Politics plays a pivotal role in industries whether primary secondary or tertiary. Like economic factors, politics helps in shaping the business world; where it can have positive influence, it can also have a negative impact. However, the capacity in which politics might have an impact will differ significantly. The government scrutinizes any business activity taken by an organization. Hence, government interference is not just limited to the public sector; they also keep a close and strict eye on the private sector through taxation system and other laws pertaining to the trade (Thompson & Martin, 2010). Yum! Brands is a big brand catering to the food industry. It is imperative for Yum! Brands to be aware of the political situation where they operate. In order to be familiar with import and export government policies, they must be familiar with the trade system of the country they operate (Yum Brands Inc., 2014).
Since Yum Brands are global, it is vital that they consider the political situations in host countries in order to avoid any sudden losses and eventual closures. Moreover, Yum! Brands must be well versed with the taxation system especially GST percentage that is applied to the food industry; this would aid in setting prices that will reap them greater profit margins (Yum Brands Inc., 2014).
Economic factors are very important to consider, as these factors are indicative of the economic performance of a country. It is imperative to take in to consideration the fluctuations in inflation to avoid downfall. Moreover, interest rates and exchange rates must be assessed in order to mark the costs of import and exports; whereas firms cost of capital will be easily recorded if an organization is able to keep a track of interest rates. For instance, higher inflation rates may mean that there is lesser disposal income available for spending; hence the change in spending patterns may cause certain industries to start shrinking. In case of Yum Brands this is especially true as lesser availability of disposal income may signify lesser customers who would want to eat out.
Moreover, Yum! Brands should be familiar with the economic growth and interest rates, exchange rates, tariffs, and taxation charges, as Yum! Brands cater to a certain market this would help them to know whether their products are affordable to their audience. This would also bring to their notice the kind of profit margins they are earning from each country. The company is big enough to acquire loans from banks in order to operate or set up new branches; therefore it is important for them to be well aware of the interest rates. Moreover, usually companies and firms earn over the retained profits through banks; hence higher the rate of interest the better able they will be to earn on retained profits. It is important to point out here that higher interest rates benefit will depend on the Yum Brands usage of it (Yum Brands Inc., 2014).
The social factors that seem to impinge on food industry are the spending patterns of consumer, which fluctuate the demand and supply of a product. Due to global recession, unemployment has risen around the world, which has made consumer more cautious during spending disposal income if they have any. In Yum! Brands case it is essential to be familiar with customer spending patterns and tastes of the consumer. Every culture has a different taste when comes to food. Certain cultures prefer food that is spicy while others consume food that had subtle spices and lesser pungent tastes. Since the organization is catering to the global market it must consider the recipes of their food accordingly.
Technological factors are an integral part of large scale organizations. Technologies are developing frequently to bring innovation in the production, thus lowering the production-associated costs. The newer the technology, the more efficient organization becomes. Technological changes also assure quality control and maintain standard throughout each product. In today’s world development of different forms of technologies have allowed organizations to increase their market share on the bases of maintained quality.
Another area where different organizations have been able to integrate technology and business operations is the use of social media tools. The presence of company website on the internet, along with the web presence via Facebook and Twitter has been aiding Yum Brands to stay connected with their customers and build closer ties with the target market in an effective manner. Due to the benefit social media can offer to an organization, the management has invested efforts in this domain (Robinson, 2013).
Legal factors are as important as the rest of the factors in a pestle analysis. It is of value for Yum Brands to fulfill all the necessary legal obligations, while still making and maintain profit records. Legal formalities if ignored can cost a company their reputation. Yum Brands being part of the international market has built its reputation with the consumer through prioritizing legal obligations. This has built a good image in the minds of consumers. In the current era technologies have made world a global village where consumer is conversant and opts for a product, which accomplishes in fulfilling an exemplary role in the society and is conscious of their actions socially. Yum Brands need to identify more laws that govern the international market (Yum Brands Inc., 2014).
Pertaining to the topic mentioned above, consumer has become more knowledgeable due to the accessibility to news through internet. Organizations violating environmental safety measure in the international market will not only lose reputation with the consumer in one country only but will also face tough time in other host countries as well. Yum Brands must focus on how their products are created. Keeping in mind the war lately the world is fighting against discrimination they must consider that some cultures might not prefer certain types of meet or meet altogether. They need to have strict restaurant policies to discourage any kind of discrimination on bases of cast, color, and creed. Moreover, they have been producing an annual environmental report where they have mentioned their activities that were specifically to improve the environment (Yum Brands Inc., 2014).
Robinson, A. (2013, April 24). Yum! Brands wants to be best at social media, Novak says. Biz Journals. Retrieved from http://www.bizjournals.com/louisville/blog/socialmadness/2013/04/yum-brands-wants-to-be-best-at-social.html
Thompson, J. L., & Martin, F. (2010). Strategic management: Awareness & change. USA: South-Western Cengage Learning.
Yum! Brands Inc. (2014). Annual Report. Retrieved from http://www.yum.com/annualreport/