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KFC and McDonalds marketing

strategy in China
Abstract
McDonalds is the greatest fast food chain in the world, its company sales and operate income was
largely exceeded KFC on a global scale, but it confronted a strong challenge from KFC when it
emerged into China. This essay analyzes the comparison between KFC and McDonalds marketing
strategy, emphases on finding the similarities and differentiations from Seven P Formula and finally
makes a conclusion that localization is more suitable than globalization as the marketing strategy
when fast food chain emerged in Chinas market.
Introduction
Localization or Globalization has long been discussed when choosing strategic orientation in
international marketplace.
These two international marketing 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 marketing strategies in China that led to
differentiation for their future development. McDonalds first franchise was founded in the United
States in 1955, serve people for hamburger, french fries and other type of fast food, while KFC also
from the same country, is now one brand of Yum, which first restaurant was founded in 1952 and
mainly sells unique taste cooked chicken. From global scope, McDonalds is exceeding KFC from
company sales, operating profit 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), while 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 significant progress in
China, and it highlighted the progress in new restaurants, recruits and volume growth in annual
report. The difference between these two fast food companies was mainly due to their marketing
strategies. That is, localization is more suitable than globalization as the marketing strategy when
fast food chain emerged in Chinas market.
Definition
The concept of marketing has long been defined by different people. The easiest one to understand
may be a process of planning and executing, from price, products, ideas and services to satisfy
customers and organizations 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 exchange, where providers goal is to offer products
and service to achieve profit and customers goal is to purchase products which benefit their daily
life. Marketing strategy could be the plan that identifying what is the customers requirement and
what marketing goals and objectives could be achieved if selling particular goods and services in an
available time (Jonathan, 2009). Briefly is the competitive plan that the organization will have.
Marketing 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 set 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 the enterprise must adapt to the
environment to gain more space in order to further development (Warren, 2008). KFC is an example
that has developed food, drink and service highly sensitized to localization. KFC was the first
western fast food chain emerged in China in 1987. In order to succeed, KFC abandoned its U.S.
business 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 links between individuals and organizations that
transcend 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 want to operate in other countries.
This tendency was influenced by technical factors such as information and communication
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 largest 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 apparent distinction of the outlets, it is necessary to analyses the similarity and
differentiation between them. The largest difference was the time these two companies settled 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 fee 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 training new employees but apply to join in
and take over a mature restaurant. In that situation, franchisees can omit the preparatory work and
incorporate

themselves

to

the

standard

management

system

as

soon

as

possible.

However, McDonalds insist on implementing direct chain operate until 2003, while KFC has
developed about 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, price, 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.
Product
A 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 mystery ingredients mixed with local ingredients created a large amount of customers. The
manager of KFC realizes that the customers in Sichuan, Hunan and Chongqin are preferred chilly
while Shanghai customers would complain the dishes are too 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 be the price, according to the latest price of beef and chicken, there is
large gap 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 traditional cultivation industry in China raise more chicken than cattle, as cattle is so
heavy that will eat more and its long growth stage means costly 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 seventeen 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.
Price
Price 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 choice of pricing
strategy will benefit the companys competitive position. KFC and McDonalds use multiple pricing
strategies in different situation. They mainly choose 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 roll 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
to different meat. McDonalds mainly sell beef burger all around the world, but the high price is 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.
Promotion
Promotion is an activity that designed to boost the sales of products and service (Jonathan, 2009).
Sales promotion also defined as an activity or martial 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 portrait of Colonel which leave deep impression on Chinese. It has changed old logo to a
new one, which stress on Taste and present youthful energy, friendlier and more 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 meal 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.
Place

and

Positioning

Place 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 targeted by customer (Wind, 1980). Generally, Fast food chain has two target consumers.
One

is

the

people

who

live

in

busy

life.

Such

as

employees 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
placement 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 study 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 across the
country, such as the outlets in the city centre of Beijing and Shanghai, where has shopping mall or
commercial street. People 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.
Packaging
Packaging 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 making it more versatile, safer and easier to use (Sally et al, 2012). The customer would
evaluate the product or service from the first moment of seeing. And package characteristics help
sharp 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 both adopt 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.
People
All 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.
Conclusion
In 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 content 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. KFCs success is largely because it realizes the distinctiveness
of the Chinese market and emphasis on the local environment and local customers.

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