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Hyatt Park and Peninsula Hotels
The business news reviews the situation around the luxury hotels in Chicago that is taking place due to COVID-19, also known as coronavirus. It is stated that the luxury properties, the Park Hyatt and Peninsula, could be the first among plenty of hotels that close because the pandemic has led to customers’ absence (Ecker, 2020). The hospitality market is facing substantial hardships caused by COVID-19.
The Park Hyatt and Peninsula hotels claimed that public health concerns force them to close their doors. The mentioned actors of the hospitality industry are the first properties that were affected by coronavirus to the extent to make a decision of closure. The Park Hyatt will not be working until April 30; the Peninsula will not be operating until further notice (Ecker, 2020). It might be assumed that the hotels are following the highest principle of their clients’ and employees’ safety.
Unfortunately, these closures only add the list of suspended businesses because the governments of the United States are striving to restrain the spread of coronavirus. A plethora of hotels in Chicago had to fire many staff members as their occupancy rates are substantially low. According to the representatives of big hotel chains, the described situation is the only beginning of upcoming difficulties in the industry because plenty of hotels simply cannot pay to their employees. There are even proposals, according to which the government is to interfere in the market to provide help by giving necessary resources in order to reduce layoffs (Ecker, 2020). It should also be mentioned that many Chicago hotels have faced colossal revenue losses in March if to compare with the same period last year.
Relevance and Impact
The information given above might be considered as the major news story as all the facts related to the consequences of COVID-19 has the greatest extent of relevance now. Currently, coronavirus has a significant impact on every aspect of activities, not allowing people to adhere to their settled routine. Almost all entrepreneurs claim that they suffer from the situation in which the world is put – borders are closed, movement is restricted, and the opportunity to gain profits is hindered. Then, many businesses are running out of ideas regarding the issue of how to organize their supply models in such severe conditions.
It is hard to foresee what the situation around big companies will look like within the next few months. However, analysts state that the prognosis is disappointing, and the circumstances will get worse. It seems reasonable to mention that restaurants in Chicago are facing the same disruption as hotels (Barker, 2020) – again, the hospitality market is among the most vulnerable industries to COVID-19. Today, the effects of coronavirus seem inevitable, harsh, and long-standing.
Governments are doing their best to prevent the spreading of this tragedy, and the most prominent scientists and research centers are looking for a solution to the problem. The latter requires significant financial support, which reduces the possibility of providing resources to the hospitality sector. It should be emphasized that the described news is of the same tenor with the ones depicting the circumstances in other industries. This fact allows assuming that the article provided by Ecker (2020) is directly related to the most major and relevant theme now.
What is more, the above facts will impact existing businesses to a significant extent, leading to noticeable shifts and changes in the market. It might be apparent that the movement restrictions result in the diminished flow of tourists and people on a business trip. Due to the latter fact, the reduced occupation is taking place, as well as reduced incomes. Top managers are developing new and unique strategies, trying to save at least the minor part of expected profits.
It might be supposed that there is no hotel in the world today that has not been threatened with the visible possibility of layoffs. A lot of hotel personnel cannot obtain their promised salaries because, in many states, the current period is associated with a sizable number of customers. It seems that there is no obvious way to affect and change the situation for the better. The stable flow of clients is impossible when such an emergency takes place in a country.
It seems essential to notice that COVID-19 stroke the United States suddenly, which affected even the present customer pool in hotels. Many people had to cancel their trips right after they heard the breaking news about coronavirus and the actions that the government recommended to undertake. Self-isolation cannot be considered as a favorable condition for any segment of the hospitality industry. Hence, the closure of the Hyatt Park and Peninsula hotels is just the first step of mass hotel-closing both in Chicago and the whole country. It will definitely harm the economy of the US, but the solution has not appeared yet. Nevertheless, it is vital to conduct continuous strategic research in order to distinguish the best way to overcome the relevant business obstacles.
Links With Management Theory
It might be assumed that the discussed business news is connected with the management theory via the driving change and social aspects. As mention above, the industry is being influenced by COVID-19, which should be considered as force majeure that results in ample market shifts. Thus, coronavirus is a condition that may be defined as a driving change factor, accent on which was made in the article. “The closures add to the long list of businesses shutting their doors as governments across the country try to contain the spread of COVID-19” (Ecker, 2020, para. 6).
