MBA Assignment (Marketing Management)

JANE MAKWINJA

STUDENT ID NO: 0134JMMJMM0614

DATE OF SUBMISION: 15/08/2014

LECTURER: Vincent Wee Eng Kim

Table of Contents1.0Executive summary....................................................................................................................1

2.0Introduction.................................................................................................................................2

3.0Consumer behavior.....................................................................................................................3

3.1THE BUYER DECISION PROCESS....................................................................................3

4.1 Subculture..............................................................................................................................6

4.2HOFSTEDE’S CULTURAL DIMENSION...........................................................................6

4.3Culture and Marketing............................................................................................................9

4.4Culture and competitive positioning.......................................................................................9

5.0ANALYSIS OF KFC CHINA & CULTURE.......................................................................10

5.1Company background...........................................................................................................10

5.2Localization in china.............................................................................................................11

5.3Chinese values.......................................................................................................................11

5.5Customs in china...................................................................................................................12

5.6Translations and language.....................................................................................................13

6.0Competitive positioning........................................................................................................14

6.1Product innovation................................................................................................................14

6.2Pricing strategy.....................................................................................................................14

6.3Distribution strategy for KFC China.................................................................................14

6.4Public relations of KFC China..............................................................................................15

7.0SUCCESS ATTRIBUTES........................................................................................................15

7.1People....................................................................................................................................15

7.2Locality.................................................................................................................................16

7.3Product category...................................................................................................................16

8.0Conclusion................................................................................................................................17

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1.0Executive summary

This report was commissioned to analyze culture as a determinant of consumer buyer behavior

which is an external factor and how does it influences the buyer decision making of the

consumer. The analysis of the consumer behavior and the buyer decision process is discussed

and their relationship with culture. KFC Company is used as a product category for consumers

to determine the culture influence in the China market and how KFC position itself within the

local Chinese environment.

From the research it is evident that KFC chine has gradually increased its market share since its

operation in China by the year 1987 with 20% of profit margins and has annual revenue of $1

million only in China market therefore out performing all of its competitors in the fast food

business. This is achieved through competitive positioning in which KFC has localized itself

through its menu and including Chinese language in order to meet the needs of the consumers.

Furthermore the report shows that KFC china not only has customized the menu but it also

celebrates with all people from different culture. The spring festival is the most commonly

celebrated in the beginning of Chinese New Year. With this, new 20 products are implemented

every year tailored towards the local tastes. KFC has also able to meeting the eating habits of

Chinese consumers who values family dining a norm. Other factors that, this report elaborates is

the leadership and culture and their contribution success factors of KFC china. Therefore it is

recommended for KFC to also include local Chinese in the leadership team as they better

understand the Chinese culture and subculture thus increased sales. Although it is successful in

china, KFC should increase more outlets since they now better understand the culture of Chinese

and have adapted well within the region.

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2.0Introduction

In today, s’ business world, business are want to create competitive advantage due to intense

competition that occurs. Therefore marketers of the businesses have to cater for their

consumer‘s needs by understanding consumer‘s decisions when purchasing a product or service

(Smith & Fisher). Consumers are faced with competing companies offering a variety of goods or

services therefore, decision and the factors impacting their behavior should be clearly analyzed.

According to (Darley, p.96, 2010) “consumer ‘s decision are often made through five stages

which include; need recognition, searching information, evaluating alternatives , post-purchase

behavior and purchasing decisions”. However marketers should focus on the whole buying

process rather than the purchasing decision only. Internal and external characteristics are the

main factors which influences the consumers purchase decision and behavior. The internal

characteristics comprises of personal and psychological whereas external characteristics includes

cultural and social factors. In this research context, the emphasis is on one variable of any choice

thus culture will be discussed as an external variable.

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3.0Consumer behavior

Goel & Hofman (2010) Consumer behavior is defined as the process through which the buyer

makes purchase decision across various products/ services. It is the behavior shown by the

consumers while buying and using the products or services which satisfy their needs and desires.

