Free Case Study On Yum Brands

Problem Definition: The main problem faced by Yum! Brands Inc. is a lack of integration between the brands, which causes further operational and strategic issue for implementing the company’s current strategy of multibrand operations. This issues with multibranding have become increasingly acute with the international expansion, which is not possible unless the brands within Yum! learn to work together and to derive synergies from joint operations.
Situation Analysis:
The problem of integration is the heritage of the Yum!’s ex-parent company PepsiCo. Restaurant business was not core for PepsiCo, that is why it was always treated as a secondary unit, which could only offer benefits to the consumer goods segment in terms of Human Resource development and cross-selling. All restaurants operated independently and were responsible for meeting certain financial targets, which were regularly set by PepsiCo headquarters. It was not uncommon for the restaurants to engage in competition, thus cannibalizing the business as a whole. David C. Novak, the current CEO of Yum!, changed the strategic orientation of the company, after it had spun-off from PepsiCo in 1997. The main idea behind the new approach was a hybrid model that allowed integrating Yum! brands by decentralizing brand-specific operations, but consolidating shared services, such as purchasing and accounting. The new orientation aimed to modify the organization on the strategy-structure-culture level and to change not only the operational activities, but also the employees’ mindset. This approach has become especially important once the company started to pursue multibranding growth, which required both synchronization of the restaurant operations as well as the joint brand development and promotion. Although the integration model has been emphasized by Yum! Since its inception as an independent company, the complexity of the task makes it the primary issue on the company’s agenda until today.
Alternative / s: One alternative for Yum! could be to continue expanding abroad with their multibrand strategy. This could ensure internal cohesion, however it would add complexity in the unknown foreign markets, reduce flexibility and increase the risk of failure. The second alternative could be brand decentralization and abandonment of the multibrand strategy. This approach would make international growth strategy more straightforward and simplify operations and promotion. However, it would not allow the company to take advantage of synergies and cross-selling opportunities and will require a strategic reorientation of Yum!.
Recommendation. While the efforts to integrate Yum! brands have been rather successful in the U.S., it is very complicated to transfer abroad. Therefore, the company should grow internationally by promoting each brand independently. The benefits of this approach would include a reduction of complexity, which can become detrimental in the unknown international markets, more targeted promotion efforts in the regions, where Yum! brands do not have high recognition, and more flexibility in exploring market opportunities and dynamics. However, this strategy will also mean that the company will not be able to derive synergies from joint operations abroad, would have to develop a separate single-brand strategy for international markets, and it would dilute the Yum! brand image across countries.
Implementation Plan. The implementation of the hybrid model of developing multibranding in the current markets and expanding with a single-brand strategy should start by establishing regional units that would be responsible for selecting the most appropriate entry mode for different areas. In particular, multibrand development capability could be leveraged in making alliances or acquiring local players, thus allowing the company to gain recognition, access to prime locations, local knowledge and existing customer base. However, current integration and shared services strategy should still be applied for all brands, thus enabling control and synergies. Employee training and motivation strategies should be also designed centrally in order to allow cross-brand learning and to develop a unique Yum! spirit. .