Order Description
Write a fast-food industry analysis, and identify Yum! Brands’ strategies.
• HW1a – Industry Analysis
1) Industry overview: market size and growth from 5 years back into 5 years in the future, main drivers of the growth, industry life cycle stage, concentration level, major competitors’ market shares, demand determinants and profitability drivers
2) Using Five Forces, Value Chain and Economic Attributes models to assess the strength of the competitive forces and the profitability in the industry
• HW1b – Identify your company’s strategies
Example: Identify Starbucks Strategies
 Create the “Starbucks Experience,” by combing the sale of specialty coffees and other beverages with friendly and competent service in a unique setting in which customers can enjoy the beverages.
 Use licensing arrangements to foster rapid growth.
 Establish a brand name through market saturation in the US first and then export to other countries.
 Leverage its brand name by selling coffee beans and ground coffees through grocery stores, warehouse clubs, and food distributors.
 Leverage its brand name by forming partnerships with other established brand name firms to sell various high-quality beverages.
 Pursue multiple avenues to maintain its growth and discourage new entrants.
Porter’s Five Forces Framework
 Rivalry among Existing Firms
Concentrated or diffuse rivalry; the greater the industry concentration, the lower the competition among existing rivals and thus more profitable
 Threat of New Entrants
Barriers to enter?
Do existing rivals have competitive advantages making it difficult to enter?
 Threat of Substitutes
How easily and likely to switch to substitutes?
Unique products with few substitutes enhance profitability.
 Buyer Power
Are the buyers price takers or price setters?
The relative number of buyers and sellers in the industry
 Supplier Power
The leverage in negotiating input prices from suppliers
The relative number of potential buyers and suppliers of inputs

Porter’s Five Forces Framework
Example: Auto Industry
 Buyer power: HIGH – Consumers are sensitive to price as auto makers have similar offerings in each product class. Cars are a large part of most consumers budget.
 Supplier power: LOW – Given auto makers’ size it is likely that auto firms can exert significant influence over their suppliers, leading to low supplier power.
 Rivalry among existing firms: HIGH – Intense rivalry among auto firms, evidenced by heavy advertising. The market is mature so additional market share must come from competitors’, leading to intense competition.
 Threat of new entrants: MEDIUM – While entirely new auto companies are rare, non-U.S. companies entering the U.S. market is more common. Kia and Hyundai have started competing in the U.S. market.
 Threat of substitutes: MEDIUM/LOW – It is doubtful that many U.S. consumers are going to switch to mass transit or bicycles; however one threat to auto makers is the used cars. As cars become more reliable and longer lasting many consumers may switch from purchasing new cars to used ones.

Value Chain Analysis
Value Chain – the sequence of activities in creating, manufacturing and distributing goods and services
• Upstream activities – high value added, e.g., discovery of new drugs
• Downstream activities – low value added, such as wholesaling and retailing
• Brand name recognition and large number of retail stores nationwide can also earn higher margins.
• Differentiable goods and services

Value Chain Analysis
Example: Pharmaceutical Industry

Economic Attributes Framework
• Demand: grow or mature, cyclical or insensitive, seasonal or stable, customers price-sensitivity
• Supply: similar or unique products, barriers to entry or exit
• Manufacturing: capital- or labor-intensive, complex with low tolerance for error or relatively simple with ranges of products that are of acceptable quality
• Marketing: sell to other businesses or directly to consumers, steady demand pull products through distribution channels or must continually create demand
• Investing & Financing: short or long term assets, riskiness of assets, profitable and mature generating enough cash flows or growing rapidly and in need of external financing

Economic Attributes Framework
Example : Soft Drink/Beverage Industry
1. Demand:
 Relatively price-insensitive, low growth in the US but more rapid growth in other countries, not move with the economic cycle, and relatively stable throughout the year
2. Supply:
 Dominated by two (PepsiCo and Coca-Cola), branded products and domination of distribution channels by the two create significant competitive advantages
3. Manufacturing:
 The process for concentrate/syrup is not capital-intensive but bottling and distribution of final product are capital-intensive. The manufacturing process is simple with some tolerance for quality variation.
4. Marketing:
 Brand recognition and established demand pull products through distribution channels, but advertising can stimulate demand to some extent.
5. Investing and Financing:
 Bottling operations and transportation of products to retailers require long-term financing. Profitability is relatively high and growth is slow in the US, leading to excess cash flow generation. Growth markets in other countries require financing from internal domestic cash flow or from external sources.

Framework for company strategy analysis
• Nature of product or service: differentiation vs. low-cost strategy
• Integration within value chain: in-house vs. outsourcing
• Diversification: Geographical (domestic