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Yum! Brands

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Christopher Bochen

on 17 February 2014

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Transcript of Yum! Brands

Meeting 20% EPS growth in Romania after 1 year
Achieving an increase in market share for their brands among Romanian consumers

Corporate Overview
Internal Audit:
Corporate Governance
Corporate Social Responsibility
Finance/Accounting
External Audit:
Micro Factors
Competitive Analysis
Bargaining Power of Suppliers
Bargaining Power of Consumers
Threat of new entrants
Threat of substitutes
Marketing
Key Markets and Customer Profiles
4 Ps
Gross Sales by Geographic Business Segments

Technology and Operations
Mission Statement
“Be the defining global company that feeds the world.”
External Audit:
Macro Factors
Political
Economic
Social
Technological
Demographic
Yum! Brands
Global Strategy
Top Fortune 500 Firms
39,000 restaurants in 130 countries
Romanian Fast Food Market
Profitability

Resources/Capabilities
Global Position
Current Global Strategies . . .
Current Global Position . . .
Current Global Potential . . .
Renewed Focus on Romania
Global Strategy
Why Romania?
Selected Strategies
Strategy Tripod
Strategic Projections
Financial Projections
Next 5 years:
Average 8% sales growth per year
2017 Total revenue- 20,031m
Net Income - 2,134m
Earnings P/s +$1.32
=$4.64



CONCLUSION
Internal and External Audits
Competitive Analysis
Core Competencies
VRIO Framework
SWOT Analysis
Strategy Tripod Considerations
Strategic Plan
Y
U
M
!
B
R
A
N
D
S
R
O
2003
2011
2013
2002
1997
2003
Launches spin-off of Pizza Hut brand: Wing Street
May 2011
Yum! divests non-core brands:
Today
#201 in Fortune 500 List

Operates in 40,000 restaurants

130 Countries & Territories

Opens approx.5 new restaurants every day

Leader in international retail development

May 30, 1997
Tricon Global
- independent spin-off of the food division of PepsiCo

Included KFC, Pizza Hut & Taco Bell
March 2002
Tricon Global acquires Yorkshire Global Restaurants







Officially adopts the
YUM! Brands, Inc.
name
Yum! acquires Chinese Hot Pot Chain: Little Sheep
Long term Objective:
“Be the best in the world at building great restaurant brands.”
Short term Objective:
10% Annual EPS growth
Brief History
Core Competencies
1. Franchising

2. Aggressive International Expansion

3. Recognition Culture
14.7%
37.5%
1.5%
46.3%
Sales by Region
Key Markets
U.S. - China - India - International
Customer Profiles
everyone.
Busy Professionals
People on a Budget
Families
Adventurous Eaters
Shoppers
4 P's
Product
Founded by Colonel Harland Sanders in 1952.
Over 18,000 KFC outlets in 120 countries and territories.
Price
Place
"convenient
,
desirable
&
accessible"
Promotion
KFC
- world's most popular chicken chain
Pizza Hut
- world's most popular pizza chain
Based in Texas
Over 6,200 restaurants in US and 6,500 in 97 other countries and territories.
(and WingStreet)
Taco Bell
- nation's most popular Mexican-style chain
Based in California
Over 5,200 restaurants in U.S.
Little Sheep
- traditional Chinese hot pot-cuisine
Yum's most recent acquisition
Profitable franchise focusing on familiar flavors in largest foreign growth market
Low-cost strategy
Affordable + Accessible
to the majority of citizens in the markets they serve
Combined Units
Embedded in Retail Establishments
Open Late-night
Drive-thrus
"high visibility and prominence, be located on the “going home”-side of the street, and always with easy ingress and egress"
Brand Message:
Accessible, Familiar, Delicious & Affordable
Promotional Channels:
ALL
Promotional Strategy:
Price Leader w/ Niche Offering
"Think outside the bun"
Political
Transition from communism
Parliamentary Republic
Policies give Yum! opportunites
Western Ideals
NATO Member

Economic
Slow but steady growth
EU-IMF Assitance Program
Rely heavily on Foreign Investment
Yum can gain increased buying power
Social
Welcome Capitalist icons
McDonalds
Pepsi
Big Gap between upper class and poverty
25th percentile in living standard
Highly Educated
98% literacy rate
Leisure, shopping and fast foods
Technological
One of the fastest growing economies in technology
Internet users
2004: 3.31 million
2011: 9.39 million
Expenditure on R&D is far below the EU average
GDP on R&D
2000: 0.37%
2009: 0.48%
2020: 2.0%
Demographics
Yum! brands customer base: 15-54 years old
Romania: 57% meet demographic
Romanian culture enjoys dining out
Dining out: 11.6% of average Romanian income
14% of income is spent on rent
R&D
IT Systems
Production & Operations
R&D facilities
Shanghai (China Division)
Plano, Texas (Pizza Hut)
Irvine, California (Taco Bell)
Louisville, Kentucky (KFC)
R&D Expenses
2010: $30 million
2011: $34 million
2012: $33 million
Dickie Oliver created a multi-point strategy
Step 1: iChing
Facebook style connection between employees
Step 2: Coveo
Cross-silo search engine
Step 3
HD telepresence system from Tandberg
Step 4
Online training system from Saba
Traditional
Dine-in
Carry Out
Drive-Thru
Non-traditional
Express Units
Kiosks
Management Structure
Area Coaches
Restaurant General Manager
Part-time Employees
CHAMPS (Operating Standards)
Cleanliness
Hospitality
Accuracy
Maintenance
Product Quality
Service
will remain the mission driving the company forward in its current markets, as well as its newest endeavor in Romania.
“Be the defining global company that feeds the world”
Long term Objective:
“Be the best in the world at building great restaurant brands .”
Short term Objective:
10% Annual EPS growth

in Romania
20% Annual EPS growth in Romania
+
4 Key Growth Strategies
1. Build leading brands across China.

