MARKETING ESSENTIALS MARKETING PLAN FOR PIZZA HUT - Essay Example

? MARKETING ESSENTIALS MARKETING PLAN FOR PIZZA HUT Table of Contents Contents Page No Introduction 04 Current Position 04 1 Short History 04 2 Growth Overview 04 1.3 Financial Overview 04 2. Mission Statement 04 3. Market Share Information 05 3.1 Market Share 05 3.2 Market Growth Chart 07 4. Market Analysis 08 4.1 Target Market Research 08 4.2 PEST Analysis 09 4.2.1 Political Factors 09 4.2.2 Economic Factors 09 4.2.3 Social and Cultural Factors 09 4.2.4 Technological Factors 10 4.2.5 Legal Factors 10 4.2.6 Environmental Factors 10 5. Market Competitors 10 5.1 Micro Environment 10 5.1.1 Competitors 10 5.1.2 Customers 11 5.1.3 Distribution Channels 12 5.1.4 Suppliers 12 5.2 SWOT Analysis 12 5.2.1 Strengths 12 5.2.2 Weaknesses 12 5.2.3 Opportunities 13 5.2.4 Threats 13 6. New Product 13 6.1 Product 14 6.2 Price 14 6.3 Promotion 15 6.4 Distribution 15 7. Future Marketing Strategies 15 7.1 SMART Analysis 15 7.2 Marketing Opportunities 15 7.3 Market Future: Acquisitions 16 7.4 New Technology and Expertise 17 8. Financial Forecast 17 8.1 First Year Cash Flow Forecast (?) 18 8.2 First Year Months Balance Sheet (Amount in ?) 20 8.3 Three Years Projected Profit and Loss Statements 21 Conclusion 22 Bibliography 23 Introduction Pizza Hut is the world’s leading pizza chain presently operating approximately at 13,000 locations in more than 90 countries. Pizza Hut offers a variety of pizza items to its customers which include its flagship Pan Pizza, as well as Thin n' Crispy, Stuffed Crust, Hand Tossed, and Sicilian. Beside these items, the chain also offers salads, pasta, and sandwiches. 1. Current Position 1.1 Short History It was 1958, when two brothers Dan and Frank Camey established the Pizza Hut in Kansas. After passing several phases, today the chain is one of the well established pizza chains of the world. 1.2 Growth Overview In 1958, only two brothers started the business but today the chain has links to more than 90 countries across the world with more than 30,000 employees are working day and night (http://finance.yahoo.com/). Today it has the potential to entertain more than 171,000 customers by serving 97,000 pizzas per day in the United Kingdom alone. 1.3 Financial Overview Pizza Hut is one of the largest pizza chains. In 2007, it sold 35.4 million pizzas in the UK. During 2010, among other companies of Yum, Pizza Hut went from worst to first in its value ratings (Yum Annual Report, 2010). 2. Mission Statement We take pride in making a perfect pizza and providing courteous and helpful service on time all the time. Every customer says, "I'll be back!”. Pizza hut is an employer that offers its services to the team members for growth and rewarding career in a friendly and working environment. 2.1 P.E.A.R.L.S Passion for excellence in doing everything Execute with positive energy and urgency Accountable for growth in customer satisfaction and profitability Recognize the achievement of others and have fun doing it Listen and more importantly respond to the voice of customer 3. Market Share Information 3.1 Market Share The pizza huts and restaurants provide several various sectors of the food including different types of pizzas like chicken pizza and beef pizza. Some pizza huts also offer snacks, chips, and burger related items along with beverages. Pizza Hut and Domino are the most dominant companies in UK. It has been observed that generally three types of orders are placed in pizza hut. These orders are placed with respect to nature of group and family. The figure shown as Appendix-I indicates that lunch and dinner items are having a larger share of the market as 29% of the fast food industry consists of it. Snack items and related beverages contribute 22 and 21% respectively while hot coffees, breakfast items, and side dishes have a combine share of 28% (Menu Composition Analysis, 2010). Global financial market share of leading companies is shown on the next page. Pizza Hut, Domino, Papa John’s, and Little Caesars are the leading pizza companies of the world. The chart given as Appendix-I shows the global market share of these companies in 2008. Till 2008, domino has 732 stores in UK; Ireland and Germany and over 175 stores are located in London and South East England (Domino’s Annual Report, 2008). Global Financial Market Pizza Hut is also a leading pizza company having a share of 6000 Pizza Hut restaurants only in United States and more than 5600 stores in more than 90 countries across the world (http://www.pizzahut.com/aboutus.html). The following figure shows the global restaurant dispersion. 