#149 KFC loves China loves KFC
Fast food is tricky business in China. China loves to eat, but there already is an abundance of excellent affordable street food, and competition between foreign fast food brands is intense. Yum Brands-owned Kentucky Fried Chicken (KFC) stands out among many others in that it has been immensely successful in the Chinese market. With more than 5,000 restaurants in more than 1,000 cities in China, KFC has twice as many restaurants as McDonald’s. KFC’s success is without doubt the result of an interesting blend of boldness and sensitivity. Back in 1987, KFC was the first American fast food chain to launch in China. And it didn’t launch just anywhere, but within walking distance of Beijing’s central Tiananmen Square. The choice of the stately capital as KFC’s point of entry was interesting as many other foreign entrants might have chosen one of the more open coastal cities in the South instead. When the Beijing branch first opened, the restaurant was an instant success, with customers lining up outside the restaurant for several months after its opening. By 1988, the branch had already become KFC’s top-selling location among all the chain’s outlets, and it even weathered the 1989 Tiananmen incident as it was serving both protesting students and soldiers of the People’s Liberation Army. China’s economy was only at the beginning of its rapid expansion, and KFC quickly became a symbol for the country’s newly found openness and its emerging economic prowess. After its early success in Beijing, KFC moved rapidly into other cities, including second and third-tier ones. But KFC was not only a first-mover, it was also a smart first-mover that adapted both its practices and its menu to match the Chinese environment.
From the outset, it was important to KFC to be perceived as being part of the local community. This started with hiring the right people – Chinese managers who understood the local market, the restaurant industry, and the Western way of doing business. KFC also focused strongly on building unity and camaraderie among their employees in China, including management, and the executive level. KFC’s commitment to adapt to the local environment, also extended to the customer. Today’s diners at KFC don’t just find the usual staples of fried chicken, but they also can choose from items such as the “Sushirito” (a burrito-like sushi roll), the “Chizza” (a pizza-style dish that replaced dough with chicken), shrimp sandwiches, rice congee, or “Nine-Lives” juice drink, and the breakfast staples
“Youtiao” (fried bread sticks) and soy milk, all of which cater to Chinese tastes. More recently, KFC also has made a strong commitment to capture the market of China’s millennial consumers by using celebrity endorsements from popular entertainers and social media stars.
Another element in KFC’s success in China: Being a good citizen. In the second half of 2018, KFC introduced an advertising campaign celebrating 40 years of “reform and opening up”. Clearly intended as a salute to the Chinese government, a TV spot showed Chinese celebrities traveling back in time on an old train, seeing streets filled with bicycles and bamboo scaffolding. They are then transported back into the present on a modern high-speed train where they see young people using smartphones, cheering at pop concerts, and clinking chicken nuggets like champagne glasses. Make no mistake, KFC also celebrates national day pride in other countries, including Fourth of July in the United States or Bastille Day in France. But only few foreign companies have aligned themselves with overtly political events in China to the extent that KFC has done over the years. After all, in countries like China, it is not only important to keep employees happy and customers satisfied, but one also needs the support of a friendly government.
December 3, 2018 @ 8:09 am
Doing business is of a complex nature, and each market is in a certain way to say unique. Besides the competitors, the most important player on the market are the customers and their habits.
A visit to a McDonald’s restaurant in Indonesia was surprisingly entertaining. They sell just plain rice compared to what is common in Denmark, Germany, the Netherlands, France, Italy, Bulgaria, Spain, Switzerland, the UK, Russia, Hungary, Czech Republic, and other European countries. It is an example that local demands on specific markets differ.
Exploring the macro environment, e.g., using the PEST framework, and using the role of scenario planning in studying it, can result in a better understanding of the local needs, and how the market works (Burt et al., 2014). It is also a way to understand what else can drive your business.
