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

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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)

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.

Suggested Citation

  • Qiaowei Shen & Ping Xiao, 2014. "McDonald's and KFC in China: Competitors or Companions?," Marketing Science, INFORMS, vol. 33(2), pages 287-307, March.
    • Handle: RePEc:inm:ormksc:v:33:y:2014:i:2:p:287-307
    DOI: 10.1287/mksc.2013.0824
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    5. Nancy Kong & Weina Zhou, 2021. "The curse of modernization? Western fast food and Chinese children's weight," Health Economics, John Wiley & Sons, Ltd., vol. 30(10), pages 2345-2366, September.
    6. Jason R. Blevins & Ahmed Khwaja & Nathan Yang, 2018. "Firm Expansion, Size Spillovers, and Market Dominance in Retail Chain Dynamics," Management Science, INFORMS, vol. 64(9), pages 4070-4093.
    7. Erhao Xie, 2018. "Inference in Games Without Nash Equilibrium: An Application to Restaurants, Competition in Opening Hours," Staff Working Papers 18-60, Bank of Canada.
    8. Xiang Hui & Meng Liu & Tat Chan, 2022. "Targeted Incentives, Broad Impacts: Evidence from an E-commerce Platform," CESifo Working Paper Series 9894, CESifo.
    9. Yu Hu & Yonggui Wang, 2020. "Marketing research in China during the 40-year reform and opening," Frontiers of Business Research in China, Springer, vol. 14(1), pages 1-29, December.
    10. Xiang Hui & Meng Liu & Tat Chan, 2023. "Targeted incentives, broad impacts: Evidence from an E-commerce platform," Quantitative Marketing and Economics (QME), Springer, vol. 21(4), pages 493-517, December.
    11. Guler, Ali Umut, 2023. "Category expansion through cross-channel demand spillovers," International Journal of Research in Marketing, Elsevier, vol. 40(3), pages 629-658.
    12. Dimitrios Tsekouras & Benedict G. C. Dellaert & Bas Donkers & Gerald Häubl, 2020. "Product set granularity and consumer response to recommendations," Journal of the Academy of Marketing Science, Springer, vol. 48(2), pages 186-202, March.
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    15. Meliyanni Johar & Shiko Maruyama & Jeffrey Truong, 2017. "The contribution of Western fast food to fast-growing body mass in China," Applied Economics, Taylor & Francis Journals, vol. 49(8), pages 797-811, February.

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