3.2 Market Growth Chart During 2009, pizza chain of Domino, healthy fast food group Eat, and sandwich chain Pret A Manger have increased their growth by 50%, 36.4% and 29.7% respectively (www.caterersearch.com). It shows that both pizza and fast food industries are running well in United Kingdom. It has been estimated that the pizza market will further flourish especially in south-eastern parts of England during forthcoming years. A market growth chart is shown below which indicates that trend of eating of pizza is increasing among children and young generation as compared to other age groups as there is no significant rise has been observed in last few years. 4. Market Analysis 4.1 Target Market Research United Kingdom is the leading country in terms of consuming the fast food items including pizza. "The UK fast food market grew by 5.2% and reached a value of $2.2 billion in 2008" (Datamonitor, August, 2009). The diversified cultures of UK along with various cultural tastes have put a significant impact on pizza industry. The main contributory items of fast food industry are sandwiches (Greggs, Subway, and Thurstens), burgers (McDonalds and Burger King), chicken (KFC), and pizza (Pizza Hut and Domino). A pizza customer profile is shown in the following chart which depicts the trends of pizza eating with respect to different age groups. 4.2 PEST Analysis The PESTLE is an analysis tool that is used to identify the key drivers of change in the strategic environment (Johnson et al., 2008). These factors include Political, Economic, Social, Technological, Legal, and Environmental factors. 4.2.1 Political Factors UK government has enforced the new rules related to GM labelling since April, 2004. The main reason behind the GM (Genetically Modified) labelling is to update the customers regarding the ingredients of food either genetically modified or not. The government has also announced its nutritional regulations for school children as “new standards for school food” in 2006. The fast food industry is highly affected by the implementation of Goods & Service Tax (GST). As a result prices have been increased in fast food market. This is the reason that industry focuses more on service than product stating that the customer will not get such type of service in their homes to differentiate them. 4.2.2 Economic Factors Like many business fields, pizza hut industry is also directly proportional to stable economy of the country. During last few years, the fuel cost has risen tremendously throughout the world due to war in Iraq and war against terrorism (http://www.whatmattersweblog.com). Further the decline of GDP might be a serious concern for it as it has dropped significantly from 3.9% in 2000 to -4.9% in 2009 (CIA, The World Factbook: United Kingdom, 2010). 4.2.3 Social and Cultural Factors Pizza restaurants well correspond to the busy lifestyle of UK public because they provide quick services in convenient environment. One significant change is that people are becoming more health conscious and preferring healthy food as obesity is widely recognized issue in UK. 4.2.4 Technological Factors Technological advancements include the online booking of orders, seat reservations in restaurants, and cost synergies from the industry consolidation. For example McDonalds has introduced Electronic Funds Transfer at Point of Sale (EFTPOS) which accepts debit or credit cards from customers at the time of their purchase. Similarly some other examples include induction of computerised system of placing order, billing, and online promotion of products etc. 4.2.5 Legal Factors It is very important for pizza industry to follow the Health and Safety guidelines associated with food. In the interest of general public, Food Standard Agency (FSA) imposes the regulations in UK. 4.2.6 Environmental Factors Pizza restaurants have a great deal with meat of animals. Therefore, mistreatment of animals in slaughter houses is a serious concern in pizza industry. Pizza restaurants are also source of emission of greenhouse gases to the atmosphere; therefore, European Union and UK governments as well as Environmental Protection Agencies (EPAs) have strict rulings. 