It means that this factor is causing a strain in the business both at the federal and national levels, affecting the entire world similarly. Hence, coronavirus is an undoubtful driving-change element that is to be investigated within the scope of management theory when one decides to develop or adapt business strategy today.
The social factor also has a significant weight in the framework of strategic management impacted by COVID-19. The society is reasonably afraid of the illness as it may lead to even lethal results. People are trying to reduce their movement and refrain from any unnecessary trips. Hence, hotels are losing even potential customers, not speaking of the ones leaving their rooms and asking for a refund due to force majeure from which the country is suffering. Moreover, hotels that consider the social factor as a core of their policy, caring about clients’ needs – which is typical for big chains, such as Hyatt – tend to satisfy such requests. Thus, it seems rational to conclude that the driving change and social aspects serve as a connection of the above business news with management theory.
Value Chain Analysis
It seems reasonable to claim that the top management of Hyatt has always been pursuing the purpose of perfect site selection. Since its foundation in 1957, the Hyatt team has built about 900 properties in 60 countries, which allows stating that Hyatt is a full-scale transnational company (About Hyatt, no date). Locations of these properties are almost always besides water – an ocean, sea, or river – which provides customers with an exciting and beautiful view (Hotels & Resorts, no date). Then, it seems that the company effectively governs lineup of hotel locations as it has properties in big resort cities – it means that Hyatt always has significant demand for its services. Finally, Hyatt is a five-star luxury hotel chain that has great design and construction. Clients have never left dissatisfied reviews on the latter aspects.
The chain gives its customers vital services within the scope of reservation affairs. The assistance is available 24/7 and ready to help with any occurred issue. Although Hyatt has quite high rates of occupation, it is relatively easy to book a room at any time of year as the hotels are expensive and rarely have no rooms to offer. The properties operate coherently and harmoniously due to an efficient management approach, providing opportunities for various activities – starting from the spa and ending with tennis.
Moreover, Hyatt has remarkably developed its support activities, which contributes to coherent inner business processes. The company has a sophisticated accounting system – it is evident from Hyatt’s transparent reports on investment affairs and documentation available via the official website (About Hyatt, no date). The hiring and training approach might also be characterized as notable because the company provides great career opportunities and hires employees of diverse races, skills, and knowledge. Hyatt has its own significant training program for the staff, as well as corporate responsibility.
The firm has an established and well-known brand that is quite popular around the world. Hence, it does not have a strict necessity to conduct a drastic advertising company – the chain makes a few advertisements during a high-occupation season via central TV channels and social media. However, Mark Hoplamazian, President and CEO of Hyatt, has a relatively low CEO approval rating – 63/100 (Hyatt’s Competitors, no date). For instance, according to Hyatt’s Competitors (no date), Arne Sorenson, President and CEO of Marriot – the main Hyatt’s rival, has the following rating – 90/100.
SWOT Analysis
Hyatt has developed a notable approach that indicates the continuous implementation of innovations in its inner and external processes. It contributes to high-quality service providing, as well as to choosing great locations for properties. Top brand reputation and qualified staff are also among the considerable strengths of the chain. Then, Hyatt has many opportunities to even improve its performance, such as personnel exchange between the branches, franchising, and more advertisement and promotion.
However, Hyatt has a number of weaknesses that might be considered substantial. The chain depends too much on luxury and provides customers with the inflexible choice of rooms and services – everything is critically expensive. Additionally, Hyatt demonstrates a great extent of expenditures, which reduces its incomes; such a policy seems irrational as the chain exists in severe global competition. Finally, Hyatt is currently put in an unfavorable business situation due to COVID-19. Other threats might be economic crises and the steal of its technological data.
Industry’s Key Success Factors
It should be stated that the crucial success factors in the hotel industry have constantly been changing with the flow of time. Nowadays, the market cannot be rationally assessed out of the scope of international competition and noticeable policies of rivals; hence, the first key success element is a global outlook (Thompson, no date). Tourists have open access to the Internet and search, evaluate, and compare the quality of services of different hotels.
It is vital to have an appropriate vision of how the industry functions at the international level and be able to conduct continuous investigations in this regard. It contributes to a chain’s ability to adapt its strategy to relevant trends and needs, which is another key success element called flexibility (Thompson, no date). The latter might also be perceived from the angle of providing authority to managers to make critical decisions as they know current clients’ requirements best.
