Thanks to cultural differences and Social Background influences, KFC in China faces challenges: it needs to establish a new management style.
The KFC must develop the new management style to match up Chinese habit. For example accept the commission in China is the normal phenomenon but in the West was not. The KFC must to understand the different habitual behavior in China and try to adapt it. The different management style will make a lot of conflict. Some times will make the company lost the market or suffer a setback. For example Taiwan’s company was suffering a setback in China. It was a famous department store in Taiwan. It was as a leader in the department store in Taiwan. But they have a defeat in China. They lost their stock their fund in China. Their cooperation partner was absorbing their stock. The Taiwan’s company was lost their managerial authority and back to Taiwan. So the KFC might be caution in China. Although Taiwan and China have some background was the same but they still get failure in China market.
b. KFC in China would demand a huge amount of scarce managerial resources. Tony needs some management managers who can speak English and Chinese. They might be selected from Singapore or Hong Kong. Many doubts were lingering in Tony Wang’s mind and he wondered if the venture should adopt a slower approach. His first concern lay with challenges in imposing Western management practices on the employees. The need supervise employees placed a particular strain in local management. Most of this team had been imported on term assignment from Singapore or Hong Kong. For these managers, Beijing was regarded as somewhat of a hardship post; most were eager to leave at the earliest possible time. A serious challenge facing Tony Wang was in replacing these managers with competent and motivated KFC managers who spoke Mandarin Chinese and preferably some English. Even in Singapore and Hong Kong these people were hard to find.
c. Problems with employees and partners. The need to supervise employees placed a particular strain on local management. Personnel problems were also having an effect on the relationship among the partners. These problems often stemmed from Chinese partners’ resentment of the imposition. Working for a foreign joint venture was an attractive opportunity for many Chinese, because foreign partners often paid considerably above local wage levels. In Beijing, for example , it had been reported the reported the English-speaking doormen at the joint-venture Sheraton Great Wall Hotel could earn up to three times as mush as the top brain surgeon in the country. At KFC, the base salary promised to applicants was set at RMB 140 per month. This level was about 40 per cent more than could be received at typical industrial facilities and up to 10 per cent more than the remuneration received by associate professors at the country’s universities.
Strategic ImportanceIt is important to note that the human resource program was a trail program and constant changes by the state were being made to it. To Tony Wang, vice president for KFC for Southeast Asia and China, the HR program offered a great opportunity. However, there are also a lot of changes that Tony Wang must make to his managerial style once all his business is signed with the government. Numerous external and internal environmental factors appear that Tony Wang as vice president must deal with. Internal factors that influence the work place include the need for a change in the mindset of the employees. All employees must now think about how they can contribute to the KFC so that it becomes profitable. In the work force problem, one factor that influences the work force is low morale. As much as they look forward to changes in the workplace they continue to have problems in their daily lives.
Many of the employees lack a proper place to bathe, proper transportation to and from work and do not have adequate lunches at work. Furthermore, they are not supplied health insurance, personal insurance and a place to leave their children while at work. In the case, Tony Wang did not do a good job at solving these problems while the company was under environment control. In addition to all the internal factors, there are an abundant number of external factors that Tony Wang must also think about. The entire program relevantly has previous example with Mc Donald to the government. The entire task of the program is largely based on just a few previous examples. Fast food restaurants as KFC and McDonald’s are distinct American brands. Differences between China and US politics, economics, social development and ideology became obstacles to international enterprises operating in China (“KFC and McDonald”, 2004). Corporate culture could not be understood or accepted here, especially in the restaurant field, where culture plays a crucial role.
Another source of external pressure comes from the fact that rapid growth throughout the use of franchising together with increased competition from primarily MacDonald’s reduced the consistency of the standard of both food and service on the individual franchise level leading to massive decreases in profitability. Together with low Research and Development funding, the division found it difficult to match the expansion plans of its main competitors. KFC responded to these problems by improving staff training and employ a new manager. The economic reform opened China market to the outside world and improved the standard of living of average Chinese people. China began implementing economic reforms to develop and modernize its economy. The reforms have gradually rebuilt a new economic system, which is referred as a socialist market economy, by lessening the government’s control of the economy, allowing some aspects of a market economy and encouraging foreign investment. In order to reduce risk, KFC encouraged franchising in complicated markets.
This reduced financial risk, but also increased problems of operational control, as local franchisees often were more interested in maximizing profits in the short term rather than to adhere to corporate standards and strategic plans. To find the balance between corporate control and cultural sensitivity has been the main point of concern at KFC. As a result, KFC has the powerful competitive advantages in China. KFC uniquely owns its own food distribution system that gives them coverage in every major Chinese province and has allowed us to expand KFC to most cities. KFC also has one of the largest real estate development teams of any retailer in the world that opened up over 350 new restaurants in 2004 (“Power of Yum!”, 2004). Another important factor to note is that the labor market in China is full of eager unemployed people, and all poor performing employees can be easily fired. This will make Tony Wang labour decisions easier because he does not have to worry about labour supply.
