Summary This paper discusses the two strongest western fast-food brands, KFC and McDonald’s, entry to a Chinese market. KFC is the best known chicken fast-food restaurant chain, and McDonald’s is famous for its hamburgers and French fries. Literature review reviews the existing literature on internationalization. Internationalization is presented as a process that is changing over time. Later on it moves to mention an existing works that discuss the existing co-evolutionary relationship between the internationalization processes, organizational capabilities and resources, and the evolution of the industry within which firm operates. For the industry analysis, industry lifecycle theory is chosen, while it is also suggested that resources and capabilities have their own life cycles and with time lose value or can be renewed. In the case study, Chinese modern fast-food industry emergence and development is shortly discussed, KFC’s and McDonald’s internationalization activities in China are presented. After that, the existing and acquired resources and competences of KFC and McDonald’s are described. Finally, in the discussion and conclusion chapters, the co-evolution between these processes are noticed, and it was sum up, that KFC’s and McDonald’s internationalization process in is interaction with firms’ own resources and industry’s evolution. Introduction The modernization of fast food industry in China has begun relatively recently, in late 1980s’. The implementation of China’s reform to open up their market has encouraged Western fast food chains enter China’s fast food market. KFC saw China as a large market that was likely to develop in desirable manner, and was the first to enter Chinese fast food market in 1987 and evolutionary
Colonel Harland Sanders, who have developed a recipe 70 years ago that brought him fame globally. Nowadays, KFC can be considered a world's most famous chicken restaurant chain, and “one of the most loved and fastest growing retail chains in the world” (YUM!Brands, 2015), that still takes pride in its original recipe, along with many new, continually innovated items. The firm has 14200 outlets in even 115 countries around the globe, excluding YUM! China and India divisions (YUM!Brands, 2015). The expansion of KFC is led by franchising model that is adopted in many markets. Franchisees are often controlled by local people who better know the local market (YUM!Brands, 2015). The company has always strived to be ahead of its competition and explore the new markets before they have been penetrated by its rivals. Together with Pizza Hut, and Taco Bells, KFC belongs to YUM! Brands (YUM!Brands, 2015). Entry and Internationalization in China KFC was the first Western fast-food restaurant chain that has entered China in 1987 (New York Times, 1988). It entered through a creation of a joint venture with a Hong Kong-based company, called Birdland (Food Service, 2010). The joint venture entry mode was chosen because of the existing requirement from Chinese policies for foreign firms operating in Chinese market to have a local partner (Harvard Business Review, 2011). The first KFC outlet in mainland China is the biggest KFC outlet opened anywhere in the world, and is having bigger annual sales compared to other KFC outlets (New York Times, 1988). After entrance, KFC aimed to expand rapidly – company picked 16 locations from where it could continue its growth and further expansion (Harvard Business Review, 2011). One of the soon company’s selected locations was Shanghai, where it opened a KFC restaurant in 1989 (New York Times, 1989), and Tianjin, where KFC was able to receive a license to build up and operate a company-owned outlet in 1994 (New York Times, 1994), as the country’s policies became more favorable to foreign enterprises (Harvard Business Review, 2011). The pace of KFC’s expansion was continually increasing – by 1999, KFC was opening dozens of new outlets every year, and by 2002 the pace increased even more - one new outlet opens everyday (Harvard Business Review, owned