Jenny
Ku
 Management
340
 Professor
Gervais
 April
24,
2012
 Yum!
China
Case
Analysis
 Yum!
Brands
China,
a
division
of
the
Yum
Brands
Company,
is
a
fast
food
restaurant
 company
that
owns
several
restaurant
chains
such
as
KFC,
Taco
Bell,
Pizza
Hut
and
Long
 John
Silvers
overseas.
Yum!
China
first
opened
its
KFC
in
Beijing
in
1987
and
over
the
years
 has
successfully
expanded
its
operations
and
other
chain
restaurants
throughout
Mainland
 China,
becoming
one
the
largest
fast
food
companies
in
that
region.
Seeing
the
success
of
 Yum!
overseas
has
spawned
other
western
chains
to
open
up
in
China.
With
growing
 competition
from
Subway,
Dairy
Queen,
Starbucks,
McDonalds
and
Burger
King,
Yum!
 China
has
been
able
to
successfully
manage
the
pressure
and
increase
their
presence
in
 China.

 1. What
were
the
special
challenges
in
business
environment
that
Yum!
had
to
 overcome
it
he
1990’s
to
develop
its
business
in
China?
 When
Yum!
started
its
operations
in
the
early
1990’s
the
company
has
barriers
to
 overcome
in
launching
their
operations
in
China.
Yum!
had
to
get
through
the
government
 restrictions,
handle
their
missteps
in
advertising,
invest
in
a
supply
chain,
expand
company
 growth,
organize
a
team,
and
contend
with
ownership.

 Government
‐
When
Yum
opened
restaurants
and
wanted
to
expand
faster,
the
company
 had
to
follow
regulations
imposed
by
the
government.
At
that
time,
government
was
more
 interested
in
bringing
in
foreign
companies
that
could
bring
technology
into
China.
That
 changed
when
the
Deng
Xiaoping,
a
Chinese
leader
said
“China
was
moving
too
slowly.
We
 should
open
up
the
rest
of
the
country”.
As
a
result,
the
demand
for
foreign
investment
rose
 in
every
city
and
province
and
government
allowed
for
foreign
enterprises
to
enter
and
 grow.

 Advertising
–
One
of
Yum’s
first
misstep
in
China
was
their
advertising
slogan.
Their
slogan
 “finger
lickin’
good”
did
not
sit
well
with
many
of
the
Chinese
people.
In
fact,
it
put
many
 people
off
and
did
not
fully
understand
or
appreciate
the
meaning
of
the
slogan.
To
many,
 the
concept
of
licking
fingers
was
a
turn
off
and
was
considered
to
be
very
unsanitary.
 Supply
chains
–
In
the
1990’s
China
had
no
existing
third
party
restaurant
supply
 providers.
Because
Yum
relied
on
food
service
companies,
Yum
had
to
find
another
 alternative
to
stock
their
restaurants.
In
1997,
Yum
established
their
own
distribution
 company
to
ensure
their
network
of
restaurants
was
fully
stocked.
Yum
also
made
sure
 that
materials
were
coming
directly
from
China
whenever
possible.
They
worked
with
local
 raw
material
suppliers
to
improve
quality,
ensure
food
safety
and
increase
capacity.
Yum
 also
developed
a
supplier
rating
system
called
Supplier
Tracking
Assessment
and


Recognition
and
this
helped
Yum
to
identify
and
purchase
from
the
best
performing
 suppliers,
which
lead
to
improved
quality
and
low
costs
of
goods.

 Growth/Expansion
‐

Yum
Brands
first
started
out
under
the
ownership
of
PepsiCo.
Since
 PepsiCo
was
strongly
associated
with
beverages
and
not
as
a
fast
food
company,
there
was
 no
direction
for
KFC,
Pizza
Hut
and
the
other
restaurant
brands.
After
Tricon
was
created
 and
later
renamed
Yum,
the
expansion
in
China
was
one
of
the
company’s
main
strategies
 and
Yum
wanted
to
be
the
best
restaurant
company,
not
just
in
China
but
also
in
the
world.
 Their
strategy
was
to
be
part
of
the
Chinese
culture
and
to
be
seen
as
part
of
the
local
 community.

 Organizing
a
local
team
–
To
realize
their
goal
of
expanding,
Yum!
Brands
China
CEO
and
 chairman
Sam
Su
looked
for
employees
with
prior
restaurant
experience
and
for
them
to
 be
based
in
China.
He
believed
that
having
a
team
based
in
China
would
serve
the
company
 better
as
oppose
to
trying
to
run
operations
from
abroad.

