CASE TITLE

KFCS Radical Approach to

China
BY
David E. Bell & Mary L.
Shelam
HBR South Asia Nov 2011

Case introduction

The case talks about the typical dilemma

the global companies face while they enter
emerging markets
How far should they go to localize their
offerings for local needs
Should they adapt existing products just
enough to appeal to consumers in those
markets
We will discuss the six point formula used
by KFC in China to win Chinese consumers

Localize Offering by Country

and Region

In an effort to please local consumers,

the company reinvented its menu and
varied spiciness levels from region to
region
Used enlarged outlets as compared to US
ones which are mostly take away outlets
KFC Chinese menu typically included 50
items compared with about 29 in USA

Move Quickly to Add Broad

Presence

Rather than go head to head with

McDonalds in big cities KFC expanded
its footprint in smaller cities to build
national business and outlets across the
country
KFC is opening 1 restaurant every day in
China as on 2011 .
It has 3,300 outlets today and target is to
touch 15, 000 outlets

Take Charge of the Supply Chain

KFC established a local distribution arm in

1997 by building warehouses and running its
own fleet of trucks
Company introduced a supplier rating system
that allows managers to concentrate on the
suppliers which perform best
KFC China closely monitored the entire
supply chain, all the way back to animal feed
companies and other input providers
KFC has the most advanced and integrated
cold chain system in China

Become a learning organisation

Team of new employees work side by side with

experienced ones in established outlets once
trained they move to a new location
New recruits at KFC often have to be taught basic
people skills in order to interact with customers
KFC needs 1500 managers and 30000 crew
members each year and they must be ready the
day the restaurant is launched because of foot
falls
KFC was first to promote the concept of
customer experience after decades of
communism in China .

Maintain Flexibility

90% of outlets in China are company

-owned
Only 12% in US and 11% in other
international markets are franchisee run.
Owning restaurants allows company to
closely control every aspect of their
operation , from menu to dcor
It permits centralized purchases which
reduces costs

Guard Against Backlash

It could easily become the target of consumers and

governments backlash against the perceived
negatives of fast food.
In 2005 the company developed the concept of new
fast food that would be nutritious and balanced
and promote healthy living
It eliminated supersize items and added roast chicken,
sandwiches,fish,shrimp and more fruit and vegetables
dishes to its menu
Meals for children are served with veggies and juices
Tray mates carry educational message
Nutrition message is printed on each pack

Conclusion

The KFC Chinas success in wining over Chinese

consumers grew out of deep understanding of the
difference between established and developing
markets and willingness to radically alter the US
business model
Also while entering emerging markets multinationals
must decide whether it wants to garner quick extra
sales or to establish the long term presence
If its there for long haul, it should install local
managers whose vision is to build an organization that
will last