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Yum! Brands SWOT & PESTLE Analysis

ID : 52358953 | Feb 2018


Business Sector : Restaurants and Food

Operating Geography : North America

About Yum! Brands : Yum! Brands Inc. or simply Yum! is an American and one of the world's largest Fast Food Restaurant companies. It has its headquarters in Kentucky, US. As of 2017 it has 43617 restaurants out of which 40758 are franchised and 2859 are owned. Formerly it was called Tricon Global Restaurants. Its various subsidiaries are KFC, Pizza Hut, Taco Bell and WingStreet. It trades on NYSE as YUM.

Yum! Brands Revenue : US $6.4 billion as of 2016.

Competitive Analysis of Yum! Brands

The SWOT analysis for Yum! Brands is presented below:
1. Focus on emerging markets
2. Robust supply chain operations
3. Localization & Decentralized Mgmt.
4. Brand Equity & Umbrella Brand
1. Quality Issues
2. Dearth in Innovation
3. Efforts at Rebranding
1. Menu and Concept Innovations
2. Expansion and increasing penetration in new and existing markets
1. Foreign Currency Exchange Risk
2. Chinese Market Risk
3. Increasing health consciousness and Competitive Threats

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Detailed SWOT Analysis of Yum! Brands



1. Focus on emerging markets: Yum! Brands, backed by its KFC and Pizza Hut brands, focus on emerging markets such as China, India is a major competitive edge for the company. US fast-food market is almost saturated with low growth rate of ~2.5% and hence, capitalizing on the growth potential of these untapped markets has been a boon for the company. Yum! Brands even exploited the first-mover advantage in China. 60% of KFC’s volumes and profits and 33% of Pizza Hut’s volumes and profits accrue from the emerging markets , which is testimony to the substantial growth the company has achieved in these markets.

2. Robust Supply Chain operations: Yum! Brands has establisheda strong and strategic supply chain which is rare, sustainable and inimitable core competency. Yum! Brands partners with Restaurant Supply Chain Solutions to provide supply chain services and also deploys proprietary purchasing processes to ensure that minimum quality standards are met at the lowest prices. The company also emphasises that they have strict controls on suppliers via the Supplier Code of Conduct and diverse suppliers to reduce dependencies and leverage multiple perspectives.

3. Localisation and strong decentralised management: The aggressive expansion strategy of the company has been possible due to its internal focus on ‘localisation’ and building a ‘strong decentralized management’. The local management has a better knowledge of the market conditions and thus gives Yum!the freedom to effectively tailor its menu according to the customers’ preferences. It also gives this huge company agility, flexibility and time-responsiveness. It gives the firm a competitive advantage hard to replicate for Yum!has managed to decentralize yet ensure that it provides the highest quality products.

4. Brand Equity and Umbrella Brand: Yum! Brands is a huge company with three of the most popular fast-food chains (Pizza Hut, KFC, Taco) under its umbrella. It has a tremendously high market cap of USD 26 billion. Such massive dominance and presence coupled with the popularity the brands enjoy, it becomes incredibly difficult for any smaller player to compete with the company. This competitive edge provides scalability and expansionary advantage to the company.


This section is available only in the 'Complete Report' on purchase.


This section is available only in the 'Complete Report' on purchase.


1. Foreign Currency Exchange Risk: Operating in multiple geographies brings with itself the threat of foreign exchange fluctuations and Yum! Brands earn significant royalty and license fee from Yum! China. These fluctuations can hugely impact the conversion of foreign currency earnings, foreign assets, cash flows, investments abroad into USD yielding lower earnings or profits. Yum!’s foreign currency net asset exposure was as high as $2.1 billion (as of Dec 2016). Furthermore, the company is exposed to Latin American countries facing a negative growth which is hitting the company’s top line in these nations.

2. Chinese Market Risk: The most significant foreign risk Yum! Brands is exposed tois the Chinese market risk by its largest franchisee Yum! China which plays a pivotal roles in the company’s financial statement. Threats by such high indexation on one geography is twofold: a) Risks of changes in economic policies, consumer attitudes, competition, exchange rate etc. b) Risks of weakening US-China relations which could potentially lead to laws limiting Yum!’s scope of Chinese business and deteriorating public perception. Yum!’s future is potentially trapped at the whims and fancies of the Chinese government and policies.

