The History Of The Technological Factors Marketing Essay

Published Date: 23 Mar 2015

This paper focuses on analyzing the factors driving the value creation of this firm and firms competitive position is analyzed using various management tools and economic concepts including SWOT analysis to find internal and external factors affecting Pizza Hut in Australia. PEST analysis was done to do macro environment audit to find factors that will affect the business environment and operations of Pizza Hut. Porter 5 forces and generic strategies were used to determine the amount of change that the five forces can bring to the organization and whether the firm should make cost, differentiation or focus (niche) its competitive advantage . The pizza hut's Australian market was compared with its competitors to find the strategic position of the company in the market. Finally on the balance of analysis done, a strategy is proposed to increase economic value of the company.

Introduction

Pizza Hut was founded in 1958 by two brothers named Dan and Frank Carney, who worked on the concept of a pizza restaurant. They opened their first franchise in Topeka, Kansa in 1959. Pizza Hut's shares were placed on the New York Stock Exchange in 1979 under the ticker PIZ. Delivery services were introduced by Pizza Hut in 1986 and this service was innovative because no other restaurant or food chain was doing. In no time Pizza Hut managed to acquire $ 4 billion worldwide. Of all food pizza chains, Pizza Hut had the largest market share of 46.4% but Pizza Hut's market share dropped due to fierce competition from competitors of Pope John, Little Caesar and Domino. The only advantage they had was in terms of service delivery. This led to its competitors to reach the diversification of its products to include cheese bread and wings. (BeKnowledge, 2011)

A subsidiary of Yum! Brands, Inc. , Pizza Hut have more than 12,000 restaurants in over 90 countries. Pizza Hut came to Australia and opened its first franchise in 1970 in Sydney. Since then the brand has grown to over 362 stores in New Zealand and Australia and has 30 years above franchising experience. (PizzaHut, 2010)

Pizza Hut's marketing strategy has always been based on innovation and ways to make a pizza into something different to make customers think it's a new product. In this way, they have tried to cater to almost every segment of the market. Due to this diversification strategy, new products are regularly added to the menu. Moreover, diversification is brought in the existing pizzas too. 1993 onwards some new products were introduced and included in the menu. Stuffed Crust Pizza, Pan Pizza, The Edge and The Big New Yorker were the new products. (Thompson, 2006)

Value Addition

Pizza Hut believes in value addition through its excellent customer service. Pizza Hut initiated two customer service programs in 1998 which included: customer call back program and a customer hotline. These services ensured that customers were satisfied and happy with the products and services offered by Pizza Hut. (Thompson, 2006)

SWOT Analysis

The SWOT analysis provides us with an opportunity to examine the internal and external weaknesses Pizza hut must address. It also examines the opportunities presented to Pizza Hut as well as potential threats.

Strengths

Pizza hut being the biggest restaurants succession in the world, controls their market, and can invest in new goods. Pizza hut is a big market sector, although they have some low opposition rivals such as dominos, Pizza and McDonalds, still they have managed to attract more customers meaning a better percentage of sales, which may lead to better earning. (UKessays, 2013)

One source of strength for a firm is its brand name. Brand name contributes in creating value for the organization. It can also shape the way consumers think and act. (dbartel, 2008)

Strength and even a competitive advantage is the fact that they have a full service restaurant as well as delivery services. Pizza Hut's competitors do not own restaurants. Because of that, Pizza Hut can market too many different segments that other pizza competitors cannot. Pizza Hut's wide variety of products allows them to market to different market segments easily. (BeKnowledge, 2011)

It is also part of the largest chain in the world and has many franchises around the world. Pizza hut is also currently the brand leader in the UK. Their innovative range of pizza and special pizza advertising is what differentiates Pizza Hut from its rivals. (Griffiths, n.d.)

Weaknesses

Low consumer happiness may lead to consumers switching to main competitors such as dominos pizza. They are losing profits in countries such as New Zealand and Australia; possibly meaning the Company need to introduce a more varied range of goods to attract consumers of all lifestyles and societies. (Griffiths, n.d.)

One disadvantage of having too many franchises is that different franchises have different business concepts and ideas and among them only a few franchises become successful and much powerful. Internal conflicts with franchises and the CCS (complex computer systems) are the weakness of Pizza Hut. (Seudieu, 2004)

Opportunities

Opportunities include introducing new pizzas with new and delicious flavors. Pizza hut can also introduce different crust sizes with cheese fillings in it, because customers want filled crust. Venture more into home delivery is also an option for the people who want home delivery services or simply venture into a new market. (MBAschool, 2012)

Pizza Hut can firmly grow in other markets because it has a solid market share. A good market share implies that people buy Pizza Hut's products because they like it. (Seudieu, 2004)

Pizza Hut also has opportunities for new pizza franchises in both metropolitan and regional areas all over Australia. (FranchiseBusiness, n.d.)

