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Binus Business School,
MM Executive Batch 20
Presented by Group I
Alexander Christian (1342980602)
Dina Sandri Fani (13429...
8/5/2015PapaJohn'sCaseAnalysis
2
Table of Contents
Papa John’s Case
01 Case synopsis
02 Problem(s) identification
03 Relat...
8/5/2015PapaJohn'sCaseAnalysis
3
Table of Contents
Papa John’s Case
01 Case synopsis
02 Problem(s) identification
03 Relat...
1985
Case Synopsis
Papa John’s history
8/5/2015PapaJohn'sCaseAnalysis
4
Year John Schnatter opened the first
Papa John’s. ...
Case Synopsis
Papa John’s company snapshot
8/5/2015PapaJohn'sCaseAnalysis
5
Company Snapshot
Stores (2010 data)  612 comp...
Case Synopsis
U.S Pizza Industry: Papa John’s competes among the famous pizza chains and ranked
3th in 2010
8/5/2015PapaJo...
Case Synopsis
Papa John’s business structure (1)
8/5/2015PapaJohn'sCaseAnalysis
7
Element Facts Year
Technology The first ...
Case Synopsis
Papa John’s business structure (2)
8/5/2015PapaJohn'sCaseAnalysis
8
Element Facts Year
Operational
Support
S...
Case Synopsis
Papa John’s combines internal and external resources to compete on quality product
8/5/2015PapaJohn'sCaseAna...
8/5/2015PapaJohn'sCaseAnalysis
10
Table of Contents
Papa John’s Case
01 Case synopsis
02 Problem(s) identification
03 Rela...
$900
$925
$969
$1,001
$1,064
2003 2004 2005 2006 2007
Problem(s) Identification
Papa John’s had enjoyed only incremental g...
Problem(s) Identification
Papa John’s had enjoyed only incremental growth in the new century (2)
8/5/2015PapaJohn'sCaseAna...
Problem(s) Identification
Papa John’s had enjoyed only incremental growth in the new century (3)
8/5/2015PapaJohn'sCaseAna...
CAGR
CSRP Total Returns Index Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 5-year 4-year
Papa John's International, Inc. 100 ...
Problem(s) Identification
Papa John’s Key Performance Issues
8/5/2015PapaJohn'sCaseAnalysis
15
Business Growth Operations ...
8/5/2015PapaJohn'sCaseAnalysis
16
Table of Contents
Papa John’s Case
01 Case synopsis
02 Problem(s) identification
03 Rela...
Related theory
Product Differentiation
8/5/2015PapaJohn'sCaseAnalysis
17
Mission
Objectives
Internal Analysis External Ana...
Related theory
Bases for Product Differentiation
8/5/2015PapaJohn'sCaseAnalysis
18
The notion of a base of differentiation...
Related theory
The implementation of V-R-I-Oto Product Differentiation
8/5/2015PapaJohn'sCaseAnalysis
19
Valuable
Threat o...
8/5/2015PapaJohn'sCaseAnalysis
20
Table of Contents
Papa John’s Case
01 Case synopsis
02 Problem(s) identification
03 Rela...
CaseAnalysis
Papa John’s Business Model Canvas (1)
8/5/2015PapaJohn'sCaseAnalysis
21
Customer Segments
Pizza lovers who pr...
CaseAnalysis
Papa John’s Business Model Canvas (2)
8/5/2015PapaJohn'sCaseAnalysis
22
Key Resources
Education & Training
Pr...
CaseAnalysis
Papa John’s Business Model Canvas (3)
8/5/2015PapaJohn'sCaseAnalysis
23
Channels
Papa John Outlet
(Domestic &...
Papa John’s ExternalAnalysis
Porter Five Forces: determine the threats (1)
Rivalry
Potential
Entrants
Customers
Substitute...
Papa John’s ExternalAnalysis
Porter Five Forces: determine the threats (2)
Low
Though the restaurant industry
requires rel...
Papa John’s ExternalAnalysis
Porter Five Forces: determine the threats (3)
High
Customers can easily choose
the pizza they...
Papa John’s ExternalAnalysis
Porter Five Forces: determine the threats (4)
High
In restaurant industry, there
are so many ...
Papa John’s ExternalAnalysis
Porter Five Forces: determine the threats (5)
Medium
To reduce the cheese price
volatility, P...