3. Increasing health consciousness and Competitive Threats: The changing consumer preferences away from fast-foods towards healthier options is a huge threat to the entire fast food industry including Yum! Brands. There exists a major obesity problem in the US and in the recent years, consciousness about the negative effects of such foods have amplified. Not only does Yum!need to tackle the perverse consumption patterns, but also reckon with the force of medical practitioners and health activists who aggressively oppose the consumption of fast food.

The space of quick-service, fast food is becoming increasingly competitive with a larger number of players and greater intensity of competition. As consumers adapt to food ideas of burgers and pizzas, they also start demanding greater breadth of products. Domino’s Pizza is a fierce competitor of Pizza Hut/KFC and has managed high growth over the years. What compounds this threat is the economical cost proposition all these players are stuck at and how they are competing for the same segments with value-oriented prices.


1. http://www.Yum!.com/annualreport/pdf/2016-Yum!-AR.pdf


3. http://www.Yum!.com/annualreport/pdf/2016-Yum!-AR.pdf




7. http://www.Yum!.com/company/


9. http://www.Yum!

10. http://www.Yum!.com/responsibility/people/diversity-inclusion/supplier-diversity/

The PESTLE/PESTEL analysis for Yum! Brands is presented below:
1. Political Setting & Policies
2. Political Lobbying
3. Geo-Political Nature & Political Stability
1. Raw Material Price Fluctuations
2. Foreign Risk Exposure
3. Qualified Labour Pool
4. Economic Indicators & Policies
1. Health Consciousness
2. Social Media Fanaticism
3. Demographics & Cultural Beliefs
1. Innovations are an imperative trend to achieve results
2. Supply Chain & Technology Awareness
3. Social Media
4. Marketing & Data Analytics
1. Domestic Laws
2. International Laws and IPR
1. Environmental Consciousness
& Legislation
2. Weather & Climate
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Detailed PESTLE Analysis of Yum! Brands



1. Political Setting and Policies: Yum! Brands will be affected by the political setting and instability in its domestic market U.S and other emerging markets of its operations. The political party in power in each country determines the extent of influence and restriction it places on the retail food industry and the fiscal policies/ tariffs it levies.US elections, fervently contested by Hillary Clinton and Donald trump, was the biggest political instability YUM! was dealing with in its own country. Additionally, the policies of subsidies, tax credit, low-cost loans also affect the business of Yum! Brands. It is reported that ~USD 653,000 was disbursed to the company in the form of direct subsidies from the governments between the period 2004-present. For instance: the implementation of GST regime in India will affect the taxation decisions of Yum! Brands for its companies in India. Also, knowledge about the new tax policy becomes crucial not only for the company but also its supply node partners to allow for effective input tax-credit.

2. Political Lobbying: The company and all the stakeholders of the company such as employees, franchisee partners are subject to the national, state as well as local laws making it imperative for the company to participate in the political processes of the country(specifically, US where corporate lobbying plays a huge role in framing the public policies). To be a part of the political discourse, Yum! Brands makes political contributions, takes part in advocacy actions, supports advocacy groups/trade associations to impact the resulting regulations in its favour. Through this the company seeks to ensure that its position and the impact of any law on its employees, partners are carefully measured before formulating any law. Priority issues for the company are food & nutrition, health & safety and regulation of food service industry.Yum! Brands also has a Political Action Committee that supports candidates contesting the US elections. This lobbying in the US becomes paramount given the lobbying of health activists propagating the ban of fast foods.

3. Geo-Political Nature of the Country and Political Stability: Staying aware of the happenings around the globe can help companies avoid costly surprises as the political stability and safety of a country is a prerequisite to establish stable business operations for Yum! Brands.Yum! Brands will need to carefully assess and evaluate the political stability and the propensity of riots and activism in countries before choosing to expand into that country. Another complication in the geo-political scenario to be kept in mind is the relationship of US (Yum!’s home country) with the foreign country as adversarial relationships could lead to laws damaging to American corporations. Political implications of an event differ from sector to sector. For example, beef ban in India or the pork ban in Middle East would adversely change the dynamics of the fast food industry but positively impact the poultry business. Hence, factoring such long-term and short-term implications in the holistic risk assessment is extremely important for Yum! Brands while venturing into a new geographical market.


