Politeknik Sultan Salahuddin Abdul Aziz Shah

Assingment 3

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P 3118 – MARKETING MANAGEMENT

SWOT Analysis : Yum! Brands, Pizza Hut, and KFC

For: Madam.Umi Kalthum Binti Abdullah

Prepared by:

Farah Azua 08DPI09F2005

Maizatul Akmam 08DPI09F2011

Nur Azizah 08DPI09F2037

Sharinah 08DPI09F2070

CONTENTS

1. INTRODUCTION 1

2. SWOT ANALYSIS : KFC 2

STRENGHTS : KFC 2

WEAKNESSES : KFC 3

OPPORTUNITIES : KFC 4

THREATS : KFC 5

3. SWOT ANALYSIS : Pizza Hut 6

STRENGHTS : Pizza Hut 6

WEAKNESSES : Pizza Hut 7

OPPORTUNITIES : Pizza Hut 7

THREATS : Pizza Hut 8

4. SWOT ANALYSIS : PepsiCo 9

STRENGHTS : PepsiCo 9

WEAKNESSES : PepsiCo 10

OPPORTUNITIES : PepsiCo 11

THREATS : PepsiCo 12

5. REFERENCES 13

INTRODUCTION

Yum! Brands, Inc. , was the largest fast-food company in 2004.It operated more than 33,000 KFC, Pizza Hut, Taco Bell, Long John Silver’s and A&W restaurants Worldwide. It was the market leader in the chicken, pizza, Mexican, and seafood segments of the US. Fast-food industry.yum brands also operated more than 12,000 restaurants outside the united states.KFC and Pizza Hut accounted for more than 96 percent of the company’s international restaurant base and managed restaurant in 116 countries. Among the first fast food chains to go international in the late 1950s and 1960s, KFC and pizza hut were two of the world’s most recognizable brands. Both KFC and pizza hut expanded through the 1990s by growing their restaurants into as many countries as possible. However, Yum! Brands realized that different countries offered different opportunities to contribute to the company’s worldwide operating profits.

David Novak became Tricon’s new CEO. He moved quickly to create a new culture within the company. One of his objectives was to reverse the long standing friction between management and franchisees that was created under PepsiCo ownership.

Chart: Yum Brands, Inc.: Organizational Chart

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Yum! Brands, Inc.Corporate Offices

David NovakChairman, CEO & President

Long John Silver’sSteve Davis

President & CEO

A & W RestaurantsSteve Davis

Chief Executive Officer

Pizza HutPeter HearlPresident

Yum! Restaurant Int’lPete BassiChairman

Taco BellEmil Brolick

President

Kentucky Fried ChickenGregg Dedrick

President

SWOT Analysis of KFC

KFC Corporation was founded by Colonel Harland Sanders in 1952.

KFC, also known as Kentucky Fried Chicken is a chain of fast food

restaurants based in Louisville, Kentucky, in the United States. KFC

is part of Yum! Brands, Inc (the world’s largest restaurant company

in terms of system restaurants, with more than 36,000 locations around the world). Every day,

KFC serves more than 12 million customers in 109 countries and territories around the world.

KFC operates more than 5,200 restaurants in the United States and more than 15,000 units

around the world. The SWOT analysis of the KFC Corporation is given below:

STRENGTHS

KFC continued to dominate the Chicken Segment, with sales of 4.4 billion in 1999.

Strong trademarks recipes.

Ranks highest among all chicken restaurant chains for its convenience and menu

variety.

Generate $1B each year.

KFC is the world’s biggest chicken restaurant chain and 3rd largest fast-food chain.

KFC is a market leader in chicken foods for 50 years. It has more than 50 percent of

the market share and has secret recipe of spice and 11 herbs.

KFC is a most identifiable brand in chicken/fried food.

It has the strong location, store management, motivated work force and franchises.

KFC has a good image all over the globe and is globally placed for many years.

It has a strong distribution network such as outlets in shopping malls, airports, etc.

Positioning among competitors is favorable.

Unconventional methods of distribution multi branding.

Management Objectives and goals are measurable and achievable Team empowerment

Productions/Operations.

Constant improvement on quality of chicken

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WEAKNESSES

KFC was losing market share as other Chicken chain increased sales at a faster rate.

Lack of knowledge about their customers.

Question of over franchising leads to loss of control and quality.

KFC finds difficulty in entering the German market (culture incompatibility)

KFC sales stagnated. There was widespread discontent among the franchisees, some

of

whom felt the new owners did not understand the chicken business and were not

providing leadership expected from a franchisor.

