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Marketing Strategy Analysis for Z-Kung fu Restaurant Abstract Z-Kung fu Global Chinese Fast Food Chains is a new mode of operation in Chinese fast-food chain industry. It has solved the standardization problems in Chinese fast food industry for the first time and set a new way of developing the Chinese fast food. Up to now, Z-Kung fu has opened 250 bistros, and began to compete with the foreign fast-food restaurants. Developing on strong capital, Z-Kung fu is expanding rapidly. However, there are still problems existing in the marketing strategies of Z-Kung fu as follows.
Firstly, it only achieves in standardization but it’s lack of support of the functional value. Secondly, it still difficult to compete with foreign meal in many ways, such as human resources, services and quality. Thirdly, there still exist some disadvantages of high-speed expansion. These problems show the weaknesses of Z-Kung fu in development at present. This paper studies the marketing strategies of Z-Kung fu to find out its advantages and disadvantages, hoping that Chinese chain enterprises will be enlightened in the future. Key Words: Z-Kung fu; Standardization; Competition; Expansion; . History and General Situation In 1994, Cai Dabiao, 22-year-old, opened his first restaurant with partner Pan Yuhai in Dong Guan. The first outlet was located next to the No. 107 national highway and soon became welcomed by truck drivers traveling between Hong Kong and Dong Guan for its Cantonese-style steamed dishes. But he found it difficult to maintain the same taste of all dishes at different outlets. Three years later, Cai attempted to standardize Chinese fast food. He bought automatic steaming machines invented by the South China University of Technology.
All dishes then could be prepared and vacuum-packed at the factories and reheated at individual branches. They didn’t need chefs at individual branches. By simply reheating the steamed bowls in a heating machine; staff could sever customers with standardized meals. In 1999, the chain expanded to Shen Zhen and Guang Zhou. It opened the 50th outlet in 2003, and 100th in 2005. By the end of 2005, the total turnover of Z-Kung fu restaurant has reached 500 million yuan. At the end of 2006, Z-Kung fu loaned 300 million yuan for finance and put forward the listing plan. “We want to issue our stock in China’s A-share stock market. Said Cai. ” Z-Kung fu is a Chinese enterprise. Issuing stock domestically will enable our consumers to enjoy its growth. With the full name of “Z-Kung fu Global Chinese Fast Food Chains “, Z-Kung fu is making more and more people come to see its greatness of scale, the length of Origin and the weight of culture. The Bruce Lee-like portrait, logo of Z-Kung fu, is a symbol of the Chinese Kung Fu which is well known all over the world. It gives people the images of affability, health and vitality and so on. And these images are all more or less relevant to nutritional.
The two factors above, together with the Z-Kung fu advertising slogan “nutrition is steamed up,” indicate the core selling point and segmentation for consumers: steamed (It also sounds like “real” in Chinese. ), Chinese-style, nutritious, and healthy. 2. Marketing Strategies 2. 1 Product of Standardization Problems in Standardization are the greatest impediments to the development of Chinese fast food. Cai has made great efforts in the standardized management. If Chinese fast food wants to develop in a large scale at a fast pace, we must solve the problems of standardization.
As Western cooking process can be easily standardized, all steps of each operation can be set into strict norms. What the staff needs to do is just to follow the operations step by step. So standardization is the strength of Western fast food. To the opposite, because Chinese cooking is more complex and varied, which can be easily measured, we haven’t got a breakthrough in the standardization so far. Standardization of Z-Kung fu includes three parts: the standardization of production equipment, the standardization of directed process, and the standardization of managing processes.
First, Z-Kung fu uses the patented products of automatic steaming machines. Second, In order to ensure the freshness of food, all its fast food restaurants make production plans according to the number of customers in each period of time. Third, the quality of the raw materials in each branch is ensured by the means of purchasing according to a certain standard and then making semi-finished products as uniform logistic supply. The biggest breakthrough in standardization of managing processes is the CAI-standard-computer-controlled steam equipment.
By making good use of the steam which can control the pressure and the temperature, it ensures that the cooking process maintains a uniform standard: 1 to 2 atmospheric pressures, 101 ? , no more than 80-second steaming time. In this way, the quality and taste of all the food in the restaurants can be guaranteed without being cooked by chefs. Cai Dabiao was encouraged by the book McDonald’s Myth to carve out. He first standardized the steps of Cantonese- style steamed rice in the western way as a good example for other Chinese food.
