Case Study – Pizza Hut, Inc.

by: Stefan Schweig

Table of Contents

1. About Pizza Hut 3

2. Strategic Analysis 4

2.1. EXTERNAL ENVIRONMENT 4

2.1.1. Pizza Market 4
2.1.2. Competition in the Pizza Market 4
2.1.3. Demand on the Product 5
2.1.4. Features of the Product 5

2.2. FIRM INTERNAL 6

2.2.1. Franchising at Pizza Hut 6
2.2.2. Pizza Hut Franchisees – The IPHFHA 7
2.2.3. Finance 7
2.2.4. Suppliers 8
2.2.5. Marketing strategies 8

3. Strategy Formulation 9

3.1. BUSINESS LEVEL 9

3.1.1. Delivery at Pizza Hut, Inc. 9
3.1.2. Strength 10
3.1.3. Weakness 10
3.1.4. Opportunities 11
3.1.5. Threads 12

3.2. CORPORATE LEVEL 13

4. Strategy Implementation 13

4.1. ADAPT STRUCTURE TO STRATEGY 13

4.1.1. Location Regard 13
4.1.2. Business Proposal 14

4.2. STRATEGIC LEADERSHIP 14

5. References 15

1. About Pizza Hut

On June 15th, 1958, two brothers opened the first Pizza Hut restaurant in Wichita, Kansas (U.S.) by purchasing second-hand equipment and renting a small building on a busy cross-road. The concept was relatively new at the time and the brothers quickly saw the potential of this new enterprise. A short time later, they begun to open new restaurants and developed schedules for franchised outlets. Their chain started growing up very fast, ten years later Pizza Hut Inc. counted almost 300 restaurants. In 1986, it had 5,025 domestic units and annual sales of almost $2 billion. Half of the outlets were franchised.
A Pizza Hut restaurant is characterized by a particular freestanding design with a prominent red roof. The restaurants are full-service, eat-in/carryout with about 60 to 90 seatings, open from 11 a.m. to midnight. Pizza Hut´s franchisees have special rights to most of the smaller restaurants, company-owned outlets stand in metropolitan with a high population density.

2. Strategic Analysis

2.1. External Environment

2.1.1. Pizza Market

The pizza market grow up rapidly, when the possibility of home delivery was accepted by the consumer. In the mid-1980s pizza was the fastest growing up food at the fast food market. There are 3 segments comprised the pizza restaurant market. At first the traditional eat-in, where consumers can enjoy their food like in ordinary restaurants or pubs, at second the carryout ( many stores had seperated windows to provide this service ) and at last the delivery-home service, where consumer can call and order their food. Many companies competed at least in 2 of these segments. For example, Pizza Hut´s carryout accounted for 40% of the profit.

2.1.2. Competition in the Pizza Market

Pizza becomes more and more a typically dinner food in the U.S.. Many consumer view it as an evening snack, it is a personal and sensual experience for many people. They did not believe that great pizza fast food chains could be made it like others did it with hamburgers. Pizza Hut dominated the eat-in pizza segment nationwide, Godfather´s Pizza, which is another eat-in/carryout chain, competed in many of the same local areas and was the most significant national competitor. Domino´s Pizza posed a serious competitive threat to Pizza Hut´s leadership position in the nationwide pizza market. In the time between 1984 and 1985 it redoubled its profit to more than $ 1 billion, to more than $ 1.5 billion by the end of 1986. The chain opened 950 new outlets ( total: 2.839 ). Two-third of Domino´s stores were franchised, but it still was a delivery-only chain. By 1986, Domino´s intended to gain total market leadership when it begun to extend its expansion into smaller towns with smaller population density, which were already controlled by Pizza Hut franchisees.

Fig. a : adapted from Nation´s Restaurant News [figur only in downloadfile]

2.1.3. Demand on the Product

The consumption of pizza in the U.S. depends on regional reasons. Tastes of pizza varied significantly by region, the strongest consumption is in the northern and eastern parts of the U.S.. For fast food chains like Pizza Hut it represents a challenge, to sell a product with its same taste in each outlets all over the U.S., all over the world as well.

2.1.4. Features of the Product

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