Resources
George Burt, George Wright, Ron Bradfield, George Cairns & Kees van der Heijden (2006) The Role of Scenario Planning in Exploring the Environment in View of the Limitations of PEST and Its Derivatives, International Studies of Management & Organization, 36:3, 50-76, DOI: 10.2753/IMO0020-8825360303
March 2, 2019 @ 7:49 am
This was a great article. China is a notoriously difficult market to get into, but KFC found a way to have success into the market. In the research I have done, I found that most companies fail to reach the Chinese consumers because they fail to effectively emerge themselves into the culture. China is very heavily focused on loyalty, so KFC’s approach to incorporating themselves into the culture was genius. Businesses, such as Foster’s, failed to recognized this and failed to reach the Chinese people on a personal level. It was also great that they decided to adapt their menu to match the local needs. But their approach wasn’t to match the needs immediately, but first become a part of the culture. This was a fantastic approach that deserves an applaud. The marketing team did a great job of identifying how to effectively present their product/service.
March 13, 2019 @ 12:31 pm
I was quite surprised about the impressive strategy of KFC and honestly, I did not expect such I high degree of market adaptation and cultural openness because to me they appear very “American”. It seems like that KFC did everything right when entering the Chinese market. First, they have chosen a very attractive place to open their first restaurant namely Beijing. Obviously, (after reading the story of Best Buy #150) Chinese customers believe in “big brands” from big cities. Secondly, they were there at the right time and very courageous and innovative since they were the first big American food chain entering the Chinese Market. They definitely took advantage of their pole position in the following years to expand throughout the country. Thirdly, they adapted their product perfectly to the Chinese market and embraced the different culture, which I think is outstanding for a US company especially starting to enter this very different market already 40 years ago. KFC also managed to pick the right people for entering the huge market. From my point of view, they did everything right. The result of 5000 restaurants in 1000 cities impressively underlines this fact.
Many companies could learn from KFC’s strategy in China although I think that the high degree of adaptation also implies many costs that can only be covered by businesses with a high degree of market penetration.
March 14, 2019 @ 7:00 pm
KFC’s success story in China is really an impressive one. China has always been an extremely difficult market and many examples on this blog underline this. However, with high risk comes high return, and KFC mastered the challenge of the Chinese market entry.
When the company opened its first Chinese restaurant in 1987, it was headline news. The U.S. ambassador and several high-ranking Beijing officials were invited. Beijingers lined up in front of the store; but they were not only hungry for chicken breasts but also for the Western lifestyle, I think. KFC’s grand opening has to be considered in the historical context. Although Beijing had opened up over the years, the late 1980s were influenced by Chinese conservatives who were again preaching Maoist dogmas. After decades of communism, however, the local population wanted to learn what makes the Western world tick, they wanted to experience the Western lifestyle firsthand. KFC was considered to be the perfect symbol of the American culture and thus the whole KFC fast-food experience met the taste of the time. Also, KFC had the advantage of the first-mover when entering the Chinese market and pioneering this type of fast-food experience. Finally, Chinese household incomes were significantly rising during that time, which also might have triggered Beijingers to spend their money on the then not so cheap KFC meals.
Thus, I am torn, whether KFC’s success was only based on strategic considerations upfront or also on some luck, entering the right market at the right time. Still, KFC had done its homework when coming to China. They had listened very carefully to the local customers. In the long run, the company relied on an adaptation strategy for its products to meet the Chinese taste and combined it with excellent customer service, which was very much appreciated. More interestingly, however, I feel that KFC really strived to blend in into the Chinese context – not only product-wise. If one watches the opening ceremony from 1987, one can really tell that KFC was culturally sensitive and aware of how to win over the Beijingers. This personal level might have been the prerequisite to success, as also Josh has pointed out above. KFC achieved the Herculean task of becoming part of China, without diluting its “American” brand perception too much. This remarkable market entry will remain a best-practice example for decades.
