Yum! Brands SWOT and PESTLE Analysis

Strength

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.

Weakness

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Opportunity

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Threat

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Political

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.

Economic

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Social

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Technological

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Legal

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Environmental

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