#7 Fast Food in China
Is it a deadly sin not be a first-mover in foreign markets? Burger King, the world’s second largest burger chain, recently announced that it would expand it’s business in China by 250 to 300 outlets. Compared with McDonald’s 950 or KFC’s 2,200 this seems to be a relatively small number. Looking at the timing of entry, the link between time of entry and market penetration seems apparent: While KFC (a part of Yum! brands which also operates Pizza Hut) entered China in 1987 and McDonalds entered the Middle Kingdom in 1990, Burger King only joined the crowd in 2005. KFC also seems to cater to local tastes much better. Chinese prefer chicken over beef, and KFC has even added a long list of new items to it’s menu, including deep-fried dough sticks (youtiao) or pumpkin porridge. My prediction is, this will be a case to watch…
January 9, 2009 @ 4:39 pm
I think, that the success of a new market entry not only depents on the timing. It`s more important which products the company provide and how the company is going to communicate/advertise them. For example there are big differents between Mc Donald`s and Burger King. While the meat by Mc Donald´s is fried the meat by Burger King is grilled. That is the reason, why there are existing differents in the taste and different target groups. People which likes Burger King don`t often go to Mc Donald`s for a quick menu and the other way round. And the companies are advertising the differences.
I also think, that nearly every Fast Food Chain could be successful in china. China is a growing market and time is money. People don`t have time for cooking and so it is tradition to eat fast food. Beside the most famous Fast-Food-Chains there are many people on the streets which cook fresh food. Those cooks on the street prepare fresh menus in a very short time.
The last think I would like to mention is, that in my opinion, the product adaptation is also a very important point. I think, that it is not possible to enter a new market in the Fast-Food-Sector without a product adaptation. Every country has its own specifics, e.g. in some countrys the companys couldn`t offer menus made out of pigs. The Fast-Food-Companys have to think about the regulations and should offer the right products to their target group.
January 31, 2009 @ 12:31 pm
I personally think that the timing for entering a foreign market is important, but choosing the right strategy, choosing the level of product variation and gaining a high position in the customer’s mind are even more important for success. As I’m not willing to repeat the comment from above, I won’t focus on the importance of the product variation. I’d like to show the importance of being first, second or out of the customer’s mind.
Basically, I think that the potential for western brands and companies in China is very high. Additionally, the advantage of being a first-mover in a foreign market is that there is the chance to achieve a high ranked position in the customer’s mind. The fact that Mc Donald’s and KFC entered the Chinese market around fifteen years before Burger King has taken it into consideration, allowed them to receive high positions in the customer’s mind. Furthermore, they were able to gain experiences. These advantages were only possible to get to a high risk over fifteen years ago. Burger King had time to watch the first-movers. They entered the market to a lower risk. But now they have to struggle with the advantages of the first-movers, which are well known and accepted by the customers. That is why Burger King has to focus on the communication and the availability for the customer now.
All in all, companies have to be aware that it is important to be first or second in the customer’s mind. They have to calculate the risk of entering the market first or wait and watch and fight afterwards for a profitable position.
April 26, 2010 @ 3:39 pm
THE FOLLOWING COMMENT IS IN RESPONSE TO THE ABOVE BLOG POST FOCUSING ON THE TOPIC OF STANDARDISATION vs. ADAPTATION.
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In the book Principles of Marketing it is noted that marketing strategy is a central pillar to the debate surrounding standardisation vs. adaptation. (Armstrong & Kotler, 2007)
The entry of KFC, in 1987, and McDonald’s, in 1990, to China allow us to some extent to see both the standardised and adaptation approach at play when it comes to the marketing mix. In terms of Product, as a central part of the marketing mix, KFC has approached the Chinese market by adapting their offering to the local consumer, while McDonald’s initially approached the market with a more standardised approach. Given that KFC enjoys much greater success to that of McDonald’s, arguably KFC’s strategy to adapt their product range, in part, to the local consumer is advantageous over the largely standardised approach that McDonald’s had followed. Internet sources state that the growth of KFC is outpacing McDonalds at a rate of 3 – 1 (wikinvest, 2010).
There is much debate around the issue of whether or not a company should look to use a standardised strategy for foreign market expansion versus a strategy that adapts products and/or services to each individual foreign market (Szymanski, Bharadwaj, & Varadarajan, 1993).