Thanks to his very brilliant idea, Z-Kung fu developed fast, and set up the goal as a listed company in the near future. 2. 2 Z-Kung fu will Become McDonald’s of China Between 2004 and 2006, Z-Kung fu maintained an average annual growth rate of 55per cent. At the end of 2006, after the completion of the financing, Cai had full confidence in rapid and steady growth in the following years. It has always been the dream of this young man that Z-Kung fu became Chinese McDonald’s. So far, the domestic fast food industry generally is not in a good condition.
The fast food in China has a capacity of approximately 200-billion market. Two foreign brands KFC and McDonald’s account for 20 per cent of the shares, while the remaining part is shared by nearly 800,000 Chinese fast food enterprises. So, Cai has to work hard to realize his dream. Compared to McDonald’s (currently 700 stores in China), KFC (currently 1400 stores in China), Z-Kung fu (only 250 bistros) is not a giant chain fast food company. Yet Z-Kung fu abandon still wants to match the two world 500 top enterprises. It frequently has launched sales campaigns in recent years.
Firstly, through the advertising of nutritional fast food, they welcomed the foreign fast food companies to join the community of nutritional healthy fast food. Secondly, they criticized that fried foods are junk foods; At last it combated with McDonald’s & KFC by locating their new stores next or close to them. A series of attacks undoubtedly helped Z-Kung fu win great attention and even approvals. Moreover, Z-Kung fu has made McDonald’s & KFC upset which listed it in their blacklist. As Guo Fan, the public relationship manager of Z-Kung fu said, “When signing contracts with some householders, McDonald’s and KFC sually require the householders not to sign with Z-Kung fu. ” In the marketing-orientation stage, companies identify what customers want and tailor all the activities to satisfy those needs as efficiently as possible. Companies can be identified as market-oriented and customer-driven only when they are finely tuned to the changing customer’s needs and competitor’s strategies. The social marketing concept holds that an organization should discover and satisfy the needs of its customers in the way that maintains or improves the consumer’s and the society’s well-being. 2. The Rapid Expansion of Strong Capital In 2005, Z-Kung fu worked with “Kung fu” and “Fearless” films, which make a deep impression on the people all over China. Z-Kung fu were linked with the heroes, creating a good image for its customers. Z-Kung fu launched its first children’s “Kung fu small chief Competition” in June of 2006 in Dong Guan of Guangdong Province so as to promote “beyond themselves and to challenge limits” for the purpose of popularizing the spirit of the Chinese heroes. The kids joined the “Kung Fu parade. More than 3,000 children attended this event with more than 20,000 audiences.
Today, Z-Kung fu has 250 bistros in China and has become the leading local brand of Chinese fast food. In order to protect its brand name, Z-Kung fu has not been carried out franchisee. It’s reported that at least an investment of half a million to 2 million is needed to open a Z-Kung fu fast food restaurant. Cai said that the company had sufficient capital, but they considered the capital competition in the future market of fast food, so they reserved the capital to compete with others. At present, Z-Kung fu has followed the Western fast food and set up a standardized production logistics system.
President Cai of Z-Kung fu fast food chain said that the Z-Kung fu has invested more than 100 million yuan to three major logistics hubs in the South, the East and the North of China. Z-Kung fu began to expand rapidly with the mature operation mode and sufficient capital support. In 2010, Z-Kung fu will accomplish its goal of opening 800 restaurants. Effective planning requires a set of objectives that can be achieved by carefully-designed plans. To be worthwhile and workable, objectives should be clear, specific, consistent, ambitious but realistic, quantitatively measurable, and effective in a particular period. . Existing Problems 3. 1 Lack of the Support of Favorable Prices Pricing is a critical, because price has a direct impact on a company’s profits. At present, the advantage of Z-Kung fu is only reflected in the standardization scale. The prices of its fast food are fairly high compared to those of its domestic competitors. The expected price of a product is the price at which customers consciously or unconsciously value it-what they think the product is worth. Expected price usually is expressed as a range of price rather than as a specific amount. In Z-Kung fu, a meal costs 20 yuan, while a customer can enjoy the same food at a half price in Blue and White restaurant. ” A Guangzhou resident said. Such view has also been agreed with by many patrons. No matter how universal this view is, people realize that the core value of Z-Kung fu is “steamed nutrition”. Although some Cantonese-style restaurants supply nutritious foods, Z-Kung fu puts lots of money in advanced centralized and large-scale advertising to make it popular. However, this mode of advertising can be easily used by the competitors to campaign against it.
