International Business

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 ||
https://www.researchgate.net/publication/313652934_Changing_culture_at_Pizza_Hut_and_Yu
m_Brands_Inc
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/
5. Quarzt India || https://qz.com/india/699503/burgers-burgers-everywhere-but-are-the-eaters-
in-sight/
6. India’s Fast food Market || https://www.cnbc.com/2015/04/02/indias-fast-food-industry.html
7. Fast Food Growth Market || https://www.prnewswire.com/news-releases/india-fast-food-
market-report-2015---2020-market-is-expected-to-grow-at-a-cagr-of-18-505221141.html
8. KFC in India Ethical and Social Concerns ||
http://www.icmrindia.org/casestudies/catalogue/Business%20Ethics/BECG044.htm
9. KFC Appealing to Indian Market || https://www.courier-
journal.com/story/opinion/contributors/2015/06/05/student-project-kfc-appealing-indian-
market/28573649/
10. Understanding the impact of culture on business in India ||
https://www.relocatemagazine.com/articles/understanding-the-impact-of-culture-on-business-
in-india-crown
11. Cultural considerations when doing business in India || https://www.tmf-group.com/en/news-
insights/articles/2018/march/cultural-considerations-in-india/
12. When Culture Impact Business ||
https://www.thehindu.com/features/metroplus/society/when-culture-impacts-
business/article5962866.ece

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13. Understanding Indian Culture for Successful Business ||
http://www.sourcingfocus.com/site/opinionscomments/understanding_indian_culture_for_suc
cessful_business/
14. Impact of Changing Socio-Economic Environment on Business in India ||
http://www.ijrbsm.org/pdf/v2-i4/3.pdf
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-
socioculture-business-10602.html
17. KFC story in India, Kentucky Fried Chicken (KFC) || https://www.mbarendezvous.com/general-
awareness/kfc-story-in-india/
18. https://www.fool.com/investing/general/2014/04/19/5-things-you-probably-didnt-know-about-
yum-brands.aspx
19. https://fmtmagazine.in/news/yum-brands-inc-reported-strong-sales-growth-india-2018/
20. https://www.restaurantindia.in/news/yum-brands-reports-double-digit-sales-growth-in-
india.n17862
21. https://www.thehindubusinessline.com/companies/kfc-pizza-hut-post-strong-sales-growth-in-
india-in-2018/article26206682.ece
22. https://www.livemint.com/companies/news/kfc-and-pizza-hut-report-sales-growth-in-india-in-
q1-1556723512498.html
23. KFC putting vegetarian Item on menu || https://economictimes.indiatimes.com/industry/cons-
products/food/kfc-increasingly-putting-vegetarian-items-on-its-indian-menu-to-cater-to-
customers/articleshow/16314308.cms?from=mdr
24. https://economictimes.indiatimes.com/industry/cons-products/food/pizza-hut-marks-out-india-
as-a-key-market-for-global-growth/articleshow/61821195.cms?from=mdr
25. Research Gate || Influence of Culture in International Business
26. Cultural Frameworks and Their Importance for Leaders ||
http://sk.sagepub.com/books/leadership-in-a-diverse-and-multicultural-environment/n3.xml
27. http://compete.org.in/wp-content/uploads/2016/02/Food_Chapter.pdf

https://www.ibef.org/download/Food-Processing-August-15.pdf

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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

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

Yum! Brands Entry in Indian Market: Objective of Entry

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

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

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

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

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