Running head: THE WAY TO YUM! BRANDS’ SUCCESS

THE WAY TO YUM! BRANDS’ SUCCESS

NGUYEN DINH QUYEN

Bristol University

Abstract

The success of Yum! Brands in China can be studied and correlated to a number of factors that

held valuable effects to the overall success in the fast food eastern countries market. Where does

Yum! have the best chance to replicate its success in China, and which of the strategies that

have worked well there might be adapted to other markets? The company could invest heavily in

Africa, where McDonald’s is still small and the population loves fried chicken. India, however,

with its large number of young people and taste for spicy food might be the ideal location

to build Taco Bell. Which countries deserve Yum!’s attention, and what emphasis should the

leadership team place on Yum!’s different brands?

Keywords : Yum! Brand success, China , India, Africa, Taco Bell, KFC, Pizza

THE WAY TO YUM! BRANDS’ SUCCESS

When making the analysis about the capability of the firm to build off of success and

position of Yum! Brands 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

China is already acknowledged, and the key characteristic which would prove itself as the

foundation build upon is to focus primarily upon those developing countries as India, Africa…

that have the greatest growth potential. 

India – The most suitable country to replicate Yum!‘s success in China

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’ everyday life.  By putting the greatest deal of importance on the

Chinese consumer’s 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. India is

expected to overtake China as the world’s most populous nation as early as 2025, according to

projections from the United Nations. While China’s population is aging, 60 percent of India’s

1.2 billion residents are under the age of 30, and that is the sweet spot for fast-food restaurants.(1)

People in India currently spend less on fast food — 2010 spending per person was $11 in

India versus $60 in China — but India’s GDP growth is expected to exceed China’s as early as

2014, (2). At some point India’s growth is going to be so rapid that it will be a pretty big driver

of Yum!’s business. 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 India’s 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 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.(3)  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 it’s 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.

Which of the strategies that have worked well there might be adapted to other markets

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 depended 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.

However, the success in China give Yum! many valuable lesion. It has been built through

a combination of factors such as tailored product offerings, the use of a local management team,

effective franchise control and favourable store locations. By integrating these strategic factors

into its growth strategy in India, Yum should look forward to building a strong position in the

country and enjoy similarly robust growth as it did in China.

The aforementioned factors

It have allowed Yum to secure a firm competitive position in the Chinese market. Yum

boasts a healthy lead over US fast-food giant McDonald's in China and currently operates more

than 4,000 stores in the country. McDonald's operates around 1,400 fast-food restaurants in

China. (4) While Yum will continue to enjoy exciting prospects in China, the prospect of stronger

growth will, however, be accompanied by a greater volatility in earnings. In order not to fall

victim to its own Chinese success, international diversification is therefore pivotal to its long-

term growth strategy, and India features strongly on Yum!'s radar in this regard. Given Yum's

impressive feat in China, it is not surprising that the company plans to export its Chinese

operating model to India, and they will elaborate on how each of the aforementioned factors will

be crucial towards Yum!'s success in the Indian market.

Tailored Product Offerings:

Instead of replicating its Western menus in its Chinese stores, Yum adapted its product

offerings to suit localised Chinese tastes and preferences, and this strategy clearly struck a chord

with Chinese consumers. Similarly, Yum is tailoring its menu in India to cater to the differing

regional tastes. Yum plans to introduce spicier offerings at its KFC stores in India, which should

appeal well to local consumers. Moreover, we acknowledge that Yum already has a competitive

edge over McDonald's in the Indian market. Although everyone eats meat in India, it has not

been particularly easy to establish mainstream appeal for the Big Mac, while KFC-styled chicken

has been a much bigger draw.

Local Management Team

Employing ethnic Chinese managers for the operation of its stores in China, Yum was able

to leverage on their local expertise to develop a product portfolio that caters well to domestic

tastes. This strategy also has the additional benefit of circumventing language and cultural

differences. Given the hugely regionalised nature of the Indian market, an understanding of local

consumer preferences and tastes is necessary to build a strong position in the market. The use of

a local management team should therefore facilitate Yum's expansions in India.

A Well-Managed Franchise Network

Yum's effective control of its franchise structure in China was a significant driver behind

its growing dominance in the country. By maintaining an effective control over its local

franchisees in India as it did in China, this should provide Yum with a strategic platform to adapt

its product offerings and expand rapidly.