Then, a client is always looking for a hotel that has beautiful surroundings and views. Thus, location is the second element to remain successful in the industry (Thompson, no date). Another factor that is directly related to the latter is the construction of a hotel. The better properties are built, the more customers tend to choose such an accommodation to stay. The ones making accent on these two factors usually gain a solid reputation and popularity, which leads to the status of a luxury chain.
The organization of service-providing also plays a significant role in the hotel market. Quality management provided by experienced employees results in customers’ satisfaction and their loyalty (Thompson, no date). Nevertheless, the development of diversified training programs for personnel might be considered a key success factor too. Continuous staff improving via lectures, seminars, and mobility contributes to their confidence and qualification, which, in turn, leads to better interactions with a client. Top managers are to take into account the listed factors if they want their chain to remain profitable, recognizable, and successful.
PESTEL Analysis
Being a luxury and top brand chain, Hyatt is not affected by political changes substantially as the properties are located mostly in safe countries in this regard. Economic issues that impact Hyatt are recession, inflation, and global tax increases. Keeping in mind Hyatt’s outstanding reputation, it is relatively easy to obtain a loan for Hyatt. Then, the chain should take into account various people’s lifestyles and societies’ cultural peculiarities as Hyatt is located worldwide.
The world is constantly improving in technology regard, so as competitors; hence, Hyatt needs continuous technological development and investments, as well as sharing techniques between branches. Ecological issues affecting the chain are as follows: global warming, the trend to use environment-friendly technologies, and pollution increasing. The most crucial legal external aspects are strong regulatory bodies, complicated visa procedures, and continuous laws changing.
Strategy for Changing the Game
Hyatt has faced a harsh business situation that threatens the further stability of the company. Thus, it is essential to undertake a number of principal and compromising actions. COVID-19 is affecting many of Hyatt’s rivals that suffer from the lack of clients so as the firm. It seems reasonable to state that there are no issues of competitiveness in the market now – there is rather a problem of simply surviving.
The chains need new industry opportunities and mitigation of risks to their businesses. Hence, these common reasons allow assuming that Hyatt can enter into a strategic alliance with some of its competitors. For example, it may cooperate with the Peninsula at the local level in Chicago. They may develop a new saving policy and make a report on substantial threats to the industry and present them to the municipal government in order to request financial support. Moreover, these firms are pursuing a similar pivotal goal of keeping their personnel and clients safe and secure.
The mentioned strategic alliance also may contribute to the development of the management process during the period of coronavirus and quarantine. The properties might exchange their staff and implement something kind of bundling strategy regarding salaries. They may negotiate the issue of the current lack of money and reduce their wages temporarily. Instead, employees will be provided with the opportunity to have an internship in respectful partner properties, which will contribute to their professional development. It should be emphasized that a strategic alliance and productive partnership might be the only rational decision in the present business conditions. Companies involved in the industry are to be careful with being absolutely independent and with conducting risky and unsafe strategies.
Paradigm and the Cultural Web
It might be supposed that Hyatt has a significant cultural web that results in a healthy working environment and an impeccable reputation. The company has many stories that indicate the fact that Hyatt includes a philanthropic element in its culture. Among the latest related activities are: facilitating good hygiene with Hyatt Regency Mumbai, protecting Wild Elephants with Grand Hyatt Erawan Bangkok, and preserving the Batiquitos Lagoon with Park Hyatt Aviara (About Hyatt, no date). Then, Hyatt has a quite popular logo that is associated with first-class hotels, luxury, and comfort, as well as high prices.
The chain is governed by the President and Chief Executive Officer, Mark Hoplamazian, and the Board of Directors elected by the stockholders. They are the most powerful structures of Hyatt that do not merely govern the business but direct employees, allowing them to make independent decisions to the exact extent (Corporate governance guidelines, 2018).
According to Corporate governance guidelines (2018), the Board establishes the following organizational structures, or committees: Audit, Talent and Compensation, Nominating and Corporate Governance, and Finance. Furthermore, the company has a transparent control system that measures personnel activities. Hyatt prepares quarterly and annual reports, have an interactive analyst center and provide its stockholders with exhausting financial summaries. All the investment affairs are accounted for and conducted according to applying legislation and fundamental principles of the chain.