2. Drive aggressive International expansion and build strong brands everywhere.

3. Dramatically Improve U.S. brand positions, consistency, and returns.

4. Drive Industry leading long-term shareholder and franchisee value.

Before:
1. 2. Drive aggressive International expansion and build strong brands everywhere .

2. 4. Drive Industry leading long-term shareholder and franchisee value.

3. 1. Build leading brands across China.

4. 3. Dramatically Improve U.S. brand positions, consistency, and returns.



After:
in Romania
Key Success Factors
Competitive Analysis
McDonald's- $137m / 34% M.share
Subway 2012 +40 by 2016
Kebab stands, small restaurants & cafes
Weinerwald by Victorian Food & Bev.
Bargaining Power of the Suppliers
Major producers driving away competition
After communism- 16m acres of farmland
Increase in suppliers:
Lower Prices
Increased quality
Bargaining Power of Consumers
2010 Austerity measures- reduced salaries
Diminishing bargaining power of cons. - Higher price sensitivity
Quality fast-paced dine-in experience
CSR Framework-Food, People, Community
World Hunger Relief
Sustainability
Corporate Social Responsibility
Corporate Governance
Annual Audits
Guidelines for business conduct
Hotline for reporting transgressions
Director Compensation
Tied directly to stock price
Fast food is attractive to fast-paced culture
Slow economic Growth
Fewer barriers to entry
Why Romania?
Threat of New Entrants
Low Entry Barriers
Medium threat of new entrants
Threat of Substitutes
Supermarkets
Fastest growth rate
Dine in restaurants
Farmer's markets
Selected Strategies
Continue Franchising
Proven strategy already in use
Acquire Dristor Kebap
Strategy Tripod
Institutional Considerations
Formal and Informal
Industry-Based Considerations
Oligopolistic climate
Low bargaining power of suppliers
Resource-Based Considerations
Corporate Culture
Tricon Global Restaurants- 1998
$7.50 p/s
11/20/2013- $72.32 p/s
Strategic Projections
Continued Franchising
Continued support of franchisees
Acquisition of Dristor Kebap
Continue using Global Franchise Partnering
Vincent Pezigot to assist new managers
Micky Pant to oversee operations
140,000 EUR sales projected in 2014
RARITY
Novel fast food concept in developing economies
Strength in R&D and Marketing
Leads to better product differentiation and diversification
Pizza Hut
(Italian)
KFC
(American)
Taco Bell
(Mexican)
Caters to consumer tastes for "casual dining experience"
IMITABILITY
Casual dining concept may be easy to imitate...

...but Product diversification and unique menu options are not:
Pizza Hut
- "authentic Italian"
KFC
- "Colonel's secret recipe"
Taco Bell
- mexican concept

Brands possibly unable to withstand long-term competitive advantage alone, but will dominate the market together
ORGANIZATION
VALUE
TANGIBLE
Financial
strength, raising external capital while retaining internal capital
Ranked #201 in Fortune 500 ($13 billion revenue, 13% growth in EPS, exceeded ROIC by 22%)
Physical
expansion of domestic and int'l facilities
Technological
platforms to aid R&D, Marketing, and HR
V
R
Profitability
I
O
Return on Sales
Net Profit Margin: 11.71% vs. 4.87%
Operating Profit Margin: 16.83% vs. 8.49%
Return on Investments
Return on Assets: 17.72% vs. 6.25%
Return on Equity: 74.14% vs. 15.41%

Revenues $13,633m
Net Income $1,597m

INTANGIBLE
Organizational structure
Corporate culture
Global reputation
YTILIBATIMI
Company Hierarchy
ORGANIZATION
Theme of "recognition":
- every employee is important
- accomplishments deserve to be celebrated
Highest
performing
organization
Strong employee engagement
avid Novak
"Our single
biggest
advantage..."
CEO, Yum! Brands
1. Build leading brands in China
2. Aggressive international expansion
3. Improve U.S. brand positions
4. Drive long-term shareholder and
franchisee value
4 Key
Strategies
Leaders in QSR segments
Store differentiation
Continued growth in harsh economy
Financial
Physical
Technological
Organizational culture
Inconsistent SCM practices and enforcement
- SFDA investigated poultry in China
- Taco Bell using less than 40% beef in tacos
Stabilizing allegations
Stabilizing allegations
Strengthen supply chain practices
Use own testing facilities
Strengthen Supply Chain practices
Develop own testing
facilities
Primarily in emerging markets
Developing markets with established presence
- 50% of revenue from emerging markets
- Offers 58 restaurants per 1 million people in U.S. and developed economies
- Offers 2 restaurants per 1 million people in emerging economies
- Rising incomes in developing countries
- Macroeconomic conditions prime for
high growth rates (urbanization)
- Affordable to lower AND middle class
consumers
1. Retail food industry highly competitive
Focus on brand awareness, quality, and value pricing
2. Allegations against food quality
Invest in building brands and drive customer loyalty
3. Legislative and regulatory changes in foodservice industry
Keep up to date; aware of Romanian complexities
4. Consumer demand for healthier product
Taco Bell drive-thru
Pizza Hut's Fit n' Delicious pizza
KFC's grilled chicken options
Value convenience and health with:
SW
OT
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