Abstract
To analyze China's attractiveness for both companies in late 1980s, we will first analyze the market opportunities.
When KFC and McDonald's tried to enter the Chinese market in 1980, the country was an emerging one. Like an emerging country, China presented lots of opportunities. The growth was, for example, important – an average of 9% per year –. It is “thanks to” this high growth that both companies wanted to penetrate the market. Moreover, the size of the market was big – approximately 1.3 billion Chinese people.
The quality of demand was also interesting insofar as Chinese people were (and still are) the largest consumers of meat worldwide. Moreover, there was rapid expansion in the middle class especially in the big cities. In the countryside and small cities, the low end segment was large. Despite the economic boom, Chinese people had very low income, so in 1980, consumption of fast food was not a feasible option for all.
The entry objectives of KFC and McDonald's are primarily to capture a new market and develop their business. Actually, with the development of China, a significant rise of general consumption and GDP (9% per year and it has remained constant); it is an excellent opportunity for the restaurant companies to enter the market.
The potential of China's Restaurant Industry is a key attractive factor: “Retail revenues of the restaurant industry increased from 5.2% in 1991 to 14% in 2007”, “China was the world's largest consumer of meat!”. Finally, from a demographic perspective, China was very interesting insofar as it is a large area with a very high number of inhabitants.
