Mini-case KFC

Essay by jasonmeesUniversity, Ph.D. July 2006

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Question 1

What are the relative advantages and disadvantages of offering the standard AmericanKFC menu in China versus adapting the KFC menu in China to include items more familiar to Chinese consumers?

1. Advantages:

* Offering the standard American KFC menu in China will make it easy for KFC to benefit from economies of scale. KFC can buy their resources from their suppliers in bigger quantities. Furthermore, KFC can produce larger quantities of products they are already producing for the American market. This means that the unit costs will decrease.

* The Chinese market is probably already saturated with traditional Chinese products. When marketed carefully Western products tend to be very successful on the Chinese market. It might be an opportunity for KFC to explore this market and differentiate their product from the existing products on the Chinese market by offering the standard American KFC menu.

* By offering the standard American menu most business activities can remain in America, this way the business will stay centralized.

If KFC would decide to adapt the menu then business would probably be more complex, and at least one head office would have to move to China.

2. Disadvantages:

* The standard American menu may not be successful in China. Chinese culture is very different form western cultures, also when it comes to tastes and preferences. Chinese people might not enjoy the standard American menu.

* KFC would have to market their American menu to familiarize the Chinese market with the American menu. This would be expensive and very time consuming. The Chinese market might be hesitant to try the new and unfamiliar products.

Question 2

Should KFC open its first locations in the leading Chinese cities of Beijing or Shanghai, or select lower-profile cities?

The mini-case itself does not provide us...