Favourable Store Locations

According to Yum's CEO David Novak, the company has been securing flagship store

locations in China and plans to adopt a similar strategy of acquiring favourable store locations in

India. While such a strategy should ease Yum's expansions across India, more noteworthy to us

is the company's plans of expanding in both large and smaller cities in India. By entrenching

itself early in the smaller cities, which are typically less mature and provide greater room for

growth, Yum could secure an early lead in these markets before competition intensifies rapidly.

Restaurant Operations

Through its Concepts, YUM develops, operates, franchises and licenses a worldwide

system of both traditional and non-traditional QSR restaurants. Traditional units feature dine-in,

carryout and, in some instances, drive-thru or delivery services. Non-traditional units, which are

typically licensed outlets, include express units and kiosks which have a more limited menu and

operate in non-traditional locations like malls, airports, gasoline service stations, convenience

stores, stadiums, amusement parks and colleges, where a full-scale traditional outlet would not

be practical or efficient.

The Company’s restaurant management structure varies by concept and unit size.

Generally, each Company restaurant is led by a restaurant general manager (“RGM”), together

with one or more assistant managers, depending on the operating complexity and sales volume

of the restaurant. In the U.S., the average restaurant has 25 to 30 employees, while

internationally this figure can be significantly higher depending on the location and sales volume

of the restaurant. Most of the employees work on a part-time basis. We issue detailed manuals,

which may then be customized to meet local regulations and customs, covering all aspects of

restaurant operations, including food handling and product preparation procedures, safety and

quality issues, equipment maintenance, facility standards and accounting control procedures. The

restaurant management teams are responsible for the day-to-day operation of each unit and for

ensuring compliance with operating standards.

CHAMPS – which stands for Cleanliness, Hospitality, Accuracy, Maintenance, Product

Quality and Speed of Service – is our proprietary core systemwide program for training,

measuring and rewarding employee performance against key customer measures. CHAMPS is

intended to align the operating processes of our entire system around one set of standards.

RGMs’ efforts, including CHAMPS performance measures, are monitored by Area Coaches.

Area Coaches typically work with approximately six to twelve restaurants. The Company’s

restaurants are visited from time to time by various senior operators who help ensure adherence

to system standards and mentor restaurant team members.

RGMs attend and complete their respective Concepts’ required training programs. These

programs consist of initial training, as well as additional continuing development and training

programs that may be offered or required from time to time. Initial manager training programs

generally last at least six weeks and emphasize leadership, business management, supervisory

skills (including training, coaching, and recruiting), product preparation and production, safety,

quality control, customer service, labor management, and equipment maintenance.

Concept and new product development 

In the current economic situation, it is obvious that Yum! Brands cannot progress and gain

larger share of international market using only traditional products. In stark contrast, nowadays

the necessity of changes has become as obvious as it has never been before. It is quite a natural

process since the companies united under Yum! Brands target at entering new markets that is

impossible in fast food market because different regions of the world have different gastronomic

tastes and preferences. As a result, products that are popular in one country will not necessarily

be accepted in another country. This is predetermined by the existing food culture that defines

the preferences and tastes of the local population and which differ dramatically in different

regions.

In this respect, China is not an exception. This is a unique country with a very original

national cuisine that naturally needs certain adaptation from the part of Yum! Brands. In fact,

this is exactly because of the local peculiarities, Pizza Hut has launched serving sangria and

escargot along with traditional pizza and other-related products that are sold in other countries of

the world. It is worthy of mention that such products sangria and escargot are close to the

traditional Chinese cuisine and the introduction of these products which are new for Pizza Hut

can lead to the growing popularity of its restaurants in China.

However, such changes of menu and products supplied to customers are not extraordinary

and serious as the changes that have occurred in Taco Bell. It should be said that the company

has changed its traditional positioning in the market. To put it more precisely, the Chinese Taco

Bell restaurants are actually not fast food restaurants as in other countries throughout the world.

Instead, they are full service restaurants called Taco Bell Grande that are more analogous to

Mexican grill in the US. Unlike fast food restaurants, Taco Bell Grande, in addition to the

traditional menu including taco and burritos, Chinese restaurants also serve other Mexican

cuisine such as albondigas, i.e. meatball soup, grilled chicken, and alcoholic drinks such as

Margaritas. Thus, Taco Bell restaurants are positioned as more prestigious restaurants in China

compared to its traditional market position in other countries of the world.

