Lessons Learned: What Can We Learn From Yum Brands' Success?
Written by Denise A. Harrison
Growth does not happen by accident: we can shorten our learning curve by looking at how other companies succeed. In this article we examine how one company outpaced its competition, but first it had to learn from its earlier msitakes.
Yum Brands, known best for its fast food restaurants KFC, Pizza Hut and Taco Bell, opens a new restaurant in China every 18 hours - what made them so successful? Many have sought to make inroads in China, but few have been successful. Yum Brands' results highlight some key areas that allow for a successful market entrance - and these lessons do not only apply in China.
Try, Try Again
Yum Brands did not get it right at first, they had several aborted attempts; first in Hong Kong and then in Taiwan. But rather than simply giving up, they asked what would we do differently if we were to do this again? Here are some of the answers to that question:
Success through Focus
Now Yum Brands has 40% market share and its profit is up 23% in China, but down 2% in the US for the third quarter of 2010. But what will allow this success to continue? The answer is focus.
Yum Brands has several geographic segments including the US and China. The US is a mature market for fast food and competition is fierce and margins are shrinking - often a characteristic of a mature market. In contrast, China is a growing market; even with many competitors, an increasing percentage of the Chinese population will earn enough disposable income to be able to eat at fast food restaurants, so growth is assured. A growing market with a 40% market share is clearly a market where an expand strategy is warranted. But what about the US? Should Yum Brands try to maintain its position (i.e., vigorously defend its market share) or should it contract - pruning itself of marginal restaurant chains? Yum Brands has decided to sell its Long John Silver's and A&W chains so that it can redeploy its resources into segments (e.g., China) that will reap greater rewards.
What does this mean for you?
Denise Harrison is Executive Vice President at the Center for Simplified Strategic Planning, Inc. She can be reached at: email@example.com