International Business of Pizza Hut
Running a business is a difficult task for the management team, as well as, the owners. The managers and owners must face the challenges and the risks involved in managing a business, especially if it spans internationally. Pizza is one of the most popular foods in the world. Almost every people in this world, at some point in their lives, have tasted Pizza. Pizza marginalised marginalised the social status of the people, from class A to E individuals individuals eat Pizza. Therefore, the demand for the food is high and businesses catering to this market have emerged over the past years. One of the most popular Pizza parlours in the world today is the Pizza Hut. The company is one of the oldest chains of restaurants in the industry today, having been in the food industry for almost 50 years. Pizza Hut continues to flourish in the business, adding more chains in every part of this world. This paper describes the appropriate tools and techniques in the strategic analysis in order to examine the current trends and issues in the business environment of Pizza Hut. In addition, at the beginning of this paper a brief history pf Pizza Hut will be provided. In the strategic analysis of Pizza Hut different methods will be used. For the analysis of the impact of the external environment a PEST analysis will be used, in determining determining the mobility mobility barriers and the strategic space, strat6egic group analysis will be utilised. Moreover, for the determinatio determination n of the competitive competitive advantage advantage of Pizza Hut, Porters Five Forces Analysis will be used and competitor analysis will be used for the determination of the wherabilities of the competitors in order to assess the opportunities and threats in the industry.
Pizza Hut was established on June 15 1958 in Wichita, Kansas by two brothers Frank and Dan Carney. The brothers had the concept of opening opening a pi pizz zza a parlour which was relatively relatively new during the 1950s and the potential of this business was seen by the two. They borrowed around $600 from their mother to buy second-hand equipments and rent a small space to open the first Pizza Hut. The next year, the second store was
opened in Topeka, Kansas and for only just a decade Pizza Hut already has 310 pizza parlours in various locations serving approximately a million people. In the year 1970, Pizza Hut was listed in the New York Stock Exchange under the symbol PIZ. In 1986, Pizza Hut already had 5,025 branches in the United States alone with half of it franchised. During the same year, the company introduced the concept of deliver service; the total amount of the sales of the company in 1986 alone amounted to $2 billion dollars. In the years 1990, the total sales of Pizza Hut reached $4 billion dollars world wide. By the year 1996, the sales in the domestic market, which is the United States, have reached over $5 million dollars; the company had the largest share of the market in that year for 46.4%. In the year 1998, Pizza Hut launched their campaign, “The Best Pizzas under one Roof,” in celebration of the company’s 40 th anniversary. (Pizza Hut, 2007) The restaurant of Pizza Hut has a particular concept and design which is a prominent red roof. The services of all the restaurants range from eat-in and carry out with approximately 60 to 90 seating for people. Pizza Hut, no longer dominates the pizza industry, a number of restaurants have emerged, and thus the playing field for this particular industry have been more competitive in the past decades. In order to keep up with the competition and remain one of the top players in the industry Pizza Hut must examine the trends and issues using the proper techniques and methods. Impact Analysis The external environment plays an important role in the sector of business. According to the Chartered Management Institute (2005) the PEST Analysis is a method utilised in order to examine, identify and assess the external forces that have a huge impact in the performance of an organisation. In addition, the PEST Analysis is used to aid an organisation to obtain a better comprehension of the broader environment in the sector of business and can be used in carrying out the continuous process of environmental analysis. PEST stands for Political, Economic, Social, and Technological Factors.
Political Factors- the policies and actions of the government wherein Pizza hut is located, whether national of local affects how the business is being conducted. The political and legal conditions that could affect the business of Pizza Hut are the policies of the local and national government towards business, if the government is more open in the establishment of numerous Pizza Hut restaurants, then more restaurants will be established. On the other hands, if the policies do not protect the business then fewer restaurants will be established. Another factor is the regulation of the business and the environment. If the business environment is not friendly with the company, then there is a possibility that Pizza Hut will not open a restaurant and instead move to a more businessfriendly government. Economic Factors- this part is concerned on the overall perspective of the economy. The macro economy of a nation has a huge impact on the business such as Pizza Hut. Factors in the economy include the gross domestic product, the unemployment and inflation rates, the foreign trade deficit and surplus. If the overall economy of a country is not favourable, lesser people will franchise Pizza Hut because they will most likely loss a great amount of money instead obtaining profits. Social Factors- it is the most difficult from the four factors because the attitudes and beliefs of people are difficult to quantify. Aside from the attitudes and beliefs, demographic factors such as population and life expectancy are also important aspects in the analysis of the social factors. The influence of the values and beliefs affects the business of Pizza Hut, example in Muslim countries such as Egypt and Middle East; the recipes of the Pizza do not include pork. In the case of India beef is not served in the Pizza. The changing trends in the taste of the consumers also play an important role in the external analysis of the environment, if the current trend in food is Thai, Japanese or Vietnamese, therefore Pizza Hut can add an additional food such as Vietnamese or Thai soups. If the current trend in the society is being health conscious, thus consumers will demand that the foods be healthy.
