PEST Analysis of Pizza Hut Inc - Essay Example

PEST Analysis of Pizza Hut Inc Introduction Pizza Hut Inc. is a fast food chain of restaurants and global franchise. It is a part of Yum brands Inc. - a company which has over 34000 restaurants across the globe and also has take-away units and delivery fleets in more than a 100 countries in the world. Pizza Hut has been able to become the largest pizza restaurant in the world (Pizza Hut, 2007). Pizza Hut originated from Texas USA and mainly has American style pizzas with add-ons like salads, garlic bread, buffalo wings and breadsticks etc. in order to expand globally the firm has intelligently employed strategies which enable them to cater to a vast market which is diverse in profile (Stevens, 2006). A PEST analysis has been conducted to assess the international marketing environment of the firm. The next section covers the international promotional decisions the firm makes to be a global brand. Pizza Hut’s international market entry strategies are covered in the next portion which illustrates how it assesses the market before it enters it so that it can modify itself accordingly. The international segmentation strategies are then highlighted to show how the firm segments its international market. Lastly the market research methods of the firm are discussed to show how the firm understands the market it enters and survives in. By studying all these aspects the strategic marketing moves of the firm can be understood and how Pizza Hut has been able to be one of the top fast food names in the world. International marketing environment Political Pizza Hut and other fast-food chains like McDonalds have been accused of causing obesity due to their calorie contained products which is making nations fat and it seems like the issue will be a national issue and concern (BBC, 2007). Legal actions have been taken against competitors like McDonalds, however, Pizza Hut has been saved from the negative image building for now however it will have its trickle down effect and soon legal actions would be taken against the brand too(Dev and Don, 2005). To avoid this, the firm is incorporating healthier meals in its menu which are less in calories but it has not been able to do it on a large scale. However, for now governments have not been involved to put legal restrictions on fast-food chains but this is becoming increasingly likely and the firm should take action to protect itself. The strategy of introducing healthy meal options should be applied globally so that the firm can be proactive and be saved from government restrictions and legal involvements (BBC, 2007). Economic Pizza hut has entered those countries which are progressing economically when considering the developing countries like India which has a growth rate of 9.4% and has tremendous investment opportunities and its large population poses a huge market for Pizzas (Panagariya, 2004).Thus the purchasing power of the people has improved and they can now afford to buy meals at fast-food restaurants. A similar market is China which also has a large population and a ready demand for fast food with a growth rate of 11.4 %( The Economist, 2004). Fast food chains should keep the economic conditions of the country they are going to enter in perspective before they decide to enter it so that the firm can expand and progress in the country. Also, the prospective of survival can be assessed with the economic growth. Also with a developing transportation and infrastructure system in a growing country with developed media, the country would pose better opportunities for expansion for fast food restaurants. Sociocultural There is a growing trend globally towards eating fast-food as the lifestyles of consumers have generally become busier and there is a trend towards going to fast-food restaurants instead of cooking at home. According to Gelder, home delivery is another growing trend which has been incorporated intelligently within most fast-food chains. However, every culture requires different types of products which suit their customs, religions and preferences. Pizza Hut has to keep in consideration the religious and cultural needs of the consumers globally and thus it has changed its menus to suit the local markets. Like vegetarian pizzas in India and using halal meat in Muslim countries (Novicevic et al, 2004, p. 77). In order to glocalize, the products have to be localized as it is the ongoing culture and the need of the consumers. Firms like Wal-Mart have failed as they did not localize but Pizza Hut has localized the taste according to the country it is in (Roberto, J 2005). Technological Technology plays a key role in the fast-food industry. The production of products and the timely services are all based on technology. Wireless systems for communication between the employees enable them to communicate faster and orders