KFC has a refocused international strategies to grow its company and franchise restaurant based on over the world. Competitive MKT strategy: developed 3 types of chicken :Original recipe (pressure cooked) Extra crispy (fried) tender roast (roasted). If there were just a few things that China has wholly embraced from the West, it would be their love for Kentucky Fried Chicken, or KFC as it is more commonly known. In 1987, the fast-food operator opened its first outlet near Tiananmen Square in Beijing.
Then came 2,000 other outlets, which sprung up across China within the next 20 years – a phenomenal achievement by any standard. The improbable success of KFC China can be attributed to a few key ingredients: context, people, strategy and execution, so says Warren Liu, a former vice president of business development and a member of Tricon Greater China Executive Committee. Tricon was the predecessor to KFC China’s parent company YUM! Brands. | In his book ‘KFC in China: Secret Recipe for Success’, Liu says it was firstly the context in which KFC entered the China market, that paved the way for its eventual success. Strategy is context-dependent; a strategy that works well in a stable and mature market economy would most likely not work well in China, given the diversity of its people, geography, the heritage of a rich and complex culture, and a rapidly and continuously changing business environment since China’s economic reforms commenced in 1978,” Liu says in his book. | Case in point: when KFC first entered Hong Kong in 1973, it quickly grew to 11 restaurants in the following year. But it misjudged the local market and failed to develop a suitable business model. By 1975, all 11 restaurants were forced to close their shutters.
Ten years later, KFC came back with a vengeance, eventually franchising its operations to a company called Birdland, which was backed by a group of local investors. KFC’s rocky experience in Asia served as invaluable and relatively inexpensive lessons in preparation for its 1987 entry into China. At a time when joint ventures were the only viable alternative in the late 1980s and early 1990s, KFC China selected local partners with government connections and effectively leveraged their tangible and intangible local resources. Once JVs were no longer required by Chinese regulations, and sufficient knowledge and esources had been transferred from the local partners, KFC went direct in order to avoid the paralysis that can result from disagreements between partners. The ‘Taiwan Gang’ Another vital ingredient in KFC’s secret recipe is its leadership team, specifically its founding leadership team known as the ‘Taiwan Gang’, mainly because most had hailed from Taiwan and to a lesser extent, other parts of Asia. According to Liu, members of this pioneering team of KFC in China had accumulated at least 10, if not 15 to 20 years of fast-food industry experience prior to landing in China.
Though predominantly Western-educated, being ethnic Chinese, they inherently understood China. Many also came with a background from McDonald’s. That factor led to an intuitive knowledge of the market context, which then put KFC China on track to becoming a successful enterprise. “In order to be successful, especially for foreign companies or non-local companies, a deep understanding and a broad understanding of that market context is critical to success. To the extent that understanding is (even) intuitive.
Intuitive – meaning that you don’t have to do the market research, you don’t have to have multiple meetings to come to the best solution to a problem or to point to a future strategic direction,” Liu told INSEAD Knowledge. “Those money and time saved are going to add to your probability of success in the long run because in a dynamic and fast-changing market environment, speed becomes a lethal competitive differentiator. The speed with which to come up with the best ideas, to make the optimal decisions, and to execute those decisions once they are made.
Over time, speed contributes to the accumulation of a competitive advantage in a fast-paced and rapidly-changing market environment. ” Going local Intuition led to product localisation, which is also a very important part of the success formula. Liu says that KFC China tended to introduce new products more frequently than their competitors in China. Also the fact that KFC has chicken as its core product offering is a very natural advantage that fits this context very well, since most Chinese prefer pork, followed by chicken; whereas beef and mutton lag far behind.
So in that light, KFC enjoys a natural product advantage over McDonald’s. | That KFC has also done a lot of work to continuously invent and launch new products; products that better fit the Chinese consumer’s taste preference, has allowed them to keep the competition at bay. It has got a 2:1 ratio over McDonald’s in China, whereas outside China it’s the other way around. Although KFC’s original recipe is accepted by most Chinese, KFC China did not stop there.
The highly localised menu includes congee or Chinese-style porridge for breakfast; Beijing Chicken Roll (a la Beijing Duck) served with scallion and seafood sauce; Spicy Diced Chicken resembling a popular Sichuan-style dish. Their latest creation is you tiao or Chinese dough fritters. Yet for all its hits, there are already rising brands that are not the KFCs or the Burger Kings or the McDonald’s. Liu says that Wei Qian La Mian, also known as Ajisen Ramen, is a Japanese product that has been doing very well in various cities throughout China. So is Zhen Gongfu or Real Kung-fu, a Chinese fast food chain which is showing a lot of promise.
