Chapter 14 How KFC entered China

The initial reaction to the Beijing KFC chain was one of confusion and excitement.For ordinary Chinese workers, KFC's food is too expensive and unattractive. Although many people came to experience the freshness on the first day of opening, how to attract repeat customers is a challenge for KFC.At the beginning, the business of the store was booming among foreign tourists in Beijing. Although the number of foreign tourists was relatively small at that time, they would go to Tiananmen Square, visit the Forbidden City, the Great Hall of the People and Chairman Mao Memorial Hall, KFC still has at least a group of customers like them.Wang Dadong, regional vice president of KFC in charge of the store's construction and opening, said: "This is the best store location in the world, so we opened the world's largest KFC fast food restaurant here." However, his optimistic view has not been generally accepted.

At least one prominent American newspaper is not optimistic about the development of KFC, a food that is generally regarded as commonplace, in China. "KFC will have difficulty finding customers because China is the birthplace of fast food and Beijing is the capital of China... When other brands of fast food also enter the Chinese market, the KFC brand will lose its effectiveness... …We understand that McDonald’s is now considering opening stores in China.” But less than five years after opening, the KFC flagship in Beijing expanded thousands of square feet and added 200 seats because of the boom in business. Twenty years later, KFC, which is well known to the Chinese, is a brand of Yum! Brands and has become the most popular foreign brand in China.KFC has nearly 2,000 chain stores in China, twice the number of McDonald's chain stores. KFC's profits are astonishing, and it is still developing at a rate of more than 30 chain stores every year.There are even more shocking data - although China's 2,000 KFC chain stores accounted for less than 7% of the total number of Yum! Nearly 1/4.

KFC is generally not considered to be such an attractive brand.Compared with Amazon in the 1990s and modern brands such as Google and Apple today, KFC and its parent company Yum!But the KFC chain generates profits far beyond its name, making KFC's China story all the more compelling. It's hard to imagine a more quintessentially American company than KFC.Founded in Kentucky by Harlan D. Sanders, the brand's first 25 years were modest.Sanders was born in Indiana in 1890, and his story is a classic one from poverty to wealth.He read only into the sixth grade, and after years of traveling state-to-state and changing jobs, he opened a gas station in 1930, which was accompanied by a "Sanders Café."He has been cooking fried chicken since then, and he is so good at it that he successfully invented a secret recipe made of 11 spices.At the same time, he also improved the method of making fried chicken, adopting a new method, using a pressure cooker to speed up cooking.Sanders' restaurant was so popular that he himself was awarded the honorary title of "Colonel Sanders" by the governor of Kentucky in 1936 after he applied.

But it was the recipe, not his first restaurant, that made Colonel Sanders' fried chicken a national treasure.Since his own restaurant could no longer satisfy customers' purchasing needs, Colonel Sanders started a chain of KFC stores that used his secret recipe. In the mid-1960s, the number of KFC chain stores had reached 700, and the food quality of each branch was very high. This was in stark contrast to the food quality problems that KFC encountered in the 1970s and 1980s. In 1964, Colonel Sanders sold KFC's business at a very low price. Since then, the quality of products has begun to decline.Over the next 10 years, KFC grew rapidly, but this development came at a high price.As the number of chain stores increased to several thousand, the ability of the corporate headquarters to continue to implement uniform quality standards for each branch diminished.This is mainly because KFC implements a decentralized business management model compared with competitors in the fast food market such as McDonald's.Unlike McDonald's, which has micromanagement of its individual chains, KFC has given local and regional chain managers more autonomy.If the lower-level managers recruited by the management have strong working ability and pay attention to food quality, then this management model can work, but later, because KFC was acquired by another larger group, many experienced The old employees of the management have all left, and KFC's profits and food quality have also declined.

In the 1980s, KFC's situation began to improve.Profit growth resumed and food quality improved.But the stability of the company has become a problem again.The company was sold again, this time to tobacco giant RJ Reynads Industries.At the time, the company was diversifying to include fast food and soft drink makers, among others.For KFC, the biggest advantage of the new owner of Reynolds is that it is willing to invest in KFC's brand expansion.Although the domestic market in the United States was not fully saturated at the time, for KFC, the real development opportunity was in other markets, especially in the almost untapped East Asian market.At that time, apart from Germany, the Pacific Rim was the most economically dynamic region in the world.Japan's power is on the rise, and its consumers have strong consumer demand.Thailand, South Korea and Taiwan also have a growing middle class, with growing disposable income and seeking new avenues to spend.KFC has an advantage: Although KFC is foreign compared to local dishes in these markets, fried chicken is familiar to consumers.

