Yum Brands SWOT Analysis / Matrix

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SWOT analysis is a vital strategic planning tool that can be used by Yum Brands managers to do a situational analysis of the organization . It is a handy technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Yum Brands is facing in its current business environment.

The Yum Brands is one of the leading companies in its industry. Yum Brands maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis.  SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework helps an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Yum Brands to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
Yum Brands swot analysis / matrix

SWOT Matrix Strategies Objective

The central purpose of SWOT matrix is to identify the strategies that an organization can utilize to exploit external opportunities, counter threats, and build on & protect Yum Brands strengths, and eradicate its weaknesses.

Step by Step Guide to Yum Brands SWOT Analysis

Strengths of Yum Brands – Internal Strategic Factors

As one of the leading companies in its industry, Yum Brands has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Yum Brands are –

  • Strong distribution network – Over the years Yum Brands has built a reliable distribution network that can reach majority of its potential market.
  • Strong Free Cash Flow – Yum Brands has strong free cash flows that provide resources in the hand of the company to expand into new projects.
  • Highly successful at Go To Market strategies for its products.
  • Automation of activities brought consistency of quality to Yum Brands products and has enabled the company to scale up and scale down based on the demand conditions in the market.
  • Good Returns on Capital Expenditure – Yum Brands is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
  • Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
  • Strong Brand Portfolio – Over the years Yum Brands has invested in building a strong brand portfolio. The SWOT analysis of Yum Brands just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
  • Superb Performance in New Markets – Yum Brands has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.

Weakness of Yum Brands – Internal Strategic Factors

Weakness are the areas where Yum Brands can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

  • Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
  • Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Yum Brands needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
  • The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Yum Brands has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
  • Investment in Research and Development is below the fastest growing players in the industry. Even though Yum Brands is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
  • High attrition rate in work force – compare to other organizations in the industry Yum Brands has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
  • The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
  • The profitability ratio and Net Contribution % of Yum Brands are below the industry average.

Opportunities for Yum Brands – External Strategic Factors

  • The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Yum Brands to increase its profitability.
  • Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Yum Brands’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
  • Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Yum Brands in other product categories.
  • New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Yum Brands to drive home its advantage in new technology and gain market share in the new product category.
  • Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
  • The market development will lead to dilution of competitor’s advantage and enable Yum Brands to increase its competitiveness compare to the other competitors.
  • The new technology provides an opportunity to Yum Brands to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
  • Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Yum Brands to capture new customers and increase its market share.

Threats Yum Brands Facing - External Strategic Factors

  • The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
  • New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
  • Liability laws in different countries are different and Yum Brands may be exposed to various liability claims given change in policies in those markets.
  • Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Yum Brands
  • Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
  • Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
  • As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
  • Rising raw material can pose a threat to the Yum Brands profitability.

Limitations of SWOT Analysis for Yum Brands

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

  • Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
  • SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
  • The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Yum Brands
  • SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
  • SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of Yum Brands

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Yum Brands managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of Yum Brands

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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SWOT Worksheet & Template

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References / Citations & Bibliography

  • M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
  • A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
  • O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
  • L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
  • R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)