What is more, Hyatt cares about its staff and has a notable code of business conduct and ethics. Employees’ routine is to follow the following principles: mutual respect, diversity and inclusion, safe workplace, and supremacy of human rights (Code of business conduct, 2018). Such an approach makes it possible for the staff to concentrate on providing high-quality services to clients as employees feel that they work in a healthy and cooperative working environment. To conclude, the Hyatt’s paradigm is to be a luxury brand that cares about all its inner and external stakeholders, as well as to operate transparently and coherently.
Business Process
The company is in an acute and dire business situation at this moment. Due to unpredictable force that negatively impacts the whole hospitality industry, Hyatt is to develop a new and reasonable business pattern promptly. Keeping in mind that the processes of the chain have been quite profitable and efficient for a considerable period, it seems reasonable to assume that the internal policy should not be changed. A significant cultural web, value chain, favorable key success factors of the industry, and a healthy internal environment – almost everything indicates the success of Hyatt. However, because of the large-scale changes in the market caused by the disruptive force of COVID-19, the company has to redesign its processes radically. It means that the most reasonable solution for Hyatt might be the re-engineering of the business process.
The simplification pattern seems inappropriate as the firm is not demonstrating any issues of duplication and redundancy within its processes. The only point here might be unreasonably high expenses of the company, but this aspect does not seem to be crucial within the scope of the current problem. Then, Hyatt has a notably developed and implicated value chain, which is evident from the discussion above.
Hence, the difficulties regarding added value are not a characteristic of the firm, which allows supposing that value-added analysis will not contribute to Hyatt’s success. Finally, the company has a plethora of rational, coherent, and fundamental guidelines and documents that make business processes efficient and unified. The developed managing system contributes to well-coordinated and harmonious governance. The interests of stockholders are secured, customers’ needs are satisfied, and employees also demonstrate high rates of job satisfaction. It might be concluded that the approach of gaps and disconnects is not suitable for the company too.
As mentioned above, the re-engineering pattern might be the most logical option for Hyatt today. However, it should be claimed that this pattern should be applied with a considerable remark. COVID-19 is not able to hinder the market forever, which means that the situation in the industry may be characterized as temporary. The core of re-engineering for Hyatt is establishing a strategic alliance with its competitors as the company will be forced not to adhere to its external strategy of independence. Due to the nonpermanent situation in the market, the mentioned policy of partnership will not last for too long and will not bring any substantial shifts in Hyatt’s internal environment.
Yum! Brands Profit Slumps
The business news is about Yum! Brands company that reported the fact that its brand, Pizza Hut US, faced decreased incomes by the end of 2019 in the United States. “The company’s share price was down as low as $101.08 on Feb. 7 after closing at $106.78 on Feb. 6, the day before earnings were announced” (Danley, 2020, para. 1). Danley (2020) states that in comparison with the same period in 2018, the price of $4.23 per share was down 16% (para. 2).
Then, revenues reduced by 2% if to compare with 2018, which might be considered as a significant loss. Nevertheless, “worldwide system sales grew 9%, with KFC at 10%, Taco Bell at 9% and Pizza Hut at 8%” (Danley, 2020, para. 3). It might be assumed that the firm needs some innovations to be implemented into its strategy in order to prevent any further losses.
It is claimed that restaurant development is a crucial element of growth for Yum. “The company opened 9 gross restaurants per day on average and now has 287 brand country combinations” (Danley, 2020, para. 6). Nevertheless, the sales of Pizza Hut US decreased by 4% in comparison with the year 2018. In order to improve the situation, Kevin Hochman, a former KFC US president, will be a temporary president of Pizza Hut US.
He will make an accent on the distinctiveness of brands and the implementation of innovations, which makes him the right candidate for the position. It is also noticed that Yum’s affairs will have some difficulties due to coronavirus, but because of the diversified business model, the company will not suffer like many of its rivals. Finally, system sales of the firm exceeded $50 billion in fiscal 2019, and there were more than 50 000 restaurants opened.
Relevance and Impact
The described news contains facts that have a substantial influence on existing businesses and are related to the relevant theme of globalization of the industry. It seems the Yum! Brands is going to undertake a new vector within the scope of its policy in the United States. Pizza Hum demonstrated dissatisfying performance in the country; thus, top management made an appropriate decision to bring a number of changes. It is evident from the fact that Kevin Hochman took the position of Pizza Hub US president. He has a solid reputation for the leader who pursues the aim of developing creative ideas and implementing them in the business. Such a manager might contribute to the prosperity of the firm to a great extent. It seems that Pizza Hut US will conduct a strategy with the accent on innovativeness.
