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Yum! Brands Multidomestic Strategy Helps to Position Itself as a Global Leader in the Fast Food Industry

Updated on August 29, 2016
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Headquartered in Louisville Kentucky, Yum! Brands, Inc boasts more the 41,000 restaurant locations in more than 125 countries around the world. Company growth has been tremendous in recent years. In 2014, an average of more than five new restaurant locations opened per day in international markets (Yum!, 2015). Yum! Brands owns the KFC, Pizza Hut, and Taco Bell franchises and utilizes a multidomestic strategy to penetrate both established and emerging markets by offering inexpensive foods tailored to the tastes of the region. In many cases, even restaurants located within a country (such as China) can have differentiated menus across the region.

Not only does the company's strategy involve observing and incorporating local tastes into their restaurant's menu, company executives also look for untapped foreign population centers where American culture has already begun to permeate society (New Charter University, 2015). This reduces the risk of opening new restaurants in the area while also capitalizing on emerging cultural shifts within the community.

According to the 2014 annual report, Yum! Brands takes advantage of economies of scale as they have a supply chain and purchasing powering that exceeds what most of their competitors have. With a resilient and established presence in developed markets and a lead role in entering emerging markets, Yum! Brands focuses their strategy on building recognizable brands that people "trust and champion" (Creed, 2014). Furthermore, Yum! Brands has established winning strategies in each of the ten major strategic decision areas in order ensure the continued success of their business.

Design of Goods and Services

Yum! Brands restaurants prepare products that are tailored to the tastes of the region in which the restaurant resides. This helps to ensure that the customers can order foods that are familiar to their palate while also maintaining a cuisine that is unique enough to encourage continued sales via repeat business. Yum! Brands owns Pizza Hut, KFC, and Taco Bell which historically has been predominantly an American cuisine. Even Taco Bell's food is considered "Mexican-style" or "Americanized." Due to their multidomestic strategy, the foods that you can get at these establishments in America aren't necessarily available on the international Market. For example, Chinese Pizza Hut restaurants ironically offers a lot more menu choices then pizza. In fact, you can order rice with chicken or beef, soups and salads, and even cakes or smoothies. (Thinking Chinese, 2015)

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Managing Quality

Quality is king in the world of Yum! Brands' restaurants. All products are designed for optimum taste in an effort to create repeat customers in every market. Franchise owners must take training classes which helps to ensure that food quality standards are maintained at all times. And finally, the company strives to meet or exceed the minimum health and safety guidelines of the region in which the restaurants reside. According to Yum! Brands 2014 corporate social responsibility report, their stated goal is to "maintain the safest, highest quality food supply and preparation in the industry" (Yum! 2015). Yum! Brands prides itself on quality and standards of food safety. This is evidenced by their attitudes toward employee health, product handling, and the way they monitor and obtain their raw ingredients. Clearly, food safety is a top priority for the restaurant industry and the mission at Yum! Brands restaurants is no different.

Process Capacity and Design

The food at Yum! Brands restaurants isn't prepared until it's ordered, however, workers are able to make it quickly and efficiently. This is because of the proper use of staff training, store layout, food pre-preparation and the use of technology to reduce errors and improve overall process efficiency. For example, Taco Bell has a menu of items that are very easy to prepare which significantly reduces the time it takes to get a customer's order out. Another process innovation at Taco Bell includes the empowerment of employees which has reduced the need to layers of upper management and increase the speed at which problems can be resolved (Heizer, pg 18).

Location Strategy

Yum! Brands has worked diligently to ensure that all of their restaurant locations are successful. In the international market, this is accomplished by locating establishments in populated areas that are currently being underserved by the fast food industry. For domestic locations, Yum! Brands subsidiary companies have a process in which they ensure new restaurant locations aren't opened too close to existing ones. For example, KFC has minimum criteria for locating new restaurants and looks at a multitude of factors to give the new location the best possible chance of being successful (KFC Franchising, 2015).

Layout Strategy

The layout of most retail establishments are designed to promote the efficient travel of customers as well as the employees. Cooking equipment is situated to reduce the amount of time workers take to prepare food and customer seating is typically casual yet diversified. Taco Bell restaurants have worked diligently since their inception to determine optimum kitchen layouts with the goal of increase speed and efficiency. Designers of the kitchens looked to creating multiple assembly lines that operate in parallel as opposed to a single assembly line as other restaurants may do (Chase 2007). Taco Bell has also worked to improve building layouts to retain more customers. Many of their stores are being revamped to include a "more balanced" variety of seating arrangements to accommodate the changing needs of customers (Bhasin, 2012). Facility layout is extremely important to the core business of all Yum! Brands subsidiaries.