With heated competition, other Chinese fast food companies produce similar foods. Even if Z-Kung fu has an advantage of scale at present, this can be weak because of the lack of the support of reasonably pricing in a long term. 3. 2 Foreign Fast Food To launch effective competitive marketing strategies, the company needs to find out all about its competitors. It must constantly compare its products, price, channels, and promotion with those of close competitors. Each company has a certain philosophy of doing business, a certain internal culture and guiding beliefs.
Marketing managers need a deep understanding of a given competitor’s mentality if they want to anticipate how the competitor will act or react. Z-Kung fu must overcome many disadvantages to compete with foreign fast food. At present, because most western fast foods are fired, the foods of Z-Kung fu are much more “nutritious”. Due to this disadvantage, foreign fast food has taken many measures to solve problems and even accelerated localization. KFC restaurants have supplied tomato egg soup and porridge for breakfast to meet the needs of Chinese customers.
Thus, with the changing and developing of foreign fast food, the weapon of nutrition of Z-Kung fu will gradually turn to be weak. The challenger can attack the market leader. It is a high-risk but potentially high-gain strategy that makes good sense if the leader is not serving the market well. To succeed with such an attack, a company must have some sustainable competitive advantage over the leader. Z-Kung fu does not have any advantage in human resources, service or quality. If it wants to be successful, a company must provide customer with greater value and satisfaction than its competitors.
Thus, marketers must do more to meet the needs of target consumers, and gain strategic advantage by positioning their offerings strongly against their competitors’ in the minds of consumers. McDonald’s is a very good example. 3. 2. 1 Human Resources At present, McDonald’s, like many companies, has its own headquarters. There are 3,000 full-time experts in trade, accounting, construction, restaurant management, market research and food quality control in Illinois. They are responsible for business strategies, management, and quality standards. They have established 8,000 distribution branches in 38 countries and regions.
At the same time, McDonald’s also has its own specialized personnel training base McDonald’s Hamburgers College in Chicago. All the managers and working staff in McDonald’s branches should study and get training in this college. They must learn the courses of market forecasts and sales, hotel management, economics, McDonald’s business principles and strategies, McDonald’s quality of service and so on. McDonald’s training philosophy is that training is to help staff develop their potentials as soon as possible. McDonald’s managerial staff must work in low-rank positions first.
When he/she gets the position of a restaurant manager, his/her previous working experience helps him/her train and work with his/her own team. Every three months, McDonald’s department managers have a performance evaluation. At the beginning of the assessment, they set two goals. These are how to train your subordinates, and when the training courses should be completed. Department managers should clearly know who should be trained to take over their positions; otherwise they have no chance for promotion. Because McDonald’s managers at all levels spend much efforts and considerable time in training their uccessors, McDonald’s becomes a classroom for discovering and training. It makes McDonald’s strongly in the competition. Z-Kung fu is also having a special training on the management staff, but it was not enough scale, and can not be effective in training human resources. 3. 2. 2 Services Services include comfortable shop’s construction, convenience of the business hours and service attitude. Smile is a feature of McDonald’s, all the staff smile cheerfully. They chat and work with customers to make the customers feel satisfied. After being recruited, all the employees should have systematic training.
Customers enjoy fast, accurate and friendly service, and they do not have to queue up for more than two minutes. After ordering food, waiters will get the food ready in one minute. Restaurants also provide a wide range of services, such as a joyful birthday party for children, a group reservation, a free charge service and so on. McDonald’s is a standardized enterprise and each shop’s products and services are consistent all over the world. McDonald’s has a book of 385 pages McDonald’s manual to ensure the standardization of operation.
