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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Two Decades of Success Contd...

Yum's outlets were brightly lit and had a temperature controlled environment with contemporary décor. They were spotlessly clean and had other facilities like play areas for children. From 1987 on, Yum opened new restaurants in several cities and even entered Tier-II cities in China. Apart from offering the standard American fare, Yum customized its menu to appeal to local tastes by introducing spicy chicken dishes as well as local cuisine. The staff at the outlets were trained in providing the customers with the best service, managing operations well, and keeping the outlet clean. Yum had an efficient distribution channel which ensured the supply of food items and ingredients to all its outlets spread across the country on schedule.

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Yum made its mark in the Chinese fast food market, which was until then dominated by restaurants serving traditional Chinese cuisine.

Yum brought into China advanced concepts of operations, as well as a new dining experience. Yum became one of the most successful American companies in China, with its Chinese operations accounting for 16% of the company's total profits in 2005.

According to John Glass, Analyst at CIBC World Markets7, "Operating margins (in China) are likely the best in the system, thanks to healthy unit volumes and exceptionally cheap labor. The company also has benefited from a higher proportion of stores in mid-size Chinese markets, where the company gets better rent deals and wields greater clout in the local community."8...

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7]  CIBC World Markets is wholesale and corporate banking wing of a leading financial institution based in the US. CIBC World Markets provides integrated credit, capital management, investment banking, and merchant banking services. Its operations are spread across Canada, US, Europe, Asia and Australia.

8]  Susan Spielberg, "Yum Halts Co-Branding of KFC Chain in US: Despite Stateside Slump, Chicken Segment Leader Still Driving China Growth,"Nation's Restaurant News, December 20, 2004.


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