Strategic Choices for California Pizza Kitchen - Report Example

Strategic Choices for California Pizza Kitchen (CPK 1 INTRODUCTION California pizza kitchen (CPK) is a multinational grocery and food retailing company with headquarters in California. The organization is currently operating at the Business level Strategy that is geared towards medium range tactics which includes the market positioning of the company, the Geographic locations of the Company and the Distribution channels of the company. CPK is a company operating in a market that requires strategic locations to blossom. According to (Sloman & Hinde, 2007) the tertiary production class of productions, refers to the production of services which usually includes wide ranges of sectors which are identified as: Finance sector, the leisure industry, retailing and transport. CPK operates in the food and grocery retail market which is a highly competitive market, their main product being Pizza. Retailers that will succeed in this line of business have to have certain competitive edges over their counterparts. The fist primary edge is the ability to operate in strategic locations where the customer purchasing power is high and the business itself is close enough for the customers to access. CPK are strategically positioned in big cities that has population mass; in other words purchasing power is high and this will play out in favour of CPK as they will have little or no problem with patronage. Secondly, CPK has a strategy that entails setting up in business environments where students are the predominant customers. This is because it is easier to attract students and middle level customers to a grocery/food store via advertising certain delicacies and running promos. Statistics prove that most students eat out, and majority of students have constant purchasing power as they are either funded from parents or on various levels of scholarship, thus customer loyalty becomes easy for CPK unlike most of its competitors who strive to compete via cost leadership, niche focus and or pre-emptive move strategies that puts them in an unavoidable contestable market with big firms in the big cities and are either pulled out of business due to monopolies and pricing strategies in such markets, or they only survive on marginal profits. Also, CPK are situated in strategic geographical locations, by reason of various market expansion strategies they have employed in recent years as a way of expanding the scope of their operations via taking their products into new territories in other to reach out to new user groups as far as the provision of services is concerned. Lastly, the distribution channels of CPK though semi-effective in the sense that food products are very difficult to distribute, could be greatly improved upon. The current chain of distribution via vans, supplies, home deliveries etc could be very frustrating and in most cases, serve as brakes in the supply and distribution chain of CPK. At this junction, there is a vital need for us to briefly identify and evaluate the strategy employed by CPK as a means of gaining competitive advantage in its business environment, we will achieve this via the SWOT analysis tool. By this action, we would be in a better position to determine if operating by the current strategy will help the company secure a sustained competitive advantage (SCA) or if there is a need for the company to switch strategies to either the other identifiable strategies. Invariably we will take a closer look at the strategic choices this actions has led the leadership of CPK to take and the result of such strategic choices i.e do they align with the firms generic strategy? If they do not, what are the possible points of disconnects? When we have discovered the discrepancies and problems of the ensued strategy, we would attempt to proffer solutions that will aid CPK in gaining sustainable competitive advantage in the market place. 1.2 STRATEGY OF CPK According to (Scribd,2010) we have four general and distinct strategies we use in analysing strategic options. Though there are various approaches to achieving these strategies employed by different firms. The four strategies are: cost leadership, differentiation, niche focus and pre-emptive move (or first-mover advantage) CPK operates a Differentiation Strategy. This is a situation/strategy whereby a company strategically positions itself as offering products or services that are different from its competitors in a way that the customers value. It is clear that this is the Market strategy and approach chosen by CPK in other to gain sustained competitive advantage over other competitors. An example is the fact that their Ingredients/components are not just so called innovations but are actually greener and healthier combinations of flavours, suitable to customers taste and value, they have added services that provides clear cut extra benefits to customers beyond the normal functions of their products, they offer better products than all other competitors, they have perfect products combination schemes, they offer unique channels of products distribution that is not practiced by competitors in any business environment; i.e the ability to reach millions of users simultaneously with your products via convenient methodologies that both attracts and maintain customers., they have a unique product design that is appealing to customers globally and most importantly they maintain high product quality, which is a major strategy in acquiring SCA and great Branding which is necessary for building SCA via creating customer appeal, customer lust for ones products and customer loyalty and trust. All of the above strategies are perfect ways of knowing a firm that operates a Differentiation strategy, and these are core characteristics of CPK operations and market strategy. Thus I am positive in my stance that CPK practices a Differentiation strategy. 