KFC and McDonalds: Western Country And China

Published Date: 23 Mar 2015 Last Modified: 16 May 2017

This chapter describes the background of the two typical western fast food companies in china, which are KFC and McDonald. It also provides research questions along with the purpose of the thesis and corresponding primary and secondary research methodologies. In addition, there is a brief introduction of the theoretical Frameworks used thoroughly within the thesis.

Background

The KFC and McDonalds are the two major entities operating in Chinese market in western fast food industry. McDonalds is one of the famous brands of restaurant in the world, owning more than 30000 outlets in 120 counties, generating US$ 24.075 billion revenue in 2010 while KFC has more than 10000 stores in 80 countries with the US$ 520.3 million revenue in 2007 (en.wikipedia.org).Howbeit, McDonalds trails behind its competitor KFC in china, although in other countries, such as USA, UK, the business of McDonalds is more successful than that of KFC. McDonald was founded by Ray Kroc in 1955 in the United States. On October 8, 1990, the first McDonald's restaurant in China opened in Shenzhen. On April 1992, Wangfujing outlet in Beijing was opened, which was the world's largest area of McDonald's restaurants. At the same day, the total income was over a million RMB. At present, McDonalds only has approximate 200 outlets. In addition, the numbers of McDonald's delivery service outlets are more than 480. There are more than 1,000 dessert stations, more than 280 wheat coffee shops, and more than 1,000 24 hour restaurants. In 2012, McDonalds in Shanghai, Beijing, Guangzhou, Shenzhen, Tianjin, will open online order services to expand its business scale in E-business market. For KFC, since 1987, when its first outlet opened in Beijing, china, 24 years passed. During these years, KFC china always dedicates to create 'new fast-food' concept for China Market and has been trying to explore the most attentive service to Chinese consumers (Bell and Shelman, 2011.P3). Till 2012, KFC China has opened 3200 outlets in more than 650 cities and town. It is the largest and fastest growing fast chain company. In China, KFC plays a much more dominate role than that of McDonalds. In July 1987 the first KFC outlet opened in Beijing which is regarded as the first step into Chinese fast food industry. Since then, KFC has achieved the leading position in fast food industry in china, which has already formed its unique cooking style, especially tailoring to the tastes of specific regions within China.

Research questions and aim

The specific objectives that are researched in this thesis are:

Comparing difference market strategy KFC and McDonald used to improve their market position in Chinese fast food market.

The analysis of cross-cultural management strategy adopted in KFC and McDonald

The challenges that KFC and McDonald will encounter in China in the future.

Our aim is to research and analyze about the key factors for foreign fast food companies running successful business in China. We want to find out what changes western fast food companies should make in order to achieve the sustainable growth.

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Contribution: From the result of this case-study the organization will be able to identify the root cause of their successful business and also reveal their potential weak point. By using our result, they can improve their further overall business strategy.

Research methodologies

To achieve the target of doing deep analysis between KFC and McDonald's s business strategy, the primary methodology chosen is a mixed-method approach (Bryman, 2004). The qualitative research method will be introduced into this case study. By doing so, a series of random selected questions will form a questionnaire. The answer of each of the questions will determine each consumer's attitude toward each well designed topic relating to their reaction to various business strategy adopted by KFC and McDonald. The secondary research methodology is applied to gather the evidence from other aspects and sources (Bryman and Bell, 2007, P28). One part of these materials include KFC and McDonald's annual report, revenue report that will reflect and reveal their finical positions in the Chinese market so as to determine whether their current business strategy generate a positive impact based on the reaction from the consumers. What's more, the press and journals published in China, for example, China Daily, 21 century, will also be considered for the reference. For those collect data, a statistics analytic method will be carried to conclude what aspects KFC and McDonald should improve to increase their marketing margin in Chinese Market from consumer's perspective.

Disposition

Chapter 2: Introduce the Theoretical Frameworks, which are composed of cross-culture and 4P marketing strategy. The discussion is divided into two parts. At first, the components of culture which could form the key elements of cross culture strategy such as the different values, languages and customer behaviors will be chosen and they are combined with the analysis of 4P marketing strategy to illustrate how cross-culture strategy interacts with 4P marketing strategy and vice-versus. Secondly, illustrate 4P marketing strategy individually. In addition, we present different views of the relationship between society structure and consumer behavior such as service quality, customer expectations, perceived service quality and the relationship between customer expectations, perceptions and satisfaction in different countries. Finally we describe 4P marketing strategy that is used for analyzing the result and its relationship with cross-culture strategy.

Chapter 3: This chapter describes the methods that were used for making the survey. The questionnaire structure as well as the method for choosing the sample of sources to support the evidence is also described

Chapter 4: The empirical material is presented. The analysis is based on the 4P Marketing strategy. Product Strategy, Price Strategy, Place Strategy and Promotion Strategy are discussed together with the example of KFC and McDonald. In addition, cross culture analysis is combined with 4P analysis in order to support the results that KFC and McDonald as western fast food company are performing well in Chinese market.

Chapter 5: In this chapter we present conclusions for KFC and McDonald respectively. Then we compare the disadvantage and advantage of western fast food companies with traditional Chinese food restaurant and then provide recommendations for western fast food companies to improve. In addition, we outline what aspects could be enhanced in the further research and the limitation of our studies.

Literature review (Theoretical framework):

The theoretical framework of this study is based on a number of relevant theories that are discussed in this part. The model which authors constructed in this study integrates cross-culture and 4P marketing strategy.

