The Impact of Corporate Culture on Marketing Strategy: KFC in China - Case Study Example

The impact of corporate culture on marketing strategy - A case study of KFC in China Method Research is nothing but to search until you find the answer to the questions. Kumar (2005, p.6)1 mentions that there are numerous ways of obtaining answers to the professional questions by using various methods that range from the fairly informal, based upon clinical impressions, to the strictly scientific, adhering to the conventional expectations of scientific procedures. Burns (cited in Kumar, 2005) defined research as 'a systematic investigation to find answers to a problem'. According to Kerlinger (cited in Kumar, 2005) 'scientific research is a systematic, controlled empirical and critical investigation of propositions about the presumed relationships about various phenomena.' It is clear from the above definitions that research is a scientific and systematic process to find answers to the problem. As far as present study is concerned, it is related to corporate culture and its related effect on marketing strategy and the researcher aims to assess and evaluate the effects while conducting a case study on KFC, China. Research Design The research design is a procedural plan that is adopted by the researcher to answer the questions validly, objectively, accurately and economically (Kumar, 2005, p.84) There are basic types of research that need to undertaken to arrive at an appropriate conclusion. However as the present study is to analyze the effects of corporate culture on marketing strategies, analytical as well as descriptive study is undertaken for the study as voluminous literatures are being reviewed for the study to gather evidence in order to find answers to the questions. Qualitative methodology is also adopted to ensure quality data is collected pertaining to the case study which is the basis for whole study as it is specifically important in behavioral sciences when the aim is to discover the underlying motives of the human behavior. Through this method, it is possible to analyze the various factors which motivate people to behave in a particular manner or which make people like or dislike a particular thing (Dr. C.R. Kothari, 2008, p.33).2 As the present study is related to the influence of corporate culture on marketing strategy of KFC, the qualitative methodology is essential for the study. Research Questions The present study aims to find relevant answers to following questions - How the corporate cultures influence the marketing strategy in China What is the relationship between corporate culture and corporate strategy What is the factors corporate culture impacting to marketing strategy What is the feature of restaurant market in China When corporate culture meets marketing strategy, how they interact What are the differences between on marketing strategy and corporate culture among Local enterprises and international enterprises With the acceleration of the internationalization, whether they tend to assimilate or not Data Collection The primary data for the present study will collected through interview of employees of KFC outlets in China. The samples for the interview will be randomly selected ranging from lower to middle to top level executives at the outlet to get a clear picture of their strategy. However the sample size is limited to only five outlets with five employees from various job profiles so as to minimize the cost and time. However, care has been taken to maintain confidentiality of the interviewers in view of future unknown problems and in view of this anonymity has been maintained with regard to their identity and the outlets. The secondary data has been collected from various literature, journals and websites pertaining to the topic so as to arrive at a formidable conclusion and find answers to the research questions. Conclusion Research is an important task which involves serious work on researchers' part. The primary data which has been collected will be presented and analysis will made justifying the objectives and answering the questions. Data Analysis Introduction Corporate culture is the micro-environment of a strategic development and implementation. Excellent corporate culture not only can contribute to strategy development, but also can promote the effective implementation of the strategy. For the successful implementation of the strategy, companies need to establish a corresponding culture, not to mention a decent corporate culture, is itself an important component of the strategy. Successful enterprises are always having its typical corporate culture. In Chinese fast-food industry, KFC's success is unmatched by peers. Its corporate culture was followed by many companies. What is the connection between the corporate culture and corporate strategy and how does corporate culture influence marketing strategy. It will be addressed next. Kentucky Fried Chicken, popularly known as KFC, is the world's largest chicken restaurant chain with more than 12 million served everyday in restaurants in 109 countries and territories around the world. The chain operates more than 5200 restaurants in the United States, and more than 15000 units around the world (www.kfc.com).3 KFC has been successful in China overshadowing McDonalds' with more than 2870 restaurants in more than 650 cities across China. The strategy in China adopted by KFC is 'In China into the life' providing integrating Chinese culture in its marketing strategy. The rapid development in China has resulted large employment opportunities and by the end of 2007, the chain had 146,000 local people (www.kfc.com.cn)4. KFC's China business generated US $2 billion in revenue during the year 2007, which accounted for 20% of the global total of Yum Brand. It is further reported that the present rate of continuous growth in China will account for more than 50% of Yum Brands global earnings (Burroughs, 2008)5. It is evident that KFC has been able to achieve greater success in China rather than in any other part of the world, where the results are