Task: Kentucky Fried Chicken in China
Case Assignment Background
Kentucky Fried Chicken is currently a huge success in China, although their decision to enter was considered highly risky at the time.
Go to Proquest to look up the following article:
Kentucky Hatches Its Chickens in Beijing
Caplen, Brian. Asian Business. Hong Kong: Feb 1988. Vol. 24, Iss. 2; p. 17
Abstract: With the opening of a 3-story restaurant in Beijing, Kentucky Fried Chicken (KFC) became the first international fast-food chain to penetrate the market in the Peoples' Republic of China. Generating average daily sales of 10,000 yuan (US $2,700), the outlet is being touted as an "instant success" by KFC officials. KFC now plans to establish a 2nd site in Beijing and a string of outlets in all major cities over the next 2-3 years. Competitors like McDonald's and Burger King have opted for a more cautious approach, as they are unconvinced that China can offer the high-quality supplies, disciplined labor, and receptive consumers needed. Using experience gained from a disastrous early foray into the Hong Kong market, KFC took time to address local supply sourcing, market research, capital funding, royalty payment, foreign exchange, location, and labor issues.
Click here for a more recent update on the fast food market in China. You might try to find recent information on Starbuck in China or on McDonald
Case Assignment Task
Perform additional updated research on this topic, then write a paper that refers to the following issues:
Question 1. How big of a risk was it for KFC to enter the Chinese market? What could have gone wrong?
Question 2. What would be your major concerns if you were the Chief Financial Officer of KFC and you were asked to find financing for further expansion into China?
Question 3. How would the financing strategy of a China subsidiary of a large multinational food chain such as McDonald or Starbuck be affected by the perception of the 'political risk' for these companies in China?
Assignment Expectations:
A five page paper detailing the financial risks of entering the Chinese market.