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International Business

International Business Preliminary Report Yum! Brands : Impact of social and cultural forces on business? manifestations,

Preliminary Report

Yum! Brands:

Impact of social and cultural forces on business? manifestations, consequences and remedial strategies adopted

Group - 10; Section - E

1. Saurabh Jawade PGP/22/215)

2. Vengatesan P (PGP/22/216)

3. Ankita Gandhi (PGP/22/233)

4. Sachin Kuruttukulam (PGP/22/234)

Table of Contents

Topic

Page Number

Introduction to the Study

2

Statement of Problem

2

Proposed Study

3

Motivation & strategic importance of the study

3

Why Yum! Brands?

4

Methodologies

4

Source of Data

5

Presentation Scheme Planned

7

Introduction to the Study

Yum! Brands is one of the fastest growing American fast food companies in the world. Headquartered at Kentucky, USA, it boasts of the position of being the world’s largest fast food business in terms of system units i.e. over 43,000 units of which just over 90% is runs through a franchise model.

The important financial metrics of the firm are as follows (2019):

Revenue

6.366

Billion USD

Operating Income

1.625

Billion USD

Net Income

1.619

Billion USD

Yum! Brands is regarded as one of the fastest growing restaurants chains in the world. They have reputed brands such as Pizza Hut, KFC and Taco Bell in their portfolio. This international giants’ entry

into the Indian market was done very meticulously and in a structured manner. Therefore, the purpose

of the study is to analyze how the brand was able to establish a presence in the Indian consumer market. The study will study in depth how various social and cultural nuisances affected the product

mix

of Yum! Brands and also looks at how competitors react to the same.

The

study will also examine how the brand grew in the Indian market right from entry till present.

Regional factors within the country and adoption of state specific factors by Yum! Brands will also be studied. The study will aim to understand why a particular entry strategy was used by the brand during entry and while during continued operations.

The various frameworks learned during the course will be used to evaluate its effectiveness in this

particular contest. Certain strategies adopted by the firm have met with tremendous success and certain others have failed. The report aims to find out why certain strategies did not work and why other did. Lastly, the study also includes the sets of recommendations for the firm in order to further

tap and expand in the Indian market.

Statement of Problem

The broad problem statement is: How can foreign restaurant chains tackle the cultural issues

arising in a foreign market?

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Yum! Brands is one of the first international brands to enter the Indian market. The first KFC store was established in Bangalore in 1995 and ever since there has been an exponential growth for the firm in the Indian market. Subsequently pizza hut and taco bell also entered the Indian market. The problem statement that we will be addressing is about how effectively the firm was able to adapt to the various social and cultural factors prevalent in the Indian market.

The problem statement will include the following questions:

1. How was Yum! Brands able to effectively adapt to Indian market.

2. Was Yum! Brands use the optimal entry strategy for the Indian market.

3. How effectively did it change its product mix to account for socio-cultural nuisances?

4. The effect of regional factors if any in modifying the product mix

5. Was there a significant deviation in service methods used in the Indian markets compared to the standard methods

The analyzes of the above statements give a picture of the firm’s story in India. The success and failure stories can be used to understand why certain international firms fail while entering the Indian market whereas other do succeed.

Proposed Study

Our proposed study is on the ‘Impact of social & cultural forces on business’

Through this study we will try to address the following:

Identification of Yum! Brands’ chosen mode of internationalization

Did Yum! Brands alter its internationalization strategy while entering Indian markets as has been the case with many international companies in the past? Why/Why not?

Impact of socio-cultural factors on Yum! Brands strategy in India

Success/failure of its strategies and corrective action taken

Comparison between the strategies of different brands in Yum’s portfolio

Current strategy followed in Indian markets and intra-country variations if any

Future scope and strategy for further expansion

Motivation & strategic importance of the study

Socio-cultural factors refer to the belief systems, attitudes, practices, preferences, customs, traditions and behaviour of the people in a country. It is a major contributor to the buying decisions of consumers and overall market activity.

Therefore, socio-cultural factors play a very crucial role in the success or failure of any business. Their impact becomes all the more critical when the parent company is unaware of the social norms and local culture of the host nation. In such a situation, even the smallest error or oversight in understanding the local population can prove fatal to a business’s internationalization efforts.

When talking about India, the role of socio-cultural factors becomes even more prominent. Not only is the Indian culture remarkably different from that of any western nations, the variability in the customs and practices of various regions within the country further complicates the business environment and decision-making process.

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As a result, there is tremendous scope for international companies to devise creative solutions to ensure successful entry into Indian markets making this an interesting and strategically relevant topic of discussion.

Why Yum! Brands?

Yum! Brands is an American fast food company. The Fortune 500 corporation operates various fast food chains like Taco Bell, KFC, Pizza Hut, and WingStreet worldwide (except in China).

The reason we chose Yum! Brands is because socio-cultural factors are all the more relevant for a company with food & beverage offerings. The vast differences in Western and Indian culture further complicate this situation. At the same time, the India opportunity is too large to be missed by a company like Yum that faces a saturated and highly competitive local market and is also sufficiently internationalised in a number of other western economies.

India which is forecasted to become the largest consumer market, ahead of US and China, by 2030 is the focus for various companies like Yum. With its massive population, rising income, and westernization of consumption patterns, India provides a huge opportunity. However, various social factors such as religious beliefs that are closely linked with eating habits, tastes and preferences, abundance of competition in the form of local cuisine and other international fast food companies also complicate the business environment. Though Yum! Brands has been quite successful in India it has also faced its fair share of challenges and this is the journey that this study intends to explore.