 Ownership
in
China
–
Government
restricted
foreign
companies
from
operating
without
 local
partnerships
at
the
time
Yum!
first
arrived
in
China.
To
overcome
this
obstacle,
KFC
 and
Pizza
Hut
were
owned
through
joint
ventures
with
local
businesses
and
started
to
 franchise
their
restaurants
in
order
to
make
their
presence
in
China.
Operating
through
 joint
ventures
and
franchising
helped
Yum
to
understand
the
operation
practices
in
China
 and
secure
permission
from
the
government.
 2. Summarize
the
key
elements
of
Yum!
China
strategies,
policies,
practices
and
 management
approaches.
Identify
Yum!
China
competitive
advantages;
are
they
 sustainable?
 Strategies:
 · · · · · · Build
a
nationwide
restaurant
chain/expand
their
businesses
to
other
regions
 Assemble
a
team
that
is
local
to
the
region
 Partner
with
local
businesses
 Invest
in
a
supply
chain
 Market/evolve
their
brand
to
embody
local
culture
and
integrate
western
culture
as
 well
 Constant
new
product
development
and
customize
menus
to
appeal
to
Chinese
tastes


Building
a
nationwide
restaurant
chain
of
Yum
Brands
restaurants
increases
their
presence
 overseas.
Their
objective
of
expanding
their
brands
was
to
be
“rooted
in
China,
be
part
of
 China”.
In
their
early
stages,
the
vision
was
to
expand
on
multiple
fronts
and
have
their
 restaurants
all
over
the
country.
Yum’s
continued
vision
and
efforts
to
expand
in
China
 resulted
in
over
3,000
KFC’s
in
650
cities
and
about
500
Pizza
Huts
in
120
cities,
making
 them
one
of
the
largest
food
companies
in
China
in
2010.



Assembling
a
local
team
to
run
the
business
was
important
to
Sam
Su.
He
believed
that
in
 order
to
expand
Yum
throughout
China,
the
team
should
be
based
in
China.
Running
 operations
close
to
home
eliminated
the
need
of
traveling
from
abroad
to
fix
problems
and
 provided
a
hands‐on
approach.
Su
also
looked
for
employees
who
had
restaurant
 experience,
and
knew
how
to
speak
and
write
in
Chinese
and
those
who
understand
the
 Chinese
customer.

 Partnering
with
local
businesses
allowed
Yum
to
gain
a
market
share
in
China’s
restaurant
 industry.
Because
government
did
not
allow
foreign
companies
to
enter
without
a
local
 partnership,
Yum’s
first
KFC
and
Pizza
Hut
were
owned
through
a
joint
venture.
In
addition
 to
joint
ventures,
Yum
also
sought
out
franchisees.
Through
these
two
operations,
Yum
was
 able
to
understand
the
operations
of
a
business
in
China
and
expand
their
coverage
in
the
 region.

 In
1997,
Yum
started
its
own
distribution
company
as
a
result
of
the
lack
of
third
party
 providers
in
China.
The
distribution
company
helped
to
keep
up
the
demands
of
the
 growing
number
of
restaurants
and
Yum
was
dedicated
to
sourcing
materials
from
China.
 Yum’s
supply
chain
consisted
of
materials
from
local
suppliers
and
the
company
worked
 closely
with
the
providers
to
improve
quality,
guarantee
food
safety
and
increase
capacity.

 Marketing
is
always
essential
to
promote
the
brand
particularly
in
a
new
region.
When
KFC
 first
opened
its
doors
in
China,
it
was
seen
as
a
western
brand
but
overtime,
their
image
 became
part
of
the
culture
in
China.
To
achieve
this,
KFC
evolved
the
brand
through
 product
localization
and
differentiated
marketing.
They
also
targeted
customers
of
all
ages
 to
bring
in
more
business
and
promoted
a
friendly
family
oriented
restaurant.

 Knowing
that
Chinese
customers
expect
variety
in
their
menus,
Yum
China
was
assertive
in
 their
product
development.

They
would
introduce
between
85‐100
products
a
year
and
 new
products
would
be
sold
as
special
promotions.
Executives
also
were
conscious
about
 different
consumer
tastes.
Many
KFC
menus
had
local
items
such
as
wraps
with
fried
 chicken
and
local
sauces,
chicken,
fish,
shrimp
“burgers”,
egg
tarts,
fried
dough
sticks
and
 soy
milk
drinks.
Any
new
product
development
catered
to
what
people
liked
to
eat
and
 Yum
has
created
several
menu
options
for
the
varying
taste
preferences.

 Policies:

 Yum!
China’s
policies
are
straightforward
and
simple.
Because
Yum
got
their
products
from
 500‐600
suppliers,
their
policy
is
to
buy
locally
and
work
with
vertically
integrated
 suppliers.
In
addition
to
working
with
local
suppliers,
Yum
made
sure
that
there
were
 trained
staff
available
for
new
restaurant
openings
and
that
staff
was
trained
in
the
most
 extensive
manner.

