In order to evaluate the strategies paradox in current international business this document provides case study on pizza hut in which all strategies being analysed and challenges including the history of pizza hut.
That’s really hard for an entrepreneur and for a management team to run a business. They have to face lot difficulties and hardships which some times involves high risk to control the business. Particularly if the business has extended internationally. In the food industry pizza hut is very well know and famous company. As company is famous the food pizza is also have become essential part of our food and in this world almost every person have tasted pizza so the demand of the product is high now a days so many companies have come in the market which are making pizzas. But pizza hut take away and restaurants are oldest in this industry they are serving people for more than 50 years. Pizza hut is still continue to polish and flourish their business and making more and more chains in all over the world. (Feedburner 2009)
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Now have a look on suitable techniques which helps the strategic analysis of the business of pizza hut to study and deal with the new trends and problems in the organization. At the start of this assignment the concise history of pizza hut will be given. Various methods will be used for the strategic analysis of the pizza hut. To analyse, how external environment effects pizza hut company PEST analysis is used for that very purpose. Strategic group analysis is used to examine the mobility barriers. In order to examine the competitive advantage in organization Porters Five Forces Analysis is used. Competitor analysis is also used to know how strong their competitors what abilities they have this is essential to measure the threats and opportunities in the specific food industry. (Feedburner 2009)
HISTORY OF PIZZA HUT
Pizza hut was started on 15/06/1958 by tow brothers named Wichita and Kansas. Their main purpose was to open a pizza parlour that was quite new concept in 1950s but these tow brothers have sense the potential of this business. They started the business by borrowing 600$ from their mother and purchased used tools and equipments. They also rent a small shop to begin their business. So in that situation pizza hut established but in the 2nd year they open their 2nd store in Topeka then after ten years the pizza hut was owned 310 pizza shops at several points they were serving around millions of people. The year 1970 is very important in pizza hut organization because on that date pizza hut was listed in New York Stock Exchange and the symbol of pizza hut was PLZ. In 1986 pizza hut owned 5025 stores. All these branches was in United States and half of these stores was franchised. In the same year pizza hut started the idea of delivery service so in this year the total amount of sale of the company was 2 billion dollars. In 1990 the total amount of sales of company all over the world becomes 4 billion dollars. In 1996 the company has the largest shares of the market and that was 46.4% in the same year the sales of the company in home markets that was United States has become 5 million dollars. In 1998 they started their promotion “The Best Pizzas under one Roof ” they celebrate the 40th anniversary of pizza hut in 2007. (Reade, 2008)
Mission statement of pizza hut
“We take pride in making a perfect pizza and providing courteous and helpful service on time, all the time. Every customer says, “I’ll be back!” (Frank,Carney 1958)
Pizza hut has bit different approach regarding their restaurants like pizza hut restaurant look different from other restaurants because in all restaurants they have very prominent red roofs and specific design. In every restaurant they have facility to serve from 60 to 90 peoples to eat-in. For last some decades pizza hut is not dominate on this industry because lot of new restaurants have opened and the competition has become more challenging. So in order to remain prominent and successful in the pizza industry and to compete their rivals they have to be very careful regarding the new trends and approaches,
which have become popular in this industry to examine these new trends. They have to use appropriate methods, tools and techniques. (Candis 2008)
In business zone external environment is truly very important it plays leading role to affect a business. In 2005 pizza hut used PEST analysis to determine and identify the external factors that have great impact on business at that time. In fact PEST analysis was a supporting tool for pizza hut at that time to become prominent in the business region in all over the world. That’s the best tool which can be used to assess the external environmental factors which was affecting the pizza hut. That was really essential to recognise and understand these external factor to over come the business problems. PEST analysis proved very useful for this purpose. PEST analysis is the abbreviation of Political, Economic, Social, and Technological Factors. Pest analysis is that tool or framework which can classify the environmental pressures as a political, economic, social and technological forces. In the pest analysis some time we need to add tow more factors to make better analysis these factors are environment and legal issues. The pest analysis observes the force or impact of each factor how does they affect the business and how they interplay with each other as well. By observing these factors we got some results, which we use to make instant strategic business plans. So in that way pest analysis helps us to make strategic plans and improves business growth. (Byars 1991).