Methodologies

1.

We would start by assessing the decision of Yum! Brands entry into India: the reasons and objectives of its venture using the Country screening and feasibility study process

2.

We would like to evaluate the entry mode and evaluate if it’s the right choice using Strategic Choices on International Business framework

3.

Evaluate the Internationalization process adopted and validate its effectiveness

4.

We would analysis using the Porters diamond of national competitiveness and PESTEL analysis

5.

Evaluate the National Cultural dimensions using Five GLOBE dimensions:

Assertiveness

Future orientation

Performance orientation

Humane orientation

Gender differentiation

6.

Evaluate the cultural factors affecting the International business using Hofstede’s cultural value dimensions as food is an integral prat of culture and in a multicultural country like India we would like to know the strategy followed by Yum! Brands

7.

Evaluate whether franchise model or equity owned business model works well for an international restaurant business, this is because Yum! Brands has started to convert all its brands to franchise model with only 20% of KFC with equity owned model. The various factors that will be evaluated are:

Ownership Structure

Business format

Contract design

Size and Age

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Behaviour and Interactions

Outcomes for the stakeholders

8. Apply CAGE Distance Framework and identify the various differences between foreign markets and India. The various distances that will be covered:

Cultural Distance

Administrative Distance

Geographic Distance

Economic Distance

9. KFC faced many challenges in its initial years of operation and had to shut shop for few years, we would like to find out what could have been done different or was it the right move

10. The menus were changed for the Indian customers and we need to know if the product diversification was in-line with its internationalization strategy and compare it with other emerging markets

11. We will be going through the value chain of the fast food industry to identify the key players and challenges

Source of Data

1. Research Journal || Socio-cultural factors affecting consumer behaviour : McDonalds & KFC in China and India || https://www.iracst.org/ijrmt/papers/vol6no22016/6vol6no2.pdf

2. Research Gate || Changing Culture at Pizza hut and Yum! brand ||

3. Euromonitor || Could India be Yum Brands New Key to international Growth || https://blog.euromonitor.com/could-india-be-yum-brands-new-key-to-international-growth/

4. Wharton Research Paper || Made for India: Succeeding in a market where one Size won’t fit All || https://knowledge.wharton.upenn.edu/article/made-for-india-succeeding-in-a-market- where-one-size-wont-fit-all/

8. KFC in India Ethical and Social Concerns ||

9. KFC Appealing to Indian Market || https://www.courier-

10. Understanding the impact of culture on business in India ||

11. Cultural considerations when doing business in India || https://www.tmf-group.com/en/news-

12. When Culture Impact Business ||

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14. Impact of Changing Socio-Economic Environment on Business in India ||

15. Social and cultural factors affecting business || https://ceopedia.org/index.php/Social_and_cultural_factors_affecting_business

16. The Effects of Socio-Culture on Business || https://smallbusiness.chron.com/effects-

17. KFC story in India, Kentucky Fried Chicken (KFC) || https://www.mbarendezvous.com/general- awareness/kfc-story-in-india/

23. KFC putting vegetarian Item on menu || https://economictimes.indiatimes.com/industry/cons-

25. Research Gate || Influence of Culture in International Business

26. Cultural Frameworks and Their Importance for Leaders ||

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Presentation Scheme Planned

We will present the case as per the flow diagram given below:

Introduction to Yum! Brands, Legacy with the internationalization and it’s experience

Legacy with the internationalization and it’s experience Yum! Brand’s Expansion in various geographies and

Yum! Brand’s Expansion in various geographies and Objectives & Vision

in various geographies and Objectives & Vision Yum! Brands Entry in Indian Market: Objective of Entry

Yum! Brands Entry in Indian Market: Objective of Entry

Yum! Brands Entry in Indian Market: Objective of Entry SWOT & PESTLE Analysis, Porter’s Diamond &

SWOT & PESTLE Analysis, Porter’s Diamond & Five Forces, Flying Geese, Type of Strategic Entry in Market: Global or Multi, McKinsey’s Strategic Horizon and BCG Matric

or Multi, McKinsey’s Strategic Horizon and BCG Matric Market Research on Indian Fast Food Market, Cultural

Market Research on Indian Fast Food Market, Cultural & Social issues in Indian Market

Food Market, Cultural & Social issues in Indian Market Franchise Model of Entry: Analysis, Operational Strategy

Franchise Model of Entry: Analysis, Operational Strategy adopted and Cultural Issue

Analysis, Operational Strategy adopted and Cultural Issue Analysis of Problems faced by Yum! Brands in Indian

Analysis of Problems faced by Yum! Brands in Indian Market and steps taken to overcome issues and problem

Indian Market and steps taken to overcome issues and problem Marketing & Strategic Solution adopted by

Marketing & Strategic Solution adopted by the Yum! Brands to tackle the social and Cultural Issues

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Its Growth and Expansion in Indian Market: More vegetarian items introduced as a strategy Challenges

Its Growth and Expansion in Indian Market: More vegetarian items introduced as a strategy

Market: More vegetarian items introduced as a strategy Challenges that still persist in Indian Market and

Challenges that still persist in Indian Market and How Yum! Brand can overcome

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