Indeed, young professionals, business people as well as educated professionals seem likely to be the person who possess enough income and purchasing power for those Western brands and who will be the most receptive to new ideas and value the foreign dining experience. Western franchises operating in China can be more expensive, for Chinese people, than local brands but with a growing middle class, more people can afford it and are willing to pay more for a western brand than Chinese one for instance. Moreover, Western products are most of the time seen as premiums, in other words luxury goods and Chinese people from that middle class want to show off with them. Quality, convenience and customer service are attributes held in high esteem by increasingly sophisticated Chinese consumers, and those consumers are therefore sensitive to Western brands. China’s economic model is changing and it favours a growth of franchises. China is moving away from its traditional role as a heavy industry, low-wage society to a service economy dominated by a highly educated workforce, it will inevitably foster a culture of entrepreneurship that is extremely favourable to franchising. Chinese environments can be volatile and difficult to predict, they are riskier than the developed markets in which most multinational companies have traditionally operated, moreover, most Western multinational enterprises without a long history in the emerging world are ill-prepared to deal with the broader range and higher levels of risk they face.
Indeed, doing business in China brings with it several challenges for the company. I agree that intellectual property issue is definitely a significant obstacle in China. Indeed, for Chinese people it seems acceptable to copy brands, concepts and products. Taking a successful concept and copy it is even view as innovative to them. It seems that Chinese people are not used to innovate, it does not seem to be in their culture and consequently not in their work life even more if we take the case of the SOE’s, where employees are not asked to think much but just to do their definite task. However I think Chinese people do have an entrepreneurship mind since I could observe many people selling a multiple of things in the streets as well as their selling and negotiating skills in shops. Nevertheless they seem to develop it more by copying than creating new things, which in my opinion also comes from Confucianism, which claims humility and not doing something if the person is not sure about it and if it will work, therefore innovate might appear too risky for them. In addition, I think potential franchisors must acknowledge the lack of confidentiality and the difficulty in controlling their brand image before entering the Chinese market. Management style between West and East is different; and I think managing a Western company by Chinese people can be difficult due to the different management style. I think it is time-consuming and expensive to train Chinese people to manage a Western franchise since Chinese people might not be used to this type of management and might not understand very well the concept and the rules set by the franchisor. In addition, the language barrier, the cultural distance between the West and China, and the fact that many Western brands are unknown in China, it seems clear to me that this is a challenging environment that requires careful consideration and planning. Moreover, I think Western franchisor should chose local manager with a high interest in the Western brand and its culture in order for the franchisee to understand better the concept and what the franchisor is expecting.
Besides, if this is the case, the franchisee would not quit the position after he has been trained since he would be very interested in making effort to implement successfully something, which appeals to him, in his own country. Consequently, I would definitely suggest for the franchisor to find a good combination of a high skilled manager with special interest in the Western concept implemented in China. Despite the potential, doing business in China is difficult.
Franchisors should seek local partners who can help them navigate the local business environment. A partner in the same industry with channels of distribution, industrial connections, and guanxi (personal connections) can greatly facilitate the success of the franchisor. Finally, it is clear that there are some major developments underway that will make franchising in China a much smoother ride. Laws and regulations are becoming more transparent, emerging lower-tier cities are fertile ground for the right franchise models, and young consumers are becoming hungry for well-known brands. I believe that it is recommended for a foreign company to enter the Chinese market initially having full control of its own stores in order to familiarise its personnel with the local market, understand its legal and industry specific complexities, and be well aware and prepared to handle any setback caused by a potential franchisee. The product includes overall experience that the restaurant provides. Franchisors may be more successful by emphasizing the “Western-ness” of their products, making standardization viable. Of course, some modifications are required to adapt to local tastes because assuming that what works for a mature market will work in China is not the right assumption. I think success comes from staying Westerner with the core international brand concept and product besides staying relevant to the needs of the Chinese consumers. Therefore, products’ improvement by adding special seasonings or Chinese ingredients to cater to Chinese tastes is important too. As Chinese people’s incomes improve, they are even more attracted to Western brands and most of all, the new generation of Chinese people likes to show off with international brands, and this includes eating more as the European way, consequently, going to international fast-food chains. In the U. S., fast-food restaurants are a place where people can get food quickly.
The food is usually tasty, but mostly unhealthy and low-priced. But in China, the same restaurants are viewed as upscale, trendy, and modern. Indeed, one can ask why people who want to eat Chinese food would go to KFC? Therefore, franchisors should be very careful in adapting their products to the Chinese markets. A good balance of standardized products and adapted products is important. Finding more Chinese dishes in International restaurant and not being able to buy the original dishes from the brand as they can see it in movies and series could disappoint Chinese people. Nowadays, international brands in China face a fierce competition with other Western brands as well as local competitors. The latter have implemented franchises with similar concepts to Westerner since they had time to see if those concepts were successful or not in the Chinese market and since they saw that Chinese consumers were keen on this type of fast foods’ concept, they implemented the same thing. Moreover, international franchises such as KFC will face obstacles such as newspapers titles chasing them and exacerbating wrong things they are doing in order for the government to make the population willing to boycott those international chains. Restaurant franchisors that miss the opportunity to enter China now will face intense competition from early entrants. It will be difficult for restaurant franchisors entering now to beat the scale and profitability of the already entrenched McDonald’s and KFC. I think it is very important for Starbucks to target high traffic streets with demographics’ criteria, which fit with the concept; especially young people, aware of the Western brands and attitudes as they can see in the movies and series for example. Since these Western brands are a symbol of modern lifestyle and sophistication, Chinese people are willing to pay more than for local brands and those products are even seen as luxury goods. Well-trained employees are essential to the success of a business.
Unfortunately, in a bad economy, a business’ training budget is often the first thing cut. It may make sense at the time, but the long-term implications can far outweigh the immediate costs saved. Over time, a lack of training may reduce motivation levels and business inefficiencies and, most detrimentally, result in staff turnover. Therefore, I totally agree with Starbuck’s strategy to train intensively new employees and send the best one to new markets, which can spread the Starbucks culture among new employees, which will then be able to spread it to the consumers. Since recent generations in China are more and more aware of Western lifestyle, international brands, instead of just going right away to a Western franchise, Chine people are starting to judge if a foreign brand can really bring something different to their lives. Foreign franchisors should therefore be able to invest heavily before they could see a return. Money investment of course, but more importantly, time and patience. As the Chinese economy currently turns down, one can wonder if the government is not pointing at big foreign companies doing wrong things so they can chase them.
And in order for the consumers to favour local brands instead of going to those Western brands in particular. These types of articles are big news here, it seems that the Chinese controlled media is trying to make Chinese consumers aware of wrong things done by big international companies even though Chinese companies also do wrong thing
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