March 16, 2019 @ 11:13 pm
Breaking into the Chinese market can be a difficult endeavor for fast food chains due to fierce competition and a complex regulatory environment. I enjoyed reading your account of how KFC became so successful in China, particularly how you describe it as the result of an “interesting blend of boldness and sensitivity.” One of the key factors to KFC’s success in China was the chain’s ability to localize their menu to suit Chinese tastes. In order to devise appropriate product modifications and effective marketing campaigns, KFC needed “feet on the ground” who understood the local context, including culture, customs, and consumer preferences. So often companies de-emphasize the need to adapt their products when expanding into new markets. In my opinion, conducting market research is the most valuable action you can undertake in such situations. It is not a surprise to me that KFC first launched in Beijing because the city is full of ex-pats and millennials who are open to trying new experiences that may be perceived as Western. Overall, KFC is a case study for other businesses to look to when expanding into new markets.
March 21, 2019 @ 12:06 am
This is an excellent example of amazing execution of a company in a new global market. KFC did proper research and development when looking to expand into China. Even from the beginning they chose a busy area with lots of potential for consumer business, they hired employees that understood the local culture as well as the restaurant business, and they adapted their menu to fit local cuisine culture. As they grew within China, they continued to market and advertised successfully not through using tried and true campaign they had run domestically in the United States, but through looking at the local community and deciding how to best fit China’s consumer needs. The extra step in connecting with the Chinese government illustrates KFC’s commitment to the new market and adapting their business strategy to meet the Chinese business environment. This all being said, I would imagine that if we dug deep into the history of KFC entering the Chinese market, we would find the challenges and mistakes that were made. I believe every new market is a learning experience that will better the company’s future globalization procedures.
March 23, 2019 @ 7:35 pm
In my opinion, KFC is far ahead of the Chinese food and beverage industry. China KFC’s profits account for one-third of global KFC profits. With the opening of the KFC restaurant in Sanya, Hainan, KFC has reached 1,200 in China. The old rival McDonald’s opened only half of its stores in China. I believe that KFC is committed to finding a balance between Eastern and Western cultures. Their requirements for managers are to combine both traditional Chinese concepts and Western management methods. I think KFC is growing rapidly in the Chinese market, which is related to customer tastes. Europeans and Americans like beef food, but Chinese people prefer chicken. As a foreign fast food, KFC is also becoming more and more Chinese. Unlike McDonald’s, it’s KFC’s consistent strategy to launch products that suit local tastes around the world, but it’s done more thoroughly in China because no regional market is launching new products at this breadth and speed.KFC has made every effort to implement localization strategies and constantly seek new changes to meet the needs of Chinese consumers.
March 25, 2019 @ 6:08 am
Operating in a foreign country must test the agility of a firm and its ability to be flexible. I remember When the first KFC opened in China and seeing it mentioned on the news during the Tiananmen Square protests. The idea of both sides’ students and soldiers, taking breaks and going to get KFC, makes one consider the level of influence western culture and western business has on a new market. In the 80’s this was all a new idea. By adopting to local tastes, serving local favorites, and even participating in local holidays, KFC has managed to find a comfortable home abroad. This is an excellent example of a firm being aware of its own abilities, its products abilities, understanding the target market, and making a smart strategic market entry decision.
March 25, 2019 @ 12:41 pm
The example of KFC shows that the company managed to follow the fundamental steps in the product readiness assessment. While usually most companies know their product and its core, it is sometimes difficult to identify differences if a foreign market is entered. The main question here is: Is there a need to adjust? And by looking at the example of KFC in China, clearly there was. The Chinese mainland population has its own distinctive taste which is why it made sense to adapt the well-known KFC products to the special Chinese taste. Thus, products like the “Chizza” were developed. KFC could have analyzed the market and have chosen to use the standardized product or abort the mission. They chose wisely and adopted to local needs and tastes.
Furthermore, the company might have been using CAGE’s distance framework too. Why? Cage describes also “administrative” aspects to be considered, including government policies. I found it extremely clever of KFC to take national holidays into consideration to show their support and respect of local traditions. The opening of its first branch in Beijing rather than Shanghai or Hong Kong was also a strong signal in this regard.
