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Pizza hut final ppt

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The journey of Pizza Hut.

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Pizza hut final ppt

  1. 1. PIZZA HUT 1958-1967 1967-1999 1999-PRESENT Submitted by :Wasim Akram
  2. 2. GENERAL INFORMATION • TYPE - PUBLIC • FOUNDED - WICHITA, KANSAS (1958) • LOCATION - DALLAS, TEXAS • KEY PEOPLE - DAN AND FRANK CARNEY (FOUNDERS) DAVID C. NOVAK (CEO) • INDUSTRY - FOOD WHOLESALE • PRODUCTS - PIZZA • EMPLOYEES - 250,000 (APPROX.) • WEBSITE - WWW.PIZZAHUT.COM
  3. 3. PIZZA HUT STORY • 1958: THE LEGACY OF PIZZA HUT BEGAN, WHEN TWO COLLEGE-AGED BROTHERS FROM WHICHITA, KANSAS, FRANK AND DAN CARNEY OPENS FIRST PIZZA HUT RESTAURANT AFTER BORROWING $600 FROM THEIR MOTHER. • 1959: PIZZA HUT IS INCORPORATED IN KANSAS AND THE FIRST FRANCHISE UNIT OPENS IN TOPEKA, KANSAS. • 1968: INTERNATIONAL MARKET ENTERED WITH OPENING OF PIZZA HUT RESTAURANT IN CANADA. • 1969: RED ROOF ADOPTED FOR RESTAURANTS. • 1972: PIZZA HUT, INC. LISTED ON NEW YORK STOCK EXCHANGE UNDER THE SYMBOL PIZ. • 1977: PIZZA HUT, INC. STOCKHOLDERS OVERWHELMINGLY APPROVE MERGER WITH PEPSICO, INC. FOR AN UNDISCLOSED SUM.
  4. 4. • 1986:DELIVERY SERVICE, AS A NEW CONCEPT, IS INITIATED • 1996: PIZZA HUT COMES TO INDIA WITH A DINE IN RESTAURANT BANGALORE THAT HAS SPECIAL VEGETARIAN PIZZAS. • 1997: PIZZA HUT OPENS A DINE-IN RESTAURANT IN DELHI. • 2007: PIZZA HUT BROUGHT OUT OUR THICK N THIN PIZZA AND BEGAN TO RE-FRANCHISE OUR DINE-IN RESTAURANTS. • 2009: PIZZA HUT OFFERING BAKED FILLINGS IN THE CORNER OF THE PIZZA
  5. 5. OVERVIEW OF THE CASE • BY 1986, PIZZA HUT’S LEADERSHIP OF THE OVERALL PIZZA MARKET IS BEING CHALLENGED BY DOMINO’S, A DELIVERY-ONLY CHAIN. • THE DELIVERY SEGMENT ACCOUNTS FOR ONLY 20% OF THE $12.7 BILLION PIZZA MARKET, BUT IT IS GROWING RAPIDLY. • A CHANGE IN CONSUMER PREFERENCES HAS LED TO THE INCREASED PURCHASES IN THE DELIVERY SEGMENT. • AFTER YEARS OF RESISTING ENTRY INTO THE DELIVERY SEGMENT FOR FEAR OF CANNIBALIZING ITS EXISTING EAT-IN RESTAURANTS, PIZZA HUT HAS DECIDED IT IS NECESSARY TO MOVE INTO THE DELIVERY SEGMENT.
