KFC and McDonald

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1 KFC and McDonald’s success in china It is in the 1980’s that both KFC and McDonald’s penetrated the Chinese market. This was mainly contributed by the high demand for meat in the Chinese market. Considering that China is the largest consumer of meat in the world, this contributed significantly to its penetration in the Chinese market. The two companies had the aim of dominating the Chinese meat market and developing their businesses. There was an improvement in China’s economy which was in favor of the two companies. The way the two companies branded their products created the major differences in their products. The purpose of this report is to provide an analysis of the two companies in China’s market. Description of China’s market China is the country with the largest population in the world and the GDP is around 4.3. By the year 2015, the country’s GDP had grown up to 69 percent which was a drop from 2014 which had a 7.3 percent GDP. The country’s landscape is mostly green and desert. The country’s living standards are improving with time and the country is generally developing which is a good indication of good times in terms of those selling meat and meat products in the country such as KFC and McDonald’s (Yu & Zhang, 2009). China as a country is well known for the mass production and consumption of pork and most of the meat consumed is produced in the country. One of the negative aspects that affect the quick-service restaurant is the low disposable income that affected McDonald’s and KFC. Description of Faster Foods market KFC and McDonalds operate in the quick-service market which simply involves customers ordering fast foods and paying at the counter. In this quick-service market, many people have gained employment from it and the growth of this industry is mostly stimulated by the increased revenue. There are expectations that sales will increase in the coming years since the last few years had shown an increase in the number of years. This is an industry with growth potential. According to the National Restaurant Association, this is one of the industries that has improved the country’s economy and created a lot of economies. If KFC and McDonald’s can become the giants in this market by ensuring that they offer quality products and services. The success of a single company is determined by their ability to determine the preferences of the customers and delivering according to those preferences. There are both large and small companies but the large companies have the advantage of marketing and financing their businesses hence being in a better position compared to the small companies. There is fragmentation in terms of fragmentation and the large companies have the highest share of revenues compared to the small companies. MacDonald’s When it comes to the quick service industry, MacDonald’s is the leading company. However, this performance is not as high in China compared to other countries. This is mainly due to the few number of outlets in China which means low returns. Comparing McDonalds to KFC in China, KFC seem to be doing much better in this industry. However, it is possible that

2 these two companies can learn from each other and grow together in becoming the largest companies in this market in China. KFC KFC opened the first outlet in China in the year 1987 when it entered in China. Many people did not see such an American company could thrive is China. KFC was able to introduce the novel concept of fast foods in Chinese markets. They were able to open more than 5000 outlets in the country especially in the major cities such as Beijing ( Starvish, 2011). During the initial years, they concentrated on the Southern parts of the country. In Beijing, the first restaurant for KFC received a warm embrace than they imagined which made them to consider increasing their outlets in the country. On the other hand, KFC tried to adjust into Chinas menu and culture so that they could become acceptable in the market. With this kind of approach, they were able to be succeed compared to the competitors and their profits increased with time. KFC delivered what the China’s population actually wanted which was one of the factors that contributed to their success. Opportunities and threats for KFC and McDonald’s  One of the opportunities for both companies was the big population in the country which meant that they had to open many outlets  The other opportunity was the high demand for meat in the country which was attributed by the low supply from the country  The next opportunity is the easy to advertise due to the advancement in technology in the country. China is well developed country especially in the technology sector.  The major threats for both companies is only the government of China which had planned to regulate these industries to ensure that the food processed is up to the required standards. Strengths and weaknesses for McDonalds  The great and well-known brand name (McDonald’s). People are well conversant with McDonald’s products and services and they have good reputation  The weakness in McDonalds is the constant decrease in sales over time. This was probably due to the accusations of selling expired meat to the clients. KFC’s Strengths and weaknesses  The great distribution and network in China is the greatest strength. The company has a wide network and many outlets in China which is a great strength  The major weakness for KFC is the way they use the same brand umbrella for all their products. They should ensure that each product sells on its own market Entry strategies into China’s market Both companies need to have a very good strategy if they have to succeed in China. Without a good strategy, they will just be wasting time and resources. They must first sit down and decide on the best way to enter into this market. Some of the factors they must consider is how the Chinese view their products as well as the culture in China in relation to the products and services they are bringing in the country. There are some cultures in the world which cannot be friendly to the services and products that KFC and McDonald’s are planning to introduce ( Zhang

3 & Zhou, 2012). Once they determine the factors that will be important, they should the following three strategies in entering into Chinese market.  Entering to China through Hong Kong  Setting up a joint venture with other companies  Exporting through direct channels to China These three strategies have their own benefits and disadvantages. For instance, exporting through Hong Kong can be the quickest compared to the others. On the other hand, entering the market through direct channels can be the most undesirable in China due to the fact that it is time consuming. McDonald should plan entering the market through joint ventures although this might take more time.it can also be of advantage for KFC and McDonald’s to try more than one strategy so that in case one fails, the other one might work for them. The strategy that was most successful to China compared to the rest of the world The strategy that was most successful in China was Hong Kong Strategy. There was increased supply in Hong Kong. There was a shift of most of Hong Kong entrepreneurs in the 1980s which was mostly attributed by the existence of the new technologies. It is also evident that most of the modern china’s exports are handled by the Hong Kong distributors. Export strategy is also one of the most successful strategy when compared to the rest of the world. One thing that has improved china’s economy is the investment in foreign markets which has helped china a lot also in term of their GDP. Some factors also contributed to success of China in the market. These factors include active participants in local markets, the adoption of aggressive pro-export strategies and finally the presence of Taiwanese investors and the availability of cheap labor Midterm and future KFC and McDonald’s firms in China The midterm and future of McDonald’s and KFC will be determined by the strategies they will put in place that will please consumers. For example, KFC had introduced some features that can attract more customers such as outdoor seating and drive thru services. On the other hand, McDonald’s also plan to introduce salads, crispy bites and desserts in their menu. There is a probability that the market share of the two companies since other companies will emerge and take some of the consumers hence reducing the consumers for both KFC and McDonald’s. However, they might not adversely affect the two companies since they can also come up with measures that can make them giant companies in fast foods market. What a good rival can do to counter KFC and McDonald’s For a company to beat KFC and McDonald’s, a better strategy is needed greater than the ones used be the two companies. They will also need a lot of resources to establish as many outlets as possible and also to financial strength to market their company. Such a company may be from China and understands the existing culture in the country. This may try to challenge the existence of KFC and McDonalds but they still have a big task ahead of them since these two companies are already well established and they would definitely react from such attempts to outdo them. This means that it may not be easy to be beat the two companies. Conclusion

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4 KFC and McDonalds are two giants when it comes to fast food industry. The report analyzed KFC and McDonald’s existence in the Chinese markets. The report also analyzed the entry strategy, SWOT analysis and also how the entrance of a new company would affect the market. The Hong Kong strategy was the most successful when it came to enter the Chinese markets. Another company entering such a market might face a lot of difficulties since the two companies have already established themselves well in the market and also have some loyal consumers who trust their foods. However, the companies must always try to uphold their positions at the top through various strategies such as marketing their products and promotions References Starvish, M. (2011). KFC’s explosive growth in China. HBS Working Knowledge . Yu, C., & Zhang, T. (2009). American Fast Food in Chinese Market: A Cross-Culture Perspective: The Case of KFC and McDonald's. Zhang, Q., & Zhou, L. (2012). Cultural adaptation pattern analysis of McDonald's and KFC in the Chinese market.

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