The Business Strategy of Kentucky Fried Chicken in China - Research Paper Example

Name: University: Course: Tutor: Date: Abstract: Western fast food major outlets like Subway, McDonald and Kentucky Fried Chicken (KFC) have been flooding the Chinese market over the years. Kentucky Fried Chicken (KFC) which is the leading western fast food operating in China has particularly managed to penetrate the Chinese market through its “finger licking good” chicken which forms a major part of the Chinese’s deep-rooted dietary habits. To the Chinese people who until the 1980s had to contend with untidy food outlets and unfriendly services, the coming of KFC, Subway, McDonald and other western fast food outlets offered them a sign of relief. The entry of these western fast food outlets in China enabled the Chinese population to embrace the ambience, rich décor and friendly service of these outlets. As of the year 2003, these fast food outlets had opened thousands of outlets in China. KFC in particular had a total of 900 outlets, with its presence being felt in 12 out of its 13 provinces. Apart from its popular products, KFC customized products and offerings like Peking duck, bamboo soup and other to suit the Chinese market and hence enable it to win over loyal customers. It also pioneered the drive-through food outlets in China. Despite stiff competition from other western fast food outlets likes of McDonalds and Subways and homegrown food chains like Ronghua Chicken, KFC has consistently lead in the fast food market in China. Literature Review: This century has seen an increased expansion of multinational organization in foreign countries. It has become common for multinational corporations to expand their products in foreign countries and become huge both economically and in size. This phenomenon has taken the attention of researchers where they have taken research in several aspect of this expansion. Some interesting studies have been conduct in this regard where attention has been directed on marketing strategies that these multinational fast food corporations have applied in order to conquer these foreign markets. Discussing international marketing involves both adaptation and standardization. The international marketing review offers a number of good findings in this line of research. According to (Doole & Lowe 2008), standardization or in other words globalization involves developing a marketing strategy that looks at the entire world as a unique market. It entails designing a standard services and products that are distinct in each area and a marketing-mix in every respective region. These proposed regions are to offer standardized products, promotion campaigns, prices, while using a common distribution channel cutting across all markets. Adaptation or localization in other words looks at every market as a distinct market that requires an approach that considers its cultural, national, and regional uniqueness. This strategy therefore calls upon the company to adapt itself to each of the regions/markets so that it can suit to the demands of every distinct region. When coming up with an international marketing strategy one ought to consider culture because of the way it impact greatly the consumer behavior and the shopping habits (Subramanian & Bala 2001). Culture has been defined various by several people. (Kroeber & Clyde 1952), for instance have featured most of these definitions in this article, all of which agree that cultural differences lead to varying consumer responses across regions. Majority of these researches have also proved that no matter how a business organization offer its services or sells its products to a foreign country, the local cultural environment will also have a significant impact on the marketing strategy that it applies in that particular region. Therefore, today’s literature on the same suggests that international marketing managers should always ensure that they understand the cultural differences of the regions that they intend to pitch camps when they are devising their marketing strategy (Hermann & Heitmann 2006). In fact, the cultural variable is hard to operate and isolate especially nowadays where the economy is increasingly being globalized thereby increasingly mixing culture. It is therefore incumbent upon multinational corporations to pay close attention to evaluating the cultural environment, discovering the variations between values and equally important, creating a cross-marketing strategy. As has been mentioned, both adaptation strategy and standardization strategy can be looked on as two entry strategies which symbolize two extremes. Considering the influence that cultural differences have on organizations entry strategies to new market, these differences also ought to play a major role in an organization’s entry to a foreign market. This is particularly important especially considering the fact that the consumer buying behavior differs across cultures (Hermann & Heitmann 2006). The development of the modern fasts food industry in China followed with the implementation of China’s reform and its opening up of its economy. It is this opening of up of its hitherto closed economy that saw the arrival of western fast food companies pitch camp in this communist state, most notable being the KFC, McDonald, Subway to name but a few. Today, the Chinese fast food market is characterized by two major segments