 Practices:
 With
over
3,600
restaurants
throughout
China
in
2010,
Yum’s
practices
have
helped
the
 company
grow
since
the
early
90s.
In
KFC
restaurants,
design
was
very
modern
and
was
 decorated
with
the
KFC
colors.
Employees
were
well
groomed
and
dressed
well.
 Restaurants
had
hostesses
to
greet
customers
and
the
restaurant
had
enough
seating
and


was
always
kept
exceptionally
clean.
In
many
of
the
KFC’s
in
China,
the
menu
was
extensive
 with
about
50
items
to
suit
everyone’s
different
palettes.
The
company
also,
overtime
 adjusted
recipes
to
appeal
to
the
Chinese
tastes.
KFC
also
promoted
more
of
a
sit
in
leisure
 restaurant.
In
China,
the
Chinese
look
at
restaurants
as
regular
restaurants
where
one
goes
 in
to
sit
and
have
a
good
time,
while
in
the
US,
fast
food
restaurants
are
a
cheap
and
fast
 place
to
go
in
grab
food.
KFC
also
employed
about
60
employees
in
one
store
whereas
in
 the
US
there
are
35
employees
in
one
place.

 Management
Approaches:
 Management
at
Yum!
China
stressed
the
importance
of
learning
in
their
company.
There
is
 formal
training,
coach
and
cross‐functional
committees
for
management
development.
One
 senior
member
said,
“We
learn
from
each
other,
make
decisions
together,
reflect
on
 common
goals.”
In
addition
to
improving
upper
management,
all
restaurant
staff
was
 “trained
extensively
in
Western
service
standards
and
the
way
restaurants
are
functioned.”
 By
doing
so,
this
ensured
that
customers
would
receive
the
highest
quality
of
service.



 Yum!
China’s
competitive
advantage
include
their
management
approach,
the
vast
number
 of
stores,
product
differentiation
in
their
menus,
their
own
distribution
company,
staff
 members
who
know
the
region
well
and
their
continual
effort
in
making
new
products
to
 appeal
to
more
customers.
They
have
been
sustainable
over
the
last
2
decades.
These
 advantages
put
Yum!
China
ahead
of
their
competitors
and
have
helped
them
establish
a
 large
market
share
in
the
country.
They
have
successfully
realized
their
vision
of
expanding
 and
being
part
of
the
local
community.

 3. Identify
the
major
similarities
and
differences
between
the
strategies
 implemented
by
Yum!
China
and
Yum!
in
the
US.
What
are
the
risks
and
benefits
 in
allowing
such
differences
among
subsidiaries
of
the
same
company?
 Similarities
of
strategy
between
Yum!
China
and
Yum!
in
the
US
include:
 · · · Expansion
of
their
restaurants
 Offering
a
traditional
menu
to
its
customers
and
also
making
sure
the
tastes
suit
local
 preferences
 Creating
a
family
atmosphere
in
their
restaurants
either
through
dining
in
or
take
out


With
the
success
of
their
restaurants,
both
Yum!
China
and
Yum!
US
knew
that
the
next
step
 was
to
expand
and
open
more
restaurants
throughout
the
country.
In
China,
by
2010
there
 were
over
3,00
Yum
restaurant
brands.
In
the
US
Yum!
was
placed
on
the
Fortune
500
List
 placing
at
#216.
Revenue
for
Yum!
in
2009
was
nearly
$11
billion
and
their
restaurant
 brands
were
leaders
in
chicken,
pizza,
Mexican
style
foods
and
seafood.
Yum!
also
started
 to
multibrand
their
restaurants
by
selling
two
or
more
brands
under
one
brand.

 In
both
China
and
the
US,
Yum
restaurants
offered
the
basic
traditional
items
on
their
 menus.
For
KFC,
their
menu
included
“original
recipe”
or
“extra
crispy”
and
also
introduced
 new
products
such
as
chicken
strips,
popcorn
chicken
and
wings.
Keeping
close
with
the


products
of
what
helped
Yum
restaurant
brands
thrive
helped
their
restaurants
to
become
 successful
and
recognizable.

 Though
Yum!
US
restaurants
are
highly
focused
on
making
their
restaurants
a
family
 oriented
place
as
they
are
in
China,
Yum
Brand
values
the
importance
of
creating
a
family
 atmosphere.
For
example,
Pizza
Hut
introduced
family
sized
pasta
dishes
to
keep
in
tune
 with
the
culture
of
family
dinner
and
being
a
family
oriented
restaurant.
In
China,
the
 importance
of
family
is
highly
stressed
inside
their
restaurants
and
many
Chinese
families
 value
the
time
spent
inside
restaurants.

