• Yum! Brands is the result of a spin-off by PepsiCo, where it sold its fast-food chains KFC, Taco Bell, and Pizza Hut. Do you consider this spin-off successful? Why or why not? Explain.
o Evaluated the success of the spin-off by looking at the value created since the divestment, and whether PepsiCo is better or worse off as a result.
o Used information in the case and other online research to defend the position taken.
• Why is Yum! Brands so much more successful in China than in the U.S., its home country?
o Used information in the case and other online research to describe specific actions taken by Yum! Brands in China to help establish competitive advantage.
o Identified the type of strategy at Yum! Brands in China, using from Rothaermel Chapter 6 and other course readings.
o Contrasted this strategy with how Yum! Brands competes in the U.S. fast food industry.
• Why was Yum! Brands KFC so successful in China, while other U.S. fast-food companies - such as Pizza Hut (also owned by Yum!), McDonald's, and Burger King - were so much less successful?
o Applied Porter's Five Forces analysis to explain how Yum! Brands' strategy provides sustainable competitive advantage vs. other U.S. fast food companies.
o Used information in the case and other online research.
• Given Yum! Brands recent challenges in China, do you consider this to be a temporary problem, or a harbinger of losing its competitive advantage?
o Applied PESTEL or SWOT analysis to assess the recent immediate challenges described in the MiniCase.
o State whether these are temporary problems that can be ignored, or something that Yum! Brands must address.
o Recommend specific actions that should be taken by Yum! Brands to respond to these threats.
• What recommendations would you give David Novak, Yum! Brands' CEO, to overcome the company's current challenges in China?
o Used PESTEL or SWOT analysis from the previous question determine other threats to long-term competitive advantage in China
o Recommended other actions to defend and sustain competitive advantage, using information provided in Rothaermel Chapters 8 and 9.
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From the point of view of PepsiCo the spinoff is not successful. Yum! Brands is making profits and during the year 2013 had a net income of $1.09 billion. PepsiCo should have continued to own Yum Brands since it is an important source of income and value. Further, with the success of KFC in China, Pepsi could have obtained valuable information and support from KFC for producing its products in China and marketing them in China. Had PepsiCo continued to own Yum Brands it would have realized synergies with it in China. It could have supported Yum with its distribution system and also clubbed its products with those of KFC in combo offers.
In the US the fast food industry is saturated. There are too many fast food competitors. They compete on price, the product is take-away, and the menu is limited. In contrast, in China the KFC restaurants are upscale, high quality, and have a wide variety of products. Further, the products of KFC in China are modified to suit local tastes. KFC has first mover advantage in China. The strategy is differentiation In China whereas in the US it is me too.
Yum Brainds KFC was so successful in China when compared with other US fast food companies because of several reasons. First KFC had a natural advantage because it uses chicken which is a popular source of protein in China. Using Porter's Five Forces rivalry, KFC has been able to better localize its offerings than McDonald's, Burger King, and Pizza Hut. It has avoided the US model of low prices, customers taking out the food, and limited menu. KFC added lots of choice to the ...
The solution to this problem explains issues related to Yum! Brands' success. It also looks into the background information on the company and its relations to PepsiCo. The references related to the answer are also included.