opposite. In order to analyze and evaluate the factors contributing towards the success of KFC in China, a structured research was conducted into regarding the strategy by interviewing the employees of KFC in China. The impact of corporate culture on the marketing strategy Culture is something that is associated with country, a distinct section of the community, or organization. It also includes the values related to customs and traditions, beliefs and religions, rituals and artefacts, and therefore it is essential for any organization to take into account the local culture of the nation in which it wants to conduct its business. According to Terpstra and Sarathy Cultural Framework as shown in the diagram below, marketing managers are advised to use this eight categories mentioned in the framework to assess the cultural nature of an international market (www.marketingteacher.com)6 Brown (2006, p.241) mentioned that aligning the business strategies with the corporate culture will provide the singular quality of uniqueness. Further it is mentioned that corporate culture permeates day to day organizational life functioning the critical lifeline to the organizations future. It spans the extreme boundaries of growth or retreat, viability or stagnation, or in its extreme, survival or bankruptcy. The corporate culture consists of the deep rooted traditions, values, beliefs, and history that powers the organizations and drives individual's action. Corporate culture is induction and integration of the enterprise's growth environment, ability and experience, it is the ability to adapt to a changing environment and the ability of continued development. Corporate culture in any large, complex organization is rarely unitary or homogenous and is a manifest in a program or decision or a habit or decision that helps in making organizational decisions, individual decisions and behavior simpler. The corporate culture emerges for several reasons which include simplification and adaption of decisions, affiliation and motivation. (Kono and Clegg, 1998, p.19). Botha and Brink (2005, p.201)7 mentioned that marketing strategy of a business consists of a combination of decisions regarding the four marketing instruments and the target market in a specific environment. Marketing strategy also includes planning in order to formulate plans pertaining to the target group. Therefore the alignment of marketing strategy with the corporate culture is necessary as it shall impact on the market, the marketplace, the products and service and the competitors also (Brown, p.243)8. Corporate culture has received large attention due its effects and potential impact on the organizational success. According to various authors and researchers, the corporate culture is referred to as a set of values, beliefs and behavior patterns which form the core identity of the organization. According to Choe (cited in Rashid et al 2003), there is a strong relationship between corporate culture and corporate strategy wherein he found that firms pursuing strategy tend to have developmental culture and those with defensive strategy have hierarchical culture (Rashid et al 2003)9. Kono and Clegg (1998, p.18) stated that corporate culture aids adaptation to an outside environment that are useful in directing strategic decisions to meet the demands of the customers.10 Most successful companies have its own unique corporate culture. With the accelerating process of globalization, corporate culture is being gradually become assimilated. "Localization" is the word. "East Dawning" is the fifth-largest catering brands that Following after the launch of the KFC, Pizza Hut joy restaurants, ZJS Pizza Hut, Taco Bell Mexican style restaurant by the world's largest restaurant group Yum in China. Though KFC try to make its product with the combination of Chinese and Western as possible and the product is also full of Chinese products with local characteristics, its competitive peers are not just Burger King or McDonald's in China. China's local fast-food industry, such as the Japanese-style fast-food chain "Ajisen Ramen" and local brand "Kung Fu", has grab market share at meantime. "Yum high-profile launch of 'East Dawning' Chinese-style fast-food chain, not only to consolidate but also to expand market ...... because they have to face the emerging local Chinese-style fast-food competitors." Said by Liu Guodong that is the KFC China's former vice president of business development, Executive of KFC parent company Yum Brands Inc. China. (hbrchina.com.2009)11 Business success or failure hinges on the implementation of the strategy. In China, a successful strategy implementation requires not only suitable for the localization of products, people, systems and procedures, but also the flexibility to change direction under the new policy, market opportunity or crisis. In China, KFC chain, the number is McDonald's twice, but outside of China just the opposite. How can KFC do this What plays the key roles in marketing resolution "People regard food as their prime want" is an Ancient Chinese Proverb. An international restaurant group is how to stand out in the competitive China, and far better than other competitors These are the questions interested in lots of people. Secondary Data China Today (2004) reports that KFC has absorbed the Chinese culture elements of showing respect, recognition, understanding, assimilation and amalgamation while maintaining the substance of the western culture of efficiency, freedom, democracy, equality, and humanity. The local market flexibility can be enhanced through intra cultural management of American culture and Chinese culture.12 The KFC in China has built its empire over these words: "Delicious security, high-quality fast; nutritionally balanced, healthy life; based in China, innovation and unlimited." These words have the characteristics of western fast foods while focusing on efforts to build KFC in China. "In China into daily life' shows the strategy of the management to integrate the chain into the day to day activities of the population living in