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 the social status of the people, from class A to E individuals eat Pizza. Therefore, the demand for the food is high and businesses catering to this market have emerged over the past years. ne of the most popular Pizza parlours in the world today is the Pizza !ut. The company is one of the oldest chains of restaurants in the industry today, having been in the food industry for almost "# years. Pizza !ut continues to flourish in the business, adding more chains in every part of this world. This paper describes the appropriate tools and techni$ues in the strategic analysis in order to e%amine the current trends and issues in the business environment of Pizza !ut. &n addition, at the beginning of this paper a brief history pf Pizza !ut will be provided. &n the strategic analysis of Pizza !ut different methods will be used. 'or the analysis of the impact of the e%ternal environment a PE(T analysis will be used, in determining the mobility barriers and the strategic space, strat)egic group analysis will be utilised. *oreover, for the determination of the competitive advantage of Pizza !ut, Porters 'ive 'orces 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 !ut was established on +une ," ,-". in /ichita, 0ansas by two brothers 'rank and 1an 2arney. The brothers had the concept of opening a pizza parlour which was relatively new during the ,-"#s and the potential of this business was seen by the two. They borrowed around 3)## from their mother to buy second4hand e$uipments and rent a small space to open the first Pizza !ut. The ne%t year, the second store was

opened in Topeka, 0ansas and for only 5ust a decade Pizza !ut already has 6,# pizza parlours in various locations serving appro%imately a million people. &n the year ,-7#, Pizza !ut was listed in the 8ew 9ork (tock E%change under the symbol P&:. &n ,-.), Pizza !ut already had ",#;" branches in the <nited (tates alone with half of it franchised. 1uring the same year, the company introduced the concept of deliver service= the total amount of the sales of the company in ,-.) alone amounted to 3; billion dollars. &n the years ,--#, the total sales of Pizza !ut reached 3> billion dollars world wide. ?y the year ,--), the sales in the domestic market, which is the <nited (tates, have reached over 3" million dollars= the company had the largest share of the market in that year for >).>@. &n the year ,--., Pizza !ut launched their campaign, AThe ?est Pizzas under one Roof,B in celebration of the companyCs >#th anniversary. DPizza !ut, ;##7E The restaurant of Pizza !ut has a particular concept and design which is a prominent red roof. The services of all the restaurants range from eat4in and carry out with appro%imately )# to -# seating for people. Pizza !ut, 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. &n order to keep up with the competition and remain one of the top players in the industry Pizza !ut must e%amine the trends and issues using the proper techni$ues and methods. Impact Analysis The external environment plays an important role in the sector of business. According to the Chartered Management Institute (200 ! the "#$T 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 "#$T Analysis is used to aid an organisation to obtain a better comprehension of the broader environment in the sector of business and can be used in carrying out the continuous process of environmental analysis. "#$T stands for "olitical% #conomic% $ocial% and Technological &actors.

"olitical &actors' the policies and actions of the government (herein "i))a hut is located% (hether national of local affects ho( the business is being conducted. The political and legal conditions that could affect the business of "i))a *ut are the policies of the local and national government to(ards business% if the government is more open in the establishment of numerous "i))a *ut restaurants% then more restaurants (ill be established. +n the other hands% if the policies do not protect the business then fe(er restaurants (ill be established. Another factor is the regulation of the business and the environment. If the business environment is not friendly (ith the company% then there is a possibility that "i))a *ut (ill not open a restaurant and instead move to a more business' friendly government. #conomic &actors' 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 "i))a *ut. &actors 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 (ill franchise "i))a *ut because they (ill most li,ely loss a great amount of money instead obtaining profits. $ocial &actors' it is the most difficult from the four factors because the attitudes and beliefs of people are difficult to -uantify. 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 "i))a *ut% example in Muslim countries such as #gypt and Middle #ast. the recipes of the "i))a do not include por,. In the case of India beef is not served in the "i))a. 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% /apanese or 0ietnamese% therefore "i))a *ut can add an additional food such as 0ietnamese or Thai soups. If the current trend in the society is being health conscious% thus consumers (ill demand that the foods be healthy.

