McDonald's and KFC in China: Competitors or Companions?

Qiaowei Shen () and Ping Xiao ()
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Qiaowei Shen: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
Ping Xiao: NUS Business School, National University of Singapore, Singapore 119245

Marketing Science, 2014, vol. 33, issue 2, 287-307

Abstract: In this paper, we study the entry and expansion decisions of McDonald's and KFC in China using an originally assembled data set on the two chains' expansion in the China market from their initial entry up to year 2007. We analyze how the presence of a rival affects each firm's strategies. The results indicate that a rival's presence has a net positive effect on a chain's expansion decision. We focus on testing two possible explanations for a positive rival impact: market learning and demand expansion. First, we derive a set of theoretical predictions on how a chain's optimal expansion decision would react to its rival's expansion patterns when market learning versus demand expansion is the driving force of the rival's positive influence. The empirical analysis based on these predictions consistently suggests that market learning is more likely to explain the positive effect of KFC on McDonald's and that demand expansion is more plausible with McDonald's positive spillover on KFC. In other words, the results are consistent with the presence of KFC signaling market demand potential and growth to McDonald's and the presence of McDonald's helping to cultivate consumer taste and generate demand for Western fast food, which benefits KFC.

Keywords: entry; market learning; demand expansion; emerging market; fast-food chains (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:33:y:2014:i:2:p:287-307

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