 Differences
of
strategies:
 · · · · Supply
chain
and
attaining
materials/products
 Product
development/innovation

 Team
members
 Business
ventures
with
other
partners


In
1997,
Yum!
China
started
its
own
distribution
company
because
of
the
lack
of
third
party
 providers
in
China.
They
made
it
their
policy
to
source
from
China
whenever
possible
 supporting
local
providers.
In
the
US,
Yum!
used
third
party
providers
to
acquire
materials.
 In
China,
they
work
directly
with
vertically
integrated
suppliers
to
ensure
safety
and
 quality.
 Unlike
the
US,
product
development
in
China
is
always
on
ongoing.
In
one
year,
Yum!
China
 would
have
about
85
to
100
new
products
each
year,
where
as
in
the
US
there
would
be
2
 new
products.
In
China,
the
continuous
effort
in
product
differentiation
is
motivated
 satisfying
varying
customer
tastes
and
keeping
in
tune
with
what
customers
want.
As
part
 of
their
innovation
and
product
development,
executives
at
Yum!
China
always
asked
“what
 flavors
do
Chinese
people
like?”
 When
Sam
Su
looked
for
team
members
to
bring
into
the
company,
he
wanted
a
team
 where
employees
were
local
and
can
understood
the
Chinese
consumer.
Yum!
China
also
 provided
extensive
training
for
their
staff
in
order
to
provide
the
highest
quality
of
service
 to
their
customers.
In
the
US,
restaurants
are
staffed
with
people
of
different
ethnicities.
 There
is
a
sense
of
diversity
but
restaurants
in
the
US
are
not
as
focused
as
the
ones
in
 China
to
understand
customers.

 In
China,
Yum
Brands
restaurants
operate
with
a
lot
of
local
businesses
mainly
due
to
 government
laws.
In
the
US
though
there
are
partnerships
through
charities
and
non‐profit
 organizations,
the
joint
ventures
and
franchises
are
not
as
extensive
as
the
ones
in
China.

 Risks
and
benefits
of
allowing
such
differences
among
the
subsidiaries
is
that
it
allows
 individual
growth
for
each
subsidiary
and
help
to
identify
and
understand
the
strengths
 and
weaknesses
of
the
two
companies.
With
these
differences,
there
are
more
 opportunities
to
explore
to
see
what
works
well
for
Yum!
More
bases
are
covered
with
 these
differences
and
the
company
is
not
restricted
to
follow
what
others
are
doing.


However,
with
such
different
approaches
to
strategies,
there
are
always
risks
when
two
 subsidiaries
operate
differently.
Risks
involve
unwanted
results
such
as
customer
decline,
 and
unsatisfied
customers.
When
companies
approach
a
different
route,
there
are
no
 certainties
that
it
will
work.
Companies
risk
losing
their
reputation
and
consumer
 confidence
if
the
differences
in
how
they
operate
are
not
successful.

 4. Analyze
the
company’s
annual
financial
statements.
Compare
the
China
and
the
 US
financial
situations
for
the
year
2007­2009
in
terms
of
revenue,
growth,
cost
 structure,
etc.
How
successful
is
Yum!
China?
Justify
your
response.

 Yum!
Brands
revenue
growth
has
been
positive
up
until
2009.
In
2007
their
revenue
 growth
reached
8.38%
and
in
2008
they
were
close
to
match
the
growth
in
2007
with
a
 rate
of
7.69%.
This
could
be
due
to
the
growing
success
of

the
Yum!
China
division.
China
 was
becoming
one
of
the
upcoming
countries
to
do
business.
Their
economy
was
growing
 faster
than
any
other
country
and
in
China,
Yum!
was
rapidly
expanding
its
restaurants
and
 gaining
a
bigger
market
share
in
the
country.

