Introduction (Overview of the company)
Strategic issue is somewhat close to the challenge that arises from the external or internal environment of business.
The strategic issue has a profound effect on organizational policies, vision along with mission impacted by challenges.
Strategic issue is required to be handled by an organization as a long drawn problem may become insurmountable and organizations may find the loss of revenue.
Strategic planning is a cornerstone of success which firms uses to its advantage for remaining competitive in the industry. In the process of planning and development of strategies firms often need to have a clear understanding about its existing and potential issues that are strategic in nature (Frynas & Mellahi, 2015).
Competition in the industry is huge and Pizza hut faces tough competitors like McDonald's, Domino’s Pizza, Starbucks, KFC and many more. Competition in the market has increased demands of revamped menu and customer is looking for large pizzas with better toppings so that they feel their price for a pizza is worth it.
Pizza Hut has faced a strategic issue in Australia and this is the focus of customers on nutritional aspects of its products. Many customers started believing that products are of low nutrition and are causes of many heart-related diseases, obesity etc.
Pizza Hut is a famous restaurant brand based in the US. The organization has a network of the international franchisee. Foundation year of Pizza hut was 1958 and was formed by Frank Carney and Dan. The restaurant has earned huge fame for its Italian and American cuisine that includes pasta and pizza. As of 2018, the month of March, this company has 16796 numbers of restaurants which have made this brand a larger pizza business. The first chain of the brand was formed in the year 1970 in Belfield of City of Sydney. Pizza Hut has grown in Australia significantly with as many as 355 stores out there. The firm is the largest pizza company across the world. The brand is present in ninety-seven countries across more than 97 countries. The mission of the brand is to become a most renowned restaurant in the globe by making perfect pizza by providing customers with better products and services on time required by them. It has huge products offering for customers in Australia to cater to demands among them. Apart from pizza and pasta, the firm offers side dishes and drinks to customers along with desserts. Products are crusts, veggie pizzas, sides, seafood range, chicken and meat-based products. All the products of these brands are of high demand among customers.
Targeted customers of the brand in Australia are of several demographics aspects like income, lifestyles, social and economic status.
In Australia, Pizza Hut has become stronger. Some former, as well as new restaurants, were opened in the country. In the same country, the brand is the second largest pizza franchisee.
The brand even has suffered some downfalls arising from strategic issues but strategies for revamping the brand is taken by the company. The market has built a positive image concerning the brand and this need to be maintained with the strategy of revamping of the brand (Harrison & John, 2013).
Background of the Strategic Issue
Australians’ excessive focus on health concerns held the firm backward with a major strategic issue such as nutritional aspects came into the scanner. Pizza Hut faced a lot of criticism from activists in fields of health nutrition. Products were believed to have triggered some problems related to heart and associated disease like obesity that creates the concerns among many consumers and they stated sidelining the products. This issue emerged most vital for the company as reputation and profitability got into a stake. People considered picking up other crucial brands in the market in Australia and these brands are Domino’s and McDonald’s. the main cause of this issue was excessive health consciousness among Australian people and this became strategic in nature as the company found it difficult to withstand even lot of efforts were put up to contend this issue. With this situation became too tricky for the firm, competitors such as McDonald’s and Domino’s introduced some products which are of higher nutritional value and customers became fond of the products. Moreover, customers considered low brand switching effort required for them and Pizza Hut perceived this costly to its business (Alkhafaji & Nelson, 2013).
If the external and internal environment of the firm is analyzed in connection to the identified strategic issues then here is the finding:
External factors of business like competitors, customers have impacted the position of the firm.
Internal factor like products produced by firms perceived of low nutritional value has an effect on the firm’s position.
Better packaging, strong reputation, high Brand reputation, diverse products
and good packaging
Limited food items, weak pricing- Inadequate strategy, inability to
cope with a low perception of
products being low in
Strategies, high competition in markets
Identification of issues in the TOWS matrix
The strategic issues identified and described above could be placed in TOWS matrix relating to Pizza Hut. The particular matrix like WT or weakness or threats holds the identified issues.
The issues are negatively influential to the company with three possible outcomes for the business. These are a loss of revenue and reputation, loss of profitability and loss of trust among stakeholders.
