Kentucky Fried Chicken in China - Essay Example

? Business KFC in China YUM! Brands, Inc. Company develops, operates, franchises, and licenses a system of restaurants that prepare, package, and sell various food items. Its restaurants are mainly specialized in chicken, Mexican-style food, pizza, and quick-service seafood categories. It operates more than 37,000 restaurants under the KFC, Pizza Hut, Long John Silvers, and all American Food Restaurants brands. The Yum! China Division is based in Shanghai and has been reported to have developed and changed since the beginning of 2005 due to its strength, size, and importance. Yum! Brand is one of the new developed companies worldwide. For instance, in 2010, the Company opened more than 500 restaurants in the mainland China. The main aim of the company is to be a leader in every significant food service category in China. KFC was the first restaurant chain to enter China in 1987 with quick services. It was also the first to bring franchising to China in 1992. KFC is still the number one quick-service restaurant brand in China.  Furthermore, it is the largest and fastest developing restaurant in the country with about 3,500 restaurants in different cities. Pizza Hut company was the first restaurant in the chain to introduce pizza and the western food-style to China in 1990 and was also the first to introduce the delivery of pizza to China in 2001. Pizza Hut has therefore emerged to be the number one casual dining brand in China with more than 560 Pizza Hut dining restaurants in many cities (Nunes et al 2010). The improvement of KFC in China is a clear indication that knowing a business environment is very important. This is because the KFC brands have great force in China as they strive to achieve their goal and increase the business performance. The core part of improving the business is by understanding the STEP analysis. STEP analysis of business is an environmental model that stands for Social, Technological, Economic and Political factors. STEP is also used to represent the decision and frame work of macro-environment factors that are used in scanning. Other models such as SWOT, Mintizberg, and transformation model can also be used to describe the business environment.  In order to achieve the proposed goals, the business should consider various environmental factors both external and internal. When doing market search, the company is required to take into consideration various external factors that would help to know the progress of the business performance. Environmental analysis is relatively qualitative and involves the identification analysis of environmental variables, which influence the business performance. SWOT analysis and PESTEL analysis are some of the environmental analysis frameworks that have been given much attention in the world of business management literature ( Leo 1999). The international differences in habits, value, tastes and demographics, age structure, lifestyle, and income of the local people are some of the social factors that illustrate what contributed to the success of KFC in China which has the greatest number of populations. The main social factors that affect KFC store include demographic issues explaining the extent of the diverse population that contribute to the large number of its diverse consumers. For KFC to succeed in China, its managers made every effort in order to ensure that the company appeared as part of the community. In addition, demographics are in the same category with the values that are held by that particular community so as to reflect on their lifestyle or way of life. Most KFC customers are presented to be in the same age structure of population, class, and the structure of income of the local population (Qin, Prybutok,& Zhao, 2010). For instance, in the corner grocery shop, most customers are people living nearby, the families, the people of same age groups, and the immigrants of the area. Business environmental analysis looks at the intrinsic factors in the business environment that may be having some impact thereof. STEP is a type of analysis which is relatively qualitative and involves the identifying, scanning, analyzing and forecasting of the environmental variables. STEP analysis also relates to other frameworks of environmental analysis such as SWOT analysis and PESTEL analysis that are also considered very important for development of business organisations. The identification of favourable environment for a company is done in order to measure and improve the situation and position of the business to the inherent environmental factors. It is important to identify the factors that affect the performance and maintenance of a business. This is mainly done at various levels including internal levels, the domestic level, the company level, and the global level. A good classification of environmental factors can be as a result of a good brainstorming session with or without the frameworks. Those frameworks exist due to the ease of deployment and should be consulted, flexibly. Scanning is another environmental analysis step carried out for qualitative factors that had already been identified. Scanning, in environmental analysis context mainly refers to the process of differentiating the identified factors which are most effective or the factors that contain most effects on the business (Hong, Noh, &Hwang, 2006). Some of the factors identified in the first step carry the similar weight, and