Technology is vital for competitive advantage, is the major driver of globalization and also is changing the way how businesses operate. Internet is having a profound impact on the marketing mix strategy of organizations and the fast food firms are quickly adapting by using social networks and website to meet the needs of the more and more technology-familiar customers. Yum understood the potentiality and the impact on its business brought by innovation technology, and is considered one of the world’s most innovative companies (Forbes, 2013).
Also, the firm spends part of the edged in learning technologies, with the dual purpose to build people capability (Yum, 201 ad) and, over the next few years, to reduce the paper- intensive training system currently used in its restaurants (Yum, 2008) Legal There may be a number of laws and regulations constraining the activities of fast food firm, such as business hours, taxation and national minimum wage which can make it difficult for the business to operate properly. Also, the firms must meet the food standards enforced by some governmental organizations like the FDA (Food and Drug Administration) in U.
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S. With regard to bureaucracy, for a company like Yum which operates in a local and overseas markets, it is very important to have an action plan to forecast and anticipate the future possible constraints that might delay or Stop the activities of production. Before to open any business, the firm must contact the business license department to find out about getting a business premise licenses which essentially grants the right to operate the business and contact the local offices to register with them.
Environmental Environment is one of the most important factors to take into account (and robbery the more deeply felt by the people). Environmental and sustainability issues are a vital element in the hospitality system (Get, 2005). According to Swarthmore (2002), due to a considerable increase in public awareness in green issues, the restaurants must be seen to be environmentally friendly to their potential visitors. For instance, due to the higher demand of beef-burger the producer need more beef production areas and for that every year many square kilometers of rainforest’s are destroyed (Bitterly and Kline, 2007).
The recognition of this kind of environmental threats has created a marketing opportunity for the green products, which are promoted to customers who are concerned about the environment and give the opportunity to the firms to gain customer loyalty. 3. SOOT ANALYSIS SOOT Analysis is a tool used in a business context for understanding Strengths and Weaknesses and for identifying Opportunities open to the firm and the Threats it has to face (Mind Tools, 2013).
Strengths Yum has, as one of its major strengths, the scale in the global market and it is a well-known company, with KEF and Pizza Hut recognized by most people in he world. Also, the portfolio diversification brings the company to decrease most of the risks associated with the business and to increase the size of the business itself, even in a financial downturns. Constant national and overseas growth with over 2000 store opening in the 2012, especially in India and China with a 5-year compound annual growth rate respectively of 21 % and 17% (YON, Bibb) World largest restaurant company with nearly 40. 00 restaurants in more than 120 countries (Fool, 201 3) Pizza Hut, KEF and Taco Bell are leaders and well recognized brands respectively in their respective disagrees (pizza, chicken and Mexican food) of the quick service global market (Wackiness, 2013) 13% PEPS (Earnings Per Share) during last year (Reuters , Bibb) Weaknesses The lawsuit against Taco Bell about the seasoned beef in the tortilla was not enough beefy (only 35%) to be called beef has been considered as a heavy financial weakness for the whole group (NAP, 201 1).
Also, most of the products present in the KEF food menu are seen as unhealthy and of poor quality (Global Times, 2013). Yum could improve its brand image by offering different menu with healthier options and providing a better service. Y mum’s store sales drop slows in the Chinese market due to the avian flu (Bloomberg, 201 3) Low performance in the U. S. Market, particularly with KEF (YON, Bibb) Few shares to conquer in the overeducated U. S. Cast food market (The Economist, 2010) Opportunities Yum has still great margins for improvement in terms of global market and especially in China, where to adapt to the different Chinese market they have founded East Dawning (The China Observer, 2010), offering Chinese cuisine and allows the company to continue to grow in this country and patronize the customers. Regarding the internal market they should improve their offer and service. Grow up steadily and continuously in China through (Mergers and Acquisitions) and favored by low labor and raw material cost (Dolomite, 2012).
Make more investments in a potentially profitable market such as India, forecasted as the country with the largest consuming class in the world (YON, chic) Introduced its brand before the competitors in France, Germany, Russia, Africa (YUM, AAA) Improve the presence of healthy options in the menus, particularly about the most sensitive categories children), as its major competitor McDonald’s (Syracuse, 201 1) The retreats The main threat comes from McDonald’s, which has successfully introduced more nutritious and healthy options in the menu (Syracuse, 201 1).
