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Case Study 2
Introduction
KFC Chinas current marketing strategy while previously effective, may lose relevance and
hence effectiveness in the future. While the price of the KFC product caters to a large
demographic the diversity and localisation may not be enough to accommodate for the
changing needs of Chinese consumers. Moreover, distribution and supply networks may
require review as well as the means of promoting the brand. Overall, for a steady growth
KFC China must consolidate on and adapt the current marketing mix of price, product,
promotion and place ensuring success in the long run.
Analysis

Product
The variety of products created and offered by KFC aim to specifically appeal to the Chinese
consumer and have shown a large degree of effectiveness. Localisation of offerings by region
in an effort to please local consumers is an important aspect of the marketing strategy of KFC
China (Week 6 Jeaney Yip). The company reinvented the original menu and even went to the
extent of varying spiciness levels from region to region in order to cater for a larger number
of Chinese consumers (Harvard Business Review 2011). Furthermore, KFC by producing
multiple new products per year increase the period of growth and prolong the length of the
maturity stage of each product thus preventing decline. While the core product is the actual
food that KFC sells to consumers, the actual product is the atmosphere, brand equity and
general dining experience which the restaurant offers. Potential concerns for KFC Chinas
product strategy would be oversights in quality control due to a heavy focus on product
development rather than on maintaining standards. However, due to recent concerns with the
safety of KFC products, the company will boost oversight over its supply chain and impose
stricter requirements therefore the quality of products should remain at the standard expected by
consumers (Los Angeles Times, Tiffany Hsu, 2013).



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Price
KFC China employs strategic price setting as an important aspect of appealing to the Chinese
consumer. KFC customers on average spend the equivalent of $2.50 to $3.50 per visit, a price
significantly above the majority of the competing food options (Harvard Business Review
2011). The relative high price of KFC products in China stems from a combination of cost
and customer value based pricing which is required to not only cover the costs of operating
larger outlets with more employees but more so to position the brand as a quality and
luxurious dining option (Los Angeles Times 2001). Despite the success of the
aforementioned pricing strategy, KFC may potentially alienate consumers who are unable to
afford or do not reflect such a high value of the product. Moreover, the changing perception
of the KFC brand as an unhealthy food option may neutralise the effect of market positioning
and alter the image of the brand from a quality food alternative to an overpriced and average
option. Although potential issues may result from the current pricing strategy used by KFC
China, in the long run the strategic set price is crucial in differentiation from local
competition and creates a positive image of a respected restaurant.

Promotion
KFC Chinas aggressive promotion strategy has revolutionised the western brand into a
culturally associated restaurant. KFC China promotes themselves as a family orientated
restaurant having introduced a mascot as a goodwill ambassador to appeal to children which
played an important role for publicity. A large aspect of KFC Chinas success was setting up
a public relations department in order to create effective communication with the media in
order to associate KFC culturally as a part-Chinese company (The European Business
Review 2013). Moreover, KFC has created the image of a company that supports local
interests by purchasing materials only from domestic manufacturers promoting the
development of Chinese industry and creating strong associations between Chinese culture
and their own brand. Other support schemes which promote the brand include donations to
charities and special scholarship funds to encourage students from impoverished families.
Generally considered to be a respected brand in China, recent media reports of drug misuse
by KFC poultry suppliers have caused serious damage to the image of KFC as a family safe
restaurant and led to a 37% drop in sales (The News Tribune 2013). In order to resolve these
perception issues KFC has begun an active campaign promising tighter quality control and
stricter monitoring in the hopes of restoring brand image.

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Place
Tactical store location and spread as well as a strong logistics network and supply chain are
the driving force behind the success of the KFC brand in China. KFC initially focused on
entry into local areas in order to command a wide presence throughout China building a
national business with outlets all over the country (Harvard Business Review 2011). Firstly,
by entering local towns KFC was able to choose locations with large amounts of foot traffic
which was essential to ensure initial success. Furthermore, KFC established a distribution and
logistics network responsible for building warehouses and its own fleet of trucks. While
initially expensive to create and operate, the efficiency of the system has proven to be a very
large factor in the success of the operations of KFC in China (Associated Press 2005).
Despite such effective operations in regards to location and distribution of products, recent
safety concerns specifically to do with suppliers may result in issues regarding the
trustworthiness of the aforementioned distribution system. However, Yum! Brands Inc. has
created a supplier system that rates and concentrates supply to those intermediaries which
perform best, ensuring that unsafe products are immediately discontinued. KFC China utilises
an efficient and informed logistics system to produce quality products which cater to Chinese
consumers.
Conclusion
KFC has become the most recognised western brand in China through effective means of
pricing, promoting, distributing and creating a successful variety of products. In the future
issues may arise from growing concerns about the healthiness of the product and the safety of
the suppliers which KFC rely on for quality. However, despite these potential threats KFC is
actively adapting and developing new strategies to increase effectiveness and profitability in
China to achieve Yum! Brands Inc. goal of becoming the defining global company that feeds
the world (Yum! Brands Inc. Website 2013).


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