Cultural aspects affecting international business activities a case of kfc in india

Globalization, by which the interconnectedness of economies is created, has given rise to a multitude of opportunities for companies engaged in international business. In fact, in the realm of international business, the impact of cultural aspects cannot be understated. This introduction delves into the profound implications of cultural dynamics on international business, focusing on a renowned multinational corporation and its experiences in navigating diverse cultural landscapes. Therefore, our team has chosen the topic “Cultural aspects affecting international business activities: A case of KFC in India”. India, a country in South Asia, is a vibrant tapestry of diverse traditions, languages, and customs. With a population of over 1.3 billion people, its a distinctive cultural melting pot. From colorful festivals, where streets come alive with music and joy, to the tantalizing flavors of Indian cuisines, India is a sensory delight. With a deep sense of identity and tradition, Indias cultural landscape offers not only captivating experience but also obstalcles for any foreign businesses wanting to enter the country.

FOREIGN TRADE UNIVERSITY FALCUTY OF ECONOMICS & INTERNATIONAL BUSINESS o0o INTERNATIONAL BUSINESS REPORT CULTURAL ASPECTS AFFECTING INTERNATIONAL BUSINESS ACTIVITIES: A CASE OF KFC IN INDIA Group Class Instructor : : KDOE307 : PhD Nguyen Hong Hanh Hanoi, 2023 TABLE OF CONTENTS INTRODUCTION CHAPTER OVERVIEW OF F&B INDUSTRY IN INDIA MARKET CHAPTER OVERVIEW OF KFC .5 History & Internalization 1.1 History of KFC 1.2 Internalization of KFC KFC’s current status .6 2.1 In the international market 2.2 In Indian market CHAPTER INDIAN CULTURAL CHARACTERISTICS & KFC ADAPTATION Religions Festivals & Traditions .11 Tastes & Cuisines 14 1.1 Indian religions characteristics 1.2 KFC’s adaptation to Indian religions features .9 2.1 Country of festivals .11 2.2 KFC’s actions to keep up with festivals 13 3.1 Indian tastes & cuisines characteristics .14 3.2 KFC’s adaptation to Indian tastes and cuisines features 14 Customer habit 16 4.1 Eating habits .16 4.2 Buying habits .19 CONCLUSION .21 REFERENCES .23 INTRODUCTION Globalization, by which the interconnectedness of economies is created, has given rise to a multitude of opportunities for companies engaged in international business In fact, in the realm of international business, the impact of cultural aspects cannot be understated This introduction delves into the profound implications of cultural dynamics on international business, focusing on a renowned multinational corporation and its experiences in navigating diverse cultural landscapes Therefore, our team has chosen the topic “Cultural aspects affecting international business activities: A case of KFC in India” India, a country in South Asia, is a vibrant tapestry of diverse traditions, languages, and customs With a population of over 1.3 billion people, it's a distinctive cultural melting pot From colorful festivals, where streets come alive with music and joy, to the tantalizing flavors of Indian cuisines, India is a sensory delight With a deep sense of identity and tradition, India's cultural landscape offers not only captivating experience but also obstalcles for any foreign businesses wanting to enter the country The case study at hand focuses on the experiences of KFC, a prominent multinational corporation, as it navigates the cultural intricacies of conducting business in India The country, with its rich cultural heritage and traditions, presents a unique and dynamic market for companies seeking global expansion By examining KFC's approach to understanding and adapting to the cultural nuances of the Indian market, we can gain valuable insights into the critical role of cultural awareness and adaptation in achieving success in international business endeavors The report focuses on three chapters, including: Chapter Overview of F&B industry in India market Chapter Overview of KFC Chapter Indian cultural characteristics and KFC adaptation strategies CHAPTER OVERVIEW OF F&B INDUSTRY IN INDIA MARKET The food and beverage (F&B) industry in India is one of the largest and fastestgrowing sectors of the economy It makes up around 3% of India’s GDP and nearly 2/3 of its retail market It is predicted that the income in the food and beverage sector will expand at a CAGR (Compound annual growth rate) of 14.2% between 2020 and 2024 Among the F&B market, Indian fast-food or quick-service restaurant (QSR) marketplace as an emerging sector India is a country of diversity Here food is not just considered as a form of nutrition but is also collaborated with customs and traditions In India, the taste and flavors of food preparation keep changing from one state to another In the early age, people would mostly prefer home-cooked food in India But as urbanization is taking place this scenario seems to be changing completely The concept of fast-food is prevailing since quite a