International Business Strategy
Describe Pizza Hut and KFC's investment strategy in Latin America.
Latin America was appealing to Yum brands because of its close proximity to the United States, language and cultural similarities, and the North America free Trade Agreement eliminated tariffs on goods traded between the United States. Performing a country analysis was an important part of the strategic decision making process. Yum Brands had to accurately assesses the risks of doing business in other countries and regions in order to make good choices about where to invest. Expanding to a foreign market was attractive because of their large customer bases and comparatively little competition. Having a separate subsidiary in Dallas, Yum brands international, managed the international activities of all five brands. KFC and Pizza Hut accounted for almost all of the firm’s international restaurants. By Yum brands to expanding further in Latin American countries they advantage of franchising, which allows firms to expand more quickly minimizing capital expenditures and maximize return on invested capital. This helps because the owners have a deep understanding of local language, culture, customs, law, financial markets, and marketing characteristics. Yum Brands also have a fix cost that could be spread over a large number of units and the company coordinates purchasing, recruiting, training, financing, and advertising. Company owned restaurants also allowed the company to maintain tighter control over product quality and customer service. Yum Brands knew that KFC could have a large success because chicken is a traditional dish in their country.
Using the country and industry risk categories discussed in the case, compare and contrast Mexico and Brazil as alternative investment locations. What risks are associated with investment in Mexico? In Brazil? What strategies can be used to minimize these risks?
Mexico is one of the most attractive investment...
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