The competition has even gone hi-tech. “I recently heard about a robot developed with subsidy from the Chinese government which is capable of preparing dozens of popular Chinese dishes at high speed, and with excellent taste, based on expert knowledge. ” Dawn of a new era? Which probably explains why KFC China has fired its latest salvo. Says Liu: “I think the reason that YUM! Brands is interested in launching and launching aggressively this new brand called East Dawning is for reasons both offensive and defensive in nature … because (they) wanted to fend off potential local Chinese fast-food competitors. However, Liu thinks KFC China should reposition East Dawning, and move its market focus and resources to outside China; and within China, continue to focus on KFC, Pizza Hut and Pizza Hut Express. After all, he says, KFC China is the indisputable star of YUM! Brands’ worldwide growth engine. That being said, Liu feels that more attention in the future should be paid to the flavour, quality and price performance of new products – not frequency of new product introduction, as this can detract consumer focus away from core products offerings.
He also thinks that the company should develop senior local talent within KFC China to take on top national, regional and even international leadership roles in the next few years. “While the ‘Taiwan Gang’ played its historical mission exceptionally well during the first two decades, it’s time for the baton to be passed on to the local Chinese – not for any altruistic reasons, but simply because the locals understand this market even better than the ‘Taiwan Gang’”, he says in his book. But past achievements do not guarantee future success. So will the “Local Gang” be as good or even better than the “Taiwan Gang”?
That, Liu says, remains to be seen. “It all depends on the evolution of that leadership team and the evolution of China, the market, in the future. Implementation will be key. And in China, successful implementation requires not only sound, localised products, people, systems and processes, but also the flexibility to change direction according to a new government policy, crisis or opportunity. “Only the most perceptive and swiftest-moving companies will rise to the top, and stay on top,” Liu says in his book, although having said that, he still has a lot of faith in his former company. KFC’s leadership position in the Chinese restaurant industry is KFC’s to lose. ” KFC does really good in the area of localization which makes Chinese people trend to believe it is a China-made restaurant! On the another hand, McDonald insists its International track. I cannot say which is good, but if want to catch the middle-age people and old people’s market in China. It’s better to do like KFC. Here are a brief explanation of KFC’s localization strategy, hope it will be helpful to you guys!
KFC – ‘a foreign brand with Chinese characteristics’ One of the many mysteries of modern marketing is how KFC, a once rather lack-luster American fast food brand, outperformed all competitors and in particular arch rival and world market leader McDonald’s, to become the biggest restaurant chain in China. Whether measured by number of restaurants, revenue, or market share, KFC is far and away the number one restaurant brand in China. Even more striking is its dominance over McDonald’s, a position that is reversed in nearly every other country.
McDonald’s has 800 branches in China, compared to KFC’s 2200 and, with KFC opening 300 new branches per year, the gap is widening. KFC China is not just outperforming the competition. In 2007 it contributed more than 20 percent of global revenue of parent company Yum! , whose brand portfolio includes Taco Bell and Pizza Hut. It is a proportion that is likely to grow up to and beyond 50 percent, according to Taiwan-born Warren Liu, a former member of the company’s Greater China executive committee. Liu, who was with Yum! or three years from 1997, and is in Beijing to promote a book about his experience with the company, is very clear about the reasons for this remarkable success story. KFC China, he says, quite simply went native. The first important move was to recruit a local senior management team; not so simple in 1987 when KFC opened its first restaurant not far from Chairman Mao’s Mausoleum in downtown Beijing. Back then nobody in Chinese mainland had experience of running a fast food chain, so KFC did the next best thing. They recruited what Liu affectionately refers to as “the Taiwan gang. Liu says it was crucial for firms trying to enter the market back then to have an understanding of China and the Chinese cultural context “so deep that it is intuitive,” to understand the Chinese people’s “mixed feelings, of love and hate about the West, to understand Chinese history, language, the influence of Confucianism, Buddhism and Taoism, this is especially important if you are in the consumer goods industry. ” KFC looked at recruiting from Hong Kong, then still a British colony, Singapore, and other areas in Asia but in the end found its core team in Taiwan. Why particularly Taiwan? ” said Liu. “The education system in Taiwan at the time was very Sino-centric. We learnt Chinese history, Chinese geography; we studied the Tang dynasty poets Du Fu and Li Bai. The Taiwan gang was the best available substitute for a local team. ” The second factor underpinning KFC’s success, according to Liu is product localization. Liu said the company has constantly sought to adapt its offerings to the local palate. For some years customers have been able to order congee (rice porridge) with thousand year old eggs.
