Consumer Behavior Research Assignment

pportu n ity ·-·------------------.. ---------------------------------. in China

As US fast-food chains look toward foreign markets for

growth, they face a typical decision-making question

concerning which fast-food model to employ abroad. The

issue centers around whether a chain should follow its

US model and offer its core products much like it does at

home, or alternatively, whether it should adapt its orga-

nization and offerings to suit the local tastes of residents

in the host country. The answer to the question concern-

ing which of these two philosophies is "right" presents a

dilemma to managers of fast-food organizations in their

efforts to expand globally. Consider two success stories:

those of KFC and McDonald's in China.

The first case involves the Yum Corporation. In

1987, when Yum brands, the holding company of

KFC and Pizza Hut, faced falling revenues in the

United States, it started to investigate the possibility

of expanding overseas. Location studies at that time

revealed that China was a promising market due to its

sheer size and large expanding population. By enter-

ing that market, Yum realized that due to distinct local

taste preferences, the company needed to adapt its

product offerings to local palates and lifestyles. The

menus, therefore, were reconfigured to add dishes

similar to the foods that millions of Chinese grab from

street-stall restaurants. Food items such as a bowl of

congee (a rice porridge), a dragon twister (a chicken

wrap) or a spicy tofu chicken rice were added to the

usual fried chicken bucket menu items. The company

hired Chinese managers for advice on food tastes,

built partnerships with local companies, and trained

other Chinese to operate the new branches that the

company continued to add almost daily. The com-

pany now commands a 40 percent market share of

China's $28 billion fast-food market. Starting with just

a single restaurant in 1987, Yum now operates over

3,300 KFCs in 650 Chinese cities.McDonalds, on the

other hand, which is a competitor in fast-food industry

in China, holds a 16 percent market share. Unlike

KFCs policy of menu adaptation to suit local tastes,

McDonald's opted to follow the same core strategy

used in the United States by offering its familiar menu

items. The restaurants' layout, decor, a'nd atmosphere

also followed the familiar format used at home. In

this manner, McDonald's franchises were marketed

as sophisticated venues for legions of increasingly-

affluent and status-conscious Chinese, who seek to

emulate the admired American way of life.

To maintain this image, McDonald's restaurants

feature bright, warm colors along with soft, comfort-

able seating within fashionable interiors. In addition,

new restaurants feature drive-thrus to appeal to Chi-

na's increasingly-mobile population. Over the next few

years, McDonald's plans to open a new outlet on an

almost daily basis. In 2013, McDonald's reports having

approximately 2,000 restaurants in China. 33

The depiction of the two companies mentioned above reveals contrasting cases for global executives seeking to determine which busi- ness model should be followed in an emerging market. Should the home-base model be kept intact, modified, or discarded altogether? Such a decision is obviously a correlate between three main factors: the product, the host coun- try, and the management philosophy, Learn more about KFC and McDonald's by visiting http:!/ hbr.org/20 1 1 I 1 1 /kfcs-radical-approach-to- china/ar/pr and http://www.reuters.com/assets/

print?aid=USTRE6BEOV J20 101 215 Which of these two alternative strategies would you sug- gest for a fast-food company pursuing global expansion in India? Similarly, which of these two strategies would you suggest for Campbell Soup in Canada? Support your answers.

effort and reward, compared to those who extend little effort to acquire the same product.Anderson reported similar findings. 39 His conclusions supported Cardozo's contention that the mere possession of information about a product may lead to a more favorable evaluation of that product, not only because cus- tomers have greater knowledge on which to base evaluation but also because