American fast food in china

Introduction:

Global competition is driving changes in organizations throughout the world. Companies are attempting to gain a competitive advantage, which can be provided by international expansion. Deciding whether to enter foreign markets and whether to develop market share in other countries is not the simple issue. Marketing globally is becoming a significant factor for all types of organizations in light of the far-reaching effects of globalization. Doing business globally requires that adaptations be made to reflect cultural and other factors that differ from country to country (Schultz & Kitchen 2000, p. 21). More and more international companies focus their global marketing strategies on the developing countries. This report will discuss the representative American fast food industry such as KFC and McDonald's sets their successful global strategies in China and brings the changes of American fast food culture with Chinese characteristic.

Chinese fast food market:

The economic reform opened China market to the outside world and improved the standard of living of average Chinese people. In late 1978 china began implementing economic reforms to develop and modernize its economy. These reforms have gradually rebuilt a new system, which is referred as a socialist market economy, by lessening the government's control and encouraging foreign investment. As the result, the economy grew rapidly and among the highest growth in the world. With huge amount of urban population, there exists enormous but unpredictable potential in the fast food industry.

Since 1991, the country's consumption of fast food has grown 23.2% annually. It is forecast that Chinese rapid development will continue to fuel demands for fast food and to lead to the growth of the industry (Research and markets: exploring the Chinese markets for fast food 2005, pg. 1). But Chinese consumers had few fast-food choices. Restaurant food was limited to five-star hotels, traditional Chinese restaurants and street-side wonton, pulled noodle and tea-egg vendors. In the last decade, China's rapidly changing lifestyles and eating habits have resulted in a booming fast food industry. Chinese consumers, especially those who live in large urban areas, have accepted Western-style fast-food restaurants that serve fried chickens, hamburgers, french fries and other popular side dishes as a way of life in China (Cee & Theiler 2004). As a result, the popular American food has become a huge success story.

Perception changes about Western-style fast food:

China's consumption trend is very different than it was just a few years ago. Before the invasion of the U.S. fast food industry, western-style food is portrayed as a luxury food item. They were associated with Western-style restaurants located in or near fancy hotels, consumed only by the most affluent Chinese people (Cee & Theiler 2004). Since fried chickens and hamburgers were basically unknown to most Chinese, many first time customers went to the fast food places just to find out what the food and the entire fast food experience were like. It was more the fact that fast food was something different that first encouraged them to try fast food. But for some people, the American aspect of the fast food was a major reason for going. Where those people have the chance to participate in and associate themselves with American culture. Moreover, when the fast food chains were first introduced, their prices were relatively high compared to lower end, traditional eating establishments. The high prices prevented most people from going there on a regular basis, and therefore fast food was seen a special treat.

But today, U.S. fast food is a booming business in China. These fast food restaurants with strong brand name images, such as McDonald's and Kentucky Fried Chicken, are more popular than Chinese-style fast-foods because they are known for quality control and good store management (Gray & Fowler 2005, pg. 1). Western-style fast-food outlets also provide a novelty in contrast to traditional Chinese cooking. Most Chinese are attracted to foreign fast-food restaurants because of: good service (compared to most Chinese restaurants), pleasant surroundings, fast, modest pricing, and consistent food quality. Chinese families visit McDonald's and KFC restaurants to please their children. In fact, when it comes to eating out, children are basically the decision makers. For the younger generation the American fast food, tee-shirt and jeans culture represents a lack of formal rules, casualness, and youth. For young adults who are involved or wish to be involved in the business world, American fast food represents the modern, global culture. Chinese teenagers and young adults enjoy these western tastes along with other fast foods.

Most of Chinese see the American chains as new and exotic. About 80% of the fast food market is western. KFC already has almost 800 restaurants in China. McDonald's has over 500 and plans to open 100 a year (Business: junk food; fast Chinese cuisine 2002, pg. 89). Unlike the local fast food restaurants, foreign fast food companies are generally well financed. Their outlets are located in either expensive commercial districts or higher-income residential areas. Consumers are attracted for various reasons besides the food. Promotional activities aimed at kids are intensive and successful, so that fast food in restaurants such as McDonald's and KFC becomes a weekly treat of the children in some families; clean and safe environment makes brief business meetings and social gatherings take place frequently; confidence with the sanitation of food served in these restaurants turns lots of fast food consumers away from meal boxes served in street stalls.

KFC has outpaced rival McDonald's in China:

Kentucky Fried Chicken, one of the most known fast food chains in the world started in the early 1930's by Kernel Sanders in the Southern USA as a small franchise operation. As a unit of U.S. fast food chain, Yum Brands Inc., KFC has been in the forefront of exporting American fast food abroad in China in 1987. Since the first restaurant opened in Beijing, KFC is becoming the largest and most popular quick-service restaurant chain with locations in approximately 150 cities (About KFC 2004). Although McDonald's is another famous American fast food franchising that stepped into China at late eighties. It is not as successful as KFC. Until 2004, there were only 570 restaurants of McDonald's in Chinese market and its menu was following the traditional standard as McDonald's in global market. Unlike McDonald's, KFC has its specifically tailored menu for Chinese market. Several items can be found on KFC's restaurant such as rice porridge, spinach soup, egg and tomato. In 2003, KFC successfully launched its 'Old Beijing Twister', a wrap modeled after the way Peking duck is served, but with fried chicken, spring onions and sweet sauce (Morris 2004). According to Yum chairman Peter Bassi (Yum Inc. 2004), KFC already had 1,000 outlets in China and the company operations contributed one-third of Yum's international profits of US$389 million during fiscal 2002.