Company stores floundered and become underperforming the franchised operations,

further convincing franchisees that the company did not know its own business.

(KFC HQ acquired them to company-owned)

Lack of focus on R&D.

KFC is not innovative because it serves only the chicken products to the customers. It

does not offer new or differentiated products.

KFC fell after the market in offering new products because it was doubling other fast

food chains to remain competitive.

Mergers with different corporations resulted in big cultural problem for KFC

employees such as Merger with PepsiCo.

The company is only focusing on few locations and is ignoring to visit or check

standards at franchises in different countries. 

KFC is facing problems to maintain the higher standards of hygienic food. It is being

charged in different countries due to poor standards of hygienic food. Some of the

important examples in this regard.

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OPPORTUNITIES

Changing demographic trends provides opportunity to diversify into new products and

locations.

Increasing demand for foodstuff eaten outside the home.

Expand globally to capture the untapped markets and increase the revenue. 

Expansion for the Latin American markets/ Mexican market.

Consumers are becoming health-conscious; introduce new products line for this

segment.

Be environment responsible because it will improve the public image of KFC and will

help it to increase its revenue.

Diversify into other fast-food and meals.

Overseas expansion with the rapid economic growth and trend toward two-income

families that had fuelled the growth of fast-food industry in the 1950s and 1960s were

appearing in the late 1960s in the other country.

US market maturity- many restaurants expand to international markets as strategy for

growing sales.

KFC is an American company and 35 largest restaurant chains in the world (2000)

were American firms Expansion program for the Mexican market/Latin

American markets NAFTA advantage Demographic trends (demand for food eaten

outside of the home.

McDonald’s accounted for 35 percent of the Sandwich Segment while Burger King

ran a distant Second, with a 16 percent market share.

In family Segment, Friend’s and Shoney’s were forced to shut down restaurants

because of declining profits.

Within the Pizza Segment, Pizza Hat and Little Caesars Closed underperforming

restaurants.

Boston Market was a new restaurant chain that emphasized roasted rather than fried

chicken.

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THREATS

KFC is facing strong competition from its competitors, such as McDonalds, Yum and

Subway.

It is also facing competition from local restaurants in different countries of the world.

The company is facing problem in maintaining same standards at their international

franchises.

To sustain a market leadership position in the global fast-food industry.

Sustaining U.S. market leadership is also another important threat for the company.

Other players are turning to new menu offerings, location and outlets.

Increasing number of health conscious consumers.

Saturated fast food industry in the U.S Market.

High rates on the prices as compared to the other brands selling same items may cause

the customer’s shift.

Less economical packages and deals are being offered in comparison of its biggest

competitor McDonalds, which work on the strategy of seasonal induction of tempting

deals.

Shift of customer demand to more healthy and fresh food, avoiding the all fried items.

Less variety of products pose a threat to the company, as they have very few products

other than their portfolio” Fried chicken”.

Saturation of the U.S. market

Increasing competition and rising sales of substitute products.

Obstacles associated with expansion in Mexico.

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SWOT Analysis of Pizza Hut

Is a restaurant chain and international franchise based in Addison, Texas, USA (a northern suburb of Dallas) specializing in American-style pizza along with side dishes including (depending on location): buffalo wings, breadsticks, and garlic bread. Pizza Hut is the world's

largest pizza restaurant chain and is a subsidiary of Yum! Brands, Inc., whose restaurants total approximately 34,000 restaurants, delivery-carry out units, and kiosks in 100 countries. The chain was founded as a pizzeria in 1958 by the Carney brothers - Dan and Frank.Borrowing $600 from their mother, the brothers purchased some second-hand equipment. The then Wichita State University students took a family pizza recipe, rented a small building, and opened the first restaurant at a busy intersection in Wichita, Kansas. The oldest continuously-operating Pizza Hut in the world is in Manhattan, Kansas, in a shopping and tavern district known as Aggieville.

STRENGHTS

Over 20,000 franchises around the world. Brand leader in the UK. Innovative range of pizzas under one roof. Famous television advertising. Food attracts people of various ranges from young to old. Sound financial situation and international turnover. 100% owned by yum! Pizza Hut sits on top of global full-service restaurant tree.

Through pizza hut being the largest restaurant chain in the world, this obviouslymeans they dominate their market, and can invest in new products, example new pizzas.

They have low competition, although they do have competitors such as dominospizza, yet they have an advantage over these as pizza hut are a restaurant as well as atake away unlike dominos pizza, this means pizza hut may have more sales thereforemore income, which may help pizza hut with any improvements or adjustmentsneeded to the business.

