SWOT and PESTLE Analysis

Case Study: Yum

Index

1. Introduction ................................................................................................................................... 1

2. PESTLE Analysis .......................................................................................................................... 2

3. SWOT Analysis ............................................................................................................................. 4

4. Conclusions ................................................................................................................................... 6

5. References ..................................................................................................................................... 7
 1.Introduction

Yum Brands, Inc. is headquartered in Louisville (Kentucky) and operating in the QSR (Quick Service

Restaurant) industry in over 135 countries with approximately 44,000 stores and three main brands, KFC, Pizza

Hut and Taco Bell (YUM, 2017). Yum, one of the most well-known market leaders, was founded on 1997 under

the name Tricon Global Restaurants after the separation from PepsiCo (Seeking Alpha, 2012). The author of

this paper, through the use of tools like PESTLE and SWOT analysis, aims to develop a wider knowledge and

better understanding of both external and internal environments of Yum to outline the current situation of this

firm and provide an overall view of the QSR industry.

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 2.PESTLE Analysis

Political: all organisations operating in the QSR industry have to comply with laws, regulations and policies

issued by the national government and other bodies intended to prevent potential damages and hazards to the

health of citizens and the environment. Consequently, all these aspects may dramatically affect the overall

operational costs and profits. For instance, large organisations like Yum need to consider that due to different

political reasons there may be changes in minimum wages that in turn increase the labour cost and reduce the

final profits (Minimum Wage, 2017).

Economic: the recession of 2008 has generated during the last decade a sense of insecurity and a lack of

confidence among customers, with a lower budget available for non-primary goods. However, Yum has been

able to cope with the changing market due to a wide number of discount, promotions and offers that reduced the

negative effects of the economic recession and increased both customer number and their average spending

(The Economist, 2010).

Social: during the last decade the food and beverage industry has faced an increased awareness about healthy

food and dietary diseases, such as obesity, diabetes, hypertension and also tooth decay, deriving from bad eating

habits and an excessive consumption of sugary and fatty foods. Consequently, the products offered by QSR,

usually labelled as “Junk Food”, generated a negative perception and impact on organisations like Yum and its

main competitors, which had to introduce in their restaurants healthy options to satisfy the needs of this new

generation of consumers. For instance, to prevent potential losses of customers, Yum focused more not only on

the food offered in its store but also on people, community and environment (Yum, 2017b).

Technological: as argued by Croitoru (2012), most of the times technological innovation generates competitive

advantages since it can introduce new manufacturing processes that can reduce waiting time, increase the

overall production and consequently make higher profits with the same amount of resources. For instance, the

Internet has radically modified the various strategies to conduct marketing through the use of social media and

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websites that are more efficient respect to all traditional media, such as TV, radio and newspapers, since they

can reach a wider amount of customers in a shorter period and at a lower cost. For instance, Yum has been one

of the first organisations in the F&B industry to adapt its marketing and organisational strategies to the new

market demand with the adoption of innovative technologies to promote its brands in new markets (CNBC,

2016).

Legal: as mentioned previously, there are several laws, regulations and policies issued at a national and local

level intended to monitor food healthy and hygiene. Apparently, all of them represent a barrier to the primary

operations of fast-food companies since they involve high costs and often they may slow the business due to

potential interruptions for breaking policies. For instance, Yum, particularly with KFC and Taco Bell, faced

several issues in the past due to alleged food poisoning and poor food quality issues, which have generated a

negative brand image and financial fines that adversely impacted on the overall business performances (Shears,

2012).

Environmental: like the increased awareness related to the health problems, environment and sustainability

represent some of the acutest concerns for the modern generation of consumers. Consequently, all business to

comply with laws intended to protect and safeguard the environment are going green with a considerable

reduction of air and water pollution emissions. For instance, during the last decade, Yum has adopted several

strategies to reduce the use of paper products, such as online training instead of hardcopy manuals and the

adoption of recycled paper (Yum, 2008).

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 3.SWOT Analysis

Strengths: one of the main advantages of Yum is undoubtedly its extensive global presence in the world market

with almost 44,000 restaurants and three brands, KFC, Pizza Hut and Taco Bell, which everybody easily

recognises. Also, due to a process intended to increase its market share further and reduce risks related to poor

diversification, Yum is continually expanding its presence. This phenomenon is attested by the fact that during

the Q2 of 2017 it was achieved not only a sales increase for all KFC (+7%), Taco Bell (+7%) and Pizza Hit

(+2%) but also a substantial growth of its overall profits (+20%). Also, Yum was also able to generate for its

investors a 21% of EPS (Earnings Per Share) during the second quarter of the current year (Siegner, 2017).