In
the
US
revenue
and
growth
rate
was
 declining
a
little
between
2007
and
2008
but
before
this
and
the
economic
recession
in
the
 US,
Yum!
US
was
still
profitable
and
successful.
However
when
the
economic
recession
hit
 the
US
it
affected
the
restaurant
industry.
Fewer
people
ate
out
and
many
restaurants
 declined.
In
2009,
Yum!
Brand’s
revenue
growth
declined
by
4.32%.
Though
the
recession
 hit
harder
in
the
US,
there
was
a
global
effect.
 Though
the
revenue
of
Yum!
Brand
fluctuated,
the
company
did
fairly
well
in
profitability
 from
2007‐2009.
In
2009
was
when
the
company
saw
its
highest
profitability
at
9.88%.
 Yum!
Brand
was
also
able
to
continue
to
expand
and
open
more
stores
from
2007‐2009.
 Each
year
yielded
around
2%
growth
and
in
2008
the
store
growth
rate
was
at
its
highest
 at
2.61%
 When
compared
to
Yum!
US’s
financial
performance,
Yum!
China
has
done
exceptionally
 well.
In
China,
the
growth
rate
of
revenue
was
always
positive.
Though
there
was
a
decline
 from
2008
to
2009,
Yum
China
still
managed
to
operate
successfully
and
generate
a
higher
 income
than
Yum!
US.
In
2008
and
2009,
the
revenue
for
Yum!
US
was
‐1.36%
and
‐14.73%
 respectively.
The
decline
was
due
to
the
fact
that
consumers
in
the
US
stopped
eating
out
to
 save
money
during
the
economic
downturn.
In
terms
of
profitability
for
Yum!
US,
the
 profitability
of
Yum!
China
was
greater
than
those
of
the
US
restaurants.
In
2009
 profitability
for
China
was
17.78%
and
only
14.46%
in
the
US.
2008’s
profitability
was
 16.96%
(China)
and
12.49%
(US).
In
2007
profitability
was
20.35%
and
13.17%,
 respectively.

 Yum!
US
was
operating
and
expanding
much
slower
than
Yum!
China.
In
the
US,
the
 comparable
growth
store
rate
declined
by
36%
in
2009
and
in
2008,
store
growth
only
 rose
by
3.86%.
In
China,
their
goal
was
to
expand
vastly
and
quickly
and
in
both
2008,
and
 2009
their
growth
rate
was
positive.
In
2008,
store
growth
rose
by
6.55%
and
in
2009
by
 0.98%
 Yum!
China
yielded
better
results
than
Yum!
US.
Yum’s
China
division
is
very
successful
 since
their
revenue
growth,
profitability
and
store
growth
rates
were
all
possible.
Though


there
are
some
declines
in
between
years,
Yum!
China
did
not
suffer
as
big
of
a
loss
like
 Yum!
US.
Because
China’s
market
is
growing
faster
than
the
US
and
any
other
country,
it
 makes
sense
for
business
to
be
up
and
generating
revenue.

 For
a
more
detailed
financial
analysis,
refer
to
Appendix
I.
 5. Evaluate
the
“New
Fast
Food”
proposal:
Discuss
the
pros
and
cons,
risk
and
 potential
benefits
of
such
a
new
approach.
 Pros:
 
 · · · · · · · Added
variety/more
menu
options
 Improved
quality
and
taste
 No
more
super
sized
items/cutting
down
portions
and
prices
 Meals
are
served
with
vegetables
and
juice
 Nutrition
labels
and
information

 Nutritious
and
balanced
 Promotes
healthy
living


With
the
“new
fast
food”
proposal
the
menu
is
expanded
and
offers
healthier
options
for
 customers.
Not
only
are
customers
allowed
healthier
choices,
but
they
are
also
informed
 about
the
nutrition
value
of
the
foods.
With
this
new
proposal
super
sized
items
are
also
 gone.
By
eliminating
items
that
use
more
materials,
costs
to
make
those
go
down.
Items
on
 the
menus
also
go
under
changes
when
trying
to
make
a
product
healthier
and
by
initiating
 these
changes,
quality
and
taste
can
be
improved.

 Cons:
 · · Expensive
 Time
consuming


The
cons
of
this
new
proposal
include
the
time
and
money
it
takes
to
research
and
develop
 new
items
on
the
menu
and
that
people
may
not
fully
adapt
or
accept
the
new
changes
in
 the
new
menu.
As
part
of
the
proposal,
new
healthier
items
would
be
added
on
the
menu.
 To
find
out
what
people
would
like
to
see
or
eat,
research
has
to
be
conducted
to
find
out
 particular
likes
and
dislikes.
This
process
can
be
time
consuming
and
the
longer
the
 research
process
the
more
costly
it
would
be.

 Risks:
 · · Customers
may
not
welcome
the
changes;
dislike
the
new
items
 Chance
of
failure
and
losing
customers
and
revenue
because
of
proposal


·

Backlash
from
government
and
the
fast
food
industry


The
new
proposal
suggests
to
introduce
healthier
menu
options
and
cutting
down
on
 portions.
There
is
always
a
chance
of
customers
who
do
not
agree
with
the
practices
and
 with
this
proposal
the
risks
are
customers
disliking
the
new
menu
and
if
they
dislike
the
 changes,
the
company
risks
alienating
customers.
Since
government
in
China
is
very
 controlled,
there
is
a
risk
of
facing
backlash
from
government.
Yum
wanted
to
government
 to
take
obesity
seriously
and
lobbied
officials
to
be
more
aggressive
in
teaching
kids
a
 healthier
lifestyle.
In
addition
to
pushing
government
to
embrace
this
new
change,
Yum
 also
called
for
their
competitors
in
the
industry
to
work
together
to
promote
healthy
living.