5. Market Competitors 5.1 Micro Environment In business, micro environment is the analysis of those factors which are immediate part of area of operations of the organization e.g. competitors, customers, distribution channels, and suppliers. 5.1.1 Competitors Pizza Hut will have to face great challenges from well established companies dealing in the industry over the years. These competitors include independent restaurants and a chain of franchise pizza restaurants. Domino Pizza UK & IRL, PizzaExpress, and fast food restaurant leaders McDonald and Burger King are the leading competitors to any new entry. Domino had revenue of ?209 million in 2011. PizzaExpress has a wide network of more than 400 pizza restaurants in UK while 40 are operating in many other parts of the world. Beside these companies, other less competitive of Pizza Hut are Ask, easyPizza, Prezzo, Zizzi, and Strada. 5.1.2 Customers Customers are at the centre of the marketing philosophy and efforts, and it is the task of marketing management to satisfy their needs and expectations better than the competition. Changing customer tastes, lifestyles, motivations and expectations is monitored by Pizza Hut so that it supplies the appropriate targeted marketing mix strategies that meet their needs. A trend of customers to eat the pizza food is presented in this chart. 5.1.3 Distribution Channels Pizza Hut uses the direct channel for product distribution because such channel is beneficial when a large number of customers are present but a small quantity of product is purchased by each one. Pizza Hut uses three distribution channels i.e. delivery to the homes, dining in the restaurant, and online ordering. 5.1.4 Suppliers Suppliers are an important link in the company’s overall customer value delivery system. They provide the resources needed by the company to produce its goods and services. Rising supply costs may force price increase that can harm the company’s sales volume (Kotler, 1999). 5.2 SWOT Analysis 5.2.1 Strengths Trademark leader in the UK and part of world’s largest pizza restaurant chain More than 20,000 franchises across the globe Variety of innovative pizzas under one roof Source of attraction for each age group of customers Food attracts people of various ranges from young to old Strong strategic resources and sound international turnover 100% owned by Yum! Top ranking in terms of global full-service restaurant tree Famous television advertising 5.2.2 Weaknesses Development of negative feelings among loyal customers that standards of Pizza Hut are declining Complex computer systems and internal conflicts between franchisees Lack of organic pizzas may limit the target market Higher prices of products because of higher overhead costs 5.2.3 Opportunities New products and brands with different flavors and crust sizes Venturing into new markets Pizza Hut targets upscale products and a downscale consumer base Introducing menu of Indian market plus bolstering the sales by launching the old favourite menu 5.2.4 Threats Rising prices of cheese threaten the net profit Traditional rivalry from Domino Pizza Competition with Mc Donald’s that has introduced a new pizza named McPizza Rising competition undermines Pizza Hut as consumers go for more options 6. New Product Since, Pizza Hut holds a firm grip on the overall market share at global scale in the pizza industry, its higher standards and innovative services has always ensured better chances of successfully launching the new products. The Pizza Hut has a glaring history as it has successfully introduced several products to spark short-term sales. The foremost point in introduction of a new product is that it must be corresponding to the latest customers’ trends. This harmonization reduces the risk of failure. Pizza industry is facing a great competition right now and in order to contest the other top firms of the industry, the introduction of a new product is essential to keep one step ahead of the competition. Innovation is the hallmark of Pizza Hut and since it has enough potential to introduce innovative food products again an again with great success, it has decided to launch a new pizza, named xPizza. Pizza Hut is the leader of market share as well as in the innovative products. Its track record anticipates that the implementation of xPizza will also be a great success of Pizza Hut. This pizza will be larger than the competitors at