Tony Wang, as the deputy general manager of KFC in Southeast Asia, undertook the important task of expanding the China market. As early as 1984, Wang established a joint venture named "Orchid Food" with local partners in Tianjin, China, which was the first Sino-US joint venture in the catering industry in China. This 80-seat take-away restaurant has been a great success since the first day of opening, and its operating income is 100% higher than the breakeven point.
Tony Wang has always believed that American fast food has great potential in the Far East market. Encouraged by this success, Wang began to consider transferring the concessions in major areas of China to attract chickens from his hometown to China. 1985, Wang wrote to Mayer, general manager of KFC, trying to convince the other party that now is a favorable time to actively enter the China market.
I fully believe that KFC has an absolute competitive advantage over any other American fast food chain in entering the China market. Although McDonald's Hamburg is trying to establish a relationship with China, there is still a long way to go before the supply of beef becomes feasible! On the other hand, the poultry industry, as a priority area of agricultural modernization in China, is strongly supported and encouraged by the government. My opinion is that KFC can open the door to China by establishing a solid poultry supply base and establish an indisputable leading position.
Meyer is very excited about Wang's proposal to introduce KFC to China. Wang himself has a long and successful history in KFC and can be trusted completely. In addition, Wang himself is from China, and he can speak standard Mandarin, which is conducive to negotiations. However, Meyer still has a lot of worries and anxieties about turning the China market, an important market with war significance, into a franchise. The experience of international market shows that it is very dangerous to rely on franchise. Granting franchise will also endanger KFC's ability to develop into other parts of China in the future. Meyer has mixed feelings. The China market is "too important to be developed as a company's business".
At the same time, Tony Wang also clearly realized that it is impossible to introduce KFC into China only by its own resources. His experience in Tianjin has strengthened his belief that to do business under the banner of KFC, there is no doubt that China employees should fundamentally change their work attitude. This change can only be achieved through time-consuming training programs, which means that he has to invest a lot of money before starting a business, and he can't afford it at all. In addition, Wang is also worried about the cost of preliminary work such as finding partners, negotiating, signing leases and obtaining business licenses. In the late autumn of 1985, Wang Yue realized more and more clearly that "the market in China is too big for individuals".
1in April 1986, Meyer decided to take action. Reorganize KFC's regional office in Southeast Asia and buy all franchise rights in Singapore. It is operating 29 KFC hometown chicken shops, which will add considerable new management burden to KFC's Southeast Asia regional office. Meyer invited Wang to be the business director of Southeast Asia, and expressed his support for Wang to push forward his China plan according to his best judgment and efforts.
Tony Wang accepted this position, and in the summer of 1986, he set up a regional office of KFC in Southeast Asia. According to Wang himself, he accepted this position because "it is a personal challenge for him to develop KFC hometown chicken in China". He thinks that the opportunity to set up the first western-style fast food restaurant in China is a historic opportunity-both for individuals and the whole company. He also realized that the adventure might fail, because the obvious challenges of this job brought him great risks personally.
Considering the overall situation of KFC's business in Southeast Asia, Wang began to look at the investment decision in China with a special eye. The single goal of entering the China market must be balanced with other investment opportunities in the region. KFC has great development potential throughout Southeast Asia. Although the markets of other countries in this region are smaller than all the markets in China, they have been exposed to western-style fast food and have a deep understanding of the demand for KFC products. Compared with China, the pursuit of growth in these markets is more attractive. Maintaining control over partners and employees is also relatively simple. This will lead to rapid growth and higher return on investment, and hard currency is also easy to obtain. On the contrary, opening the China market requires a lot of scarce management resources. The first limitation is that KFC has limited managers who can speak Chinese, and most of them have already made arrangements in Hong Kong and Singapore. So by the end of the summer of 1986, Wang began to wonder whether putting this part of human resources in China was under his control.
In the uncertain situation, Wang decided to conduct a more comprehensive and thorough investigation on the China market. The first question he faced was: Where should the first KFC store be located? This decision will have a great impact on future profits, further development in other fields in China, and the determination to invest and manage resources, and will also have an impact on all other extremely important considerations related to whether or not to do this.