March 31, 2019 @ 11:20 pm
In reviewing KFC’s international push in China, it is no surprise that their success came with a systematic approach that tailored to the Chinese culture and taste. They were able to successfully integrate into the society, starting with picking a prime location to get name recognition in China. They also did a lot of pre research on ensuring that the understood menu items that would draw the attention of locals and not just stay focused on what was successful in the western part of the world. Another major component to KFC’s success relied upon keeping up with Chinese holidays. They also were smart about hiring the right people with the skills needed to be successful. They were able to identify a benefit, the cost to do business and attained the right management skills to be successful in their locations.
March 31, 2019 @ 11:26 pm
In reviewing KFC’s international push in China, it is no surprise that their success came with a systematic approach that tailored to the Chinese culture and taste. They were able to successfully integrate into the society, starting with picking a prime location to get name recognition in China. They also did a lot of pre research on ensuring that the understood menu items that would draw the attention of locals and not just stay focused on what was successful in the western part of the world. Another major component to KFC’s success relied upon keeping up with Chinese holidays. They also were smart about hiring the right people with the skills needed to be successful. They were able to identify a benefit, the cost to do business and attained the right management skills to be successful in their locations.
April 1, 2019 @ 12:52 am
This is an example of a successful entry into a foreign market with high competition in the fast food industry by an American brand and it dates back to 1987. I find it impressive. KFC’s courage to be the first American food chain to venture into China, their choice of location to open their very first store (Beijing) and all the research and the deployment of their international market entry strategy from adaptation of their practices and their menu to this new market was brilliant. They employed very skilled management, hired Chinese managers knowledgeable of the local market, the restaurant business and the Wester way of doing business. KFC managed to satisfy not only the target market but also their employees and the local government. KFC exemplified in their entry to the Chinese fast food market their management skills in the areas of: cultural intelligence in business management, target market knowledge, strategy, and adaptation among others.
April 1, 2019 @ 6:22 am
I really liked this blog post; what a cool way of succeeding! Just like others have posted, I have to give praise to the marketing team of KFC for being able to assimilate into the culture of a foreign country by still maintaining its authenticity. Focusing on the menu, camaraderie between employees and making the government happy are huge factors for the Chinese and they earned KFC a strong customer base. I think many business fail when going international due to cultural differences and learning about the values of the country they wish to partner with. It is very impressive to see the amount of work KFC has put in to making their business work in China.
April 2, 2019 @ 7:11 am
It is surprising to me that KFC has more restaurants in China that McDonalds and that has had more success than McDonalds. Even more, that KFC is perceived as part of the local community wich is probably why it has been so successful. After reading the article it seemed like the branch managers that understood the local market, and build good companionship with the employees. They do not only serve chicken, but they also adapted their menu to the local market. It is important that when going international that the product is adapted to the local market. This will ensure acceptability and success.
Doing business in another country is complex, but it looks like they really studied their market and its customer habits. This includes the mico and macro environment. They really made “AMERICAN”, survive in a hard to survive country like China.
June 19, 2020 @ 8:58 pm
KFC strategy is an effective strategy as they understand both the external and internal environment of China and the richness of its culture. As China has a collective culture and they are very much into their own culture and food, it is not easy to enter into China market. Since KFC knows the needs of the customer in China market, they use localization strategy by blending KFC originality and Chinese taste so that customers’ perception of KFC is quite satisfactory due to the sense of Chinese taste. KFC has both market and product readiness to penetrate the China market. Adopting its culture and hiring local people makes KFC more successful as the bond is stronger with local people. KFC is thriving in China because they entered China at the right time by hiring the right people at the right cost. Furthermore, being good citizenship by saluting Chinese gov in their advertisement campaign, they gain more trust from citizens, and it makes them a part of the Chinese community.