 Benefits:
 · · · · People
eating
healthier
and
living
a
better
lifestyle
 Kids
are
more
informed
about
nutritious
choices
 Reduces
the
rate
of
obesity
among
children
and
adults
 Good
PR
and
improve
company
image


The
benefits
of
this
program
is
that
it
promotes
a
healthier
lifestyle
by
informing
people
to
 make
healthier
choices.
Kids
learn
at
an
early
age
to
be
active
and
learn
about
nutrition.
 Having
started
early
and
being
informed
about
making
good
eating
choices
help
mold
them
 in
the
future
to
stay
healthy
and
fit.
By
proposing
this
new
campaign,
Yum!
is
giving
back
to
 the
community
by
providing
health
education
and
funding
programs
for
kids.
This
effort
 paints
a
positive
image
for
the
company
and
promotes
their
CSR.

 6. Is
it
the
responsibility
of
Yum!
China
to
undertake
single­handed
such
a
 significant
shift
in
nutritional
content
and
to
further
depart
from
the
overall
 corporate
strategy,
or
should
it
be
left
to
the
Chinese
government
to
educate
its
 citizens
and
influence
their
diet?
Why?
 Responsibility
should
not
lie
all
on
Yum!
China.
The
food
industry
does
have
some
 responsibility
to
their
customers
regarding
health
and
food
safety.
But
at
the
end
of
the
 day,
Yum!
and
its
competitors
are
just
regular
restaurant
companies.

 When
Yum!
proposed
the
“New
Fast
Food”
idea,
executives
wanted
to
eliminate
the
stigma
 and
association
with
fast
food
and
obesity.
However,
because
of
alarming
statistics
that
 showed
the
link
between
the
two,
Yum!
decided
to
take
a
proactive
approach
to
improve
 the
lives
of
their
customers
through
healthier
meals
and
health
education
and
programs.

 By
doing
so,
Yum
is
raising
awareness
of
the
benefits
of
making
healthier
choices
and
living
 a
more
active
lifestyle.
With
that,
Yum!
has
given
back
and
changed
the
way
they
operate
 but
their
ultimate
goal
is
making
profits
and
expanding
their
business.

 In
end
government
should
take
more
of
an
active
approach
and
campaign
more
 aggressively
to
raise
awareness
and
educate
their
citizens.
Yum!
has
already
lobbied
the
 government
to
take
obesity
seriously
and
urged
more
health
education.
If
the
Chinese
 government
takes
over,
they
can
mandate
health
education
in
their
school
systems
and
also


regulate
restaurants
on
how
they
prepare
and
sell
their
food.
It
is
government’s
 responsibility
to
make
sure
that
their
citizens
are
safe
and
have
their
people’s
best
 interests
in
mind.
Government
involvement
would
bring
to
light
the
growing
problem
and
 may
change
the
way
people
live
and
eat.

 7. If
it
was
decided
to
expand
further
the
implementation
of
the
“New
Fast
Food”
 strategy,
what
steps
would
you
recommend
to
build
internal
and
external
 support
and
insure
its
successful
implementation
while
satisfying
the
expected
 growth
of
Yum!?
 Internal
support:
 · · · · Have
management
practice
what
they
are
preaching
 Implement
a
reward
system
 Informational
seminar/lecture
 Sponsor
a
“health
day”
even
for
employees


To
gain
internal
support,
it
is
important
for
management
to
set
examples
to
all
lower
level
 employees.
This
sends
a
message
that
executives
at
Yum!
China
are
genuine
about
changing
 the
way
fast
food
works
and
are
committed
to
improving
life
styles.
Another
strategy
to
 gain
internal
support
is
through
a
reward
system.
Yum
can
start
rewarding
their
 employees
with
benefits,
or
recognition
and
through
these
rewards,
employees
are
more
 motivated
to
embrace
the
values
and
objective
of
the
proposal.
The
company
can
also
hold
 a
seminar/lecture
for
their
employees
to
fully
inform
them
of
the
benefits
of
the
new
 proposal.
When
employees
have
a
better
understanding,
they
are
more
likely
to
endorse
 something
they
believe
in.
Coinciding
with
the
lecture,
holding
a
“health
day”
for
company
 employees
can
shed
new
light
of
the
benefits
of
living
healthier
and
making
conscious
 healthy
choices.

