After the fast-food industry was thriving in Asia and especially in China in recent years, Latin America is considered the future growth market for American restaurant franchises (cf. Bloomberg 2012). In China, KFC already encountered a stunning demand, dominating the market by far before McDonalds (cf. Mellor 2011). However, in 2012 KFC was represented by only 577 restaurants in 36 countries of the Caribbean and Latin American area (cf. CARIBLA 2012). As a consequence one can see that there is still a lot of internationalization potential for the Company in the future.
In order to be able to discuss KFC’s operations in the global market place, this paper will first give an overview of common strategic marketing concepts and management theories, before critically analyzing KFC’s international strategic approach to the global market place. Moreover, it will take a look at how -and if- KFC is able to manage the tension between globalization and localization, giving recommendations for the future development of the firm. In doing so, a critical evaluation of the Company’s pursued internationalization strategy in the past as well as the illustration of possible market entry strategies for KFC is required.
Table of Contents
1. Introduction
2. International Strategic Approach
2.1 Managing the Multinational Enterprise
2.1.1 The EPG Model
2.1.2 Thinking Globally, Acting Locally?
2.1.3 Standardization vs. Adaptation
2.2 KFC’s Internationalization Process
2.2.1 Stages of Internationalization
2.2.2 Entry Modes - Franchising vs. Internal Growth
3. Outlook
Objectives and Topics
This paper aims to critically analyze the internationalization strategy of Kentucky Fried Chicken (KFC), evaluating the balance between global standardization and local adaptation in the fast-food market.
- Strategic management theories and the EPG model
- Standardization versus localization in international marketing
- Historical analysis of KFC’s internationalization process
- Comparison of market entry modes (Franchising vs. Wholly-owned subsidiaries)
- Future development recommendations for global operations
Excerpt from the Book
2.1.1 The EPG Model
In the year 1969, Dr. Howard V. Perlmutter, an internationally recognized authority and pioneer on the globalization of firms, introduced a new business model about the general strategic profile of multinational companies (MNC) (cf. Perlmutter 1969). In his article “The Tortuous Evolution of Multinational Enterprises” he describes three kinds of management orientations: ethnocentric, polycentric and geocentric.
The term ethnocentrism derives from the Greek word for “nation”. Organizations with an ethnocentric focus are characterized by a high degree of centralization and a very parochial attitude. They feel that their home-country organization is superior to the foreign counterpart and think what works at home, would also work in other countries. Polycentrism, on the other hand, implies an orientation towards the host-country and thus a highly decentralized organizational structure. The different business units, usually wholly owned subsidiaries, have a high degree of independence in decision-making. Finally, the geocentric approach assumes a world-oriented alignment of the firm, where reference is neither made to the home-country, nor to the subsidiaries, but to an integration of both activities. It aims at serving the world market from a single source, hence looking for similarities in each country.
In the case of KFC, the question is which category fits best the international strategic approach of the Company. Having a look at KFC’s main activity, the franchising business, a clear ethnocentric tendency can be deduced, as the franchising concept is ethnocentric by definition. In this way, the International Franchise Association2 defines a franchise as “a contractual relationship between the franchisor and the franchisee in which […] the franchisee operates under a common trade name, format or procedure owned by or controlled by the franchisor […]”. Another definition states “Franchising is the practice of using another firm’s successful business model” (cf. BizShifts-Trends 2011), which can easily be translated into the management approach stated in the above paragraph “what works at home, is going to work in your country as well”.
Summary of Chapters
1. Introduction: This chapter provides an overview of KFC's history, from its origin in the Great Depression to its status as a leading global chicken chain, and outlines the research objective regarding its international strategy.
2. International Strategic Approach: This section analyzes the management orientations of MNCs and evaluates KFC's specific internationalization strategies, including market entry modes and the balance between standardization and local adaptation.
3. Outlook: This chapter concludes the paper by discussing the future challenges for KFC in competitive global markets and emphasizes the necessity of a "think global, act local" strategy for sustained success.
Keywords
KFC, Internationalization, Franchising, EPG Model, Globalization, Localization, Standardization, Adaptation, Multinational Enterprise, Strategic Marketing, Market Entry, Yum Brands, Emerging Markets, Transnational, Business Strategy
Frequently Asked Questions
What is the core focus of this paper?
The paper examines the internationalization strategy of KFC, exploring how the company balances global brand standardization with the necessity of adapting to local cultural environments.
Which theoretical frameworks are applied?
The author utilizes Perlmutter's EPG model, Ansoff’s matrix for product and market development, and Johanson & Vahlne’s model of internationalization to evaluate the company's growth.
What is the central research question?
The research investigates how KFC manages the tension between globalization and localization and whether its historical internationalization strategy remains effective for future growth.
How is the methodology described?
The paper follows a descriptive and analytical approach, combining historical data of KFC’s expansion with established management theories to critique its current strategic positioning.
What does the main body address?
It covers management orientations of MNCs, KFC’s reliance on franchising, challenges in adapting products to local markets like Germany and China, and the shift in entry modes.
Which keywords summarize the document?
Key concepts include Franchising, Standardization, Localization, Transnational strategy, Market Entry, and the EPG model.
Why did KFC struggle in early international markets like Germany?
The struggle was largely due to an ethnocentric approach, assuming that a standardized US business model and menu would be accepted without local adaptations, which failed to appeal to local tastes.
How has KFC changed its approach in China?
KFC moved away from strictly relying on a foreign brand image and started tailoring its offerings to local tastes and lifestyles, such as including local breakfast items like porridge.
- Arbeit zitieren
- B.A. International Management Nadine Ghanawi (Autor:in), 2012, The Internationalization of KFC, München, GRIN Verlag, https://www.hausarbeiten.de/document/207195
