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Yum! China Case Solution

Solution Id Length Case Author Case Publisher
1006 1365 Words (5 Pages) David E. Bell, Mary Shelman Harvard Business School : 511040
This solution includes: A Word File A Word File

Yum was the largest restaurant chain in the world. Its brands included KFC, Pizza Hut, and Taco Bell. KFC became the first of its brands and any Western fast-food restaurant to enter the mainland of China. After the success of the first restaurant in the busy Tiananem Square, Yum began opening new KFC restaurants all over the country. In this journey, the firm learned many things about doing business internationally and particularly in China. China had many regions with different preferences and cultures and each had to be looked at and catered to individually. Management was aware of and worked on to appeal to the Chinese market (Yum! China, 2013).

In an attempt to expand into a nationwide restaurant chain, management had to be aggressive in hiring and choose workforce that actually understood the consumers and their needs. These employees should have the political, economic, social, and marketing knowledge required. Just like Chinese customers demanded variety, the organization required an innovative organizational culture to ensure variety. Yum developed a quality management process to make sure only the best goods were incorporated in its supply chain.  

Following questions are answered in this case study solution:

  1. Introduction

  2. Problem Statement

  3. Strategic Alternative 1

  4. Strategic Alternative 2

  5. Strategic Alternative 3

  6. Recommended Action Plan

Yum China Case Analysis

Problem Statement

The main issue that Su was facing was how to expand Yum globally and appeal to the evolving consumer needs. Yum had been successfully introduced and was well- accepted in the Chinese market. But keeping abreast with the changes in the market was essential to maintain that position. A current development with the consumers was their need to follow a more healthy and active lifestyle to fight obesity. This also included a diet in which fruits, vegetables, and protein were encouraged and fats, carbohydrates were discouraged.

Apart from that, a growing emphasis on a company's social responsibility in the global market place would also be a reason, to have a healthier menu and environment for consumers. Research findings showed that more and more Chinese were getting overweight. In 2009 overweight children contributed to one-third of the world’s fat kids. Yum responded initially by eliminating “super-size” and incorporating more variety of healthy food. It pushed the government to educate people about the obesity problem (Cheng, 2007). Su was concerned about the welfare of Chinese people. In the long run, this decision would impact every function of this business and the positioning of KFC.

Strategic Alternative 1

Since in China the culture is very family-oriented, every marketing strategy revolves around that concept. The target market of Yum brands also included families. The restaurants’ aura was an example of that cultural manifestation. All of them were brightly lit, air-conditioned and spacious. This kind of environment attracted families that are interested in occasions for socializing with family and friends (Chan & Chan, 2008).

Yum had realized that it is crucial for the business to understand the culture of the host country thoroughly before embarking on an international expansion. The difference in culture is something that is inevitable and hard to get used to if required planning is not involved. Yum should carry out market research to create a clearer profile of its current target market and avoid any unwanted reactions from them. This includes making sure that they retain their current customers. The strategy of including healthy foods might also attract other segments of people that prefer fast food. So, Yum should understand all those segments.

Strategic Alternative 2

In its advertisement, it needs to use direct and indirect communication to appeal to the local customers. (Dlabay & Scott, 2010). China is a high context culture and Chinese people “interpret little meanings to words and interpret them figuratively. So the body language, appearance, eye contact, colors, numbers, etc. used in ads and any other form of communication should be carefully thought of (Hyun, Kim, & Lee, 2011). Yum management should make sure that due to cultural differences the same strategies, objectives, and tactics need not be applied to the Chinese market. For instance, KFC’s slogan “finger lickin’ good” was taken in an unhygienic context among the Chinese despite its popularity with the U.S consumers.

Yum should incorporate this new change also inside the firm. It should display support for healthy living in the organization. Any Chinese firm has a similar culture; one which promotes collectivism. Through collectivism, everyone dedicates themselves to the corporate goals and carries out the daily activities. Everyone in Yum should contribute in decision-making keeping the healthy lifestyle agenda in mind. The organization culture should be set up to facilitate growth, leadership, and innovation. Any culture gap that exists between American and Chinese market should be finished, and employees should be trained in that field.

Strategic Alternative 3

The labor force is another crucial element that determines a firm’s success. Many businesses fail primarily because they are not able to select the right people, recruit using the “right” methods, or govern their labor force with the right set of policies. Nationally the policies, systems, and standards dealing with labor should be the same (Ge & Yang, 2011). This will help Yum to define its organization culture more precisely and consequently help the firm in the long run, for instance to attract the right potential employees.

One of Yum’s core competencies was its supply chain. Its competitors like McDonalds didn’t have the flexibility and reach of Yum brands because of its superior supply chain. Even though, the preferred alternative of outsourcing wasn’t available, yum created its own distribution system. This helped them have a consistent and timely supply of goods. Yum avoided duties, taxes, transportation costs, and unfavorable exchange rates, and thus financial risk, by using locally produced products.

Recommended Action Plan

Yum should use this to develop an agile supply chain network. This means that they must “achieve rapid response” as mentioned by to the changing consumer markets. Yum should use its supply chain network and build stronger relations with its suppliers. These suppliers can be a good source of information for the company with regards to the market. It should also try to make this supply chain as cost effective and efficient as possible in the near future.

Though forming a global business holds a lot of opportunities; it is important to plan all internal and external aspects of a business. For instance, China is a growing economy with many opportunities for business investments. The financial statements provided are proof of their better financial performance as compared to U.S. But, considering the fact that it is government-affiliated; it is becomes clearer why business is harder to run for foreign firms. If Yum is somehow able to use its “healthy lifestyle stance” to receive the government’s support, this would be a huge incentive for the business as a trend setter.

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