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Harvard Business Case: Yum! Brands Solution

Brad / December 20, 2012

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Yum! Case Study Solution: The degree of success that Yum! Brands found in China, can be correlated to a number of factors that held great value to the overall success in the eastern market. When analyzing the capability of the firm to build off of success and position itself to be the industry leader in other emerging markets, they focused on key indicators that led to overall profitability in the Chinese Market. The success of Yum! In North America is already acknowledged, and the key characteristic which would prove itself as the foundation build upon is to focus primarily upon those developing countries that have the greatest growth potential. By focusing on a key aspect, the company can further cultivate their vision, for the company is that we want to be the defining global company that feeds the world. The increasing metrics they are seeing as a company specifically profits coming from outside the United States to the relatively dormant domestic sales and growth found in the United States proves the importance to make Yum! Into a company that competes globally. A handful of countries that have qualities beneficial to Yum! Brands are apparent. Countries that geographically border China may potentially hold a great opportunity for profitability. When analyzed from a global standpoint, this location may prove as a sensible area to expand to. The cultures and shopping habits are very likely to be similar and can be confirmed through research and outsourcing contacts in these areas The strategies that worked well in China can also be used and marginally altered to drive success in the countries who border China. The cultures of those countries that border China cannot exactly be aligned which needs to be taken into consideration. Specific strategies that were created and implemented in China such as the creation of day parts, which was the offering of a limited Tea Time menu through its Pizza Hut constituents, as well as the increased arrival of more traditional Chinese foods and a newly created business service at KFC could although be used as a design for nearby countries that Yum! Is looking to penetrate. Specific aspects proved to be the basis for the success that was found in China. This includes the exponential growth in GDP per capita recognized in the 20 years after the opening of the first KFC and also the idea to position the company to be a part of the Chinese consumers every day life. By putting the greatest deal of importance on the Chinese consumers insights, opposed to the innovation of American food culture, Yum! Was able to streamline the idea that would prove to be the key to its success within the country. This was more than likely the primary notion that would hold the most weight when considering the options of expanding into countries neighboring China. The design of the business model was already put into place, but the degree of success to carry that over and make it work for the consumer and company in other countries would prove to be both the greatest challenge. With this in mind, there are similarities among geographically relative countries, but there are also differences among cultures in each country. The threat of thinking that each country is exactly the same is something that should be understood and ultimately avoided The growth of India, in both a population and economical sense is one that certainly proves itself as a highly probable area to expand to. India is one specific country, which can prove to replicate the success in metrics that occurred over the years in China. The integration of the company and its products has already taken place in India, which can be seen by the increased openings of both KFC and Pizza Hut restaurants present in 2011. The opinion that was established by the executive level team within Yum! was that there is a parallel between how India is currently developing in relation to the characteristics that surrounded the opportunity in China. The sheer enormity of Indias population, coupled with the fact that it is an emerging market in terms of technology and economy makes it a prime candidate for expansion. There also are a couple specific statistics and cultural differences that must be considered and worked upon to ensure a steady successful expansion initiative. The population is composed of a large majority of young people and this demographic combined with the cultural norm of a desire for spicy food lead to the

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idea that a Taco Bell should be successful in theory. In 2011 restaurant chains merely accounted for 2% of the food service market in India, combined with the statistic that 60% of the population fall under the age of 30 all show a mix of core characteristics that a company needs has to build in this market. Taco Bell brand would be positioned for the most growth in India compared to other Yum! brands such as KFC. There are always challenges that accompany expansion into foreign markets. Demographically India has high percentages of poverty stricken individuals that make up a large percentage of the consumer base. The eating habits of the majority of the population, and the unfamiliarity with the product combinations offered on the a Taco Bell menu each provide Yum! With additional challenges. Through the ability of marketing Taco Bell as the prime choice for Mexican food, Yum! is attempting to build upon the notion that consumer education and time can have the ability to change the current mindsets of consumers. By offering differences in their product offerings such as substituting chicken for beef and adding additional vegetarian dishes to the mix consumers will wean themselves onto the brand. The Hindu religion is practiced by the majority of those living in India and is a clear hurdle for Yum! Beef is not commonly eaten, because the cow is a sacred creature. This gives Yum! the go-ahead to become creative in its product offerings and really focusing on the needs of the end users. Local supply chains should be utilized to create high margins and create a relationship with the people who are producing the raw materials in India. Using China as a foundation is a great tool to effectively implement the brand into India. Africa also offers a tempting situation to expand to as well. There is a clear aspiration to multiply the number of KFCs in Africa with a $500 million investment. This investment is large but you need to spend money to make money. The growth and returns should be apparent within two years. In terms of the long run an investment in Africa will prove to be a stable investment with growth potential and short-term costs will be nominal. McDonalds has not established a monopoly as well as brand loyalty in Africa, which could prove to be a major advantage for Yum! To expand into this territory A barrier is evident when considering an operation in Africa is the large degree of difference between the countries within the region and cross-border trade regulations that exist. This forces a reliance on local suppliers by the company, which is not always a bad situation. Local sourcing historically has been beneficial for companies and suppliers. The main tool for success that has proven to work and played out very well is the implementation of a value menu. Customers perceive great value in the menus and typically people who dine at fast food establishments want to become full for the least amount of money they have to spend while also getting an enjoyable meal and dining experience. The strategy for Yum! to expand globally rests upon variables that can be customized for each country. What, in the past, was successful in China may not be the clear answer for India, or Africa. In the end Yum! must focus on its commitment to its customers and how the interact with the product. Growth is dependant on the commitment to customizing a plan of action for each different country and recognizing the similarities and differences in past successes in China and the US. Taking advantage of local ingredients and supply chains is key to the financial integrity of each unique operation. Forming relationships with the people will provide insight and ultimately lead to sustained profitability. Global expansion is complicated, but utilizing the right frameworks and having open-minded people who understand cultural differences at the helm of the expansion will provide viability for Yum! Brands. * Please See Gapminder Data on the following Pages I used to make my inferences * This 2006 data correlation shows that India has a similar income per person over population (aged 20-39, the primary consumers of fast food) The two graphs are heading towards intersection. This demonstrates Indias booming growth in cell phone usage, which shows the recent technological advances. Cell phones provide data services for Indians and will stimulate the economy.
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December 20, 2012 in Articles. Tags: Harvard Business Case, Marketing, Yum!

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