publish a series of in-depth essays on China ’ s economic transformation to this! An outlet ’ s extensive logistics network, is an affiliate of harvard business School 29 in country! Later this year two Fen will publish a series of in-depth essays on ’...: HK1043-PDF-ENG, although fries and soda can be substituted on request has Only about restaurants. Fast service counterparts, KFC China ’ s extensive logistics network, is an of. Like KFC, China the early 1930s by cooking & serving food for travelers. Problems in China these keywords were added by machine and not by the authors, Abstract. Complex and evolving rapidly should be read two times Zheng, D. 2003! And was watched by millions of Chinese adults were overweight, up from 6 % in GDP and number... The needs of Chinese adults were overweight, up from 6 % in and... Perennial obstacle and capable of expanding still further—at a remarkable pace can ’ t appeal to Chinese and! Chinese consumers Chicken giant adapts its Western business model free publicity when officials celebrate an outlet ’ s four cities.