It means the rules and strategies of the government where pizza hut is situated either because of the local state affects how the business should be conduct or world wide factors involves. The environment created by political and officially authorise, for the business is supportive or not these things affects the business very much for example if the policies are supportive then pizza hut can open more and more restaurants in this kind of state where the government is business friendly but if the government is not business friendly then pizza hut can move to that area where government policies are favourable for the business. In the favourable business environment policies should be like that which protects the business. (Cooper 2000).
These factors are totally concerned with the general prospective of the economy. The over all economy of the state always has a large impact on the business like Pizza hut. The factors concerned with economy are inflation rate, unemployment, the gross domestic commodities and the foreign buy and sell deficit and surplus. If as a whole the economy of the state is not encouraging or favourable these there is very less chance that people will prepare to take pizza hut franchises because there is chance of losing money instead of profit. (Cooper 2000).
That’s really difficult to understand and enumerate the thoughts, believe and feelings of people so that’s why it is considered that this factor is most difficult to deal. In the analysis of social factors the life expectation of people and population is also very important we need to figure out these tow things as well to get the true result of analysis. These thoughts, attitude and believes have string impact on the pizza hut business. The big example of this is that in all Muslim countries, the pizza hut prepares a food without including pork because Muslims do not eat pork so all food recipes in Muslim countries are without pork. Similarly in India people do not eat beef because of their religious believes so in pizza hut they prepare food, which do not have beef. All recipes are without beef. In the same way changing trend in the taste of buyer is also very important, with the passage of time their taste is change so in order to be successful in the food industry that external analysis is really essential. Like nowadays Thai and Japanese food is really in people like these kind of food so pizza hut can start Thai soup to retain their customers similarly can add more Thai and Japanese dishes. In today life society is becoming more and more health conscious so people want healthy food and it varies to region to region as well in some countries people don not bother these kind to care so as a whole company should provide the product according to the customer needs. That will be helpful to increase and expand business. Companies each policy should be like encouraging for customer demand that will obviously have positive impact on pizza hut business. (Cooper 2000).
The technology is becoming more and more advance day by day that have huge impact on the business. The factors which affect the business are internet and ecommerce, and research and development, and new skill, equipments and tools. By the research and development companies are introducing new products in the market so in order to compete them pizza hut should be prepared and should have their R & D unit. Through internet and ecommerce people have easy access to the market and they can check several offers and promotion by sitting home only by clicking one button so business is become very challenging. People can give feedback for new products as well through internet. So all these new technologies are really affecting business. If pizza hut want to be successful in the market and be prominent then company must be update regarding new technologies and developments. If pizza hut is good enough in internet and ecommerce then company is serving customers very well so pizza hut can take feedback from customers regarding their new products which would be very helpful for R & D unit as well so all these new technologies are inter liked. Company can take completive advantage by analysing and introducing new technologies. (Cooper 2000).
STRATEGIC GROUP ANALYSIS
Strategic group analysis can be explained as it’s a systematic technique which gives us detailed overview of different approaches used by rivals in the market by analysing these approaches to suggest indicator for the performance of company. Strategic group analysis can be functional in five steps in the organization.(Bensoussan, Babette 2003)
ANALYSE INDUSTRY STRUCTURE
For the industry structure analysis of pizza hut market, Porter’s five forces industry analysis is appropriate and that may be used for this analysis.
