Three Stories About China: Yum Brands, the Venture Capital Market in China and More, and Hollywood

Several years ago, Yum Brands, the company that owns KFC (Kentucky Fried Chicken), Taco Bell and Pizza Hut, was lauded as the company that had figured out how to succeed in China.  Indeed, a substantial portion of its profits were based on its sales in China—specifically KFC (4,200 restaurants in China) and to a lesser extent Pizza Hut (almost 800 restaurants in China).  When asked about the cause of its success, a representative from Yum Brands said “a first mover advantage.”  And, a big part of that first mover advantage was a very strong brand.  Unfortunately for Yum Brands and its investors, times have been very tough for Yum—a strain of bird flu plus regulatory challenges based on claims of “excessive antibiotics and hormones” have led to empty restaurants.  Consumer confidence is dropping and the value of the brand with it.  How should Yum Brands rehabilitate its brand in China?  Any suggestions?

Stanford business school professor Steve Blank recently visited China on a book tour concerning startups and has many, many interesting observations concerning venture capital and startups in China in his five blog posts titled “China -- The Sleeper Awakens.”  Blog posts three and four are very interesting; although I believe they are all worth reading.  Here are his lessons learned from his fourth post titled “Zhongguancun in Beijing – China’sSilicon Valley”:

• China has the biggest Venture Capital industry outside the U.S
• For software, the action is in Beijing
• China has closed its search, media and social network software market to foreign companies
• Beijing’s VC’s primarily invest in the Technology, Media and Telecommunications segment
• Liquidity is via IPO’s not buy outs

Finally, the New York Times recently reported on how Hollywood’s latest releases are not doing as well as expected in China.  The reason given is something between Hollywood’s blockbusters have no depth and are just bunch of explosions, and China’s moviegoers are more interested in domestic films.  Interestingly, several of the Hollywood movies discussed in the article concern films arguably with a “built in” fan base that loved an earlier work the movie is based upon.  I wonder if they will move to capturing the power of nostalgia by reworking more Chinese tales.  What do you think?