 External
support:
 · · · · Celebrity
endorsement
 Partner
up
with
government
 Partnership
with
athletic
companies
 Promote
strategy
through
nation
wide
sports
events


To
gain
external
support,
having
a
celebrity
or
public
figure
that
people
look
up
to
can
 greatly
influence
the
choices
of
people.
Endorsements
by
well‐known
figures
can
send
 messages
to
thousands
and
have
the
general
public
embrace
the
new
changes.
Partnering
 up
with
the
government
to
aggressively
promote
the
new
proposal
can
also
get
people
to
 listen.
Government
officials
in
the
health
department

can
easily
endorse
the
new
plan
and
 point
out
the
benefits.
In
addition,
working
with
sports
companies
and
sporting
events
help
 to
send
the
message
because
both
share
the
same
values
of
living
a
healthy
lifestyle.



8. What
changes,
opportunities
and
threats
do
you
foresee
for
the
next
few
years
 that
you
must
take
into
consideration
before
making
your
final
 recommendations?

 Changes:
 · · · Consumer
tastes
 More
health
conscious
eaters/habits
 Eating
trends


Opportunities:
 · · · · · Geographical
expansions
 New
product
development
 Online
orders/sales
 Store
growth
because
of
the
growing
population
in
China
 Beverage
industry
is
growing‐capitalize
on
affiliation
with
PepsiCo.


Threats:
 · · · · · Increase
in
prices
for
materials
and
from
suppliers
 Competitive
industry
(anyone
can
enter)
 Government
regulations
 Product
substitution
 Economic
turbulence


Changes
that
Yum!
China
should
take
into
consideration
include
consumer
tastes,
eating
 habits
and
eating
trends.
In
this
industry,
change
is
always
happening
and
restaurants
can
 easily
adapt
to
the
new
changes.
Eating
habits
are
constantly
changing
through
new
 products
and
eating
habits.
Such
changes
may
include
customer
preference
for
organic
 foods
and
people
wanting
to
eat
healthier
essentially
cutting
out
fatty
foods.
Because
these
 changes
are
easily
adaptable,
Yum!
can
still
continue
to
grow
and
be
successful.
 Opportunities
for
Yum!
China
is
to
expand
geographically.
This
coincides
with
their
 strategy
of
having
15,000
stores
in
China.
Expanding
geographically
to
rural
areas
can
 boost
up
sales
and
stimulate
the
local
economy.
One
of
Yum!
China’s
strong
points
is
that
 they
constantly
come
up
with
new
products
to
sell.
Each
year
they
produce
85‐100
new
 items
to
differentiate
their
products.
Yum!
China
should
continue
this
practice
as
they
are
 very
good
at
product
development.
Capitalizing
on
their
strength
allows
Yum
to
grow
and
 expand
their
market
share.
In
the
past
decade,
the
Internet
has
grown
and
surged
in
 popularity.
Yum
can
take
advantage
of
the
use
of
the
Internet
by
starting
to
sell
online.


Accepting
online
orders
can
increase
sales
for
the
company
and
decrease
costs.
Time
spent
 on
taking
a
customer’s
order
is
decreased
with
every
online
purchase
because
a
worker
 does
not
have
to
wait
for
the
customer
to
order
and
then
input
the
order.
Not
only
does
this
 same
labor
time
for
the
company,
this
saves
time
for
the
customer.
The
customer
does
not
 have
to
spend
extra
time
by
going
out
to
purchase
a
meal.
Instead
they
can
do
it
in
the
 comfort
of
their
own
home
and
possibly
have
it
delivered
to
them
or
ready
for
them
to
pick
 up.
Another
opportunity
for
Yum
is
using
China’s
growing
population
to
their
advantage.
 With
a
growing
population,
there
could
be
more
demand
and
with
high
demands,
business
 can
grow.
By
using
this
to
their
advantage,
Yum
is
one
step
closer
to
achieving
their
 objective
of
growing
in
China.

In
addition,
other
opportunities
for
Yum
is
the
growing
 beverage
company.
Today,
there
are
many
drinks
that
target
several
groups.
There
are
 sports
drinks,
water,
energy
drinks,
etc.
In
its
early
days,
PepsiCo
operated
Yum
and
 because
PepsiCo
is
in
the
beverage
industry,
Yum
can
use
the
affiliation
to
attract
more
 beverage
buyers
toward
the
fast
food
industry.

