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China- Poeter

Essay by   •  January 12, 2011  •  527 Words (3 Pages)  •  697 Views

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Rivalry

Unlike what one would expect, KFC has little rivalry with similar fast-food chains

in China. The primary reason is that their core products are different, as in they

sell different kinds of fast-foods with very different tastes and styles. For

example, if KFC raised its price for chicken by a small amount, Chinese chicken

lovers who may not be as accepting to pizzas (many Chinese people strongly

dislike the taste of cheese) are not going to switch to Pizza Hut just because the

price for KFC increased. In addition to that, these restaurants have such different

target customers that the fluctuation of price for one restaurant is not going to

affect the others. For example, a full meal at KFC range about Ð'Ґ15, whereas a full

meal at Pizza Hut can cost over Ð'Ґ50. The drastic difference in price assures no

price competition between these restaurants

Buyer/Supplier Bargaining Power

The customers of KFC, especially as individual buyers, have almost no

bargaining power because if only one customer threatens to no longer eat at KFC,

the store is not going to lower its price because the cost of losing one customer is

not very great. The suppliers, like the buyers, have very little bargaining power.

In terms of food, KFC, upon its move into China, urged many of its U.S. suppliers

to also extend branches into China. KFC also began helping local suppliers by

giving them technological support to improve their products. This is a brilliant

strategy because the supplies that KFC would otherwise need to import from the

U.S. can now be obtained domestically, and if the U.S. suppliers decide to raise

their prices, KFC can easily switch to the local suppliers. With this strategy, KFC

created competition among its suppliers, lowering the supplier bargaining power.8

In terms of human resources, labor cost is extremely low because the supply of

non-skilled workers great exceeds the demand for them. With so little buyer and

supplier bargaining powers, KFC is able to have a very tight control over its

prices and expenditures.

Barrier to Entry

For the current Chinese market for fast food, it is not difficult

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