Professional Documents
Culture Documents
INTERNATIONAL
GLOBALIZATION RE-EXAMINED
Burgers
Burgers
Burgers comprised more than one-third of total fast food industry.
Leader in Burgers is McDonalds Corporation founded in 1955 by Ray Kroc.
In 1998, it generated sales of $36 billion.
80% of McDonalds total capital expenditures were earmarked outside of US
in 1998.
McDonalds international operations accounted for 49% of company revenues
and 57% of its profits.
McDonalds tried to achieve consistency of experience in key processes.
A major milestone was a franchisees innovation of Big Mac in 1968.
Pizza
Pizza
Pizzas comprised of about 15% of total fast food industry, second largest after burgers.
Pizza market was much less concentrated than burger market.
Capital requirements were low in pizza business.
Almost $300,000 were required for a pizza parlor and $150,000-200,000 for delivery
business.
The leader in pizza market is Pizza Hut, opened by Dan and Frank Carney in 1958 in
Wichita, Kansas.
In 1998, Pizza Hut generated sales of $7.2 billion from 12,285 units.
Innovations included deep-dish pan pizza, personal pizzas, and launch of delivery business.
Biggest competitor is Dominos .
Chicken
Chicken
Chicken was less US-dominated and more internationalized.
KFC accounted for 55% of market, followed by Pop-eye with 8%, and Churchs with
6%.
Leader in quick service chicken, KFC, was opened in 1939 by Colonel Harland D.
Sandars in Corbin, Kentucky.
KFC had more than 6500 units in 1969.
In 1998, KFC generated sales of $8.3 billion from 10,432 units.
KFCs international activities were organized under Tricon Restaurants.
KFC accounted for 62% of Tricon Restaurants.
KFCs direct competitor was Burger King and indirect competitor was Boston market.
Mexican Food
Mexican Food
Mexican quick-service restaurant industry was estimated for 5% of fast food
market.
Pioneer was Taco Bell, accounting 73% of market share.
Taco Bell was started by Glen Bell in Downey, California in 1962.
It went public in 1969 and opened first international restaurant in 1977.
In 1998, Taco Bell generated sales of $5 billion from 7,055 units.
Taco Bell recently entered the $20 billion after-five dinner category with
$9.99 12-item Grande Meal.
In 1998, it also launched an advertising company, Gidget.
History
PepsiCos restaurant businesses had not been successful.
Customers switched to Coca-cola from Pepsi.
There was minimal coordination in operations across different countires.
The Spin-off
In January 1997, PepsiCo announced to spin off its restaurant as an independent,
publicly traded company - Tricon Global Restaurants, Inc.
PepsiCo also announced to sell its food distribution company to focus more on its
core beverage and snack food businesses.
In 1998, TRIs system wide sales were $6.7 billion.
Its operating profits amounted to $191 million.
TRI was organized into 17 separate geographic business units.
In 1998, TRI decided to concentrate its equity investments in countries that either
generated significant profits, or had the potential to do so.
Operations
Operational improvement program: CHAMPS Cleanliness, Hospitality,
Accuracy, Maintenance, Product quality, and Speed of service.
Mystery shopping program began in 1996.
CHAMPS also created a standard library for operating manuals which
consisted of four volume set: management, service, product, and equipment.
Allowances had to be made for different tastes.
Marketing
Before spin-off, there had been a lack of standardization and shared practices
between brands.
Set standards and determined best practices.
White paper
Animated colonels with voice-overs
Local budgets supported local marketing campaigns.
Quarterly brand board meeting was attended by all marketing managers for
sharing best practices.
In units that were 100% franchised, marketing manager played a consulting role.
Human Resources
TRI adopted a restaurant-focused culture.
Tricon emphasized ownership and recognition to a greater extent than McDonals by encouraging its middle
management to own company stock.
Finance
Allocation of funds across myriad demands was the main focus.
Each country unit was evaluated every two years.
Some aspects of financing were standardized across countries, some varied by
country.
Dealing with currency fluctuations and determining country risk premia were the
biggest challenges.
Level of sophistication of financial intermediaries was improved.
Taxation issues were not standard across countries.
Capital was raised in US with domestic banks in different countries.
Some franchisees were listed on domestic stock exchange.
Franchising
TRI had opened franchise support centers in Dallas, London, and Singapore
which dealt with substantial international heterogeneity in franchising
arrangement.
The support that the franchisor provided could be different from US.
Asian franchisees had been more independent than the ones in US.
Product Development
Product development had been bundled into R&D and Quality Assurance
department which reflected that it had failed to come up with new products.
Tricon spent almost $20 million yearly on R&D.
The resources that Tricon did not spend on PD were earmarked for US.
Product Development outside the US was comparatively limited.
TRI made some attempts to tap into franchisees ideas about product
innovation.
TRI product development for KFC had been centralized in Asia.