The Sense of UrgencyDespite the fact that it is great opportunity, human resources management is hard to conduct in China, where family contacts are often used to land highly sought-after jobs. Basic working condition, take advantage from cultural value and training system are needed. Also, KFC
needed to be as specific as possible about the precise attributes they are seeking. The skills and abilities hired need to be carefully considered and consistent with particular job requirements and the organization’s approach to its market. The results of job analysis helped them to identify job duties, specifications, and performance standards. A mismatch between these and the selection criteria will not only result in poor hires but also will expose the organization to possible lawsuits from job applicants who believe that they have been discriminated against. On the other hand, performance-based job descriptions provided clearer guidelines while selecting managers and employees for various positions in KFC.
Through using performance test, KFC measured the ability of applicants to do some parts of the work for which they are to be hired by a keying test for keyboard operators and counter manager or a driving test for delivery service. Their employment tests are useful for obtaining relatively objective information, which can be compared with that pertaining to other applicants and present workers. A simulation exercise is needed as a math test for a bookkeeper and a manual-dexterity test for an assembly worker.
These tests were used more frequently for jobs that pay an hourly wage than for salaried positions because hourly jobs usually call for a limited number of skills or activities that can be tested easily. The task of KFC is that management and professional jobs are often too complex to be tested fairly and economically in this manner because in general, tests are popular for selecting white-collar and managerial position in China, but not for blue-collar jobs. Personality tests are popular for selecting managers. The use of personality and aptitude tests become more popular as the firm size increases. In contrast, honesty tests were not very popular.
The other section, KFC in China needed training before hiring managers or employees. Training provides employees with specific, identifiable Knowledge and skills for use in their present jobs. In addition, KFC in China also needed selecting HR, because of the process of choosing individuals with qualifications needed to fill jobs in an organization, like John Boudreau said: “Selecting qualified employees is like putting money in the bank.” (Robert and John, 2006, p.224). Therefore, Tony Wang needs some management managers who can speak English and Chinese, and also should be familiar with Chinese culture. They might be selected from Singapore or Hong Kong. Cultural differences on politeness between western and Chinese can be found in many aspects of daily communication, including addressing, greeting and parting, compliments, apologies, thanks, etc. Today, KFC’s utilization of Chinese focusing on cultural symbols was quite good. In the initial period of KFC’s entry into China market, few of Chinese consumers were really impressed with the food itself (“KFC’s Localization Strategies”, 2004).
Instead, they were more fascinated with the eating experience: the encounter with friendly employees, quick service, spotless floors climate-controlled and brightly-lit dining areas, and smiling Colonel Sanders standing in front of the main gate. Having experienced the initial surprises brought by a never-seen western lifestyle, Chinese consumers have gradually calmed down and their consumption attitudes towards foreign products are getting more reasonable. They are more concerned with the nutrition and tastes of the fast food. KFC, who has taken advantage of McDonald’s by offering poultry food which is more acceptable to Chinese people compared with beef, have taken consumers’ needs and competition with other brands into account.
As a country with the best culinary culture in the world, China was a big challenge for KFC’s efforts to cater to the captious palate of Chinese consumers (“KFC’s Localization Strategies”, 2004). This shows that more power was given to the individual enterprises, they could control their own labour decision and how they use profits. For the vice president, Tony Wang, of Kentucky Fried Chicken there was now a growing list of external and internal factors affecting his managerial decisions that KFC’s success in China is based on its understanding toward the country and the culture.
The major problems of KFC exist in China.
When the KFC enters Chinese market for the huge profits, there are huge problem and challenging waiting for them.
First of all, the period which KFC decided investing to the Chinese market, the Chinese government just opens the business opportunities to all around the world. But there is still some planned economy policy left in China. According to the foreign investor, although there is huge potential market waiting for them in China, but it also has some unstable problem or essential from many factors. Although China is a huge, high-level profits market, but at the beginning it still needs the resource of the management, and cannot guarantee if the foreign investor can get the money back to the pocket. At that time which Tony Wang want to involve in to China market, the income of the Chinese is lower than other countries around the world, and the Chinese market is controlled by the government by the law called “limiting the foreign business policy”.
Second, the beginning of entering china market, there is no previous experience as the example. Everything starts with zero. And there is also human resource problem existing in the southern Asia area of the KFC-lacking of the management people. Tony Wang does not have enough people to adjust around the Asia area, the backup resource of the HR is not enough.
Then, KFC is known as the “western fast food”, is different from the Chinese traditional food custom. So he also wonders if the Chinese consumers can accept the KFC. If they can, it still needs a long time to achieve that. And the culture of the China is different from US, so the KFC franchise store model is not fit for Chinese market.