In 1986, Reynolds changed hands and sold KFC to Pepsi-Cola, and the fate of KFC's continuous change of owners continued.In the Chinese market, Reynolds was an active early mover, mainly because it took a fancy to the sales opportunities in the Chinese tobacco market.In the few years it has briefly owned the KFC brand, Reynolds has drawn up plans to open a flagship store in mainland China.At that time, KFC was already very popular in Hong Kong, China, and the company had great expectations for opening up the market in mainland China. Under normal circumstances, decisions are made at corporate headquarters and execution depends on the ambition and enthusiasm of regional managers.This is even more so in untapped markets.The core character of the KFC China story is Wang Dadong.Born in Sichuan in 1944, he followed his family to Taiwan in 1949 when the Kuomintang withdrew.Like many earnest young people in Taiwan in the 1970s, Wang Dadong also went to the United States to study and obtained a master's degree in management from Stevens Institute of Technology in New Jersey and New York University.

Taiwan then was as closely tied to the United States as it is now, both politically and economically.The U.S. government has made it clear that it is helping to maintain Taiwan's security, which was the focus of much attention during the early decades of the "Cold War."Cut off from mainland China, Taiwan has looked elsewhere for export markets and has become a global production center for cheap manufactured goods, especially electronics.Although China's Taiwan and the United States maintain ties, after all, they are far apart culturally, and the US's let nature take its course in the 1970s has deepened the differences between the two sides.

Dadong Wang is well adapted to both cultures and speaks both languages ​​fluently.Unlike many of his peers in America, he doesn't focus on topics like pornography, drugs and rock 'n' roll.He wanted to succeed in corporate America.He joined KFC in 1975.At that time, KFC was in a difficult situation, partly because of management problems.Wang Dadong, who is full of ambitions, is very dissatisfied with the rigidity and conformity of the company's top management and many chain store managers.He urged his bosses to pay more attention to opportunities in international markets, especially in Asia.He believes that KFC's potential in the Asian market has not been fully explored, because KFC's chain stores in Asia are managed by Americans in a rigid and conservative manner.The response of the upper echelon of the company to his proposal was relatively lukewarm.Disappointed, he left KFC to lead a new fast-food chain in northern California. In the mid-1980s, the mayor of Tianjin, China, went to San Francisco to promote Chinese-American entrepreneurs to invest in mainland China. Wang Dadong had the opportunity to meet him.

Tianjin is a big Chinese city that most foreigners don't know about. In the 1980s, Tianjin was China's third largest city, with a population of 7 million, only slightly smaller than New York.Like other coastal cities in China, Tianjin at the time was just emerging from the rigid constraints it had suffered over the past few decades.Tianjin is less than 90 miles away from Beijing and is a major port near the capital. It enjoys the advantage of a geographical gateway and is part of the capital's economic circle. At the same time, its geographical distance from the capital allows it to have free development space.Also, Tianjin has a very capable mayor who has Deng Xiaoping's policy of opening up and economic development in mind and is willing to embrace the global market.

After this meeting, Wang Dadong quickly established a cooperative relationship with the Tianjin Municipal Government and opened a joint venture fast food restaurant in Tianjin - Aoqi Fast Food.The success of Aoqi Fast Food caught the attention of Wang Dadong's former KFC bosses.They urged Wang Dadong to return to KFC and take charge of the market strategy in mainland China.It may be Reynolds that gave KFC the green light to open up the Chinese mainland market, but it was Wang Dadong's ambition that really made KFC's management think seriously about entering the Chinese mainland market.Although he still had concerns about KFC's corporate culture at the time, those concerns were nothing compared to the opportunities before him.He accepted the new position, energized by the "personal challenge of developing the Chinese market for KFC".