Therefore it is vital for marketers to develop understanding and to know reasons the reasons why

consumers purchase certain goods and services. With that information, they can able to know the

needed products and identify the best ways to present the goods to the consumers in the market

place. Consumer behavior further tries to understand process of buyer decision making and

characteristics of individuals such as personality and preferences are learnt in order to

understand the consumer ‘s wants(Villie, 2009). It further evaluates factors which influence

consumers such as the society, family and friends and also it allows companies to adopt

relationship marketing. Cultural influences are an external major factor which influences

consumer s behavior.

3.1THE BUYER DECISION PROCESS

Figure 1: Source: (Buyer Decisions, Kotler, 2009)

Fig. 1 indicates the purchase decision process and what a buyer encounters in the choice making

process regarding the type of goods or services to buy and this process is in stages.

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Problem recognition- at this stage buyers identify what they need to purchase in comparison

with their needs and wants (Sinha, 2011). These needs can be influenced mostly by internal

factors which are personal and psychological. Also marketers sometimes stimulate the need by

providing information about the product. For example, an advertisement about new clothes can

stimulate the consumers recognition that the need new clothing

Information search- after they identify their needs; consumers have to now source for

information of what they will purchase (Lee & Cranage, 2010). Searching information could be

external (word of mouth) or internal and if the search is a success the buyer is left other

alternatives (evoked sets). The information search can be on low –evolvement purchase or high

evolvement.

Evaluation of alternatives- this is the stage whereby the buyer evaluates the options available.

With the information search gathered the consumers are able to know what they want and what

they do not want. Comparison of brands is made based on price and quality factor during the

process.

Purchase decision – it the stage whereby the buyer has concluded on the best choice brand to

purchase after evaluation of the alternatives. The decision could be made based and the product,

packaging or services. Zhang & Wang (2012) discussed that, attitudes from people close

(significant others) to you such as friends can influence this decision. For example, a consumer

deciding to eat KFC informs their friend and in turn the friend will persuade them to buy Kenny

Rogers as it offers healthy meals; therefore the consumer is likely to change their initial

decisions made. Another factor which influences the purchase decision is the unexpected

situations

Post Evaluation- purchase it is determined by two outcomes which is satisfaction or

dissatisfaction which evaluates the decisions. The consumer evaluates if the decision made is

right or not (cognitive Dissonance) and therefore marketers can reduce this behavior by offering

warranties, after sales services, coupons and rewards points(Roberts, 2011).

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4.0CULTURAL INFLUENCES

Effect of culture on consumer behavior

Culture determines the way people live and it is usual dynamic depending on societies. It is a

way of life, which comprises of the core values, traditions, attitudes, language, peoples’ tastes

and preferences and it also communicates the thoughts of the society (Francis, 2013). It also

includes artifacts, sign and symbols. It is a broad aspect that determines the consumer’s behavior

thus marketers have to understand its key role on consumer‘s decision. Changes in the trend and

cultural values & norms should be monitored and recognize by marketers so they can satisfy

their customer’s needs and determine the business and marketing strategies which work well

and effectively (Rosso & Diane, 2011). However, these changes vary from country to country so

marketer should pay attention to things that are offensive or not. Therefore, there is a need for

new product development if there are any changes in the cultural shift. (Palmer et al. 2012)

mentioned that, “Another element that makes up culture is beliefs as people in the society usually

show some similarities, for instance eight symbolizes wealth in a Chinese culture therefore

anything that has to do with the number indicates prosperity”. Non-behavior of individuals is

related to tradition, which marketers have to understand in a competitive environment. As a

result, marketers have to learn the culture factors in analyzing the consumer’s behavior as it has

been a crucial aspect of market segmentation, positioning, and target market (Kim, 2011).

4.1 Subculture

Cultures are different entities which have different values. This means each culture consists of

smaller groups known as subcultures. These groups have distinct modes behavior of their own

and therefore marketers need to understand the difference between these groups so they could

effectively develop more strategies. Subcultures are formed through geographic regions,

ethnicity, gender groups and religions and usually preferences vary depending on how people

live with each other (Russell, 2009). Brands usually consider these groups for the market

segmentation so that they can adopt the product or communicate the strategy for particular needs

of the segment.