This company is famous for its good service. So the image of McDonald’s fast food restaurants is more prominent and more distinctive. It makes people feel at home when they have meals in McDonald’s. However, surveys show that Z-Kung fu’s service is not satisfactory. 3. 2. 3 Quality Quality is the core of fresh and healthy food. McDonald’s is very strict with the quality of its products. It has optimized technology to ensure the food and other products to match its stringent quality standards. In the 1990 McDonald’s opened its first Chinese restaurant.
As early as 1983, McDonald’s suppliers have begun construction of factories and farms to make preparation for their semi-finished products and processing. All the factories and farms are equipped with advanced technology. So far as we know, McDonald’s suppliers have established more than 50 furniture-scale farming and food processing plants, production of raw materials by quality meat, vegetables and package type and so on in various regions of China. At present, 95 per cent of the raw materials are in the local procurement, and 100 per cent of beef cake is produced and processed locally.
All the foods have to go through a series of meticulous quality assurance system before they are served. There are altogether forty steps of strict processing and quality control operation for beef cake. Take packing as an example, McDonald’s is absolutely meticulous for every cut. It continues to study all the way for cutting bread, because in the cutting the bread’s thickness and temperature affect the quality of the finished products. Therefore, if the cutting is irregular or not fluent, they can not be uniform; and sauces are not easy to infiltrate into bread and melt fiber structure, which greatly damage delicious, crisp taste.
Do you know no matter where you buy McDonald’s hamburgers all over the world, thickness of bread at the bottom is roughly the same! Z-Kung fu can match McDonald’s in standardization. 3. 3. Disadvantage of High-Speed Expansion In Chinese restaurant, there are two well-known brands, one of which is called Little Sheep, and the other is Z-Kung fu. The former is seldom seen on TV commercials and newspaper ads. However it opened a hotpot chain in Toronto of Canada. Recently, it is seeking a chance to be listed in stock markets. The latter is expanding rapidly and making a great sensation.
With different ideas of enterprise operation, they are on different ways to achieve the same goal. Although Little Sheep have so many negative reports, they eventually get investment from 3i clique of Europe’s biggest investment institutions. By contrast, Z-Kung fu is not active in the capital markets. In the regard, it may be preparer to explain it by different operating styles. But the problem of this explanation is obvious. Can Z-Kung fu’s chain of funding support its high-speed expansion? Recently, Today’s Capital inputted 100 million yuan to Z-Kung fu in high tone which decreased people’s question.
Z-Kung fu is not a listed company, so we can not know its financial statements and operating affairs. But by calculating the inputs and outputs of a single restaurant, people will ask: where comes the strength to support its dozens of new restaurants every year? By estimating only the size and standard decoration, a single restaurant of Z-Kung fu has to take at least more than 100 million yuan for opening. It’s difficult to support the scale and speed of opening a branch with the income of the branch. For high-growth enterprises, short-term gains can not decide its speed of development.
In fact, there is another reason for Z-Kung fu’s rapid development. Chinese fast food industry doesn’t have many high technologies in it and is a low-threshold industry. Although Z-Kung fu benefits from precise positioning and unique ideas, if there is another more powerful capital appearing, it must lead to a confrontational situation like McDonald’s and KFC. If running too slowly, better shop resources may be occupied by the competitors. Even though this imaginary enemy did not appear, the selection of shop resources directly affect profits of the enterprise accord to the developing path of foreign fast food restaurants. . Analysis of Development of Z-Kung fu in Future 4. 1 Enhancing Their Competitiveness A Chinese fast-food enterprise in Beijing indicated that it is very risky for Chinese fast restaurants to carry out the national chain strategy. “It would be better if it has developed by having restaurants of other places in the country joined in. It would at least reduce a lot of pressure on finding resources. ” A man in the industry said, “I think there are too many competitors in the Chinese fast food market.
Guangzhou, Shanghai and Beijing’s catering market competition is very fierce. If enterprises do not focus on development in a region but expand in these three places at the same time, there is no doubt that it will lose the strength of competition. ” To the opposite, Z-Kung fu thinks that Chinese fast-food has caught the opportunity of expanding to national chain. Between 2003 and 2004, Z-Kung fu has spent a great deal of money in inviting a well-known domestic research institution to do two large researches for Beijing, Shanghai, Guangzhou, and other five cities.
