Yum Brands VREAL paper
MGMT 680
Yum! Brands
VREAL Paper
Team Yum Yum
4/2/2010
Table of Contents
Introduction
Yum! Brands (Yum) operates, franchises, and licenses the Kentucky Fried Chicken (KFC), Pizza Hut, Taco Bell, Long John Silver 's (LJS) and All America Food (A&W) fast food restaurant brands (Datamonitor, 2009). Tricon Global Restaurants was created as a spin-off of PepsiCo’s restaurant division, which consisted of Taco Bell, KFC and Pizza Hut, in 1997 (Restaurants, 2009, p. 11). Tricon later purchased Yorkshire Global Restaurants, the owner and operator of A&W and LJS, and changed its name to Yum! Brands in 2002 (Datamonitor, 2009). This paper will examine Yum! Brands in the VREAL format.
Value
The value section evaluates how Yum! Brands can make economic value in the marketplace using their resources. Five key areas have been identified. First, Yum can take advantage of their dominant market position in China. Second, the corporate culture at Yum encourages value creating practices. Third, Yum has a portfolio of strong brand names which presents them with the ability to multi-brand. Fourth, Yum is able to use their research and development to improve menu offerings. Finally, Yum’s size allows for economies of scale.
Dominant Market Position in China
Yum has had a presence in China since 1987, when KFC opened its first franchise there; this was three years before McDonalds (Einhorn, Wing-Gar, & Leung, 2010). According to IBIS (2009), one of the key factors of success in the fast food restaurant industry is having a clear market position against competitors. If Yum! Brands has a dominant market position in China, they should be able to exploit the Chinese marketplace to create value. “Yum! is the most successful foreign fast-food firm in China. It operates in 600 cities, in 400 of which it faces no Western competition” (Economist, 2009, p. 76). Having no competition in many areas from other American restaurants, such as McDonalds, has allowed Yum to
Yum! Brands
VREAL Paper
Team Yum Yum
4/2/2010
Table of Contents
Introduction
Yum! Brands (Yum) operates, franchises, and licenses the Kentucky Fried Chicken (KFC), Pizza Hut, Taco Bell, Long John Silver 's (LJS) and All America Food (A&W) fast food restaurant brands (Datamonitor, 2009). Tricon Global Restaurants was created as a spin-off of PepsiCo’s restaurant division, which consisted of Taco Bell, KFC and Pizza Hut, in 1997 (Restaurants, 2009, p. 11). Tricon later purchased Yorkshire Global Restaurants, the owner and operator of A&W and LJS, and changed its name to Yum! Brands in 2002 (Datamonitor, 2009). This paper will examine Yum! Brands in the VREAL format.
Value
The value section evaluates how Yum! Brands can make economic value in the marketplace using their resources. Five key areas have been identified. First, Yum can take advantage of their dominant market position in China. Second, the corporate culture at Yum encourages value creating practices. Third, Yum has a portfolio of strong brand names which presents them with the ability to multi-brand. Fourth, Yum is able to use their research and development to improve menu offerings. Finally, Yum’s size allows for economies of scale.
Dominant Market Position in China
Yum has had a presence in China since 1987, when KFC opened its first franchise there; this was three years before McDonalds (Einhorn, Wing-Gar, & Leung, 2010). According to IBIS (2009), one of the key factors of success in the fast food restaurant industry is having a clear market position against competitors. If Yum! Brands has a dominant market position in China, they should be able to exploit the Chinese marketplace to create value. “Yum! is the most successful foreign fast-food firm in China. It operates in 600 cities, in 400 of which it faces no Western competition” (Economist, 2009, p. 76). Having no competition in many areas from other American restaurants, such as McDonalds, has allowed Yum to
Bibliography: Datamonitor. (2009, June 12). YUM! Brands, Inc company profile. Retrieved from Business Source Complete database Einhorn, B., Wing-Gar, C., & Leung, W Farmer, J., & Hillman, M. (2009, June 04). Initiating at Hold: Strong ROIC, but Unclear When China SSS Momentum Returns. Jefferies & Company, Inc Analyst Report. Retrieved from Thomson Research database Foster, D Nation’s Restaurant News. (2007). Franchise partnership with Yum! Nation 's Restaurant News, 41(41), 51-55. Retrieved from Business Source Complete database Hoover’s IBIS. (2009, December 22). Fast food restaurants in the US. Retrieved from http://www.ibisworld.com/ Ivankoe, J., & Rees, S Kalinowski, M. (2009, November 10). YUM: Initiating Coverage at BUY. Janney Montgomery Scott LLC Analyst Report. Retrieved from Thomson Research database Liu, W Philip Lief Group, & Arden, L. (2000). 220 best franchise to buy: The essential sourcebook for evaluating the best franchise opportunities (3rd ed.). New York, NY: Broadway Books Restaurants Siegner, K., & Holthouse, K. (2008, September 09). YUM: There 's More to YUM Than China: That 's Gravy. Credit Suisse – North America Analyst Report. Retrieved from Thomson Research database Staszak, J Economist. (2009). Taking the hill less climbed. Economist, 393 (8655), 76. Retrieved from MAS Ultra - School Edition database Yum! Brands Yum! Brands. (2009). 2008 Annual report. Retrieved from http://www.yum.com/annualreport/docs/annualReport08.pdf