KFC's localization strategy and competitive success in China

KFC in China

Yum! Brands, the operating holding company for KFC, Pizza Hut, and Taco Bell continued its success in the China market with another strong showing in Quarter One of 2012. "Yum Brands is seen by investors as a bet on Chinese domestic demand. The company opened 168 new restaurants in China (out of a total 297 around the world) and now counts with 4,649 stores there, including franchises" (Fontevecchia, a. April 18, 2012. PP. 1). The company's sterling record in China, particularly KFC demonstrates the company's strong commitment to localization and targeting to the Chinese consumer; a strategy which has left the organization in a competitive position to outpace its fast food rivals.

How has KFC China positioned itself Differently from McDonald's China?

Yum! Brand's KFC has performed spectacularly in China because of their commitment to the Chinese culture and consumer tastes. While McDonald's has lagged KFC because of a reliance on beef offerings, KFC has worked to provide their "core product chicken, second only in popularity in China to Pork" (Case 7-2) to their customers. Additionally, KFC "works tirelessly to ensure that it continues to come up with and launch new products that are a better fit for the Chinese consumer" (Case 7-2). These offerings include a "highly localized menu: Chinese-style porridge, Beijing Chicken Roll, Spicy Diced Chicken, and Chinese Dough Fritters" (Case 7-2). This menu is in sharp contrast to McDonald's which "in China mostly sell the same U.S.-style burgers" (Mellor, W. January 26, 2011. PP. 1).

In addition to product choices offering local flavors, Yum! Brands also utilized a China-centric strategy of "carefully selecting local partners with strong government connections" (Case 7-2), a necessity in navigating the bureaucracy of commerce which works to block foreign entities seeking operating license in China. Further, "in the 24 years it has been operating in China, Yum has hired Chinese managers to build partnerships with local companies…and even more important to entrust management of the China business to ethnic Chinese from Taiwan" (Mellor, W. January 26, 2011. PP. 1). Together these operational moves: management and menu provide the local touch requisite for KFC to excel.

What Successful Companies have in Common

Without question the success of companies in China depends on adaptation to local Chinese ways of doing business and the intricacies of culture. While not to indicate that Chinese consumers do not want the West, rather they embrace the chance to experience Western culture; Chinese consumers do appreciate and respect those companies which seek to provide connectivity to the Chinese culture and the local flavor to which they are accustomed. Adaptation is the key strategy, how best to continue offering products or services which provide a fusion between Western brands and Chinese culture. A story from KFC illustrates this concept:

Yum's cultural flexibility doesn't end with the localized menu. While fast-food restaurants in the West often host kids' birthday parties, KFCs in Urumqi, capital of the Xinjiang autonomous region that's home to the Muslim Uyghur people, advertise parties for the families of boys who have just undergone the religious ritual of circumcision. (Mellor, W. January 26, 2011. PP. 1).

Companies can learn from Yum! KFC which; "got in early, adapted the product, expanded aggressively and gave their Chinese managers real decision-making power" (Mellor, W. January 26, 2011. PP. 1).

Conclusion

For Yum! Brands their Chinese revenue and store growth is a compelling story.

"David Novak, Yum's chairman and CEO, noted the China business 'continues to fire on all cylinders' (Fontevecchia, a. April 18, 2012. PP. 1). With designs "to eventually have 20,000 outlets in the country" (Case 7-2), Yum! Brands, with KFC as its standard bearer, offer the Chinese consumer a mix of Western flair with traditional Chinese menus and culture. This recipe will continue to pay dividends for Yum! even as new rivals attempt to poach the company's strategy. Going forward the company will focus on harnessing its palpable energy in China to deliver on the synergies between Western and Chinese culture.