KFC and McDonald’s marketing strategy in China Essay

AbstractMcDonalds is the greatest fast food honk of a function in the world, its familiarity sales and operate income was more often than not exceeded KFC on a global scale, but it con campaigned a strong challenge from KFC when it emerged into China. This essay analyzes the comparison amongst KFC and McDonalds merchandising strategy, emphases on finding the similarities and diametriciations from septet P Formula and finally invents a conclusion that localization is more qualified than globalization as the selling strategy when fast food train emerged in Chinas merchandise.IntroductionLocalization or Globalization has immense been discussed when choosing strategic orientation in international marketplace. These two international merchandise philosophies influenced enterprises current situation and future development. There are two fast food international companies named McDonalds and Kentucky Fried Chicken (KFC) who initially adopted different selling strategies in Ch ina that led to differentiation for their future development. McDonalds graduation exercise franchise was founded in the United States in 1955, serve people for hamburger, cut fries and otherwise type of fast food, go KFC also from the same country, is now one steel of Yum, which first restaurant was founded in 1952 and in general sells unequaled taste cooked chicken. From global scope, McDonalds is exceeding KFC from company sales, operating usefulness to worldwide system units.McDonalds company- operated sales were 18875 million, operating income was 8764 million and it had 35429 systemwide restaurants in 2013(McDonalds, 2013), plot KFCs company sales were 11184 million, operating profit was 1798 million and there were 18875 KFC restaurants in 2013(YUM, 2013). However, as these two global fast-food brands emerged in China, the situation has been reversed. McDonalds annual report uses APMEA (Asia Pacific, Middle East and Africa) as representative of Asian but not show the profit from China while KFC can saw of import progress in China, and it highlighted the progress in new restaurants, recruits and volume growth in annual report. The difference amid thesetwo fast food companies was of importly due to their marketing strategies. That is, localization is more suited than globalization as the marketing strategy when fast food chain emerged in Chinas market.DefinitionThe concept of marketing has long been defined by different people. The easiest one to understand may be a process of planning and executing, from value, products, ideas and expediency to reciprocate customers and physical compositions objectives (Ferrell et al, 1987). This definition emphases marketing as a process preformed in organization, which has an overview of its practical function. It has mutually beneficial between providers and customers ex interpolate, where providers goal is to introduce products and service to achieve profit and customers goal is to purchase product s which benefit their daily life. shell out strategy could be the plan that identifying what is the customers requirement and what marketing goals and objectives could be achieved if selling loticular goods and services in an available time (Jonathan, 2009). Briefly is the competitive plan that the organization will have. trade strategy enables an organization to have an understanding on the environment and achieve its goals and objectives by using its resources that can meet the needs of customs (Douglas et al, 2010). A good marketing strategy would effectively improve company to supervise their value and create consumers brand loyalty. Localization is a strategy that advocates enterprises to adapt to local culture.The process often hard-boiled up their products, services and promotion customized relate to local market. Enterprise should try to integrate into and treat them as an inherent member but not a foreigner to the local culture in the target market, which emphasizes th e enterprise must adapt to the environment to gain more space in order to hike development (Warren, 2008). KFC is an example that has developed food, drink and service highly sensitized to localization. KFC was the first westerly fast food chain emerged in China in 1987. In order to succeed, KFC abandoned its U.S. duty model and planned to sell core products and services locally. Since it started to now, the companys strength and competences accumulation has exceeded a major part of fast food companies and successfully posed formidable barriers to competitors in China. Globalization was defined by Edmund as the process of creating linksbetween individuals and organizations that die national boundaries and are not subject to political interference (Edmund, 2008).Globalization is also a marketing strategy that the organization extended their activities worldwide, it is a main tendency for international companies or company who regard to operate in other countries. This tendency was influenced by technical factors such(prenominal) as information and communion technology revolution, and principle of finance and trade, also affected by the movement of people. Globalization will continue be a major tendency in the future because of opportunities, which created huge increases in prosperity, notably in emerging markets, such as China (Martin, 2013). McDonalds was the example that opened it first restaurant in China in 1990 and adopted globalization strategy initially, but eventually achieved few successes than KFC in Chinas market.The similarity and differentiation between KFC and McDonalds in Chinas market KFC opened its first outlet in Beijing in 1987, it was the first western fast food company at that time and now it has 4563 outlets, which can be regarded as the heavy(p)st restaurant chain in China (YUM, 2013). McDonalds first restaurant opened in China in 1990, and now it has 2003 outlets all around the China. From the spare distinction of the outlets, it is necessary to analyses the similarity and differentiation between them. The largest difference was the time these two companies colonized in China and implemented their strategies. Franchising is a