The abovementioned cannot be denied by competitors that operate in the market. Pizza Hut might be defined as a crucial rival in almost every country in which in functions. Even a small strategic move from the firm may affect the industry notably. Keeping in mind that Kevin Hochman tends to adhere to the priority of creativity in his affairs, it might be assumed that the further actions of Pizza Hut US will be unpredictable.
Such a situation is not in the interest of rivals in the United States, where the brand is trendy. One of the critical elements of a company’s success is a rational assessment of its external environment in which the prediction of competitors’ strategic moves is an essential aspect. Hence, it might be supposed that the unforeseeable actions of Pizza Hub US will affect the existing businesses because, in the case of rational Hochman’s solutions, the company will gain a definite competitive advantage.
Furthermore, the business news sheds light on the fact that the industry of fast-food tends to become more and more globalized. It was stated that Yum! Brands was opening nine restaurants per day, which is an immense number for any market or company. It has 50 000 restaurants in 150 countries, and demand for the products of its primary firms – KFC, Pizza Hut, and Taco Bell – does not seem to reduce. Moreover, its profits from sales worldwide increase year by year, which makes the firm one of the biggest and serious actors in the industry. Yum never misses an opportunity to expand the coverage of its services and invest in many smaller companies or simply buy them. It might seem that plenty of the firm’s rivals adheres to a similar strategy, which makes the globalization of the industry even more apparent.
Globalization has a number of advantages and disadvantages that contribute to the construction of any operating industry nowadays. For instance, borders of countries are becoming blurred, which allows the free flow of capital, goods, and human resources. It is quite beneficial for a business as it may enter new markets at the international level. On the other side, globalization leads to a monopoly of big companies that tend to dictate the rules of the industry and interfere in small and local entrepreneurship. The latter may be a characteristic of Yum! Brands as it buys smaller enterprises and tends not to pay the necessary attention to their affairs. There are many examples of such failures of Yum, such as Habit Burger Grill or Grubhub.
Links With Management Theory
It might be assumed that the business news has an obvious connection with management theory via the impact on rivalry and driving change. As mentioned above, competitors of Pizza Hub in the US are not able to predict the future actions of the company for certain. Nevertheless, a number of substantial shifts caused by the firm’s new approach are expected. It is not clear whether Hochman’s policy will be beneficial for Pizza Hut US or not, but it should be stated that rivals will be forced to take into account Hochman’s ideas anyway. When rivalry is being affected by a transnational corporation, then, the industry is changing due to the transformation of its core element – competition. Thus, it might be argued that the impact on rivalry is the link with management concepts contained in the business news.
The other aspect that was provided in the piece of news is the upcoming driving change within the brand of Yum. It was claimed that Kevin Hochman would do his best to foster innovations in order to increase the profit margins of Pizza Hut US. Bringing a novelty in a business model means that the policy of a company will be changed. A new element or elements will result in diversification of business processes, which, if implemented appropriately, leads to improved performance and the firm’s growth. These changes may occur in various spheres – starting from the production process, and ending with management affairs. Thus, it seems reasonable to state that the above business news has a visible relation with management theory. Yum! Brands might be among the most significant examples of how a firm could bet on efficient managers to achieve success.
Value Chain Analysis
Yum! Brands developed its value chain adhering to the fundamental principles of the fast-food industry. It should be noticed that the firm is functioning primarily on the franchising basis, obtaining the exact share of restaurants’ incomes worldwide. Hence, each brand – KFC, Pizza Hut, and Taco Bell – has some peculiarities regarding their value chains. Nevertheless, it might seem that Yum! Brands created the core value chain that is of characteristic to each of its restaurants.
The primary activities of the company may be depicted as follows. The inbound logistics of the firm are the process of purchasing of raw materials and their storage. It seems reasonable to state that the keeping of products takes place in accordance with the economy principle – raw materials are stored close to restaurants. Such an approach might be quite rational because food should not be stored in a warehouse for long, and its close location to a restaurant results in the economy on transportation. Then, the company “deployed a … strategy that emphasizes on transparency of ingredients, sodium reduction, simplified ingredients with increased vegetarian, high-protein, lower-calorie, and other offerings that promote a balanced diet” (Food, no date, para. 12). It means that the firm cares about food safety and purchases only quality ingredients.
