Harland Sanders, KFC is known mainly for his fried chicken, which is usually served in a bucket. Sanders began selling fried chicken at his gas station in the year in Corbin, Kentucky which subsequently moved to a motel. He closed his business in the late s when the Interstate highway through town.
Christina Nelson on July 1, Lessons learned by leading chocolate companies can help firms succeed in the China market. Thirty years ago, most Chinese had never eaten a piece of chocolate; their taste for chocolate was ready to be shaped by whichever company entered the country with a winning combination of quality, marketing savvy, and manufacturing and distribution acumen.
Even today, the amount of chocolate sold in China is relatively small, accounting for less than 2 percent of total global consumption. Most Chinese would not be able to find chocolate in their vicinity even if they were willing to buy it.
There is no single path to business success in China, however; the country is too big, too complex, and evolving too quickly for simple, one-size-fits-all business formulas. Cultural considerations Western and Chinese cultures evolved separately, and the cultural divide between the two reaches down to fundamental values, including beliefs about food.
Big Five chocolate company executives needed to grasp the significance of these fundamental cultural differences to formulate successful plans for introducing their products to Chinese consumers. When chocolate was first introduced to the fledgling China market in the s, most Chinese viewed it as a foreign and exotic curiosity.
Imported chocolate was considered a luxury and the expense was more easily justified for a gift than for self-consumption.
Even Chinese beliefs such as yin and yang—the division of the natural world into two opposing but complementary forces—affected how and when the Big Five would bring a product to market.
Chinese pharmacognosy is an ancient form of pharmacology that calls for balancing yin and yang forces within the body. Consequently, chocolate company executives in the late s planned their business operations around significantly lower sales volume in the summer.
Bureaucracy and frequent shortages of suitable delivery trucks in China during the s and early s meant containers would often sit for days or sometimes weeks at the port. Once chocolate was unloaded in China, a supply chain of make-do solutions put the product at constant risk of heat damage.
For example, a band of workers on a warm day would unload a truck containing cases of chocolate, bucket brigade-style, up fire escape stairs into a second-floor apartment with a window air-conditioner and newspapers taped to the windows to block the sun.
From such makeshift warehouses, distributors would pick up and deliver stock to retailers using small non-air-conditioned vans, cars, tricycle carts, and even bicycles.
Food stores in China throughout the s were, for the most part, open-air wet markets filled with tanks of live fish and baskets of fruit, vegetables, and rice and other grains. Modern-trade retail stores—air-conditioned hypermarkets, supermarkets, and convenience stores—emerged in the mids see Understanding Chinese Consumers: Choosing the Right Retail Format.
It was only then that the Big Five started applying impulse-purchase merchandising techniques in retail stores to make their products more visible and accessible. Managing a national business in a large country with various stages of development and income became one of the more complex aspects of selling chocolate in China.
Cities such as Beijing; Guangzhou, Guangdong; and Shanghai were classified as first-tier cities—those with the highest level of economic development and the highest living standards.
By the late s, these cities had enough accessible consumers and sufficiently developed retail and distribution infrastructure to support a substantial and robust albeit highly seasonal chocolate business. Second-tier cities were more numerous, but provided fewer accessible consumers and far fewer suitable retail outlets.
Most third-tier cities lacked air-conditioned supply chains and could support only a seasonal chocolate business. Each new air-conditioned hypermarket or supermarket that opens in these locations grants tens of thousands of people access to chocolate for the first time.
Given the geographic reach of these hundreds of new markets, the challenge will be significantly more complex, however. This trend, which will unfold over the coming decades, defines China as a multitier market: Striking the right balance between the competing priorities of current and future opportunities is the crux of any successful multitier market strategy.
For example, chocolate companies will no longer need to develop and build their entire local management talent from scratch; there is now a pool of experienced managers to deploy throughout the country. Mass media makes a big impact The openness of mass communication is changing lower-tier markets.
Nationally broadcast television shows give Chinese in remote locations a look at the modern lifestyle in cities such as Beijing and Shanghai, sparking their interest in all manner of goods, including chocolate.
Though mass communication may accelerate the development of future chocolate consumers in lower-tier cities, the battle for these first-time consumers will, in some fundamental respects, be the same as it was in first-tier cities.
Most significant, it will still involve introducing an exotic and foreign curiosity to people who are unaccustomed to foreign tastes and textures. Companies must keep in mind that credibility can be lost, however.
Product quality has been another competitive advantage for multinational chocolate companies. Local companies, which lack extensive chocolate expertise, must either copy or attempt to out-innovate foreign companies that have been marketing chocolate for more than a century.
For example, Mars can sell smaller Dove chocolate bars as an introductory offering for emerging consumers in second-tier cities and high-priced Dove boxed chocolates in cities, such as Shanghai, with more sophisticated consumers.
Effectively executing this strategy for a country the size of China requires extensive coordination. Companies must build their business plans—in many cases, city-by-city—based on a complex decision matrix.
Capitalize on global retail best practices Foreign chocolate companies generally have more management experience, particularly in marketing and effective retailing. Therefore, they can better capitalize on the rapid growth of modern retail stores in China by leveraging their extensive global retail experience and introducing global best practices that are new in China.
Consider limitations Foreign chocolate companies should understand their limitations in China.The Product Life Cycle Theory is an economic theory that was developed by Raymond Vernon in response to the failure of the Heckscher-Ohlin model to explain the observed pattern of international lausannecongress2018.com theory suggests that early in a product's life-cycle all the parts and labor associated with that product come from the area where it was invented.
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Well, the summer is over, even if we have had great weather into September. My apologies for the delay in a new post, and I know I have several topic requests to fulfill 🙂 Given our own journey at Danske Bank on availability, I thought it was best to re-touch this topic and .
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