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YUM! China

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by

Stephen Gossman

on 1 April 2014

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Transcript of YUM! China

YUM! China
Background
The parent company of several restaurant chains including KFC, Pizza Hut, and Taco Bell.
The world’s leading restaurant company with 40,000 restaurants in more than 125 countries.
Ranked #201 on the fortune 500 list with revenues of more than $13 billion in 2012.
By 2010, Yum ran over 3000 KFC's in 650 cities and nearly 500 Pizza Huts in 120 cites with 250,000 employees in China.
Since the first KFC opened in Beijing in 1987, it became the largest restaurant company by 2010 in mainland China.
Yum operated the largest food delivery business and had the most advanced and integrated cold-chain system in China.
How can Sam make sure that fast food restaurants in China
don’t make the same mistakes as in the West?
Need to be perceived as a company that has more to offer than the typical western fast food restaurant
“Five star restaurant with a three star price”
Hire employees with previous restaurant experience and put them through thorough training to create highly skilled staff
Sam Su has a “looking ahead” framework for his business, which is something western companies lack
Is Sam ready to go ahead with another 15,000 stores?
Claire Depotter
Claire Lafave
Kelly Schluckebier
Patrick Mehall
Stephen Gossman
William Covert
Youyou Yang

Yum! China’s expansion plan to open and operate 15,000 stores is possible when focusing on key strengths in the correct time frame
New product development and differentiation
Developing 85-100 new products each year has become a standard strength.
The population growth in China is a great opportunity to increase sales with more customers
In 2010 the middle class was at about 300 million people and is expected to grow to 800 million in 2025.
With such high population in China it is a great time to expand and take advantage of the growing numbers.
With more people, there’s more possibility to increase the target audience and gain a larger market share.
Sam’s emphasis on hiring locals to work in stores that understood the Chinese customer is key, raising customer satisfaction and ultimately profitability.
Yum! China has 500-600 suppliers and uses as many local suppliers as possible.
Online ordering could also help with expansion, during the internet/technology era.
Lowering the amount of in-store time employees need to be a part of and lowering the overall transaction time.

Time Frame to Expand
Mistakes
Slogan
West: “finger lickin’ good”
Chinese thought that was unsanitary

Menu
West:
29 items
Original Recipe of Fried Chicken

China:
Over 50 items
Customized menu to appeal to the chinese (spicy foods)

Question?
Over 500 new stores a year = around 30 years, maybe less
Expected middle class population for 2025 = 800 million (500 million more than in 2010)
Healthier quick-serve restaurant model
 
Number of overweight and obese people and children has gone up significantly

Eliminated “super-size” option
 
Healthier choices on menu

Yum involved in lobbying government to take obesity more seriously

Yum’s! Involvement with the community has boosted their brand equity and enhanced public opinion about their company

YES
Trademark Law
Copyright Law
“2+1”Rule
The “2+1” rule requires a business to operate at least 2 company-owned franchises in China for a period of 1 year before being registered as a franchise.
Plays a major restrictive role on businesses operating in China.
Other requirements for franchises include a minimum 3-year term, the ability to train Chinese personnel and provide long-term operational guidance, and a track-record of operations and services.
Confucianism
The idea that human beings are fundamentally good ultimately affects Chinese law by advocating a ruling based on traditional customs, mores and norms.
Legal Background of China
Patent Law
Intellectual Property in China
Full transcript