1. Introduction
The case study is about Papa John’s Pizza restaurant that has adopted various strategic initiatives which enabled them to register growth and progress. Their capability and strategic moves adopted for delivering top quality pizza yielded good results, despite high competition. Various customer centric approaches and strategic initiatives adopted by the company include, designing the menu to deliver high quality products with unique side dishes; innovativeness in new product development; “efficient operating system”; employee empowerment and developmental activities; effective and precise marketing techniques and the franchise system (Case study 8). But in the recent times, the market conditions, competitive position, economic situation and the commodity pricing adversely affected the profitability of the company. Like their competitors such as the Pizza hut, Dominos and others there are certain strategic issues affecting the company in regaining its profitability mode, which are assessed and are discussed in detail.
1. Strategic issues facing Papa John’s
They operate in a highly competitive market environment, which appears to be mature and saturated. In order to survive or develop competitiveness in these markets they need to adopt some strategic changes like improved menu and variety for the customers, right pricing, more options for the customers, etc. As the barrier to entry is very low, it is easier for new organizations to become part of the system, which could create competitive pressures. Intense competition made companies to compromise on their profit and most of the firms could not find the right pricing solutions for their businesses. Drastic changes or increase in the price of the ingredients, real estate costs, labour costs, lifestyle changes of the customers, etc, coupled with price wars among the competitors affected the profitability factor. The scope for developing differentiated or unique products and services that is essential for developing competitive advantages is also very bleak.
2. Application of Porter’s Five Forces model to the Pizza industry (Papa John’s).
Competitive rivalry – Rivalry is very high for this industry. Papa John’s compete with large Pizza chains like Pizza hut, Dominos, etc. and even with some restaurant chains that sell high quality pizzas. That is, they share the customer base and have the similar line of operations both in the domestic and international markets. Power of suppliers – Power of supplier is low. That is the pizza industry does not require much specialized raw materials and so there are many suppliers who are capable of supplying highly quality ingredients for the industry.
Powers of buyers – the power of the buyers are also medium to low. That is the number of customers for pizza restaurants is more. Customers might not exert much pressure on the pricing or other strategies as there appear less opportunity for bulk buying by a single customer. Customers are not so sensitive to the variations in the price. They do not have much option for quality pizza from the specialists. Threat of substitutes – threat for substitution is high. Pizzas can be obtained at lower prices from fast food joints, restaurants, snack outlets, drive in restaurants, etc. Though these restaurants and non specialized outlet cannot provide the high product quality like the specialist pizza chains like Papa John’s, the possibility for product substitution is high. Threat of new entrant – The threat of new entrant is medium as the cost of entry is low bit the scope for developing unique products are less, It is difficult to attain the economies of scale in this industry.
3. Assessing the product differentiation strategies used by Papa John’s
Papa John’s focuses on developing high quality products that are unique and are highly valued by the customers. Customizations were done on the basis of feedback, comments or suggestions. Papa John’s International is committed to producing their products from fresh and high quality ingredients that enabled them to develop as a superior brand and so they have developed “domestic commissaries” (Case study 6). Centralised production, sourcing and other related activities helped them in making price rationalizations. They use print, electronic and internet options for consumer marketing. They are also engaged in one to one marketing solutions using the latest technological advancements. They have developed strategic alliances with different firms for operations, distribution, sourcing and even for marketing purposes. Papa John’s have developed proper link between all the functions right from sourcing to delivery. Centralized sourcing, production and quality control enabled them to stick to quality of the product. Regular trainings and empowerments provided to the employees helped them to attain needed levels of competitiveness. Trainings were useful in equipping the employees to improve the customer support and service capabilities.
4. Assessing the replication capabilities and sustainability of the strategies
The different bases of differentiation adopted at Papa John’s are not easy to replicate by other firms. Developing customized products based on customer views – medium; Using only fresh and high quality ingredients – medium; Developing domestic commissaries to ensure quality and freshness of the ingredients. – high; Developing and maintaining strategic alliances or partnerships – high. The strategies adopted by Papa John’s appear to be sustainable to a certain extend. That is, these strategies enabled the company to develop superior quality products as well as for make price rationalizations.
5. Assessment of the different options to achieve their growth goals
Expansion into the international markets appears to be the best strategy for Papa John’s for attaining the progressive growth. The market in which they operate is rather saturated and so it would be difficult to register greater levels of growth without international expansions (Gamble, Thompson and Peteraf 9). In mature or saturated markets, there appears very limited opportunity for growth as well as for increasing revenues. If Papa John’s expand their operations into international markets, the scope for enhancing revenues, growth prospects, etc are relatively higher. But the company need to make a few alterations to better suit the markets. Next option available to Papa John’s International is to explore deeper into the domestic markets. In order to expand domestically, the company has to make some inclusions or alterations in their menu to accommodate more delicacies, which might affect their quality based approaches. Developing strategic alliances with firms to develop new brands and products is another possibility under this option. As the alterations or expansion of the menu options might affect their commitments towards quality and hence found to be not suitable for Papa John’s. Another option for Papa John’s is to adopt diversification in their product ranges. That is, they would have to expand their product ranges beyond just pizzas, which appear to be in contrast with the aims and objectives of the company. Adopting options such as this could take the focus away from their core competencies and hence found to be not applicable to Papa John’s.
6. Elaborating the key lessons learnt from the case analysis
References
Gamble, John, E., Thompson Jr., Arthur, A. and Peteraf, Margaret, A. Essentials of strategic management: The quest for competitive advantage. New York: Mc Graw Hill, 2009. Print.