few years now In this fastmoving world where the expenses are day by day inclining, it is a must for all the members of the family to work for living Also many times lot of people shift to other regions away from the family in order to earn a living This kind of a rush lifestyle gives a scope for consumption of quick meals which are easily prepared and quickly served which we term as fast-food Being the most largest population country in the world, with a population of 1,4B (2021), India has become one of the most massive hubs for global fast food chains to grow Whether it’s Indian fast-food chains or foreign fast-food companies in India, they all run very well The quick-service restaurants (QSR) market is expected to clock a CAGR of 23% between now to the fiscal year 2025 as large food services chains such as McDonald’s, Burger King, and Domino’s, among others, deepen their reach in India’s smaller cities and benefit from a younger demographic However, to enter Indian market, international fast-food chains have to face a lot of obstacles The biggest one, which has a massive impact on the F&B industry, must be culture India is a cultural hotbed, and business is more about building relations than presenting figures and sums The polychronic culture can be very difficult for international franchise businesses, which have the same model of business all over the world, to adapt and earn market share CHAPTER OVERVIEW OF KFC History & Internalization 1.1 History of KFC Kentucky Fried Chicken, or KFC for short, is a global quick-service food service system that serves over a billion meals annually in more than 80 countries Founded by Colonel Harland Sanders in 1955, KFC faced challenges during its journey Through Colonel Sanders' culinary skills and franchising efforts, KFC grew rapidly to become one of the largest quick-service food service systems worldwide, offering its famous "finger lickin' good" chicken to delighted customers around the globe About Colonel Sanders, who was born in 1890, he opened a gas station in Kentucky and cooked for his family and customers His pressure cooking method for chicken, along with his secret "Original Recipe" of 11 herbs and spices, gained popularity Despite setbacks during World War II and the threat of a bypassing highway, Sanders embarked on franchising his recipe across the U.S Through franchising, KFC expanded rapidly, becoming one of the largest quick- service food service systems worldwide Colonel Sanders' culinary skills and determination to share his recipe played a crucial role in KFC's success 1.2 Internalization of KFC Initially, the restaurant gained popularity for its unique blend of 11 herbs and spices in its fried chicken recipe With the success of the original restaurant, Sanders began franchising the KFC concept, leading to its rapid expansion By 1964, there were over 600 KFC restaurants in the United States and Canada However, KFC's global expansion truly took off in the 1970s and 1980s The company began opening restaurants in international markets, starting with Canada and Mexico in the late 1960s By the 1970s, KFC had established a presence in various countries, including the United Kingdom, Australia, and Japan Throughout the years, KFC continued to expand its global footprint By the 1990s, KFC had established a significant presence in Asia, particularly in China, where it became immensely popular The company recognized the potential of the Chinese market and invested heavily in its expansion Today, China remains one of KFC's largest markets, with thousands of restaurants across the country As of 2021, KFC has a vast global presence, with more than 24,000 restaurants in over 140 countries and territories These restaurants are operated through a combination of company-owned locations and franchise partnerships KFC's international growth has been fueled by its ability to adapt its menu, offerings, and marketing strategies to suit local preferences and cultures KFC’s current status 2.1 In the international market KFC's commitment to international expansion is evident through its continuous efforts to penetrate new markets Through strategic partnerships and localized approaches, KFC aims to maintain its position as a global leader in the fast-food industry KFC’s annual revenue: According to statistics, KFC’s revenue is $6.8B annually Besides, KFC has achieved an enormous growth in other aspects, such as:  KFC's revenue growth from 2009 to 2022 is 36.86%  KFC has 820,000 employees, and the revenue per employee ratio is $8,343  KFC's peak quarterly revenue was $2.0B in 2022 (quarter 4)  KFC peak revenue was $13.6B in 2012  KFC annual revenue for 2021 was $6.6B, a 16.49% growth from 2020  KFC annual revenue for 2022 was $6.8B, a 3.92% growth from 2021 In 2019, KFC reported its best growth in three years In the first quarter of the year, KFC, operated by YUM! Brands, continued its global expansion, opening 372 new restaurants in 46 countries With a total of 22,886 locations worldwide (4,062 in the