namely; western fast food brand that are led by KFC, McDonald, Burger King, among other and Chinese fast food brands that include Da Niang, Kungfu, Dumpling, and Yonghe King to name but a few. KFC Corporation belongs to one of the largest restaurant group by the name Yum global food system. Among the other brands that it owns includes the Pizza Hut, Kentucky Fried Chicken and Taco Bell, all of which have a combined outlets totaling over 30,000 fast food outlets. The main reason that explains KFC success in China is its marketing strategy. KFC first entered the Chinese capital of Beijing in 1987. One of the things that KFC had to contend with in this city was its long food culture, although its large population was a consolation to KFC. As a first step, KFC began by experimenting and learning on how best to adapt to the Chinese society and food market, from where it proceeded to come up with a management model that had Chinese characteristics. By 2007, KFC had opened a total of 2000 restaurants. This paper will endeavor to explore KFC performance from four perspectives namely product strategy, product innovation, channel and public relation and pricing strategies. Methodology: Research Problem: For KFC, in order to gain as much market share in China as possible, they have decided to supply their “finger licking good” chicken in the China based on it culture. This study will look at the impact that cultural environment in China has had on KFC implementation of its international marketing strategy. Problem formulation: Therefore, the problem formulation of this research study will be “how has KFC being conducting its marketing strategy in a culturally diversified place like China?” and “how has the specific culture influenced the international marketing strategies of KFC in China” Research purpose: The main aim and purpose of this research study is to research the marketing strategies in various cultural environments and also to find out how the effect that the Chinese culture has had on the entry of a multinational organization and especially the one that KFC has implemented in its penetration of Chinese fast food market. Limitations: This study is limited to investigating KFC marketing strategy in China. By focusing only on KFC operations in China the study makes the generalization of its finding to the rest of the industry other than the fast food industry impossible. This selection of KFC also limits this study to only investigating western multinational organizations in the fast food industry that are operating in China. Previous study: Over the last couple of years a good number of researchers have studied the topic of cultural diversity and cross-culture comparisons in various sectors and areas. However, majority of those studies have mostly compared the cultural differences between two or many regions, while others have dwelt on the culture differences to consumers’ needs, values and buying behaviors, with only a handful looking at the international marketing strategy execution from a cross-cultural perspective. For instance, in this article; “fast food and ethical consumer value: a focus on McDonald and KFC” (Monika & Morven 2005) present research of how KFC and McDonald carry-out their marketing strategy in a socially responsible and ethical manner. However, it is unfortunate that they did not explore other aspects of marketing strategies especially from a cross-cultural point of view; if anything various cultural environments may have an influence on the understanding of ethical issues. Definition: Culture in course of this research will be used to mean “the sum total of learned belief, customs and value that serve to direct the behaviors of the consumer in a particular region’s market.” Methodology: The methodology that has been in this research is meant to get a deeper understanding of how different cultures influence the marketing strategies in KFC marketing strategy in China. Using a qualitative approach will give the researcher an opportunity to be flexible in the research, and to get a comprehensible and extensive view of the cultural feature (Bryman & Bell 2006). The methodology will also come up with the research, assess the theories and elucidate on the researched phenomenon in a new and better way. Data collection: The data collection method that will be used will involve the collection of both primary and secondary data. Primary data in this case is the data that has been collected from primary sources. In this case primary data has been collected by telephone calls from the marketing managers of KFC. Because the biggest KFC outlet is in Beijing, the researcher chose the respondents working in Beijing KFC’s fast food outlets. On average it took 40 to 50 minutes to interview a respondent, an interview which was tape-recorded for analysis purposes. In course of these interviews the researcher a specific interview guide while the respondent were able to freely answer the questions forming the interview. One advantage of using this approach is that it allows the researcher to ask follow-up questions in case the answers provided by the respondents are not sufficient. In order to avoid misunderstanding the researcher contacted respondents with email in order to confirm the answers that they provided. The second data is essentially data that has been collected for other purposes. Secondary data being of better quality than primary