Cross-Culture Management

The process of cross-cultural management, in general, is divided into two steps. Cultural analysis and evaluation are considered as the first step. For the second step, culture then is regarded as a resource that could be controlled through the effective integration in management level. In the study of cross-cultural management, how to analyze the culture is the key that could directly and effectively reflects the current achievement of cultural management within the enterprise. Hofstede's model is generally accepted as the most comprehensive framework of national cultures values which comprise the difference in performance of the managers and employees on the four dimensions of national culture: power distance, individualism vs. collectivism, uncertainty avoid index, masculine vs. feminine as the reference model to analyze the cultural differences. In addition, Kluckhohn and Strodbeck's values orientations theory proposes that cultures differ in terms of how they approach the six basic dimension which are relationship to nature, time orientation, views of human nature, activity orientation, Relationships among People and Views of Personal Space. Furthermore, there are some other cultural measurement theories, such as the Denison's model, which is a relatively newer and more detailed model, is used in order to understand the organizational culture of the Karun Oil & Gas Production company. According to this model, organizational culture has four dimensions: involvement, consistency, adaptability and mission. Moreover, Kim S. Cameron and Robert E. Quinn's competing values theory develops a series organizational culture assessment scale (Organizational Culture Assessment Instrument, OCAI) aiming to assess organization's current views and expectations through a questionnaire usually take 5-10 to complete.

Culture Difference between western country and China:

The purpose of the cross-cultural management is to create a not only accepted by the host country employees, but also conducive to the development of corporate culture in multinational company. Cross-cultural management is the core measure to resolve cross-cultural conflicts due to globalization. The culture is a double-edged sword. On one hand, cultural confliction will evitable happen within the corporation and the original corporate culture will face the challenge. On other hand, it will bring opportunities which can take full advantage of the international market and competition, therefore enhancing corporation's competitive advantage.

With regard to the cultural comparison between Chinese and western business management, hofstede's four-dimensional framework model is adopted. The four dimensions are power distance, individualism vs. collectivism, uncertainty avoid index and masculine vs. feminine. Based on Hofstede's analysis of the surveys from 53 countries or regions, the following table illustrates the major difference:

Table 2-1 Comparison result of hofstede's four-dimensional framework

Country

Power distance

Individualism

Masculine

Uncertainty avoid

USA

Low

High

High

Low

China

High

Low

Low

High

Power distance:

Power distance is the most typical feature of the national and cultural differences. The meaning of empowerment in each country is not exactly the same, thus there are also significant differences. Cross-cultural management consulting firm ITLM latest research results show that power distance indicators, China and the United States score is 80 and 40 (the world average is 55) at rank 5 and 40 among the 56 countries respectively. Such significant difference indicates that the staffs relatively paying more attention to pursuit power within Chinese company. In Chinese business management, the higher position the more power and the more positive the employees' performance have. Comparing to the United States, individual's abilities, and actual performance is considered in the first place.

Individualism / collectivism.

In Hofstede's study, individualism index is used to measure society's tendency with regard to individualism and collectivism. Individuals in countries with a high level of the index value personal freedom and status, such as the United States, while individuals in countries with a low level of the index value harmony and conformity, such as China and Japan.

According to Hofstede's study of 53 countries or regions, with regard to the individualism, the United States ranked first, while Hong Kong ranked 36, Taiwan was ranked 43 with score 91,25,17 respectively. From the score, it is obvious that there is a large discrepancy between individual's attitude to individualism and collectivism in different countries. As a matter of fact, the culture of the United States and China is highly different in various areas including values ​​orientation, the habits and thoughts. In China, people consider more about and pay more attention to the spirit of solidarity and collective strength while in the United States, the Americans emphasis the importance of freedom meaning that everyone needs control their own destiny, desire and ability of individuals should not be subject to the government, church or other organizations and individuals restrictions and interference, which is a core concept in American culture.

"Bread is everything" is regarded as the most comprehensive conclusion of Chinese diet culture while the other countries may not follow the same rule. Different regions have different eating habits, even in the same country. Therefore, it is understandable that different countries have their own eating habits which are caused by regional, national and ethnic, cultural differences between countries.

Western food has a rational diet concept, regardless of the colour of the food, flavour and shape balanced diet, nutrition must be ensured. The food is always viewed from the aspect of nutrition therefore does not have excessive pursuit of the taste. However, Chinese has an emotional diet concept always believing diet as a significant part of life, which cannot be ignored.

First, Chinese tries all the way to pursuit the taste of the food by combing the flavour during the cooking, the flavour after heating and the flavour of the ingredients, as well as the flavour of spices altogether. Secondly, the way of dining is the most obvious difference between the Chinese and Western food culture meanwhile it demonstrates how Chinese culture effluences the diet. In dinner party, Chinese people usually shares dishes on the table. Hosts greet and encourage everyone to work together to eliminate all dishes and also every guest will strongly desire to become the first one who pays the final bill. All of above acts emphasize "cooperation". Westerners believe the eating habits are varied by person thus each guest orders their own meals and there is no need for the host to consider the tastes and preferences of others and when party finishes, each guests pay what have been ordered from menu by themselves. In summary, the major differences between Chinese and Western cultures cannot be ignored and should be seriously taken into consideration in international enterprises when implementing the business strategy in global market.

1. Cultural innovation strategies

Cultural innovation strategy provides effective ways and various channels for the parent company to integrate the local culture of the foreign subsidiary branch into its main stream corporate culture in order to promote mutual understanding, adaptation as the basis for the management of the foreign branch. During the process of cultural integration, localization strategy is a guide for cultural innovation, which does not only retain the parent company's original corporate culture characteristics and also is able to adapt to the local cultural environment. Western Fast Food Company, for instance, the integration process for Chinese culture in KFC experiences three stages, which are product culture, brand culture, and corporate culture.

Product culture:

KFC China has always been following the high quality standard required by its parent company, such as quantization process, the cooking process including the tools that are used for combining the raw materials as well as the cooking temperature and cooking time through quantified production process to ensure product quality. Furthermore, Because of the correct understanding of the Chinese culture, KFC is able to reasonably develop localized products suitable for Chinese tastes, accepted by Chinese people to a large extent. KFC China devotes to the product development, including the taste expansion in existing product and also new product innovation. In order to change the impression, which are limited products and monotonous taste, Chinese people towards to western food; it specially develops spicy flavour suitable for north China market and also introduces new products for whole china market, such as soup and Chinese-style breakfast.