twenty inches and in order to attract the customers, it will have twice the toppings that the competitors have. One of the main objectives behind this introduction is to create recognition for new product. Pizza Hut has the target to gain 85% recognition of this product in the primary market. This recognition will lead the company to achieve its strategic objectives i.e. to increase the revenue and profit. Pizza Hut has made the assumption that the marketing of xPizza will support it to increase the overall sales of the company by 7% in next two to three years. The recognition up to 85% will be very crucial as it will be the base of increasing the sales. In order to reach this recognition level, Pizza Hut will go through a successful marketing mix. 6.1 Product xPizza will have several competitive advantages. (1) It will be launched by Pizza Hut brand name which will attract the customers. (2) It will be the largest pizza in the market. (3) It will have more cheese and extra toppings. (4) It will primarily target the young generation of UK. 6.2 Price Pizza Hut intends to apply high/low pricing strategy for xPizza. The company will get several benefits through this strategy. The strategy will allow the company to set the price above competition level but also to promote frequent sales to lower the price below them. By setting of higher prices, the strategy will also create excitement and customers will purchase the new product just for curiosity. It will also improve the product and service standards of the company. 6.3 Promotion Pizza Hut will carry out an extensive campaign to promote xPizza in the target market. The campaign will be executed mainly by mail, but also by fliers on college campuses around the country in order to reach the target market. 6.4 Distribution Pizza Hut will use its traditional direct channel distribution strategy for xPizza i.e. either home delivery, or dining in at Pizza Hut restaurant, or ordering online. 7. Future Marketing Strategies 7.1 SMART analysis It is fact that during initial phase, a strong advertising campaign is obligatory to get some standing in the target market. SMART analysis assists the management to plan their marketing strategies with respect to situation, message, audience, response, and trends of the target market. In order to observe the customers’ trends and response, Pizza Hut conducts a local survey that elaborates the situation of the market and enables the management to launch an advertising message according to the need and trends of audience. Hierarchy-of-Effect Model (HEM) is a supporting tool as it is the predominant model of advertising and presents six steps of customers’ trends i.e. awareness, knowledge, liking, preference, conviction, and purchase (Clow & Baack, 2007). 7.2 Marketing Opportunities The main contributory factor of the success of Pizza Hut is its expedient response to the customers by providing them with fresh and tasty pizza in an attractive environment. Besides primary target market, it collects the data of the nearby areas to look out for a productive strategy. It includes: Coupons Sporting events for schools and group events Kids school tours Gift Certificate Program Excellent service and high quality food Word of Mouth 7.3 Future Opportunities In present scenario, the future of pizza industry is very much bright. Population is increasing day by day not only in UK but across the borders as well. Hectic office hours activate the people to plan for going out to calm down. In addition, the economic and law and order situation is quite stable in United Kingdom which is a good sign for pizza industry. The tourism trends are also expected to grow in UK in near future because of attractive offerings to tourists by UK government. In future, number of full-service restaurant of Pizza Hut will focus to dominate the take-out services. Home-delivery services will also observe a new trend as the value of customers’ time is paramount for food providing outlets. In order to monitor the market trends and to meet the future market challenges, managing authorities of Pizza Hut will continuously work on innovative and revolutionized products and offering best services. A good amount of money will be spent on advertising campaign. Pizza Hut will be reliant on significant supplementary resources to enhance the marketing and production of upcoming products like xPizza. Moreover, Pizza Hut has the option to expand its network in some other emerging markets. 