Yum! Brands Inc. in china

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Case Details:

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.

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Excerpts Contd...

Joint Ventures and Franchises

When Yum entered China, it entered into partnerships with local Chinese companies, as several cities in which it planned to operate were not allowed to provide licenses to restaurants that were wholly owned by foreign companies. Another reason the company opted for joint ventures was to address the bureaucratic issues. The local partners were better equipped to handle these, and they also helped the company with issues related to supply and distribution...

Sourcing and Distribution

Yum sourced most of the ingredients locally. The suppliers of chicken were located in Shandong and Shanghai. The company relied on several suppliers to meet its requirements. The products that were imported from the US included cheese, corn, some desserts, and French fries. In order to ensure the quality of the locally sourced products, teams from the BMUs visited the suppliers to check if they were adhering to the standards. If it was found that quality levels were not being maintained, the suppliers were replaced...

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Food habits in China varied widely from one province to another . In the northern part of the country, meat was widely consumed, and sea food less so. The cuisine in Harbin had strong and dense flavors, and had large amounts of fresh vegetables, soy sauce, flour based food and dumplings. People in Sichuan used red peppers extensively, giving the food a very hot taste and flavor. Beef was popular in Cantonese cuisine and sea food was popular in Guangzhou (Refer Exhibit VI for Dining Habits in China)...

The Challenges

Yum had a few problems in China especially on the promotional and HR front. One of the company's advertisements featured a Tao priest holding a chicken burger; this came in for criticism from the media, experts and the general public. The advertisement based on the movie Seven Swords , featured Taoist Fu Qingzhu, a historical figure, who was said to have defended Central China from the attacks of ethnic groups during Ming and Qing dynasties. As Taoists were vegetarians and killing animals was against their faith, the advertisement showing a Tao priest holding a chicken burger and calling it a masterpiece, was deemed particularly insensitive...


Exhibit I: Fast Food in China
Exhibit II: KFC Logos
Exhibit III: Yum Brands - Operating Companies
Exhibit IV: Yum Brands - Growth Strategies
Exhibit V: Franchising in China
Exhibit VI: Dining Habits in China
Exhibit VII: Mcdonald's in China

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