This project report provides details on the competitive advantage and competitive position of the Pizza Hut restaurant chain in the UK. The pizza chain has a two-tier governance role due to its success in the pizza industry, overlapping quick-service and full-service cafeterias. Pizza Hut has a premium positioning in the consumer's mind because it is a well-established pizza chain in the UK (Khanna & Palepu, 2014). However, the company experiences competition from various players in the UK pizza industry. As for conventional eat-in cafeterias, Prezzo and Pizza Express are the major rivals to Pizza Hut UK while Domino's Pizza UK is the competitor at the fast food market (with the inclusion of takeaway and home delivery). Pizza Hut has its challenges that have been encountered by the owners and also the team that manages all the operations of the restaurant chain. The difficulties are either internal or external. The report evaluates the Pizza Hut's background; Porter's Five Forces; PESTEL; Marketing Mix and provides recommendations for the attainment of competitive advantage.
Pizza Hut was established in the United Kingdom in 1973. The firm is the UK's largest pizza eatery enterprise. The number of customers has been increasing in recent years. Thus, the firm has focused on matching the supply and demand from the customers. Pizza Hut has more than 700 restaurants. The company not only targets the household market but also advertises itself to young teenagers and married couples with preferences of having fun (Ivanova, Ivanov, & Magnini, 2016). Pizza Hut offers products like signature pizzas, appetizers, desserts, pasta, and beverages. Pizza Hut is an appreciated quick-service brand in the United Kingdom. In a 2008 review, Pizza Hut ranked number 4 in the 'Most Appreciated' list of eating out in the UK. Pizza Hut now utilizes the online ordering service effectively. In 2009, Pizza Hut was ranked number one among the exceptional audience in the Pizza Brand Site. Pizza Hut has rebranded some of its restaurants as 'Pasta Hut' which has created greater customer appeals (Ivanova et al., 2016).
A competitive advantage is what puts an organization in superior business status. Competitive advantage is determined by the benefits, target market and greater value. Competitive advantage is gained by granting customers a better and greater value. Pizza Hut operates like a monopoly in the pizza sector with its big number of menu products and their diversities.
A PESTEL analysis is a model utilized by sellers to evaluate and track the macro-environmental components that have an influence on a company. PESTEL analysis involves examination of political, economic, social, technological, environmental and legal factors.
Political elements play a crucial role in determining the factors that can impact Pizza Hut long-term viability in the Pizza market. Political elements include regulatory and judicial framework which may impact the enterprise. Since Pizza Hut is situated in the UK, there is no series of political difficulties in the market. An upsurge in taxes can impact Pizza Hut in the future, but suitable management will help the firm overcome some political issues (Khanna & Palepu, 2014).
The United Kingdom is sometimes affected by the recession. The UK has high levels of unemployment meaning that low-class people cannot afford to purchase pizza. Although there is a likelihood of improvement in the economy, the slump is likely to affect Pizza Hut's sales (Khanna & Palepu, 2014).
Every nation has its social standards, ethics, and belief which can influence sales of a particular product. In the UK, people are from different backgrounds; therefore, they have different purchasing behaviours (Khanna & Palepu, 2014). Social elements play a vital role in the growth of the pizza industry.
Technology is a very important factor impacting the advancement of the pizza industry. Over the last ten years, the pizza industry has continued to grow due to the development of new ways of preparing pizza. Information technology, internet, globalization and advanced use of ordering equipment for purchasing have impacted the sales, consumer preferences and promotion in Pizza Hut's market. Existing customers in the UK market are more knowledgeable and make purchases after comprehensive research. The customers tend to share their views with other clients about the product they purchase. Technology is crucial in Pizza Hut's success. It has advanced the Pizza Hut's supply chain and established greater effectiveness to their pizza industry. Pizza Hut has also benefited from technology through home delivery (Khanna & Palepu, 2014). After ordering, products are tracked until they reach their destination.
Environment and sustainability are very important in the UK pizza market. Pizza Hut is careful about its carbon footprint and markets itself in an ecologically-friendly brand. Pizza Hut has focused on investing in sustainability and ecology and using more ecological awareness of raw materials and packaging (Khanna & Palepu, 2014). Pizza Hut is also ensuring that packaging materials are easily recyclable after use.
Legal elements are crucial in the pizza market. Pizza Hut is expected to comply with ethics and regulations. The pizza market is one of the best employers in the UK and therefore experiences effects on constant change in labour laws. Pizza Hut is expected to comply with the UK's trade laws and labour laws (Stuman, Corgel, & Verma, 2011). Pizza Hut reviews the various laws in the UK market to ensure compliance. Some transformations in the labour laws include employment laws, discrimination laws, consumer protection, anti-trust law, copyrights law, and health and safety law. In addition, there have been new rules to address the gender gap in the UK (Stuman et al., 2011). Companies like Pizza Hut are expected to adhere to these laws.
