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.
Table of Contents
1. About Pizza Hut
2. Strategic Analysis
2.1. EXTERNAL ENVIRONMENT
2.1.1. Pizza Market
2.1.2. Competition in the Pizza Market
2.1.3. Demand on the Product
2.1.4. Features of the Product
2.2. FIRM INTERNAL
2.2.1. Franchising at Pizza Hut
2.2.2. Pizza Hut Franchisees – The IPHFHA
2.2.3. Finance
2.2.4. Suppliers
2.2.5. Marketing strategies
3. Strategy Formulation
3.1. BUSINESS LEVEL
3.1.1. Delivery at Pizza Hut, Inc.
3.1.2. Strength
3.1.3. Weakness
3.1.4. Opportunities
3.1.5. Threads
3.2. CORPORATE LEVEL
4. Strategy Implementation
4.1. ADAPT STRUCTURE TO STRATEGY
4.1.1. Location Regard
4.1.2. Business Proposal
4.2. STRATEGIC LEADERSHIP
Objectives and Research Focus
This case study analyzes the strategic positioning and operational evolution of Pizza Hut, Inc. to determine how the company maintained its competitive advantage amidst significant challenges from emerging rivals like Domino’s. It investigates the efficacy of the company's business model, particularly the transition into the delivery market, to sustain its market leadership.
- Evaluation of the external environment and competition in the U.S. pizza market.
- Analysis of the internal firm structure and the franchising model.
- Assessment of strategy formulation regarding delivery services.
- Examination of strategic implementation and the integration of technology.
- Development of SWOT-based strategic recommendations.
Excerpt from the Book
3.1.2.Strength
A franchising concept allows to increase its own position without having too many risks in financiation and managing. Pizza Hut concept in delivery aimed to open a cluster of delivery-only units in each market and keep its costs as low as possible because of the small expected market.
A really good advantage is the Customer Service Center (CSC). It allowes customers in a particular market to call a single number to place an order. The caller will be asked about his phone number and the operator can connect him to his relevant delivery unit. Also caller´s data can be stored and the operator can suggest him to order the same pizza he previously ordered. It is important that the CSC system works because customers, who orders by phone, changes their pizza-delivery unit, if they have to wait too long or getting the wrong order. Eat-in consumers tolerate waiting to be seated, caller dial the number of the competitor if the call is unanswered.
One of the strengths of Pizza Hut is to be a division of PepsiCompany Inc. since 1977. It is the world's largest pizza restaurant and has a good reputation and branding. It can raise the profile of the company to gain the ability to sell at higher price, to recognise its products through the corporate image and to launch new products more easily. However, Pizza Hut has a good franchising development that has risen rapidly since its foundation in 1958.
Summary of Chapters
1. About Pizza Hut: Provides an overview of the company's history, founding principles, and its expansion from a small local business to a major national franchise.
2. Strategic Analysis: Examines external market forces, including competitor dynamics, and evaluates internal firm factors such as franchising, finance, and marketing strategies.
3. Strategy Formulation: Discusses the transition into the delivery market, presents a SWOT analysis, and addresses the challenges of maintaining competitive positioning at both business and corporate levels.
4. Strategy Implementation: Focuses on the practical application of the delivery strategy, including infrastructure, technology, location strategy, and leadership directives for quality control.
Keywords
Pizza Hut, Franchising, Strategic Analysis, Market Leadership, Delivery Service, SWOT Analysis, Competition, Domino's, Customer Service Center, Business Strategy, Corporate Strategy, Market Share, Operational Management, Upsizing, Brand Reputation
Frequently Asked Questions
What is the primary focus of this case study?
This study examines the corporate and business-level strategy of Pizza Hut, Inc. during the mid-1980s, specifically focusing on its response to the competitive threat posed by delivery-only pizza chains.
What are the core thematic areas?
The core themes include franchising dynamics, the external competitive environment, strategic formulation for market penetration, and the implementation of operational technology like the Customer Service Center.
What is the central research objective?
The objective is to understand how a dominant market leader like Pizza Hut adapts its structure and strategy to defend its position against rivals like Domino's while navigating internal tensions with its franchisee network.
Which scientific methodology is applied?
The study utilizes a descriptive case study methodology, employing external market data analysis, internal performance evaluation, and SWOT analysis to assess strategic options.
What is covered in the main section?
The main section details the shift toward delivery-only units, the importance of "upsizing" for profit margins, and the strategic integration of computer systems to maintain service quality and operational control.
Which keywords define this document?
Key terms include Pizza Hut, Franchising, Strategic Analysis, Delivery Service, Competition, and Customer Service Center.
Why was the Customer Service Center (CSC) considered a critical strategic asset?
The CSC allowed for centralized order management, data storage for customer loyalty, and improved efficiency, which were deemed necessary to compete effectively with delivery-only rivals.
What was the main source of tension between the company and its franchisees?
Tension arose because franchisees doubted the necessity of the delivery concept and the high costs of the computerised ordering systems, which they felt were not required to maintain profitability.
- Quote paper
- Stefan Schweig (Author), 1994, Case study: Pizza Hut, Inc., Munich, GRIN Verlag, https://www.grin.com/document/45066