help in recognizing the environmental factors that are most significant to the business and that may assist in rendering a course of improvement in the organization. Analyzing is another step in environmental analysis that facilitates the analyzing of the effect that the appropriate environmental variables have on various levels of the production including the improvement of the entire company. There are various tools presented for this type of analysis that range from the scenario building, benchmarking to the Delphi technique. It is important to forecast the effects that the proposed variables would have in the future. This is actually the primary function of the analysis of both the current and the historical data. By considering the trend in which each significant environmental variable is forecasted to take, strategy information can be created which can assist the management to develop a business strategy in response thereto. Factor groups of environmental analysis as developed by some individuals, facilitates the marketers in comparing the competitive environments. For instance, the PEST (Political, Economic, Social and Technological) analysis which is also known as STEP is a tool for environmental examination of the business. The analysis of the factors however, is geared toward the Strategic Business Unit, which is a single business. In addition, some analytic factors are very necessary in creating a business that can stand on its own. Threat of Entry is a factor associated with the economies of scale, which refers to purchasing in bulk. It also looks at the advantages that the stand-alone business would have according to the specific knowledge or personal contacts that big organizations may not have access to. This factor is mainly concerned with any future laws that the government may implement and might weaken the single businesses competitive edge. The threat of entry is also concerned with how easy or how hard it will be for the business to have access to the distribution channels. Another factor that is important to consider in business is the power of buyers which refers to the quantity of pressure the customers can bring to bear on a business. The power of buyers is mainly important and considerable when there are a few significant players, but this power dwindles in situations where there are many small suppliers of goods. In the case of small suppliers, the cost of moving your business from one line to another is low. The Power of Suppliers is in a great position when the products or brand in the company is well known and sought after. Hirji (2009) asserts that the threat of substitutes is a factor that is concerned with the substitution of needs of the consumers. It can also be referred to as situations in which one product can no longer be purchased due to the presence of another preferred product. The main importance of knowing the threats of substitutes is that it helps the company to plan for the business and produce the most preferred products to the consumers. This also helps the business to improve on its performance because it would be producing the products that are highly demanded.        Furthermore, competitive rivalry also affects the business performance. It refers to the situation when both buyers and suppliers are looking to gain control over a market where there are several substitute products and services. Competitive rivalry is often considered to be the central factor in business environment analysis. All the factors that facilitate business performance are very important because they enable the organization to have a good idea on what to produce and what not to depending on the demand. In addition, it also enables the company to be aware of the threats it is likely to come across. The knowledge of STEP is very important in all organizations because it enables them to identify the social, technological, economical and political factors that may affect their businesses (Allen et al 2010). For instance, YUM in China is very successful due to well maintenance of the STEP factors. Therefore, the threats and the opportunities of the business can be identified through the STEP analysis. This would enable the organization to find possible solutions of solving their threats and be ready to take advantage of all the opportunities in order to generate more profit by producing the products in high demand and attracting more consumers.     References Allen Broyles, S., Leingpibul, T., Ross, R. & Foster, B. 2010, "Brand equity's antecedent/consequence relationships in cross-cultural settings", The Journal of Product and Brand Management, vol. 19, no. 3, pp. 159-169. Hirji, F. 2009, "Somebody Going to Get Hurt Real Bad": The Race-based Comedy of Russell Peters", Canadian Journal of Communication, vol. 34, no. 4, pp. 567-586. Hong, P., Noh, J. & Hwang, W. 2006, "Global supply chain strategy: a Chinese market perspective", Journal of Enterprise Information Management, vol. 19, no. 3, pp. 320-320.  Leo, P.D. 1999, "Kentucky Fried Chicken", British Food Journal, vol. 101, no. 5, pp. 493-495. Nunes, P., Piotroski, S., Lay, L.T. & Matheis, R. 2010, "Seven lessons for building a winning brand in China", Strategy & Leadership, vol. 38, no. 1, pp. 42-49. Qin, H., Prybutok, V. & Zhao, Q. 2010, "Perceived service quality in fast-food restaurants: empirical evidence from China", The International Journal of Quality & Reliability Management, vol. 27, no. 4, pp. 424-437. Read More