Proponents of a standardised marketing mix strategy, may point to what Boddewyn and Grosse note, which is Levitt’s claim that “everywhere everything gets more and more like everything else as the world’s preference structure is relentlessly homogenized” – thus, as Boddewyn and Grosse go on to note, this supports the idea that competitive advantages based on differentiation are thus becoming nonexistent or at best irrelevant (Boddewyn & Grosse, 1995). Additionally, proponents would also favour the benefit of economies of scale and the relative efficiencies and savings that this may bring to the company. But KFC is clearly benefitting from adapting their product lines to the tastes of Chinese consumers. In fact, the marketing strategy of McDonald’s in China with regard to product, is now also adapting to local tastes. An interview with the President of McDonald’s China, Jeffrey Schwartz, reveals that the McDonald’s menu has at least 20% of products reflecting regional tastes. McDonalds also has a $2 million research facility in Hong Kong that is developing items for the Asia Pacific region: including McArabia flatbread for Indonesia, rice burgers for Hong Kong and Taiwan etcetera. (Hume)
It would thus appear that adopting a strategy of adaptation to the marketing mix, certainly with respect to the product, are key success factors for food industries expanding into foreign markets. By contrast, and in terms of Product – IKEA follows a standardised approach to their marketing mix within China, offering identical ranges as are offered throughout their world-wide network of stores. It is only when you visit the restaurant of IKEA that you find the Chinese style food additions. The examples above support the fact that different industries clearly require different approaches and strategies when it comes to developing the marketing mix in a foreign market. Clearly, there is no universal strategy.
Theodosiou and Leonidou covered the topic of “Standardisation vs. Adaptation” and they concluded that “superior performance is not the adoption of marketing strategy standardisation or adaptation”. Through their extensive research, they pointed out that the best way to achieve success was actually through the “appropriate co-alignment or fit between international marketing strategy and the context in which this strategy is implemented”. Explaining further, they say that “superior performance” can only be derived when the company marketing strategy also aligns to the foreign market in question. (Theodosiou & Leonidou, 2003)
So what questions arise out of this short debate?
In terms of market success, how interlinked is the timing of entry to the strategy of the marketing mix? By this I mean: Is it critical for a company to enter the market with, for example, a long term approach to the marketing mix already established, or would it be acceptable to enter a foreign market with the intention of adapting the marketing mix over time and if required. To simplify further, could it affect a company’s long term success and profit maximisation if they enter a foreign market with one strategy at the beginning and then change it later?
With hindsight, does it not make sense that a company only enter a foreign market having conducted the necessary due diligence so that they are fully confident that their marketing strategy is co-aligned with the uniqueness of the trading environment? If we look to the conclusion of Theodosiou and Leonidou then we could answer this question with a YES.
WORKS CITED:
Armstrong, G., & Kotler, P. (2007). Principles of Marketing. Prentice Hall.
Boddewyn, J. J., & Grosse, R. (1995). American marketing in the European Union: Standardization’s uneven progress. European Journal of Marketing , 23-42.
Hume, S. (n.d.). The Road to China. Retrieved April 26, 2010, from Buyerzone.com: http://www.buyerzone.com/professional_services/franchises/rbic-road-to-china.html
Szymanski, D. M., Bharadwaj, S. G., & Varadarajan, R. P. (1993). Standardization versus Adaptation of International Marketing Strategy: An Empirical Investigation. The Journal of Marketing , 1-17.
Theodosiou, M., & Leonidou, L. C. (2003). Standardization versus adaptation of international marketing strategy: an integrative assessment of the empirical research. International Business Review , 141-171.
wikinvest. (2010). Yum! Brands. Retrieved April 25, 2010, from Wiki Invest: http://www.wikinvest.com/stock/Yum!_Brands_%28YUM%29
November 5, 2010 @ 5:42 pm
I think, that the success of a new market entry not only depents on the timing. It`s more important which products the company provide and how the company is going to communicate/advertise them. For example there are big differents between Mc Donald`s and Burger King. While the meat by Mc Donald´s is fried the meat by Burger King is grilled. That is the reason, why there are existing differents in the taste and different target groups. People which likes Burger King don`t often go to Mc Donald`s for a quick menu and the other way round. And the companies are advertising the differences.
I also think, that nearly every Fast Food Chain could be successful in china. China is a growing market and time is money. People don`t have time for cooking and so it is tradition to eat fast food. Beside the most famous Fast-Food-Chains there are many people on the streets which cook fresh food. Those cooks on the street prepare fresh menus in a very short time.
The last think I would like to mention is, that in my opinion, the product adaptation is also a very important point. I think, that it is not possible to enter a new market in the Fast-Food-Sector without a product adaptation. Every country has its own specifics, e.g. in some countrys the companys couldn`t offer menus made out of pigs. The Fast-Food-Companys have to think about the regulations and should offer the right products to their target group.