Threats

Pizza Hut faces major threats from its competitors Domino's, Papa John's and Little Caesar's. The low price charges of Pizza Hut's main competitors are a serious threat to the firm, as low prices attract more and more customers. Due to the recent economic meltdown restaurant industry had been affected. (BeKnowledge, 2011)

Many of its competitors are trying to bring in similar pizzas and food items like Pizza Hut's, in order to capture its market share. (Adam, 2010)

PEST Model

POLITICAL ISSUES:

Political issues include regulatory framework operating in the judicial system which may affect the business in different ways. Laws on business employment, pollution and taxation are factors that apply to the organization which it has to follow regarding the rules. (ManagementParadise, 2013)

The policies and actions of the government wherein Pizza hut is located, whether national or local affects how the business is being conducted. The political and legal conditions that could affect the business of Pizza Hut are the policies of the local and national government towards business, if the government is more open in the establishment of numerous Pizza Hut restaurants, then more restaurants will be established. On the other hands, if the policies do not protect the business then fewer restaurants will be established. Another factor is the regulation of the business and the environment. If the business environment is not friendly with the company, then there is a possibility that Pizza Hut will not open a restaurant and instead move to a more business-friendly government. (SlashDocs, 2012)

ECNOMIC FACTORS:

A better GDP of the country is a green signal for the business as the per capita income of the people will be higher and they will be able to spend more money, their expenditure will increase. People tend to spend more money and they visit pizza hut very often in the beginning of the months. When the inflation rate increases the cost of raw material also increases and ultimately resulting in high prices of the products and vice versa. (ManagementParadise, 2013)

Factors 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 favorable, lesser people will franchise Pizza Hut because they will most likely lose a great amount of money instead obtaining profits. (SlashDocs, 2012)

SOCIAL FACTORS:

It is the most difficult of the four factors because the attitudes and beliefs of people are difficult to quantify. 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 Pizza Hut, example in Muslim countries such as Egypt and Middle East; the recipes of the Pizza do not include pork. In the case of India beef is not served in the Pizza. 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, Japanese or Vietnamese, therefore Pizza Hut can add an additional food such as Vietnamese or Thai soups. If the current trend in the society is being health conscious, thus consumers will demand that the foods be healthy. (SlashDocs, 2012)

TECHNOLOGICAL FACTORS:

Due to new technology there are new ways of marketing like internet; telemarketing and the organization can advertise their products faster and effectively. Computerized customer data that is MIS helps in collecting data of customers, daily transactions, future forecasting and decision making. (ManagementParadise, 2013)

The fast changes in technology nowadays have far-reaching effects in the businesses. The factors that have a huge impact are the research and development, internet and e-commerce, and new technologies. The research and development has effects on the business of Pizza Hut because through R&D new products are developed for the business, the internet and e-commerce also contributes to the technological factors because through them customers can give feedback regarding the products of Pizza Hut which can also aid in the research and development, and the service of the company. (SlashDocs, 2012)

PORTER'S 5 Forces

As Porter's 5 Forces analysis deals with external factors that influence the nature of competition within it, the internal forces that influence the way in which organizations compete, and therefore the industry's profitability is analyzed in Porter's five forces model. A firm has to understand the external environment of its industry and market in order to compete effectively in the marketplace. (CourseWork, 2009)

1. Threat of Potential new entrants: Capital requirements and economies of scale are examples of two potential "barriers to entry". Pizza Hut has been such a powerful firm will not be affected by new entries that much because the entry barriers are there to prevent many potential firms.

2. Bargaining power of buyers: Informed customers become empowered customers because they now have a range of options in the marketplace. This situation is more pronounced if there are one or two large, powerful customers. The number and capability of your competitors is very important. Pizza hut has few competitors who are not as powerful as Pizza Hut so suppliers and buyers won't go elsewhere because Pizza Hut offers highest quality and service.

In pursuing an advantage over its rivals, Pizza Hut Pizza Hut Australia has introduced a new Signature Range menu, which includes thirteen new pizzas that will be permanent additions in the menu. (PizzaMarketPlace, 2012)

3. Bargaining power of Suppliers: Concentration of suppliers and availability of substitute suppliers are significant factors.

4. Threat of substitute products: If the industry has a few close substitutes then the customer may switch preferences due to changes in cost, increased health consciousness or any other such reason. Pizza Hut has competitors Pizzas as its substitute in order to stop customers from switching to rivals Pizza will need to be cost effective and high in quality.

5. Rivalry among competitors: Is more likely to be higher in those industries where there is a threat of substitute products; and existing power of suppliers and buyers in the market. (CourseWork, 2009)

Pizza Hut is clearly the strongest form among all its competitors in Australia. But Pizza Hut's competitors are slowly becoming powerful; Pizza Hut will need to implement good strategies in order to stay powerful in the market.

Porter's Generic Strategies:

A firm's relative position within its industry determines whether a firm's profitability is above or below the average of the industry. The fundamental basis of above average profitability in the long run is a competitive advantage. The two basic types of competitive advantage combined with the scope of activities for which a firm seeks to achieve them, lead to three generic strategies for achieving above average performance in an industry: cost leadership, differentiation, and focus. (VectorStudy, 2012)

Cost Leadership

Pizza Hut has attractive promotional deals that offer large pizzas at low price. But cost is not pizza hut's specialty. The company deals with quality and services and charges good price for that. Also the rising cheese costs are a threat to the profit margin. (UkEssay, 2013)

Risk: Other competitors may provide products and services at a lower cost which may harm the market share and profitability of the company.

Differentiation

Pizza Hut's most impressive attribute is diffrentiation from its competitors. Pizza Hut has placed itself so well in the minds of customer through effective advertising, campaigns and attractive offers.

Pizza hut has created a new software to advertize at ATM machines which is a very unique advertising strategy. It has developed a localization strategy such as in India it advertizes products through a popular Indian celebrities namely Masala Pizza, Tandoori Pizza which appeals the Indian market. Now it comes to the iPhone with a new Pizza Hut application. Now customers can order pizza through that software. (UkEssay, 2013)

Conclusion

Through the intensive market consultation of the company, the marketing techniques are integrated and applied in different branches. In return, the efforts will be mimicries by the competitors. The added marketing strategy of the company called "takeout order" is another measurement of their effectiveness in the society. This is an indication that even if the person in at home, he or she still in search for the product they offer. Their success in on-going innovation both results in good and bad but with their objective to satisfy their customers' needs and wants is a quality of service that every firm should adopt.