1.

What are the opportunities and risks of China at the time of the case?

In 1987, China had a franchise from Kentucky Fried Chicken as first fast-food chain that has more
than 2,200 stores all over China with annual revenue of $1 million each and 20 percent profit
margins. KFC outperforms all competitors in China in number of outlets, revenue and market share.
Currently, 21,487 branch stores nationwide in China as of 2017.

Opportunities

KFC had a right timing for opportunities. Biggest opportunity for KFC is no competition in Chinese
market. McDonald’s is the only real competition, but chicken is more popular by costumers in china
then beef. Growth in the Chinese market can lead to more revenue and further expansion
possibilities in future in China or worldwide. Gain popularity, which would help KFC expand and tap
into different markets such as India, which is one of the world’s biggest countries

Risks

The greatest risk that attained for KFC was the uncertainty of venturing business in a foreign market
that foresee as ‘tremendous’ growth ability. Alongside with unknown market, KFC has to compete
with popular fast-food chain such as Burger King and Mc Donald – as biggest competitor fast-food
chain. China is too huge for just one organization to be structured and it seemed to be frightening
for KFC to move in to China’s market. Another risk, having less skilled Chinese employees, KFC lacked
the ability to manage how the chicken were grown and farmed. This is the crucial point as per KFC’s
core competency is ‘to provide healthy food options.

2. What are KFC’s competencies and deficiencies?

Looking at its competencies, KFC has capability to expand because of highly profitable company and
the demand for delicious and crispy chicken by consumers. We can see how they set themselves
apart from the competition especially against big timers like Burger King and McDonalds. KFC
competencies are: their chicken is highly regarded and most requested by many as best friend
chicken. Smart and knowledgeable individual at upper management making smart business decision
to maximize revenue and growth for business. However, the major deficiencies of KFC are: having
lack of risk-taking moves which could benefit the company. Lacking of reliable sources of fresh
chicken every corner and constant change in management is also one of its deficiencies

3. Argue where the company should go first: Beijing, Shanghai, or Guangzhou.

For me, KFC should build its operations in Shanghai. Unlike to the other cities, Shanghai suits KFC’s
core competencies and opportunities. Shanghai is the largest city in China with a population that
consists of prominent businesses. Shanghai consist of one of the five sea harbors for foreign trade
which allows easy transportation. A benefit for KFC is that Shanghai strong access on poultry
industry being the largest poultry supplier. Shanghai already has western influence so starting there
would be beneficial as the population is exposed to western culture.
 4. Also, a brief SWOT/PESTEL analysis, an alternative and a recommendation.

SWOT Analysis

 Strengths - In 1987, KFC acquired on its franchise in China which provided first mover
advantages and a huge potential market for KFC’s products. Early success in the Southeast Asia
market made them confident on its capability to balance its corporate control with the demands
for local responsiveness. This matches the positive image of Western fast-food restaurants with
high reputation, air-conditioned and cleanliness. Furthermore, the products of KFC are not
strange for Chinese consumers since chicken is not unusual food for them, and the price per kilo
of chicken are cheap than other meat and more widely available.

 Weaknesses - In contrary of strengths of KFC, Expansion cost for every new restaurant is high.
KFC having hard time to get a constant supply of quality chickens from the local supplier. It is
needed to rely on domestic partners in order to get the utility services and it is usually not easy
for KFC to get timely and sufficient service.

 Opportunities - This is the outside positive outlook of a business, KFC had a right timing for
opportunities. During 1990s, the yearly increase in food and beverage retail sales was 20%. The
poultry industry is one of the main priorities of China’s agricultural modernization plans. Hence,
it receives great support from Chinese government, which signifies the good opportunity for KFC
that rely on chicken products.
 Threats - Expanding into China market involves a great deal of uncertainty. There is insufficient
market and industry or financial information.

PESTEL analysis

 Political factor – as you can see the Chinese government received support for KFC for supplying
poultry products such as chicken. So, a forces tends to be altered by the influence of
government which match on its description on political factors.
 Economic factor – looking at their economic aspect, KFC provides the lower price. They have a
food packet just like we buy the packet we can get the discount or something that support us to
buy there again. They can grow up with the lower price and the satisfying service.
 Social factor – KFC built their social connection with others or the company around the world.
KFC also supported the many of events, they help the committee by sponsored event. The
earnings of money from sponsored events usually donated to the less fortunate people.
 Technological factor – using modern technology, they make a website of KFC so easily we just
search through internet and many information about. KFC accept online delivery transactions on
ordering foods available in China.
 Environmental factor – in environmental aspect, KFC China adopted efficient waste
management practices to protect their urban areas. KFC can benefit from it and invest
renewable technologies to guarantee long-term sustainability. It will also increase stakeholder
satisfaction and expand the customer base due to enhanced brand image.
 Legal factor – KFC China must follow the labor code to ensure labor safety. Providing a secure
work environment in workplace means ethical and moral obligation of KFC China. In terms of
consumer’s right, KFC must to study data privacy regulation to protect consumer data.