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Case #10: Yum! Brands, Pizza Hut, and KFC
By: Jorge E Fernandez

1.

Describe Pizza Hut and KFC's investment strategy in Latin America .
The maturity of the U.S fast food industry intensifiedcompetition within the same segments; this
created a need for new markets. Taking in consideration that the only new available markets were outside
the US, firms like Pizza Hut and KFC decided to gofor the international market s so that they could expand
their sales. Foreign markets in Latin America were attractive because of their large customer bases and
comparatively little competition.Latin America as a region was of particular interest because of its
geographic proximity to the United Sates, cultural similarities, and NAFTA.

With more than 12,000 KFC and Pizza Hut restaurantslocated outside the USA, it was imperative for these
fast food enterprises to make sure their standards were held. This was possible do to their 77% of their
franchises been manage by local franchiseesand or joint ventures. They were of great help do to their
understanding of the local language; culture, customs, laws, financial markets and marketing
characteristics. Franchising allowed firms toexpand more quickly, minimize c apital expenditures, and
maximize return on invested capital. The country selection models typically assessed countries on the basis
of market size, growth rates,the number of and type of competitors, government regulations, and economic
and political stability. The strategy for these fast food restaurants was an aggressive move towards new
developing marketsbased on the segment they were aiming to achieve. Different factors and different
situations guide were to establish each new restaurant.

2. Using the country and industry risk categoriesdiscussed in the case, compare and contrast Mexico
and Brazil as alternative investment locations. What risks are associa ted with investment in Mexico?
Brazil? What strategies can be used to minimize...