China (www.kfc.com.cn).13 In early days, it was learning that Chinese prefer local goods over foreign brands; therefore it was essential to integrate the traditional culture into their products to give a feel of china in their product. It was realized that the brand in China need to be one that spoke to the local consumer needs. Hence, KFC introduced children's program to appeal to families, staffing each store with dedicated hostesses whose responsibility was to welcome the guests and reinforcing the local nature of the business and creating a real track record of the community service. The menu also included items which they were famous around the world; original recipe chicken and twisters and items unique to china like oven roasted wings, breakfast twisters, winter soup, and seasonal vegetables. KFC also invested in developed outstanding customer service practices and building a local culture. KFC established a good rapport among the Chinese locals regarding the food and their brand which helped them achieve the status of being the leading fast food chain in the territory (Hexter et al 2007, p.11-14)14. This clearly presents the influence of corporate culture on the marketing strategy wherein it is seen that local culture has significant effect on the business strategy. Watson and Caldwell (2005, p.168) mentioned that KFC in china introduced many other changes to adapt to local consumer demand within a shifting political economy. It is further stated that the ability to respond quickly to the consumers demand was the key to the KFC's international success. Marketing plans are driven by local assessment of potential consumers and are also executed on the local level. However it is pertinent to mention here that KFC's major source of revenue were children and to improve its recognition among the younger lot, KFC worked towards developing partnership with schools, teachers and parents apart from sponsoring numerous children sporting events, essay competitions, and other contests which helped in creating brand awareness and attracting the younger generation and their parents into its restaurants. John Cranor, the erstwhile President and CEO of KFC regarded company's customers as 'aspirations consumers', people with enough disposable income to spend the money for fast food meal.15 Ambler et al (2008, p.164) mentioned the segmentation strategy that can lead to success if applied with creative thinking as in the case of KFC where they targeted children as their main aspiring consumers which led to huge growth of the business in China.16 KFC, by large, has been successful in China owing the various factors like increased amount of family income spent on children by families, it's symbolic representation of modernity, concerns over food safety, high and standardized quality of food and the restaurant environment and its relative prestige and novelty compared to other outlets (Davis, 2004, p.273).17 Further it is mentioned by Ball et al (2007, p.91) KFC mainly focused on selling chicken products, localizing its menu to suit the tastes of local consumers and giving great importance to a healthy diet.18 Further Yan (2000, p.30) states that the success of KFC in China is largely due to the large market for its highly branded and promoted Western food.19 The cultural factors that contributed towards the KFC's success in China were: Reducing the 'psychic distance' by handing over of operations to local people so that customers could relate to them more easily Able to adapt cultural differences, tastes and preferences. In China, different flavors of Chinese tea are made available in the KFC outlets. Got an edge since Chicken is staple dish and is taken more frequently in Asian countries compared to other countries More accustomed to take out food over the counter The target consumers of KFC (upper, middle and above) are health conscious and hence to cater to their interests Kentucky Fried Chicken changed to KFC Price sensitivity drove KFC to introduce menus that were easy on the consumers pocket (Sen et al n.d)20 Primary Data It was found during the interview of a supervisor at the KFC outlet regarding the strategy towards marketing their products in Chinese environment, that the culture was blend into the products. The employee stressed that Chinese loved the food and drinks that features color, fragrance, flavor and variety. Moreover it has been mentioned that new menus are introduced at KFC mostly Chinese like preserved Sichuan Pickle and Shredded Pork Soup which provided a glimpse of respect towards their culture. The store has local employees which helped the management to engage consumers with local consumers so that difficulty of communication in foreign language is eliminated and oneness and belongingness is achieved simultaneously attracting more customers. This is supported by Kono and Clegg (1998, p.180) wherein it is stated that product market strategy has the greatest impact in changing and sustaining corporate culture. It is further stated that outstanding corporate philosophy and vision give direction to an aggressive product market strategy, similar to the frequent change in KFC menus resulting in increased consumers and repeated consumers to taste the different products. While discussion with another employee at another KFC outlet in mainland China, it was found that alliance with the schools, colleges and other educational institutions was the main source of revenue. By this way, the outlet was able to market the brand on a large scale as one child policy has resulted in families spending more on their children. The integration of traditional Chinese culture in our management, behavior, service offered has attracted large number of customers, not only children, but of all age. The employee took enough pride in saying that KFC is the largest fast food chain in China, which is originally an American company. It is stated that the company has to change its strategies in view of the environmental changes and the company should have revitalized culture in order to change strategies (Kono and Clegg, 1998, p.182). Another