Papa John’s ExternalAnalysis
Determine the industry
6/19/2015CaseAnalysis-Walmart,Inc
29
Type of
industry
• Mature
Charact...
Papa John’s InternalAnalysis
Papa John’s Value Chain
8/5/2015PapaJohn'sCaseAnalysis
30
Value Chain Activity Value for Cust...
Papa John’s InternalAnalysis
VRIOAnalysis
8/5/2015PapaJohn'sCaseAnalysis
31
Value
High quality pizza with fresh
ingredient...
Papa John’s InternalAnalysis
Do Papa John’s products own an edge compared to its competitors?
8/5/2015PapaJohn'sCaseAnalys...
Papa John’s Business Level Strategy
Applies differentiationstrategy
8/5/2015PapaJohn'sCaseAnalysis
33
What is it?
Action u...
Papa John’s Business Level Strategy
Application of differentiationstrategy
8/5/2015PapaJohn'sCaseAnalysis
34
Papa John’s Business Level Strategy
Application of differentiationstrategy
8/5/2015PapaJohn'sCaseAnalysis
35
Papa John’s Business Level Strategy
Application of differentiationstrategy
8/5/2015PapaJohn'sCaseAnalysis
36
Conclusions
Perceived not to have a sustained competitive advantages due to several factors
8/5/2015PapaJohn'sCaseAnalysis...
Conclusions
Key consideration points
8/5/2015PapaJohn'sCaseAnalysis
38
• Papa John’s weaknesses in the industry are: the
b...
8/5/2015PapaJohn'sCaseAnalysis
39
Table of Contents
Papa John’s Case
01 Case synopsis
02 Problem(s) identification
03 Rela...
Recommendations
Let’s revisit Schnatter goals
8/5/2015PapaJohn'sCaseAnalysis
40
Opening 200-300
stores per year
4,000 stor...
Recommendations
How the firm plan to bring about?
8/5/2015PapaJohn'sCaseAnalysis
41
Internation
al
Expansion
• Partner wit...
Recommendations
Critics to Company’s Goals
8/5/2015PapaJohn'sCaseAnalysis
42
Goals Critics Advise
International
Expansion
...
Recommendations
Business-level strategy recommendation
8/5/2015PapaJohn'sCaseAnalysis
43
Strategy Implementation Example
N...
8/5/2015PapaJohn'sCaseAnalysis
44
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Case analysis papa john's pizza group 1_final draft

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Strategy and Execution - Product Differentiation

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Case analysis papa john's pizza group 1_final draft

  1. 1. Binus Business School, MM Executive Batch 20 Presented by Group I Alexander Christian (1342980602) Dina Sandri Fani (1342981574) Muhammad Irsan (1340001263) Puntin Kulmongkon (1342980514)
  2. 2. 8/5/2015PapaJohn'sCaseAnalysis 2 Table of Contents Papa John’s Case 01 Case synopsis 02 Problem(s) identification 03 Related theories/ frameworks/models 04 Case analysis & solutions 05 Recommendation
  3. 3. 8/5/2015PapaJohn'sCaseAnalysis 3 Table of Contents Papa John’s Case 01 Case synopsis 02 Problem(s) identification 03 Related theories/ frameworks/models 04 Case analysis & solutions 05 Recommendation
  4. 4. 1985 Case Synopsis Papa John’s history 8/5/2015PapaJohn'sCaseAnalysis 4 Year John Schnatter opened the first Papa John’s. Generate US$ 500,000,- revenue & open 8 stores 1986 Year Sold its first franchise 1993 Year Initial Public Offering on June 8, 1993 1998 Year Internal expansion began with opening units in Mexico & Puerto Rico. Acquired “Perfect Pizza” in UK 1 year later 1992 Year Revenue closed to US$ 50 million 1998-2001 Year Continuous growth unabated 2001 Year Introduce online order pizza – The 1st in pizza industry. 2006 Year Begun introducing dessert pizza – Papa Sweetreats. Followed by Choco Pastry Delight 2 years later 2001-2007 Year Online sales grow exponentially by 50% a year. Reached US$ 400 million in 2007
  5. 5. Case Synopsis Papa John’s company snapshot 8/5/2015PapaJohn'sCaseAnalysis 5 Company Snapshot Stores (2010 data)  612 company-owned  2,280 domestic franchise  754 int’l franchise % franchised 83% Public/private Public Headquarter Louisville CEO Nigel Travis with John Schatter remaining chairman Employees 16,336 International Yes Internet Ordering Yes 2007 sales US$ 504 million
  6. 6. Case Synopsis U.S Pizza Industry: Papa John’s competes among the famous pizza chains and ranked 3th in 2010 8/5/2015PapaJohn'sCaseAnalysis 6
