Yum! Brands: Pizza Hut India, Research Paper Example

Executive Summary

Yum Brands has enjoyed international success for many years. This is especially true of Pizza Hut in India. Pizza Hut India practices a strategy of localization that has appealed to and attracted many local consumers. As age demographics shift, fast food is becoming increasingly popular. With these changes within the country, Yum will continue to experience success. Their aggressive expansion strategy has allowed the company to enter the Indian market through strategic alliances with home companies. These alliances have aided in the easy entry as well as cultural barriers that would have led Yum to their downfall within the country. This study examines the success of Pizza Hut in India.

Company Background

Yum Brands is an American company located in Louisville, Kentucky (Yum! Brands, 2013). The company was founded in 1997 and was formerly known as Tricon Global Restaurants (Yum!Brands Inc., 2013). Yum creates and operates a group of restaurants that include Kentucky Fried Chicken, Pizza Hut, Taco Bell, Long John Silver’s and A&W All-American Food. The restaurants exist globally and consist of many franchises and licensing procedures worldwide (Yum! Brands, 2013). At this time, Yum operates 39,000 restaurants in 125 countries and is currently on the Fortune 500 list, ranking #213  (Yum! Brands, 2013).

There are approximately 12,500 Pizza Hut Restaurants in 97 countries (Yum! Brands, 2013).  This case study is intended to focus on Pizza Hut operations in India. One of Yum Brands significant strategies is to expand internationally at an aggressive pace, placing their brands everywhere as well as increasing shareholder and franchissee value. This is currently being accomplished through their increasing expansion within India. Infia is one of the largest markets that the company has entered, though this entrance has come with challenges and successes.

Pizza Hut is currently ranked #3 for the 10 best food and beveraged companies in India (SiliconIndia, 2013). It is said that the use of local fare as well as comfortable price points lead to success for the company in India (SiliconIndia, 2013). This could be the reason that there are 138 Pizza Hut Franchises across India and Yum has opened its first owned Pizza Hut in India in 2012 (Yum Brands Opens its First Owned Pizza Hut Outlet in India; Targets $1-bn Revenues, 2013).

Country Background

According to the Global Competitiveness Report, India is ranked at #59 out of 144 economies (Schwab, 2012). India continues to lose momentum in competitiveness as time passes. This is due to the poor infrastructure within the country according to the Indian business community (Schwab, 2012). Those this issue is improving.

Other hindrances to becoming more competitive include health and education. The standards regarding these two issues within the country are very low which continues to lead to poor productivity within the country (Schwab, 2012). As these conditions continue to produce low productivity, Indian will continue to suffer the consequences by becoming less and less productive as time passes. It is important that these issues are soon improved in order for overall economic improvement.

Though there are many hindrances to the country’s competitive well-being, there are also strengths to be found within this economy. The country itself relies on a developed and sophisticated financial market which is a very positive aspect to competitiveness (Schwab, 2012). Other positives that would relate to Pizza Hut and the fast food industry are the country has a population of 1,220,000, with the median age being approximately 27 years old (South Asia: India, 2013). The country also practices an open market economy which allows entry into the market more easily accessible than other places (South Asia: India, 2013).

Yum Brands has already entered the Indian Market and has seen much success within the country. Because of the changing demographics and the young population, this fast food franchise has easily adapted to the Indian market even with a few mishaps in the beginning.

Entry Strategy

Yum Brands placed Pizza Hut within the Indian market as a franchise business. This franchise situation has become very popular within the market. This was easily made possible through strategic partnerships with companies such as Dodsal and Devyani Group (Sinha, 2012). As entrance barriers are eased, Yum and their 13 partners are easily increasing the number of restaurants within the country and taking advantage of the ever growing fast food industry within these borders.

Another way that Yum Brands intends to double their market share over the next couple years is by operated Pizza Huts owned by the company and not franchisees (Yum Brands Opens its First Owned Pizza Hut Outlet in India; Targets $1-bn Revenues, 2013). The company has decided that merely relying on franchisees will not create enough of an impact for their aggressive expansion strategy. Through the task of opening their own Pizza Hut Restaurants in India, Yum intends to increase revenue by $1 billion (Yum Brands Opens its First Owned Pizza Hut Outlet in India; Targets $1-bn Revenues, 2013).

Yum seems to be making all the right moves to ensure success. The company rigidly adheres to the strategies that they have set forth. This is leading the company to continue to be ranked in the top in regard to fast food chains that operate globally. As long as the company continues this tradition of aggressive expansion with the insight to research areas intensely they will continue to view success from the top ranks.

Marketing and R&D Strategies

Yum has chosen to use a localization strategy for Pizza Hut Restaurants in India. Though American options are available, the menu has been customized to include options such as Double Cheese, Teekha Chicken Masala, Kadhai Chicken, Veggie Crunch, and Tandori Paneer Pizzas (SiliconIndia, 2013). These options have been added to attract the local consumer. This very strategic move than offers the company success based on the understanding of cultural preferences within the country.

