Firm Structure:

Pizza Hut operates in
Pakistan under the umbrella of the MCR Pvt. Ltd. (a division of Habib Oil). MCR
is the sole franchise owner of the global chain, and operates 75 Pizza Hut
restaurants nationwide.

As a franchisee, MCR
operates under regulation and frequent monitoring from the parent company, YUM!
Brands, following global standardized practices and procedures – getting
guidelines from the regional offices.

Interestingly, MCR is
also the sole franchisee for rival (non YUM! Brands) food chains Burger King
and TGI Fridays, with shared resources and capabilities that sometimes does
compromise each brand’s independence.

For instance, it has
been a practice that Burger King and Pizza Hut outlets in Pakistan open at the
same locations (at times even sharing the location), a practice followed
nowhere else in the world.

As we have seen in our
class discussions, the best tool to analyze the internal functions of a company
is through the application of Porter’s Value Chain Analysis, which is discussed
in detail as follows:

Primary
Activities

Inbound Logistics

Pizza Hut, like most
QSRs operating internationally, emphasizes on the standardized sourcing of
ingredients only from certain approved global vendors. Equipment used must also
meet the same standards as determined by the parent company, and the
import/custom/shipping managed here.

Operations

The core of a QSR’s
business is its capability to use its resources in preparing and serving good
tasting food… as quickly as possible. The operations department follows
meticulously timed SOPs in preparing, cooking, serving and preserving food
items  – to ensure a consistent
experience across all restaurants

Outbound Logistics

Pizza delivery defined
an entire generation growing up in the United States, and is continuing to do
so in Pakistan. It is imperative that the riders deliver the food on time, that
there is a robust network supporting them, and that they drive safely.

Marketing and Sales

Operating under
regional guidelines, Pizza Hut’s Marketing and Product Innovation Department is
responsible for ensuring differentiation from the competition (Pizza Hut does
not compete on cost-leadership). Through extensive Branding, BTL, and PR
campaigns, the department tries to boost its weekly and per restaurant sales
figures.

Service

Primarily encompassed
in its in-house customer support call center and social media moderation team,
the brand tries to cater to customer complaints in a timely and effective
manner.

Support
Activities

Infrastructure

The Projects
department is responsible for New Store Opening, with input on location,
sizing, architecture, furnishing, and timeline.

Human Resource Management

Responsible for
recruiting, training, retaining, and compensating employees for their contribution
to the business

Technology

Primarily split into
three functions: Graphics (attached with Marketing), Web Development (for
website and online order portal), and ICT Support

Procurement

For arranging
necessary supplies as required by the other operating departments, either
through 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 flavors
and versions. International brands have also introduced customized pizza
flavors which suits local tastes.

Hence, the value is low because there is no secret formula and the
pricing changes because of the cost of ingredients and branding. It is not
substantial.

Rareness: Low

Pizza Hut was a first mover in the pizza category of the fast food
industry. 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 a
rare product. That is because food industries can only sustain rarity if they
claim to have a “secret recipe”. Otherwise, the concept of rarity does not
apply.

Imitability: High

Imitation in the food industry is common. The consistency of quality is
what develops brand equity. Fast food chains develop and grow their strategies
on distribution and dining experiences.

Pizza Hut has also built its brand equity through an exclusive dining
experience which gains its loyal customers. There is monopolistic competition
in pizzas. There are thousands of local pizza stored all over the world and a
few brands. Pizza Hut has the highest share in the brands with Domino’s
competing and closing in fast.

Organization: High

When a product is of low involvement, low rarity, high imitability, then
it is extremely important for an organization to organize itself to sustain its
strategy.

Pizza Hut has also maintained its brand and strategy through efficient
organization and maintaining a high standard of products it used. Even in the
developing world, Pizza Hut was the first-of-its-kind dining experience when no
other pizza outlet was open. The local outlets used the standard design set by
pizza hut and used localized flavors to penetrate the market.

 

Defining
the industry

Producers: American and Italian business in the form of international
chains, franchises, and local spots.

Customers: Young adult and adult population belonging to the middle to
high income section of the economy. Age: 15-50

Supplier: Bakeries, meat suppliers, dairy suppliers, and vegetable
stocks

Producers of substitute goods: American fast food and local fast food
chains.

Cost
Advantage vs. Differentiation Advantage

 

Yum! Brands has always focused on the lower tier of the market offering
consumers fast food dining options in an affordable price. They have picked up
on the competition brands’ digital approach and have also adopted many options
of ordering and taken full use of social media.

Hence, Pizza Hut has enjoyed the first mover advantage and a cost
leadership as part of Yum! Brands. Another advantage that Pizza Hut derives
from its competition is that there are very few truly global pizza chains in
the world because most brands are extremely localized or consist of all kinds
of fast food. Pizza Hut has been able to standardize its method while also
customizing flavors to local needs. (Euromonitor International,
2017)

The brand is in its maturity stage. The market is saturated and does not
have more room to grow. Innovation is required for any major breakthroughs. It
is important to push marketing