  7. 7. Case Synopsis Papa John’s business structure (1) 8/5/2015PapaJohn'sCaseAnalysis 7 Element Facts Year Technology The first pizza company with online ordering & text messages ordering 2001 & 2007 Menu • Pan Pizza • Added desserts to their carryout & delivery menu and chocolate pastry delight 2006 & 2008 Company growth • High-quality pizza with side items. Proprietary blend of pizza (Menu) • Lower operating cost & efficient QC center (Efficient Operating System) • Training programs for corporate members & franchisee, performance- based financial incentives (Commitment to Team Member Training and Development) • National advertising campaign, restaurant level-marketing, direct-mail, store-to-door couponing, community oriented activities, cross marketing activities with third party companies, sponsorship (Marketing) • Attract franchisee with experience in retail business and financial resources to open multiple location. Assistance in restaurant operations 2007 Cost Management • Net property & equipment value $2 million & property lease $22.4 million. Leasing building space provide the flexibility to move locations quickly • Leased the trailers used to distribute ingredients • Cheese contribbute appx 35-40% of food costs • Partnered with a third-party entity formed by franchisee, BIBO Commodities, Inc. To reduce cheese price volatility 2007
  8. 8. Case Synopsis Papa John’s business structure (2) 8/5/2015PapaJohn'sCaseAnalysis 8 Element Facts Year Operational Support System • Created Operation Support Service and Training (OSST) for training & development of team members • Printing company for high-quality service 2007 & mid-90s Community Affairs • Sport team sponsorships • College scholarships ($5 million) • National FFA, Cerebbral Palsy K.I.D.S Center, Children Miracle Network Marketing Partnerships • Coca-Cola (sole supplier in Papa John’s store) • Endorsement • Blockbuster Video (30-day trial of free Blockbuster Video online) Up to 2011, Industry • Pizza industry is a mature and saturated industry • Highly competitive, cost of entry was relatively low and produc differentiation was difficult
  9. 9. Case Synopsis Papa John’s combines internal and external resources to compete on quality product 8/5/2015PapaJohn'sCaseAnalysis 9 “By using a combination of internal and external resources, Papa John’s was determined to not compete with its competition on price. Focusing on quality product, active participation in the local communities, and product branding enabled Papa John’s to hold its own with the other pizza chains” – excerpt from the case study +  Product quality  Active participation in the local communities  Strong product branding
  10. 10. 8/5/2015PapaJohn'sCaseAnalysis 10 Table of Contents Papa John’s Case 01 Case synopsis 02 Problem(s) identification 03 Related theories/ frameworks/models 04 Case analysis & solutions 05 Recommendation
  11. 11. $900 $925 $969 $1,001 $1,064 2003 2004 2005 2006 2007 Problem(s) Identification Papa John’s had enjoyed only incremental growth in the new century (1) 8/5/2015PapaJohn'sCaseAnalysis 11 98.4% 98.3% 98.1% 97.7% 97.1% 1.6% 1.7% 1.9% 2.3% 2.9% 2003 2004 2005 2006 2007 Total Domestic Revenues Total International Revenues Total Revenues (in million USD) CAGR: 4.3% Revenues Distribution  Domestic growth decreased dramatically to 1% contraction in 2003  Picked up again in 2004 and reached a steady process for domestic growth  International Revenue contributed the most of the average growth (21.3%) than Domestic Revenue (3.9%) due to large and promising scale of international opportunities
  12. 12. Problem(s) Identification Papa John’s had enjoyed only incremental growth in the new century (2) 8/5/2015PapaJohn'sCaseAnalysis 12 $34 $23 $46 $63 $33 3.7% 2.5% 4.8% 6.3% 3.1% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% $- $10 $20 $30 $40 $50 $60 $70 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Net Income Net income ratio Net Income & Net Income Ratio In mio USD $55 $37 $73 $98 $52 J A N-03 J A N-04 J A N-05 J A N-06 J A N-07 Operating Income (in million USD) CAGR: -1.2% CAGR: -0.5% • Operating Income and Net income had been declining for the last 4 years on average by -1.5% and -4.0%
  13. 13. Problem(s) Identification Papa John’s had enjoyed only incremental growth in the new century (3) 8/5/2015PapaJohn'sCaseAnalysis 13 Stock performance: • The performance of overall F&B business has been very poor compared to the overall growth in stock indices • Despite a better performance compared to its peer in the industry (CAGR 10%)but Papa John’s stock also under-performing compared to the overall stock indices • Meaning, Papa John’s investor would create more wealth investing in other company than pouring their money in Papa John’s $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 CAGR CRSP Total Returns Index Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 5-year 4-year Papa John's International, Inc. 100.0 116.7 120.7 213.1 206.3 161.0 10.0% 8.4% Nasdaq Stock Market (US Companies) 100.0 146.0 160.0 167.8 180.8 197.6 14.6% 7.9% Nasdaq Stocks (SIC 5800-5899 US Companies) - Eating and drinking places 100.0 137.8 202.4 209.4 225.5 150.3 8.5% 2.2% Papa John’s