Another attractive feature of the Indian menu is a low price point that makes the product available to even those with lower incomes (Sinha, 2012). This strategy allows the chain to be available to numerous communities throughout the country. Without this strategy the company would face stagnant growth within India.

Yum also practices advertising to spread the message about their products. Because India is somewhat technologically advanced in that they have communication abilities such as television, internet, and radio (South Asia: India, 2013). This allows the company to create advertising campaigns that cater to the local consumer.

There has been extensive research done by Yum to ensure that these different strategies are exactly what the Indian consumer desires (Yum! Brands, 2013). Whether this research was accomplished through trial and error or through developments through the R&D department, it is all very important and informative to Yum Brands.

Opportunities and Challenges

Though there has been some challenges faced by Yum Brands Pizza Hut Restaurants in India, overall, this attempt at expansion has been successful. Challenges have included cultural differences such as food preferences as well as pricing challenges. The issue of food preferences has been resolved with the implementation of a localization strategy. The price point has been lowered to reflect the income within the Indian economy. After these issues were faced and resolved, the company has been blessed with many instances of success.

As of 2008, Pizza Hut was named the most trusted food service brand in India according to the Economic Times for four years in a row (Pizza Hut Named Most Trusted Food Service Brand in India, 2008). Pizza Hut was the only restaurant to place in the top 25 ranks (Pizza Hut Named Most Trusted Food Service Brand in India, 2008). According to Yum, the restaurant has created a strong brand name, localized menu, and a skilled workforce which has created value in the eyes of Indian consumers ( Pizza Hut Named Most Trusted Food Service Brand in India, 2008).

In 2006, commemorating 10 years of service in India, Pizza Hut introduced the Great Indian Treat menu (Pizza Hut Gets Local with Great Indian Treat, 2006). Part of the great Indian Treat was the Tandoori Pizza (Bhan, 2006). With local flavors added to the menu, Pizza Hut was able to quadruple business (Bhan, 2006). This allowed Pizza Hut to introduce familiar food to the Indian Consumer and also started to engage the consumers through games and music (Pizza Hut Gets Local with Great Indian Treat, 2006). It was a good marketing tactic for Yum in India.

Since these two instances of success have occured, the fast food market continues to grow in India. As this market grows, Pizza Hut continues to profit. The local consumers, even those who have very little disposable income, seem to figure fast food into their budget each month which is a great opportunity for Pizza Hut (Sinha, 2012). It seems to be due to the changing demographics within the population. Fast food brands are easily recognized by Indian youth, making these foods attractive to the population (Sinha, 2012). Because the average age in Indian is approximately 27 years old, ths demographic fits in with the generation that is most likely to purchase fast food products such as Pizza Hut.

Evaluation and Conclusions

Pizza Hut in India is a very successful branch of Yum Brands. As the age demographic changes and the fast food market becomes more popular, the company will continue to be successful in this market. Operating franchises as well as company owned restaurants within the country will allow the company to adhere to their strategy of aggressive expansion and also allow the company to obtain their goal of $1billion in revenue based on this entry strategy. This success would not be possible without the help of strategic alliances located in Indian.

The success of Pizza Hut in Indian can also be attributed to their localization strategy, price consciousness, and advertising campaign. These aspects of R&D have allowed the company to become more familiar with the local consumers and have allowed the local consumer to become interested in this fast food brand. It is important that research is continued in order to adapt to the changing market.

Though it was not an entirely challenge free entry into the Indian fast food market, Pizza Hut has done well in this country. Their overall success and continued growth in the market show that the company has exceeded their expectations. It is recommended that Yum Brands continues this course of aggressive expansion into India to continue their overall global success. They are reaching for the stars and just may be the ones to touch them.

References

Bhan, N. &. (2006, May 8). Brand magic in India. Retrieved June 7, 2013, from Businessweek: http://www.businessweek.com

Pizza Hut Gets Local with Great Indian Treat. (2006, August 4). Retrieved June 7, 2013, from Indiantelevision.com: http://www.indiantelevision.com

Schwab, K. &.-I.-M. (2012). The Global Competitiveness Report 2012-2013. Geneva: World Economic Forum.

SiliconIndia. (2013, February 6). 10 Best Foods and Beverage Company in India. Retrieved June 7, 2013, from SiliconIndia News: http://www.siliconindia.com

Sinha, N. &. (2012, December 14). Fast Food Emerges as the Great Leveller. Retrieved June 7, 2013, from Live Mint & The Wall Street Journal: http://www.livemint.com

South Asia: India. (2013, June 5). Retrieved June 7, 2013, from The World Fact Book: http:www.cia.gov

Yum Brands Opens its First Owned Pizza Hut Outlet in India; Targets $1-bn Revenues. (2013, September 28). Retrieved June 7, 2013, from The Economic Times: http://articles.economictimes.indiatimes.com

Yum! Brands. (2013, June). Retrieved June 7, 2013, from Yum!: http://www.yum.com/company/ourbrands.asp

Yum!Brands Inc. (2013, June 7). Retrieved June 7, 2013, from Yahoo! Finance: http://finance.yahoo.com/q/pr?s=yum