can be taken and delivered quicker (The Consumerist). The point-of-sale systems are computerized using soft wares that make coordination easier and data can be maintained easily. Sales records, customer complaints and purchasing behavior can all be systematically recorded and thus reports can be produced on these data which help in further improving the products and services. Highly sophisticated equipments are being used which are tailored to the specifications of the particular needs of the fast food chain so that there is precision and timelines (Roberto, J 2005).Equipment like heat sensors, sophisticated design techniques of equipment are being used. Also, restaurants and equipments are being remodeled using technology so that they are in perfect synchrony and production is efficient and quick. This has been done only because of the incorporation of technology (The Consumerist). International promotional decisions Promotional activities should be conducted keeping the local market in mind. Thus the advertising agencies that the firm uses are local so that the market is understood well. These advertising agencies are in line with the agencies in other countries thus there is coordination in promotional activities but at the same time localization is practiced in each country. In some cases there is also regional promotion like in India and Pakistan where they use the same advertisements in some cases as the language and culture in the two countries is similar. The main tagline for Pizza Hut is ‘gather round the good stuff’ (Pizza Hut, 2008). Also, the brand does not have any mascot to promote itself. A mascot would have worked better especially as they target children as well like McDonald’s mascot Ronald which attracts children. Pizza Hut changes its product, price, promotional and distribution strategies according to the market it is in (Stevens, 2006). The promotional tools that are used differ tremendously depending on where the target market is found most. For example in some countries internet promotions and TV commercials prevail while in others more emphasis is on press advertisements (BBC). The kind of promotional tools used depends entirely on the market. Pizza hut has recently decided to increase its sales in the UK where the fast food chain recently launched its “four for all” promotional campaign in London which encourages families to come in together to eat (Sandison, 2007). Family eating has been a decreasing trend especially in Europe and the chain intends to revive it. Also, promotions like “all you can eat” in Pakistan all throughout Ramzan is introduced every month. Promotional deals are offered keeping the culture and festive seasons of the country in mind (Dev and Don, 2005). The firm is also focusing on developing its online marketing and promotion where it targets its consumers directly. According to Gelder, this promotional tool has been effective in the western countries though in the developing countries it is still a rising trend. Such a promotion has increased the sales of the brand tremendously as it offers the consumers convenience (Hye-won, 2006). The packaging used is globally the same bearing the Pizza Hut logo and environmentally friendly paper bags, boxes and napkins etc. even delivery bikes have the same logo across the globe. To promote the brand as a global chain, all restaurants across the world have the same environment, décor and service so that the consumers have the same experience anywhere they go (Doyle, 2000).Thus the promotional strategies although remain the same globally however, they are altered and localized according to the needs of the market and the prevailing culture (Novicevic et al, 2004, p. 77). International market entry strategies Before entering a market, Pizza Hut conducts extensive researches to know the market and the trends, the existing competition, the affordability of the consumers and the tastes and preferences of the market. Also, it has to know and define its target market, their age, their income and lifestyles etc. before they launch their brand in a particular market (Latham and Bidlake, 1991). Pizza Hut modifies its products according the markets local taste so that their products are more readily acceptable (Cooper and Kleinschmidt, 1986, pp. 75-84). Cultural aspects are also taken into considerations. The economic progress of the country is also taken into account so that the prices may be altered according to the purchasing power of the consumers. To enter the market, Pizza Hut forms alliances with locals and enter the market with joint ventures and partnerships. This tactic enables them to localize more effectively (Doyle, 2000).The employees are local especially in the restaurants so that they can communicate well with the consumers. As Gelder sayshe firm also has to ensure that all the ingredients are available and if not they