July 3, 2020 @ 11:22 pm
For many multinational companies, it is not easy to enter the Chinese market, not only because they are far away, but also with different cultures and consumption habits. But KFC’s success is because it adopts different strategies and is the first fast-food fast food restaurant opened in China. This also provides a first mover advantage because he is the first, so everyone feels fresh to it which can be easy to get more market share. In addition, it is also a huge bet to open near the capital, which may have a large initial cost. However, if you success, you can get the reputation and open more chain-stores in the other cities. But I think the most critical factor is to obtain the government’s consent, but I also want to be a multinational enterprise with Chinese companies, so the government will also be open, and bilateral mutual benefits have been achieved. However, some of them will be different from the legal systems of Western countries, which is also worth noting. KFC’s efforts are also to please the Chinese government, so it can get more opportunities to do business and open up more markets.
July 10, 2021 @ 12:46 pm
Since KFC is one of the largest fast-food restaurants and they therefore also want to be represented worldwide, entering the Chinese market, which is also one of the largest and also most valuable, was a very important step for the Yum brand.
I find it impressive that KFC ventured into China as early as 1987, also because its biggest competitor McDonalds, for example, only entered the market three years later.
And having worked at KFC for a year myself, I know how important it is for a still unknown product to establish itself in a new market. In my case, it was the opening of the first KFC in Graz (2017).
At the beginning, we had to experiment with the products we offered and see which ones were best received by the guests. We had also considered offering the “Chizza”, but the demand of the customers was more on the side of fried chicken and less for burgers or sandwiches.
Through this experience I know only too well how extremely important it is to inform yourself beforehand and to study the new market in detail and to adapt it optimally in order to be successful in the end.
I remember the failure of Taco Bell when they wanted to penetrate the Mexican market. Which many thought was a great idea at first, but real Mexican food had nothing to do with the Taco Bell products and were doomed to fail because the locals didn’t consume them.
December 16, 2021 @ 5:50 am
This is very interesting. Like the article stated, being the first American fast food restaurant to launch in China, this was a risk. China is one of the most competitive markets to get into and it is great that it was successful. When trying to understand the culture and the lifestyle of people within those countries, it can be difficult to immerse the American culture into one that is completely different. For a company that is thinking about entering into the Chinese market, the first step would be to think about how you are going to become part of their daily or typical lifestyle is important. The route that KFC using to focus in the local areas was a smart decision because they were able to built from within out. By targeting the smaller group, they were able to built on the eating habits and taste of that specific Chinese community.
December 30, 2021 @ 12:12 am
KFC is symbol of a western company that knew how to enter the Chinese market and have a profitable reign as the #1 Fast Food Restaurant in China. Since its opening in 1987 KFC China has grown from its initial location in Beijing’s Tiananmen Square to more than 7,900 restaurants in 1,600 cities as of September 2021.
How and what did KFC do that made it so popular and profitable in China when so many other western restaurants and fast-food chains fail in China. The secret is KFC willingness to assimilate to the Chinese culture by offering a menu catered to Chinese taste buds. In China the menu offering is one not seen or available in any KFC locations in the US, for instance egg tarts, rice porridge a drink called the nine lives juice drink. In providing a menu offering tailored to the Chinese consumer and incorporating Chinese culture in its marketing material it has been able to garner the acceptance of the Chinese consumer. KFC has also been able to place itself as a high-quality western fast-food restaurant that has not been easily replicated by Chinese knock-off chicken restaurants. Another reason for the success of KFC in China is that the parent company Yum China is a Chinese company who manages the company as such as holds the control of most restaurants as only ~10% are franchised, therefore being able to maintain a certain level of quality control that is incorporated in the KFC business model and corporate is able to ensure quality/service standards are met.
KFC in China can also attribute its success in quickly being able to expand to other major cities in China and being able to quickly take advantage to the economies of scale and lock in cheaper domestic supply. This quick expansion enabled KFC to build its domestic supply chain and therefore be more profitable in a price sensitive market where the competition for affordable meals is fierce. But, KFC dominance in popularity in China is constantly being attacked my local Chinese competitors or other foreign restaurants, such as Taiwan fried chicken brand Dicos or Japanese noodle company Ajisen. As competition get more and more aggressive KFC and parent company Yum China continues to fine tune its localization strategy and incorporating other offering such as breakfast, home delivery and 24-hour service in order to stand out from the competition and stay at the forefront of Chinese consumers dinning choice.
