China Fast Food Case Study

China as a Market for Fast Food Franchises The Chinese market is attractive for fast food franchises. Many Chinese consumers are spending money on eating out due to country’s economic boom since the economic reform in the 1970s (Barney & Hesterly, 2015). In addition to an economic boom, the growth of urbanization and busier lifestyle demand increasing the market for the fast food industry in China (Wang, 2016). The trend is shifting from traditional restaurants to fast food restaurants. Therefore, fast food franchises have a good chance of being successful in the Chinese market.

Opportunities and Obstacles China offers many opportunities for fast food franchises. China is one of the highly populated countries with a growing economy. The

The obstacles include “different labour force structure, difficulty in recruiting technically competent and culturally sensitive managers, tough technological problems, and a less than satisfactory legal environment and enforcement” (Barney & Hesterly, 2015, p. 3-55). For example, KFC faced many challenges in cultural difference and technical difficulty. KFC hired elite managers from nearby Asian countries to overcome these challenges. Over the years, the foreign fast-food companies became popular among the local culture. Although western fast food companies and local restaurant chains are currently dominating the market, there are still opportunities for new entrants. Currently, economic trend and growth of culture exchange encourage other fast food franchises to invest in

According to Peter Tan, former President of McDonald's Corporation Greater China, and the strength of McDonald’s model are product quality consistency, convenience outlet locations, and good pricing (Barney & Hesterly, 2015).

KFC model weakness. KFC’s weakness is lack of ensuring the product quality. KFC compromised its food safety standards while focusing on the expansion. Chinese consumers lost confidence in KFC’s food safety because a red chemical dye that causes cancer was found in two products (Barney & Hesterly, 2015). McDonald’s model weakness. McDonald’s weakness includes hesitation to expand the franchise. Although McDonald’s linked to China’s SinoPec gas stations to open up drive-through outlets, it is behind KFC’s expanding by almost 50 percent (Barney & Hesterly, 2015).

International Strategy Lesson Both KFC and McDonald’s are driven by focusing on focusing on customer value. However, they took different international strategies. KFC establish a strategic alliance with local suppliers while McDonald’s maintained a partnership with its global suppliers. KFC currently have more outlets in China than McDonald’s because KFC exploited environmental opportunities through franchise