Brand Culture

Brand culture refers to a specific brand name or mark, or a combination of these two elements. It represents the emotional cognitive, cultural traditions and image of the personality that are conducive to consumers to identify and distinguish the particular sellers of products or services.

1. Create a standardized Brand image

KFC launches the "CHAMPS" champion plan that is standardized services in the global market, successful initiatives to create a brand strategy. Its specific contents include: C-cleanliness (to keep clean and beautiful restaurant); H-Hospitality (sincere and friendly reception); A-Accuracy (to ensure the accuracy of supply); M-Maintenance (maintain excellent equipment); P-product Quality (adhere to the high quality and stable products); S-SPEED (pay attention to the fast and quick service). Such plan has been conscientiously implemented in every restaurant in the world, and all KFC All employees must strictly enforce the uniform standard.

2. Build brand affinity.

KFC's slogan of "In China, as China becomes and KFC integrates " family "," love "emotional world into product advertisement as its unique characteristics to create a new image of the brand to adapt to the emotional culture in the Chinese diet culture, thus to some extent, it improves Chinese impression on the "fast" meal, then gradually, KFC restaurants are also be considered as the place where family or friends' party usually takes place.

3. High degree of social responsibility

KFC is enthusiastic in public welfare and actively assist the vulnerable groups, in particular, devotes to Chinese children and young people's education. According to the statistics, it shows that in nearly 10 years, KFC's direct and indirect contribution to the public welfare has reached more than 6500 million. Kendall China Youth Development Foundation in September 2002 set up a total of 38 million Chinese Yuan program "China KFC dawn Fund" aiming to provide long-term funding for poor college students with good academic performance in school. Currently, the fund has been implemented in 42 colleges and universities across the country, nearly 860 students have received assistance. The "China KFC dawn Fund" is one of the largest foundation program since the implementation of the" Hope Project" to aid the poor college student by China Youth Development Foundation. KFC's social activities does not only establish a good brand image, but also exerts a subtle influence on their own potential consumers and employees. What KFC does match an old Chinese saying goes: Never forget a generous act and grasp every opportunity to return the hospitality that you've received.

Corporate culture:

KFC China realizes that Human Resource is the most significant strategic resources and the importance of the establishment of "people-oriented" corporate culture.

1. The human resource localization:

KFC China make efforts to train promote local staff because they are familiar with national policies and have a depth understanding of the local competitive environment and market characteristics. Of all 16 market segments in KFC China, 8 local leadership teams with extensive industry experience are formed in order to make the correct judgments within the shortest time. At the same time, it can also reduce the communication barriers between cultural differences.

2. Staff training

Annually, KFC china makes investment covering various areas in order to strengthen employees' expertise and support employees' personality development from the restaurant waiter, restaurant manager to top corporate management personnel. Furthermore, Management staff conducts a series of management training while for the junior staff, the training will last three hours on every 2 weeks include on-the-job training and examination. When there is new product to be launched, all junior staffs are required to participate a relative short period training in order to raise the profession quality of staff to adapt to the change of existing products. In addition, the aim of training restaurant managers is to make sure them be familiar with all the operational processes in the local restaurant, from the introduction of products, inventory management, personnel management, crisis management, and quality control and labour costs, although the training process could potentially increase their variable cost.

Marketing Strategy

Jerome McCarthy, professor at the University of Michigan, for the first time, introduces the 4P theory in his book "basic marketing", including product (Product), price (Price), distribution (Place) and promotion (Promotion) four elements. Within the theory, product factors is the combination of performance, quality, colours, varieties, specifications, models, trademarks, packaging, services and other small factors. Price factors are composed of cost, price, price discounts, payment terms, and credit terms. Distribution factors includes the choice of marketing channel structure, mode of transport, storage location, wholesalers and brokers, as well as the retailer's selection and control. Promotional factors contains advertising, personal selling, sales promotion, public relations. Thus, 4P marketing mix theory instructs how companies should do, as what Philip Kotler has mentioned is "if the company is to produce the appropriate product, set the appropriate price, the use of appropriate distribution channels, and paved the appropriate promotional activities, the company will be successful". The marketing mix can be adjusted on a frequent basis, to meet the changing needs of the target group, and the other dynamics of the marketing environment. They are as follows: product, price, place, and promotion.

Product is a tangible object, or an intangible service, that is mass-produced or manufactured on a large scale, with a specific volume of units. Intangible products are often service-based.

Price is the amount a customer pays for the product. The business may increase or decrease the price of a product if other stores have the same product.

Place represents the location where a product can be purchased. It is often referred to as the distribution channel. It can include any physical store as well as virtual stores on the Internet.

Promotion represents all of the communications that a marketer may use in the marketplace. Promotion has four distinct elements - advertising, public relations, word of mouth and point of sale. Advertising covers any communication that is paid for, from cinema commercials, radio and Internet adverts through print media and billboards. Public relations are the communications that are not directly paid for and include press releases, sponsorship deals, exhibitions, conferences, seminars or trade fairs and events. Word-of-mouth is any apparently informal communication about the product by ordinary individuals, satisfied customers or people specifically engaged to create word-of-mouth momentum. Sales staff often plays an important role in word-of-mouth and Public Relations.

Cross-culture and Choice of 4Ps

When a firm enters into a new market, especially a foreign market, which strategies should be chosen is very important to managers. Focusing on this, Doole and Lowe discussed about the standardization and adaptation in their study. They mentioned that firms adopt a combination of standardization and adaptation of the various elements of the marketing management programs and processes by globalizing some elements and localizing others, and they thought the cultural factors are the balance between standardization and adaptation. Culture differences can be seen as the usage factors and legal factors. In their opinion, marketing objectives and strategies are more readily standardized than operational marketing decisions. Therefore, when firms enter into a new market which has a different cultural context, the market managers must think over the alternative strategies, such as the global strategy, multi-domestic strategies and so on. In this study authors suggest to choose the 4P marketing strategy model help to analyze the effect of cross-culture.

