McDonald's and KFC - Recipes for Success in China

Thèmes abordés

McDonald - KFC - Chine

Résumé du document

To analyze China's attractiveness for both companies in late 1980s, we will first analyze the market opportunities.

When KFC and McDonald's tried to enter the Chinese market in 1980, the country was an emerging one. Like an emerging country, China presented lots of opportunities. The growth was, for example, important – an average of 9% per year –. It is “thanks to” this high growth that both companies wanted to penetrate the market. Moreover, the size of the market was big – approximately 1.3 billion Chinese people.

The quality of demand was also interesting insofar as Chinese people were (and still are) the largest consumers of meat worldwide. Moreover, there was rapid expansion in the middle class especially in the big cities. In the countryside and small cities, the low end segment was large. Despite the economic boom, Chinese people had very low income, so in 1980, consumption of fast food was not a feasible option for all.

The entry objectives of KFC and McDonald's are primarily to capture a new market and develop their business. Actually, with the development of China, a significant rise of general consumption and GDP (9% per year and it has remained constant); it is an excellent opportunity for the restaurant companies to enter the market.

The potential of China's Restaurant Industry is a key attractive factor: “Retail revenues of the restaurant industry increased from 5.2% in 1991 to 14% in 2007”, “China was the world's largest consumer of meat!”. Finally, from a demographic perspective, China was very interesting insofar as it is a large area with a very high number of inhabitants.

Extraits

[...] To answer to this question, I think it is not possible. The success of KFC in China depends of the culture of the country. Indeed, Asian people, and more particularly Chinese, are the first consumers of chicken in the world. Consequently, it appears normal that they prefer KFC. In addition, KFC was the first to open a restaurant in China. The success on this country can also come from this point. On the contrary, American privilege McDonald's because they prefer eat beef. Moreover, American and Chinese cultures are totally different. [...]

[...] Indeed, the entry barriers are high: open a fast food requires a high capital of investment. The bargaining power of suppliers is medium or high. The bargaining power of customer is medium for McDonald's compare to KFC which is very low The threat of substitute products is low. Substitutes are almost inexistent on this industry In long term, the business is profitable. Incentives: Insofar as the government knows that, thanks to the Chinese economic growth, companies will penetrate the market, there are a not government incentives. [...]

[...] Consequently, business models are also different. You can try to establish it but it is sure that the success will not be the same. We cannot do something in China like in USA and vice-versa. [...]

[...] Mc Donald's keeps as blockbuster product the Big-Mac menu like in USA. Both companies pointed out that it was very important to take into consideration quality and use it like a value attribute. Finally, the fact that both companies are American, and consequently foreign brands, is another value attribute. Consumers segments: attributes: KFC is broad whereas its rival, McDonald's, is focused. From the beginning, KFC targeted all segments, not only in big and small cities but also in remote cities while McDonald's only targeted on one or two customer groups especially in big cities. [...]

[...] Indeed, nowadays the fast-food industry is becoming bigger and bigger in China. Between the end of 1980 and 2005, Chinese people get the habits to consume this kind of food every day (what was not the case when KFC and McDonald's tried to enter). Moreover, China, which was an emerging country, is, now, a new industrialised country. Finally, in 1980's, because of the low Chinese incomes, both companies could not target every segment. Nowadays, on the contrary, every segment goes and eats this kind of food without financial barriers. [...]