This section is available only in the 'Complete Report' on purchase.


This section is available only in the 'Complete Report' on purchase.


This section is available only in the 'Complete Report' on purchase.


1. Domestic Laws: Food business is a regulated industry and thus, Yum! Brands need to comply with laws of Food authority (labelling, ingredients, health) and of the state machinery (employment, wage, marketing, licensing, IPR, franchisee etc.). Apart from these, the company is subject to zoning regulations while making location decisions for its outlets ensuring minimum safety standards and fire protection1. Additionally, the company can face severe repercussions if it does not comply with the anti-corruption laws enforced and this becomes all the more cumbersome with the huge number of supply chain partners Yum! brands has. Violations of any of these laws could impose both monetary costs (fines, investigation costs) and non-monetary costs (reputation damage).

2. International Laws and IPR: Since 24,000 of the 42,000 total restaurants of Yum! Brands are located outside of its domestic country US, it is subject to other laws, in addition to the above laws of different countries, about FDI, import tariffs on commodities and machinery. The company needs to tweak its strategy and operations according to the different country-wise local laws.1Yum! Brands, being the umbrella brand of KFC-Pizza Hut-Taco Bell, has several trademarks and patents for both signature dishes and machinery which are a sustainable competitive advantage for the company. Yum! Brands needs to be aware of the disparate intellectual property rights across the countries it operates and prevent any IPR-related infringement.


1. Environmental Legislation &Consciousness: Expenditures will be incurred for pollution-control and environmental-control facilities as per the laws. Environment laws, at all government levels, can potentially threaten profits and competitive advantages .Consumers are increasingly becoming aware of a company’s operations and Yum! Brands has to proactively support environmental stewardship and adopt environmentally responsible practices to not endanger its reputation. Attitudes towards ‘green’ brands shapes Yum! brands strategy wherein it has focused on providing ecological packaging for its products, reducing carbon footprint and minimizing its utility usage among many other initiatives. As a recognition of its efforts, Yum! Brands was named in the Newsweek’s 2016 Green rankings.

2. Weather & Climate: The natural risk of being a player in the food industry is that the business is influenced by the weather and climactic conditions of the regions it operates in as they predominantly drive the supply of food raw materials. Shelf life of raw materials and finished products also depends on the weather and climate the store is operating in which implies that Yum! can’t follow a standardized operating mechanism across all regions of its operations. The weather is not only a key driver from the supply-side but also the demand-side where the consumer behaviour changes from a summer to harsh winter to rainy. The location choices of the stores that Yum! opens will be affected by the impending climate and weather conditions of that particular region. Store layout will also be determined by the climate of the region – can’t go for open spaces in areas which receive heavy rains or sunshine.




3. http://www.Yum!.com/investors/governance/media/Yum!PoliticalExpenditurePolicy.pdf

4. http://Yum!

5. http://www.Yum!.com/annualreport/pdf/2016-Yum!-AR.pdf (Page 106)

6. http://www.Yum!.com/annualreport/pdf/2016-Yum!-AR.pdf (Page 105)


8. http://www.Yum!.com/annualreport/pdf/2016-Yum!-AR.pdf (Page 106)

9. http://www.Yum!.com/annualreport/pdf/2016-Yum!-AR.pdf (Page 102)


11. http://www.Yum!.com/annualreport/pdf/2016-Yum!-AR.pdf (Page 105)

12. http://www.Yum!

13. http://www.Yum!.com/annualreport/pdf/2016-Yum!-AR.pdf

14. http://www.Yum!.com/annualreport/pdf/2016-Yum!-AR.pdf (Page 102)


16. http://www.Yum!.com/Yum!-named-to-newsweeks-2016-green-rankings/#.WoaW8SVuapo

17. http://www.Yum!.com/Yum!-brands-announces-2-1-stock-split/#.Woa6vINuapo

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Yum! Brands SWOT and PESTLE analysis has been conducted by Aastha Agarwal and reviewed by senior analysts from Barakaat Consulting.

Copyright of Yum! Brands SWOT and PESTLE Analysis is the property of Barakaat Consulting. Please refer to the Terms and Conditions and Disclaimer for usage guidelines.