Nonetheless, even such a significant change seems to be quite an ordinary thing compared

to the development of a totally new chain of restaurants under the brand of East Dawning. It

should be said that these restaurants are a kind of compromise between traditional Western and

Oriental cuisines, or, to put it more precisely, Western and Oriental restaurants. This new chain

of restaurants provides an opportunity for the local customers to benefit from Western quality of

services and size and Oriental, notably Chinese, traditional cuisine.

These restaurants are more spacious and have better lighting. Chinese food is served

exclusively but the chain focuses on the elements of Chinese cuisine that are more quickly and

easier to prepare. In such a way, the philosophy of Western fast food restaurants is attempted to

be settled on Chinese ground, adapting to local national cuisine, traditions and food preferences.

As a result, by means of creation of the new company Yum! Brands attempt to enter Chinese

market using adaptation of the traditional Kentucky Fried Chicken restaurants to Chinese

cuisine.

Sources and distribution strategies

Naturally, taking into consideration the fact that the companies constituting Yum! Brands

operate worldwide, they are traditionally oriented on the local sources to supply the restaurants

with essential products and ingredients. In fact, such a strategy has a number of advantages. For

instance, in such a way Yum! Brands can save costs on transportation of the essential products

from different parts of the world. Moreover, speaking about Chinese market, it is worthy of

mention that many products are substantially cheaper even compared to neighbouring Asian

countries. At the same time, the use of local product stimulates local government to support the

companies entering Chinese market since they buy the products of local producers. In such a

way, Yum! Brands naturally acquire support of the local state due to the use of the products of

Chines agriculture.

However, it is also necessary to agree that some products that are used uniquely Chinese

restaurants cannot be imported from any other country of the world since it is economically

unmotivated. Furthermore, it should be pointed out that the company uses a traditional strategy

of distribution of its products. Yum! Brands create chain of fast food restaurants throughout the

country providing the high quality of services to a possibly larger number of people. Naturally,

taking into consideration the relatively low experience of fast food consummation in China and

relatively low level of income, the companies constituting Yum! Brands primarily focus on large

cities and capitals. It is obvious that large cities, with a large number of population, are

practically perfect places for the development of the chain of fast food restaurants since the

number of customers in such cities is incomparably higher than in average or small towns.

Geographical spread 

In the result of the existing strategy of distribution of Yum! Brands products through the

chain of restaurants placed in the largest cities of the country, the geographical spread of

restaurants is disproportional and rather tends to be denser at the Eastern coast of the country

where the largest Chinese cities, including Hong Kong – the first city where companies

constituting Yum! Brands entered the local market, are situated.

To put it more precisely, it is possible to name Shanghai, Hong Kong, Beijing as the cities

where practically all companies of Yum! Brands are represented. It is worthy of mention that

Pizza Hut is one of the most widely represented companies which operates in Chinese market

compared to other companies of Yum! Brands. For instance, in 2005 this company had nearly

200 restaurants in such cities as Shanghai, Tianjin, Chongqing, Guangzhou, Nanjing, Shenzhen,

Hangzhou, Wuhan, and Changsha.

Obviously, at the present moment Yum! Brands are underrepresented in Western China

and average cities of the country but the current market situation provides ample opportunities

for the further growth even in the current geographical borders of the regions where its chains of

restaurants operate.

Franchising and licensing 

Unquestionably, one of the most important points of the further development of Yum!

Brands as well as its current position are franchising and licensing. Basically, the companies tend

to unification and mutual support and the cases when local producers receive an opportunity to

operate under the brand of Yum! Brands are quite rare. The reason is that the companies

constituting Yum! Brands do not have a long experience of work in the local market, and what is

more, of the work with local companies operating in the same segment of the market.

To a significant extent, this is the result of a low development of fast food industry in

China before Yum! Brands and other Western companies entered the local market. This is why

the local companies are considered to be not very reliable, and thus, the companies of Yum!

Brand do not want take a risk of merging with some local fast food restaurants which are

substantially weaker compared to Yum! Brands.

On the other hand, it is necessary to say that it is rather a question of time since Yum!

Brands traditionally operate on the basis of franchise and licenses.