Mooij considered that the managers of transnational corporations should provide appropriate products according to the local consumer values and buying behaviors of a certain market. The product strategy owing to cultural factors, usage factors and legal factors. Hall described some countries'culture is high-context culture. He meant that in this kind of country, most of the information is shared by members of a society. In this kind of country, people often do the same things as others did, especially as those around them. For instance, to most families in China, members share the similar values with each other. In other words, China is a society with relatively high collectivism , and where people have a high sense of identity to the traditional culture and food. Moreover, according to Doole and Lowe, pricing decisions in international markets can be very complex. Many factors can influence the pricing strategy in different markets, including internal and external factors. From the level of company and product, factors such as corporate and marketing objectives, firm and product positioning, product range, life cycle, substitute, product differentiation and unique selling propositions, cost structure, manufacturing, experience effect and economics of scales will influence the pricing decision of a company. Market factors like consumers'perceptions, expectations and ability to pay, need for product adaptation and market servicing, market structure, distribution channels, discounting pressures, market growth, competition objectives, strategies and strength can also affect the pricing strategy of a company. According to the Hofstede's culture dimension model, China ranked in a relatively high position in power distance. From the perspective of cross-culture, therefore, many people in China consider the relationship between the prices of consumer places and the personal appearance seriously. Place represents the location where a product can be purchased. It is often referred to as the distribution channel. It can include any physical store as well as virtual stores on the Internet. Similarly, place strategy can be influenced by both internal factors and external factors. For instance, internal ones like company size and product positioning are main factors influencing the place strategy. In addition, social-cultural factors such as local law and government policy, religion, language, customer buying behavior also affect this strategy obviously in different ways. When it comes to the promotion strategy, decisions in international markets are even more complicated than the pricing decisions, because promotion represents all of the communications that a marketer may use in the marketplace. It often includes several distinct elements, such as advertising, public relations, word of mouth and point of sale. Promotion activities play a role of introducing the product and service, motivating and leading the demand of the customers and also facilitating the products and services easily sold. When implementing the promotion strategy, the marketing managers of a transnational corporation should take many factors into consideration. Language, adaptation ability of customers, values, life style and attitudes, different kinds of customs and other culture factors of a certain nation are all very important which will influence different promotion activities.

Methodology:

This chapter consists of an introduction to the research approaches and strategies we chose and how to collect valuable data and analysis data to find the answer to research questions. The reliability and validity of our collected data also discussed below.

Research Approach

We have chosen to use both quantitative and qualitative research method. Bryman and Bell (2005) describes that a quantitative method means that data is collected with the aim to try theories. The difference between making a qualitative or quantitative study is that the qualitative study goes to the heart of the problem and has an inductive approach. The quantitative research design reaches a broader part of the problem and has a more deductive approach. Quantitative research focuses on measurement, causality, generalization and replication. Quantitative research is rather a lot of interpretation. With regard to qualitative approach, it is able to get a deeper understanding of how different cultures influence the marketing strategy in multinational companies. Using a qualitative methodology will let the researcher have the opportunity to be flexible in the research, and to get a clear and broad view about the cultural aspect (Jacobsen, 2002). The methodology will also develop the research, test the theories and explain the researched phenomenon in a new way (Bryman, 2006).

Data collection:

When collecting the data, the researchers often used primary and secondary data to gather the empirical finding. Primary data is information that especially has been collected for a specific purpose from a primary source. According to the research purpose, data about marketing strategies in Chinese market need to be collected. Thus, the primary data in this paper has been gathered through the phone interviews and the employees for the questionnaire survey which was carried out in Beijing KFC branch. The following requirements were made clear to the subjects:

Participators would be expected to read each statement carefully before ticking the choices

Participators would be expected to tick the choices as realistically as possible according to what they would actually do in their real daily lives

Secondary data is the data or information that has already been recorded and collected by others for other purposes (Cooper et al., 2005, p.315). Secondary data is often of good quality, and it can therefore be useful for another purpose than the primary reason. We can collect secondary data from the course books, article, newspaper papers, Internet Website and other publications.

Interviews and Questionnaires:

It is widely recommended to use interviews to collect information for evidence as a source (Cooper et al., 2005, p.378). We utilize two types of methods to collect the primary data. The first is survey research in which we use a questionnaire with an emphasis on fixed response categories and systematic sampling and loading procedures combined with statistical methods and quantitative measures (Ghauri, 2002, p.100). The second type is unstructured interviews in which the informant is given almost full liberty to discuss reactions, opinions and behavior on a particular issue. After some answers we decided to give the question about "how" and "why" to continue the dialogue. The questions and answers are often unstructured and are not systematically design beforehand (Ghauri, 2002, p.100-101).

We decided to do the interviews by telephone with the Beijing KFC's Training manager and Finance manager. We also e-mailed the questionnaires to the managers for them to deliver them to the employees to answer. The telephone interview was tape recorded because audiotapes can provide a more accurate rendition of the interview. The manager's questionnaire includes 31 questions that were made with information and theories from the marketing and cross-culture area. The questionnaire of employees includes 22 questionnaires according the theoretical framework provided by Hofstede's cultural dimensions theory and marketing mix 4P theory introduced by McCarthy.

To find out the appropriate interviewees, we sent E-mail to KFC Beijing Branch and asked for interviewing the managers of KFC Beijing. KFC replied to us and gave the managers‟ E-mail to us. Fortunately, the Finance manager and Training managers agree to the interview and we sent the E-mail to the managers asked for phone interviews and also sent the questionnaires to them. The interviews lasted one hour in total. These informants behaved nicely and were knowledgeable and also knew well the employees working providing the information for the paper that we needed. A recorder was used in the interviews and we wrote down everything they said during the interviews in order not to forget something and misunderstand. Meanwhile, the managers helped us to send the employees questionnaire to the staff to fill in the answers and then 20 employees sent their individual answers to us via E-mail.