Wang first thought of Tianjin. Through his early experience, Wang established a very friendly relationship with the Tianjin municipal government. In addition, Tianjin is one of the three municipalities directly under the central government. However, he also saw several weaknesses in Tianjin. First of all, Tian Li lacks convenient grain to feed broilers. KFC's experience in Hongkong shows that China consumers attach great importance to the freshness and delicacy of food, which is more important for a product unfamiliar to China people. Another problem is that western tourists generally don't visit the city often. Although Wang predicted that the main sales revenue would be the soft currency RMB, part of the hard currency sales revenue was also very important for the remittance of profits and the purchase of important inputs such as chicken bag materials, packaging and publicity materials. Finally, and perhaps most importantly, Tianjin may not be the base for KFC to explore the national market in the future. The city doesn't have the image and influence needed for this grand plan. Geographically, Tianjin is usually regarded as the gateway to Beijing.
Then, what about other site selection schemes-Shanghai, Guangzhou and Beijing? Let's do it one by one.
Shanghai is the largest market in China, with 1 1 10,000 residents, more than 9,000 factories and the busiest port in China. Shanghai is the most prosperous commercial center in China. The total industrial output value accounts for 1 1% of the whole country, and foreign trade exports account for 17% of the whole country. It is one of the municipalities directly under the central government.
Shanghai has a long history of communication with the West. /kloc-In the middle of the 9th century, Britain forced China to sign the treaty of nanking, and Shanghai became one of the five trading ports. Western business and culture have a great influence on Shanghai. From 65438 to 0949, after the liberation of Chinese mainland, Shanghai maintained its interest in international business and trade. Today, Shanghai has built various western-style hotels and commercial facilities, making it an ideal tourist destination for foreign tourists.
The obvious advantage of Shanghai is that it is easy to get sufficient supply of high-quality broilers here. Zheng Da Group of Thailand has established 65,438+00 feed mills and poultry breeding bases in Southeast Asia through the establishment of joint ventures, which can supply broilers to Shanghai. KFC's Southeast Asia office has a good relationship with Chia Tai Group and is currently negotiating with a branch of the company to sell the franchise in Bangkok.
Although Shanghai has always been a major commercial center, its noise and pollution make tourists feel depressed. For KFC, the actual population of the host city is very important, but it is not as important as the size of the potential customer base. Although Shanghai can provide KFC with the news propaganda it craves, it still needs to show that it has enough foreign exchange income to finally justify its investment. The concern here is whether western businessmen will be attracted by KFC's hometown chicken, or whether they can visit KFC more frequently than going to more modern restaurants. Obviously, no one knows the answer.
Guangzhou is another choice. It is located in the southeast of China, near Hongkong. As one of the open coastal cities in China, Guangzhou became a special economic zone with preferential foreign investment in 1984. In this way, Guangzhou gained more autonomy in approving foreign investment projects, reducing taxes and encouraging technological development. By the end of 1986, these coastal open cities will get an investment of about 6 billion US dollars. Three of the four special economic zones in China are located in Guangdong Province, which are specially designed and established to attract foreign investment. Guangzhou is a place frequented by western businessmen and a good place for tourists to take a one-day trip from Hong Kong. The distance between Guangzhou and Hong Kong is less than120km, and the road and railway transportation is very convenient. Doing business in Guangzhou is easy to get the services provided by KFC's Hong Kong office. In addition, China people in Guangdong are more familiar with western management practices and western culture. Guangdong and Hong Kong speak the same Cantonese, with little difference. Preliminary investigation shows that it is not difficult to find sufficient sources of broilers.
Beijing is the most worthy of careful investigation. Beijing has 9 million residents, second only to Shanghai in population. Beijing has been the political and cultural center of China since the 3rd century. The unified use of Beijing time throughout the country is a symbol of the city's authoritative position. Beijing has a well-developed underground railway and expressway system, and an international airport with air conditioning, escalators and corridors.