The quality of the chicken is very important for the KFC: the cooking method for the KFC is different from others, it needs 11 plants and chicken which is just born 7 weeks. As KFC just entered China, it’s really hard to reach that. And all the potatoes for the KFC is hard to find in China, they need to import from US, so to find a good partner and can provide the chicken and potato in china became the most important thing to do.
What’s marketing strategy should Tony Wang choose in China?At the beginning he need to choose the cooperate strategy, means he need to find out the partners. This is the decision he made is the case. Then for the long term strategy, he can change it to the franchise stores models.
Does Tony Wang need partners? And who’s that?Partners are really important for him, he chose the China animal productive company as the partner and they can supply the chicken for the KFC. And this company also can help KFC to solve some problem that KFC cannot do it by itself.
From the case, we can see that, there are 2 major problems that Tony Wang has to face,The first one is the training of the employees and the managers.
For the short term strategy I suggest to give all the employees an orientation meeting, we have to let all the employees know, what we have to do in the store. Like mentioned in the case, “a staff does not know when to mop the floor,” we must make all the employees motivated themselves. And for the short term plan, a disciplinary program and a mystery shopper plan must be added to the day-to-day work. These 2 plans will make the employees motivated themselves really well. Who got the really low score, and then he or she cannot get the bonus for this month, that really a good idea for Tony Wang.
For the long term strategy to deal with this problem, first we must find a training center to train these employees. But as the B-KFC just entered Chinese market, and Tony Wang is not that familiar with the situation, so to find a training partner is the most important thing.
When Tony Wang find a partner, they can discuss how to training the employees. The training detail is important. When the KFC hires a new employee, they have to set up the own training plan for the employee, with the technical and developing strategy training plan. That plan will go through the whole process with the company developing and marketing system.
The training center with consist the following level or position for the employees:1.Novitiate assistant2.Formal assistant3.Under manger4.Store manager5.Area manager6.Top area managerThe training of each level is based on the last level. That means, if you finish the novitiate assistant, then you have the rights to apply for the training of the formal assistant, if not, you do not have the chance to get the train. This will make the training process of each employee understand more easily.
And also during the training, we have to apply a self motivated program, through this program, we have make each employee felt that, they are the owner of the store, they have to pay responsibilities to the store.
Later on, I will suggest Tony Wang to separate the human resource department into 2 parts; training operating department and human resource department. This method is not familiar with other KFC management strategy in other countries of the world, but the Chinese market is that important to the KFC, so we must do this.
So from now on, the HR department just focus on the hiring or interviewing applicants, the TO department will focus on the training and developing employees.
This partner for KFC is called YUM!What is Yum? “Yum is established in Shanghai in 1993, it provides, development, marking, financial, human resources, public affairs and franchise support to all YUM! Brands restaurants. They include KFC, pizza hut, pizza hut delivery, Taco Bell Grande and East Dawning company-owned, joint venture and franchise stores in the Yum! China Division.” (www.yum.com.cn)The second problem is the supply for the KFC. Right now for Tony Wang there is only one suppler called Beijing animal product Inc. and also, there is lack of the potato to make the fries.
The short term alternative: first thing for Tony Wang to face is how to deal with the Beijing Animal production for the “price problem”. I think we can just increase the price of the chicken for the BA production, to make sure KFC still have a stable supplement from them. And for the Fries problem, we can try to import the potato from other countries in the Asia area.
The long term alternative:I will suggest Tony Wang to find other chicken suppliers, because there is thousands of animal production company in china, it really easy to find others.
But if we find other suppliers, there is another problem we have to face, how to train the new suppliers.
So for the training of the new suppliers, we can make a training system, and will apply this system to all the suppliers. Also, before the training, we need to do a evaluation of the each suppliers from 5 sections:A.Quality: to evaluate the suppliers from the safety, stability, and high quality productive ability.
B.Technology: to evaluate the suppliers level of technical developing and researching abilityC.Financial: to evaluate the suppliers’ financial situation and abilityD.Loyalty: to evaluate the suppliers’ loyalty and supply stabilityE.Communication: the ability of communicateThe five section of the evaluation involves of many details staffs, and is controllable. For the suppliers, the evaluation is not for the eliminating through the selection or contest, but for strict control of the products from the beginning.
Later on, we also need to train and support the suppliers.
Through the evaluation program, we can see through the week points of the suppliers, and focusing on the week points, KFC must give the relative training, that will invite the standard of international quality to the suppliers.
The training includes:1.Altitude: how to be a good and trustable suppliers2.Technology: the technical information of raising the chicken.
3.Finance support: for the suppliers, who need the finance supportThrough the alternatives we talked above, I think Tony Wang will let the KFC running really well in China.
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7. KFC’s Localization Strategies in China. (April 30, 2004) Retrieved April 1, 2008, from http://lidan.net/blog/2004/04/kfcs_localization_strategies_in_china.htmlHuman resource problemsa. Thanks to cultural differences and Social Background influences, KFC in China faces challenges: it needs to establish a new management style.
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