data will be gotten from KFC web pages, newspapers and other periodicals. Research Criteria: In research, the researcher uses various criteria that make his/her research valid and trustworthy (Bryman & Bell 2006). In this particular research the criteria that will be used is reliability and validity. Validity in this case refers to the integrity of the findings that are generated from a piece of research, and it is important that the sources of the data are close to the phenomenon (Jacobsen, D.I 2002). In this paper, the primary data came from the responses of a KFC marketing managers by telephone and email interview. Result Analysis: Product strategy: 4P marketing strategy is considered a perfect reflection of the market being targeted. It is a known fact that manager should always provide products that are appropriate to the customer’s needs and value and also buying behavior of the same people. When trying to strike a balance between adaptation and standardization, an important factor that has a major effect on the international management of services and products is the cultural factor. From the cross-cultural perspective, the Chinese people are generally curious about new products. In order to meet the demand of these new products KFC has endeavored to launch new products faster in order to win more customers quickly. Price strategy: Price setting is normally a complex thing whose determination calls for the consideration of a number of factors namely; competition, material cost, market share, consumer’s perceived product value and product identity. Other factors that can affect the price setting strategy include; distribution channels, market structure and servicing, product adaptability, market growth, competition strategies, strengths and objectives. From the cross-culture perspectives, majority of the Chinese people emphasize the relationship between the personal status and consumer products. As mentioned in the Beijing, KFC barely reduces its product prices. Other than reducing and lowering prices in relation to the financial situation, KFC carries out a number of promotion strategies to attract the customers. Place strategy Place strategy in fast food industry means the place where products are being sold. Place strategy is normally influenced by external and internal factors. Social culture factors like governance policy, religion, customer buying behavior, religion and local law affect place strategy in various ways. Since KFC opened its first fast food outlet in Beijing its managers told the researcher in the interview that the process of choosing location is normally taken really cautiously mostly through collecting information from residents of such location. During this process KFC also collects information on financial condition, political risk, population density in those locations and the culture of those areas. This is the reason why products and decorations in KFC restaurants in various locations differ significantly. Promotion strategy: Promotion in this case refers to the totality of communications that a marketer has in his disposal in a certain marketplace. It normally includes; public relation, advertising, point of sale, and word-or-mouth. KFC implements some definite promotion strategies in line with the Chinese culture so that it can do business perfect, including adverting, take-away services and strategy of selecting cooperate associates in China. Conclusion: When examining the international marketing strategy of the KFC, the researcher has confirmed that KFC emphasized the Chinese culture when carry out it marketing strategies of various aspects. KFC product strategy is mostly influenced by the customer value and by traditional taste in a larger extent. KFC price strategy in China is mainly affected by both the customer behavior and also the local economic condition. As far the place strategy, KFC takes the consideration of the Chinese financial condition and political risk, the level of concentration and minority nationalities’’ particular dialect and customer. Additionally, when implementing the promotion strategy, KFC stress the combination of Chinese culture with corporate culture. For example, all KFC advertisements in China are associated with the value, language, and customs tightly. In a nutshell, cultural differences influence the implementation of international marketing strategy in various ways in KFC foreign business adventures. Bibliography: Bryman, A. & Bell, E. (2006). Integrating Quantitative and Qualitative Research. Qualitative Research, 6, 97-113. Doole, L., & Lowe, R. (2008). International Marketing Strategy (5th edition). London: South- Western Cengage Learning. Herrmann, A. & Heitmann, M. (2006). Providing More or Providing Less? Accounting For Cultural Differences in Cons. International Marketing Review, 23 (1), 7-25. Jacobsen, D.I. (2002). What, How and Why? - If The Method In Business And Other Social Sciences. Lund: Studentliterature. Kroeber, A., & Clyde, K. (1952). Culture. Anthropological Papers. No. 4, Peabody Museum. Monika, J.A. & Morven, G. (2005). Fast Foods and Ethical Consumer Value. British Food Journal, 107 (4-5), 212-225. Subramanian & Bala. (2001). Culture Based Product Classification in Global Marketing for Competitive Advantage. Global Competitiveness, 9(1), 419-428. Usunier, J., C. (2000). Marketing Across Cultures (3rd edition). Prentice Hall, Essex. Read More