Yum!brands Strategy Analysis With Increasing Term Paper

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S. market anticipated to deliver between 5 and 7% margin growth over the next five years. Further, the Chinese marketplace is also one marked by lower labor costs and a lack of the stigma associated with working in fast food establishments that exists in the United States and other westernized nations.

Looking at Table 2: U.S. Operating Profit Source by Brand for 2004 according to SEC filings (2004) clearly Taco Bell contributes the majority of profits followed by Pizza Hut at 34%, then KFC at 15%. Long John Silver's and A & W. have been continually losing share and profits relative to larger competitors.

Table 2: U.S. Operating Profit Source by Brand

Taco Bell

Pizza Hut

KFC

Long John Silver's/A&W

Contrast U.S. profit source by brand with International profit sources, and the critical role of KFC in any expansion strategy becomes clear. Table 3, International Operating Profit Source by Brand for 2004, shows the dominance of KFC overall.

Table 3: International Operating Profit Source by Brand

KFC

Pizza Hut

Taco Bell/Long John Silver's/A&W

From this analysis it's clear that KFC is one of the stronger brands with greater profit potential globally, yet key to making this possible is aligning this specific brand with a given geography. The next section of this analysis deals with the specifics of analyzing Latin American geographies in addition to China.

Geographical Assessment

Latin America is one of the slower growing markets that Yum! Brands participates in during the timeframe analyzed, with just $9M in incremental sales from 1999 to 2004, rising from $33M to $42M respectively. Yum! Brands however has done extensive analysis of the highest growth Latin American nations, and a short summary by nation of opportunities and risks are presented below.

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The company finds these nations attractive due to the World Free Trade Agreement of the Americas and the significant reduction in trade tariffs throughout Latin America. In addition, Yum! Brands felt that Latin America was attractive due to its close proximity to the United States, language and cultural similarities, and an economical labor pool existed. Here are the opportunities and risks by Latin American nation:

Argentina

Opportunities

38.7 million population is a sizeable market for Yum! Brands to target and sell their KFC brand and products to.

High level of European population would favor the development of entirely new Pan-American and European menus that could be imported from Europe.

Relatively little direct competition today.

Risks

Argentina has the lowest literacy rate in Latin America, so finding enough skilled workers will be a problem.

Mid-range Per Capita Income and a significantly dropping GDP rate (-14.7%) shows that this economy is in trouble. This could lead into difficult fast food sales as the economy continues to be challenged.

Brazil

Opportunities

180 million population makes Brazil the largest country in Latin America, and one of the wealthiest due to its strong agricultural base and advanced manufacturing processes including airplanes, automobiles, and chemicals.

The fast food industry in this nation is underdeveloped and in need of basic operational support.

Significantly different eating patterns could open up an entirely new approach to selling fast food, as many Brazilians eat their big meal in the early afternoon, and have a light dinner in the evening, typically pasta.

Rio de Janeiro is the exception in the country as many there have more hectic lifestyles and prefer fast.....

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