Pizza Hut Strategic Choice - Case Study Example

Pizza Hut Pizza Hut Introduction Businesses worldwide thrive on proper management and effective organization. This demonstrates that order is imperative through abiding by the stipulated business rules of spotting new opportunities and expanding them. It, therefore, is the main goal and objective of Pizza Hut, a fast food restaurant in UK to satisfy its clients while remaining relevant. However, this is achievable only through a complete understanding of the organization profile embodying the restaurant chain in terms of management, number of employees, and marketing techniques to double the expected market growth (Stern & Deimler, 2012, p. 123). Additionally, Pizza hut has equally integrated the strategic model of BCG to expand its marketing opportunities and also attract new customers. Despite the concerted efforts of the fast food company to succeed in areas of low market share through clever cash quadrant methods, challenges of operating multiple stores persists. Main Body Organization Profile The organizational profile of a company involves the integral issues that define its existence as a marketing entity. This is evident in Pizza Hut, a restaurant chain in the UK that is an international franchise and gives customers diverse styles of pizza together with side dishes (Mintzberg et al 2003, p. 130). They offer garlic bread, buffalo wings, pasta, salad and desserts. Pizza Hut’s organizational profile is characterized by certain concepts and format worth noting. For instance, as wholly owned subsidiary, it has its main office in Wichita, Kansas and was founded by Frank and Dan Carney. In terms of organizational format, Pizza Hut is divided into numerous restaurant formats that have adopted the family-style of dine-in locations (Amason, 2011, p. 110). Alternatively, the carry-out locations have a store front delivery that is complimented by a hybrid site for both dine-in and delivery options. This means the organization has to infuse various business concepts to enable it outwit fierce competition from other pizza outlets (Allen, 1998 p. 18). It has, therefore, establishes new locations with an expanded menu that mostly serve fast foods loved by their customers. Notably, the outlets are found in theme parks, food courts and near college parks concentrated with a majority of their customers. Pizza Hut in the UK is concerned with a shift in its delivery to cater for an urban client with big expectations. This suggests their organizational model has to reflect the shifts in popular tastes and preferences. Additionally, as an organizational sector fully aware of the competition in the fast food industry, Pizza Hut relies on advertising to reach out to its customers spread out across more than 94 nations globally. For example, in 2007, the giant fast food company used advertising slogan of “Gather ‘round the good stuff” to persuade their customers to buy the salads, pork fillings and pepperoni served with cheese (Day & Reibstein, 2004, p. 89). Contrastingly, the use of celebrities has equally gained popularity in the UK in promoting Pizza Hut’s products. Jonathan Ross, a talk show host, for example, has collaborated with an American model in advertising crust pizza by convincing people on the sweetness of stuffed crust pizza bought from the fast food outlet (Barney & Hesterly, 2010, p. 56). It, thus, means Pizza hut depends on a large number of employees to sustain their targeted annual profits and income. In UK alone, they are approximately 10,000 spread across different cities (Grant, 2008, p. 133). They operate under a vertical hierarchy of leadership with the General Manager being the topmost following by the board members and then the rest. Strategic Theory The use of strategic choice models in the success of Pizza Hut has taken a high precedence particularly in its management (Grant, 2008, P.120). However, the restaurant’s use of the BCG strategic model, according to its managers, adds value to the customers and overall business. It is unlike the value chain concerned with the activities that an organization within a specific industrial context operates to deliver its goods and services to the market. Pizza Hut therefore incorporates the Boston Consulting Group’s matrix of product portfolio to conduct its marketing operations strategic planning of long-term contexts (Hope & Muhlemann, 1998, p. 9). This is often harnessed through internalization and interconnectedness mechanisms to help grow new opportunities and develop new products. Alternatively, the division of the BCG matrix into 4 quadrants is fundamental in the overall assessment of growth share found in market growth of diverse food outlets spread across the UK. Cash generation, for instance, usually takes four decisive models in their overall evaluation of relative market share. Within Pizza hut, dogs represent the food products such as cheese and salad that possess a low market share and total growth. Conversely, the stars display the bread crusts, buffalo wings and pepperoni products that fetch a high market share when marketed efficiently through its delivery stores (Feurer & Chaharbaghi, 1995, p. 15). The use of cash cows is a replication of the challenges of products lacking high market shares in a low growth market as noted with a decline of sales amongst college students eating cold pizzas. This is supported by the Problem Child symbol defining Pizza Hut’s high growth markets witnessed in saturated regions with low market share (Ghemawat, 2002, p. 50). On the same perspective, within the cash quadrant, the BCG model strives to remove the ‘dogs’ from the fast food industry because they waste resources. These include excessive workers underutilized at the dine-in locations and delivery stores. Critically, it should use effectively the ‘cash cows’ such as establishing more food courts that offer pizza and salads as discounted prices (Graham, 2004, p. 144). Overall, the introduction of a marketing budget for the fast food entity will enable it to classify its products in accordance with the goals and objectives of sustaining growth in all markets. Application of strategic choice The BCG matrix is highly helpful in the Pizza Hut case because it analyzes possibilities of growth from four angles. It is essential to highlight that Pizza Hut deals in an array of products, which are essential in deriving diversification benefits. Pizza products are the cash cows of the Pizza Hut Company (Thompson et al 2007, p. 102). Pizza products are highly profitable meals because they are a stale in the UK market. It is crucial to underscore the fact that Pizza has Western