Taco bell swot analysis 2015

Running Head: YUM BRANDS SITUATIONAL ANALYSIS

Yum Brands Situational Analysis

Yum Brands Situational Analysis

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Yum Brands Situational Analysis

Introduction

Yum! Brands, Inc., has its headquarters at Louisville, Kentucky United States. The CEO is Greg Creed as of 2015 to present. This company is an international umbrella company that has the following subsidiaries under its wings; Taco Bell, KFC, Wing Street, and Pizza Hut. All these brands operate under Yum! Brands except in china where Yum China runs them. At this point, it is clear to see that Yum! Brands mainly focus on fast food and the main competitors, also deal with fast food; such as Mc Donald's. This company has been declared a Fortune 500 company, in addition to having a spin-off; PepsiCo that started in 1997. This paper will be looking at the situational analysis of Yum! Brands that will help in understanding the external and internal environment of this brand to understand its capabilities.

Background Data on Sales & Costs

The sales of Mc Donald's and Yum brands have not been that different for some few years now. The two companies have been competitors for a long time, and it is only fair to have them head to head in the market capitalization. As stated, before these two companies are both International giants in the fast-food industry. According to the NYSE as of August 30th, 2019, the market capitalization of Yum Brands was at 35,53 Billion dollars, and on the other hand, Mc Donald's had a market capitalization of 165.54 billion dollars. Which is not a bad thing the gap may be a representation of how Yum Brands is not as "ancient" as Mc Donald's. The good news is that the growth Index of Yum Brands is excellent and within no time will the brand catch up to their fierce competitor Mc Donald's.

This is also as a result of the strategy the two companies have adopted of late. The de-risking approach, which means using refranchising to drop their ownership of restaurants around the world. This has technically reduced their operational costs, and overall costs while on the other boost earnings per share growth. Another factor is that there is a growing free cash flow, whereby Yum Brands is leading; which in return it gives the chance for both companies to make investments that are aimed at growing their restaurants, technically this is why these two companies are head to head, that will give us a transparent background of their performance in this situational analysis.

At the same, it is crucial to recognize that Mc Donald's has more returns of about of 41.2% while on the other hand, Yum Brands have gained a 30.3% in the previous year up to date. This is to add to the fact that both of these companies have outperformed the fast-food industry in the margin of 14.4% in the same period. The EBITDA ratio presents vivid valuation and earnings of the two companies. Typically, it is usually the more appealing company is the one which shows a lower EBITDA. Thus, both of these brands are overvalued based on the overall industry EBITDA of 13,8. However, Mc Donald’s holds the lower EBITDA value between the two at 16.1 and 19.8, respectively (Zack equity research, 2017).

Competitors

There are a lot of competitors in this industry; the like of Wendy’s, Papa John’s, Del Taco, Quiznos and Mc Donald's. But the focus will be mainly on Mc Donald’s since they are almost head to head in all aspects of the company and business in this industry. This segment will be looking at the advantages that Yum Brands had over the competition and what makes them a worthy competitor and a threat to a huge brand such as Mc Donald’s.

What makes Yum brands stand out is the three brands, being the owner of the big three brands in the world, KFC, Pizza Hut, and Taco Bell. These three brands have established themselves solidly in the fast-food industry, as compared to Mc Donald's that is competing with the same brands. Another competitive advantage is the China dominance; following the creation Yum China has made this brand dominate china with KFC whereby it presents non-vegetarian food in this market. About this, Yum brands have the massive operation in highly populated markets such as China and India. Whereby also in India there is, Yum India responsible for all the franchises, whereby Pizza Hut and KFC are the major brands in the Indian Market. The fact that they are capable of getting the outside markets with more than one brand in the market is what makes this brand so fierce and competitive. With this in mind, it is a clear indication that the company has an expansion advantage, whereby smaller brands don't pose any threat to this brand. Only huge brands such as Dominos and majorly Mc Donald's to go against the Yum Brands (Bhasin 2019).

