One of the most impressive stories of a U.S. multinational in an emerging market is unfolding right now in China: KFC is opening one new restaurant a day, on average (on a base of some 3,300), with the intention of reaching 15,000 outlets. The company has achieved this success by abandoning the dominant logic behind its growth in the United States: a limited menu, low prices, and an emphasis on takeout. In 1987, when the first Chinese KFC opened in Tiananmen Square, Western-style fast-food restaurants were unknown in China. Many Chinese still wore the tunic suits of the Mao era, and bicycles were the primary means of transportation. KFC was a novelty, a taste of America. It was a place where residents with spending money could go for a special occasion. Although customers didn't like the food much, KFC made steady progress, according to Sam Su, now the chairman and CEO of Yum! Brands China Division, which owns KFC and several other brands in the country. KFC China's success in winning over Chinese consumers grew out of a deep understanding of the differences between established and developing markets and a willingness to radically alter a western brand's infusing with Chinese characteristics. The company's managers sought to stretch the brand so that consumers would see KFC as part of the local community-not as a fast-food chain selling inexpensive western-style items but as a restaurant offering a variety of foods and the traditional dishes that appeal to Chinese customers. They enlarged the outlets, which are about twice the size of those in the U.S., to allow bigger kitchens and more floor space for customers to linger. They made a special effort to welcome extended families and groups. By contrast, in the United States, KFC outlets are designed primarily for takeout-most of the dining is done at home. KFC China's menus typically include 50 items, compared with 29 in the United States. The menu variety adds traffic and encourages repeat visits. The company introduces about 50 new products a year (some of them are offered only temporarily), compared with one or two in the U.S. Its executives have what they consider to be a very aggressive program for new product development, which is handled by a committee of managers from marketing, operations, product safety, and the supply chain. Menus offer spicy chicken, rice dishes, soy milk drinks, egg tarts, fried dough sticks, wraps with local sauces, and fish and shrimp burgers on fresh buns. Spiciness levels are critical to customers. In the chain's early days, when the same recipes were served at all outlets, Shanghai customers complained that dishes were too hot, while diners in Sichuan and Hunan complained that they were too bland. So the company changed its recipes to suit the regions. It also offers congee, a famous rice porridge that is hard to make at home, KFC's number one seller at breakfast. (Source: Doyle, P and Stern, P., 2006) a) Analyse KFC approaches to market segmentation in China. b) Elaborate the internationalization approaches adopted by KFC on its presence in China.