The results show that although no Chinese fast food restaurant has made advertisements or sales promotions in these areas, the overall image of Chinese fast food brand to the consumers in these areas has made a great improvement in less than one year. Professional researchers believe that this indicates that consumer demand is gradually expanding and tending to mature. The idea of brand is also strengthening. When the idea increases to a certain degree, consumers will spontaneously choose the leading brands in the region even though the brand doesn’t make advertisements. “In the future the national chain must be arried out. The expansion of Z-Kung fu is based on external estimate of the industry and itself. We have had half a step ahead indeed because we do not want to miss the opportunity of occupying consumers. ” said Cai Dabiao. Guo Geping, chairman of the China chain association, thinks that Z-Kung fu broke though regional chain, which will accelerate the development of the entire market doubtlessly and at the same time lead more consumers to make consumption, which enlarge the market. Breakthrough from region wide to nationwide is a phase which Chinese fast food industry inevitably will go over in the future.
The one that has the upper hands is the one that can get more advantages. With the standardization, Z-Kung fu has attracted the attention of restaurants in the nation. Many managers of foreign fast food restaurants go to visit Z-Kung fu restaurant with admire of Z-Kung fu’s reputation. However, Cai Dabiao thinks clearly that Chinese fast food has just walked a small pace comparing to the foreign fast food magnates. In Cai Dabiao’s opinion, Z-Kung fu should not only provide nutritious and delicious food, but also continue to invent exceptional products and provide customers with an attractive culture of fast food brand. . 2 Expanding the Space of Development In fact, Chinese fast food industry is extremely regional. When opening restaurants in different places in the country, Z-Kung fu must cater different tastes by innovating and transforming in variety, style and service and so on respectively. Z-Kung fu’s taste is light, which is different from the eating habits of heavy taste and large amount of food in the North. At present, Z-Kung fu has developed a new noodle product to suit for the Beijing market. Although the new product meets the demand of a part of customers, it still mainly promotes steaming rice and steaming soup.
It is reported that since three branches of Z-Kung fu opened in flourishing commercial area in Beijing, their payoffs have exceeded that of expectations. It still needs to be waited to see if it can have the good performance in the north as in Southern China. In a word, modern civilization gives fast food the features of industrialization, large-scale, standardization, modern management. Z-Kung fu is the product which fits for these requirements. Z-Kung fu Chinese fast food chain enterprise combines the model of standardized service which it learned from western fast food estaurants with the healthy and nutritious concept of Chinese diet, serves streaming food as the main product and updates quality control, sanitation, types of food and other aspects to the international standard. It’s rapidly becoming the leader of Chinese fast food with the opportunities and its innovative catering culture. It provides a very valuable sample to other Chinese fast food brand. But how far the Chinese fast food restaurants can develop depends on how well they combined traditional Chinese catering culture and modern nutritional science. Chinese catering culture is broad and profound.
The room for the development of Chinese fast food restaurants is enormous. Chinese fast food should position accurately on the target customers, establish strict, scientific, executable and standards for products, services, sanitation and so on, strengthen staff training, pay attention to establishment of brand culture, stick to the core values of health and nutrition, persist in inventing and maintaining products, take advantages of their strength, and achieve containable development. Conclusion Thanks to definite positioning, increasingly standardized steaming products, vivid drumbeating, Z-Kung fu obtains today’s refulgence.
Many experts within the industry optimistically estimated that the appearance of Z-Kung fu and some large-middle-size Chinese fast food chain enterprises possibly help centralize the industry, change the unenlightened image of Chinese fast food industry, and then form the power for competing with the foreign fast food restaurants. By analyzing the marketing strategies of Z-Kung fu, we can see clearly its strong points and shortcomings. Through this article, I hope that it can really bring some advice to Z-Kung fu. An enterprise should walk step by step steadily in the field which it’s good at.
In this point, Z-Kung fu perhaps can learn from Little Sheep. Incomes of single store and high price for franchise give Little Sheep huge profit. Z-Kung fu has to learn from two competitors from the United States. McDonald’s and KFC introduced new competitive products to stimulate new growth at the right time. In the era, with marketing strategies emerging in endlessly, some basic elements appear to be particularly important. It’s especially so in catering industry. Therefore, Z-Kung fu should draw more experience in the future so that it can build up its name all over the world, widely spread Chinese culture and create a better future.