Yum China: Strategic Expansion Plans

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Yum! China

Strategic actions for expansion in 2011


Table of Contents
1.0 Problem Identification2
2.0 SWOT Analysis2
2.1 Strengths2
2.2 Weaknesses4
2.3 Opportunities4
2.4 Threats5
3.0 Yum! China’s Strategic Decisions5
3.1.1 Expansion rollout plans5
3.1.2 Expansion plans – Human Resources6
3.2 Tackling the Perception of QSR associated Obesity6
3.3.1 Brand Positioning – City Tiers6
3.3.2 Brand Positioning – Target Audience7
4.0 Recommendations7
4.1.1 Proposed Expansion Strategy for Yum! China7
4.1.2 Proposed Augmentation of HR Strategies (Internal Marketing)9 4.2 Further improvements to reinforce healthy image10
4.3.1 Brand Positioning – City Tiers11
4.3.2.1 Brand Positioning – Target Audience (Teenagers)12 4.3.2.2 Extending the Family and Communal Dining Concept – Bundling12 5.0 Time Horizon of Implementation13
6.0 Performance Indices and Success measurement of Proposed Market14 7.0 Conclusion16
Appendix A16
Appendix B16

1.0 Problem Identification
Yum! Brands (Yum!), parent company of several restaurant chains, including Kentucky Fried Chicken (KFC), Pizza Hut and Taco Bell entered China market with its first KFC outlet in 1987. Since then, Yum! under the leadership of Sam Su, has been extremely successful. Instead of being seen as a Western brand, Sam’s decision was to make the chain a “part of China”. Catering to the Chinese market, the image and offerings are localized and are extremely different from outlets overseas, winning Yum! the hearts of Chinese consumers. Yum! China’s revenues have now exceeded that of USA. Yum! has decided on an aggressive expansion plan in China. Therefore the scope of this project will encompass the following: ObjectivesTo increase market share by expanding into new geographic markets IssuesHandling the image of QSR being associated with obesity •High rental costs

Labour constraints limiting expansion plans
Changing consumption behaviours
Positioning strategies across various city tiers
Response to competition from international QSRs
2.0 SWOT Analysis

2.1 Strengths – The reason why Yum! China has been so successful in expanding in the Chinese market is due to its competent management team. CEO Sam Su recruited an experienced team locally based which could speak Mandarin. The strong corporate culture also managed to attract and retain highly motivated individuals which led to the continued success of the organization. Because the management team were given much control, due to PepsiCo not knowing much about the fast food business, they could make decisions quickly and independently. They were highly responsive to the changing demands of different regions and also analysed and negotiated for great real estate deals upon which to build their restaurants. Yum! China basically had a team which clearly understood the nuances of the different geographical markets, and knew intrinsically what customers wanted. They developed a flatter learning organization and developed their staff to make decisions and to speak up and share ideas with management. Another major factor contributing to the success is their extraordinary supply chain. Yum! China is said to have a first class supply chain, only second behind the Chinese Army. The logistical operations is able to handle the complexity of over 50 items on KFC’s menus, reaching deep into inland China while constantly introducing highly customized variations (84 – 100 new products a year) to suit the local taste palates. The company also had developed important “Guan Xi” with the locals, supporting the domestic market by buying Chinese products, working with Chinese farmers and government organizations. Because of the backwards integration and knowledge transfer, Yum! China is able to maintain exemplary health and hygiene standards which are lauded as the benchmark for all food companies in the country. Overall, Yum! China brands such as KFC and...
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