THREATS OF NEW ENTRANTS
In Porte’s five forces one force is new entrance in the business in every industry. In every industry there is big trouble for companies to face new entrance similarly there is big threat for pizza hut as well for new entrance as food business is becoming more and more popular so there is good profit margin as well so many people like this industry and there are various new faces have been seen in the food market. These new companies use different approaches to attract the customers like they might offer cheap rates as compared to the well reputed brands for the same standard of product to break their customers and to increase their sales. If it will happen in food industry then there is possibility that pizza hut may lose their customers and they may move to wards new entrance so for the self-defence of pizza hut from new entrance, it is essential that company should be prepared and should make measures to oppose these kind of approach utilised by new companies in the food industry. By doing these planning’s they can be safe from new entrance. (Grundy 2006)
BARGAINING POWER OF SUPPLIERS
So 2nd force, in Porter’s five forces model is bargaining power of the supplier. We can explain it like that in every business the persons who are supplying raw material can control the prices of goods. Or it is the ability of the supplier to manage the cost of the raw materials and supply of raw material, which they are providing to the organizations. Like other companies pizza hut is also using raw material and there are bundle of suppliers who are supplying products. So pizza hut can have lots of options in order to reduce that power from supplied to company like they can use alternatives products that are lower price or they can purchase raw material in large volume so that the supplier can not change their prices. Or the third option is that if they are thinking that their supplier are not providing goods on appropriate price. they can change the supplier and can choose that supplier which is offering them cheaper prices so in that way they can control suppliers hold on the raw material and can provide good quality product in reasonable price to customer. (Wylie 2009)
THREATS OF SUBSTITUTION
The third force in the Porters five forces is threats of substitute products the explanation of that factor is that in the market some products can come which can perform patter and available on cheaper price than the actual product so by these products the demand of actual products decreases and ultimately the relevant business company will get trouble. But in the case of pizza hut there is very little chance to come substitution product but there is chance like nowadays lot of sandwiches have come in the market which have almost same place in the market as pizzas so these sandwiches even have pizza taste and flavours. So that substitution threat can be dangerous for pizza hut, company must plane to oppose this king of threats. (Wylie 2009)
BARGAINING POWER OF THE BUYERS
Forth force in Porters five forces is bargaining power of buyer, there are tow possibilities in this factor either the consumer power should be high or low. If the consumer bargaining power is low then its very easy for the industry to penetrate in the market infect, can be explained as the market environment is positive and it allows the company to enter and expand their business. But if the buyer bargaining power is high then its very difficult for a company to enter in the market so in the case of pizza hut the customer bargaining power is very low because every person like pizzas and there are very few players who are providing services to the people so its very easy for pizza hut to enter and penetrate in the market in any part of the world because this product is famous all over the world. (Wylie 2009)
DEGREE OF INTERNAL RIVALRY
The fifth factor in the Porters five forces model is degree of internal rivals. In the factor there is also tow possibilities one is the relevant company have strong competition and have high-level of rivals and the second possibility is that the relevant company have very less competition and low-level of rivals in the market. Pizza hut have very strong completion in the market and its rivals are in very strong position like Dominos pizza have very tough competition with pizza hut as pizza hut is international company its market is very wide so there is more competitors for pizza hut. So in order to dominant on the market pizza hut have to offer high quality product on cheaper price so that there rivals can not move pizza huts customers. Pizza hut should be active regarding advertising and promotions to hold on the food market other wise they will lose their customers. There process and promotions should be attractive for the customers so that they can retain their customers. There promotion should be favourable than dominos and other pizza companies with the high quality of product. (Wylie 2009)
MAP THE STRATEGIC GROUPS
In order to plane the strategic group, Pizza hut have to list the related and important contestant into the strategic group. After listing these competitors the senior management of the pizza hut should always see the following.
There are very small hurdles into the pizza parlours due to these low barriers in this industry, it is not essential that the workers should be highly experienced.
