Structures and Practices within Yum Brands

Created as Tricon Global Restaurants in 1997, and changed to Yum Brands in 2002, the fast food and marketing company has grown drastically in size in the past 10 to 15 years.  Some of the biggest changes happened between 2011 to the present time of 2015, during which the company changed practices, sold some of the smaller brands within it, and expanded the restaurants that remained under its control.  By cutting down from 5 managed brands to three managed brands – KFC, Taco Bell, and Pizza Hut – Yum Brands; an integrated service provider was able to increase their organizational ability  (Poliquin & Siegel, 2012).  The company now works on franchising those restaurants, as well as assisting with marketing.  While they do rely on those within the industry to assist in their business, mainly those working within the restaurant, the company employees at Yum Brands are mainly in charge of performing multiple aspects of the production process.  According to the Yum Brands “About” page, the company seeks to increase brand visibility and promotion by growing social media and digital engagement, creating more specialized products and restaurants, and increasing their marketing efforts (yum.com, 2015). They encompass the management side in terms of the supply chain; they manage the outbound supply of information and business practices to the restaurants, which then manage the supply for customers.

While the company’s connection and collaboration with their shareholders makes it seem as though Yum Brands could be structured as a business network, the company structure also resembles a business hierarchy.  Top management consists of CEO Greg Creed and Executive Chairman David Novak, senior officers, and a Board of Directors; middle management consists of regional managers for restaurants, as well as general managers; and lower management consists of supervisors or store managers for the various stores and companies that Yum Brand holds within it (yum.com, 2015).  Yum Brands prides itself on a close-knit work environment.  However, the website states that Yum Brands has 1.5 million associates worldwide, which would make it difficult for there to be a close or personal relationship between management and workers.  At the same time, Yum Brands has tended to sell brands or businesses that do not fit with their aesthetic, which points to the idea that they may want to establish a good relationship with brands that they feel would be positive to work with.

There are various practices which Yum Brands enacts within the workplace.  One of the first practices is creating and maintaining open communication within their company and shareholders.  Others include establishing rules and regulations in the workplace and assigning responsibilities to specific groups as needed, working to improve the company throughout time, and making sure to relay information to outside and inside sources as needed.  For the most part, Yum Brands has done a good job implementing these practices.  The company is working on being more transparent with information, and it includes a letter from the CEO within their Annual Report.  Their continuous efforts to expand and grow the company through emerging restaurant markets, as well as their effort communicating with business organizations within a specific location, speaks of the nature of the company.  By implementing these business practices; according to the 2014 annual report, 737 new restaurants were opened through their China division.  The company has experienced a 4% 4-year compound annual growth rate between 2010 and 2014 for worldwide system units.  However, a lack of responsibility with money or growth also shows.  Despite the enormous amount of restaurant and brand growth, company sales and brand revenue between 2013 and 2014 were negligible, and both operating profit and net income were less in 2014 than 2013.  This could mean that management is not delegating responsibilities properly throughout all channels, meaning that some slack in any one area could lead to a loss of profits.  At the same time, the company has grown steadily throughout the past four years, so the lower profit and net income could be due to change, in which case it would even out soon.

The need for the company to operate in the international market was necessitated by the desire to grow. The corporation had acquired a substantial amount of the US market hence could not increase its profitability in the region substantially. Its operations in the international markets are quite different from how the company operates in the domestic market. Among the differences is the menu involved. The company has different menus for various countries compared to the menus available in the US market (Poliquin & Siegel, 2012). Yam Brands also has similar standards for all the employees regardless of the geographical location. The execution might be slightly different depending on which market is involved. However, the expectations are the same based on what each employee is expected to attain.

Yam Brands does not take its operations in any country for the sake of it. Various aspects are analysed before any consideration is made. The company likes to target countries with a growing middle class, who are receptive to fast foods. Most of these countries are usually experiencing positive economic growth at this moment. Labour laws involved in these countries also play a huge role in influencing this decision. Some countries have unfavourable laws for international corporations.

Organizational Trajectory

Yam Brands’ organizational structure is not definite. The organization’s structure resembles both a network and hierarchy. Having a combination of these two structures, works in favour of the organization due to the nature of the activities involved. The network structure has enabled the organization to operate in the global market.  This has been attained by way of enhancing the development of franchises with different third parties. The company would not have the ability of opening so many outlets if it was responsible with the development of each outlet. The logistics and management of the outlets could not be matched. Franchises established become easier to oversee since most of the activities are conducted at the base level. Use of franchise also means that Yam Brands uses the locals to initiate their operations. They are more familiar with the market environment hence stand a better chance of ensuring that the fast food outlets follow the desired consumer patterns (Aquinas, 2009). Failure to go with the trends for any business would be detrimental for its future endeavours. This can only be conducted at the grass-root level and not in the top hierarchy of the organization.

On the other hand, complementing the networks with a hierarchical structure makes the organization more compact. Yam Brands aims at establishing consistency in all of its food outlets. This cannot be achieved if the all the outlets are given the autonomy to set up their own practices. The differences created would elicit negative feedbacks from the consumers. The hierarchy of the organization ensures that there is a CEO, who makes major decisions involving all the food outlets distributed all over the world. In this case, its Greg Creed working in partnership with Executive Chairman David Novak, other senior officers and a board of directors.  They communicate with the middles managers who comprise of general managers and regional managers. Every region of operation has its independent manager. Managers at the regional level tend to deal with the lower management personnel. These include the supervisors and store managers at these regions. Supervisors on the other hand, keep in touch with employees. Among the advantages of this structure is that it makes communication easier. It ensures that every department has a clear spokesperson. The aspect also brings clarity with regards to reporting. In most organisations, employees tend to be frustrated since they are not aware of whom to report to (Aquinas, 2009). A hierarchical structure defines the reporting relationships where every employee has one direct report responsibility. This structure also ensures efficiency in decision making. The decisions are autocratic due to the defined roles and separation between management and employees. As a result, managers are able to make timely decisions on urgent issues (Aquinas, 2009). This ensures that there are no delays being experienced.