U.S.), KFC achieved a net new unit growth of percent The brand's sales performance exceeded expectations, with a percent yearover-year growth in systemwide same-store sales China, accounting for 27 percent of KFC's total mix, experienced an 11 percent increase in system sales In the U.S., system sales rose by percent Noteworthy double-digit comps were also reported in Japan and Indonesia KFC's investment in new menu board designs and delivery through Grubhub contributed to its sales growth, with plans for a nationwide launch later in the year KFC has seen heavy orders around dinner, big packs, and bone-in chicken In-store, KFC closed out Q1 with more than 1,500 “American Showman” designs in the U.S The package is known for its red color blocking, barn-like materials, heritage accents, and test elements, like an open “kitchen theater,” retail stores, and delivery call-outs KFC remodeled 65 units in the period as it strives for positive net unit growth in the U.S Recently, KFC holds a significant market share in the global fast-food industry By the end of 2018, KFC market share was 2.82% of the Fast Food market In fact, KFC is consistently ranked among the top fast-food chains globally It competes with other major players in the industry, such as McDonald's, Subway, Burger King, and Starbucks 2.2 In Indian market KFC, the renowned fast food chain famously known as Kentucky Fried Chicken, entered the Indian market in the 1990s as the first foreign fast food restaurant chain after the country's economic liberalization Despite initial challenges, KFC persevered and successfully established a presence in India In 1995, KFC inaugurated its first Indian outlet in Bangalore, catering to the evolving preferences of Indian consumers Contrary to misconceptions, KFC expanded its menu to offer an array of vegetarian options, including Veg Zinger, Veg Rice Bowlz, and Veg Strips, in addition to its signature fried chicken However, KFC faced protests and opposition in its early years, driven by concerns over the encroachment of Western culture on Indian traditions The Bangalore outlet endured frequent acts of vandalism, prompting the management to request police protection Although the combined revenue from outlets in Bangalore and Delhi proved insufficient, KFC remained committed to the Indian market Following a brief withdrawal, KFC returned in 1999, starting with a single outlet in Bangalore By diligently addressing concerns, dispelling misconceptions, and adapting its offerings to suit local tastes, KFC experienced exponential growth across various Indian cities Today, KFC boasts a network of 296 outlets in India In fiscal year 2022, the annual sales revenue of KFC in India was over ten billion Indian rupees, up from about five billion Indian rupees in fiscal year 2021 As of 2022, there were 263 Kentucky Fried Chicken restaurants in this country Figure 1: Annual sales revenue of KFC in India FY 2020 - 2022 Source: Statista.com CHAPTER INDIAN CULTURAL CHARACTERISTICS & KFC ADAPTATION Religions 1.1 Indian religions characteristics Nearly one-sixth of the world's population, or 1.4 billion people, live in India and represent a wide range of nationalities and religious beliefs India is home to 94% of the world's Hindus, although there are also sizable numbers of Muslims, Christians, Sikhs, Buddhists, Jains, and others who practice folk faiths Food holds significant cultural and religious importance in Indian traditions Indian religions emphasize the concept of ahimsa, or non-violence, which extends to the food choices of their followers Several religions practiced in India have strict dietary laws For instance, Islamic teachings provide guidelines for halal eating, which prohibits the consumption of pork and other forbidden products Jains not only avoid meat but also refrain from consuming root vegetables to prevent harm to the entire plant, as it is considered violence according to Jain theology The issue of beef consumption and cow slaughter, connected to the Hindu belief in cows as sacred animals, has become a contentious topic in Indian politics According to a survey, approximately 40% of Indian adults identify as vegetarian, and many others have some form of meat restriction in their diet This can include avoiding specific types of meat, refraining from meat on certain days, or both In total, about 80% of Indian adults limit their meat consumption in some way, with a majority within all major religious groups adhering to these practices 1.2 KFC’s adaptation to Indian religions features 1.2.1 Halal dietary law Halal dietary laws are guidelines followed by Muslims that determine what foods are permissible for consumption All foods are considered halal, or lawful, except for pork and its by-products, animals improperly slaughtered or dead before slaughtering, animals slaughtered in the name of anyone but Allah (God) Halal food must meet specific criteria and adhere to certain principles When it comes to KFC, their adoption of halal practices varies depending on the