  6. 6. STRENGTHS • IT IS THE MARKET LEADER IN PROVIDING DIFFERENT VARIETIES OF PIZZAS • SPECIALIZES ONLY IN PIZZAS • HAS FULL SERVICE RESTAURANT AS WELL AS DELIVERY SERVICES. • STRONG FRANCHISEE NETWORK WEAKNESS • HIGH OVERHEAD COSTS DUE TO LARGE NUMBER OF RESTAURANTS. • HIGH PRICE • INTERNAL CONFLICTS AMONG FRANCHISEES
  7. 7. OPPORTUNITY • EXPANSION THROUGH ONLINE ORDERING SYSTEM. • INTRODUCTION OF MORE INNOVATIVE PIZZAS. • VENTURING INTO SENIOR CITIZENS MARKET. THREATS • THE DIFFERENTIATION STRATEGY FOLLOWED BY ANY PIZZA CHAIN IS SOONER OR LATER ADOPTED BY ALL PIZZA INDUSTRY PLAYERS. • MAIN THREAT FROM COMPETITORS: DOMINOS
  8. 8. PORTERS 5-FORCE MODEL
  9. 9. EXISTING RIVALRY • RIVALRY AMONG EXISTING PLAYERS • AT PRESENT THERE ARE 3 MAJOR PLAYERS IN US PIZZA MARKET MAINLY DOMINOS LITTLE CEASERS PIZZA HUT AND THE DEGREE OF RIVALRY IS VERY HIGH • THE REASON IS NUMBER OF COMPETITORS IS VERY LARGE INDUSTRY GROWTH IS HIGH AND FIXED COST INVOLVED IS HIGH
  10. 10. THREAT OF NEW ENTRANTS SINCE INDUSTRY GROWTH IS HIGH IT ATTRACTS NEW POTENTIAL FIRMS TO ENTER INTO THE MARKET. HOWEVER, IF THE NEW ENTRANTS IS EXPERIENCED THEN IT WILL BE ABLE TO COMPETE WITH THE EXISTING PLAYERS ELSE THE ECONOMIES OF SCALE ENJOYED BY THE EXISTING PLAYERS WILL FORCE THE NEW ENTRANTS TO EXISTING MARKETS
  11. 11. THREATS OF SUBSTITUTE THREATS FROM JUNK FOODS SUCH AS HOT DOGS, SANDWICHES AND BURGERS. THREATS OF BUYERS BARGAINING POWER FROM CUSTOMER OR BUYERS WHEN THERE ARE NUMBER OF SUPPLIERS OF BUYERS CONCENTRATION IS HIGH OR LARGE AVAILABILITY OF SUBSTITUTE GOODS
  12. 12. THREATS OF SUPPLIERS BARGAINING POWER ALSO FROM SUPPLIERS WHEN THERE IS LARGE NUMBER OF BUYERS FROM THESE SUPPLIERS, HIGH CONCENTRATION OF SUPPLIERS, HIGH SWITCHING COSTS AND NON AVAILABILITY OF RAW MATERIAL SUBSTITUTES
  13. 13. CONSUMER SEGMENTATION BY CHANNEL Eat-In Carryout Delivery Benefit Atmosphere, Quality Time Time factors Price Sensitivity Lowest Modest Highest Demographic Profile Non-families Families, timestarved Families, convenience
  14. 14. COMPETITION FROM DOMINOS & LOCAL PLAYERS Units Average Delivery Check/Person($) PIZZA HUT System wide Sales ($ millions) 1934 5025 9.99 Separate delivery units plus franchisee add-on delivery out of restaurant DOMINO'S 1550 3696 9.5 Delivery only LITTLE CAESAR PIZZA INN 520 1308 2.75 No delivery 278.7 748 4.3 Separate delivery units GODFATHER'S 275 650 9.75 Add-on delivery out of restaurant ROUND TABLE PIZZA SHOWBIZ/CHU CK E. CHEESE 250 535 5 Add-on delivery out of restaurant 249 268 5.2 No delivery SHAKEY'S 197 386 4.25 Add-on delivery out of restaurant Mr. GATTI'S 139.2 319 7.81 Add-on delivery out of restaurant
  15. 15. 1979 System net sales ($MM) 732 1980 832 1981 1007 1982 1170 1983 1394 1984 1556 1985 1743 1986 1934 Market share Units Company Franchise Total 14.9 15.7 17 17.2 18 17.3 16 15.4 1940 1801 3741 1888 1873 3761 1843 1922 3765 1845 1975 3820 1911 2095 4006 2051 2157 4208 2224 2309 4533 2534 2491 5025 196 221 267 306 348 372 395 282 400 289 Company PSA sales ($M) (Traditional) (Delivery) PSA sales growth Real Price Total Net sales($MM) Net sales growth (%) Total revenues ($MM) ROAE(%) Franchisees: PSA sales($M) -3.1 6.4 3.3 4.7 8.1 12.8 11.8 9 20.8 8 6.6 14.6 9.8 3.9 13.7 1.8 5.1 6.9 2 3.4 5.4 -2 0.8 -1.2 354 399 12.7 556 6.1 476 19.3 489 8.9 556 16.8 569 16.4 678 21.9 699 21.7 766 13 795 16.9 835 9 867 15 929 11.3 967 12.4 237 280 314 350 386 400 415 495 3.5
  16. 16. REASONS WHY PIZZA HUT ADOPTED “FRANCHISING” AS THE ENTRY STRATEGY • BEST METHOD TO ESTABLISH OPERATIONS WITHOUT RISK OF OPERATIONS IN AN UNFAMILIAR MARKET. • FRANCHISING ROUTE HELPS IN LEARNING THE BUYER BEHAVIOUR , CONSUMER BEHAVIOUR & MARKET REALITIES. • IN COUNTRIES WHERE DIRECT FOREIGN INVESTMENT IS NOT ALLOWED , FRANCHISING IS THE EASIEST ROUTE TO ENTER IN THESE MARKETS.
