Firm Structure:Pizza Hut operates inPakistan under the umbrella of the MCR Pvt. Ltd. (a division of Habib Oil). MCRis the sole franchise owner of the global chain, and operates 75 Pizza Hutrestaurants nationwide.As a franchisee, MCRoperates under regulation and frequent monitoring from the parent company, YUM!Brands, following global standardized practices and procedures – gettingguidelines from the regional offices.
Interestingly, MCR isalso the sole franchisee for rival (non YUM! Brands) food chains Burger Kingand TGI Fridays, with shared resources and capabilities that sometimes doescompromise each brand’s independence.For instance, it hasbeen a practice that Burger King and Pizza Hut outlets in Pakistan open at thesame locations (at times even sharing the location), a practice followednowhere else in the world.As we have seen in ourclass discussions, the best tool to analyze the internal functions of a companyis through the application of Porter’s Value Chain Analysis, which is discussedin detail as follows:PrimaryActivitiesInbound LogisticsPizza Hut, like mostQSRs operating internationally, emphasizes on the standardized sourcing ofingredients only from certain approved global vendors.
Equipment used must alsomeet the same standards as determined by the parent company, and theimport/custom/shipping managed here.OperationsThe core of a QSR’sbusiness is its capability to use its resources in preparing and serving goodtasting food… as quickly as possible. The operations department followsmeticulously timed SOPs in preparing, cooking, serving and preserving fooditems – to ensure a consistentexperience across all restaurantsOutbound LogisticsPizza delivery definedan entire generation growing up in the United States, and is continuing to doso in Pakistan.
It is imperative that the riders deliver the food on time, thatthere is a robust network supporting them, and that they drive safely.Marketing and SalesOperating underregional guidelines, Pizza Hut’s Marketing and Product Innovation Department isresponsible for ensuring differentiation from the competition (Pizza Hut doesnot compete on cost-leadership). Through extensive Branding, BTL, and PRcampaigns, the department tries to boost its weekly and per restaurant salesfigures.ServicePrimarily encompassedin its in-house customer support call center and social media moderation team,the brand tries to cater to customer complaints in a timely and effectivemanner.SupportActivitiesInfrastructureThe Projectsdepartment is responsible for New Store Opening, with input on location,sizing, architecture, furnishing, and timeline.Human Resource ManagementResponsible forrecruiting, training, retaining, and compensating employees for their contributionto the businessTechnologyPrimarily split intothree functions: Graphics (attached with Marketing), Web Development (forwebsite and online order portal), and ICT SupportProcurementFor arrangingnecessary supplies as required by the other operating departments, eitherthrough international vendors or by vetting and approving local vendors.
External Analysis The pizza industry is saturated, and it is a low-involvement product.Pizza price ranges from $5 to $20 on average. The formula can be easily customized which gives way to multiple flavorsand versions. International brands have also introduced customized pizzaflavors which suits local tastes.
Hence, the value is low because there is no secret formula and thepricing changes because of the cost of ingredients and branding. It is notsubstantial. Rareness: LowPizza Hut was a first mover in the pizza category of the fast foodindustry. It became a pioneer in shaping a new and unique dining experience.However, because of high imitability, it was not able to sustain itself as arare product. That is because food industries can only sustain rarity if theyclaim to have a “secret recipe”.
Otherwise, the concept of rarity does notapply. Imitability: HighImitation in the food industry is common. The consistency of quality iswhat develops brand equity.
Fast food chains develop and grow their strategieson distribution and dining experiences. Pizza Hut has also built its brand equity through an exclusive diningexperience which gains its loyal customers. There is monopolistic competitionin pizzas. There are thousands of local pizza stored all over the world and afew brands. Pizza Hut has the highest share in the brands with Domino’scompeting and closing in fast.
Organization: HighWhen a product is of low involvement, low rarity, high imitability, thenit is extremely important for an organization to organize itself to sustain itsstrategy. Pizza Hut has also maintained its brand and strategy through efficientorganization and maintaining a high standard of products it used. Even in thedeveloping world, Pizza Hut was the first-of-its-kind dining experience when noother pizza outlet was open. The local outlets used the standard design set bypizza hut and used localized flavors to penetrate the market.
Definingthe industryProducers: American and Italian business in the form of internationalchains, franchises, and local spots. Customers: Young adult and adult population belonging to the middle tohigh income section of the economy. Age: 15-50Supplier: Bakeries, meat suppliers, dairy suppliers, and vegetablestocksProducers of substitute goods: American fast food and local fast foodchains. CostAdvantage vs. Differentiation Advantage Yum! Brands has always focused on the lower tier of the market offeringconsumers fast food dining options in an affordable price. They have picked upon the competition brands’ digital approach and have also adopted many optionsof ordering and taken full use of social media.
Hence, Pizza Hut has enjoyed the first mover advantage and a costleadership as part of Yum! Brands. Another advantage that Pizza Hut derivesfrom its competition is that there are very few truly global pizza chains inthe world because most brands are extremely localized or consist of all kindsof fast food. Pizza Hut has been able to standardize its method while alsocustomizing flavors to local needs. (Euromonitor International, 2017)The brand is in its maturity stage. The market is saturated and does nothave more room to grow.
Innovation is required for any major breakthroughs. Itis important to push marketing