What future challenges does YUM face in China?

Yum, which known as the parent company of restaurant chains, such as KFC, Pizza Hut, and Taco Bell. Since they opened the first KFC restaurant in Beijing in 1987, nowadays they become one of the most successful Western restaurant groups in China. However, Yum still faces some challenges. Many analysts believe that they have to solve problems including market burden, rising competition, food safety issues and slowing economic growth.

Market burden

In the United States, fast food restaurants, such as McDonald’s, KFC and Burger King, people consider them as junk food. With the lower price compare to other restaurants, people who go to these fast food restaurant most likely to be lower middle class. Thus, they struggled with targeting the middle class because of the increased wealth gap. To be more concise, consumers would not go to KFC because they are wealthy enough to other places, having decent food. On the contrary, with limit income, people who come to KFC or McDonald’s usually would satisfy with a fast food combo. In China, it has been developed so rapidly that wealth gap also growing between the middle class and upper class. It is a vicious circle that people go to KFC, spending 5 to 10 bucks, eating junk food. That is why obesity problem becomes more and more serious in China. Nowadays, customers are well educated than before. They started to realize that they should avoid having fast food. Thus, Yum has to understand and learn what people like to eat and consider to develop and adjust menu.

Rising competition

As information and sources become more accessible and convenient, more and more small restaurants start to appear. Other restaurants chain also saw the success of what Yum did and began to expand their restaurant to China. In my opinion, if Yum will not make any change in the future, they may fail and lose their competitiveness. Thus, Yum had a very aggressive program for product development. Generally, Chinese customers expect more variety than customers in the United States. According to the Yum, they introduce more than 85 new products within a year. In addition, they develop the different product for different regions because people live in different places have different dietary habits. From my perspective, Yum did a very great job on product development, yet still, they need to focus on what are people’s needs. I would say that design a signature meal rather than changing items frequently.

Food safety

The constant problem which China always has is food safety issue. This problem in China, where overall system sales fell, and store declined because of the food safety scandal. I still remember that KFC and McDonald’s meat supplier was shown in a TV news report reusing meat and the story was shocked that they use meat which falls to the factory floor and mixing fresh meat with expired meat. Even if they announced that they had already switched the meat suppliers. This negative story caused a huge impact on brand image. Driving Chinese consumers away from KFC restaurants. Yum had a numerous loss because they relied on KFC as a high revenue percentage. Unlike the United States, always pay a lot of attention to food safety issue. Customers trust the quality provided by restaurants. In China, Yum mush establishes their own supply chain and stick to rules of quality control. Instead of losing consumers and market share, they should truly face the food safety issue. Although it may take a lot of effort and internal cost, brand image, and reputation are more important than other factors in the long run.

 

 

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