  14. 14. CAGR CSRP Total Returns Index Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 5-year 4-year Papa John's International, Inc. 100 96.76 75.55 58.74 81.52 92.26 -1.6% -0.9% Nasdaq Stock Market (US Companies) 100 107.67 117.74 68.53 82.7 97.88 -0.4% -1.9% Nasdaq Stocks (SIC 5800-5899 US Companies) - Eating and drinking places 100 118.19 123.76 103.71 122.55 161.71 10.1% 6.5% $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 $180.0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Problem(s) Identification Papa John’s had enjoyed only incremental growth in the new century (4) 8/5/2015PapaJohn'sCaseAnalysis 14 Stock performance:  Papa John’s stock even performed terribly after 2007  Loosing its value from 2005 by 8% while the restaurant industry has grown 60% against 2005 Papa John’s
  15. 15. Problem(s) Identification Papa John’s Key Performance Issues 8/5/2015PapaJohn'sCaseAnalysis 15 Business Growth Operations Pizza Industry 01 Enjoyed only incremental growth in the new century (2000- present) 02 International operation suffered loss for several years (AR 2010) 03 2010 stock performance (vs. 2005 & 2007) showed that the company might destroy shareholders wealth 01 Experience declining operating income 02 Operating expense has grown faster than the revenue despite the growth in revenue 03 Schnatter wanted to see Papa John’s return to the days when it opened 200 to 300 stores a year 01 Restaurant analysts believed that pizza industry is a mature and saturated industry 02 Labor cost & food commodities cost were rising in restaurant industry Food commodities rises exceed 20% from June 2007 to June 2008. Utility cost & delivery fuel cost experienced dramatic increased in 2007 & 2008
  16. 16. 8/5/2015PapaJohn'sCaseAnalysis 16 Table of Contents Papa John’s Case 01 Case synopsis 02 Problem(s) identification 03 Related theories/ frameworks/models 04 Case analysis & solutions 05 Recommendation
  17. 17. Related theory Product Differentiation 8/5/2015PapaJohn'sCaseAnalysis 17 Mission Objectives Internal Analysis External Analysis Strategic Choice Business Level Strategy Corporate Level Strategy Cost leadership Product differentiation 01 It is a business level strategy “What is Product Differentiation?” 02 To create & exploit differences between their products & those offered by competitors 03 May lead to competitive advantage if: • customers perceive the difference • have a preference for the difference 04 Such differences will lead to competitive advantage only if the differences meet the VRIO criteria
  18. 18. Related theory Bases for Product Differentiation 8/5/2015PapaJohn'sCaseAnalysis 18 The notion of a base of differentiation is important because it allows a firm to focus its efforts on creating and exploiting a particular difference between its products and competitors’ products. Managers need to understand their own bases of differentiation and the bases of differentiation of competitors so that they can make informed strategic choices Bases for Product Differentiation Product Attributes Firm- Customer Relationship Firm Linkages Product or Services Attributes Firm-Customer Relationship Firm Linkages Preferences are created by actual differences in the tangible product or service offered by the focal firm vis-à- vis competitors’ offerings • product features • product complexity • timing of product introduction • location Local firm develops & exploits relationships with customers based on what the focal firm’s target customers want • Product customization • Consumer marketing • Product reputation Local firm combines the competencies of different functions within or across organizations to produce tangible and/or intangible differences between the focal firm’s offerings and those of competitors • linkages among functions within the focal firm • linkages with other firms • product mix • distribution channels • service and support
  19. 19. Related theory The implementation of V-R-I-Oto Product Differentiation 8/5/2015PapaJohn'sCaseAnalysis 19 Valuable Threat of Entry Threat of Rivalry Threat of Substitutes Threat of Suppliers Threat of Buyers Rare If the company has established a differentiated product, which implies that the product is rare Imitability Easy to duplicate. Such as product feature Maybe costly to duplicate. Such as product mix, links with other firm, product customization, product complexity, consumer marketing Costly to duplicate. Such as links between functions, timing, location, reputation, distribution channels, service and support Organizing Organizational structure, management control systems, and compensation policies can all be managed to encourage customers to have a preference for the focal firm’s products and/or services Product differentiation can neutralize the threats of the forces mentioned in the Five Forces Model If a product differentiation strategy is costly to imitate, the firm can reasonably expect to enjoy a competitive advantage.