Weaknesses: in the past Yum has faced several issues related to the quality of its food that have slightly

destabilised the entire organisation generating negative legislative consequences and economic losses (Reuters,

2014). Yum, and particularly KFC and Pizza Hut, are perceived by most people as some of the worst fast-food

restaurants due to their inconsistency in customer service (Cole, 2014). Also, due to its broad and rapid

expansion, Yum is facing several issues with its customer supply chain (DuBois, 2013).

Opportunities: despite a significant number of stores already present across the globe, Yum has several further

expansion opportunities, and particularly in the Indian and Chinese markets that offer a vast number of

potential customers (Yum China Holdings, 2017). However, this US firm should slightly adapt its dishes to

these new markets to satisfy the needs and dietary requirements of their customers. In addition to this market

penetration and development, Yum should adopt strategies to focus more on diversification to offer new

products, such as the wider number of healthy options, which can bring competitive advantages (Ansoff, 1957).

Threats: apparently the main threat for Yum is the presence of a wide number of global food chains, such as its

main competitor McDonald’s, and also by the potential entry of new firms that aim to make profits in the short

term and eventually reduce the market share of Yum (Forbes, 2014). Mainly due to the nature of its business,

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Yum has to face potential issues related to food safety and contamination. In fact, they can generate a

substantial negative brand image and several adverse legal consequences, and also the growing concerns and

awareness related to the consumption of food that is considered not highly nutritious or unhealthy (Sharma,

2015).

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 4.Conclusions

Throughout the entire paper have been analysed both external and internal environments. The main findings

emerged from this brief investigation are that despite the high degree of rivalry present in the QSR industry, it

can be argued that Yum is performing well from the market and financial point of view. The main reasons can

be found in the fact that, despite a certain degree of instability of the global markets, particularly during and

after the recession of 2008, Yum has focused on expanding into new markets, such as China and India, to

increase its global share. In fact, as reported before, Yum is one of the main market leaders with approximately

44,000 store in over 135 countries and much room for improvement that makes of this US organisation as a

model to follow not only for existing brands but particularly for those that aim to enter the QSR market.

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 5.References

Ansoff, H.I. (1957), Strategies for Diversification, Harvard Business Review, vol. 35, no. 5, pp. 113-124.

CNBC (2016). Yum China faces menu, reputation, tech challenges, analysts warn, accessed 17 August 2017,

<https://www.cnbc.com/2016/11/01/yum-china-faces-menu-reputation-tech-challenges-analysts-warn.html>

Cole, M. (2014). The 11 worst fast food restaurants in America, The Week, accessed 18 August 2017,

<http://theweek.com/articles/445391/11-worst-fast-food-restaurants-america>

Croitoru, A. (2012). A review of a book that is 100 years old, Journal of Comparative Research in

Anthropology and Sociology, vol. 3, no. 2, pp. 137-148.

DuBois, S. (2013). Yum Brands faces chicken troubles in China, Fortune, accessed 17 August 2017,

<http://fortune.com/2013/05/09/yum-brands-faces-chicken-troubles-in-china/>

Forbes (2014). Key Trends Impacting Burger King's Business, accessed 17 August 2017,

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Seeking Alpha (2012). A comparison of 3 Restaurant Heavyweights, accessed 18 August 2017,

<https://seekingalpha.com/article/381631-a-comparison-of-3-restaurant-heavyweights>

Sharma, N.C. (2015). ‘I would never eat street food after reading this report’: Scientists appalled as tests on

Delhi food stalls find high level of faecal matter in golgappa and momo, Daily Mail, accessed 17 August 2017,

<http://www.dailymail.co.uk/indiahome/indianews/article-3101342/I-never-eat-street-food-reading-report-

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Shears, R. (2012). Girl, 14, left brain-damaged after eating KFC chicken twister forced into new court battle as

food giant appeals $8m payout, Daily Mail, accessed 18 August 2017,

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Siegner, K. (2017). Yum! News, Yum, accessed 18 August 2017, <http://www.yum.com/app/uploads/Q2-2017-

Earnings-Release.pdf>

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Yum (2008). Serving the World – Yum Brands 2008 Corporate Responsibility Report, accessed 18 August 2017,

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Yum (2017a). Yum Company, accesses 17 August 2917, <http://www.yum.com/company/>

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Yum China Holdings (2017). Yum China Board Expands with More China Market and Operation Insights,

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