Beijing has a large number of migrants and potential customers. Beijing is also the education center of China and the gathering place of institutions of higher learning. These factors have caused a large influx of people and people's ideological enlightenment, which is extremely important for KFC's RMB sales. Beijing is a must for western tourists who yearn for the Forbidden City, the Great Wall and the Ming Tombs, which means that KFC will have a stable foreign exchange income. Therefore, starting from Beijing will undoubtedly attract people's attention, and the approval of those in power is self-evident. This will help the further development of other cities in the future.
For a company eager to expand its business in the whole country, Beijing can provide considerable advantages. According to preliminary investigation, there are several poultry breeding bases in the suburbs of Beijing. But from the political and operational level, choosing Beijing may be more risky than choosing several other cities. A successful and eye-catching enterprise will increase the possibility of government intervention.
Wang is an adventurous man, and he knows the degree of risk. He also knew that the location of the first branch was well chosen. Can greatly reduce the risk of entering China. What can't be decided is whether several low-risk schemes are worth carrying out. To this end, it is necessary to compare the possibility of reducing risks with the potential benefits that may be obtained through investment. Wang believes that if Meyer, after careful consideration, suggests KFC to postpone its current plan to defeat China, he will not object. Wang also realized that since China has no other competitors, now is probably the best time to take action. In fact, even if the address of the China branch has been selected, it may take several years to open. Delaying time is tantamount to giving the market to others, which is the biggest risk. The challenge facing Wang is to balance the possible risks and benefits. In a city managed by an administrative organization that is difficult to understand and cooperate with, it is simply too difficult to achieve anything.
Due to the indefinite delay in finding the location of the store and obtaining the approval, the implementation progress of the new restaurant reservation is in chaos. A project can only be started after it has been approved by many government agencies that make rules and regulations. In addition, Wang is very skeptical about whether employees in China have the motivation and enthusiasm to implement KFC's quality, service and cleanliness standards, which the chain requires its restaurants around the world to provide to customers. Deciding whether to do or not to do this project is the last minute. Although Wang is interested in the huge potential of China market, he also knows that many people have failed in similar adventures.
The history of KFC in the international market is mixed. The company established its first Far East branch in Japan on 1970. However, for most of the 1970s, KFC's international business suffered from disharmony between local managers and employees. Managers in the host country often feel that employees of the company are too keen to exert control that is incompatible with the cultural traditions of their market. In addition, the rapid growth of the company in the 1970s mainly depended on the sale of franchise rights, which was even more difficult to control. 1975 in the face of the serious decline in the operating performance of branches at home and abroad, KFC began to implement the long-term strategy of "returning to the basic purpose", emphasizing the quality, service and cleanliness (QSC) norms of all KFC branches around the world. By establishing an independent international business department at the company's Louisville headquarters, the business outside the United States has been strengthened. At the beginning of 1982, the business situation changed dramatically, and KFC was acquired by the tobacco king R J Renault. With Renault's strong support, KFC's international business expanded faster. By 1983, its international business department has established five autonomous regions, and Southeast Asia is one of them. The growth of business in this area is related to the dietary tradition that people in this area like to eat poultry products. In fact, Southeast Asia is the only region in the world where KFC's market share exceeds McDonald's. By 1986, KFC had established 1 12 branches in Southeast Asia, with an annual sales income of 53 million US dollars. Recognizing that the development of the central market needs strong management as the backing, Wang asked the company to increase financial support for the central market. This request was strongly supported by Meyer. He knows that KFC needs more branches not only in Southeast Asia, but also in other parts of the world.
On the basis of strengthening regional organizations, Wang began to consider and evaluate various options for choosing investment sites in China. This investigation and evaluation process is carried out city by city. Because we can't find any reliable market information that determines market demand and pricing basis, the decision of choosing investment location is more complicated. Without the guidance of local peers, the decision of investment location is mainly to pursue the greatest long-term impact on the company's future entry into the broader China market. Considering Beijing's modern hotels, huge floating population and national image, Wang decided to take Beijing as a starting point for the time being. Another great advantage of Beijing is that the municipal government has the same autonomy as the provincial government. Investing in municipalities directly under the central government means that one level can be reduced when dealing with a huge government system. The process of finding potential local partners began with the intentional choice of the first branch of KFC in China.