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4.2HOFSTEDE’S CULTURAL DIMENSION

(Minkov, 2011) mentioned that, Hofstede is the theory model regarding the cross cultural which

helps business to understand how different nation culture is in various countries. The framework

is applicable for advertising, ethics (decision making) and global brand strategies. Hofstede

(1980) model comprises of the key five dimensions of culture: Uncertainty Avoidance,

Masculinity/Femininity, Power Distance, Individualism/Collectivism and Long Term/short Term

orientation.

Figure, 2.Source :( E-Business Review, 2009)

Fig.2 illustrates the five cultural dimensions of Hofstede which acts as a guide for assessing a

particular culture and decision making.

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Power distance- it focuses on inequality of power across countries within companies. Power

distance further analyses people‘s feelings within the society and the low power distances views

power relations as equals.

Individualism versus collectivism-discusses how individual societies tend to be focused on

themselves than the group while on the collectivist side it’s all about the whole group (society)

with cohesiveness and they are strongly integrated.

The uncertainty avoidance- is all about the society‘s tolerance for uncertainty and ambiguity

with cultures of high index having less tolerance of changes and there is rigid laws implemented.

For the societies with low index there is flexibility, embracing change and having fewer laws.

Masculinity versus femininity- basically is all about genders and how emotional roles are

distributed. Stereotyping is measured on this dimension and its importance on culture and

masculine factors covered include materialism, ambition and power. Feminine values are more

focused in human relationships and societies with high masculinity usually have lots of gender

difference and there is more competition (Powell & Dainty, 2009). However, the cultures that

have low masculinity possess less gender differences and building relationship is vital.

Long term versus short-term orientation-It discuss the horizon time of the society whereby

cultures who are short term oriented regard methods which are traditional, relationship building

is a long term. This type of society believes in doing things through interconnecting the past and

the future. Oppositely, short-term cultures always looking forward and the past or present is not

considered. It is all about attaining goals and rewards are highly valued (John, 2011).

Indulgence versus restraint- in this dimension the culture is supposed to be able to satisfy

immediate needs and the member’s personal desires. Cultures that are restraint are characterized

stricter social rules and norms.

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4.3Culture and Marketing

Marketers of multinational companies should consider cultural differences when doing business

across the borders with planned marketing strategies. Understanding consumer s behavior, firms

are able to finalize that marketing mix decision. These marketing mix comprises of four

variables which includes, product, place, promotion and price and they have impact on the

marketing decisions as they determines the rate of demand for products/services. Okeyre &

Gloria (p.50, 2011). For promotion variable it shows marketing tools required for promoting the

business such as direct selling, advertisements, promotions and publicity. The place determines

where your business can be find, distribution channels and warehouses. As for price, factors such

as the discounts mark up sales, allowances are important and the product itself it the main

determinant of consumer’s buying decisions and is usually hard to adapt (Peter, 2013). The

product should consider quality, packaging, size and branding.

4.4Culture and competitive positioning

Multinationals are now developing cultural product positioning strategies on cross cultural basis.

Therefore in order to gain competitive advantage these companies are employing competitive

positioning to differentiate themselves and creating value in the market. (Lucas, 2011) Stated

that, “competitive positioning is about, carving out a spot in competitive environment and

making sure the company deliver on the strategy”. That, is to say, it assist companies to gather

information about the market segmentation and therefore making better decisions. A viable

competitive strategy includes the company s market profile which specifies the business rivals,

size and the growth stages. An effective competitive strategy also should analyses the strengths,

opportunities, threats and weakness(Adam & Michael, 2010). The positioning strategy and value

prepositions are part of a good competitive strategy that companies should include. However, To

differentiate products culturally, characteristics, products benefits and features are used in the

competitive positioning strategy

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Source: (marketingmo, 2014)

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Competitive Positioning

Strategy

ProductDifferentiati

on?

Value Propositi

on?

Market Niche

?

Mind Share

?