business format that the franchisor grants a license to franchisee and franchisee then can use it logo, products and goodwill. For example, McDonalds allow other business man open their chain by using the same name if they have paid initial tippytoe and ongoing management service fee (Colin, C et al, 2012). KFC use collaborative model of direct and franchise chain which laid the solid foundation of completive advantages.KFC is earlier than McDonalds to implement franchising, who established the first franchising restaurant in 1993 and continue implement do not start from scratch mode, which means franchisee do not need to found a location, recruiting and facts of life new employees but apply to join in and take over a mature restaurant. In that situation, franchisees can omit the p reparatory work and compound themselves to the standard management system as soon as possible. However,McDonalds insist on implementing direct chain operate until 2003, while KFC has developed round 40 franchise locations during this period. Thus, McDonalds was fall behind to KFC at the initial stage, which have deep influence on their future development. Marketing strategy helps make recognition of international opportunity on seven parts product, wrong, promotion, place, positioning, packaging, and people. The Seven P Formula was used to evaluate and reevaluate the business activities. As the marketing environment changed so rapidly that it is vital to track and achieve the maximum results by adjust seven P (Brain, 2004). The similarities and differentiation of seven P between two companies also illustrate localization is suitable than globalization.ProductA product is anything that be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. (Philip, 2011). A product contains good, service and ideas. Food is a heart concept of the society and services from the fast-food chain would attract consumers and change customers attitude. KFC obtained the success of fast food market mainly by selling chicken products. KFCs products utilized standard production, which selling inexpensive western-style items with local favor. KFCs menu changed rapidly to follow the changeable market as they followed product life cycle from introduction, growth to maturity and finally decline. Some products offered temporarily while other permanently. For example, since 24th of March in 2014, KFC started to use the new menus, which eliminated seven items, renewed one item and added fourteen items. The totally variety has reached to 66 products. The success of KFC also from its special ingredients, Sanders Original Recipe of 11 herbs and spices is one of the most famous trade secret in fast food industry (Chartrand, 2001).The riddle ingre dients mixed with local ingredients created a large amount of customers. The director of KFC realizes that the customers in Sichuan, Hunan and Chongqin are favourred chilly while Shanghai customers would complain the dishes are as well spicy. So the company adopted the localization strategy in products and finally changed its recipes to suit the region. McDonalds mainly selling hamburger with beef, which is a typical western food style. Chinese prefer chicken to beef for some reasons. Firstly, may bethe price, according to the latest price of beef and chicken, there is large initiative between them, the average price of beef is 66.60RMB (approximately 6.5 pounds) per kilogram while the average price of chicken only in 19.58RMB (approximately 1.8 pounds) per kilogram (data from the government of china price).Secondly, the conventional cultivation industry in China raise more chicken than cattle, as cattle is so heavy that will eat more and its long growth stage means lively when buying. Due to the price of raw materials, company would change their recipes to adapt the regions, which means products localization. By far, McDonalds menus have 17 types of burger and four type of rice, others are beverages and dessert. And McDonalds insist on standardization on products and just had little change on some food, such as start to sell soy milk for breakfast from 2011. From the difference of the menu, it is obviously that KFC has more products and local appetite products than McDonalds. Compared the products, KFCs localization strategy is more suitable than McDonalds globalization strategy in China.PricePrice is the customer pays for a product or a service. It is the most important factor of marketing (McCarthy, 1975). Prices would affect companys marketing decision and organizations goal and the achievement in sales volume would influences price reversal. So, it is difficult for manager decide which price is the best, especially in a downturn. Because recessions make customers are able to shift another products or service with lower price as alternatives or substitute (Douglas.2010). The price of a product may go up or go down along with time and location. The right natural selection of pricing strategy will benefit the companys competitive position. KFC and McDonalds use multiple pricing strategies in different situation. They mainly favour the price skimming strategy, the process of selling product or a service for a high price initially, then gradually reducing the price in order to access new market segments(Price , 2009) as their pricing strategy in China.The staple food in KFC contains ten units(six of burger, two types of paradiddle and two types of rice ) in the latest menu, hamburgers price fluctuated around 14 RMB (approximately 1.3 pounds), while McDonalds have nine burger as its staple food and the price range from 6 to 16.5 RMB due todifferent meat. McDonalds mainly sell beef burger all around the world, but the high price i s not suitable in developing country, therefore, it started sell burger with pork, chicken, duck and fish. KFC and McDonalds fierce competition sometimes force each other to adjust their price according to the cost and demand.PromotionPromotion is an activity that designed to boost the sales of products and service (Jonathan, 2009). Sales promotion also defined as an activity or soldierlike that acts as an inducement to stimulate consumers to buy the products (Sally et al, 