On the contrary, many of the products served by KEF are seen as unhealthy due to the presence of fried chicken resulting in a negative impact on sales (Global Times, 2013), and after the bad publicity due to the salmonella poisoning (Financial Post, 201 2) Food safety: Avian Flu, CARS, E coli. Do not allow the full potential in terms of sales due to negative advertisement (YOGI, 201 c)
Concerns about nutritional value and the bans on trans fats (The Economist, 2005) Close dependence on the Chinese market, due to the large sales(for instance KEF makes in China almost of its total share), makes the company vulnerable to any eventual and consistent changes in that market (China Hush, 201 2) Variations in foreign currency exchange rates and different government laws and regulation In foreign countries, such as the China, can heavily affect the company’s profitability, respectively with sales and higher tariffs to pay (Euro Investor, 2012 ; China Briefing, 2012) High competition room other brands in a saturated and easily accessible U. S. Market (Value Investing Center, 2010) 4. PORTER’S 5 FORCES ANALYSIS This model was introduced in 1 979 by Michael porter and used by most companies, organizations and sole traders for industry analysis and corporate strategy development. This model analyses industry rivalry, buyers, suppliers, potential entrants and substitutes (Business Dictionary, 2013). Industry Rivalry Due to the fact the Industry Rivalry in the USSR is highly competitive, the major firms invest a consistent part of their budget in (Research and Development) to differentiate their products and meet the customers needs.
Although Yum is trailing behind McDonald’s Corporation in terms of market share, it dominates the Chinese USSR market (Rapport, 2013). In the internal market (U. S. ), with a large number of different USSR, Yum faces a highest competition, due to the concentration of the market which enhances the industry rivalry. Different situation in China, where KEF is the first USSR to enter into that market (and continues to be the number one brand) and Pizza Hut is the first restaurant chain to serve pizza, Western casual dining, and Aziza delivery in that country. Due to these facts, it is possible to realize that there is less competition in the quick service sector in the Chinese market.
Buyer Power The price is one of the main factors which can affect the choice of the fast food restaurants, when the customers value the food and how much they want to pay for (Young et al. , 2013). Most likely, if a restaurant is overpriced, compared to its competitors, it will lose customers and that leads to the conclusion that there is, to some extent, a buyer power in the USSR market. Also, according to Mulberry et al. (1999), “the competitiveness of the arrest can increase buyer power and customers are price sensitive when there is a no switching cost between competitors”. Hum’s customers can easily switch to a competitor with a no extra cost, especially in the U. S. Where there are over 200. 00 USSR (Franchise Help, 2013). For instance, Hum’s approach should be more sensitive (not overpriced food) in the new overseas markets to avoid the customers could come back to a previous USSR (Harvard Business School, 2013). Supplier Power The supplier power can determine the food commodity costs, but the volatility of this latter can tie down the power to price the commodities (PRI, 01 1). Yum has implemented a Supplier Tracking and Recognition System” (YON, Bibb), to set up and continuously monitor quality and safety suppliers: only those that reach a certain level of standards are rewarded and stimulated to compete with other suppliers (Diddled, 2013).
The supplier power, within a large scale restaurant market, is very low due to there are many food and beverage suppliers that Yum can collaborate with (YON, 201 c); therefore, commodity prices must be kept competitive and relatively low, otherwise a company like Yum can Opt to replace those suppliers who re considered too expensive or those who do not meet the essential standards of quality and safety (The Wall Strenuously, 2013) Threat of Substitutes The presence in the USSR industry of so many firms (with a non-existent switching cost) and almost similar food options leads to have a very high threat of substitutes. On a limited market scale, Yum, due to the outstanding quality of food and service, can be the leader even if its products have many substitutes and the customers can easily switch to competitors. Vice versa on a large scale, the customers have two opposite options: l)decide to pay a little it more for a better food quality in more expensive restaurants; 2)choose to cook at home to save money. Obviously both options are affected by the actual economy and the customers’ willing to spend on food. Also, customers may opt for what they believe could be a healthier and safety food.
Threat of Mobility The entry of new potential competitors has two important and conflicting assumptions: 1. The USSR industry has a low number of potential entrants in a market already shared by the major firms, which have accrued experience and advantages to create barriers to the entry of new potential competitors. . Entry in the USSR industry’ is not very difficult as the main barrier is the capital needed to build or refurbish a new store (further costs derive from food, beverage and labor). After these assumptions, it is possible to deduce that Yum has consistent advantages from the economies of scale in supply, advertising and during the years an outstanding leading reputation has been gained.
All these factors, besides the fact Yum can offer the level of quality expected by the customers, give the company the opportunity to enter into any given location and market. Regarding new overseas markets, Yum may ace some barriers to entry due to a lack of experience, reputation and also the different local habits and tastes. For instance, Yum to enter into the Chinese market and contend it to the traditional local restaurant has developed East Dawning a brand of Chinese style dining (The China Observer, 2010). Also, great importance must be given to the government laws, regulations and limitations which can be seen as barriers to entry (Stock Analyst, 2008). 5.