7.4 New Technology and Expertise UK is one of the advanced countries of the world and enjoying lot of technological applications in all aspects of life. The more use of technology provide opportunities for new products and offers quality improvement with respect to marketing. The globally well-established network of Pizza Hut uses the latest modes of information technology for an effective and comprehensive campaign. It includes both print and electronic media. Pizza Hut has its own website to keep the customers apprised about its offers and provides them several options for advance booking. 8. Financial Forecast A well sorted investment, strong infrastructure, and financial projections make the launching of any new product easy. The financial concerns include working capital like salaries of staff, utilities, and some miscellaneous expenditure. The budget experts of Pizza Hut believe that preliminary financial support of ?125,000 is adequate to achieve the short term profitability plans from the new product. The restaurant has the potential to arrange this money through its business shares and personal investment. To cover the early expenses, Pizza Hut will focus on the production and marketing of new pizza item. It is estimated that by the end of first fiscal year, Pizza Hut will make a minimum gross margin of 07%. Pizza Hut also estimates that during the same period, it will sustain a net return on sale by 35% to 40%. Pizza Hut has planned to come in operations with its new product by first May i.e. on Labour Day. The stakeholders expect that the new product will observe the highest peak season in November and December, especially close to Christmas. Climatology of UK is also a main factor to determine the initial sales projections. It reveals that the season from September to November is the best time for tourists and for local families as well to go outside for dinner or social gatherings. Estimated sales projections of first twelve months are shown below. Cash flow forecast, balance sheet, and projected loss and profit statements are shown given below. 8.1 First Year Cash Flow Forecast (?) Variables Month Wise Forecast (?) May (2012) Jun Jul Aug Sep Oct Beginning Cash Balance 125000 8352 8379 11256 17513 26177 Sales 79445 95000 97000 102000 104000 108900 Total Cash Available 204445 103352 105379 113256 121513 135077 Cash Disbursements Manufacturing 5000 4800 4770 4800 4890 5100 Expenses 27550 22220 21850 22555 22000 23550 Depreciation 778 778 778 778 778 778 Principal 1020 1020 1015 1035 1048 1070 General And Admin 2200 1780 1410 2075 1970 2070 Staff Salaries 46500 46500 46500 46500 46500 46500 Total Cash Disbursements 83048 77098 76323 77743 77186 79068 Net Cash From Operations 121397 26254 29056 35513 44327 56009 Loans and Capital Infusion National Bank Fixtures 0 0 0 0 0 0 Capital Infusion 0 0 0 0 0 0 Other Disbursements Proprietor's Draw 12000 12000 12000 12000 12000 12000 Debt Service 1100 1100 1100 1100 1100 1100 Capital Disbursements Furniture & Fixtures 66645 0 0 0 0 0 Equipment 33300 0 0 0 0 0 Net Cash Balance 8352 8379 11256 17513 26177 37409 Variables Month Wise Forecast (?) Nov Dec (2012) Jan (2013) Feb Mar Apr Beginning Cash Balance 37409 49601 50073 44830 35357 19709 Sales 111000 102000 98000 94000 88000 94000 Total Cash Available 148409 151601 148073 138830 123357 113709 Cash Disbursements Manufacturing 5325 5500 5610 5800 6100 6100 Expenses 24250 25500 26855 27125 27200 27000 Depreciation 778 778 778 778 778 778 Principal 1055 1040 1050 1055 1055 1055 General And Admin 2100 2710 2650 2615 2515 2420 Staff Salaries 46500 46500 46500 46500 46500 46500 Total Cash Disbursement 80008 82028 83443 83873 84148 83853 Net Cash From Operation 68401 69573 64630 54957 39209 29856 Loans and Capital Infusion National Bank Fixtures 0 0 0 0 0 0 Capital Infusion 0 0 0 0 0 0 Other Disbursements Proprietor's Draw 12000 12000 12000 12000 12000 12000 Debt Service 1100 1100 1100 1100 1100 1100 Capital Disbursements Furniture & Fixtures 0 0 0 0 0 0 Equipment 0 0 0 0 0 0 Net Cash Balance 49601 50073 44830 35357 19709 10256 8.2 First Year Months Balance Sheet (Amount in ?) Assets and Liabilities Current Year 1 Current Assets Cash and Equivalents 125,000 318,912 Receivables from Sales 0 87,100 Prepaid Expense/Deposits 0 9,000 Total Current Assets 125,000 493,112 Fixed Assets Equipment & Machinery 33300 33300 Furniture & Fixtures 66645 66645 Net Fixed Assets 99645 99,645 Total Assets 224,645 592,757 Liabilities Current Liabilities Trade Payables 0 18,624 Income Tax Payable 0 25,360 Short Term Notes 0 7,125 Total Current Liabilities 0 51,109 Long Term Liabilities Notes Payable, Bank 224,645 558,000 Notes Payable, Others 0 0 Other Liabilities 0 0 Total Long Term Liabilities 224,645 558,000 Total Liabilities 224,645 609,109 Proprietor's Account Owner's Equity 224,645 10,000 Less Withdrawals 0 6192 Total Net Worth 224,645 16,352 Total Net Worth and Liabilities 224,645 592,757 Current Ratio 10.2 Quick Ratio 8.1 Return on Investment 2.2 8.3 Three Years Projected Profit and Loss Statements The following graphical data displays our estimated profit and loss in first years. Cost 2012 2013 2014 2015 Sales 18,71,900 21,54,980 23,96,110 28,12,250 Direct Cost of Sales 297,655 311,168 348,258 402,224 Misc 125,000 64,000 80,000 92,000 Total Cost of Sales 422,655 375,168 428,258 494,224 Gross Margin 14,49,225 17,79,812 19,67,852 23,18,026 Expenses Payroll 608400 812,600 924,250 10,80,500 Sales and Marketing and Other Expenses 191,525 221,000 234,000 254,000 Depreciation 81,633 83,455 85,280 90,000 Utilities 26,000 26,000 26,000 26,000 Insurance 40,000 40,000 40,000 40,000 Miscellaneous 5000 6000 7500 10,000 Total Operating Expenses 952,558 12,89,055 13,17,030 15,00,500 Profit (EBITDA) 496,667 590,757 650,822 817,526 EBITDA 66,286 67,125 70,256 74,274 Interest Expense 25,360 25,360 25,360 25,360 Taxes Incurred 85,585 85,585 86,640 90,000 Total (EBITDA+IE+TI) 177,331 178,070 182,256 189,634 Net Profit 319,336 412,687 468,566 627,892 Net Profit/Sales 17.05% 19.15% 19.55% 22.32% Pizza Hut believes that by getting crucial financial support through its sales within three years, the company will be able to 17% to 22% profit for its investment by the end of April, 2015. Conclusion Pizza Hut has successfully achieved many targets in the past generally over a timeframe of one year. For this, Pizza Hut adopts innovative strategies. xPizza is an innovative offer of Pizza Hut in the field of pizza industry and the company has expectations that by applying skilled human resource and utilizing modern technology, the product will generate valuable profit to the company. Pizza Hut has devised its strategies to achieve this target and in case some changes occur in market conditions or targets, Pizza Hut will show its flexibility in applications of marketing strategies. Bibliography About us. Pizza Hut Inc. Retrieved 8 July 2011 http://www.pizzahut.com/aboutus.html CIA, The World Factbook: United Kingdom, (2010) . Retrieved 21 May, 2010. Clow, K. E. & Baack, D. (2007). Integrated Advertising, Promotion, and Marketing Communications 3rd Edition, Pearson Education. pp. 165-171 Datamonitor, August, 2009 Domino's Pizza UK & IRL, Annual Report (2008). http://ww7.investorrelations.co.uk/dominos/uploads/reports/2008AnnualReport.pdf. Retrieved 2009-11-28 Domino’s toppings set to be uber alles. (2012). http://www.thisislondon.co.uk/business/business-news/dominos-toppings-set-to-be-ber-alles-7593804.html. Retrieved 26 January 2012 Hrebiniak, L.G. (2006). Obstacles to Effective Strategy Implementation, Organizational Dynamics, 35, 12-31. Johnson, G., Scholes, K., and Whittington R. (2008) Exploring Corporate Strategy Text Cases, 8th Ed, Prentice Hall, London. Kotler, P. (1999). Kotler on Marketing: How to Create, Win, and Dominate Markets, Simon and schuster Menu Composition Analysis, 2010 Piercy, N.F. (1998). Marketing Implementation: The Implications of Marketing Paradigm Weakness for the Strategy Execution. Academy of Marketing Science Journal, 26, 222-236. Pizza Hut: ‘Our Story’ Pizza Hut. (2011). Last accessed 13 Apr 2011. http://www.pizzahut.com/sitemap2.html?request=ourstory.htm Rapert, M.I., Lynch, D., and Suter, T. (1996). Enhancing Functional and Organizational Performance via Strategic Consensus and Commitment. Journal of Strategic Marketing, 4, 193-205 Sashittal, H.C., and Wilemon, D. (1996). Marketing Implementation in Small and Midsized Industrial Firms an Exploratory Study. Industrial Marketing Management, 25, 67-78. Statistical Profile, Demographic, Socioeconomic, Land Use, Education, Cambridge Community Development Department: 2011 Wilson, R.M.S., and Gilligan, C. (1998). Strategic Marketing Management, 2nd edition, Butterwoth Heinemann, Oxford Read More