Technological &actors' the fast changes in technology no(adays has far' reaching effects in the businesses. The factors that have a huge impact are the research and development% internet and e'commerce% and ne( technologies. The research and development has effects on the business of "i))a *ut because through 123 ne( products are developed for the business% the internet and e' commerce also contributes to the technological factors because through them customers can give feedbac, regarding the products of "i))a *ut (hich can also aid in the research and development% and the service of the company. $trategic 4roup Analysis According to !arrigan D,-."E strategic group analysis is an analytical techni$ue 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 ?ensoussan D;##6E there are five steps in which strategic group analysis can be applied and these areF Analyse industry structure' in the analysis of the structure of the industry wherein Pizza !ut markets, PorterCs 'ive 'orces &ndustry Analysis can be utilised. Threats of 5e( #ntrants' new entrants in the pizza industry could be a threat in Pizza !ut because it can lessen the market share of the company. <sually new entrants offer cheaper products than the established= therefore more customers could be lured in buying their products which eventually would shift from Pizza !ut to these new entrants. The new entrants in this field usually offer cheaper prices of products= therefore Pizza !ut should create measures to counter the approaches used by the new entrants. 6argaining "o(er of $uppliers' the supplier power is the capability of the supplier to control the cost and supply of the raw materials used in the market. Pizza !ut uses raw materials in creating their products= in order to shift the power from the supplier to the company Pizza !ut can alter it in a number of ways, such as replacing it with substitutes that are cheaper than the prices of the suppliers, Pizza !ut should order in bulk so that the prices will be cheaper, and if Pizza !ut thinks that the suppliers are over4charging then shift to another supplier.

Threats of $ubstitution' it e%ists when the demand for the product decreases because there are substitute products that performs better at a cheaper price. Although the Pizza &ndustry has low threats of substitutes, still it poses threats such as instant pizzas, and sandwiches that have pizza flavours. 6argaining "o(er of the 6uyers' the power of the buyer can either be low or high. &n low buyer powers the conditions of the market allows the companies or entrepreneurs to enter easily because of the wide markets. n the other hand, a high buyer power the entry to the industry could be hard. &n the case of Pizza !ut, 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 !ut. 3egree of Internal 1ivalry' it is the final factor in the 'ive4'orce theory, the degree of rivalry can either be low4level or high4level. &n the case of Pizza !ut the competition is in the high4level, although the market is wide, the degree of competition is tough, in order to gain the biggest market share, Pizza !ut must have aggressive advertisement and competitive pricing. Map the $trategic 4roups' &n mapping the strategic groups, Pizza !ut should list the relevant competitors into strategic groups, and the senior managers should look at the followingF Mobility 6arriers' 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 e%perienced. 6argaining "o(er' the bargaining power of the suppliers and buyers in the industry is low, therefore the threats to these two is low, however Pizza !ut must still be aware on the changes that may occur. Threat of $ubstitution' +ust like, the mobility barriers and the bargaining power, the threat of substitution is also low= therefore Pizza !ut must also be aware with the entry of the substitutes so that they could create measures to counter it.

1ivalry from other strategic groups' the rivalry is stiff in the case of the food industry and in order to come out on top, Pizza !ut must develop attractive menus, as well as, prices so that the company could be one of the top players in the industry. 4auge the $trength of barriers bet(een groups' gauging the strength of the barriers has five steps in which Pizza !ut must follow= first is to determine the factors that prevent companies in a strategic group to compete with companies in another group. (econd, Pizza !ut 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. 'ourth, is to e%amine the strengths of the rivalry between the strategic groups. Gast, is to utilise the PorterCs 'ive4'orces Analysis on strategic groups. 7nderstand the strategy of the firm vis a vis strategic group8s interaction' 2hoose the membership of Pizza !ut in the prime strategic group. <se the PorterCs five forces model of the strategic group in which Pizza !ut belongs and assess the weaknesses and strengths of the firm. 1etermine the strategic group that will provide the greatest opportunity to utilise the strength of the company and decrease the weakness of Pizza !ut. Identify the appropriate strategic responses' in identifying the right response to the evolution of the food industry, Pizza !ut 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. ?ased on the analysis the positive scenarios that could be seen in Pizza !ut is it will penetrate more markets in various parts of the world and the company will gain more shares in the market. !owever, 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.

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