Reliability & Validity

In business research, the researchers work with different criteria that make the research trustworthy and valid (Bryman, 2006). The criteria that will be used in this paper are validity and reliability.

In many ways the most important criterion of research is validity. Validity is concerned with the integrity of the conclusions that are generated from a piece of research, and it is important that the sources of the data are close to the phenomenon (Bryman and Bell, 2007; Jacobsen, 2002). In this paper, the primary data came from the answers of managers by email and telephone interviews, which are close to the fact and phenomenon. Moreover, when gathering the primary data, the researcher had the opportunity to contact the respondents again if something was unclear or misunderstood the first time.

Reliability is commonly used in relation to the question of whether or not the measures that are devised for concepts in business and management are consistent (Bryman and Bell, 2007, p.40). It refers to the extent of data collection procedure and analysis generating similar interpretations and findings however and whenever is carried out (Franklin and Ballan, 2001). In this paper, some classical theories are used to conduct the theoretical framework. These theories have been tested and researched in the subject of marketing strategy and cross-culture. Additional, the researchers should use the same interviewer for all the interviews, which has been done in this research (Jacobsen, 2002).

In addition, In order to have reliable and valid data we have recorded these interviews. The questionnaires were both present in English and Chinese to the managers and employees. The employees sent the answers to us individually in order to get the information from the employees to be as reliable and valid as possible.

Empirical Study

The main focus of this empirical part of the study is to present the information gathered from the KFC and McDonald manager and the questionnaire answered by the employees.

Survey Discussion:

Business Performance:

([Jihong Lu Comment]: This paragraph is used to illustrate the KFC's cross culture principle who believes that China's KFC, slowly become the Chinese of Kentucky while for McDonald, its cross culture emphasis China is still the world of McDonald's McDonald's.)

Business Development Speed

1.1.1 KFC

1.1.2 McDonald

From 2001 to 2003, KFC's business growth shows a leap forward comparing that of McDonald's from the aspect of the number of chain stores newly opened. The reason is that McDonald China adopts ongoing global "downsizing" action, hindering its growth in China. As a result, since 2004, KFC and McDonald, the gap is widening, the speed of opening new branches of McDonald obviously slow down, while the number of chain stores hold by KFC continues to increase in a steady speed.[JihongLu comment: More evidence will be added further such as chart, diagram].

Business Income

KFC

Mcdonload

From the financial report from 2002 to 2006, KFC considers China market as an explicit separate region, which shows the importance of China market towards to its contribution to the global revenue. In China market, KFC sales growth year after year, the average annual growth rate is 20% while the revenue contributed by franchise is also constantly growth, the average annual growth rate is 22%. These phenomena are indicates that KFC pursuits the long term expansion in the Chinese market. McDonald, however, did not separate China market from its global market division; Instead china market is incorporated into the Asia-Pacific, Middle East and Africa market region. The report shows the sales revenue of McDonald's in China is about $ 270 million, relatively less than the $ 1.3 billion KFC; McDonald's franchise revenue is about 2.2Billion while KFC is around $ 800 million.[JihongLu comment: More evidence will be added]

Reputation

The end of 1999, the internationally renowned AC Nielsen research firm survey results show that "Kentucky Fried Chicken" is the most favorite International fast food brand. In 2000, AC Nielsen research firm survey conducted in 30 cities in China, KFC is recognized as the top of the Top 10 customers most frequently visited international food brand.

In 2004, because McDonald is unwilling to disclose its sales revenue in China, Netease specially make a questionnaire contains the total number of votes for the 3340 votes, 34% of voters believe McDonald performs better than KFC, however, 31% participators believe that McDonald achieved better instead(JihongLu comment: More evidence will be added).

Marketing strategies

[Jihong Lu comment: I think I could expand more areas/points in addition to the area I listed below, for example, discussing the different ways of franchising KFC and McDonald used to support the market strategies. Since it is only a draft outline, I will develop deeper and even figure out more in the formal version.]

Product and Position

KFC

McDonald

Marketing manager in KFC said that there are also some new products that are sold in the Chinese market, and some of them have special recipes for Chinese people. For instance, original chicken in China involves mixing all the ingredients and dig chicken pieces in beaten eggs, then turning them over in regular bread crumbs, finally plunging them into the secret spices and heating them in the oven at 350 degrees. The ingredients include chicken, flour, bread crumbs and secret recipe. Moreover, Chicken Roll of Old Beijing is chicken rolled in a thin pancake with green onions, cucumber and hosing sauce, and made into a wrap which is modeled after the way Peking duck is served, but with fried chicken inside. It is flavored, not only with hamburger sauce, but also a sweet sauce made of fermented flour, which is a condiment for the famous Beijing dish. According to the same marketing manager of KFC in Beijing, the main target group of KFC in China is Chinese families. By doing so, every KFC restaurants has a special area for children and the decorations in those areas are jolly and colorful. In some festivals, KFC would prepare some toys and presents for family customers.

For McDonald, from the menu of McDonald's core product in China and the market manager in McDonald, it delivers a sense that McDonald thinks that the customers come to McDonalds are going to enjoy the Western-style fast food, so it does not plan to change our core product, such like the Big Mac, Fries, Coco-Cola, Milk Shake and so on. However, it adds some kinds of adaptable products into menu in order to adapt to the Chinese market. A typical example is the breakfast product, which likes scrambled eggs, pancakes and hot tea having typical Chinese elements that can be found in McDonalds's breakfast menu in China. Such improvement receives good market response proving their strategy of product localization is correct. [(JihongLu comment: More evidence will be added).

]

Price

KFC

McDonald

For McDonald, Considering about the customer's consumption level, McDonald tends to use low-price strategy in this market. The same product would get different prices from Chinese and American markets. Thus, it is not unusual to find that a Big Mac is much cheaper in Beijing than in Boston." McDonalds marketing manager explained.