KFC has rich operating experience in China and can confidently explore the Chinese mainland market.The previous success of KFC in Hong Kong was a positive signal, but before Wang Dadong, no one had been appointed to China to be responsible for developing the mainland market.Moreover, Wang Dadong and everyone who really understands China understand that although Hong Kong is near the coast of China, in fact, its development model has always been closer to that of the Western world.A direct colony of the British Empire since the mid-19th century, Hong Kong has a mixed culture, more like Singapore than China's Beijing, and is a thriving commercial and banking center.Hong Kong has not experienced any major turmoil, and the overall experience of Hong Kong residents has long been positive as part of a global market. So, although Hong Kong can serve as an example to demonstrate the potential of the Chinese market, KFC's operating model in Hong Kong cannot provide a model for its commercial operations in mainland China.There is no ready-made model for doing business in mainland China, and entering the Chinese market means starting from scratch for everyone.There are no rules to break, no lessons to learn, and no lessons to learn — which makes KFC's success in mainland China all the more stunning. In 1986, the most important thing for Wang Dadong was the location of the first KFC chain store.Tianjin is an option, Shanghai is also an option, but he finally chose Beijing.As the capital of China, Beijing had a population of nearly 10 million at that time. It attracted domestic and foreign tourists and had a large student population, which was a very crucial point.At the same time, Wang Dadong has also received important support in Beijing, including the support of the Mayor of Beijing, the Beijing Municipal Tourism Bureau and the Bank of China.Chinese government officials may theoretically welcome American companies and multinational companies to invest in China, but to a large extent, they are still not used to or understand the business operations of foreign companies.After negotiating with them for two years, Wang Dadong led KFC to start the practice in the Chinese mainland market. The grand opening of the KFC chain in Beijing was clearly a success, but the chain's expansion into the rest of China was years away. In the 1990s, it was still difficult to enter the market in most parts of China, and Wang Dadong and his bosses were also very cautious about KFC's market expansion, not wanting to go too fast.They wisely decided that a planned move was a better option than opening a chain of new chains only to find that business failed.Branches can be expanded one by one, but we must act cautiously and carefully consider the pros and cons of each city's conditions. Five years later, KFC has only 10 chain stores in mainland China, all of which are concentrated in northern cities.Although the KFC chain store near Tiananmen Square soon became the busiest and most profitable KFC chain store in the world, KFC was still a new western thing in China, a country far away from the international market at that time. In today's China, KFC chain stores are so common, not to mention that there are major Western brands in every big city, it is easy to forget the surprise that the earliest three-story KFC chain store once brought to Beijingers.At the time, the vast majority of Chinese were more familiar with ration cards than currency, spent most of their time working on farms or state-owned enterprises, and had no televisions or telephones at home, and few electrical appliances ; They wear traditional uniforms and go out on foot or by bicycle.At that time, even in a big city like Beijing, many people may have never met Westerners, eaten Western food, and did not know various foreign brands.Except for some students who have studied abroad, KFC is unfamiliar to the vast majority of people, just as many foods in China are unfamiliar to residents of Kentucky in the United States. Therefore, when a three-storey, clean and bright KFC chain store suddenly appeared in Beijing, it was a strange and fresh experience for the Chinese people, and it was a symbol of the reform and opening up advocated by Deng Xiaoping.People patronize KFC not only because they like the food there, but also because they want to experience modern life.China is rapidly, aggressively and firmly integrating into the modern world.In fact, many regular customers of KFC admit that although they know they are eating chicken, they don't really like the way KFC food is cooked, and of course, they don't like foreign foods like vegetable salads.The reason why they go to KFC is because it can show some of their wishes.Neither Wang Dadong, the mayor of Beijing, nor KFC's first few thousand customers realized that KFC's entry into China heralded the birth of a new global system. Later, McDonald's also entered the Chinese market, and KFC was strongly aware of the approaching market threat.McDonald's and its partner Coca-Cola are important global brands. In China, McDonald's adopts a development strategy starting from the cities in the southern special economic zone.At the time, it was thought that McDonald's would eventually overtake KFC in the Chinese market, as it did in most of the world.However, Wang Dadong was able to turn KFC's disadvantages into advantages. Since the KFC chain store implemented a decentralized business management model and did not have a strict employee training system like McDonald's, KFC could not attract managers from other parts of the world at that time. It could only look for local talents to manage the chain store. And that's exactly the problem: KFC couldn't find the right local talent.In China at that time, people in their 30s and 40s might be willing to join KFC, but they had no business experience.Needing managers who can speak Mandarin, Wang Dadong and his regional management team decided to look to Taiwan. In the 1980s, under the call of new opportunities, many Taiwanese came to mainland China.KFC has hired more than 20 Taiwanese managers to oversee business expansion on the mainland and