Yum! Brands
Problem Definition: The main problem faced by Yum! Brands Inc. is a lack of integration between the brands, which causes further operational and strategic issue for implementing the company’s current strategy of multibrand operations. This issues with multibranding have become increasingly acute with the international expansion, which is not possible unless the brands within Yum! learn to work together and to derive synergies from joint operations.
Situation Analysis: The problem of integration is the heritage of the Yum!’s ex-parent company PepsiCo. Restaurant business was not core for PepsiCo, that is why it was always treated as a secondary unit, which could only offer benefits to the consumer goods segment in terms of Human Resource development and cross-selling. All restaurants operated independently and were responsible for meeting certain financial targets, which were regularly set by PepsiCo headquarters. It was not uncommon for the restaurants to engage in competition, thus cannibalizing the business as a whole. David C. Novak, the current CEO of Yum!, changed the strategic orientation of the company, after it had spun-off from PepsiCo in 1997. The main idea behind the new approach was a hybrid model that allowed integrating Yum! brands by decentralizing brand-specific operations, but consolidating shared services, such as purchasing and accounting. The new orientation aimed to modify the organization on the strategy-structure-culture level and to change not only the operational activities, but also the employees’ mindset. This approach has become especially important once the company started to pursue multibranding growth, which required both synchronization of the restaurant operations as well as the joint brand development and promotion. Although the integration model has been emphasized by Yum! Since its inception as an independent company, the complexity of the task makes it the primary issue on the company’s agenda until today.
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Situation Analysis: The problem of integration is the heritage of the Yum!’s ex-parent company PepsiCo. Restaurant business was not core for PepsiCo, that is why it was always treated as a secondary unit, which could only offer benefits to the consumer goods segment in terms of Human Resource development and cross-selling. All restaurants operated independently and were responsible for meeting certain financial targets, which were regularly set by PepsiCo headquarters. It was not uncommon for the restaurants to engage in competition, thus cannibalizing the business as a whole. David C. Novak, the current CEO of Yum!, changed the strategic orientation of the company, after it had spun-off from PepsiCo in 1997. The main idea behind the new approach was a hybrid model that allowed integrating Yum! brands by decentralizing brand-specific operations, but consolidating shared services, such as purchasing and accounting. The new orientation aimed to modify the organization on the strategy-structure-culture level and to change not only the operational activities, but also the employees’ mindset. This approach has become especially important once the company started to pursue multibranding growth, which required both synchronization of the restaurant operations as well as the joint brand development and promotion. Although the integration model has been emphasized by Yum! Since its inception as an independent company, the complexity of the task makes it the primary issue on the company’s agenda until today.
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