Case Study Description of Yum! China, Spanish Version
To maximize their effectiveness, color cases should be printed in color.Since the first KFC opened in China in 1987, Yum--under Sam Su's leadership--had built the largest restaurant company by far in mainland China. Averaging one new restaurant opening a day for the past five years, in 2010 Yum ran over 3,600 restaurants in 650 cities and employed over 250,000 people, many of them college students in their first jobs. In the third quarter of 2010, Yum China's revenues surpassed U.S. revenues for the first time and many analysts expected that Yum's China business--driven by a rapidly growing middle class--would be twice as large as its U.S. business within five years. But before rushing out to open thousands more stores, Su wondered what the company should do to forestall some of the problems plaguing the fast food industry in the West.
Swot Analysis of "Yum! China, Spanish Version" written by David E. Bell, Mary Shelman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Yum China facing as an external strategic factors. Some of the topics covered in Yum! China, Spanish Version case study are - Strategic Management Strategies, Managing people, Sales, Strategy and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Yum! China, Spanish Version casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, increasing energy prices, central banks are concerned over increasing inflation, increasing commodity prices, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models,
there is backlash against globalization, wage bills are increasing, etc
Introduction to SWOT Analysis of Yum! China, Spanish Version
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Yum! China, Spanish Version case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Yum China, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Yum China operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Yum! China, Spanish Version can be done for the following purposes –
1. Strategic planning using facts provided in Yum! China, Spanish Version case study
2. Improving business portfolio management of Yum China
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Yum China
Strengths Yum! China, Spanish Version | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Yum China in Yum! China, Spanish Version Harvard Business Review case study are -
Training and development
– Yum China has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Yum! China, Spanish Version Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to recruit top talent
– Yum China is one of the leading recruiters in the industry. Managers in the Yum! China, Spanish Version are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Sales & Marketing field
– Yum China is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Yum China in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Yum China digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Yum China has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Cross disciplinary teams
– Horizontal connected teams at the Yum China are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Operational resilience
– The operational resilience strategy in the Yum! China, Spanish Version Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High switching costs
– The high switching costs that Yum China has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Low bargaining power of suppliers
– Suppliers of Yum China in the sector have low bargaining power. Yum! China, Spanish Version has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Yum China to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Sales & Marketing industry
– Yum! China, Spanish Version firm has clearly differentiated products in the market place. This has enabled Yum China to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Yum China to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Yum China has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Yum! China, Spanish Version - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Yum China
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Yum China does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Yum China in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Yum! China, Spanish Version | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Yum! China, Spanish Version are -
Workers concerns about automation
– As automation is fast increasing in the segment, Yum China needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Yum! China, Spanish Version, is just above the industry average. Yum China needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Lack of clear differentiation of Yum China products
– To increase the profitability and margins on the products, Yum China needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Yum China has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, Yum China has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Skills based hiring
– The stress on hiring functional specialists at Yum China has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Yum! China, Spanish Version, in the dynamic environment Yum China has struggled to respond to the nimble upstart competition. Yum China has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– After analyzing the HBR case study Yum! China, Spanish Version, it seems that company is thinking about the frontier risks that can impact Sales & Marketing strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High bargaining power of channel partners
– Because of the regulatory requirements, David E. Bell, Mary Shelman suggests that, Yum China is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Yum China supply chain. Even after few cautionary changes mentioned in the HBR case study - Yum! China, Spanish Version, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Yum China vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study Yum! China, Spanish Version that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Yum! China, Spanish Version can leverage the sales team experience to cultivate customer relationships as Yum China is planning to shift buying processes online.
Opportunities Yum! China, Spanish Version | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Yum! China, Spanish Version are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Yum China can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Yum China can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Buying journey improvements
– Yum China can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Yum! China, Spanish Version suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Manufacturing automation
– Yum China can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Yum China to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Yum China to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Yum China has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Yum China in the consumer business. Now Yum China can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Yum China can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Yum China is facing challenges because of the dominance of functional experts in the organization. Yum! China, Spanish Version case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Yum China can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Yum China has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Yum! China, Spanish Version - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Yum China to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Yum China to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Yum China can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Yum! China, Spanish Version, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Yum! China, Spanish Version External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Yum! China, Spanish Version are -
Environmental challenges
– Yum China needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Yum China can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Yum! China, Spanish Version, Yum China may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Yum China with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Stagnating economy with rate increase
– Yum China can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Yum China will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Yum China.
Technology acceleration in Forth Industrial Revolution
– Yum China has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Yum China needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Yum China in the Sales & Marketing sector and impact the bottomline of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Yum China business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Yum China can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Yum China
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Yum China.
Weighted SWOT Analysis of Yum! China, Spanish Version Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Yum! China, Spanish Version needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Yum! China, Spanish Version is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Yum! China, Spanish Version is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Yum! China, Spanish Version is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Yum China needs to make to build a sustainable competitive advantage.
