KFC, a restaurant NYU President John Sexton describes as a “rather lack-luster American fast food brand” currently operates 2,200 branches across China, almost three times as many as McDonalds, and is continuing to expand at a rate of 300 new restaurants every year. In fact, when I first landed in Shanghai and asked a Chinese friend where was a good place for me to go to try good Chinese food, he offered to take me to KFC.
KFC arrived in China in 1987, beating both McDonalds and the Internet. At the time of the restaurant’s arrival, the concept of Western Fast Food culture was missing, and KFC had to figure out how it was going to maintain the balance between staying true to their brand and adopting characteristics to help them succeed in China.
KFC, rather than making these crucial decisions from corporate headquarters abroad, decided to let a select group of real Chinese people to manage some of the strategic aspects of the business, in turn teaching them how to appeal in the future to this foreign culture. Outsourcing their management team is considered to be the explanation for KFC’s wild Chinese success. Besides saving them a couple of dollars, it allowed them to react to the nuances of Chinese culture in a truly Chinese way, instead of through an artificial business plan created by Americans who would only understand China through an American framework. As Warren Liu from Yum! Brands—which owns KFC—explains, to understand Chinese people’s “mixed feelings, of love and hate about the West, to understand Chinese history, language, the influence of Confucianism, Buddhism and Taoism, this is especially important if you are in the consumer goods industry.”
The company Estee Lauder is trying to do the same thing, by opening a research and development center in Shanghai to use Chinese knowledge to help carve a product uniquely designed for the wants and needs of the Chinese market.
The brand, called Osiao (Oh-shao), is positioned as the cream that will “help renew skin’s youthful radiance” because of the importance of clarity and luminosity of skin in China. Many Chinese believe in herbal medicine so the product contains Asiatic Pennywort herb and ganoderma, a type of mushroom. The brand’s in-store shelves are designed to mimic traditional Chinese apothecaries, and the lotion’s salespeople are instructed to guide customers through a diagnostic observation process similar to that of old Chinese medicine. Once the customer buys the product, they will be advised to follow a specific skin care regimen catered to their own skin type. Because it begins and ends with the letter O, Chinese people see that it has symmetry and balance, and because it contains 5 letters, Chinese people will think that it is lucky.
Estee Lauder believes that it has followed the localization strategy that made KFC such a success. “We made a lot of effort to understand the consumer from her point of view, not from an American point of view,” says Veronique Gabai-Pinsky, the global brand president in charge of Osiao. “Hopefully all of our research will translate into marketplace success.”
The product recently launched last November, positioned on the luxury market for $211 USD a unit. Whether it prospers or fails remains to be seen.
There is the saying that when in Rome, you do as the Romans do. However, you can never beat the Romans at being Roman. As a brand, you can’t win by losing your identity and acting entirely as a Chinese brand, and you can’t win by holding on completely to your Western ways. You must find a compromise in the middle. Businessweek warns, “Many companies make the mistake of assuming that, because urban Chinese customers appear quite Westernized in their outward appearance, they will easily accept Western concepts, products, and services. Even in the case of premium luxury goods, companies are realizing they must understand and adapt to potentially important market differences.”
References for this post:
- Sexton, John. “KFC – ‘a Foreign Brand with Chinese Characteristics'” China.org.cn. N.p., 22 Sept. 2008. Web.
- Singer, Natasha. “Estee Lauder Develops A Brand Just For China.” N.p., 24 Sept. 2012. Web.
- Wei, Michael. “Http://www.businessweek.com/magazine/in-china-barbies-reign-may-be-shortlived-11102011.html.” Bloomberg Businessweek. N.p., 10 Nov. 2011. Web.