Technological Factors- the fast changes in technology nowadays has farreaching effects in the businesses. The factors that have a huge impact are the research and development, internet and e-commerce, and new technologies. The research and development has effects on the business of Pizza Hut because through R&D new products are developed for the business, the internet and ecommerce also contributes to the technological factors because through them customers can give feedback regarding the products of Pizza Hut which can also aid in the research and development, and the service of the company. Strategic Group Analysis
According to Harrigan (1985) strategic group analysis is an analytical technique that gives insights in the various approaches utilised by the competitors in the marketplace and the resulting indirect indications for the performance of the organisation. According to Bensoussan (2003) there are five steps in which strategic group analysis can be applied and these are: Analyse industry structure- in the analysis of the structure of the industry wherein
Pizza Hut markets, Porter’s Five Forces Industry Analysis can be utilised. Threats of New Entrants- new entrants in the pizza industry could be a threat in
Pizza Hut because it can lessen the market share of the company. Usually new entrants offer cheaper products than the established; therefore more customers could be lured in buying their products which eventually would shift from Pizza Hut to these new entrants. The new entrants in this field usually offer cheaper prices of products; therefore Pizza Hut should create measures to counter the approaches used by the new entrants. Bargaining Power of Suppliers- the supplier power is the capability of the
supplier to control the cost and supply of the raw materials used in the market. Pizza Hut uses raw materials in creating their products; in order to shift the power from the supplier to the company Pizza Hut can alter it in a number of ways, such as replacing it with substitutes that are cheaper than the prices of the suppliers, Pizza Hut should order in bulk so that the prices will be cheaper, and if Pizza Hut thinks that the suppliers are over-charging then shift to another supplier.
Threats of Substitution- it exists when the demand for the product decreases
because there are substitute products that performs better at a cheaper price. Although the Pizza Industry has low threats of substitutes, still it poses threats such as instant pizzas, and sandwiches that have pizza flavours. Bargaining Power of the Buyers- the power of the buyer can either be low or
high. In low buyer powers the conditions of the market allows the companies or entrepreneurs to enter easily because of the wide markets. On the other hand, a high buyer power the entry to the industry could be hard. In the case of Pizza Hut, the buyers have low power because almost all the people love Pizzas and there arte only few players in the industry, therefore entering to new markets in different parts of the world is easy for Pizza Hut. Degree of Internal Rivalry- it is the final factor in the Five-Force theory, the
degree of rivalry can either be low-level or high-level. In the case of Pizza Hut the competition is in the high-level, although the market is wide, the degree of competition is tough, in order to gain the biggest market share, Pizza Hut must have aggressive advertisement and competitive pricing. Map the Strategic Groups- In mapping the strategic groups, Pizza Hut should list the
relevant competitors into strategic groups, and the senior managers should look at the following: Mobility Barriers- the barriers to entry in the pizza parlour industry is relatively
low, due to fewer barriers in the entry and the employees do not need to be highly experienced. Bargaining Power- the bargaining power of the suppliers and buyers in the
industry is low, therefore the threats to these two is low, however Pizza Hut must still be aware on the changes that may occur. Threat of Substitution- Just like, the mobility barriers and the bargaining power,
the threat of substitution is also low; therefore Pizza Hut must also be aware with the entry of the substitutes so that they could create measures to counter it.
Rivalry from other strategic groups- the rivalry is stiff in the case of the food
industry and in order to come out on top, Pizza Hut must develop attractive menus, as well as, prices so that the company could be one of the top players in the industry. Gauge the Strength of barriers between groups- gauging the strength of the barriers
has five steps in which Pizza Hut must follow; first is to determine the factors that prevent companies in a strategic group to compete with companies in another group. Second, Pizza Hut must identify the strength of bargaining power between the buyers and suppliers and the strategic groups and the industry. Third, identify the threats of substitutes between the strategic groups. Fourth, is to examine the strengths of the rivalry between the strategic groups. Last, is to utilise the Porter’s Five-Forces Analysis on strategic groups. Understand the strategy of the firm vis a vis strategic group’s interaction- Choose
the membership of Pizza Hut in the prime strategic group. Use the Porter’s five forces model of the strategic group in which Pizza Hut belongs and assess the weaknesses and strengths of the firm. Determine the strategic group that will provide the greatest opportunity to utilise the strength of the company and decrease the weakness of Pizza Hut. Identify the appropriate strategic responses- in identifying the right response to the
evolution of the food industry, Pizza Hut must analyse the strategic opportunities and threats that come with the changes in the industry. There are two types of strategic response that could be use in order to meet the challenges and these are mildly proactive and intensely proactive. Based on the analysis the positive scenarios that could be seen in Pizza Hut is it will penetrate more markets in various parts of the world and the company will gain more shares in the market. However, there are also negative scenarios in the future such as more competition from the new entrants in the market, substitutes would be created in the future, and suppliers may be fewer in the near future.
http://ivythesis.typepad.com/term_paper_topics/2008/08/internationa-28.html