can be imported within affordable price range. One more important thing is the location of the restaurant which should be in a place reachable by the target market and in the most advanced and media exposed city in the country. This is because if there is already an awareness of the brand amongst the target market then it is easier to establish oneself. According to Cooper and Kleinschmidt (1986), before entering a market, Pizza Hut has to device strategies to alter its products, price, promotions, distributions, people, packaging etc in accordance with the market it is going to enter. Before entering, the market prospects are assessed and the growth opportunities the market poses are predicted. When there is enough potential in the market, only then does the firm enters it. Without appropriate market entry strategies the firm can incur a lot of losses and may lose opportunities to win that market successfully (Hye-won, 2006). International segmentation strategies Pizza Hut has broadly segmented its global market and caters to fast-food eaters who do not have the time to eat at home and want to enjoy the aura of a fast-food restaurant with quick and timely service. The next segment is the age bracket which is mostly teens and the working class (Abell, 1980). According to Gelder, whether to target families or not depends upon the market they are going to enter. If the culture of the country is living with family then the segmentation will be different and if it is to be independent then the focus would be more on individuals rather than families and promotions would be framed accordingly (Sandison, 2007). Also, different markets have different cultures like in the US the customers spend less time in the restaurants while in the East the consumers spend more time thus segmentation varies according to the trends in the market. The purchasing power of the customers also determines how the market would be segmented. Pizza Hut mostly targets the middle class bracket who seeks value meals (Doyle, 2000). On the broader perspective, the firm has segmented the market geographically and regionally. The European region, the US the South Asian market, the Asian markets, the Middle East etc. which have different tastes and cultures these markets have very different demands but within each market there is similarity (BBC). Each market segment is again localized according to the specific country (Abell, 1980). Such segmentation enables the firm to be globally uniform where image and marketing is concerned but at the same time cater to individual markets with its differing products and services. For example in India there is curry Pizza while in China there is sea food in the pizzas (Pizza Hut, 2008). Seafood pizza was tested successful in the Chinese market and then it was introduced in the regional Asian market with success (Novicevic et al, 2004, p. 77). As per Abell, (1980), ssegmenting the market in such a way is essential for Pizza Hut as trends are changing and there is tough competition globally. If products are not localized according to the markets then the products would not be liked by the market (Cooper and Kleinschmidt, 1986, pp. 74-80). Market segmentation also enables the firm to study the markets and understand the consumers and their needs and enables them to alter their products according to consumer preferences (Hye-won, 2006). International marketing research Pizza Hut conducts its international marketing research by employing several different methods of research. One of the main research methods that they use is studying the consumers which comprises of what their habits are, their purchasing power, their social circle, their eating habits, culture, religion, their socialising habits, their consumption patterns, their tastes which means whether they like spicy or non-spicy food, heir cultural cuisine etc. questionnaires are floated to the target market in person or online to conduct this kind of research. As per Dev and Don (2005), aanother way of researching is focus groups which are especially used when the firm wants to introduce a new product in the market. The questions of course change keeping the market or country in mind but he methods of research remain the same. Another effective way of researching is asking the customers to fill comment cards which give the firm instant feedback from the target market. According to Gelder, the trends of this data are researched and documented over a long term to evaluate the current trends by comparing it with the past trends and then future projections are made regarding the demand and preferences of consumers. Researches from different countries or markets are compared to give results of global trends. According to Vaughn, this gives the firm a broader perspective of where the firm and its products are heading towards. Comparing results of similar markets can