origins that it strives to maintain. Due to this basis, there is a considerable potential for further growth in the market. However, the company can only facilitate further growth if they invest in creative diversity (Mintzberg, 2003, p. 108). This demands a careful study of the market to reveal subtle hints of a given market preference. It also requires the company to predict the future. By foreseeing trends and testing given results, the company may come up with solutions. This process, however, demands a huge capital base whereby the company can utilize such funds in research and development. Instead of investing in Pizza, the company may utilize the excess revenues and profits attained from related sales in enhancing the sales of other products (Ghemawat, 2002, p. 73). Since Pizza professes an elastic demand curve, the company should physically expand in order to draw sales from lowly exploited markets. This process is profitable since Pizza sales in the UK do not rely on consumers’ income differences. Most of the spices’ products profess low relative market share in a fast growing market. This means that most spices fall in the question marks category. Traditionally, the Western market has remained less attached to spices (Keller & Horne, 1976, p. 70). The Eastern market, however, has influenced the Western consumer base towards preferring spices in food. This suggests a detail-oriented consumer base who emphasize on how restaurants spice up their foods. A difference in the diversity with which a restaurant samples its spices serves a long way in determining the sales of particular foodstuffs (Feurer & Chaharbaghi, 1995, p. 109). Expanding the market share will rely on market sensitization on the nutritional benefits of the spices that Pizza Hut uses in preparing it foods. Since the company may not be immediately aware of the potential in the market, aggressive advertisement unravels the mystery. Pasta falls in the dogs’ category. These products fall in this category because they possess a low market share in a dwindling market. There are two major contributions to this problem. To begin with, most households participate in the making of their won pasta. This is because customers face high opportunity costs of purchasing such products from the restaurants and the supermarkets (Graham, 2004, p. 42). Additionally, the simple technology of making pastas has led to proliferation of market players who cash on the relatively low costs of production. It means too much products are flowing in the market for the few customers available (Wheelen & Hunger, 2008, p. 178). Pizza Hut may enact the strategy of making their sales through supermarkets. It thus enables the company to avoid the direct costs of distribution and selling the products. Besides, the company may use technologies that facilitate cheaper production of the pasta products. This is because food companies usually invest in expensive machines that allow for mass production of pasta products (Grant, 2008, p. 16). Buffalo wings are the stars of the Pizza Hut Company. This is because they possess a high market share in a similarly fast-growing market. This cuisine comprises a deep-fried chicken wing. Companies have become innovative in fine-tuning such products by frying the chicken in vinegar and pepper sauce. In turn, Buffalo wings thrive on a fad that s hitting the consumer base (Huxley, 2003, p. 3). The market shares a great potential of growing exponentially because there is a significant space for diversity. Growing in the end demands that Pizza Hut designs exceptional competitive strategies that edges out competitors. The company possesses a wide array of strategies that it can follow in capturing the market. To begin with, it should adopt vertical integration programs whereby Pizza Hut directly involves with farmers in producing chicken. This gives the company a bargaining power in purchasing supplies because they attain chicken at low costs while experiencing the benefits of convenience (Smith, 2007, p. 18). Besides, the company should participate in horizontal integration. Horizontal integration demands that the company links up with similar businesses in becoming single and robust entities. This is crucial for an impressive competitive advantage because large companies experience the benefits of economic of scale (Kahn, 2006, p. 103). In addition, Pizza Hut may experience the benefits of added expertise into the company. The company should also utilize market penetration strategies by offering slightly lower prices to their products (McGee & Wilson, 2005, p. 98). This is beneficial in a market whereby almost every player supplies highly quality products. The BCG matrix is crucial in analyzing the Pizza Hut’s brand standing in terms of four perspectives. The food market is a highly sensitive area that demands precaution in approaching the market. Pizza products are cash cows because they generate high profits in a squeezing market (Johnson & Scholes, 2011, p. 157). This is because Pizza cuisines are highly popular products that do not depend on income stratification of consumers. Most of the spices possess a low market share in a fast growing market because the UK market is slowly becoming sensitized to food additives. On the other hand, pasta products fall in the dogs’ category because there are many players offering high quality products. Currently, Buffalo wings are the stars of the company because they thrive on a culinary fad among the UK consumers. It, therefore, is imperative for businesses to take advantage of high market shares that emerge. This begins with clear assessment of the existing opportunities such as the use of BCG strategic model for Pizza Hut to expand its market in other regions. Additionally, management should become a high priority for any fast food entity that wishes to thrive with limited challenges (McGee & Wilson, 2005, p. 107). In other words, business entities should listen to the feedback and suggestions of their clients and offer prompt solutions. Bibliography Allen, D 1998, ‘Coming to terms with volatility (Achieving continuity in a changing environment)’, Management Accounting (British), vol. 76 (4), p.18. Amason, A 2011, Strategic Management: From Theory to Practice, Routledge, Mason. Barney, J.B & Hesterly, W.S 2010, Concepts, Strategic Management and Competitive Advantage, Pearson Education, London. Day, G & Reibstein, D 2004, Wharton on Dynamic Competitive Strategy, SAGE, New York. 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Wheelen, L & Hunger, J 2008, Strategic Management and Business Policy: Concepts and Cases, Prentice Hall, New Jersey. Read More