But at the same time, there is an aspect that leads Mc Donald's to give Yum Brands a stiff competition. Every company has its weaknesses, and that is where they lose their competitive advantage. When it comes to quality, it somehow lags behind KFC, and that is where it fails, as KFC has managed to the quality world through the one system of operation worldwide instead of having different branches. Whereby this comes with the problem of customer service, which cannot be compared with the KFC customer service, which is much better, these are some of the issues that cause the Yum Brands to lose their competitive advantage, but overall, they a worthy competitor with largest brands in the hospitality fast food industry. The appropriate thing to do is to take of the flaws mentioned above, and it will have a better capitalization in the years to come. This is because matters like quality and customer are aspects that can be fixed if the management is willing.

Customers

It is a fact that almost everyone has dined in Yum Brands franchises all over the world or rather have seen it in advertising or just at their street. Yum Brands has a specific consumer based on the type of food they offer. Technically their target consumer range between the age of 10 years to 40 years, both male and female and in all demographics. This is due to their diverse and unique meals and menus. Take, for example, the pizza hut menu has the following; pizzas, pasta, meal deal, desserts and; soup and salad. This is the type of menu that has a range of choices for everyone at the age range mentioned above.

The other thing is that their brands also have in themselves marketing aspects; take, for example, the Mexican delicacy the tacos inspire taco Bell. So the what they do best is cover the market in terms of using Taco Bell as a pioneer for the other brands. Currently, Taco Bell is expanding in Europe using this same concept. On the other hand, earlier before it was made clear that KFC pioneer Yum Brand in the Chinese market for the reason that it focuses on the non-vegetarian menu, which is the strength of Chinese cuisine. Also, in the Indian Market Pizza Hut and KFC are the dominating brands in this market, for the reason that the consumers in this region can enjoy internationally accepted menu of these two restaurants (Rogers 2015).

Wing Street is not that emphasized in any of the segments because it is not performing very well, in the sense that people have accepted the Yum Brands’ brand representatives as Pizza Hut, KFC and Taco Bell. This also comes to look at the American consumers, whereby all thee four fats food restaurants flourish. The reason is that the demographics of this market has various cultures Spanish, Asian, American, black American, and other smaller cultures. The diversity in this market is what males these brand flourish different in every city, depending on the cities' demographics, cultural representation. But also, that is not enough representation of the consumers. Yum Brands have specific and general ways in which they establish their consumers and cover the market.

Typically, the consumers of Yum brands are middle class and high-class families or rather people with a high Income and are food lovers. These consumers are the people who have built this brand. In addition to that, the younger generation adds up to their consumers, people who don't lie to cook, like to spend money on food, and people who are socially conscious and follow trends. Like for example, Pizza Hut is the only brand between the four which has a vegetarian menu, which has helped the brand to grow because recently the millennials ad the x generation have been conscious about their health and fitness (Mike et al. 2003). Thus, when a fast food can provide a vegetarian menu is a win for everyone.

Company

There are some advantages to Yum Brands. This is one of the leading companies in the fast-food industry, whereby the strengths are what makes this brand to thrive in the market place. Whereby this helps to penetrate new markets and expand their existing market share. Some of the advantages that Yum brands have is the best distribution network; this helps the brand to reach its global market with ease. There is also the fact of free cash flow; this enables Yum Brands to have the ability to expand into new projects when there is need. In addition to that as mentioned before the Yum brands have a strong brand portfolio; pizza hut, KFC, Wings Street, and Taco Bell; and as discussed before these have been strategically used to cater for different markets.

At the same time, the Yum brands have some disadvantages; such as quality, Yum Brands lacks a global work routine which degrades the quality of some brands like JFC India that was faced with quality issues. At the same time, the company has gone ahead to acquire some question mark brands that instead of making them money, they have become a liability, e.g., Bah Shop and East Dawning. To emphasize on the quality issue, the customer service segment technically wrong, the customer service at Mc Donald's cannot be compared to the customer service at Pizza Hut or KFC (Bhasin 2019).

