Essay on KFC's Expansion in China: A Risky Yet Rewarding Opportunity

Introduction

At the time of the case, China was a significant unexplored market that KFC could capitalize on establishing a fast-food empire in the nation. The nation's large population was viewed as a potential opportunity which could translate to high sales and profits for all the stakeholders. Besides, China at the time had a well-developed agricultural industry with poultry farming being given investment precedence by the government which could provide KFC with ready raw materials for it's chicken product's needs. Besides, China was the door to other markets in the eastern Asia region and could significantly increase the overall business success.

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Despite the current opportunities, China's market at the time presented a significant cultural unfamiliarity risk due to the consumer's preference for domestic cultural food recipes. The western style of KFC success in China was a question due to the cultural and the fast-food business model conflict with the local business approaches. Besides, China, at the time, lacked necessary human resources who could help in the management and operations of hotels in the nation. The venture into China posed a risk of invested capital, and also in case, it failed it could negatively affect the reputation of Tony, who was the major pro-Chinese investment implementation. Lastly, KFC faced competition from other western fast food businesses such as; McDonald's, Pizza Hut, Wendy's, and Burger King, which had entered the Hong Kong market after the exit of KFC and had prospects on the Chinese market.

KFC Capabilities to Expand

Effective Negotiator

Tony Wang provided KFC with significant potential to negotiate with the Chinese government, which could help the organization to win a more attractive deal. Having been born in Sichuan, Tony Wang was an instrumental human asset who gate KFC unique potential to enter the Chinese market.

Franchise Model and Previous Experience

KFC entered the international markets through domestic partnerships, which reduced the financial burden and also benefited through the ability of the local partners to help the company to comply with internal business rules. In China, Tony Wang had the potential of establishing a practical partnership which would be a head start for the organization to enter the market. Previous experience in foreign markets such as Thailand, Singapore, and Indonesia. The franchise model helps KFC to reduce the overall risk, create local appeal, and also incur less capital investment.

Competencies and Deficiencies

Quality and Universal Product

KFC is established through quality and operations efficiency, which has been behind the business success and ability to enter other foreign markets. The quality products and the universal demand for Chicken products was a competitive advantage for KFC to enter the Chinese market.

Fast Food Business Experience

Before the desire to enter the Chinese market KFC had operated successful fried chicken fast food hotels in the United States and Japan where the organization had acquired important business and operational skills that could be directly adopted in the Chinese market.

Poor Experience in the Domestic Chinese Market and Culture

At the time, KFC had little understanding of how the domestic Chinese market operated and the rules and regulations, which was a significant challenge towards venturing into the market.

Strategic Location for KFC in China

Guangzhou

The most strategic location that KFC should have located its initial franchise in Guangzhou due to its unique features and privileges, especially for foreign investors. Guangzhou received preferential treatment such as tax rates, technology, and greater autonomy of foreign investment approval as a special economic zone posed more significant long term potential. The coastal city was frequented by western tourists and business people who could provide an alternative market and ensure that its sales become sustainable within the short term.