Published on February 18, 2014
Assignment 2 BPSM Industry - Restaurant Company - Pizza Hut Author: Tushar Upadhyay
INTRODUCTION& FACTS The Indian restaurant industry amounts to Rs. 75000 crores and has a growth rate of 7% per annum. There is a high degree of fragmentation in the industry mainly due to diversity in the Indian culture, in other words, every religion and caste in India has different food preferences and therefore they have their own favorite eating outlet. The Indian restaurant industry can be divided into mainly 5 subcategories: -Fast food restaurants: likes of McDonalds, KFC. -Casual fooding restaurants: Pizza hut, ching’s real Chinese. -Cafes: cafe coffee day, costa coffee, Barista lavazza, -Fine dining: Rajdhani, Mainland China, copper chimney … -Pubs, clubs and lounges: Hard rock café, sports bar As compared to foreign countries Indian eat out less frequently but since population is very high, small increase in eat out count impacts a lot. Pizza hut is the subsidiary of the world’s largest restaurant company – Yum! Brands. Pizza hut opened its first Indian settlement in Bangalore, KA. From then it has adapted several competitive strategies to service and beat down rivals such as dominoes and other fast food chains. Pizza Hut almost has 50% market share in organized pizza restaurant industry.
ETOP ANALYSIS FOR RESTAURANT INDUSTRY Factors Economic Nature of impact ↑ Impact on each sector Rising income of the middle class which forms a major part of Indian population Political → Government regulation regarding minimum wage, health and safety lawsuits, large regional disparity in Indian food habits Social → Rising health concerns amongst the common consumer can put off the consumers, however eating out is becoming a fashion trend, this can help the restaurant industry As compared to U.S.A and other foreign countries there’s an acute shortage of suppliers especially for meat and flesh based foods Suppliers ↓ International ↑ Technological ↑ Majority of restaurant such as pizza hut are of foreign origin therefore further arrival of international player won’t pose as threat because they already have strategy to compete with them Consumers are becoming internet savvy, online and phone deliveries count for 20% of the revenues of the Indian restaurant industry.
PORTER’S FIVE FORCES ANALYSIS Threat of new entrants MEDIUM High startup costs yet large number of restaurants opening daily, franchising system makes it easy to get into competition. Supplier power- LOW Plenty of suppliers available in the market at almost no switching cost, also they supply common commodities, no special customised items, therefore low leverage for them. Industry rivalry - HIGH Limited product differentiation promotes fierce competition, competive and differentiating factors are imperative to survive. Threat of substitutesMEDIUM Virtually zero cost to customers for switching brands hence less loyal customers, still customer loyalty can be demanded by introducing differentiated products Buyer power- HIGH Buyers have numerous options to choose from and several outlets of the same company to go to all offering more or less same degree of customer experience
PIZZA HUT VALUE CHAIN ANALYSIS General structure of a value chain
Primary Activities Inbound logistics: Pizza hut buys all the raw materials require like pizza dough, mozzarella cheese, toppings, vegetables, edible oil, chicken etc. from suppliers Operations: In order to achieve uniformity of quality throughout the different chains the dough is made at a centralized location and then distributed across outlets Outbound logistics: Pizza are delivered for the customers at their home, conventional mopeds are used in order to drive in narrow streets of India Marketing and sales: Pizza hut sells a brand rather than just food, It targets especially youngsters and students which is evident from their advertising campaigns who are majorly inclined towards young population, In order to indianise the restaurant chain they have introduced several items customized for Indian taste, They have also introduced some pizzas which start from as low as 49 Rs.. Services and Support: Pizza hut’s philosophy is all about making their customers feel delighted, they keep on introducing things which makes customers happy, for example as a promotion strategy they installed a bell in their outlet and asked customers to ring whenever they had a good time in the restaurant. Support activities Procurement: Pizza hut is famous for their special flavors of toppings, they could maintain their taste consistently because they procure their ingredients especially from Australia and Spain. Technology development: Pizza hut is an innovative company, they have developed their special research facilities in order to devise new tastes for changing times and consumer preferences. Human resource management: Pizza hut has a unique employee appraisal and reward program, each employee is given the amount of incentive according to his quality of work.
COMPETITOR ANALYSIS The obvious rival of Pizza hut is Dominoes. Let us see how it fares against it. Both Pizza hut and Dominos entered the Indian market in 1996, both are USA based companies. Market share in 1999 Market share in 2012 0% Others 32% 0% Dominos 22% Pizza hut 46% Others 12% Pizza hut 18% Dominos 70% Dominos is more aggressive in its expansion and selling. This is evident by above charts. Following points of difference further support this fact. Dominos Pizza hut Started with a franchise system Decided that franchisees will deprecate quality, hence it is better to own company owned outlets only Emphasizes on quick service (fast food restaurant Emphasizes on fine dining experience style) Has an economy price for menu items Has premium prices for menu items Positioned pizza as a casual snack which can be quick Promoted pizza as an integral part of Italian cuisine and easy to eat as luncheon or dinner which can be enjoyed with family and friends Slashed price significantly when compared to initial Very less changes to price compared to time period prices. Entered into home delivery service arena quite early Entered into home delivery service quite late because and successfully they were unsure of the quality of the pizza delivered.
We clearly see DOMINOS has adapted a more fierce strategy, this is because the profit making belief of the company. Pizza hut believes in delivering quality to the customers, customers who want quick service and easy location access can go to dominos, those who want quality in food and service can go to PIZZA hut, it all boils down to consumer preference, each chain has its own competitive advantage and are more of an indirect competitor. Pizza hut, in my opinion would have more number of loyal customer.
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