Buad453 Yum Brands Case Analysis

Alicia Bauman

BUAD 453

Yum Brands Case Analysis

Yum! Brands has cornered the market on expanding their businesses globally. The company started by using a joint venture to get started in China. The company formed joint ventures in Beijing and Shanghai with multiple partners including a state-owned bank and a food distributor. However, by 2011, Yum! Owned 83% of its restaurants in China. The company has tried to own restaurants where profit margins exceed 15% and use franchisees in riskier countries.

In different countries, the key to success is adapting your products to properly serve your customers. This is exactly what Yum! Brands did with the KFC, Pizza Hut and Taco Bell menus. The Pizza Hit menu in China is 40 pages long and contains more than 120 items organized into nine categories and the company replaces 25% of the menu every six months as a way to increase frequency. China’s KFC also regularly launches new products and seasonal, limited time offers. The company had to adapt its products again for the Indian market’s eating habits which are influenced by Hindu religious practices. Taco Bell had to change over to chicken and potatoes as a meat replacement. Pizza Hut divided its menu into vegetarian and non-vegetarian and none of the pizzas had meat toppings.

The goal was to integrate KFC into Chinese consumers’ daily life, so they wanted to have asset penetration, daypart penetration, age group penetration and food category penetration. Yum! Did an excellent job of adapting to lifestyle changes in China over the years in order to expand its brand and user base including breakfast service, 24-hour service and home delivery. Another way that they ensured they stayed up to date with the changing trends, Yum! Brands hired employees from the local market.

 For market entry, Yum! Uses a standard approach from which they rarely deviate. This approach starts with the company looking for countries with a growing middle class that is receptive to western brands. Other major considerations include experience and vision of potential franchise partners, the ability to operate within the local regulatory environments, and the capability of local suppliers to meet its food quality and nutrition standards. Yum! Brands ensures that all of the business units around the world comply with the same standards. Yum! Brands deviated from this formula when they first entered Brazil, Russia, India, Africa, Australia, France and more.