Harvard Business Case: Yum!Brands SolutionBrad / December 20, 2012

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 theoverall success in the eastern market. When analyzing the capability of the firm to build off of success and position itself to bethe industry leader in other emerging markets, they focused on key indicators that led to overall profitability in the ChineseMarket. The success of Yum! In North America is already acknowledged, and the key characteristic which would prove itselfas 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 profitscoming from outside the United States to the relatively dormant domestic sales and growth found in the United States provesthe 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 borderChina may potentially hold a great opportunity for profitability. When analyzed from a global standpoint, this location mayprove as a sensible area to expand to. The cultures and shopping habits are very likely to be similar and can be confirmedthrough research and outsourcing contacts in these areas The strategies that worked well in China can also be used andmarginally altered to drive success in the countries who border China. The cultures of those countries that border Chinacannot exactly be aligned which needs to be taken into consideration. Specific strategies that were created and implementedin China such as the creation of day parts, which was the offering of a limited Tea Time menu through its Pizza Hutconstituents, as well as the increased arrival of more traditional Chinese foods and a newly created business service at KFCcould although be used as a design for nearby countries that Yum! Is looking to penetrate. Specific aspects proved to be thebasis for the success that was found in China. This includes the exponential growth in GDP per capita recognized in the 20years 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 consumer’s insights, opposed to the innovation ofAmerican food culture, Yum! Was able to streamline the idea that would prove to be the key to its success within thecountry. This was more than likely the primary notion that would hold the most weight when considering the options ofexpanding into countries neighboring China. The design of the business model was already put into place, but the degree ofsuccess to carry that over and make it work for the consumer and company in other countries would prove to be both thegreatest challenge. With this in mind, there are similarities among geographically relative countries, but there are alsodifferences among cultures in each country. The threat of thinking that each country is exactly the same is something thatshould 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 toexpand to. India is one specific country, which can prove to replicate the success in metrics that occurred over the years inChina. The integration of the company and its products has already taken place in India, which can be seen by the increasedopenings of both KFC and Pizza Hut restaurants present in 2011. The opinion that was established by the executive levelteam within Yum! was that there is a parallel between how India is currently developing in relation to the characteristics thatsurrounded the opportunity in China.

The sheer enormity of India’s population, coupled with the fact that it is an emerging market in terms of technology andeconomy makes it a prime candidate for expansion. There also are a couple specific statistics and cultural differences thatmust be considered and worked upon to ensure a steady successful expansion initiative. The population is composed of alarge 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 servicemarket in India, combined with the statistic that 60% of the population fall under the age of 30 all show a mix of corecharacteristics that a company needs has to build in this market. Taco Bell brand would be positioned for the most growth inIndia compared to other Yum! brands such as KFC.

There are always challenges that accompany expansion into foreign markets. Demographically India has high percentages ofpoverty stricken individuals that make up a large percentage of the “consumer base.” The eating habits of the majority of thepopulation, and the unfamiliarity with the product combinations offered on the a Taco Bell menu each provide Yum! Withadditional challenges. Through the ability of marketing Taco Bell as the prime choice for Mexican food, Yum! is attempting tobuild 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 dishesto 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 commonlyeaten, because the cow is a sacred creature. This gives Yum! the go-ahead to become creative in it’s product offerings andreally focusing on the needs of the end users. Local supply chains should be utilized to create high margins and create arelationship with the people who are producing the raw materials in India. Using China as a foundation is a great tool toeffectively 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 KFC’s inAfrica with a $500 million investment. This investment is large but you need to spend money to make money. The growth andreturns should be apparent within two years. In terms of the long run an investment in Africa will prove to be a stableinvestment with growth potential and short-term costs will be nominal. McDonald’s has not established a monopoly as wellas 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 theregion and cross-border trade regulations that exist. This forces a reliance on local suppliers by the company, which is notalways a bad situation. Local sourcing historically has been beneficial for companies and suppliers. The main tool forsuccess that has proven to work and played out very well is the implementation of a value menu. Customers perceive greatvalue in the menus and typically people who dine at fast food establishments want to become “full for the least amount ofmoney 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 it’s commitment toits customers and how the interact with the product. Growth is dependant on the commitment to customizing a plan ofaction 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. Formingrelationships with the people will provide insight and ultimately lead to sustained profitability. Global expansion iscomplicated, but utilizing the right frameworks and having open-minded people who understand cultural differences at thehelm 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 India’s booming growth in cell phone usage, which shows the recent technological advances. Cell phones

provide data services for Indian’s and will stimulate the economy.

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December 20, 2012 in Articles. Tags: Harvard Business Case, Marketing, Yum!

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