The document discusses Papa John's operations in China. It performs a PESTEL analysis of the Chinese market, finding opportunities in economic growth but also threats such as pollution. It analyzes Papa John's using the VRINE framework, identifying valuable operating systems and recommending improving franchisee selection and differentiating their brand. It concludes by recommending slowing expansion pace and increasing advertising.

1. Muhammad Aqdas Muzaffar

2. Background
PESTEL in China
VRINE
Recommendation
References

3. Background PESTEL VRINE Recommendation References
 Introduction
• Papa john’s is the third largest take-out and pizza
delivery restaurant chain in the world with
headquarters in Jeffersontown, Kentucky.
• Brand slogan: Better Ingredients. Better Pizza.
• Papa john’s was founded by John Schnatter at age of
22 and the first papa john’s store was opened in 1985
• Internationally, there are over 4,600 Papa John's
establishments, including over 3,200 in the U.S. and
the remainder spread among 34 other countries. In
china, Papa john’s has more than 200 brunches, and
this country became the biggest market of Papa
john’s outside the United States

4. Background PESTEL VRINE Recommendation References
 Papa John’s in China

5. Background PESTEL VRINE Recommendation References
 PESTEL Analysis of the Chinese Market

6. Background PESTEL VRINE Recommendation References
 Political
• Political environment is stable
• In 2004, trade agreement with WTO to
encourage the development of the tertiary
industry including fast-food industry
• In 2010, “Notice on further improving the
food industry”
• Pointed the significance of developing food
industry.
• “National food industry development plan”

7. Background PESTEL VRINE Recommendation References
 Economic
• China’s economy is developing greatly,
which is the world’s no.2 economy
• Suffered from Severe economic
condition since 2008

8. Background PESTEL VRINE Recommendation References
 Economic
• GDP

9. Background PESTEL VRINE Recommendation References
 Economic
• GDP per capita

10. Background PESTEL VRINE Recommendation References
 Economic
• Chinese disposable income per capita

11. Background PESTEL VRINE Recommendation References
 Economic
• National Bureau of Statistics of China:
January-October in 2015, Chinese food
industry revenue reached 2.6246 trillion RMB,
increased by 11.8% compared to same time
in 2014.

12. Background PESTEL VRINE Recommendation References
 Sociocultural
• Trend of having western fast food——
pizza become a popular food
• More and more Chinese people tend to
go to restaurants rather than cooking by
themselves
• Chinese people like to dine in rather than
take out
• Chinese cities are crowded

13. Background PESTEL VRINE Recommendation References
 Technological
• The development of Internet:
• Social media (weibo, wechat, etc.)
• Online order
• App (Experience sharing app like
Dazhongdianping, etc.)

14. Background PESTEL VRINE Recommendation References
 Environmental
• Pollution of food packaging is severe
• Green packaging and environmental
friendly processes became popular.
• Save water and energy in stores is
important

15. Background PESTEL VRINE Recommendation References
 Legal
• In 2009, Implement the new “Food safety
law”
• In 2015, the revised version of the “Food
safety law”
• Government enhanced the monitor and
control of the food industry.

16. Background PESTEL VRINE Recommendation References
 Effective Operating System
• Commissary System and Domestic QC Centre
System
Valuable? • High quality pizza with fresh ingredients
• Economies and efficiencies of scale
Rare? • Scarce
• Equally (or more) effective operating system not very
common
Inimitable &
Non-
substitutable?
• Difficult and costly to imitate
• Almost inimitable for small companies in the industry
• No patents or copyrights
Exploitable? • Well-organized to exploit the system
• Long presence in market and established relations with
suppliers

17. Background PESTEL VRINE Recommendation References

18. Background PESTEL VRINE Recommendation References
 Arenas
Current Situation:
• Food industry: western food, pizza
• Market segments: young people
• Geographic area: Chinese market

19. Background PESTEL VRINE Recommendation References
 Vehicles
Current Situation:
• Some franchised stores are explored to
the expired ingredient and Husi rotted-
meat scandal in China

20. Background PESTEL VRINE Recommendation References
 Vehicles
Recommendation
• Use high quality franchisee:
• Choose franchisee under specific rules:
Lowest net capital, current asset, cash
flow and previous performance
• More monitor and control on individual
stores

21. Background PESTEL VRINE Recommendation References
 Differentiators
Current Situation:
• Papa John’s dose not express its
differentiators to Chinese customers and
can not compete with rivals effectively
Recommendation:
• Set the image of high quality pizza in
Chinese market

22. Background PESTEL VRINE Recommendation References
 Staging and Pacing
Current Situation:
• Planned to open 20 more stores per year.
In recent two years, more than 60 stores
closed down.
Recommendation:
• Slow down the pace of expansion

23. Background PESTEL VRINE Recommendation References
 Economic Logic
• Cost side: Remain the same
• Revenue side:
• Advertising:
• 1. Cooperate with search engine like
Baidu
• 2. Social media like weibo and wechat

24. Background PESTEL VRINE Recommendation References
Chines Business, (2015). To reverse the tide pizza magnate Papa John let go of Beijing
and Tianjin guide. [online] Available at:
http://www.cb.com.cn/info/2015_1121/1153943.html [Accessed 25 Nov. 2015].
Fortunechina.com, (2015). Papa John's lessons. [online] Available at:
http://www.fortunechina.com/business/c/2013-05/27/content_157731.htm
[Accessed 25 Nov. 2015].
Kraneshares (2015), International Monetary Fund 2015 Forecast- China Largest
Contributor to Global GDP Growth. [Online] Available at:
http://www.etftrends.com/2015/04/international-monetary-fund-2015-forecast-
china-largest-contributor-to-global-gdp-growth/ (Accessed: 24 November 2015 ).
Lutz, A. (2015). Papa John's just made subtle dig at Domino's. [online] Business Insider.
Available at: http://uk.businessinsider.com/papa-johns-is-focusing-on-pizza-2015-
5?r=US&IR=T [Accessed 25 Nov. 2015].

25. Background PESTEL VRINE Recommendation References
National Bureau of Statistics of China (2015), The Total Revenue of Social
Consumption Increased By 11% in October, 2015. [Online] Available at:
http://www.stats.gov.cn/tjsj/zxfb/201511/t20151111_1271251.html (Accessed: 24
November 2015).
Statista, (2015). Papa John's: restaurants in China 2014 | Statistic. [online] Available at:
http://www.statista.com/statistics/279095/number-of-papa-johns-restaurants-in-
china/ [Accessed 25 Nov. 2015].
Wong, V. (2014). How Papa John’s Turned Beijing Into a Money Pit. [online]
Businessweek.com. Available at: http://www.bloomberg.com/bw/articles/2014-11-
07/how-papa-john-s-turned-beijing-into-a-money-pit [Accessed 25 Nov. 2015].

26. Background PESTEL VRINE Recommendation References