Human Resources and Job Design

According to the 2014 annual report, Yum! Brands, works to hire diversified, motivated, and talented employees. To accomplish this goal, the company offers plenty of incentives to attract top talent. In addition to competitive pay, Yum! Brands offers employees a number of complimentry health a wellness benefits, an excellent retirement plan, and a top-notch career development program (Benefits, 2015). At their retail establishments, entry level jobs come with plenty of training and flexible working hours.

Supply Chain Management

Yum! Brands has established a massive supply chain with reputable suppliers in order to maintain its low prices (Annual Report, 2014). The company strategy has also helped to ensure consistency in their products over time. Yum! Brands contracts with another company called Restaurant Supply Chain Solutions in order to improve the accuracy, speed, and quality of the food being supplied to Taco Bell, KFC, and Pizza Hut. This company has strong relationships with local food suppliers (RSCS, 2015).

Inventory Management

Retail locations keep a small inventory of food and ingredients on hand. Inventory turnover is high in order to maintain the freshness and quality of the food. Meals aren't prepared until they are ordered so there is essentially no inventory of prepared food. Yum! Brands also makes great use of technology to reduce waste and virtually eliminate "out of stock" issues. Inventory control systems have been implemented within the restaurants to automatically order more supplies when something is getting low. The computers that run this system can even be used to prepare for and forecast future sales.

Scheduling

The scheduling of worker's hours as well as supply deliveries is completed on local basis with each franchisee managing the restaurant within the guidelines set forth by Yum! Brands management team. Technology is used to optimize the scheduling process based on trends in sales and customer demand. This helps to ensure that each restaurant is capable of serving their market in the most economical fashion possible.

Maintenance

Restaurant staff are trained to prepare food consistently to quality standards. Franchisees must take a hands on approach and utilize their training to maintain a reliable and stable operation. Yum! Brands restaurants rely heavily on their suppliers in order to ensure that products delivered to their stores are consistent and of the highest quality. The restaurants pride themselves on being retail service companies rather than a manufacturing company (Charantimath, pg 250). This means that food is simply put together and heated using premade components as opposed to preparing food from raw ingredients.

References

Bhasin, Kim. "Here's a Look at the New Prototype Store Taco Bell is Testing." Business Insider. 10/2/2012. Accessed 08/29/2015. <http://www.businessinsider.com/photos-taco-bell-prototype-stores-2012-10>

Charantimath, Poornima M. "Total Quality Management 3rd Edition" 2009. Print.

Chase, Richard B. "Operations Management 2nd Edition" Technical Note 5: Facility Layout. October 2007. Accessed 08/29/2015. <http://www.ateneonline.it/chase2e/studenti/tn/6184-7_tn05.pdf>

Creed, Greg. "Yum! Brands 2014 Annual Report" Yum! Brands, Inc. Accessed 08/27/2015. <http://www.yum.com/annualreport/>

Heizer, Jay. "Operations Management: Sustainability and Supply Chain Management." 11th Edition. 2014. Print.

KFC Franchising. "Frequently Asked Questions." KFC. Accessed 08/29/2015. <http://www.kfcfranchise.com/faqs-qsr-restaurant.php>

New Charter University. "International Strategy". Flat World Knowledge. Accessed 08/27/2015. <https://new.edu/resources/international-strategy--2>

RSCS, LLC. "Welcome to Restaurant Supply Solutions." Accessed 08/29/2015. <http://www.rscs.com/>

Thinking Chinese. "China's Pizza Hut Experience - Everything but Pizza"Acessed 08/29/2015. <http://www.thinkingchinese.com/china-pizza-hut-experience>

Yum! Brands, Inc. "2014 Corporate Social Responsibility Report" Accessed 08/29/2015. <http://www.yumcsr.com/food/food-safety-quality.asp>

Yum! Brands, Inc. "About Yum! Brands" Accessed 08/27/2015. <http://www.yum.com/company/>

Yum! Brands, Inc. "Benefits & Compensation" Accessed 08/27/2015. <http://www.yum.com/careers/benefits-compensation.asp>

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    • FlourishAnyway profile image

      FlourishAnyway 

      7 months ago from USA

      Good article which I enjoyed reading. Given the recent KFC inventory shortages in chicken recently that resulted in temporary closures of restaurants or menu availability restrictions, I wonder what changes they'll make now.

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