Given that KFC still maintains the #1 as the most popular fast-food restaurant in China according to China Cuisine Association (CCA) in 2019 then that means they are continuing to do things right.
January 12, 2022 @ 8:37 am
KFC’s success in China teaches us many things. The first thing that impressed me was KFC’s attitude towards politics. Initially, I had the opinion that business and politics should be separated to some extent, if not completely. However, KFC in China is actively involved in political events and is increasing its presence. We have also succeeded in building wonderful relationships with the local community, such as by hiring locals for management and executives. Their products are also tailored for the locals and their brands are well adapted to the local culture. In my personal opinion, their personnel is the key to their success. Recruiting locals for management and executives gives you the flexibility to make local decisions and respond flexibly to sudden events. I have to say that this point of KFC is wonderful.
January 15, 2022 @ 8:51 am
KFC in China is a greatly successful example. KFC has twice as many restaurants as McDonald’s in China. All around, McDonald’s gets more market share than KFC, except the Chinese market. KFC get the success because it really do a lot of thing to understand the Chinese customers’ culture and habits and make its product adapt the Chinese taste. First, KFC employed Chinese managers who understood the local market, the restaurant industry, and the Western way of doing business. KFC’s commitment to adapt to the local environment, also extended to the customer. KFC in China do not only have the usual staples of fried chicken, but also offer the “Sushirito” (a burrito-like sushi roll), the “Chizza” (a pizza-style dish that replaced dough with chicken), shrimp sandwiches, rice congee, or “Nine-Lives” juice drink, and the breakfast staples “Youtiao” (fried bread sticks) and soy milk, all of which cater to Chinese tastes. Chinese customer could find the American fast food and Chinese tasty food. Moreover, China belongs to bureaucratic law, so KFC is a good citizen in China and pays more attention on the relationship with the Chinese government. KFC has aligned it with overtly political events in China. Therefore, KFC is successful in China, because it understands that it is very significant to understand local culture and political environment.
February 10, 2022 @ 12:30 am
Prior to reading this article, I knew that KFC existed within the Chinese market, but I did not know how successfully it had entered China nor that it underwent significant growth following its launch in 1987. The Chinese market can be extremely difficult to enter especially when it comes to the fast food industry, primarily due to an abundance of food options, intense competition amongst foreign fast food brands, and heavy government regulations. However, I found it extremely impressive how KFC successfully adapted itself to both the Chinese market and Chinese culture. I believe what first set KFC on its path to success included its choice of location for its first restaurant. In comparison to Best Buy who opened its first stores along more coastal locations, KFC’s decision to open its first restaurant in a much more attractive location like Beijing would give the brand the necessary exposure to incentivize potential consumers to actually visit and order food from the restaurant, especially considering how Chinese consumers believe in big brands from the big cities. Furthermore, I believe KFC did an incredible job in successfully modifying and diversifying its menu items to better fit the Chinese consumers’ tastes and preferences by incorporating the right people who understand the Chinese local market, the fast food industry, and the more westernized style of conducting business. Thirdly, I believe KFC’s strategy to reach out to millennial consumers by utilizing celebrity endorsements can be considered a smart strategy as this will allow it to capture even more of the Chinese fast food market share. Lastly, while KFC celebrates national holidays in other countries like the United States and France, I believe KFC aligning itself with the Chinese government through its ‘reform and opening up’ advertising campaign in 2018 serves as both a bold and somewhat rare strategy. From my own experience, it’s relatively rare for companies, especially foreign brands, to align themselves with foreign government authorities and its unique national holidays with the intention of better integrating itself within that country’s culture. Ultimately, after reading this article, I couldn’t agree more with how KFC’s success within China can be described as the result of an interesting blend of both boldness and sensitivity.