Pizza hut has a huge market segment, attracting more customers meaning a higherpercentage in sales, which may lead to greater profits.

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WEAKNESSES

Loyal customers are feeling that the satisfaction of the pizzas is declining. This maylead to low customer satisfaction and a reduction in customers and credibility in themarket, this may lead to customers converting to main competitors such as dominospizza.

While Novak said Pizza Hut’s expansion into China is going exceedingly well, thereis battling problems in New Zealand and Australia. This therefore meaning they arelosing money in places such as new Zealand and Australia, this could be due to theirculture and lifestyle, maybe meaning pizza hut need to introduce a more varied rangeof products to attract customers of all lifestyles and cultures.

There are complex computer systems and internal conflicts from franchisees, thisleads to de-motivation of staff. Lowering the quality of products (pizzas), service tocustomers, and could lead to a lack of new ideas.

There is a lack of organic pizzas, which will limit the target market.

OPPORTUNITIES

Pizza Hut can introduce new Pizzas with different crust sizes and flavours. This mayattract new customers with new tastes and this may increase their sales.

Pizza Hut has expanded into the Indian market menu and looks to the old favourite tobolster sales in the US.

Pizza Hut has targeted upscale products and a downscale consumer base; this willattract customers who are more willing to buy these Pizzas.

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THREATS

Rising competition undermines Pizza Hut as consumers go for greater convenience;

this will lower the amount of sales consumed by Pizza Hut as these sales are going to

smaller companies who are charging less.

Rising cheese costs threaten margins, cheese is essential to the business as it is there

primary good, there for they are unable to go with out it, this may lead to Pizza Hut

eventually buying goods from abroad or buying cheaper brands.

Threat from Dominos pizza, also from Mc Donald’s who have tried to introduce a

new meal that is a Pizza called: McPizza. So Pizza hut will have to improve or

maintain the quality of the pizzas in order to compete with Dominos and McDonalds,

to ensure that Pizza hut dominate this market.

They will also have to keep their prices down and this may lead to them buying good

from abroad where it is cheaper.

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SWOT Analysis of PepsiCo

PepsiCo is an American multinational corporation. The company is headquartered in Purchase, York. PepsiCo was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. Popular brands of PepsiCo are: Mountain Dew, Diet Pepsi, Lay’s, Doritos, Tropicana, Gatorade, and Quaker. Pepsi’s

products are available in some 200 countries. In 2010 the company acquired its two largest bottlers, Pepsi Bottling Group and PepsiAmericas. SWOT analysis of the company is given below:

STRENGTHS

One of the leaders in the industry.

Number one maker of snacks, such as corn chips and potato chips.

PepsiCo sells three products through the same distribution channel.

For example, combining the production capabilities of Pepsi, Gatorade and Tropicana is a big opportunity to reduce costs, improve efficiency and smooth out the impact of seasonal fluctuations in demand for particular product.

Branding - One of PepsiCo’s top brands is of course Pepsi, one of the most recognized brands of the world, ranked according to Interbrand. As of 2008 it ranked 26th amongst top 100 global brands. Pepsi generates more than $15,000 million of annual sales. Pepsi is joined in broad recognition by such PepsiCo brands as Diet Pepsi, Gatorade Mountain Dew, Thirst Quencher, Lay’s Potato Chips, Lipton Teas (PepsiCo/Unilever Partnership), Tropicana Beverages, Fritos Corn, Tostitos Tortilla Chips, Doritos Tortilla Chips, Aquafina Bottled Water, Cheetos Cheese Flavored Snacks, Quaker Foods and Snacks, Ruffles Potato Chips, Mirinda, Tostitos Tortilla Chips, and Sierra Mist.

The strength of these brands is evident in PepsiCo’s presence in over 200 countries. The company has the largest market share in the US beverage at 39%, and snack food market at 25%. Such brand dominance insures loyalty and repetitive sales which contributes to over $15 million in annual sales for the company.

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Diversification - PepsiCo’s diversification is obvious in that the fact that each of its top 18 brands generates annual sales of over $1,000 million. PepsiCo’s arsenal also includes ready-to-drink teas, juice drinks, bottled water, as well as breakfast cereals, cakes and cake mixes. This broad product base plus a multi-channel distribution system serve to help insulate PepsiCo from shifting business climates.

Distribution - The Company delivers its products directly from manufacturing plants and warehouses to customer warehouses and retail stores. This is part of a three pronged approach which also includes employees making direct store deliveries of snacks and beverages and the use of third party distribution services.