also turn out to be beneficial and cost effective. Pizza Hut also keeps a close tab on its competitors regionally and globally. As per Dev and Don (2005), this enables the firm to see what sort of promotion and products work in a certain market and the firm does not have to make the same mistakes as its competitors. Also such a research enables the firm to be proactive and remain competitive (BBC). If competitor analysis were not conducted, Pizza Hut would not be able to be competitive in any market and competition would over take it. Pizza Hut conducts its research through researching companies who specialise in studying market trends. According to Vaughn, this enables them to get more accurate results and analysis. Pizza Hut conducts research in the same pattern across the global, however, the tools have to be adjusted and localised for the market that is being researched. HuyH Conclusion Pizza Hut is considered as one of the leading fast food chains globally. This is because it is present in most countries of the world and has been able to survive and be successful in different sorts of markets. The firm has been able to maintain its global image and uniformity in every country it goes in by using the same logo, restaurant designs, color, services, packaging and branding etc. at the same time the brand has been able to localize its products according to the demands of the local market. They were able to achieve this with researches that they conducted on the markets. The firm then segmented its markets thereby it was able to study the markets and consumers closely and meet their needs better. As Keegan (2004) says, the firm has also been able to alter their promotions and marketing campaigns according to the market and win loyal customers over time. The firm has a diverse range of products which varies according to the market and it has been able to successfully cater to a diverse market globally. The firm has been able to modify its strategies and grow into different directions understanding the consumer psyche and growing manifold with several restaurants in each country it enters. The firm’s ability to modify itself and at the same time maintain its global identification has enabled it to grow internationally and be a successful brand. References Abell, D, 'Defining the Business: The Starting Point of Strategic Planning' (Prentice-Hall, 1980) BBC Accessed 8 April 2008. Available at: http://www.bbc.co.uk/dna/h2g2/A137657 BBC, 2007, ‘Fast food salt levels ‘shocking’. Accessed 8 April 2008. Available at http://news.bbc.co.uk/1/hi/health/7050585.stm Cooper, R and Kleinschmidt E.J 1986, ‘An Investigation into the New Product Process: Steps, Deficiencies, and Impact, Journal of Product Innovation Management, vol. 3, no. 2, pp. 71-85. Dev, C & Don E. Schultz, D. 2005. Mix into the 21st Century. Marketing Management, vol.14, no.1. Doyle, P. 2000. Value based marketing. Wiley, Chichester, 2000. Gelder, S. General strategies for global brands. Accessed: 26 March 2008. Available: http://www.brandchannel.com/images/papers/GLOBALBRANDSTRATEGIES.pdf Hye-won, J 2006, ‘Is globalizing succumbing to glocalization?’ The Korean Times, June 18. Keegan, W 2004, ‘Strategic marketing planning: a twenty-first century perspective’. International Marketing Review, vol.21, no.1, pp. 130-164. Latham, V and Bidlake, S 1991, ‘Pizza Hut goes for bigger cut’. Accessed: 8 April 2008. Available at: http://www.accessmylibrary.com/coms2/summary_0286-5474814_ITM Novicevic, M; Michael Harvey, M & Chad W. Autry, C 2004, ‘Dual-perspective SWOT: a synthesis of marketing intelligence and planning’, Marketing Intelligence & Planning, vol.22, no. 1, p.65-96. Panagariya, A 2004, “India in the 1980s and 1990s: A Triumph of Reforms". Accessed 10 April 2008. Available at http://ideas.repec.org/p/wpa/wuwpit/0403005.html Pizza Hut, 2008. Accessed 8 April 2008. Available at www.pizzahut.com Roberto, J 2005, ‘Falling flat’, Accessed 10 April 2008. Available at http://www.sfgate.com/cgi-bin/article.cgi?f=/chronicle/reviews/books/THE_WORLD_IS_FLAT.DTL Sandison, N 2007, ‘Pizza Hut targets families with 'four for all' push’. Accessed 8 April 2008. Available at: http://www.brandrepublic.com/login/News/770027/ Stevens, L 2006, ‘In search of quality’, International Journal of Retail & Distribution Management, vol.34, no.3. The Consumerist, ‘Upcoming technology in fats food drive thru’. Accessed 10 April 2008. Available at: http://consumerist.com/consumer/fast-food/upcoming-technology-in-fast-food-drive+thrus-151586.php?mail2=true The Economist, 2004. Unemployment in China. The Economist. Accessed 10 April 2008. Available at http://www.economist.com/world/asia/displaystory.cfm?story_id=3178704 Vaughn, A. Pizza Hut is an American Success Story. Accessed 8 April 2008. Available at http://ezinearticles.com/?Pizza-Hut-is-an-American-Success-Story&id=248973 Read More