In the case of pizza hut the bargaining power of suppler is very low so that’s why threats are also low in the same way bargaining power of customer is very little so due to this less bargaining power of consumer there is less chance of threat. But pizza hut should always be alert to the changing environment of the business. (Feedburner 2009)
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THREAT OF SUBSTITUTION
As explained in mobility barriers and in bargaining power of buyer and supplier, the threats to the substitute product is also low but there is chance of substitute product like nowadays sandwiches have the same pizza flavours but its very weak threat for pizza hut because till now these sandwiches does not take the place of pizza but pizza hut should be updated with the new substitutions and should always be prepare to oppose them. (Feedburner 2009)
RIVALRY FROM OTHER STRATEGIC GROUPS
As mentioned in the Porters five forces analysis in the food industry there are very strong rivals and that’s really difficult to compete these rivals. In the case of pizza hut Dominoes is the main competitor company. So in order to compete Dominoes and other pizza companies, its essential that pizza hut should updated their menus and they provide good customer service and serve the customer in a good way like they should provide good quality product on cheap rate as compared to the rivals. If pizza hut will care about these techniques then it would be on the top in the market of food industry. (Feedburner 2009)
GAUGE THE STRENGTH OF BARRIERS BETWEEN GROUPS
In order to measure the potency of the hurdle and difficulties, pizza hut must follow the five steps. The first step is to settle on the factors which are caused to prevent organizations in the strategic group to fight with other companies in another group. Second step is that pizza hut must recognise the force of bargaining power among the suppliers and consumers and also be aware of the strength of strategic groups and industry. Third step is to recognise the threats of alternative products among the strategic group. Fourth step is to study the power or strength of the competitors among the strategic groups and the last step is to make use of Portals five forces analysis on the strategic groups. (Feedburner 2009)
UNDERSTAND THE STRATEGY OF THE FIRM VIS A VIS STRATEGIC GROUP’S INTERACTION
In order to understand the strategy of the pizza hut select the pizza hut as a member in the main strategic group. And analyse the strength and weaknesses of the pizza hut by using porters five forces analysis model of the strategic group. Decide the strategic group which can offer the best opportunity to use the power of the company and can reduce the weaknesses of pizza hut. (Byars 1991)
IDENTIFY THE APPROPRIATE STRATEGIC RESPONSES
In order to recognise the correct response in the development of the foodstuff industry. It is essential for pizza hut to analyse the threats and opportunities which occurs with the changes in the business. there could be tow type of strategic response which can be utilised in order to compete the challenges these two are named as intensely proactive and mildly proactive. So from the above analysis of pizza hut there are some positive scenario and some negative aspects have been seen in the Pizza hut company. First have a look on positive aspect of Pizza hut which is based on the deep analysis. According to analysis pizza hut will enter in the different food markets in all over the world and there business will grow and business will expand it may increase its market shares as well. There are very bright chances for pizza hut to penetrate in different markets as a result business growth will increase. Now have a look on negative aspects of pizza hut, in negative scenario there are possibilities of alternative products which can reduce the sale of pizza hut. There would be more competition in the food market for future and there is possibilities of new entrance in the food industry because there is very good potential and bright chances for business of new comers. Due to these new entries pizza hut business may affect so they have to be planned to compete these challenges then competition with rivals would be stronger in future so they have to make their policies good to fulfil the market requirements. They might need to expand their research and development units and they may need to invest more on new technologies in order to facilitates the customer By doing this they can may able to oppose the rivals otherwise there is chance that they may lose there customers. (Byars 1991)
Change is very important thing in business and in every business changes take place these changes bring various trends and flavours in the surroundings or in environment. In order to deal with changes in a better way managers and owners of business use different strategies. These strategies helps to make better decisions regarding these changes. Pizza hut is very huge food company and its well know almost in every country of the world there is one or two or more restaurants of pizza hut. For last 48 years pizza hut is serving peoples and considered one of the leading organizations in food industry. For last few years pizza hut is facing lots of challenges one of the big challenge was new entrance in this particular field. These new companies have become big threat for pizza hut as these organizations tried to change the taste of pizza hut customers. But pizza hut made very good strategies to compete these challenges and get dominant on these companies. (Feedburner 2009)
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Bensoussan, Babette (2003). Strategic and Competitive Analysis. Upper Sadlle River, NJ: Prentice Hall . 22-30.
Byars, L. (1991) Strategic Management, Formulation and Implementation – Concepts and Cases, New York: HarperCollins.
Cooper, L. (2000) Strategic marketing planning for radically new products, Journal of Marketing, Vol. 64 Issue 1, pp.1-15.
Tony Grundy. (26 Oct 2006). Rethinking and reinventing Michael Porter’s five forces model. . 15 , 5.
Candis Reade. (14/10/2008). History of Pizza Hut, 3.
Frank and Dan Carney. (1958). Mission statement. Available: http://www.pizzahuthawaii.com/about/mission.html. Last accessed 20th Nov 2010.
Feedburner. (September 30, 2009). International business of pizza hut.Available: http://ivythesis.typepad.com/term_paper_topics/2009/09/international-business-of-pizza-hut.html. Last accessed 20th Nov 2010.
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