WEAKNESSES

Not diversified offerings.

Pepsi hard to inspire vision and direction for large global company.

Not all PepsiCo products bear the company name.

PepsiCo is far away from leader Coca-cola in the international market - demand ishighly elastic.

Overdependence on Wal-Mart - Sales to Wal-Mart represent approximately 12% of PepsiCo’s total net revenue. Wal-Mart is PepsiCo’s largest customer. As a result PepsiCo’s fortunes are influenced by the business strategy of Wal-Mart specifically its emphasis on private-label sales which produce a higher profit margin than national brands. Wal-Mart’s low price themes put pressure on PepsiCo to hold down prices.

Overdependence on US Markets - Despite its international presence, 52% of its revenues originate in the US. This concentration does leave PepsiCo somewhat vulnerable to the impact of changing economic conditions, and labor strikes. Large US customers could exploit PepsiCo’s lack of bargaining power and negatively impact its revenues.

Low Productivity - In 2008 PepsiCo had approximately 198,000 employees. Its revenue per employee was $219,439, which was lower than its competitors. This may indicate comparatively low productivity on the part of PepsiCo employees.

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OPPORTUNITIES

Sponsorship, global presence including building facilities in new markets.

Noncarbonated drinks are the fastest-growing part of the industry.

There are increasing trend toward healthy foods.

Focus on most important customer trend - "Convenience".

Broadening of Product Base - PepsiCo is seeking to address one of its potential weaknesses; dependency on US markets by acquiring Russia’s leading Juice Company, Lebedyansky, and V water in the United Kingdom. It continues to broaden its product base by introducing True North Nut Snacks and increasing its Lipton Tea venture with Unilever. These recent initiatives will enable PepsiCo to adjust to the changing lifestyles of its consumers.

International Expansion - PepsiCo is in the midst of making a $1, 000 million investment in China, and a $500 million investment in India. Both initiatives are part of its expansion into international markets and a lessening of its dependence on US sales. In addition the company plans on major capital initiatives in Brazil and Mexico.

Growing Savory Snack and Bottled Water market in US - PepsiCo is positioned well to capitalize on the growing bottle water market which is projected to be worth over $24 million by 2012. Products such as Aquafina, and Propel are well established products and in a position to ride the upward crest. PepsiCo products such as, Doritos tortilla chips, Cheetos cheese flavored snacks, Tostitos tortilla chips, Fritos corn chips, Ruffles potato chips, Sun Chips multigrain snacks, Rold Gold pretzels, Santitas are also benefiting from a growing savory snack market which is projected to grow as much as 27% by 2013, representing an increase of $28 million.

Food division should expand internationally

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THREATS

Large and small beverage companies, including bottled water firms.

F&B industry is mature

Pepsi is blamed for pesticide residues in their products in one of their most promisingemerging market example in India

Over 50 percent of the company's sales come from Frito-Lay; this is a threat if themarket takes a downturn

PepsiCo now competes with Cadbury Schweppes, Coca-Cola, and Kraft foods (because of broader product line) which are well-run and financially sound competitors.

Size of company will demand a varied marketing program; Social, cultural, economic,political and governmental constrains.

Decline in Carbonated Drink Sales - Soft drink sales are projected to decline by as much as 2.7% by 2012, down $ 63,459 million in value. PepsiCo is in the process of diversification, but is likely to feel the impact of the projected decline.

Potential Negative Impact of Government Regulations - It is anticipated that government initiatives related to environmental, health and safety may have the potential to negatively impact PepsiCo. For example, manufacturing, marketing, and distribution of food products may be altered as a result of state, federal or local dictates. Preliminary studies on acryl amide seem to suggest that it may cause cancer in laboratory animals when consumed in significant amounts. If the company has to comply with a related regulation and add warning labels or place warnings in certain locations where its products are sold, a negative impact may result for PepsiCo.

Intense Competition - The Coca-Cola Company is PepsiCo’s primary competitors. But others include Nestlé, Grouped DANONE and Kraft Foods. Intense competition may influence pricing, advertising, sales promotion initiatives undertaken by PepsiCo. Recently Coca-Cola passed PepsiCo in Juice sales.

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REFERENCES

1. Case Study: Yum! Brands, Pizza Hut and KFC. Jeffrey A. Krug.

Appalachian State University.

2. http://mba-lectures.com.

3. http://www.kfc.com.

4. http://www.pepsiCo.com.

5. http://www.pizzahut.com.

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