5.0ANALYSIS OF KFC CHINA & CULTURE

5.1Company background

Kentucky Fried Chicken is one of the largest fast food franchises globally which offers fried

chicken products. KFC started it operation in Beijing China in the year 1987 through Sino-

foreign Joint venture which is the biggest fast food business in china. Its restaurants are over

4600 branches today, serving 10 million customers per day. KFC has vastly grown in Beijing

and it has impacted the childhood experiences of Chinese. Research shows that it has become an

integral part of the Beijing children‘s social lives and have adopted as part of their culture (KFC

website).

5.2Localization in china

KFC china offers some standardized products in the menu but it has able to innovate and become

unique in the Chinese environment, the company has able to localize the menu by adding some

Chinese cuisine such as Dragon twister and herbal teas. By doing so, KFC is incorporating some

local spices in order to meet their tastes. Research shows that, KFC launches 20 new products

yearly so it can remain competitive and to satisfy the Chinese people’ needs thus providing

variety and plenty choices for its consumers (Berry, 2010).

5.3Chinese values

In china people values are incorporated by KFC by targeting the children and the elder people. It

makes people feel like they are at home during their dining as the environment is tailored

towards family lifestyle. Furthermore the company uses some elements in sales and promotions,

advertisements and decorations in doors. These elements comprises of family reunions, love and

care between married couples (Shapira, 2014). KFC also makes sure values are passed through

generations by continuing to diversify menu and adapting local tastes therefore influencing

consumers’ purchasing decisions. Their commercial are simple and engaging as it tends to use

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some funny scenes of or by introducing some storyline as mentioned by (Sender & Sheila, 2013).

This allows consumers to easily understand the commercial. The cartoon which comes with the

kids meals are also made in Asian version mostly the Japanese cartoons such as Astro boy.

5,4Eating habits in China

In china it is a norm for people to use dinning in restaurants as a way of communicating with

each other. It used as an occasion to meet up with people probably friends therefore KFC notes

that and considers that aspect as function to consumers. With some studies it is evident that,

people in china often prefers to meet their friends at the restaurant rather than in their house

(Taylor, 2010). With such habits KFC restaurants have able to strategically locate themselves

along the main streets but most of the restaurants are built in populated cities. These restaurants

have the playground for kids to cater for parents who needs time off to stay for a bit longer.

Although KFC has delivery and drive thru service, Chinese people still prefer dining in the

restaurant so they can able to chat, relax with each other while eating. Most of the sales are

made from dining inside the restaurant

5.5Customs in china

KFC has gone to greater lengths to learn and adapt Chinese customs such as festivals. Every year

Chinese do celebrate the Spring festival which starts the same time with Chinese new year (Shan,

2014).Therefore during this celebration, the KFC restaurants are decorated in conjunction

Chinese elements such as red color, animal signs for which correspond to that particular New

Year. Also these elements are included in the other on advertisements and the packages of the

products. Ambience is created in the restaurants through traditional Chinese music during the

spring festival and Colonel Sanders will be dress on Chinese traditional clothing. However, KFC

does not only focus on the spring festival rather it celebrates with all including the Muslims who

are based in Urumqi the capital of Xinjiang. KFC has position itself there by holding parties for

those who have gone for circumcision (religious ritual)

5.6Translations and language

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Language difference is a major barrier for multinational companies therefore they need to clearly

understand the translated versions when doing business in other countries. According Katrin

(2010), Chinese are perceived to be showing interest on brands that are pronounced in a funny

way because it makes it easier for them to easily remember. The mother company of KFC, Yum

Brands, Inc ‘s name had to be translated in “Baisheng” which in Chinese language it meaning is

“ we will always win the victory”. Moreover, part of the menu has been modified to other lingual

name so as to meet the consumer s’ decision and also to adapt within the cross cultural regions.

The cultures of Chinese focuses mostly on sharing happiness and having family reunions thus

KFC always portrays it through beautiful name and that are meaningful. Another aspect is the

menu; it has been tailored in an understandable and easier way. KFC also has gone to an extent

of changing their slogan to “Life is so tasty with KFC” specifically made for China market.