Risk management 

Despite a serious progress that Yum! Brands has made in China, it would be a mistake that

its entering Chinese market was deprived of any risks and threats. In stark contrast, the

companies constituting Yum! Brands faced serious obstacles while they entered the local market.

In this respect, it is worthy of mention the opposition of the local population and quite unpopular

image of fast food restaurants in the public eye.

In such a context, it should be said that the recent researches are quite noteworthy because

they manage to trace the evolution of fast food industry at large and Yum! Brands in particular.

At the same time, it is also extremely important to reveal the evolution of products used by

Yum! Brands companies that are sold to their consumers. Basically, at the present days it is

argued that initially natural components were used in food production. As the time passed, new

technologies, especially in chemical industry, were implemented in the process of food

production. Moreover, food became an object of mass production and in a combination with new

technologies it resulted in the development of companies struggling for their share of the market

of the food industry.

In fact, nowadays, artificial elements, which are used in food production, substitute natural

elements. In the result, consumers are not informed about what they eat and the taste of food is

deceptive because it can vary depending on chemical components used. Moreover, some

specialists raise another extremely important problem. To put it more precisely, it is stated that

companies involved in food production are not willing to reveal their commercial and

technological secrets and the information about the process of food production and its

ingredients is a kind of taboo. Thus, consumers lack information about food that leads to their

deception.

Furthermore, since there is little information about food ingredients, neither consumers nor

specialists can really define the extent to which the fast food is dangerous for human health. It is

extremely disturbing because fast food industry is a dynamically growing industry and Yum!

Brands is only a leader but not the only company operating in this niche of the market. This is

why the companies of Yum! Brands are not alone in their struggle with the public opposition

and they try to minimize the risk and negative results of such opposition in China.

Obviously, the problem raised cannot remain unsolved. It is extremely important to find

some solution that could help people to be better informed about the ingredients of the fast food

they regularly consume and whether it is safe for their health or not. However, this is where

another problem, rises.

At first glance, the solution seems to be quite obvious – food producers should simply

provide consumers and specialists with detailed information concerning the process and

ingredients used in the food production. Naturally, it would probably solve the problem. In such

a situation, consumers could know what they ate and they could make a free and conscious

choice whether to eat or not the food suggested by fast food restaurants. Unfortunately,

nowadays they are deprived of such a possibility, since artificial elements substituted natural

ingredients and it is practically impossible to find the difference between natural food and one

consisting of artificial ingredients. Moreover, consumers are simply deceived. Otherwise, they

would probably react in a different way. Probably they would change their diet if fast food tasted

differently, or if they really knew what they ate. It is obvious that artificial elements may be

dangerous for their health.

For instance, it is not a secret that fast food causes obesity that is getting to be epidemic in

the US. Obviously, this situation is evidence of the negative consequences of the lack of

information about fast food, its processing and ingredients.

On the other hand, it is only one of negative consequences, while the negative effects may

be much more serious. For instance, the wide use of artificial ingredients, including chemical

elements, may have a number of side-effects, which may be disastrous for the health of some

individuals. To put it more precisely, some elements may provoke allergy that may deteriorate

individual’s health or even death of some individuals. Unfortunately, it is practically impossible

to predict such consequences of fast food consumption because of the lack of information about

food people eat. For instance, if an individual eats a beefsteak, it does not necessarily means that

it contains beef, or some other natural ingredients. Instead, some artificial elements, which are

potentially allergic, may be used.

Thus, it is obvious that the lack of information about ingredients of food and the use of

artificial elements in its production may have disastrous consequences but the problem is

aggravated by the fact that it also makes the proper treatment of health problems caused by food

practically impossible. It is not a secret that it is necessary to find the cause of illness to cure

patients efficiently.

This is why Yum! Brands attempt to be as open to the wide public as possible but it is

worthy of mention that they remain open only as long as there is no threat to their commercial

secrets.

At the same time, it should be said that the companies also faced a number of other

problems and risks. For instance, in 2005, Sudan Red was found in some KFC products. As a

result, the company had to launch a campaign in order to prove that its products are really safe

and healthy and cannot cause any harm to the customers of KFC in China. In this respect, it is

possible to remind that the state control in the country is quite strong and it was also used as one

of the elements to prove or guarantee the safety of the company’s products which were carefully

analyzed and researched by the local medical and state services.

