KFC in China

KFC in China

In 1986, Tony Wang was Vice President of the Southeast Asia division of KFC. He had an opportunity of bringing the world\'s largest chicken restaurant company into the world\'s largest populated country. Wang was an experienced entrepreneur and had been working for KFC for seven years. No other fast food companies were currently operating in the People\'s Republic, so Wang did not have anything to go by and nothing to help him evaluate the attractiveness of the Chinese market. The main downsides of operating in China were huge demand on managerial resources and the low prospects of significant hard currency repatriation.

The first decision that Wang was faced with was where to open the location of the first KFC. Obviously there were differences from city to city but a reliable way to evaluate these differences did not exist. Wang was interested in the enormous potential of the Chinese market, but he knew that many other companies had failed in similar ventures.

Ta-Tung, (Tony) Wang was born in the Sichuan province in the People\'s Republic of China in 1944. He moved to Taiwan when he was young and graduated from the Chong-Yuan University with a degree in engineering. He later moved to the United States, and in 1973 completed a masters degree in management science from the Steven\'s Institute of Technology in New Jearsey. He then attended New York University where in 1975 he received his post-master\'s certificate in international business management.

Wang joined KFC in 1975 at the headquarters in Louisville. Wang was convinced of the large potential for American-style fast food in China. He attended a lecture by the mayor of Tianjin(the third largest city in China), who spoke of the many opportunities for investment in his city. Wang was asked by the mayor to sit on a council to advise on improving the fast food industry in Tianjin.

KFC was currently owned by R.J. Reynolds who were very interested in getting into the Chinese market to sell their cigarettes. American smokes were in high demand in China.
Wang had the support of top management. He spoke perfect Mandarin and English and was as comfortable working in New York as he was Beijing. He also had experience negotiating with the Chinese.

As Tony Wang investigated more and more into the necessary requirements, concerns were beginning to grow. He knew that Chinese workers would have problems working under the KFC guidelines. Time-consuming, expensive training programs would be a necessary requirement. As well their large capital outlays would be needed to find and negotiate a partnership, to sign a lease and gain operating permits.

Wang began to thoroughly research the Chinese market. The first are that he began to look at was location. The reason that this was so important was because the location would have dramatic impact on the profitability, future expansion to the rest of China, and the managerial resources commitments. Four cities were selected as potential locations for the first store: Tianjin, Shanghai, Guangzhou, and Beijing.
Tianjin - The major advantages of Tianjin were the established contacts that Wang had there. As well, it was only one of three municipal governments in China that were not controlled by the Central Government in Beijing. The major problems with Tianjin were it lacked a convenient supply of grain-fed chickens. The chickens there were fed using fish meal-fed chickens. The Chinese place great emphasis on freshness and taste. They also were not a very popular tourist location. Wang expected most profits to be in Renminbi, but some foreign currency would be needed for profit repatriation and purchasing needed supplies, that can only be purchased outside of China.

Shanghai - Shanghai has over 11 million people, and is regarded as China\'s most prosperous business centre. Shanghai is home to a large variety of Western hotels, business facilities and tourists, however its also is not a very popular tourist spots because of the pollution and loud noise. The investment could not be justified if it did not supply an adequate amount of foreign currency. . However it did contain several feed mills and the largest poultry supplier in China.

Gangzhou - Gangzhou is located in Southeast China only a short distance from Hong Kong. Gangzhou is recognised for it preferential treatment for foreign investment. It has greater autonomy