1.3 SWOT ANALYSIS OF CPK STRATEGIC CHOICES Strengths: one of the major strength of CPK in its competitive environment is the decision to operate via the differentiation strategy. CPK would have lost a lot of grounds to one of its major competitors; Dominos Pizza as Dominos Pizza employed the cost leadership strategy via selling their products at very low prices to consumers. Pricing is a major strategy in business because the lower the price the higher the patronage and vis a vis. CPK on the other hand, employed the differentiation strategy by giving its products, style, class and uniqueness that attracts customers and maintains customer loyalty. This strategy works because the sole purpose of any business strategy is to create and maintain customers. Thus the strategy employed is a major strength for CPK. Weakness: The choice to employ the Differentiation strategy also has its lapses and discrepancies based on the desired generic strategy of CPK. Competitors who operate via the Niche focus strategy spend little or nothing on advertisement, competition and Branding because they are only known for a singular product thus they establish and maintain a unique identity. This saves cost and reduces the strain, skills, finances and Risk involved in Diversification and promotion/product innovation. CPK have spent millions of Dollars competing unnecessarily in a bid to improve quality of product, capture new markets, advertising, create customer loyalty because customers have alternatives from close competitors etc. These strain towards differentiating CPK in the market which have also involved high risk diversifications, is counter productive to the generic strategy of CPK and this is a primary source of disconnection that has to be addressed as this form of differentiation has taken CPK away from the original vision and mission of the founding fathers of the company, which is to be the “leader in authentic California-style cuisine (and to be) widely known for its innovative menu items. California Pizza Kitchen (will) provide a range of creative dishes, from signature California-style hearth-baked pizzas, creative salads, pastas, soups and sandwiches to extensive beer and wine lists with a full bar”(Oppapers.com, 2010) If CPK loses complete focus and lose their objectives and sense of purpose, they could drift into strange markets where they do not have the capacity to compete. Opportunities: CPK have numerous opportunities in their peculiar business environment. Food and snack is a constant product that customers must continue to buy, as long as the earth remains. Thus, there is always opportunity to expand to new territories where there are potential buyers. Also, CPK should utilize the market strength they have in America and other parts of the world to further expand their Horizon. The Brand name and high quality Pizza products has become a house hold name to many, especially youths between the ages of 12- 24. This are market segmentation and expansion opportunities that many of their competitors do not have. Threats: Dominos Pizza and other food and grocery retailers are major threats to the operations and survival of CPK. Certain unfavourable business environments also serve as threats to the existence of the company. The most recent and most challenging threat to CPK is the world economic crises that hit the centre (USA) very hard. CPK has low patronage as many people have cut down their spending. This has resulted to the closing down of many CPK restaurants and operational/distribution trends. They only viable way they can survive in business amidst all these threats, is to re-change and re-evaluate their strategic choices. In this regards they need to utilize a combination of two strategies which will be explained below. 1.4 An Alternative Approach A prime way of surviving in today’s business environment where many companies employ certain strategic choices as a way of gaining sustained Competitive advantage over competitors, is to employ a combination of two or more strategic choices. CPK should employ the duo choice of low cost and differentiation strategies known as the “Blue Ocean” strategy. This strategy has created much a-do in the recent business press. Known as "Blue Ocean" strategy, (Blue Ocean Website) it is a strategy that will help them compete with price like their rivals; Dominos and compete by differentiating their products. (Kim and Mauborne, 2009) explains in depth, how this strategy works. But the primary SCA that the Differentiation strategy employed by CPK is the creation of customer value that is perceived as such by the customer. The hallmark of successful businesses is the ability to create and maintain customers, and this can only be realised by creating customer value. In other to maintain the successful value creation standard, CPK has to embrace the “Blue Ocean” strategy and avoid any form of Diversification either relatedly or unrelatedly. They need to improve on their strengths especially in areas like Branding, Quality, Design, and product development/expansion. 1.5 COMMENT/RECOMMENDATIONS In concluding this work, I will suggest that the management of CPK strongly embrace the Blue Ocean strategic option; which is a combination of low cost and Differentiation strategies, as the only viable way of dominating their peculiar and highly competitive business environment. REFERENCES 2010, Blue Ocean Website, Retrieved from http:// csi-bosrc.blueoceanstrategy.com/ 2010, California Pizza Kitchen Mission, Vision, Values, And Goals, Retrieved December 29, 2010 from http:// www.oppapers.com › Social Science. Kim, W.C. & Mauborgne, R. (2009), what is BOS? Nine key points of Blue Ocean Strategy. Retrieved from http://www.blueoceanstrategy.com/abo/what_is_bos.html 2010, strategy and competitive advantage, retrieved from: www.scribd.com › School Work › Study Guides, Notes, & Quizzes (Accessed December 29, 2010) Sloman, J. & Hinde, K. (2007) Economics for Business (4th ed) England, Pearson Read More