Abanob Khalil

Strategic Management - BUAD-4980

Article Discussion

1.

I chose the Forbes article “Meet The 'Force Of Nature' Propelling Yum China's

Sales And Shares” by Russell Flannery. The article mentions several external forces

that are discussed in the context of Yum China's business, and they can be viewed as

both opportunities and threats for the industry:

1. Macroeconomic Challenges: According to the article, macroeconomic challenges

for Yum China include weaker economic development in China. Given that they

may have an effect on consumer purchasing and overall company performance,

these economic difficulties might be considered as threats.

2. Competition: The article mentions that there are now many more informal dining

restaurants in China, which suggests that there is more competition. This might

result in price pressure and the need for distinctiveness to stand out in the market,

which could be seen as a threat.

3. Changing Consumer tastes: Yum China must modify its menu and offers to

reflect shifting consumer tastes. Both an opportunity and a danger might be

identified in this situation. Yum China will have a chance if they can effectively

satisfy customer wants, but they will face risk if they can't.

4. Digital Transformation: Yum China emphasizes that one of its main areas of

attention is the digitization of China's restaurant sector. The goal of this digital

drive, which includes mobile payments and online purchasing, is to increase

 consumer interaction and simplify business processes. However, the rapid pace of

digital transformation can also be a threat if not managed effectively.

5. U.S.-China Trade Tensions: The article briefly mentions Sino-U.S. trade

tensions. These tensions can potentially impact the supply chain, import/export

costs, and overall business operations for companies operating in China, including

Yum China.

2.

In the article, one of Porter's Five Forces that can be applied is the "Threat of New

Entrants." This force examines the ease or difficulty with which new competitors can

enter a particular industry. Let's discuss how this force is addressed in the context of

Yum China:

Threat of New Entrants:

Low Entry Barriers: Yum China, which owns well-known food franchises including

KFC and Pizza Hut, is featured in the article. Yum China has a substantial presence and

a well-known brand because to its size and lengthy experience in the Chinese market

(KFC entered China in 1987). As a result, new rivals face relatively high entry barriers

and would need a significant investment of time and money to build a similar network

of eateries and consumer loyalty.

Scale economies: Yum China's extensive network of eateries offers economies of scale

in buying and operations, enabling them to deliver competitive prices. This makes it

difficult for new competitors to compete on price, particularly in the lower-priced

market sector, like fast food.

Customer Loyalty: Yum China has amassed a devoted following over the years.

Because of their well-known brand, excellent customer service, and well-known menu,

customers exhibit this loyalty. To compete successfully, new entrants would need to

make significant marketing and customer acquisition investments.

Regulatory Environment: The restaurant industry in China may have specific

regulatory requirements and permits that new entrants would need to navigate. This can

add to the complexity and cost of entering the market.

The threat of new entrants in the Chinese restaurant industry, as portrayed in the article,

appears to be relatively low due to Yum China's established presence, economies of

scale, loyal customer base, and the investments they've made in digitalization. These

factors collectively make it challenging for new competitors to enter the market and

pose a significant threat to Yum China's dominance in the industry.

3.

The article doesn't mention Yum China's mission and vision statements.

Mission Statement: Their mission is “to build the world's most loved, trusted and

fastest growing restaurant brands.”

Vision Statement: “We are dedicated to serving our customers' evolving needs by

enhancing in-store experience, improving mobile connectivity, introducing innovative

new products, and constantly delivering value.”

How the external environmental aspects could impact Yum China's ability to pursue its

vision and execute its mission:

1. Macroeconomic Headwinds: Slower economic growth can impact consumer

spending habits. Yum China's ability to offer affordable dining experiences and

adjust menu prices according to economic conditions will be crucial in maintaining

their mission of providing value to customers.

2. Competition: Increased competition can challenge Yum China's market share and

profitability. To execute its mission and vision, Yum China needs to stay ahead of

competitors by continually innovating and differentiating its offerings.

3. Changing Consumer Preferences: Evolving consumer preferences may require

Yum China to adapt its menu and offerings. To fulfill its mission, the company

must be agile in responding to these changes and ensuring customer satisfaction.

4. Digital Transformation: Yum China's focus on digitalization aligns with its

mission and vision to provide convenience and innovation. The company must stay

at the forefront of digital trends to maintain its competitive edge and meet

customer expectations.

5. U.S.-China Trade Tensions: Trade tensions can affect the supply chain and cost

of imported goods. Yum China may need to find local sourcing alternatives and

adapt its menu to minimize the impact of trade disputes on its mission of offering

diverse cuisine.

4.

The strategic objective for Yum China is to expand its market leadership in response to

the evolving environmental conditions within the Chinese restaurant industry. This

objective entails securing a substantial market share in key segments, with a focus on

KFC and Pizza Hut, while continuously innovating menu offerings to meet changing

consumer preferences. The company aims to accelerate its digital transformation to

enhance the customer experience, strengthen community engagement through corporate

social responsibility initiatives, optimize operational efficiency, and invest in talent

development to ensure a culture of excellence. Additionally, Yum China will

strategically expand its restaurant network, leverage its digital ecosystem for growth,

implement prudent financial management practices, and employ data-driven decision-

making to stay competitive in this dynamic market. Collaboration with global partners

will further enhance Yum China's position as a leader in the restaurant industry.

Success will be measured through various key performance indicators, including

market share growth, customer satisfaction, revenue, and profit margins, among others.

Work cited
Flannery, Russell. “Meet the “Force of Nature” Propelling Yum China’s Sales and

Shares.” Forbes, www.forbes.com/sites/russellflannery/2019/02/06/meet-the-force-of-

nature-behind-yum-chinas-expansion/?sh=78834dc71ad9 Accessed 16 Sept. 2023