Thursday, February 18, 2010

KFC in China


The world’s largest chicken restaurant is planning to penetrate and like blog advertising, spread its marketing channel to the world’s most populous country. In 1986, they have 400 stores in Japan and 33 franchises in Singapore which are highly noticeable in terms of profitability and customer satisfaction. Again, that does not guarantee an easy penetration to other country, such as China, not merely because of its size or partly of the other players in the industry (McDonalds, Burger King, Wendy’s and Pizza Hut), but also by the environmental aspects that KFC would encounter. Even though, Tony Wang had experienced doing business in Tianjin, still he has to consider the managerial resources, supply of chicken, and the frequency of tourist and political issues that can bring major changes in the attitudes of Chinese employees. These changes are required under the KFC banner and entail time consuming training programs.

Being a fast food chain, KFC caters its customers in a manner that it is being prepared and served quickly. Customers that fall to these categories are being driven basically by their way of lifestyle and culture. Let us take for the example the case of Jollibee wherein the target audience are the kids that are normally accompanied by parents. In this case, it makes the whole family the major customers. The branches that were established in other countries tell us that foreign taste is being satisfied by their products, thus, tourists are also sought as target audience. Having chicken as the major raw material in their operation, accessibility of quality chicken will be of in great priority.

Now you got the point, the question is, Will the KFC’s advertising line of “we do chicken right” be patronized in China?

Having Tianjin as the sole ground for Tony Wang’s experience in doing business in China, he has acquired a sense of confidence in terms of developing contracts within the municipal government but unfortunately, question arises as to how can they do chicken right, if in the first place, they lack convenient supply of grain-fed chicken. Well, Shanghai shines as the largest population and being the center of Finance in China and it is the ground for major trade and financing, business transactions, and an arena that is bred by competition due to several existing “fashionable restaurants.” Likewise, the “doing the chicken right” concept is very much constrained because they have to import quality chicken from Thailand. The politically “foreign investment friendly” Guangzhou has the aces of being the preferred city for foreign investment, accessibility and familiarity in Western Management and Culture. But then again, they lack the accessibility of the primary economic factor for raw material-quality chicken.

In terms of the accessibility of supply, Beijing, have several poultry producers operating just outside the city and so it defines the feasibility of KFC’s investment. KFC’s dilemma of “franchising vs. partnership strategy” is being answered by the kind of political power that China possesses. Beijing, the capital city, and the center for most political activity, has the probable advantage of KFC’s first investment in China. Being the center for political activity, the provision of necessary access to Government agencies and business regulatory bodies can somehow be eased. Again, the implication for being the center for political activity means power and this justifies somehow the future of KFC China to expand using franchising strategy. Not mentioning Tony Wang’s ability in handling franchising operations particularly in major fast food companies, he knows that the franchising indeed is the best strategy and at the same time a management tool to handle branches that are being lead by managers who are culturally out of touch. He felt that KFC had been too conservative in penetrating international markets and also noted that most of the enormous profits for his projects were generating for franchisees and Beijing will be the “epicentre” of the expansion of KFC in China.

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