need to answer 2 questions after the case, write no less than 400 words.
The world’s
second-largest burger chain is gearing up in China
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CHINA may boast a 5,000-year-old
culinary tradition, but when it comes to fast food, Western-style outlets rule.
For this you can thank—or blame—changing consumer tastes, and the breathless
expansion plans of chain restaurants, which are eager to grab a bigger slice of
the country’s estimated annual 200 billion yuan ($29 billion) fast-food market.
For two decades the battle for the
modern Chinese stomach was fought between two American giants: McDonald’s, the
world’s largest fast-food chain; and Yum! Brands, which operates the KFC and
Pizza Hut brands in China. Yum!, which first arrived in China in 1987 (three
years before McDonald’s), has always stayed ahead of its rival—going by both
the number of restaurants and consumers’ awareness of the brand. In 2005 the
two titans were joined by another American stalwart, Burger King, the world’s
second-largest burger chain.
In April Burger King had just 12 outlets
on the mainland, including nine in Shanghai. But after this cautious start, the
company is pushing ahead with a faster store roll-out: in June it announced
plans to open between 250 and 300 outlets in China over the next five years,
including another ten restaurants in Shanghai. As in other markets, 90% of them
will be franchised and a tenth owned by Burger King. For comparison, KFC has
more than 2,200 outlets in some 450 cities and McDonald’s has 950 outlets.
Airport eateries will also be vital.
Some 200 of Burger King’s 11,500 outlets worldwide are at airports. Catering
there has a number of advantages, including steady, captive customers and
limited competition. In February Burger King opened its first outlet at Beijing
Capital Airport’s Terminal 3, and the following month it opened two restaurants
at Shanghai Pudong International Airport’s Terminal 2. Another ten mainland
airports are also on its menu.
One problem for Burger King is that its
trademark “Whopper” is made out of beef. Like McDonald’s, the chain must cope
with the fact that Chinese consumers prefer chicken. McDonald’s has launched
lots of marketing campaigns to try and convince mainland customers about the
health benefits of eating beef (apparently, there are some). This has done much
to overcome the traditional indifference of Chinese towards beef, probably
saving time and money for Burger King’s own marketing campaigns.
Burgers with
Chinese characteristics
Burger King is also adapting its menu
for China. It has added chicken dishes and has also added chili to some of its
offerings. It has not localised its China menu as much as its rivals have,
however. KFC has gone the furthest in tailoring its menu for Chinese tastes,
with offerings ranging from pumpkin porridge and Beijing chicken rolls to the
Chinese deep-fried twisted dough sticks (youtiao) on its breakfast menu.
McDonald’s (and to a lesser extent, KFC) is also ahead of Burger King in making
“off-the-menu” innovations. These include “dessert” kiosks selling just sweet
pastries and drinks. McDonald’s also runs a 24-hour service at 600 outlets.
With its two American rivals so far
ahead, is Burger King likely to be successful in China? There should be demand
enough for more than two big American fast-food firms here, analysts reckon,
and the company has the resources to finance rapid and sustained expansion into
mainland cities. Most important, it is strongly motivated. Burger King is keen
to build its business outside America. Four-fifths of the new restaurants to
open this year will be outside its home turf, and the company aims to double
its Asia-Pacific presence to some 1,400 outlets over the next five years.
In China, Burger King’s strategy is
particularly to chase younger, more individualistic diners in the country’s big
cities. Its idea is that these restaurant-goers will want to set themselves
apart from older family members or colleagues by trying the newcomer. If so,
the Whopper—sold in China as huangbao, or “Emperor Burger”—may yet
dethrone the Big Mac here.
Questions
1.
What
business strategy should Burger King adopt in China?
2.
What
suggestions and comments you would like to recommend to the international
companies when doing business in China?
