What do you standardize, what do you decentralize? The case of Kentucky Fried Chicken
http://planetn.biz/?page_name=nottoway-county-virginia-public-records I attended a great seminar yesterday (24th March), presented by David Thomas called, “The Australian Financial Forum in Sydney”.
follow link One of the key presentations was on Shifting your Centre of Gravity to Asia by Nigel Andrade (McKinsey & Co). An important question Nigel brought up was ‘when taking your company global, what do you standardize and what do you decentralize?’This is one of the main challenges for Western companies going into China.
A good example of this is the case of Kentucky Fried Chicken (KFC). They were the first quick service (or fast food) chain to enter China in 1987. In 2002 they were also the first Western franchise model to take on China and are now one of the largest and fastest growing chains there, with more than 3,200 stores across 700 cities. In the early 90’s when franchising in China was newly developing, the laws were unsophisticated and KFC had to come up with a corporate structure that suited this precondition. Most KFC’s there are either company owned or joint ventures involving the chain. Their success, it is said, was due to their initial acceptance to ‘go native’.
Interestingly, if you walk into a KFC in China you will notice a store layout and food items you may expect to see in the West. If you look closer, you will notice however that the menu has been localized to include food delights such as congee and lotus root along side beef, pork and fish – a unique feature of KFC China! Listening to local tastes and market drivers, has allowed KFC to grow at a rate faster than their efforts anywhere else in the world. They successfully moved their thinking from product centric to market centric.
It would be fair to say that KFC in China is still KFC as ‘we’ know it, despite those little China idiosyncrasies and deviations from their original USA model.
Taking a new business to China is complex, and careful consideration should be given to local market forces; what do consumers like? what and how do they purchase? How are they different from city to city? How much of what you change at the local level should be the responsibility of local managers and when do you listen to them? This is a challenge each and every new entrant must consider, and the sooner you accept you will have a China business with ‘Chinese characteristics’ the better.