For KFC, it sometimes raises the price of its products in the recent years. According to the marketing manager in Beijing, in the beginning of the year 2005, KFC raised the price of some products. However, it did not cut down the amount of consumers coming to KFC. And in the January and June last year, KFC raised the price again. "Because we have no choice," noted by the marketing manager, "the cost of labor, material, and rent have raised, we must adapt to the change of market condition." In addition, KFC did not think this activity would reduce the loyalty of their consumer. Moreover, we are also told that if you are a student and have a student ID card in China, you can go to the KFC restaurant to apply for a "student sunshine card". After getting this card, the owner can have a discount when buying some products during the valid period of the card. (JihongLu comment: More evidence will be added).

Place

KFC

McDonald

For KFC, According to the marketing manager, after considering the balance of risks and benefits, KFC chose Beijing as a starting point in 1987. For Beijing, which is the center of Chinese political and culture, the population and tourism industry there was increasing year by year at that time. Thus, it was beneficial for KFC to sell products and attract customers. Evidently, we think it was a really successful decision and from then on, KFC entered more and more cities in the Chinese market. And he also noted that in some minority nationality regions in middle and south-west of China, KFC enrolls some local people as waiters because some of these areas have their own dialect.

For McDonald, marketing manager of McDonald mentioned during the interview, "When choosing a place to open new restaurant, McDonald tends to set up the stores which are near the large-scale business establishments, and chooses the area which can easily be adapted to the American fast-food. Before decisions of expanding new stores are made, we often do the market research and collect the information as much as possible, including the amount of population, economic level, buying ability and the potential development scale, and income levels and development of shopping opportunities. (JihongLu comment: More evidence will be added).

Questionnaire Discussion:

This part mainly deals with the result collected from the questionnaires in Beijing and explains the collected data. Firstly, the results are presented in the form of charts. Secondly, the results are divided into four aspects (Power distance, Individualism, Masculine and Uncertainty avoid) according to Young Yun Kim's cross-cultural adaptation structural model to conduct further discussion. It reveals the multitude factors to facilitate or impede the growth of KFC's business in China. Finally, the different reasons to explain the great success of KFC are compared in the form of pie-chart.

Discussions of the Results of Questionnaire

After the investigation, the author summarized the results and made a specific analysis of the results. Totally, 300 copies of the questionnaire were handed out and altogether 207 copies were valid in the end. The results, divided into different categories according to Young Yun Kim's cross-cultural adaptation structural model, are now presented in tables, and followed by respective elaborations.

1.1 Discussions of the results on Environment

It began with the first element called environment in Kim's structural model. The environment is composed of host receptivity, host conformity pressure and ethnic group strength. The first eight questions from Question 1 to Question 7 in the questionnaire were used reveal the current situation of host receptivity. Table 1 illustrates the results of each choice relating with host receptivity made.

Q1

Q2

Q3

Q4

Q5

Q6

Q7

Q8

Choice 1

13%

5%

21%

0%

5%

3%

0%

1%

Choice 2

21%

6%

11%

12%

2%

5%

8%

6%

Choice 3

49%

28%

19%

31%

2%

1%

20%

3%

Choice 4

9%

21%

30%

56%

78%

20%

70%

30%

Choice 5

8%

40%

19%

1%

10%

71%

2%

60%

Table 1 Choices concerning Host Receptivity

The figures in Table 1 show that Chinese culture's receptivity to the foreign culture is strong, although it has a long-established native and splendid culture since 5000 years ago. When dealing with the question about other foreign brands food and restaurants, 49% of the responders shows uncertainty attitude whereas they demonstrated their strong confidence to KFC because 40% of them choose the option "Totally agree" when the Question 2 was given. Therefore, it is obvious that the KFC's brand and its product image building is successful, which is widely accepted in Beijing. However, the result shows a little confusion when inspecting the answers to Question 3 because it only has 19% responders choose eat in KFC frequently. There are some reasons to explain, for example, the price comparing with the native Chinese fast food restaurant.

In sum, the statistic results show that Chinese shows positive attitude when dealing with exotica and they show great interesting to try the western food. Such behavior provides a critical fundamental factor for the development of KFC in China and it paves the road for KFC to go further in the cross-cultural adaptation process.

Questions 4, 5,6,7,8 are used to reveal the fact of Chinese environment receptivity and ethnic conformity pressure. From the feedback of the questionnaire, the result shows that 78% responders show they are readily to accept and try new things while only 5% of them chose totally disagree. Furthermore, 71% responders strongly agreed that the compatibility of the Chinese culture was outstanding comparing with only 3% responders consider that the Chinese culture is unable to incorporate and accept exotica.

In sum, both the Chinese people and Chinese culture have the ability to incorporate and accept exotica which play a significant role in KFC's success in China because it provides "a door" for KFC become China's KFC.

Except host receptivity, environment also includes the factors of host conformity and ethnic group strength which determines the pressure coming from local traditions. Although the trend of cultural globalization, Chinese still insists on traditional culture because of the brilliant civilization achievements within 5000 years. Under such circumstance, KFC is under great pressure to fully understand Chinese culture so as to sustain its long term growth in China market. Question 8 is designed to collect the opinions from responders. The result shows that 30% believed that the deep-rooted traditions put KFC under great pressure while 60% strongly agreed with it. Thus, cross-culture adaptation process should be considered as a long term policy for KFC in China.

1.2 Discussion of the Result on Reasons of Choosing KFC

The rest questions were designed to investigate the reason of great success of KFC in China related with its market strategy. The questions then are designed to cover the four general categories by the author: the product (the food quality and service), the place, the price (promotion) and the position.

Questions 9, 10, 11 and 12 were used to gather the feedback from responders when considering the quality of food and services of KFC and the results were illustrated in Table 2

Questions 12 deals with KFC place choosing strategy.