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6.0Competitive positioning

6.1Product innovation

Due to intense competition from its rivalries KFC China makes sure they are continuing to

innovating their products. Chinese are culturally oriented as they possess a highly sensible

cultural identity mostly on to their traditional foods. KFC has effectively combined the culture of

the Chinese with innovation thus consumers having a wide choice of food on menus for them to

choose from. A good example of innovative product is the Old Beijing Chicken volume it has

also positioned itself as leading fast food Company in China thus making competition intense for

its competitors.

6.2Pricing strategy

Pricing strategies are not widely adopted by KFC instead they more into product strategies.

People value the relationship between in consumer prices and personal image china as the

country has a society of large power distance.it is therefore empirical for KFC china to hold

constant prices in order to keep up its image to the consumers without waving their prices. On

the other hand, Chinese‘s the eating habits of collective tendencies should be noted when

promoting their products in the restaurants. For instance, providing family buckets instead of

using one product since Chinese are family oriented

6.3Distribution strategy for KFC China

The culture of China is oriented towards masculinity and has a distinctive power distance

therefore employees cannot complete some vital minor issues which are very crucial to the food

industry as consumers could easily notice those issues. However KFC need to recruit employees

who are attentive so they can deliver quality to the Chinese society so the company can be more

successful

6.4Public relations of KFC China

Reflecting on the company’s supply chain it is clear that the management is not attaining a

desired effectuate

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7.0SUCCESS ATTRIBUTES

KFC China has successfully penetrated the Chinese market therefore several factors are

attributed to it. These factors are including the main ingredients in its recipe, the people and the

strategy that is it deploys. The strategy that KFC is using is really working well as it has

incorporated the Chinese culture and heritage and also by continually meeting the demands of

the dynamic business environment. it first started by leveraging the local resources and

selecting the local investors along with the government and forming joint ventures. However

when china revised that regulations pertaining business operation, KFC left joint venture and

directly operated itself in the Chinese market thus avoiding dissolutions or disagreements with its

investors. This was a very smart move for KFC as it has able to dominate the fast food market in

china and very successful.

7.1People

Leadership plays a key role also on the success of KFC Company as it adheres to the leadership

team called “Taiwan Gang”. This team comprises of a team that is from outside China and it is

well experienced with the fast food industry. They possess ten to twenty years of experience

which leads to proper knowledge regarding the market context therefore making KFC a very

successful company. With knowledge team, consumer behavior and purchase decisions are able

to be tailored for as the team truly understand and have the intuitive market context. The

leadership team also contributes to sustainability and the competitive advantage as they have the

ability to be creative, come up with good ideas and quickly execute the ideas to meet the fast

changing business environment.

7.2Locality

Although KFC is a western company, it has decided to go local when entering the China

market/economy. KFC China is always introducing new products every year more than its

rivalry. The products best fit the local tastes of Chinese consumer. It is only in China; KFC is

dominant over McDonalds due to blending well with Chinese culture. The KFC ‘S core

products is widely accepted in China , the menu was localized highly such as the Chinese

porridge known as congee , and Chinese dough fritters (tiao) which is served for breakfast in all

the KFC outlets. Furthermore, its core product chicken is advantageous for the company because

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most of the Chinese prefer chicken and pork therefore having advantage over other competitor

who are offering beef as a core product such as McDonalds.

7.3Product category

With reference to KFC‘s cultural and competitive positioning context, it is evident that the best

product category that fits KFC is the convenience products. Consumers in China frequently

make purchases of KFC due to the cross cultural difference it has tailored for in their products.

KFC has outlets in almost every street in Beijing and also offers a lower prices and it stable so its

consumers can perceive it as the same. It has further went on to rely on advertising, having sales

promotions that meet the needs and culture of the Chinese consumers.

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8.0Conclusion

In conclusion, it is crucial for business operating on cross cultural basis to understand the

consumer behavior and buyer purchase decisions. This helps the company to survive and gain

competitive advantage by incorporating the culture of the people in the products/services. KFC

has able to incorporate Chinese culture through changing its standardized menu to the meet the

local tastes in China. Chinese consumers consider KFC to be part of their culture and it goes

from generations to generations. It is therefore can be said; KFC china has positioned well and

has gained a competitive advantage in the fast food industry of china.

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