  17. 17. ISSUES IN THE CASE - 1 SHOULD PIZZA HUT ENTER THE DELIVERY SEGMENT OF THE PIZZA MARKET IN AN ATTEMPT TO COMBAT DOMINO’S GROWING POPULARITY AND MARKET SHARE FROM THIS SEGMENT? • YES IT SHOULD ENTER BECAUSE THE PIZZA DELIVERY MARKET IS AN ENTIRELY SEPARATE SEGMENT IN ITSELF. MOREOVER PIZZA HUT WOULD HAVE COMPETITIVE ADVANTAGE BECAUSE OF ITS BRAND NAME.
  18. 18. KEY CONSTRAINTS • CANNIBALIZING • CONVINCING THE FRANCHISEE • SETTING UP THE INFRASTRUCTURE FOR DELIVERY SYSTEM. • COMPETITION FROM LOCAL PLAYERS.
  19. 19. • IT DID NOT CANNIBALIZE THE DINE IN RESTAURANT AS BOTH HAVE ITS DIFFERENT MARKET SEGMENTS. • PIZZA HUT WAS ABLE TO CONVINCE THEIR FRANCHISEES AFTER SUCCESSFULLY PUTTING ACROSS THEIR POINT OF HIGH MARKET POTENTIAL IN THE PIZZA DELIVERY MARKET. • THEY BUILT A VERY ROBUST AND SUSTAINABLE DELIVERY MODEL. • THEY GAINED COMPETITIVE ADVANTAGE BECAUSE OF THE NEW CSC SYSTEM.
  20. 20. ISSUES IN THE CASE - 2 IF PIZZA HUT DOES PURSUE THE OPPORTUNITY TO MOVE INTO THE DELIVERY SEGMENT OF THE PIZZA MARKET, WHAT OPERATIONAL APPROACH SHOULD THEY USE? APPROACHES TO BE FOLLOWED • ADOPTION OF CSC SYSTEM. • ADEQUATE MAN POWER, DELIVERY VEHICLES AND OTHER SUPPORTING INFRASTRUCTURES. • PROPER TRAINING OF SALES AND DELIVERY FORCE. • PROPER DEMARCATION AND PLANNING OF ZONES AND DELIVERY ROUTES.
  21. 21. ISSUES IN THE CASE - 3 IF PIZZA HUT DOES PURSUE THE OPPORTUNITY TO MOVE INTO THE DELIVERY SEGMENT OF THE PIZZA MARKET, HOW DO THEY CONVINCE THEIR EXTENSIVE FRANCHISE SYSTEM TO PARTICIPATE WITH THEM? • INCENTIVIZE THE FRANCHISEE. • MAKE THE FRANCHISEE UNDERSTAND THE POTENTIAL OF DINE AT HOME.
  22. 22. ISSUES IN THE CASE - 4 • IF PIZZA HUT DOES PURSUE THE OPPORTUNITY TO MOVE INTO THE DELIVERY SEGMENT OF THE PIZZA MARKET, WHAT WILL BE THE OVERALL EFFECTS ON THEIR EAT-IN RESTAURANT BUSINESS AND THEIR FRANCHISE RELATIONSHIPS? EFFECT ON EAT IN RESTAURANT
  23. 23. EFFECT ON THE FRANCHISES IN THE BEGINNING THERE WAS RESISTANCE FOR THE ADOPTION OF THE NEW DELIVERY AND CSC SYSTEM BUT AFTER LEARNING THE ADVANTAGES OF THESE NEW STRATEGIES AND THE GROWTH POTENTIAL THAT IT WOULD BRING ALONG WITH IT, THEY ADOPTED THESE NEW CHANGES.
  24. 24. RECOMMENDATION • HIGH QUALITY PERSONNEL: TOTAL COOPERATION OF ITS EMPLOYEE’S THEREBY INCREASING PRODUCTIVITY , BEATING COMPETITION AND ENHANCING CUSTOMER SATISFACTION. FOR THIS HIGH INCENTIVES SCHEMES MUST BE ESTABLISHED. • FOCUS ATTENTION TO UNTAPPED SEGMENT OF SENIOR CITIZENS: CAN ESTABLISH PIZZA HUT SENIOR CLUBS WHICH WILL ORGANISE ACTIVITIES FOR OLDIES. INNOVATION AND LAUNCH SOME PRODUCT FOR SENIOR CITIZENS. • CONTINUOUS INNOVATION IN PRODUCTS • INNOVATION THROUGH CONSUMER FEEDBACKS AND REVIEWS AND WHAT CHANGES THEY WANT TO SEE. • LOCATION: THE MOST CRITICAL SUCCESS FACTOR FOR ANY HOSPITALITY BUSINESS IS “LOCATION”. PIZZA HUT DOES NOT AIM TO BE A PREMIUM BRAND WITH SELECTIVE DISTRIBUTION, INSTEAD IT

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