region and the customer demand In many predominantly Muslim countries or areas with a significant Muslim population, KFC outlets may offer halal-certified options to cater to the dietary needs of Muslim consumers 1.2.2 Vegetarian & meat restriction diet The most popular religions in India all have food customs and laws For instance, vegetarianism is frequently praised in Hindu writings, and as cows are traditionally revered, some Hindus may also refrain from eating beef Islam forbids the consumption of pork The majority of Indian people (81%) impose certain limits on their diet, such as not eating meat on particular days or refraining from eating certain meats The majority of Indians not, however, completely refrain from meat; only 39% of Indian people identify as "vegetarians," according to a recent Pew Research Center survey Figure 2: Percentage of Indian following meat restriction in each religion Source: Pewresearch 10 Tastes & Cuisines 3.1 Indian tastes & cuisines characteristics The food of India is as regionally specific and diverse as its population Indian cuisine is known for its variety of spices and flavors, which can be quite different from the taste preferences of other regions Indian spice mixes often use upwards of five different spices, sometimes combining 10 or more One challenge for KFC has been to stay true to its products yet still create a menu that appeals to a wide consumer base in India As a consequence, KFC had to create taste-specific menus for local customers Although Indian cuisine is highly regionally specific, there are certain common threads that unite the different culinary practices In particular, Indian cuisine in general is also very dependent on rice, especially Southern Indian regions that use rice more heavily than other areas Moreover, all regional cuisines are reliant on “pulses” or legumes Indian cuisine uses perhaps a greater variety of pulses than any other world cuisine: red lentils, Bengal gram, pigeon peas or yellow gram, black gram, and green gram are used whole, split, or ground into flour in a diverse number of Indian dishes 3.2 KFC’s adaptation to Indian tastes and cuisines features 3.2.1 Localization in flavor To begin with, the recipe in India is relatively different from the original Outside India, for example, Singapore, there is an option of original one and variations like hot and crispy one However, the original is still available in India but with a different recipe because the original is a bit mushy, meanwhile the chicken seems to be fried more, with more coating and more spices in India Furthermore, KFC also modified its menu to include more spicy and flavorful options to cater to the Indian palate Indian people habitually use spice mixes such as chili pepper, black mustard seed, garam masala, mint leaves in various combinations to offer their pungent and herby flavors to dishes Therefore, KFC has significantly spiced up its recipes in India The hot and spicy wings it serves here are the spiciest in the world, among KFC restaurants In 2011, it introduced Fiery Grill, which promised a spicy hit for consumers’ taste buds Additionally, Indian cuisine throughout the nation is highly dependent on curries, which are gravy-like sauce or stew-like dishes 14 with meat, vegetables, or cheese, although the particular spice mixtures, degree of liquidity, 15 16 and ingredients are determined by regional preference Hence, KFC also launched curry chicken, a variant of the fried chicken which has the aroma and punch of curry for the Indian market Besides, while staying true to the core product, fried chicken, KFC has introduced dozens of variants that appeal to the Indian palate Indians are reported to love the concept of duality They like two flavors together, which is why when people order fresh lime soda in restaurants, they often ask for it with salt and sugar As a result, KFC has absolutely used this concept to offer them duality For example, “Chilli and lime chicken" is a favorite combination in India that KFC offers 3.2.2 Rice and pulse dependant Correspondingly, KFC has established new "layers" based on the consumers' longing to include rice and pulses offerings on its menu with a veg thali, a vegetableand-rice mixed plate, and the Chana Snacker, a chickpea burger with Thousand Island dressing Beyond that, the company had a big ambition and wanted to be a brand that offers craveable food and beverage to anyone at any time in India KFC understood the importance of including rice in dishes, since the staple has been an integral part of Indian meals for over 3,000 years For example, Biryani which is flavorful rice with juicy KFC chicken was introduced to the Indian market year ago In India, rice can be a game changer because it strengthens the concept of “home-meal replacement” in the country At the same time, it gives Indian consumers the convenience of a quick, ready- made meal It can be seen that items like rice bowls, which consumers don't get in the U.S because it is specifically made for the