2012). Companies are aimed at stimulating sales through advertising campaign, temporary price reductions and variety types of promotion methods. The brand would be intangible assets and goodwill of a company. The more successful it promote, the more it will creating brand loyalty from customers. KFC restaurant in China has a large logo of KFC and the depiction of Colonel which leave deep impression on Chinese. It has changed old logo to a new one, which stress on Taste and present fresh energy, friendlier and m ore welcoming. The promotions of KFC are varied from advertising in television to Internet, or distributing coupons in public place. Every year, KFC would have new menus to attract customers and provide repast set, such as buy burger with cola together will save money. Sometimes KFC will send gifts as premiums to attract customers, especially children. It also distributes coupons in the street or can download app of KFC, then you can get small discount from the product. McDonalds logo is a golden arch of M, with a slogan of Im lovin it. The promotion method of McDonalds is similar to KFC. Coupons, package and digital marketing all create growth in marketing. graze and PositioningPlace is where the products or service actually sold, it includes geographical location which offered products or services and different types of distribution channel (McCarthy, 1975). The product or service positioning has been described as the place occupied in a particular marketing where product is targe ted by customer (Wind, 1980). Generally, Fast food chain has two target consumers. One is the people who live in a busy life. Such asemployees who spend whole day in front of computers. These people busy at their working and had no time preparing food. Fast food gives them the chance to eat in a very short time. The other is the consumer who does not like cooking such as young people. KFC and McDonalds give them the chance to try new. Target on these consumers, these two companies has their special outlets organization strategy. In order to satisfy consumers who have a busy lifestyle, they open their outlets in cities, in which has a higher population density and well-developed transport system.And to those who want to try new and unwilling to cook by themselves, the restaurant always placed close to schools, universities, city centre and commercial areas that young people ruminate at and prefer to go. It has published in McDonalds official website for the restaurant development. McDonalds looks for the best locations within the marketplace to provide our customers with convenience. We build quality restaurants in neighborhoods as well as airports, malls, tollways, and colleges at a value to our customers.(from McDonalds official website), while KFC provides customers with the most convenient, desirable and accessible restaurant locations a subdue the country, such as the outlets in the city centre of Beijing and Shanghai, where has shopping mall or commercial street. population go shopping in those place prefer to find a comfortable place to have a rest, drink a cup of tea or coffee and eat some food. KFC and McDonalds success in choosing location set a good example for other fast food restaurants.PackagingPackaging is a part of marketing process and link to brand identity. The impact on the image of product ultimately derived from customers perception of satisfaction. Package is a vital part of a product that qualification it more versatile, safer and ea sier to use (Sally et al, 2012). The customer would evaluate the product or service from the first moment of seeing. And package characteristics help distinct buyers impression during use. Then their attitude would influence their purchase decisions. KFCs package adopted world class packaging with new logo which has character of KFC and the portrait of Colonel in the middle of front page. And the design is flexible to local market. McDonalds package use more colorful package with creative idea. And also has the logo M in every package. These two companies bothadopt family packaging, an approach in which all of companys package are similar or include one major element of the design (Sally et al, 2012), as their approach to promote. Both of their package had live a deep impression on Chinese.PeopleAll the people directly or indirectly involved in the service or production will concern in market when making marketing strategy. Customers, employees and other people are inseparable when production and consumption happened. It is essential to pay attention to those people (Booms et al. 1981). KFC in China targets on the concepts of family and group. The customers range from children to the elders. Before 2004, McDonalds insists on families centered on children, at the same time, attracted young person and young parents. After the year of 2004, the target market has been young people whose age between 4 and 30. McDonalds advocates the passion and enthusiasm in younger while KFC emphasis on the harmony between family members, in China, this particular marketing where the concepts of family was strengthen, KFC therefore occupied advantages.Through the comparisons of KFC and McDonalds from seven aspects in marketing strategy, it can have a clear judgment between them. The reason why China has become the place that KFC exceed McDonalds initially because the policy makers think highly of this particular market and understand the cross cultural management, the appropriate survey helps avoid mistake.ConclusionIn conclusion, KFC and McDonalds adopted different strategies for their development in China. The gross or net profit from their annual report shows that they both have success on operating and developing, but the essence emphases on Chinas market have apparent difference as their initially adopted localization and standardization (globalization) in advent of China. It means the localization strategy of KFC adopted in China market is more suitable than globalization strategy. The great achievement of KFC in China is not an accident while McDonalds backward does not mean their strategy is not good. 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