This brand has opportunities, earlier before it was mentioned that the brand has available finances; thus, the wisest this to do is expand using the existing funds. The bran also has the localization opportunity, just like KFC is introducing new dishes to menu of their current operating market. This will help in localization, whereby this should also be implemented in Taco Bell and Pizza Hut that have localization options which are different.

Yum brands also have threats that are affecting this brand. Take, for example, like competition form Mc Donald's and Dominos, whereby Mc Donald's is the majority shareholder. Also, to this, the threat of health consciousness is lurking as mentioned before only Pizza Hut has vegetarian meals. This will be a problem for this brand due to the mindset that is currently being set to reduce obesity globally. Whereby it is majorly caused by fast food, this will affect the company if they don't adapt slowly. Finally, the other threat that the Yum Brand is facing is a competition that is not organized; they have indirect competitors like Starbucks and other restaurants and small businesses which profoundly affect the Yum Brand.

Community

The Yum is not only involved in the business part of the industry, but it also has some innovative aspects that help grow the company slowly. Taking, for example, in India, the Yum brand decide to involve the audience in the brand and its successes in this market. Which was after the brand launched KFC radio that made the audience feel part of the company and not left out mainly because it was a brand that is foreign. On the other hand, this brand has mastered how they communicate to their market and audience. Take, for example, Taco Bell accounts is almost all social media platforms, but when they post a message, it will be the same, but the delivery is different in each platform. In the sense that snapchat has a modified version of the word and Instagram or Facebook has different words. Regarding this, Taco Bell was the first fast-food restaurant that adopted snapchat, and currently, they have Snapchat filters whereby customers connect on the same.

Image Source; AdWeek

Besides, the Yum community was further developed with its localization in China and other parts. Taking for example, as it was first established in Beijing in 1987 when western fast food was unrecognized in this region. Which the result was creating a novelty for the first KFC branch in this region that made the expansion more natural and paved the way for other areas like in India which are more of the same (Riley 2013). The fact that they have Yum India, Yum China, and Yum International, this creates an international community of this fast-food restaurants which has helped this brand survived up to date. Taking, for example, that is why other fats food restaurants find it hard to survive in markets like china mainly because they lack a background the same as Yum brands. The Yum brand community is all about interacting with the people and the market, and other corporate social responsibility efforts like kicking out world hunger campaigns; these are some of the campaigns the Yum brands have embarked on in the quest of developing their name and at the same working on improving the societies in which they operate in, creating one big Yum community.

References

McDonald's vs. Yum!: Which is the Better Restaurant Stock? By Zack Equity Research. December 22nd, 2017. Retrieved from https://finance.yahoo.com/news/mcdonald-apos-vs-yum-better-152103366.html

Competitive advantage and SWOT analysis of the YUM Brands by Hitech Bhasin. February 21st, 2019. Retrieved from https://www.marketing91.com/swot-analysis-of-yum-brands/

Mike, B., & Slocum, J. W. (2003). Changing Culture at Pizza Hut and Yum! Brands, Inc. Organizational Dynamics, 32, 319-330.

Enz, C. A. (2005). Multibranding strategy: the case of Yum! Brands. Cornell Hotel and Restaurant Administration Quarterly, 46(1), 85-91.

Rogers, E. (2015). Millennial Consumer Preference: Waffle Fries vs. Potato Wedges.

Giang, P. H. (2016). The Study of Factors that Influence Consumer Purchasing Decisions towards Top Three Fast Food Brands Including KFC, Pizza Hut, and Lotteria in HoChiMinh City, Vietnam.

Why Localisation Is Important for Success in China – Yum! Brands and the Rapid Growth of KFC by Jim Riley. September 22nd, 2013. Retrieved from tutor2u.com