Questions 13 were aimed at the Price (market promotion) strategies adopted by KFC

Questions 16 - 22 were to study how cross culture adaption makes KFC to use different market strategy from other countries in China.

Table 2 Choices concerning Food and Service Quality

Q9

Q10

Q11

Choice 1

2%

5%

4%

Choice 2

4%

6%

8%

Choice 3

31%

%

23%

Choice 4

40%

63%

43%

Choice 5

23%

20%

22%

Table 3 Choices concerning KFC place choosing strategy.

Q12

Choice 1

9%

Choice 2

10%

Choice 3

11%

Choice 4

57%

Choice 5

13%

Table 4 Choices concerning Price and Promotion Strategies

Q13

Q14

Q15

Choice 1

8%

9%

4%

Choice 2

12%

13%

8%

Choice 3

19%

17%

23%

Choice 4

51%

50%

43%

Choice 5

10%

11%

22%

Table 5 Choices concerning the market strategy influenced by cross-culture adaption

Q16

Q17

Q18

Choice 1

1%

7%

6%

Choice 2

1%

13%

10%

Choice 3

2%

20%

15%

Choice 4

6%

35%

61%

Choice 5

90%

25%

8%

In sum, from table 2, 3 and 4 in the question, it is understandable that why the consumer in China will chose KFC. Combing the market strategy and corresponding culture adaption measures applied in KFC is the core competency and critical point in its successful business in China. Therefore, the rest of questions in questionnaire are designed in order to cover market strategy and cross culture adaption. As a result, the responders' opinions as well as feelings can be analyzed that can be used to support the theory applied in reality.

Because flavour plays a significant role in Chinese culinary industry, Question 9 is designed to investigate the importance of flavour affects the product quality thereby leading to consumption behaviours. The results shows 40% responders chose "Agree" and only 31% responders chose "Not sure", which means they express uncertainty attitude towards to KFC flavour. In addition, there are 23% responders strongly agreed the opinion that the flavour of KFC food is very attractive to them thereby retaining customers. In sum, the number of agreeing voice 23% plus 40%) is much larger than the disagreeing one (2%), hence food quality improvement in flavour was one of great factors for the KFC's success.

The answers to Question 10 showed the quality improvement in surroundings and food quality improvement in cooking standard are able to attract customers because more than half (63%) of the responders chose "Agree" and 20% chose "Totally agree" demonstrate the most positive response ever in the investigation.

Question 12 aims to investigate the KFC's place choosing strategy concerning the convenience and time-saving factor. The modern life make its tempo become much faster than ever. As a result, the place that consumer is accessible to reach will provide much convenience and time-saving advantage than its counterpart, becoming one of the customers' influential choices. The answers to Question 12 reveal that 57% responders selecting "Agree" believe the location of KFC led them to choose it. Furthermore, 13% responders chose "Totally agree", which was relatively high with respect to this choice. However, out of expectation high up to 11% responders show negative attitude to show their disagreement. Such abnormal data could be explained from the aspect that convenience and time-saving were of unequal importance for consumers from all levels. For instance, the working and professional class take "convenience" much consideration than students. Because students as responders are also involved in investigation, the statistical result is subject, reasonable and reliable.

In sum, the results in Table 2 showed that high quality of food and service were of great importance in culinary industry. However, when taking time-save and convenience into considerations, the place factor influences the consumer behaviours because almost 70% responders chose the positive answers including agree and strongly agree for this question. Furthermore, the great eating surroundings are also important as 70% responders have the positive attitude towards to this point.

The three questions, from Question 13 to 15 in Table 4 aimed at the price and promotion marketing strategy. Question 13 mainly focused on the effect of tokens and discount, which are the most common measures taken by culinary corporations. 51% responders chose "Agree" and 10% responders chose "Totally agree". Meanwhile, 8% of them chose "Totally disagree" and 12% responders chose "Disagree". As what it is shown, the number of negative attitude was significantly less than the positive one.

Beside direct marketing promotion strategies, KFC embed cross-cultural adaption measures in its product and service. Various method have been implemented such as menu, external and internal decoration, logo and translation of the food names. Question 16 is designed so as to receive expected outcome. The results shows that the cross-cultural adaptation measured worked well in China market because 90% responders chose "Totally agree" and 6% of them chose "Agree", leaving only 1% responders select "Not sure" while another 1% of them chose "Disagree". From the time when KFC firstly introduce Chinese style into market, more and more potential consumers are attracted by KFC because of their curiosity about the combination of Western food and Chinese traditional food. Question 17 is used to investigate responders' opinion as well as feelings about the cross-cultural adaptation measures KFC adopted. 20% responders chose "Not sure" and 60% responders show positive attitude with regard to KFC's product strategy that Western food is incorporated with Chinese element. Question 18 is based on translation of food names as well as the creation of logo, slogan and jingle which suggested Chinese cultural such as reunion of the whole family, 61% responders chose "Agree" and 8% responders chose "Totally agree". With regard to logo, KFC China has done a slight modification for the colour of its traditional black suit instead it is changed to Chinese red apron. Chinese red is always considered to be one of the symbols in Chinese culture. The previous studies show that Chinese red in Western culture represents blood and violence. Thus, it is a little surprise that KFC China has replace its western meaning into positive Chinese culture symbol into to implement its cross-culture adaption.

In sum, the cross-cultural adaption is implemented on a large scale and had won the recognition of more and more Chinese people.

Conclusions of the Results of Questionnaire:

Based on the results and analysis above, the pie-chart below demonstrate the contribution of each strategy mentioned in Table 2,3,4 and 5,and then the further discussion would be presented as follow-up.

Figure 4: Comparison all the Marketing Strategies

Notes: 52% --- Quality of food and services (flavour, surroundings, service)

11% -- Price and promotion

5% -- Place selection (convenience or time-saving)

32% -- cross-cultural adaptation

The pie chart illustrates the percentage of each strategy from consumer's point of view since the data is based on the consumers' opinion collected from questionnaires.

