China Restaurant Industry Analysis

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TOWS
OPPORTUNITY&THREATS
A Brief Description of China's Restaurant Industry
In the 1970s and 1980s, China's restaurants were mainly state-owned enterprises and collective-owned enterprises. After economic reform and opening up, however, the restaurant industry experienced dramatic changes. Huge quantitative expansion, scale-based chain development and brand upgrading, were areas of significant change.
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The social-economic development of the past 30 years had improved people's disposable income and living standards as well as allowing changes in life style. As a result, food and drink consumption level per capita had grown sharply. Additionally, China's urbanization had also significantly helped the growth of the restaurant industry. …show more content…

Private investors rapidly replaced state ownership. Individually-owned enterprises, privately-owned enterprises and foreign-owned enterprises became the main body of the restaurant industry. New business categories emerged including traditional Chinese cuisine, western food, fast food, casual dining and theme restaurants. Concentration in the restaurant industry has risen steadily. By 2010, the annual sales of the Top 100 restaurant enterprises in China accounted for 7.91% of total restaurant revenue, while the number of restaurant enterprises with a turnover of more than RMB 1 billion a year grew from 26 during 2009 to 36. Nevertheless, China's restaurant industry is fiercely competitive, with small restaurant enterprises still taking the major market share. China is a vast country with people in different areas preferring different cuisines. This increased the complexity of market competition. Also, developed big cities with frequent employee turnover tend to have high acceptance of different cuisines, and brand effect is more significant in these …show more content…

Economic advantages of scale come from standardized purchasing and distribution processes. Unified quality and services are also key to chain operations globally. This is very complex to do in China as Chinese food is not highly standardized. Chinese food comes in many varieties and has very complicated production processes. Consequently, it is difficult to standardize the amounts of raw materials in the final product. Additionally, personal preferences and cooking experience levels of chefs significantly impact the quality of dishes. It is difficult to standardize the color, fragrance, taste and shape of a dish. Consequently, it is difficult to achieve the uniformity in chain operation. To improve the competitiveness of the Chinese food, technological innovation is required to standardize

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