KFC management stated that they stressed hard to involve the consumers decision in including the products in their list of menus. The inclusive strategy helped the outlet to retain its customers as the updated menu attracted the customers which were also the source of marketing about the new item in the outlet, thus bringing new customers to the outlet. The outlet achieved good rate of profit for the past few months by including customer oriented items in the menu along with western style items duly integrated with Chinese culture. The interview of one more employee at the KFC outlet in Tiananmen Square revealed that, they adopted media marketing as the outlet was situated at a busy place with lots of commuters moving around. However, the menus were displayed with in Chinese language giving a feel of China to the people attracting them to the store. Further it is understood that the outlet had employed local employees that enabled them to leave up to the expectation of providing the Chinese feel to the consumers. The main theme of their marketing was to provide the feel of China culture in every product they served. Summary and Conclusion The employees at KFC - China from various outlets reiterate one main thing in their strategy towards marketing the product, i.e. the Chinese ingredient. Whatever the strategy, method, planning is; the Chinese aroma, essence, fragrance, taste is necessary. And they have successfully managed to do so as a result of which the company has been able to open over 2800 stores in 650 cities across China. One main aspect observed is that the outlets in the prime location like busy areas, shopping malls, markets, etc. the company strategy is to advertise through banner, media, etc., in the Chinese way which attracts consumers whereas the outlets in remote areas like localities use the segmentation approach of marketing by dividing the target group as in the case of children mentioned earlier, wherein the outlet enters into alliances with the schools, colleges, institutions by sharing profits with the authorities. According to Jing (2000, p.132)21 KFC patrons ate because it was convenient, children liked it, and hygienic Further exaggerating is that eating at KFC represented a change in eating habits as one man stated "You can't make KFC chicken at home". Further KFC in China realized that being western was not enough to ensure success in the longer run as it had become routine part of the local environment. Therefore it was necessary to provide consumers different taste every time they come to the store and viewing this as an opportunity, KFC offered spicy chicken sandwich that was not available in American outlets. The main success factor for KFC in China was the role played by children in localizing the brand, influencing many changes in business tactics. It is further stated that the children's special relationship with KFC restaurants is reinforced by television shows and other popular media and by their schools creating awareness among them which results in children coming to the outlet, forcing their parents to the outlet to eat food, taste the modernity and have fun. The primary data reveals the corporate culture has greater impact on the marketing strategy on the company depending on the country, region, culture, language, etc. The random interviews undertaken by the researcher reveals that the marketing strategy differed at various locations. It should be noted that outlets in remote locations targeted schools whereas in the busy areas the outlets advertized through electronic media and frequently changed their menus along with providing Chinese taste. It has been found during the present study that national culture plays a vital role in the marketing strategy of a company in different regions. References 1. Ambler T, Xi, C and Witzel M (2008) Doing Business in China, Edn. 3, Taylor & Francis, US 2. Ball, S., Horner, S and Nield K (2007) Contemporary hospitality and tourism management issues in China and India: today's dragons and tigers, Butterworth-Heinemann, UK 3. Botha J and Brink A (2005) Introduction to Marketing, Ed. 3, Juta and Company Ltd, Republic of South Africa 4. Brown, R.I. (2006) Mastering marketing: a comprehensive introduction to the skills of developing and defending your company's revenue, Ed. 2, Thorogood Publishing, UK 5. Burroughs, T. (2008) KFC Vs McDonalds, China Economic Review, September, 22, 2008 http://www.chinaeconomicreview.com/ 6. China Today (2004) KFC and McDonalds, - a model of blended culture, www.chinadaily.com.cn 7. Davis, E.L. (2004) Encyclopedia of contemporary Chinese culture, Routledge, US 8. Dr. C.R.Kothari (2008) Research Methodology - Methods and Techniques, Ed. 2, New Age International, India 9. Hexter, J, Woetzel .J, and Woetzel, J.R. (2007) Operation China: from strategy to execution, Harvard Business Press, US 10. International marketing and culture, Marketing Teacher, www.marketingteacher.com 11. Jing J (2000) Feeding China's little emperors: food, children, and social change, Stanford University Press, US 12. KFC China is Chinese KFC, www.kfc.com.cn 13. KFC China, www.kfc.com.cn 14. KFC, About Us, www.kfc.com 15. KFC, win in china, 2009, Available: http://www.hbrchina.com/c/company_case_article-layoutId-48-id-2379.html (Accessed: 2009, OCT, 28) 16. Kono T and Clegg S (1998) Transformations of corporate culture: experiences of Japanese enterprises, Walter de Gruyter, Berlin 17. Kumar, R (2005) Research methodology: a step-by-step guide for beginners, Ed. 2, Sage Publication, India 18. Rashid, Z.A, Sambasivan, M and Johari, J (2003) The influence of corporate culture and organizational commitment on performance, Journal of Management Development, Vol. 22, No. 8, pp. 708 - 728, MCB UP Ltd 19. Sen D, Prakash N, Ghosh, R and Guha S (n.d.) Kentucky Fried Chicken, Case Study, www.scribd.com 20. Watson J.L. and Caldwell M.L. (2005) The cultural politics of food and eating: a reader, Wiley-Blackwell, US 21. Yan Y (2000) International joint ventures in China: ownership, control and performance, Palgrave Macmillan, UK Read More