manage new chain stores.These managers have been given considerable freedom of action, can combine the KFC brand with the local environment, and can work with local governments and enterprises to determine the address of the chain store and carry out marketing.As a result, KFC has taken the first step towards transformation in China.In the process of market expansion, KFC has integrated local elements from all over the world, and began to achieve success in the 1990s. KFC began to reshape corporate personality, global image and business performance in China.What KFC wanted when it entered the Chinese market was to open new chains, which it did; and later, these vibrant, profitable chains began to serve as models for KFC chains around the world. First of all, the location of the KFC chain should be very eye-catching.In other parts of the world outside the United States, KFC has adopted the same strategy, but in China, this strategy has developed to a whole new level.In the words of Allan Huston, KFC's global president at the time, KFC's goal is to "choose the most conspicuous locations."KFC wants to open its chain stores on the "Fifth Avenue" in developing countries.Site selection became part of KFC's brand strategy.At that time in China, there were still relatively few large-scale media, and the advertising industry was not developed, so the flagship store became the facade and billboard of the chain store.Because the company's strategy requires first-class location selection and grand opening celebrations to support it, it often takes several years from the selection of a new city to the opening of the first KFC store in that city.This is also the reason why KFC has less than 12 chain stores in China within 6 years after the Beijing flagship store opened.KFC followed a similar pattern in the cities that later opened chain stores.Every time it arrives in a new city, KFC will hold a grand opening ceremony, which becomes a major event in the life and business activities of the local people. In 1994, KFC ushered in another leap in the development process.This year, KFC's 9,000th chain store opened in Shanghai.The location of the new store is also eye-catching.The store is located in a big hotel on the Bund.One of the most spectacular buildings in Shanghai, this hotel by the Huangpu River epitomizes the pre-World War II prosperity of the city.The opening of this new store on the Bund is almost as loud as the opening of the first store in Beijing.At the time, Shanghai was building its economic clout in southern China while strengthening its position as China's premier business center.Both Jiang Zemin and Zhu Rongji once worked in Shanghai, and they actively supported Shanghai's development.The Bund symbolizes the past and present of Shanghai, while Pudong across the river symbolizes the future of Shanghai.Cultural elements, shops and restaurants dot the Bund, while factories and new skyscrapers line the opposite bank. When this KFC chain store on the Bund opened in 1994, it became the most distinctive place in Shanghai at that time.This is where China's increasingly affluent young consumers can be stylish. Being different, KFC chains in Shanghai can sell food at the same high prices as KFC chains elsewhere in China.From an absolute price point of view, the price of the same KFC food in China is lower than that in the United States. However, due to the relatively low cost of goods supply and labor costs in China, the profit of the same KFC food sales in China is higher than that in the United States. 3 to 4 times of that.At that time, Chinese consumers did not come to KFC on the Bund for fast food, they wanted to hang out here with friends and leave a deep impression on their dates.Going to KFC is the purpose, but the food is second.KFC can develop globally because it sells common food, and there is no food more common than chicken.KFC's global chain system has empowered the person in charge of the chain store to manage the business, so that the fast food produced in this way is of ordinary quality and low price.In China, however, the situation is completely reversed. In the chain store in Shanghai, KFC's business model has been further improved.Management has revamped the menu, adding some new items to cater to Chinese tastes, such as coconut milk, mango juice and Tsingtao beer.There is also a children's activity area in the store, with dedicated waitresses distributing gifts and toys to children.In addition to the image of Colonel Sanders that appears in every KFC store, there is a new image here-Kiki.After years of operating in China, KFC executives conducted extensive customer research and found that the image of Colonel Sanders as a hospitable uncle was not as popular in China as it was in the United States.Instead, people feel that he is more like a strict grandfather.That's not the image the company wanted to promote, so Kiki was born. How would you describe Kiki?You can imagine it as a fluffy chick with white feathers, an orange beak, and a small blue cap.Kiki quickly became a favorite of the children, and to Chinese families, Kiki was more attractive than Colonel Sanders.Soon, Kiki was as integral to KFC in China as Colonel Sanders was to the KFC chain in the United States.It is only a matter of time before the image of Colonel Sanders changes in China.After the turn of the millennium, various images of Colonel Sanders in all KFC chain stores in China have also been changed into Tang suits.When talking about KFC's experience in China, Alan Heston said: "In other countries, you can't do business in the same way as American companies in the United States. You have to think locally." This is to say That's easier said than done, especially for a company like KFC that uses a traditional business model that works so well.Usually, only those companies that are in a desperate situation or are willing to innovate will actively adapt to different environments and change their business models, while the former are usually in a desperate situation because they are unable to make changes, even if they realize that they need to change, there is no way to change.