Operations of Yum! Brands might be considered via cooking, timing, and cleanliness control. It seems that the corporation hires staff that is able to create significant meals in a minimum possible time. Communication of personnel takes place with the help of modern technologies. Then, the restaurants conduct the strategy of customization – they adapt to local cultural features. Outbound logistics are characterized by a drive-through window, fast shipping of ingredients, and swift order processing, which is quite typical for the industry.
Marketing and sales of the firm are at a notable level if to compare with rivals in the industry. It has a worldwide-recognizable brand that is continually being maintained by significant and customized advertising (Building global, iconic brands, no date). Furthermore, Yum! Brands lures its customers by providing them with continuous discounts and coupons. Finally, the firm has qualitative service-providing – it has the customer call center that is available 24/7, takes into account various complaints and communicates with the client to collect feedback.
Support activities of Yum! Brands demonstrate an in-depth intersection with the primary ones. Procurement is visible via the fact that the company gets about 90% of ingredients from local suppliers, and imports a few ingredients to provide a unique taste; for instance, Pizza Hut imports pepperoni and mozzarella. Then, the company believes that implementing new technologies in its processes is one of the keys to success.
The technology development of the firm is founded on the client’s and employee’s feedback and takes place regularly. The corporation has a quite progressive approach regarding HR management – it provides significant career opportunities worldwide, gives appraisals, and focuses on hiring new personnel. Yum has the experienced and qualified Board of Directors governed by David Gibbs, CEO, who has 86/100 approval rating – the highest among competitors (Yum!’s competitors, no date). Moreover, the company claim that each of its brands “publicly shares its nutritional profile, allergens and ingredients of its core menu items” (Food, no date, para. 14). It indicates that Yum! Brands demonstrates transparent operating that could be easily reviewed online.
SWOT Analysis
Yum! Brands has some of strengths that lead the company to ongoing success. It focuses on emerging markets, which allows Yum always to remain a considerable competitor. It demonstrates the significant localization of its restaurants and a solid brand reputation. Moreover, Yum has sturdy supply chain operations that result in consistent and notable performance. The company is quite able to implement some innovations in its menu and continue the policy of expansion to seize the opportunity of further development. Nevertheless, the firm has weaknesses that hinder its prosperity, such as dearth in innovation or rebranding efforts. Moreover, a number of quality issues were identified, which does not contribute to a good reputation. Current crucial threats might be as follows: currency exchange risks, increasing health consciousness, COVID-19, severe competition, and Chinese market uncertainness.
Industry’s Key Success Factors
The critical factors of the fast-food industry might be described as follows. A company that is involved in the market should have a recognizable brand so that consumers could know what they get when they enter a fast-food restaurant (Xaxx, 2019). Then, top management is to develop and implement an appropriate locating strategy of their properties to make it easy for customers to attend them. Timing is another primary factor of success because the main clients’ expectation from a fast-food brand is to get their meal quickly. Finally, a company is to have an efficient and sustainable operations process because a substantial number of transactions and orders may lead to some system errors that may result in decreased profits.
PESTEL Analysis
Yum is located worldwide, and many countries encourage their citizens not to obtain fast food. It means that the company is affected by political settings – both domestic and international; hence the impact of the applying law is also significant. Crucial economic external factors are quite typical for a fast-food firm: raw material prices, foreign risk exposure, qualified staff pool, and financial crises. Then, societies care to a significant extent about their health; thus, they tend to discuss problems around Yum’s food via social media. Hence, the company is to take into account such cultural peculiarities and adapt its policy to them.
Then, Yum should follow the trend of continuous innovations implementation and advanced marketing because the primary competitors demonstrate exceptional success in this regard. Besides, the firm is to be aware of all supply chain opportunities as they indicate the ways for reducing expenses. Finally, climate change issues should be monitored as customers’ attendance also depends on this factor.
Strategy for Changing the Game
There are two factors to consider in the framework of a new possible strategy for Yum! Brands. First, within the global scope, it remains quite profitable and successful, as well as has noticeable competitive advantages. Second, it has decreased incomes in the United States fast-food market with Pizza Hut US. Thus, it seems reasonable to assume that a new strategy should be mostly related to the latter statement.
Keeping in mind that the firm is among the most successful and popular fast-food corporations, the strategy of strategic partnership seems irrelevant for Yum as it successfully follows an independent policy. The latest experience of mergers and acquisitions was unprofitable and caused a number of problems. Furthermore, in the current conditions of coronavirus, purchasing small companies seems inappropriate. Then, narrowing the scope with outsourcing might also be inadequate for Yum because it has enough resources and capabilities to handle the issue on its own.
