Essay About Bargaining Power And Customers Of Kfc

China- Poeter
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Rivalry
Unlike what one would expect, KFC has little rivalry with similar fast-food chains
in China. The primary reason is that their core products are different, as in they
sell different kinds of fast-foods with very different tastes and styles. For
example, if KFC raised its price for chicken by a small amount, Chinese chicken
lovers who may not be as accepting to pizzas (many Chinese people strongly
dislike the taste of cheese) are not going to switch to Pizza Hut just because the
price for KFC increased. In addition to that, these restaurants have such different
target customers that the fluctuation of price for one restaurant is not going to
affect the others. For example, a full meal at KFC range about ÐҐ15, whereas a full
meal at Pizza Hut can cost over ÐҐ50. The drastic difference in price assures no
price competition between these restaurants
Buyer/Supplier Bargaining Power
The customers of KFC, especially as individual buyers, have almost no
bargaining power because if only one customer threatens to no longer eat at KFC,
the store is not going to lower its price because the cost of losing one customer is
not very great. The suppliers, like the buyers, have very little bargaining power.
In terms of food, KFC, upon its move into China, urged many of its U.S. suppliers
to also extend branches into China. KFC also began helping local suppliers by
giving them technological support to improve their products. This is a brilliant
strategy because the supplies that KFC would otherwise need to import from the
U.S. can now be obtained domestically, and if the U.S. suppliers decide to raise
their prices, KFC can easily switch to the local suppliers. With this strategy, KFC
created competition among its suppliers, lowering the supplier bargaining power.8
In terms of human resources, labor cost is extremely low because the supply of
non-skilled workers great exceeds the demand for them. With so little buyer and
supplier bargaining powers, KFC is able to have a very tight control over its
prices and expenditures.
Barrier to Entry
For the current Chinese market for fast food, it is not difficult