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Research question: Do the Chinese fast food chains in Hong Kong behave in oligopoly structure?

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Introduction

Research question: Do the Chinese fast food chains in Hong Kong behave in oligopoly structure? Forward When talking about fast food, most people will think of McDonald's. In fact, Hong Kong, a melting pot between east and west, Chinese fast food also captures a significant share in the fast food market. It is closely related to every Hong Kong people's life. Although a lot of researches have already been conducted to investigate the fast food market, most of them are targeted at Western fast food. There does not seem to have many researches which focus on Chinese fast food. In fact, Chinese fast food is actually totally different from the Western fast food. Because of that, I think it will be very interesting to investigate the Chinese fast food market in Hong Kong. My concern will be how this market works, how the chains compete with each other, and how their business strategy different from those Western fast food chains. Among the Chinese fast food market, Caf� de Coral, Fairwood, and Maxim are the biggest three Chinese fast food chains in Hong Kong. From the economic view, this is called the oligopoly structure, which is characterized by the domination of market share by relatively few competitors. If that is the case, the equilibrium price tends to be very stable. However, in reality, these Chinese fast food chains need to lower their prices together regularly. Because of that, I think it will be very interesting to investigate whether Chinese fast food industry belongs to oligopoly structure. After the thorough investigation, I also hope to find out the reasons why these Chinese fast food chains have to resort to lowering their prices. Background of Hong Kong fast food market The notion of Chinese fast food is over a century old in Hong Kong. Since 1960s, thousands of vendors had supplied take-away food to Hong Kong workforce in a fast, cheap and convenient way. ...read more.

Middle

Due to the economic recession (Fig.3), the total value of fast food restaurant receipts has slashed significantly. (Fig.4 and Fig.5) From that, we can deduce the demand for Chinese fast food also has dropped greatly in this few years. In order to regain the lost revenue back, the Chinese fast food chains need to cut their prices. Fig. 37 Fig. 48 In fact, when comparing the tables (Fig.3 and Fig.4) above, the reason becomes more obvious. We can see that when the growth rate of the GDP decreases, the fast food receipts also decrease, but in a greater extent. So, it becomes more logical to understand why the Chinese fast food chains need to cut price. Since the fast food market has slimed in this few years, in order to maintain the same market shares, Chinese fast food chains have no choice but to cut their prices. Statistics of Fast Food Receipts and Purchases9 Value Volume Q2 2001 100.1 100.2 Q3 2001 100.0 99.6 Q4 2001 98.6 97.2 Q1 2002 98.5 98.3 Q2 2002 95.7 96.1 Q3 2002 94.9 95.6 Q4 2002 95.0 95.8 Q1 2003 92.7 93.6 Q2 2003 85.0 86.2 Table 3 *Index of restaurant receipts (Quarterly average of Oct 1999 - Sept 2000 = 100) Fig. 5 Non-price competition In this research paper, my investigation on non-price competition includes the variety of food, the quality of food, the environment and the service. The variety of food 67% people think that the Chinese fast food chains have already provided enough food choices. They also think the food provided by different fast food chains are similar with each other which is a characteristic of the oligopoly. The firms in oligopoly structure tend to provide standard goods or similar goods, so that they will not lose any potential consumers from their competitors. In addition to that, 38% people wish the Chinese fast food chains can provide more healthy food. ...read more.

Conclusion

In addition to that, the Chinese fast food chains now buy the food globally. For example, according to Caf� de Coral's source17, they buy hams from Brazil, but chicken wing from USA, and the fish are from New Zealand. This can diversify their food source, ensure a sustainable food supply, and enhance the variety of their dishes. Changing the business strategy Unlike the Western fast food restaurants, which are more image oriented, i.e. trying to create an "experience" for the consumer, Chinese fast food restaurants are more focus on providing product variety and regularly rotating their menu. But, in order to attract and retain the teenagers, who generally prefer to eat Western fast food, the Chinese fast food restaurants now have changed their strategic marketing. For example, Caf� de Coral now asks some famous teenager singers as their spokesmen; Fairwood is now asking some movie stars as their spokesman. In addition to that, Chinese fast food restaurants now include more western dishes, like chicken wings, French fries in their menu to meet teenagers' desires too. Conclusion: 1 Source: Hong Kong Market Development Report: Hong Kong Fast Food Market Brief prepared by Howard R. Wetzel, US Consulate Council, Hong Kong 2 Source: a research conducted by the Hong Kong Consumer Council in 2003 3 Source: www.peoi.org/Courses/mic/mic7.html 4 Primary data obtained by personal visit to different Chinese fast food chains 5 Ref. Alan Glanville, Economics from a global perspective, 1st edition 6 Source: http://adlib.athabascau.ca, an on-line library of Athabasca University of Canada 7 Source: data from Census and Statistics of HKSAR government 8 Source: data from Census and Statistics of HKSAR government 9 Source: Census and Statistics Department of HKSAR government 10 Source: 2003 yearbook of Caf� de Coral 11 Mr. Chan talked about outlets' decoration in 2003 annual general meeting 12 Source: 2004 half year report of Caf� de Coral 13 Source: 2003 yearbook of Fairwood 14 Source: 2002 Annual general meeting of Caf� de Coral 15 Source: 2003 Annual general meeting of Fairwood 16 Source: http://www.cafedecoralfastfood.com/eng/lunch.jsp, the website of Caf� de Coral 17 Source: 2003 annual general meeting ...read more.

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