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KFC's localization strategy in China! 3 replies,24892 views


KFC does really good in the area of localization which makes Chinese people trend to believe it is a China-made restaurant! On the another hand, McDonald insists its International track. I cannot say which is good, but if want to catch the middle-age people and old people's market in China. It's better to do like KFC.

Here are a brief explanation of KFC's localization strategy, hope it will be helpful to you guys!

KFC - 'a foreign brand with Chinese characteristics'

One of the many mysteries of modern marketing is how KFC, a once rather lack-luster American fast food brand, outperformed all competitors and in particular arch rival and world market leader McDonald's, to become the biggest restaurant chain in China.

Whether measured by number of restaurants, revenue, or market share, KFC is far and away the number one restaurant brand in China. Even more striking is its dominance over McDonald's, a position that is reversed in nearly every other country. McDonald's has 800 branches in China, compared to KFC's 2200 and, with KFC opening 300 new branches per year, the gap is widening.

KFC China is not just outperforming the competition. In 2007 it contributed more than 20 percent of global revenue of parent company Yum!, whose brand portfolio includes Taco Bell and Pizza Hut. It is a proportion that is likely to grow up to and beyond 50 percent, according to Taiwan-born Warren Liu, a former member of the company's Greater China executive committee.

Liu, who was with Yum! for three years from 1997, and is in Beijing to promote a book about his experience with the company, is very clear about the reasons for this remarkable success story. KFC China, he says, quite simply went native.

The first important move was to recruit a local senior management team; not so simple in 1987 when KFC opened its first restaurant not far from Chairman Mao's Mausoleum in downtown Beijing. Back then nobody in Chinese mainland had experience of running a fast food chain, so KFC did the next best thing. They recruited what Liu affectionately refers to as "the Taiwan gang."

Liu says it was crucial for firms trying to enter the market back then to have an understanding of China and the Chinese cultural context "so deep that it is intuitive," to understand the Chinese people's "mixed feelings, of love and hate about the West, to understand Chinese history, language, the influence of Confucianism, Buddhism and Taoism, this is especially important if you are in the consumer goods industry."

KFC looked at recruiting from Hong Kong, then still a British colony, Singapore, and other areas in Asia but in the end found its **** team in Taiwan. "Why particularly Taiwan?" said Liu. "The education system in Taiwan at the time was very Sino-centric. We learnt Chinese history, Chinese geography; we studied the Tang dynasty poets Du Fu and Li Bai. The Taiwan gang was the best available substitute for a local team."

The second factor underpinning KFC's success, according to Liu is product localization. Liu said the company has constantly sought to adapt its offerings to the local palate. For some years customers have been able to order congee (rice porridge) with thousand year old eggs. But six months ago, Liu said, he had a kind of epiphany. "I woke up and turned on the early morning news and realized KFC was selling youtiao [a kind of Chinese doughnut]. I realized KFC has entered a new plateau. Youtiao are the quintessential Chinese breakfast. I was speechless. That's localization as extreme as it can be."

Asked if KFC might prove vulnerable to the kind of economic nationalism seen around Coca Cola's proposed takeover of China's Huiyuan juice company, Liu replied, "KFC is still seen as a foreign brand but it's a foreign brand with local characteristics." Not everyone may agree. In 2007 the All China Federation of Trade Unions accused KFC and Pizza Hut of paying their employees in Guangdong Province less than the minimum wage. The ACFTU has recently stepped up a recruitment campaign targeting foreign companies that have resisted unionization.

Liu said his primary motivation for writing the book was not to help multinationals conquer the China market, but to help Chinese firms who have ambitions to go abroad. "For the last decade the Chinese government has been urging the most capable of Chinese enterprises to step out. So far the results have not been impressive. That's an understatement. So I hope people here can learn from the KFC experience in China"

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KFC's localization strategy in China!

Western fast food giants meet the challenges of local culinary preferences
Passers-by are stopped in their tracks by these eye-catching KFC posters on Nanjing Donglu.

Many hold that it is the latest dish (pickle and sliced pork soup) which really signals KFC's localized approach.

SURPRISE was the first reaction of local student Li Ting on hearing of Kentucky Fried Chicken's latest offering. Rather than extend their characteristic range of chicken products, the fast food giant recently introduced a distinctly Chinese dish: Sichuan pickle and sliced pork soup.

"How strange to get something like that from KFC! Anyway, I'll give it a try," Li said. Perhaps that is just the type of reaction KFC hoped would meet its bold decision to cater specifically to the Chinese market with the new product, which is competitively priced at 4 yuan ($0.48).

"Some may think the soup is a ridiculous dish, but our belief is that it is right to develop new products which meet consumers' diverse needs," said Jasmine Fang, spokeswoman for Shanghai KFC Co Ltd, which has more than 70 outlets citywide.

"But that definitely doesn't mean we will turn away from fried chicken, our main product," she added.

Localized approach

In fact, astute customers will notice that the soup is not KFC's first step towards offering a more localized selection for Chinese, a large number of whom are hooked on this Western fast food.

Earlier in 2001, KFC launched a fresh vegetable soup, which was followed by "fragrant beef" and "Uygur roast pork", two Chinese-style dips for french fries.

But despite this, many hold that it is the latest dish which really signals KFC's localized approach.

Behind the seemingly simple creation is a one-year market research process, led by the KFC Chinese Healthy Food Consultative Committee, set up in 2000.

The results have been encouraging. Prior to release KFC predicted that only 5 per cent of customers would buy the soup; in fact the number of takers has turned out to be triple their estimate. On the basis of this KFC will not withdraw the soup in February as had been planned - it will continue to be served nationwide as part of the long-term menu.

Dining culture

"Choosing to eat at fast food restaurants like KFC doesn't necessarily indicate a desire for Western flavours," said Sun Min, a local government official. "I would accept the soup, which represents a simplified form of Chinese cuisine, because speed and convenience are top priorities for me (in choosing places for dining)," Sun said.

These qualities were also emphasized by Wang Qi, general manager of Shanghai KFC.

"We can't guarantee that we are better than Chinese mamas at making this type of soup, but after all people choose KFC for fast food, and we are good at offering fast and convenient service," said Wang in a recent interview with the Xinmin Weekly.

Du Jiming, a member of the Shanghai Catering Trade Association, believes that it is natural for foreign fast food giants such as KFC and McDonald's to introduce local-style recipes, given their well-established brands and sound business foundations.

KFC's localization strategy in China!
"It's hard to say at the moment whether the introduction of the soup signals foreign fast food's compromise in the face of Chinese culinary heritage," he said.

Against the backdrop of globalization, it is by no means unusual to see foreign fast food giants taking the risk of introducing market-specific varieties based on regional research. Those multinationals eyeing the vast market of China must bear in mind the importance of a localized perspective.

Localization does not relate to the number of Chinese employees or the amount of raw material purchased in China; rather, it refers to the extent to which businesses understand Chinese culture and Chinese consumers' needs.
KFC's localization strategy in China!
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