At first, Quality of food and services is at the top position among the four major strategies. Because of the limitation of word count of the thesis, the questionnaires only focus on flavour, surroundings and services. Among these factors, flavour is the most importance one because the results of Question 9 in Table 2 showed that 40% of the responders chose "Agree" and 23% strongly agreed to the answer. For the surroundings, 83 % (63% plus 20%) of the responders believed that KFC's environment was spacious and bright which attracted them. In addition, with regard to the standard and unified food production procedure in Question 11, 65 % (43% plus 22%) of them show positive attitudes. It approves that such standardization could ensure the quality of food no matter where and when you ate. Such point is quite different from traditional Chinese restaurants because the quality of food offered in most Chinese restaurants was full of uncertainties and it may varied from time to time.

To sum up, providing food and services of high quality is the basic principle for success in culinary industry, which could be possibly decided by the nature of this industry.

Secondly, cross-cultural adaptation strategy takes the second position, the second highest percentage around 32%, which shows its importance in KFC's long-term marketing process. The results in Question 17 showed that, in average, 35% of the responders have the positive attitude for the KFC's cross-cultural adaptation actions and 25% of them strongly agreed with this and they can easily realize the changes have made. In sum, the cross-cultural adaptation implemented by KFC is attracting more and more Chinese consumers and keeping the prosperity in long term in China market.

Thirdly, Price and promotion strategy accounted for 11%. The results presented in Question 15 showed that 65% (43% plus 22%) of the responders agree to these statement and they believed that such strategies naturally make them order more food and also increase their consumption times. Meanwhile, answers to Question 14 shows that responders thought that the promotion actions are able to attract new customers as well as to keep the previous ones. Obviously, KFC needs other strategies to retain and attract customers in the long term instead of purely relying in reducing the product price.

Fourthly, because the life tempo is becoming faster and faster, In Question 12, responders preferred the location of the restaurant is easier to reach without taking much time. Thus, this advantage of KFC attracted 70% responders in total including 13% responders show strong agree attitude and 57% of them mentioned they agree.

In sum, although price, promotion and price strategy are the vital factor of KFC's success in China market, it is imperative for the international culinary corporation to implement cross-cultural adaptation based high food quality strategy.

Conclusion and recommendations

Having done the analysis of survey carried on KFC and McDonald and further questionnaire for KFC. The purpose of this section is to summarise the finding of whole investigation in the first place and then describe the limitation of the research in this thesis.

Major Findings

In the thesis, the survey and questionnaire was designed to investigate the cross-cultural adaptation process adopted by KFC and 4P marketing strategy implemented by KFC and McDonald. From the results and analysis made in previous sections, the major findings are listed as following:

The result of questionnaire indicates that Chinese are still prone to accept culinary system with Chinese culture. The explanation is that because China has its own culinary culture for thousands of years, which has its own culinary pattern and is supported by the deep structure of traditional culture and also it is deeply rooted in people's mind that could not be abounded and changed completely to another exotica. As a result, even if the external force is intensive and tries to influence Chinese culinary pattern, individuals will keep and continue to keep the tradition firmly, such as, the attitude towards to meal and table manners. Culinary is one part of traditional culture, passed down from generation to generation, which can't be erased from people's minds. Such point is so important that it is the root cause of putting KFC under great pressure and forces it to apply cross cultural adaptation procedure, which is the key point that will keep KFC's business grow constantly in the long term. In order to apply cross-cultural adaptation strategy, KFC have taken various measures of localization such as flavour menu, food names, logo, slogan, jingle making KFC have dual identity in China market, which means as the typical example of western food, it is assimilating Chinese local flavour that also help Chinese cross over the traditional boundaries both in reality and in conceptions.

Another finding is the KFC and McDonald 'marketing strategy keeping their sustainable growth in China market based on the survey. The product strategy in KFC is determined and changed based on traditional and local taste and also the advice from local people. The price strategy of KFC is affected by the consumption level of local consumers and consumer behaviour. For the place strategy, KFC consider "convenience" as the most critical criteria and also take financial circumstance and local government's policy into consideration. With regard to promotion strategy, KFC take advantage of the combination effect of incorporating Chinese culture and corporate culture. For instance, the advertisement is specially designed which is aimed to establish tight connection among local culture, value and consumers. For McDonald, it continuously develops new products which are suit for Chinese taste. The product position is influenced by local individuals' consumption behaviour and local culture and also it assists McDonald to choose the right consumers in an efficient way. With regard to price and place strategy, various factors are considered, for example, buying power, buying behaviour, local economic level and customer demand. For promotion strategy, McDonald integrates Chinese culture into it and then designs several ways to make it work better for China market. Firstly, fully utilize local language and Chinese culture so as to make consumers aware of and fully understand the underlying meaning of its discount program. Secondly, it launches 24-hour and take-away services in several major cities in China. Thirdly, McDonald establishes strong relationship with local consulting companies so as to provide feedback and suggestion for the policies it has implemented and does corresponding correction if the final results are negative.

Thus, Based on the case study on two major western food companies in China, KFC and McDonald, it can be concluded that culture difference has a significant impact and even determines the implementation of marketing strategy and the effective strategy implementation could make companies understand the importance of cross-culture adaptation in order to keep its sustainable growth in the long term. Therefore, the mutual interaction between cross-culture and marketing strategy is the most significant consideration for multinational companies to operate successful business in foreign market.

Limitations and Suggestions for further study

Limitations:

There are limitations in the content and discussion of the questioners and surveys.

Firstly, it is not sufficient to cover all the aspects of the cross-cultural adaption model by only using multiple choice questions.

Secondly, the age of majority responders for the questionnaires is from 18 to 40.

Although they are the consumers who frequently eat in KFC, we could have been included other age groups and have a better coverage.

Thirdly, it is possible that there are some factors affect responders' attitude choose the answer and some answers may not be objective.

Fourth, the responders of survey answer the ques

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