  20. 20. 8/5/2015PapaJohn'sCaseAnalysis 20 Table of Contents Papa John’s Case 01 Case synopsis 02 Problem(s) identification 03 Related theories/ frameworks/models 04 Case analysis & solutions 05 Recommendation
  21. 21. CaseAnalysis Papa John’s Business Model Canvas (1) 8/5/2015PapaJohn'sCaseAnalysis 21 Customer Segments Pizza lovers who prioritize on quality & superior pizza. Take away pizza customer who love high quality pizza Customer Relationships Community based promotion Direct mailing Store to door coupons Online promotion Value Proposition Better ingredients better pizza Giving back to community Consistent product Legendary customer service
  22. 22. CaseAnalysis Papa John’s Business Model Canvas (2) 8/5/2015PapaJohn'sCaseAnalysis 22 Key Resources Education & Training Proprietary dough Advance machinery Skilled employee Key Activities Selling pizza & beverages Quality control centers to control superior quality Continuous improvement by maximizing the use of cutting edge technology Support & training franchisee Key Partners Franchisee Ingredient suppliers Transportation vendors College (scholarship)
  23. 23. CaseAnalysis Papa John’s Business Model Canvas (3) 8/5/2015PapaJohn'sCaseAnalysis 23 Channels Papa John Outlet (Domestic & International) Commissary Delivery services Online order Marketing Partnership Cost structure Headcount cost Ingredients – cheese become main cost Advertisement Technology (latest machinery) Revenue Streams Selling pizza Selling beverages Franchising Quality control centers (Commissary)
  24. 24. Papa John’s ExternalAnalysis Porter Five Forces: determine the threats (1) Rivalry Potential Entrants Customers Substitutes Suppliers High There is large number of competing firms that are roughly the same size The restaurant, pizza industry has already mature and saturated, leads to slow industry growth Pizza Hut Domino’s Pizza Little Caesar’s 6/19/2015CaseAnalysis-Walmart,Inc 24
  25. 25. Papa John’s ExternalAnalysis Porter Five Forces: determine the threats (2) Low Though the restaurant industry requires relatively low capital requirements, there were relatively high fixed costs. Barriers to entry: 1. Though product differentiation is difficult, Papa John possess brand identification; its ongoing passion to offer the perfect pizza. 2. There is cost advantages possessed by Papa John; favorable access to raw materials. Papa John partnered with BIBP Commodities, Inc. to reduce cheese price volatility. Rivalry Potential Entrants Customers Substitutes Suppliers 6/19/2015CaseAnalysis-Walmart,Inc 25
  26. 26. Papa John’s ExternalAnalysis Porter Five Forces: determine the threats (3) High Customers can easily choose the pizza they want to buy as there are a large number of competing firms that are roughly the same size. Lot of substitutes Thus, switching cost is low Rivalry Potential Entrants Customers Substitutes Suppliers 6/19/2015CaseAnalysis-Walmart,Inc 26
  27. 27. Papa John’s ExternalAnalysis Porter Five Forces: determine the threats (4) High In restaurant industry, there are so many variants of product that can be substitutes for pizza. Rivalry Potential Entrants Customers Substitutes Suppliers 6/19/2015CaseAnalysis-Walmart,Inc 27
  28. 28. Papa John’s ExternalAnalysis Porter Five Forces: determine the threats (5) Medium To reduce the cheese price volatility, Papa John’s partnered with a third-party entity formed by franchisees thus it allowed Papa John’s to purchase cheese from BIBP at a fixed quarterly price Profits and losses from BIBP were then passed on to Papa John’s Forward pricing to stabilize food cost Rivalry Potential Entrants Customers Substitutes Suppliers 6/19/2015CaseAnalysis-Walmart,Inc 28
  29. 29. Papa John’s ExternalAnalysis Determine the industry 6/19/2015CaseAnalysis-Walmart,Inc 29 Type of industry • Mature Characteristic • Earnings and sales grow slower in mature industries than in growth and emerging industries • earnings may be stable, growth prospects are few and far between What can the company do? • The company can differentiate established products by “refining” the product - new and improved • Or differentiate by offering new levels of service to accompany the product