But six months ago, Liu said, he had a kind of epiphany. “I woke up and turned on the early morning news and realized KFC was selling youtiao [a kind of Chinese doughnut]. I realized KFC has entered a new plateau. Youtiao are the quintessential Chinese breakfast. I was speechless. That’s localization as extreme as it can be. ” Asked if KFC might prove vulnerable to the kind of economic nationalism seen around Coca Cola’s proposed takeover of China’s Huiyuan juice company, Liu replied, “KFC is still seen as a foreign brand but it’s a foreign brand with local characteristics. Not everyone may agree. In 2007 the All China Federation of Trade Unions accused KFC and Pizza Hut of paying their employees in Guangdong Province less than the minimum wage. The ACFTU has recently stepped up a recruitment campaign targeting foreign companies that have resisted unionization. Liu said his primary motivation for writing the book was not to help multinationals conquer the China market, but to help Chinese firms who have ambitions to go abroad. For the last decade the Chinese government has been urging the most capable of Chinese enterprises to step out. So far the results have not been impressive. That’s an understatement. So I hope people here can learn from the KFC experience in China” Western fast food giants meet the challenges of local culinary preferences Passers-by are stopped in their tracks by these eye-catching KFC posters on Nanjing Donglu. Many hold that it is the latest dish (pickle and sliced pork soup) which really signals KFC’s localized approach.
SURPRISE was the first reaction of local student Li Ting on hearing of Kentucky Fried Chicken’s latest offering. Rather than extend their characteristic range of chicken products, the fast food giant recently introduced a distinctly Chinese dish: Sichuan pickle and sliced pork soup. “How strange to get something like that from KFC! Anyway, I’ll give it a try,” Li said. Perhaps that is just the type of reaction KFC hoped would meet its bold decision to cater specifically to the Chinese market with the new product, which is competitively priced at 4 yuan ($0. 8). “Some may think the soup is a ridiculous dish, but our belief is that it is right to develop new products which meet consumers’ diverse needs,” said Jasmine Fang, spokeswoman for Shanghai KFC Co Ltd, which has more than 70 outlets citywide. “But that definitely doesn’t mean we will turn away from fried chicken, our main product,” she added. Localized approach In fact, astute customers will notice that the soup is not KFC’s first step towards offering a more localized selection for Chinese, a large number of whom are hooked on this Western fast food.
Earlier in 2001, KFC launched a fresh vegetable soup, which was followed by “fragrant beef” and “Uygur roast pork”, two Chinese-style dips for french fries. But despite this, many hold that it is the latest dish which really signals KFC’s localized approach. Behind the seemingly simple creation is a one-year market research process, led by the KFC Chinese Healthy Food Consultative Committee, set up in 2000. The results have been encouraging. Prior to release KFC predicted that only 5 per cent of customers would buy the soup; in fact the number of takers has turned out to be triple their estimate.
On the basis of this KFC will not withdraw the soup in February as had been planned – it will continue to be served nationwide as part of the long-term menu. Dining culture “Choosing to eat at fast food restaurants like KFC doesn’t necessarily indicate a desire for Western flavours,” said Sun Min, a local government official. “I would accept the soup, which represents a simplified form of Chinese cuisine, because speed and convenience are top priorities for me (in choosing places for dining),” Sun said. These qualities were also emphasized by Wang Qi, general manager of Shanghai KFC. We can’t guarantee that we are better than Chinese mamas at making this type of soup, but after all people choose KFC for fast food, and we are good at offering fast and convenient service,” said Wang in a recent interview with the Xinmin Weekly. Du Jiming, a member of the Shanghai Catering Trade Association, believes that it is natural for foreign fast food giants such as KFC and McDonald’s to introduce local-style recipes, given their well-established brands and sound business found method and a secret seasoning mix of eleven herbs and spices.
The other chicken offering is Extra Tasty crispy chicken which is made using a garlic marinade and double dipping the chicken in flour before deep frying in a standard industrial kitchen type machine and another original recipe was tender roast chicken. Other products include: Hot Wings pieces, Chunky Chicken pot pie, Kentucky Nuggets®, Colonel’s Crispy Strips®, Honey BBQ sandwich, Original Recipe® Sandwich, Tender Roast® Sandwich, Triple Crunch® Sandwich, Triple Crunch ®Zinger® Sandwich, French Fries and salad. Due to geographical differences, KFC-Japan offered products that were slightly..