Yum! Brands Inc. in china
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Case Code : BSTR266
Case Length : 23 Pages
Period : 1987-2007
Pub Date : 2007
Teaching Note :Not Available
Organization : Yum! Brands Inc.
Industry : Fast Food
Countries : China
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
"Since I'm always asked how big we think we can be in
China, I'll give you my crystal ball answer: We're in the first inning of a
nine-inning baseball game. We clearly have a long runway for growth in mainland
- David C Novak, Chairman and Chief Executive Officer, Yum!
Brands Inc. in 2006.
"For many companies, China is a hope and a dream - maybe a
very realistic hope and a dream - but for Yum it's reality today. It's an
important piece of the company that still has plenty of growth potential ahead
- Joseph T Buckley, Senior Managing Director, Bear, Stearns
& Company3, in 2005.
Two Decades of Success
In the year 2007, US based Yum! Brands Inc. (Yum)4
successfully completed two decades of operations in China. Yum's China division
included operations in Mainland China5 , Hong Kong and Taiwan.
of September 2006, Yum operated in Mainland China through more than 1,700 KFC
restaurants, around 230 Pizza Hut casual dining6 restaurants, 33 Pizza Hut
home service units, 3 Taco Bell stores and 4 East Dawning restaurants. The China
division was Yum's largest international market with revenues of US$ 1.638
billion and operating profits of US$ 290 million in the financial year ending
December 30, 2006.
Yum had introduced several new products, which included
beverages and desserts targeted at the young adult segment, marking its two
decades in the country. (Refer Table I for sales of Yum in China).
For the financial year 2007, David C. Novak (Novak), Chairman
and CEO, Yum, estimated that Yum's China division would post an increase of 20%
in operating profit. During the year, KFC planned to add 300 more outlets while
Pizza Hut planned to add 70 casual dining branches and 20 home delivery units in
the country. Till the late 1980s, restaurants in China did not
provide decent facilities and conveniences to their customers (Refer
Exhibit I for more about Fast Food in China). The owners did not pay
attention to décor and lighting, while customer service too was not of a
Yum entered China in 1987, opening an outlet in Tiananmen Square,
Yum! Brands Inc. in china
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