Indian crowd, thus, Indians think KFC is more convenient than other choices Obviously, KFC is evaluated as a convenient option for youngsters because no other food joint – American food joint – has provided so many options in terms of food items…with an Indian touch Customer habit 4.1 Eating habits 4.1.1 Eating with their hands In India, eating with your bare hands is considered normal, given that it was started within the ancient Ayurvedic teachings The Ayurveda teaches that food must systematically be prepared before consumption, with the ideal goal to derive the perfect balance in the three doshas (elements) It is believed that when eating with your hands, join all of your fingers together This will allow you to focus more fully on the taste of the food The thing is, eating with your hands is also considered a respectful gesture in India The other reason eating with your hands is considered a respectful gesture is that in Hinduism, the right hand is considered the clean hand Because of this, it is not considered polite to eat with your left hand The left hand is considered to be unclean because of the ancient notion that when a woman is menstruating and touches her left hand, it will make anything or anyone it touches impure While this notion is no longer practiced in India, eating with your left hand is still considered impolite While there may be debates about the perceived "civilized" nature of eating with hands from a Western perspective, it is important to recognize and respect the cultural practices and customs of different societies Eating with hands is an art and tradition deeply ingrained in Indian culture, reflecting the country's rich heritage and values KFC, as a global brand operating in India, has recognized the cultural significance of eating with hands and has adapted its strategies to accommodate this cultural practice One notable campaign is the "Finger Lickin' Good" campaign, which emphasizes the joy and satisfaction of indulging in KFC's delicious food with bare hands This campaign celebrates the act of licking fingers as a symbol of enjoying the flavorful food to the fullest To further promote the cultural practice of eating with hands, KFC has also launched interactive campaigns and contests For instance, they have encouraged customers to share their "finger-licking" experiences on social media using specific hashtags or participate in challenges that showcase their enjoyment of KFC's finger food offerings These initiatives encourage engagement and participation, making customers feel involved and connected to the brand 17 Furthermore, KFC has incorporated elements of Indian cuisine and flavors into their menu, specifically 18 catering to the preferences of customers who prefer eating with their hands They have introduced localized menu items that are easy to eat with fingers, such as chicken strips, chicken popcorn, and spicy wings This strategy not only aligns with the cultural practice but also enhances the overall dining experience for customers 4.2.2 Street food alternatives KFC provides a modern twist on a centuries-long tradition of inexpensive but flavorful street food In recent years, street food has been the subject of heavy criticism centering around hygiene control Since Indian health officials devote most of their time and resources to enforcing regulations in restaurants, they tend to put street food regulations on the back burner, leaving vendors to depend on themselves for food-safety - which is minimal As people become more educated about food hygiene, Indian consumers are slowly moving away from food kiosks and turning to cleaner options such as international fast-food restaurants like KFC KFC wanted to create safe, localized food that resembled – in taste, look and price –traditional Indian street food, but with higher quality produce and higher hygiene standards Consumers and experts say fast food comes with the added benefit of being a sign of social success Company officials and consumers expect all this will continue; India is already becoming one of the fastestgrowing fast food markets in the world A report from the National Restaurant Association of India estimates the fast food industry will grow at a rate of 35-40 percent annually And food historians predict that vegetarian options will continue to play a major role, since they are expected to remain important to urban, healthconscious consumers 4.2.3 Eating together In Indian culture, there is a strong emphasis on the act of sharing food with others Dining out with families accounts for 25% of all meals outside home, according to a report released by National Restaurant Association of India (NRAI) and consulting firm Technopak The report was based on a survey of the eating habits of 3,500 consumers in 24 cities According to Statista, among the reasons for eating out for Indians, at least 53% of them are related to group outings, including reasons such as: Family outings, Friend outings, Family functions, Business meeting and 19 Festival In 20