1-1. yum! brands, pizza hut, and kfc jeffrey a. krug mcgraw-hill/irwin strategic management, 3/e...

1-1

Yum! Brands, Pizza Hut,

and KFCJeffrey A. Krug

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Yum! BrandsIndustry Analysis

1. What are the primary driving forces in the U.S. fast-food industry in 2004?

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Yum! Brands

2. Using Porter’s Five-Forces Model, assess the strength of each competitive force in the fast-food industry.

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Yum! Brands

3. Is the U.S. fast-food industry attractive?

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Yum! Brands

4. What are the fast-food industry’s key success factors?

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Yum! BrandsBusiness Strategy Analysis

1. Complete a SWOT analysis for Pizza Hut and KFC.

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Yum! Brands

2. In what ways are Pizza Hut and KFC positioned to take advantage of the industry’s key success factors?

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Yum! Brands

3. What are Pizza Hut and KFC’s competitive advantages?

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Yum! BrandsFranchising Strategy Analysis

1. What are the benefits of franchising versus company-owned restaurants for companies like Pizza Hut, KFC, McDonald’s, or Burger King?

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Yum! Brands International Business Strategy

1. Describe Pizza Hut and KFC’s investment strategy in Latin America.

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Yum! Brands

2. Using the country and industry risk categories discussed in the case, compare and contrast Mexico and Brazil as alternative investment locations.

What risks are associated with investment in Mexico? In Brazil?

What strategies can be used to minimize these risks?McGraw-Hill/Irwin

Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Q1. Industry Analysis

Industry sales are flat The industry is consolidating The industry is becoming more

global Diversification has become an

important growth strategy Many customers are health

conscious Many customers are experienced,

repeat buyers Greater consumer demand for

convenience Rising labor costs and a shortage

of labor aged 16-24 yearsMcGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Q1. Industry Environment

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

SUPPLIERS BUYERS

SUBSTITUTES

POTENTIAL ENTRANTS

INDUSTRY COMPETITORS

Strong brand loyalty; difficult for new brands to develop awareness; high fixed costs, economies of scale, retaliation

Paper/plastic standardized commodities; low switching costs, threat of backward integration; volume purchases

Knowledgeable, repeat buyers; price and quality sensitive, want great convenience and are location sensitive, low switching costs

Low customer switching costs; variety of alternatives

Flat sales, intense competition for market share, high first mover advantage, low customer switching costs

Weak

Strong

Strong

Weak

Strong

Q4. Key Success Factors

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Product quality and consistency QService SCleanliness CPerceived Value VLocationGlobal brand awareness

Framework for Country Analysis

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Environmental RisksPolitical Risk War, revolution Change in government Price controls Tariffs, trade

restrictions Appropriation of assets Government

regulations Restrictions on

repatriation of profits

Industry RisksSupplier Risk Quality Shifts in supply Changes in supplier

powerCompetitive Risk Rivalry among

competitors New market entrants New product

innovations

Framework for Country Analysis (cont.)

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Economic Risk Inflation, interest rates Foreign exchange

movements Balance of trade Social unrest, riots,

terrorism Social concerns Natural Risk Rainfall, hurricanes Earthquakes, volcanic

activity

Product Market Risk Consumer tastes Availability of

substitute products Scarcity of

complementary goods