Probably, the most serious risk KFC faced in China was the threat of Avian flue which

dramatically affected the company’s sales. As the main product of KFC was and remains fried

chicken the public panic fear before the consumption of chicken had decreased the sales of this

product dramatically, to the extent that the company was in quite a difficult position. However,

as the danger of anvian flue decreased the sales rates had started to grow steadily and at the

present moment they are at a relatively high level, though the risk of further problems provoked

by avian flue is quite serious. This is why the company has to constantly persuade the public that

there is no risk of catching avian flue in a restaurant of KFC.

Africa! A potential investment deserve Yum!’s attention

Africa offers a tempting situation to expand to as well. There is a clear aspiration to

multiply the number of KFC’s 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. McDonald’s 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.

What emphasis should the leadership team place on Yum!’s different brands? ( KFC, Taco

Bell, Pizza…. ).

Yum! Brands has Taco Bell Corporation which is also a fast food restaurant chain. Taco

Bell serves food items that are mainly based on Tex-Mex cuisine. As a rule, the company

encourages its diners ‘to think outside the bun’ by visiting its restaurants instead of hamburger-

selling fast food chain of restaurants. At the same time, Yum! Brands keep growing and one of

its recent creations is East Dawning. This company is Yum! Brands fusion of the KFC business

model with Chinese cuisine, which is specifically targeting at the local fast food market. Unlike

many other Asian fast food restaurants, Taco Bell restaurants are more spacious and possess

better lighting.

Market segmentation and positioning 

Naturally, Chinese market is very attractive for Yum! Brand and it attempts to gain a

possibly larger share of this market. In actuality, Yum! Brands plans to open at least 400

restaurants in China. It should be said that building dominants brand sin China as well as

international expansion at large was the strategic direction of the further development of Yum!

Brands. It should be pointed out that each company that is a part of Yum! Brands has it sown

market segment and positioning. In such a way, combining a variety of companies Yum! Brands

can occupy the leading position in different segments of the market.

In this respect, it should be said that Pizza Hut, for instance, is marketed as dine-in

restaurant serving sangria and escargot as well as the traditional pizza, including traditional

toppings and others like tuna. In such a way, Pizza Hut focuses on the market of fast food

restaurants being specialized on pizza and other related products. As for Pizza Hut delivery, it is

important to underline that this company targets at the delivery of company’s products to

customers either to household or office which is getting to be increasingly more important

service in China, especially in the situation, when the lunch time of Chinese is getting to be more

and more limited while the supply of services becomes widely spread, not in the last turn due to

Pizza Hut Delivery.

Speaking about Taco Bell, it is necessary to underline that the company basically operates

in the similar segment of the market as McDonalds but unlike such fast food hamburger-selling

chains of restaurants, Taco Bell positions itself as a restaurant where the customers can eat

different dishes in accordance with the company’s slogan ‘think outside the bun’. In such a way,

Taco Bell may be viewed as an alternative to traditional fast food hamburger-selling restaurants

like McDonalds.

Another company constituting a part of Yum! Brands, KFC, is a chain of fast food

restaurants widely known in the entire world due to its famous fried chicken which is cooked in

accordance with a specific recipe that is historically hidden from the wide public and which

make the company’s product unique and really attracting for customers.

As for East Dawning, it should be said that this company is quite unique since it represents

a symbiosis of a typical Western fast food restaurant with local, Oriental specificities. As a

result, this chain of fast food restaurants is different from both Western and Oriental competitors

that provides ample opportunity to occupy the leading and unique position in Chinese market.

Consequently, due to such a variety of products offered to the customers in Chinese

market, as well as in any other country of the world, companies constituting Yum! Brands

represent a serious power in fast food market occupying the leading positions in different

segments of the market.

Obviously, Taco Bell may be considered as one of the most perspective companies among

all companies constituting Yum! Brands. The fact that the company perfectly combines

traditional Kentucky Fried Chicken restaurants with the national cuisine of China made these

restaurants extremely popular and very perspective.

Naturally, the efficient analysis of the position of any company in the market implies

SWOT analysis. Speaking about Taco Bell it is possible to start SWOT analysis from the

discussion of strengths of the companies.

Finally, it is necessary to analyze the company in the context of Porter’s five force model.

In this respect, it is necessary to underline that Taco Bell possesses a great supplier power they

are constantly developing and progressing but still they cannot supply sufficient services for a

larger number of customers because of the local peculiarities of the market which is not perfectly

developed yet. As a result, the company supplies its services only to a limited amount of

customers who possess sufficient financial resources.