In 2011, Yum Brands decided to cut down A&W Restaurants and Long John Silver’s. This meant that the organization was left with KFC, Pizza Hut and Taco Bell. This was a favourable decision based on the company’s vision. Yum had the intention of participating in the global market on a greater extent. A&W Restaurants and Long John Silver’s did not have the ability to realise this vision. By 2011, the restaurants had minimal presence in the global market compared to the others (Poliquin & Siegel, 2012). This meant that they would derail the organisation in attaining its desired objectives. The resources that were being used to sustain them would help drive the growth of the other three fast food restaurants. There has been significant progress since Pizza Hut, KFC and Taco Bell increased their global presence since that time. There was a substantial increase in profits.

Giving local employees the autonomy to make some decisions has also worked in the best interest of the organisation. This is because the employees have sufficient knowledge regarding the market that is not prevalent with the high ranking organization management. Employees are required to act in certain ways, but can make some alterations depending on the circumstances. However, they have to fulfil the objective of making customers feel happy at all times. The end result is the most critical aspect. Autonomy works for the organization since the employees are aware of what works in a certain environment and what does not work. Their input is highly regarded by the management, as a result. Yum Brands top management is well familiar with the difficulties that come with multinational operations. For this reason, they do not leave any room for laxity or risk the prospect of market failure. Having employees who are aware of what they are doing, and execute it in the best way possible is an added advantage to any organization (Truss, 2013).

Yum Brands also uses different approaches while venturing into different countries. Most of its operations in oversees countries are not similar to those of the US market. This is very a good approach. Among the reasons why most multinationals fail is their tendency to remain rigid while operating in the global market (Rugraff, 2011).Yum Brands has benefited by using different approaches. This is because different markets have different components. The economic, social, technological and political factors involved in markets distributed in different geographical regions will always have various differences. A good example is how Yum Brands has benefited by using a different approach in China compared to what they are used to in the United States. Among the adjustments made was adding more food to the menus. Some foods were also removed in the process. This action was in line with the Chinese culture, which believes in variety (Poliquin & Siegel, 2012). The consumers like it when there is a lot to choose from so that they can have one that suits them. Others prefer this aspect since it helps them change from one product to another in order to avoid the monotony of enduring to similar procedures. Making additions to the menu also meant that Chinese foods were introduced. The Chinese population is adamant on its culture. This means that any business that associates with the people’s culture is usually viewed positively. It becomes easier to acquire a substantial market share as a result.

Being concerned on various business laws in different countries is also a good move by the Yum Brands management. Some companies dive into the international markets without having a sufficient analysis of the laws in these markets. It is evident that there are consequences likely to arise. Some countries have very complex business laws. Most of these laws tend to affect multinationals but not local businesses. This is because some have been developed to protect local businesses in light of the competition created by multinationals. As a result, the laws might not be favourable to multinationals. Yum Brands experienced negative consequences when it deviated from its market entry formula in Brazil. When the company first entered this market, it concentrated on operating its own stores. This was against its norm of finding local partners. What resulted was that the company was faced with a series of lawsuits. It was alleged to have violated the country’s labour laws (Novak, 2011). The laws were very complicated and made it difficult for multinationals to operate. If the company had done its due diligence regarding the laws before initiating its operations, most of the expenses incurred in the lawsuits would have been saved. This is among the reasons that justify the company’s interest in a country’s business law before initiating any operations. In the long-run, it works in that the company saves a lot with regards to the lawsuit expenses that would be incurred if negligence was exercised. Getting on the wrong side of the authority due to the breach of some laws without knowledge would also be detrimental to the organisation. The authorities have the ability to make life difficult for the business by enacting various policies that do not favour its operations (Rugraff, 2011). As a result, being concerned with a country’s labour laws before investing in any country works to the advantage of Yum Brands.

Yum Brands’ criteria for choosing the countries to invest in are a key contributor to the success attained in most international markets. A country with a growing middle class is always an indication of economic growth. What this means is that there are many individuals being involved with white-collar jobs. Quite a number of people leave their homes in the morning and come back in the evening. This means that there is no sufficient time for them to prepare food at home. Some are already tired or want to engage in other activities. This makes fast food a favourable option. They are likely to be receptive and accept the product without the need for much conviction. Another aspect is that a country with a developing middle class means that it is yet to be exploited by other companies since it has not yet realised an economic maturity. Most companies do not see the need of investing in such areas (Smith, 2014). This means that Yum Brands usually face most of its competition from local businesses as a result. Based on the organisation’s financial capability, it is easy to beat this form of competition via substantial advertising. The company is usually positioned to expand its operations in these markets as their economies grow with time.

References

 Novak, D. (2011). Yum Brands Inc. Case Study Success Fuelled by Developing Markets. S.l.: Datamonitor Plc.

Poliquin, C., & Siegel, J. (2012). Yum! Brands. Havard Business School, 29-29.

Yum! Global News. (2015). Retrieved December 5, 2015, from http://www.yum.com/

Smith, A. (2014). Food and drink in American history: A “full course” encyclopedia. New York: ABC-CLIO.

Truss, C. (2013). Employee engagement in theory and practice. London: Routledge.

Rugraff, E. (2011). Multinational corporations and local firms in emerging economies. Amsterdam: Amsterdam University Press.

Aquinas, P. (2009). Organization structure and design: Applications and challenges. New Delhi: Excel Books.

 
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