 Threats
for
Yum!
China
include
increases
in
raw
materials
and
suppliers,
competition,
 government
regulations,
product
substitution
and
an
unstable
economy.
Prices
on
raw
 materials
can
fluctuate
and
suppliers
have
control
on
what
price
to
sell
their
goods
at.
If
 prices
increase
for
meat,
produce,
and
bread
rise,
the
cost
to
produce
one
meal
can
cost
 more
and
to
balance
out
the
cost,
Yum
may
have
to
increase
prices
on
their
goods.
If
price
 increases,
customers
may
stop
eating
out
less
and
that
would
mean
a
drop
in
business
for
 the
company.
In
the
fast
food
industry,
there
are
not
many
barriers
to
keep
new
entrants
 from
joining
the
fast
food
industry.
Smaller
local
burger
joints,
sandwich
shops
are
also
 rivals
to
the
big
chain
restaurants,
so
there
will
always
be
a
constant
threat
of
competitors.
 Government
can
also
be
a
threat
that
stands
in
the
way
of
Yum’s
strategic
plans.
 Government
has
the
power
to
regulate
what
foods
are
being
sold,
control
over
health
and
 safety
and
regulate
business
practices.
There
is
also
the
high
threat
of
product
substitution
 in
this
industry.
Customers
can
easily
switch
without
incurring
any
high
costs
and
can
also
 switch
to
healthier
options.
In
the
past
few
years
during
the
economic
recession,
 restaurants
saw
declining
numbers
in
revenue
and
profit
as
in
the
case
for
Yum!
US.
Any
 economic
disturbances
can
affect
productivity
and
alter
strategic
plans.

 9. Looking
at
the
future,
what
recommendations
would
you
make
to
Chairman
Sam
 Su
to
insure
the
long­term
success
of
Yum!
and
meet
his
objective
to
have
15,000
 stores
in
China?
Be
comprehensive
and
justify
your
recommendations.
 Product
development/differentiation:
New
product
development
is
one
of
Yum!
China’s
 strength.
Following
through
and
continue
to
research
into
what
new
products
can
be
made
 will
help
Yum!
China
in
the
long
run.
Constant
innovation
will
draw
more
customers
in
 because
of
new
food
items
that
have
never
been
offered
before.
It
also
varies
the
items
on
 the
menu
since
customers
like
variety
and
it
also
differentiates
Yum!
from
competitors’
 menus.

 Marketing:
Marketing
is
also
key
to
Yum!
China’s
success.
When
KFC
first
entered
China,
 the
primary
focus
was
to
market
to
families.
Now
with
over
3,000
Yum!
Brands
 restaurants,
Yum!
can
start
to
be
more
aggressive
in
marketing.
For
example,
marketing
 new
foods
through
special
promotions
can
pique
the
interest
of
a
new
customer.
Marketing


through
ads,
radio,
television,
newspaper
and
sponsorships
with
other
companies
can
also
 raise
awareness
and
promote
new
on
going
deals
Yum!
restaurants
have
to
offer.

 Taking
orders
online/internet
sales:
Taking
orders
online
can
greatly
increase
sales
and
 revenue.
The
Internet
is
now
an
integral
part
of
everyone’s
lives.
Accepting
orders
online
 can
reduce
labor
time
and
costs
because
workers
no
longer
have
to
wait
for
customers
to
 order.
Since
technology
and
Internet
use
is
now
mainstream,
selling
online
can
help
Yum!
 grow.
 Take
advantage
of
the
growing
population:
China
is
the
most
populous
country
in
the
world
 and
continues
go
grow
everyday.
Taking
advantage
of
the
growth
in
population
can
be
very
 beneficial.
With
more
consumers,
there
is
a
larger
target
audience
and
the
chance
of
 gaining
a
bigger
market
share.
Yum!
can
expand
into
local
and
rural
areas
as
each
province
 becomes
more
populated.
With
more
people,
demand
rises
and
when
demand
rises,
 businesses
grow.

 Work
with
beverage
companies:
As
noted
before,
the
beverage
industry
is
on
the
rise
with
 the
popularity
of
sports
drinks
and
energy
drinks.
Since
Yum!
was
once
affiliated
with
 PepsiCo,
Yum!
can
use
this
to
their
advantage
by
attracting
customers
from
the
beverage
 industry
to
the
fast
food
industry.

 Expansion:
Expansion
of
Yum!
Brand
restaurants
will
solidify
the
company’s
position
in
 China.
Opening
stores
in
populated
and
busy
areas
will
boost
up
sales
and
lead
to
opening
 of
more
stores.
Expansion
can
happen
either
through
opening
more
company
owned
 stores,
or
joint
ventures
and
franchises.
Then
gradually
expand
beyond
China
and
into
rest
 of
Asia.

 Lower
costs/more
value
meal
plans:
Yum!
can
start
to
implement
a
change
in
pricing
by
 reducing
the
price
for
a
meal
or
create
a
value
meal
plan,
for
example
create
a
dollar
menu.
 Also
Yum!
can
look
into
reducing
the
cost
of
goods
sold.
If
cost
of
goods
sold
is
lower,
meal
 prices
would
also
be
lower
and
that
can
attract
more
customers
because
of
the
low
prices.