Localization of global corporations:

The spread of American fast food in china is not simply one-way process of foreign business imposing their product on local consumers. In recognition of the distinct nature of transitional markets (Arnold & Quelch 1998, pg. 12), these foreign companies try to seek other ways to compete with domestic offerings by changing their brands in local images. Localization of language, product attributes, advertising content, and even product meanings is a common practice adopted by multinational companies in most transitional economies. Therefore, these global corporations tailor their marketing strategies in different marketplace.

In the initial period of KFC's entry into China market, few of Chinese consumers were really impressed with the food itself. Instead, they were more fascinated with the eating experience: the friendly employees, quick service, well-decorated restaurant, clean and bright dining environment, and smiling Colonel Sanders standing in front of the main gate. Having experienced the initial surprises brought by a never-seen western lifestyle, Chinese consumers have gradually calmed down and their consumption attitudes towards foreign products are getting more reasonable. They are more concerned with the nutrition and tastes of the fast food (Miller 2004, pg. 18). As a country with the best culinary culture in the world, China was a big challenge for KFC's efforts to please Chinese consumers. KFC has taken advantage of McDonald's by offering poultry food which is more acceptable to Chinese people compared with beef, have taken consumers' needs and competition with other brands into account.

KFC's product strategies may categorized into two aspects, both novelty and tradition. Normally, by introducing western style products like Mexican Chicken Warp and New Orleans Barbeque Wings, KFC try to meet consumers' desire for novelty (About KFC 2004). This means can satisfy young consumers who are more open and acceptable to the foreign flavors. Otherwise, To cater to consumers' taste for traditional Chinese meal by offering Chinese style fast food from time to time, like 'Old Beijing Twister' and Sichuan Spicy Chicken which absorbs the spicy flavor of Sichuan dish. Chinese-style breakfast food, like porridge is also served since2003 on the breakfast menu. The breakfast choices are a blend of East and West, ranging from Chinese seafood and chicken congee, Hong Kong milk tea to Western burgers, potato sticks and orange juice (Adler 2003). This measure can attract older consumers who are fond of Chinese food and in need of the convenience of fast food service as well. Based on its scrutiny and adoption of Chinese traditional culinary arts, KFC has developed a series of products which are specially designed for the tastes of Chinese consumers (Lane 2002, pg. 30). Moreover, in purpose of maintaining its image of a U.S. brand and keeping consistent with its globalization strategy, most of KFC's Chinese side dishes are defined as short-term products and would be replaced by new products.

To represent the Chinese characteristics and increase the identification from Chinese consumers, both McDonald's and KFC absorbs Chinese cultural elements into the arrangements and decorations of its outlets all over China. From restaurant decoration to TV advertising, they emphasize their corporate image with Chinese characteristics, with the Great Wall, shadowgraph, Chinese kites and other traditional Chinese symbols. Furthermore, in the Chinese New Year, all the staff and statues of restaurant in china were put on the Chinese traditional suits which are known as 'Tang suits'.

Conclusion:

Based on a latest research by ACNielsen, 97% of Chinese consumers were patrons of fast food and Hong Kong ranked number one in the world in terms of frequency of fast food restaurant visits (Asians among biggest fast-food consumers 2005, pg. 1). The prominent success of American fast food industry in China's market can be attributed to its franchise policy and scientific managerial operations. Moreover, the accomplishments are the reward towards its comprehensive understanding of Chinese culture and its excellent localization strategies specifically manipulated to meet the characteristic requirements of Chinese consumers. They have introduced strict criteria in quality, cleanliness and service assuring local people their principles and standards; with efforts in publicity and various promotions to create the consumers' brand recognition; and with investment in providing a nice and pleasant environment, making the customers feel what they pay is worth what they are offered.

Global success will be driven more by a focus on the core business or core capability of the organization and its ability to drive that success in other markets around the world (Schultz & Kitchen 2000, p. 26). Managing cultural diversity is becoming more and more of a significant factor for all types of organizations in light of the far-reaching effects of globalization. As a result of the trend towards increasing globalization, organizations are in a position to reap the many benefits related to cultural diversity. In the 21st-century global marketplace, digitalization, information technology, intellectual property, and communication systems will shift to the control of the consumer in most marketing systems. This shift will put the customer at the center and they will control the marketing system (Schultz & Kitchen 2000, p. 31). To satisfy the customer's need, global market communication will be more emphasized than ever.