American fast food holding company Yum Brands announced that it would restructure its China business. Normally, there’s nothing wrong with finding a better approach to deal with the local market environment (quite to the contrary, actually), but this case seems to be different. Yum’s major brands KFC and Pizza Hut have been struggling in the Chinese market in recent years (see other posts on this blog). First, in 2012, antibiotics and growth hormones were found in KFC chicken, then Pizza Hut made some bad calls with regards to their menu and pricing, and most recently competition from Chinese fast food chains got rather intense. Yum brands had lost their appeal and started to loose money. This led to Yum headquarters making a bold move by cutting the Chinese market loose from global operations. Had it only been in order to give local operations more control over decisions on their China strategy, this might have been a good move, but it’s been reported that it is largely an attempt to shield US operations from risk. That could mean even tighter controls and a narrower look on the financials, and it could also result in a complete lack of support. Potentially, even damage to the global brands could emanate from the Chinese market.
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