For the firm, vertical integration might be the most reasonable decision to make. Yum! Brands could take part in multiple segments of the industry’s value chain to a greater extent, creatively combining in-house and outsourced activity. The mentioned aspects are a characteristic of the type of vertical integration called tapered integration. By adhering to this strategy, Yum can focus on its inner processes, identifying the opportunities for innovations’ implementation that will be proposed by Kevin Hochman. Then, for Yum! Brands, it seems rational to integrate forward toward end consumers of its offers. It will contribute to the increased product differentiation and bargaining power via control of value chain activities, as well as to strengthened position in the market.
Paradigm and the Cultural Web
Yum! Brands has a unique cultural web and its pivotal paradigm. The company is involved in many charity stories, which reinforces its reputation. For instance, the firm participates in the Harvest program, donating food to non-for-profit organizations to serve impoverished communities around the world. Moreover, Yum contributes to international literacy development and youth education, as well as maintains its employees’ charity projects. The above facts result in the global recognition of the brands belonging to the firm. Consumers easily identify the advantages of obtaining products and services from Yum! Brands, which indicates the popularity of the brands’ logos and titles.
Then, David Gibbs is the CEO of Yum! Brands and is a central person in the company; he reports to the firm’s Non-Executive Chairman. Gibbs leads the corporation to significant strategies, structure, HR development, and culture that will cause global improvements and incomes at all franchise businesses. “Yum! functional leaders [Board of Directors] and global brand division CEOs report to Gibbs” (Yum! Board of Directors, no date, para. 1). According to Yum! Board of Directors (no date), the organizational structures are as follows: Audit Committee, Management Planning and Development Committee, Nominating and Governance Committee, and Executive/Finance Committee. Their primary goal is to supervise and implement the critical decisions made by the Board of Directors.
The corporation provides transparent and exhaustive annual and quarterly financial reports that are available via the official web page. It is quite easy to assess the firm’s state of the art and evaluate its profitability. Moreover, Yum has a developed reward system that allows the best employees to obtain their deserved bonuses. Then, it seems that the company does its best to create a healthy working environment. The firm ensures that its employees “are treated with respect and dignity which includes a workplace that is free from discrimination, harassment, bullying, illegal substances and unsafe conditions” (Yum! Global code, no date, p. 21).
Furthermore, the staff is affected by the following company’s principles: mutual respect and dignity, fair labor practices, equal opportunity, employees’ health and safety, ban on substance abuse, privacy and confidentiality, and anti-corruption. The firm provides the following paradigm, “Yum! Brands believes in acting responsibly as we grow KFC, Pizza Hut and Taco Bell around the world when it comes to serving food people trust, growing sustainably and unlocking potential in our people” (Citizenship & Sustainability, no date, para. 1).
Business process
Before conducting the analysis of a possible redesign pattern for Yum! Brands, it should be emphasized that the company needs changes in a narrow market segment. Then, the business news states that the firm has had some problems with its mergers. A redesign pattern cannot be identified appropriately without considering all relevant factors that affect the current situation for the corporation. Again, it seems that Yum requires a number of substantial, but not radical, shifts in the processes of Pizza Hut US.
The abovementioned indicates the absence of necessity to undertake any actions related to the re-engineering approach. Globally, the company remains quite successful and has significant profit margins; the decrease by 4% in the single market of the US with Pizza Hut does not seem to be a good reason for re-engineering. Then, the value-added analysis is also not a wise option because the firm developed a notable value chain, as evident from the discussion above. Such an approach is not likely to contribute to figuring out weaknesses in the established and profitable value chain. The method of gaps and disconnects could have been a functional variant for Yum, but it is apparent that the corporation has a harmonized and coherent structure that does not tend to demonstrate errors.
Thus, it might be assumed that a simplification approach is the most reasonable way for the firm to redesign its business processes. The primary process to be simplified is the company’s policy regarding purchasing small enterprises that usually results in decreased incomes – such a means is simply redundant. The simplification method will challenge the systems of Yum, as well as its sub-processes, which will allow identifying the possibilities for including innovations. Simplified business processes might lead to an in-depth understanding of general policy issues and the improvement of international strategy.
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