  30. 30. Papa John’s InternalAnalysis Papa John’s Value Chain 8/5/2015PapaJohn'sCaseAnalysis 30 Value Chain Activity Value for Customer Primary Inbound logistic • Online sales account for USD 400 million (2007). Papa John’s revenue in 2007 was USD 1.063 billion Operations Store located in prime areas supported by commissaries as its suppliers Outbound logistic Use delivery van Marketing & sales • National advertising campaign through television, print media, internet, store-to-door coupon, direct mail and in-store marketing • Local communities sponsorship • CSR program in the form of scholarship • Pan Pizza proprietary & dessert Service • Customer service available online and via telephone Secondary Procurement • BIBP Commodities procure the cheese for Papa Johns’s • 10 regional Commissaries supplies Papa John’s store nation wide Technology development • Papa John’s use IT and text messages for customer order • Also use IT & mobile technologies for promotional services Human resources management Papa John’s operates Operation Support Service and Training (OSST) for its human capital development General adminsitration
  31. 31. Papa John’s InternalAnalysis VRIOAnalysis 8/5/2015PapaJohn'sCaseAnalysis 31 Value High quality pizza with fresh ingredients (proven with Pizza Hut lawsuit) Rarity The high quality resources are not rare and can be found easily since flour, dough, cheese, and other spices and ingredients are common even in the supermarket. Commissary system is common among restaurant industry because it is part of food service system. Imitability Lots of Papa John competitor tried to copy however they ended up doing price war instead of quality war with Papa John. Organization Organizational structure available to support owned & franchised stores both domestic & international “Temporary Competitive Advantage”
  32. 32. Papa John’s InternalAnalysis Do Papa John’s products own an edge compared to its competitors? 8/5/2015PapaJohn'sCaseAnalysis 32 Products Is it Valuable? Is it Rare? Costly to Imitate? Organizing Conclusion Pizza Yes Yes No Yes Despite its rarity, Papa John’s pizza is not costly to imitate Sides Yes No No Yes Papa John’s side dishes can be found anywhere else Drinks Yes No No Yes No differentiation at all Desserts Yes Yes No Yes The dessert is quite rare but not costly to imitate and the variation is not enough Extras No Yes No Yes Rare but not too valuable as they’re considered to be “extras” & cannot produce too much value Despite its Pizza uniqueness, Papa John’s products are not unique enough to be considered sustainable
  33. 33. Papa John’s Business Level Strategy Applies differentiationstrategy 8/5/2015PapaJohn'sCaseAnalysis 33 What is it? Action used by the firm to gain a competitive advantage by exploiting core competencies in specific product markets • Papa John’s applies differentiation strategy as its business-level-strategy • They reject the idea of competing in price • Their focus is on customer experience with Pizza made out of better ingredients & prepared better thus the marketing slogan came about (Better Inggredients, Better Pizza)
  34. 34. Papa John’s Business Level Strategy Application of differentiationstrategy 8/5/2015PapaJohn'sCaseAnalysis 34
  35. 35. Papa John’s Business Level Strategy Application of differentiationstrategy 8/5/2015PapaJohn'sCaseAnalysis 35
  36. 36. Papa John’s Business Level Strategy Application of differentiationstrategy 8/5/2015PapaJohn'sCaseAnalysis 36
  37. 37. Conclusions Perceived not to have a sustained competitive advantages due to several factors 8/5/2015PapaJohn'sCaseAnalysis 37 • Papa John’s Key valuable activities are not considered to be distinctive or special thus the company does not have a sustainable competitive advantage • Despite the uniqueness of the products itself (better ingredients, better pizza), the startegy seems to be not to costly to duplicate • The firm implement its strategy by doing 2 major activities: • Focus on product quality (Better Ingredients, Better Pizza) • Marketing Campaign through advertising, publicity, etc • Expanding through franchise and expanding internationally • Its international strategy seems not to work out very well. The number showed that the international business experienced loss for several consecutive years Conclusion on the Analysis
