Yum! Brands, Pizza Hut, and Kfc

Yum! Brands, Pizza Hut, and KFC

By: Jorge E Fernandez

1. Describe Pizza Hut and KFC's investment strategy in Latin America.

The maturity of the U.S fast food industry intensified competition within the same segments; this created a need for new markets. Taking in consideration that the only new available markets were outside the US, firms like Pizza Hut and KFC decided to go for the international markets so that they could expand their sales. Foreign markets in Latin America were attractive because of their large customer bases and comparatively little competition. Latin America as a region was of particular interest because of its geographic proximity to the United Sates, cultural similarities, and NAFTA.

With more than 12,000 KFC and Pizza Hut restaurants located outside the USA, it was imperative for these fast food enterprises to make sure their standards were held. This was possible do to their 77% of their franchises been manage by local franchisees and or joint ventures. They were of great help do to their understanding of the local language; culture, customs, laws, financial markets and marketing characteristics. Franchising allowed firms to expand more quickly, minimize capital expenditures, and maximize return on invested capital. The country selection models typically assessed countries on the basis of market size, growth rates, the number of and type of competitors, government regulations, and economic and political stability. The strategy for these fast food restaurants was an aggressive move towards new developing markets based on the segment they were aiming to achieve. Different factors and different situations guide were to establish each new restaurant.

2. Using the country and industry risk categories discussed in the case, compare