Porter's Five Forces
Pizza Hut maintains its dominant rank in the market by assessing and reviewing the micro-environment. Micro-environment management is a highly interactive process and necessitates suitable evaluation of new entrants, buyers, competitors, suppliers, and substitute products.
Threats of new entrants.
There are numerous entrants in the UK pizza industry. The company puts pressure on new entrants by providing new value propositions to the customers and reducing pizza costs. Pizza Hut is expected to manage the challenges and create strong barriers to safeguard its competitive edge (Stuman et al., 2011).
Bargaining powers of suppliers.
Increase in the bargaining power of the suppliers was not a huge problem until food prices started to increase. Nowadays, suppliers are not ready to supply items at low costs that fail to meet their expected profits (Ferrel & Hartline, 2008). If the supplier cost increases, then the company is forced to increase the costs in the menu or decrease operation costs.
Bargaining power of buyers.
Pizza Hut commands supplies at the lowest rate because it has a wider market reach and greater market in the pizza industry. And because of the deep-rooted market position, Pizza Hut utilizes the strategy of imposing supplies at the penetration cost. Nevertheless, their rivals cannot influence supplies at a lower cost (Ferrel & Hartline, 2008). Therefore, the bargaining power of the pizza chain is high.
The threat of substitute products.
Numerous substitutes are available for selection in this fast food industry. Pizza Hut usually depends on the customers' preferences (Ferrel & Hartline, 2008). Higher quality of product and serves is likely to retain the customers and reduce the rate of substitution.
Rivalry among the existing competitors.
Pizza Hut operates in a very competitive fast food industry. Domino's is one of the major competitors in the UK pizza industry. In regards to the market share, Pizza Hut is doing well in this industry (Ferrel & Hartline, 2008). However, competitors have become a threat to Pizza Hut's dominance.
Marketing Mix (7P's)
The 7Ps is a marketing strategy tool which was conventionally limited to the core 4Ps of Product, Price, Place, and Promotion. The 7Ps helps firms to review and define major issues that impact the marketing of its products and services.
Pizza Hut is one of the most prominent pizza quick-service chains in the United Kingdom. Despite stiff competition in the industry, the company continues to preserve its superior image.
Pizza Hut is renowned for its Italian products such as pizzas, pasta, and bread. However, due to accumulating rivalry from McDonalds and Domino's, the company has gone local in the UK market.
Pizza Hut is also famous for its delicious wide range of pizzas. The company produces and sells high-quality pizzas which are served in sizeable portions. The target consumers are known to prefer the rich flavour of pizzas and pasta from Pizza Hut (Parasuraman, Grewal, & Krishnana, 2007). Another competitive advantage of Pizza Hut is timely delivery. The company has focused on delivering its products at homes.
The cost strategy of Pizza Hut is exceptional. The pizza chain understands that there is stiff competition in the UK market. Therefore, the pricing strategy has to consider wealthy and low-class individuals. Pizza Hut offers premium quality foods compared to its rivals, and at the same time, the setting of the pizza chain is superior and comfortable than others who serve Italian products (Parasuraman et al., 2007). In that case, even though Pizza Hut has a superior cost strategy, customers prefer Pizza Hut over its competitors.
Pizza Hut is currently in most high-end places across the UK urban regions. This positioning assists Pizza Hut to sustain its exceptional placement in the heart of its clients, since B grade town individuals will be inclined to visit A-listers places actually to have a Pizza Hut pizza. On another perspective, A grade towns have a higher probability of having pizza from Pizza Hut than from Domino's due to the price positioning (Parasuraman et al., 2007). Because of higher prices, and higher quality products, Pizza Hut has to establish positioning in A grade towns only. In B grade towns, individuals would more probably prefer the inexpensive Domino's.
Pizza Hut is prominent for its promotion strategies in selling its products. The promotional strategies focus on the introduction of new products and establishing brand equity. During festivals, the advertisements focus on promoting rebates and offers on merchandises to attract clients. Additionally, Pizza Hut conducts multiple business rebates and provides deductions to corporate clients (Parasuraman et al., 2007). Local marketing is also an important aspect of Pizza Hut's success. Local marketing strategies include newspaper inserts, hoardings, and guiding clients to the stores and lollipops.
The most appropriate elements of Pizza Hut are the clients. The pizza chain established an important way of showing client appreciation-the bell. Any individual who rings the alarm on leaving from Pizza Hut is welcomed with a lurid appreciation from all the attendants in the pizza chain. The waiters also prepare performances during festivities (Parasuraman et al., 2007). In addition, Pizza Hut chain has well-mannered and polite employees who remain friendly to the customers during their ordering process.
The main reason for the pizza chain to demand premium pricing is due to its physical proof and the ambiance.
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