KFC and McDonald’s marketing strategy in China Essay

AbstractMcDonalds is the gr courseest loyal nutrient chain in the world, its phoner sales and operate income was gener completelyy exceeded KFC on a global scale, but it confronted a strong argufy from KFC when it emerged into chinaware. This essay analyzes the comparison mingled with KFC and McDonalds merchandise system, emphases on conclusion the correspondentities and contrastingiations from Seven P Formula and finally makes a conclusion that localization principle is more(prenominal) than suit adequate to(p) than globalization as the selling schema when ready regimen chain emerged in chinawares commercialize.Introduction location or Globalization has long been discussed when choosing strategic orientation in external tradeplaceplace. These both international market philosophies influenced enterprises current situation and future evolution. on that point are deuce card-playing food international companies named McDonalds and Kentucky fried Chicken ( KFC) who initially choose 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 deal for hamburger, french fries and separate type of strong food, temporary hookup KFC a alike from the identical country, is now unrivalled brand of Yum, which first eatery was founded in 1952 and chiefly sells unique insight cooked poulet. From global scope, McDonalds is exceeding KFC from pull up stakesy sales, operating profit to planetary system units.McDonalds company- operated sales were 18875 million, operating income was 8764 million and it had 35429 systemwide restaurants in 2013(McDonalds, 2013), eon KFCs company sales were 11184 million, operating profit was 1798 million and thither 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 score uses APMEA (A sia Pacific, Middle East and Africa) as representative of Asiatic but not show the profit from China while KFC piece of ass saw significant progress in China, and it highlighted the progress in unused(a) restaurants, recruits and volume growth in annual report. The divergence 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.DefinitionThe concept of marketing has long been defined by different flock. The easiest one to understand whitethorn be a figure out of planning and executing, from court, crossways, ideas and attends to satisfy nodes and organizations objectives (Ferrell et al, 1987). This comment emphases marketing as a process preformed in organization, which has an overview of its practical function. It has inversely beneficial between providers and customers exchange, where providers goal is to offer harvest-tides and run to achieve profit and customers goal is to purchase proceedss which reach their daily life. selling strategy could be the plan that identifying what is the customers requirement and what marketing goals and objectives could be achieved if selling particular honests and services in an available quantify (Jonathan, 2009). Briefly is the competitive plan that the organization ordain aim. 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 determine and create consumers brand loyalty. Localization is a strategy that advocates enterprises to adapt to local civilisation.The process often set up their products, services and promotion customized join to local market. Enterprise should try to integrate into and treat them as an indwelling member but not a foreigner to the local culture in the target market, which emphasizings the enterprise must adapt to the environment to light up more space in order to further development (Warren, 2008). KFC is an manakin that has au pasttic food, drink and service highly sensitized to localization. KFC was the first westbound fast food chain emerged in China in 1987. In order to succeed, KFC abandoned its U.S. avocation model and planned to sell sum total products and services locally. Since it started to now, the companys strength and competences accumulation has exceeded a study part of fast food companies and advantagefully 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 stochasticity (Edmund, 2008).Globalization is also a marketing strategy that the organization all-enco mpassing their activities worldwide, it is a main tendency for international companies or company who take to operate in other countries. This tendency was influenced by technical factors much(prenominal) as information and communication technology revolution, and principle of finance and trade, also affected by the movement of quite a little. Globalization pass on 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 ex axerophtholle that open up 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 clip and now it has 4563 outlets, which can be regarded as the macrost restau rant 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 unembellished 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 logotype, products and goodwill. For extype Ale, McDonalds allow other business man open their chain by using the same name if they have paid initial honorarium and ongoing management service fee (Colin, C et al, 2012). KFC use collaborative model of direct and franchise chain which laid the solid tush 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 subj ect franchisee do not need to found a location, recruiting and training fresh employees but apply to join in and take over a mature restaurant. In that situation, franchisees can omit the preparatory work and unified themselves to the standard management system as soon as possible. However, McDonalds take a firm stand 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 of late influence on their future development. merchandising strategy helps make recognition of international opportunity on seven parts product, hurt, 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 decisive to track and achieve the maximum results by adjust seven P (Brain, 2004). The similarities and differentiation of seve n P between two companies also represent localization is suitable than globalization.ProductA product is anything that be offered to a market for attention, acquisition, use, or consumption that might satisfy a take or need. (Philip, 2011). A product contains good, service and ideas. Food is a philia 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 lily- expirered 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 ex antiophthalmic factorle, since 24th of March in 2014, KFC started to use the brisk menus, which eliminated seven items, renewed one item and added fourteen ite ms. The totally regeneration 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, jibe 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 traditionalistic 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 draw 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.PricePrice 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 performance in sales volume would influences price reversal. So, it is difficult for manager adjudicate 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 decline 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 fl uctuated around 14 RMB (approximately 1.3 pounds), while McDonalds have nine burger as its staple food and the price wave 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.PromotionPromotion 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 soma 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 tension on Taste and present youthful energy, friendlier and more welcoming. The promotions of KFC are wide-ranging from advertising in television to Internet, or distributing coupons in public place. every(prenominal) 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 roadway or can download app of KFC, then you can get microscopical 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, case and digital marketing all create growth in marketing.Place and PositioningPlace is where the products or service actua lly sold, it includes geographic 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 industrious 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 a busy life. Such asemployees who exceed whole day in front of computers. These people busy at their working and had no time preparing food. Fast food gives them the take on 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 loss to try new and unwilling to cook by themselves, the restaurant incessantly placed close to schools, universities, city focus on 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 condition 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 kindly 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 prospering place to have a rest, drink a cup of tea leaf or coffee and eat some food. KFC and McDonalds success in choosing location set a good example for other fast food r estaurants.PackagingPackaging is a part of marketing process and link to brand identity. The impact on the image of product at long last 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 bendable 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 appro ach to promote. Both of their package had live a deep impression on Chinese.PeopleAll 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 indwelling 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 petulance and enthusiasm in younger while KFC emphasis on the union between family members, in China, this particular marketing where the concepts of family was strengthen, KFC therefore occupied advantages. through with(predicate) the comparisons of KFC and McDonal ds from seven aspects in marketing strategy, it can have a clear judgment between them. The reason why China has bring 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 deal helps avoid mistake.ConclusionIn 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 distinctivenes sof the Chinese market and emphasis on the local environment and local customers.ReferencesBooms, B. & Bitner, M. J. (1981). Marketing Strategies and Organizational Structures for Service Firms. Marketing of Services, James H. Donnelly and William R. George, eds. Chicago American Marketing Association, 47-51.Brain, T. (2004). The 7 Ps of Marketing. Million Dollar Habits Proven Power Practices to multiply and Triple Your Income. p133-140Charles, D.(2011). A Dictionary of Marketing (3rd ed). Oxford Oxford University Press. Wansink, B. (1996). Can package size accelerate usage volume?. Journal of Marketing 60(3)1-14Chartrand, S. (2001). 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