On the other hand, customers buyer’s power is also getting to be quite limited and

particularly sensitive to significant economic changes or crisis. What is meant here is the fact

that a serious economic crisis would decrease dramatically the buying power of customers of

both companies.

Furthermore, there remains a potential threat of substitutes since the companies operating

in fast food industry that can potentially face a strong opposition from the part of the public.

Also there is a threat from the main competitors that can simply substitute and replace the

company from its segment of the market in China though it is worthy of mention that due its

relatively unique position this risk is relatively low.

Nonetheless, it is necessary to remember about high degree of rivalry and competition that

the company suffers from and in the future there will remain less and less room for further

growth since such serious competitors as McDonalds would hardly lose an opportunity to gain a

share of Chinese market of fast food restaurants.

Future prospect 

Regardless numerous and quite serious threats the companies constituting the Yum! Brands

are currently facing their prospects are quite good. To put it more precisely, it is obvious that the

competition from the part of such giants as McDonalds, being very strong, is, nonetheless, not an

unsurpassable barrier in the way of Yum! Brands to the dominance in Chinese market. The

current position of the companies reveal the fact that they have a large share of Chinese fast food

market and there is substantial potential for the further growth.

The reason for such a statement is quite obvious. First of all, it should be said that Chinese

market of fast food restaurants is nowadays underdeveloped and the fact that such giants as

Yum! Brands are repressed only in the largest cities of the country means that there is a lot room

for the further growth. Moreover, even the representation of the companies in the largest cities is

not sufficient as the number of restaurants in such cities in China is incomparably lower than in

other Asian countries or other developed countries of the world.

Practically, this means that the companies can grow in two main directions. On the one

hand, they can grow within large cities increasing the number of restaurants. On the other hand,

they can develop the chain of restaurants developing the network of fast food restaurants in all

large cities and spreading it on average cities as well. Naturally, the future prospects should not

be overestimated since the competition with such companies as McDonalds would only grow

stronger since Chinese market of fast food restaurants is too attractive to refuse from it easily. At

the same time, it is necessary to remember that China is still not a democratic country and the

role of the government is very important. This is why there exist certain risks of changes the

policy of Chinese government in relation to foreign companies, including Yum! Brands.

Finally, the successful realization of the plans of the further growth would inevitably face

the problems such as Avian flue that means that the company should be ready to cope with these

problems beforehand.

Strategic recommendations 

Thus, taking into account all above mentioned, it is possible to recommend to the Yum!

Brands continuing the current strategy of the market expansion. At the same time, it is worthy of

mention that it is extremely important to chose the right direction the companies should target at.

In this respect, it should be said that the creation of Taco Bell is a very good strategic concept

that should be developed further. To put it more precisely, as Chinese market is very specific

with strong traditions and unique food culture, it is quite natural that the products offered by

Western companies such as Yum! Brands would be hardly accepted by Chinese people without

any doubt or certain dissatisfaction. In stark contrast they would more gladly consume products

that are typical for the local cuisine. The only condition here is that these products could be

cooked fast and easy in order to maintain the general strategy of Yum! Brands as the companies

that provide fast food services.

Furthermore, it is also possible to recommend focusing on mass consumer since China is

the most populated country. Consequently, the mass consumption of the companies’ products in

China would be quite profitable and very perspective for the further growth. In this respect, it is

necessary to primarily focus on the large cities where the companies should offer products

adapted for the local market and provide services of the highest quality typical for the Yum!

Brands.

Finally, in order to minimize the risk of such problems as decrease of sales because of

avian flue it is necessary to promote the companies where the quality and safety of food is

guaranteed and customers can rely on Yum! Brands. In this respect, the close cooperation with

state services may be quite helpful since they can provide evidence of the reliability of the

companies.

References

1 SAM ROBERTS, New York Times ( 2009 ), In 2025, India to Pass China in Population, U.S.

Estimates,

2 Lisa Baertlein and Nandita Bose, Reuters ( 2012) , Analysis: Yum eyes young India to help

mirror China profits

3 Jordan Siegel and Christopher Poliquin ( 2012) , Yum! Brands Case Study - Harvard Business

School 9-712-422, page 8

4 Erin McBride , The Motley Fool Blog Network (2013) , Bad Chicken in China for KFC