  38. 38. Conclusions Key consideration points 8/5/2015PapaJohn'sCaseAnalysis 38 • Papa John’s weaknesses in the industry are: the business does not have a difficult barrier to enter. Anyone can open a pizza joint and being a food industry meaning that customers have a lot of choice of substitutes in the market • The industry itself is mature meaning that in order to have an edge, the company must differentiate its level of services and refine its existing products • In order to have a product which is costly to imitate than Papa John’s must improve its link between functions, build brand reputation, conduct innovation in its distribution channels and service support Key points for Papa John’s consideration “What should Papa John’s be considered to obtain sustained growth?”
  39. 39. 8/5/2015PapaJohn'sCaseAnalysis 39 Table of Contents Papa John’s Case 01 Case synopsis 02 Problem(s) identification 03 Related theories/ frameworks/models 04 Case analysis & solutions 05 Recommendation
  40. 40. Recommendations Let’s revisit Schnatter goals 8/5/2015PapaJohn'sCaseAnalysis 40 Opening 200-300 stores per year 4,000 stores in 5 year from 2007 6,000-7,000 worldwide Reduce company- run stores Ensure steady stream of revenue despite difficult environment
  41. 41. Recommendations How the firm plan to bring about? 8/5/2015PapaJohn'sCaseAnalysis 41 Internation al Expansion • Partner with local producer • Franchise • Accomodate sit- down dining are Grow & Maintain domestic markets • Co-branding efforts Diversific ation • Develop or acquire additional restaurant chain Papa John’s sets-out these strategy to achieve its goals (stated previously)
  42. 42. Recommendations Critics to Company’s Goals 8/5/2015PapaJohn'sCaseAnalysis 42 Goals Critics Advise International Expansion Despite its experience in international market, the opportunity looks very promising but the company will have to sacrifice its identity as a carry-out & delivery pizza restaurant The company should maintain its core values of producing quality pizza at a premium price and its business model which is a carry-out & delivery Despite the lure of international opportunity, the company should refrain from going into asian market since the characteristic are very much different. Other option would be to focus on North America (Canada & Mexico) which share resemblance Maintain domestic market Reducing company-run store would turn disastrous because the company will lose its sense of the business. The company should maintain a healthy ratio between company-run & franchisee store because it needs to make sure that the franchisee business remain profitable Co-branding with renown brand New business (acquisition or development) Acquisition, based on various studies often failed because the differences in the culture and over-pricing the value of acquiree If the business is totally different from Pizza business then the company needs to acquire new knowledge in the new industry Acquisition can be done for expansion to international market. By acquiring brand that already established in the international market. It can be a pizza restaurant or any restaurant business
  43. 43. Recommendations Business-level strategy recommendation 8/5/2015PapaJohn'sCaseAnalysis 43 Strategy Implementation Example New & improved products • Pizza with high quality inggredients, imported inggredients • Health concious • Diversifying from pizza • Original Pizza, the one that originates from Italy • Create 2nd store chain selling healthy/low calories pizza • Diversifies through acquisition. Chooses F&B business using almost the same ingridients New level of service and support Catering services For private parties or birthday party Links between functions Store expansion through tripartite (Bank, the company & franchisee) Using the company’s guarantee, help franchisee expand their business through stores opening Location Expand to Canada & Mexico. Market that resembles US. Open new franchise; integrates with local culture Distribution channels Modern outlet (supermarket) Sell “create your own pizza” and “ready to make pizza” in supermarkets Reputation Health conciuous, not only better Pizza Marketing campaign that focus on healthier Pizza, not only better
  44. 44. 8/5/2015PapaJohn'sCaseAnalysis 44

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