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Marketing Report - By taking advantage of the acquisition benefits, product differentiation and successful marketing mix, Little Sheep is generally recognized as a leader in the hot-pot industry in China.

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MKTG 4070B Marketing in China A report on the Little Sheep's business Group Members: . Cheung Ho Yee 1009632092 Chow Tiffany Cheuk Ting 1155003729 Lam Tat Weng 1009608023 Pak She Yu 1008604123 Tso Shuk Fan 1155003823 Wong Tsz Kuen 1155002814 Ying Yuen Mei 1155000177 INTRODUCTION By looking at the factors of success and the challenges of Little Sheep is facing currently, the report is written to find out the reasons why Little Sheep has been so successful in the hot-pot industry in China and to give some recommendations for overcoming its shortcomings while doing business. By taking advantage of the acquisition benefits, product differentiation and successful marketing mix, Little Sheep is generally recognized as a leader in the hot-pot industry in China. By studying this company, clues to succeed in the Chinese market can be found. COMPANY OVERVIEW Inner Mongolia Little Sheep Catering Chain Co. Ltd. (???????????) is a private company found in Baotou, Inner Mongolia in China in 1999 by Mr. Zhang Gang (??) and Mr. Chen Hongkai (???). It currently holds 525 chain restaurants in China including Hong Kong, Macau and Taiwan, Japan, South Korea, United States, and Canada, having over 60,000 employees over the world. The company is renowned in operating its hot pot restaurants (both in franchise and wholly owned business), condiment processing (wholesale and retail) and meat processing business (wholesale). Their hot-pot business serves dinner in a variety of thinly sliced meats such as pork, mutton and beef. In 2012, Little Sheep was sold to Yum! Brands Inc, a US based fast food franchise conglomerate for $587 million, to facilitate its future international expansion after the approval of the Chinese Ministry of Commerce. Yum! Brands Inc, on the contrary, can diversify itself into a full-service Chinese restaurant segment. Being the first Chinese catering business that listed in Hong Kong Stock Exchange, The Little Sheep Co has delisted in Hong Kong in February 2012 as Yum! ...read more.


Customers are also less price sensitive and they have higher purchasing powers compared to Chinese citizens, making a high-price strategy more profitable. As Little Sheep owns its production and logistic facilities, the company is able to maintain a stable source of supply, hence lowering the production and maintenance costs. The target consumers of the Little Sheep are supposed to be the middle-class people. But due to the decreasing production cost and taking advantage of the economy of scale, the price of the Little Sheep is less expensive at about HKD$80 that becomes more affordable by most of the citizens nowadays. Currently, the Little Sheep remains a popular choice of dining places among Chinese citizens. BENEFITS OF ACQUISITION Little Sheep has become a listed company in HK Stock Exchange since 2008. However, in Feb 2012, they were acquired by Yum! Brand Inc. (????????) and delisted from the HK Stock Exchange. Yum! is a US-based company, which is the world's largest fast food restaurant company in terms of system units. Yum! is very successful worldwide, they entered China since 1987. Their brands include KFC, Pizza Hut and East Dawning (????, which is a Chinese-style fast food restaurant) and so on. After the acquisition, Yum! will manage the entire operation of Little Sheep. They aim to improve Little Sheep's operation mode, in order to increase the leading role of Little Sheep and provide a high quality food and beverage service to Chinese customers. [1] There are several advantages for Little Sheep. First of all, since Yum! has a very successful business in China, it would help Little Sheep to establish a better brand image. Second, they can enjoy economies of scale through brand synergy. For example, Little Sheep could have a co-advertising campaign with other Yum!'s brand like Pizza Hut. This may save costs due to the larger size of the promotion campaign. Little Sheep can also share the same site with KFC and Pizza Hut so that they can save rent. ...read more.


In order to enter the international market smoothly, we propose a few strategies here. First of all a better-organized English website needs to be set up as the Internet is an important channel for western customers to search for information of restaurants. Apart from offering traditional Chinese hot pot, products with some variations to cater for localities should be considered to cater for different customers, e,g, cheese hotpot. At last, brand image must be improved and promoted in the overseas market as westerners always regard Chinese food as unhygienic and dirty. Efforts must be paid to make them feel that Little Sheep is not the same as other Chinese brands. 3. IMPROVING THE HYGIENE CONDITIONS OF THE RESTAURANTS The Unhygienic kitchen conditions leads to the occurrence of mice. To cope with the hygiene problems, the Little Sheep restaurants are suggested to set up regulation all workers in the kitchen should use plastic gloves, upgrade the washing machine with the function of UV sterilization and managers should inspect and supervise the hygiene conditions frequently. In the long haul, the Little Sheep should set up a hygienic supervising taskforce. The taskforce regulates the rules regarding to the basic food and personal hygiene, and conducts regular inspections on the hygiene conditions. Moreover, 'The Secret Customers' Program is encouraged to be conducted to evaluate the hygiene environment of the restaurants by the consumers. Furthermore, the company should put more resources on staff training courses about food and personal hygiene before official appointment. CONCLUSION The case of Little Sheep provides an insight of the keys to success while running hot-pot fast chain restaurants in China. Although it is facing different threats and weaknesses, our three recommendations can help overcome its shortcomings and continue to expand and lead a dominant position in the hot-pot market. Along with the mission of the company "basing on quality to maximize customers' value" in mind, Little Sheep is believed to stay as a strong tycoon in the industry. APPENDIX * Survey result from my3q.com * Sources: -Little Sheep Official Website http://www.littlesheep.com/ -Little Lamb Official Website http://www.nmxwy.com/ -Youtube ?? ?? ?? ?? 3 16 ...read more.

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