The brand image could be affected from the issues as customers who are the concern of brand function from ethical points of considerations may be averse to the firm (Pearce & Robinson, 2013). Higher competition with Domino’s creates more products option for customers.
If the issue is resolved then Pizza Hut may achieve its standing back in the market which will pave the way for success and revenue earning.
If the strategic issue is left unaddressed then it is very likely that the firm may lose out on its competitive advantage (Morden, 2016).
The above illustration denotes positioning map in general. In a positioning map related to Pizza Hut, Products and positions are in the slots of high quality–high price. Since the quality of products is good from the firm’s viewpoint, therefore the firm stands a good opportunity to market its high-quality products at high prices (Hill, Jones, & Schilling, 2015). This further can lead to competitive advantage in the market.
Recommendation for addressing an issue about the focus on nutritional aspects of products by customers in Australia.
Excessive focus on nutritional aspects of products has caused dissatisfaction among consumers as they do not consider the products of nutritional values. Moreover, the products were blamed for taking a toll on their health fearing heart-related ailments, obesity and so on. This can be overcome by Pizza Hut by taking strategy like building the high perception of the products by improving products’ quality and enriching this with adequate nutritional values for satisfaction among clients. If the firm is sure of its production strategy as competent enough to assure nutritional contents then shift of focus on sourcing of products is necessary and the firm could use better technology and innovation for fitting these adequately into the activities of quality checking of every product right from the acquisition of products to final conversion into edible products (Lasserre, 2017). If deemed necessary then Pizza Hut needs to have a separate quality checking team who must be entrusted with the function of looking into the entire matter for ensuring that products do not violate the norms of quality and customers are very likely to accept the products by becoming satisfied of the nutritional aspects of products.
Competition in the market is unavoidable and firms like pizza Hut can fend it off only by developing a better strategy for surpassing the competition. Competition with Domino ’s and McDonald’s has come down heavily on Pizza Hut and this is mostly due to the technical superiority of the business over Pizza Hut. This has facilitated the rival firm to ensure better exploitation of innovation and quality control mechanism for causing high sales. It is essential for Pizza Hut to understand where is the business lagging and what are the essential factors required by the firm to compete with Domino’s and McDonald’s. The business of Pizza Hut is quality focused and it requires adopting innovation and technical expertise to add more value to the business (Gamble, Thompson, & Peteraf, 2013). If Domino’s core competence is assistive of making better position in business using better technology and innovation then Pizza Hut may adopt resource-based view to support its strategic management (Hahn, 2013). This strategic analysis could help the firm to build competence that is comparable with both Domino’s and McDonald’s and business can improve its production technique for causing more brand value proposition to motivate consumers to select its products. Within this strategic framework Pizza Hut can identify its efficient resources and based on the findings, the firm can provide its business with comparative advantage. Moreover, the firm can identify its strength and can focus on competitive advantage so that this can be sustained in the industry for long. If the competitive advantage is not identified but the firm has a good level of resource capabilities the same can be used for developing a competitive advantage for ensuring a better position in the food industry (Vogel & Güttel, 2013).
Pizza Hut also needs to work on its advertising strategy for improving its brand perception. Customers need to be aware of its new products concepts and quality enriched nutritional aspects. In this quest, the firm needs to adopt all-out efforts to promote the products to create mass awareness for attracting consumers towards products. This strategy can work if consumers are convinced and step in the restaurants of this brand. Once they purchase and eat the products, subject to their satisfaction they can become repeat customers and business may improve its brand image and perception among them (Morschett, Schramm-Klein, & Zentes, 2015).
The key aspect regarding the issue can be addressed or solved by this recommendation. Required level of technological efficacy can be grown by the firm depending on competitive advantage and the firm can strengthen its position in the market taking over the firms’ position (Goetsch & Davis, 2014).McDonald’s and Domino’s leading position in the market can be challenged by Pizza Hut based on the competitive advantage in the market.
The steps as per recommendation to address issues are:
- Focus on better and ethical sourcing of products
- Development of knowledge about competition and market
- Identification of its available strength from business
- Adoption of the resource-based view
- Knowledge development for relating identified strength to business growth
- Better advertising strategy for making consumers aware of new products.
- Achievement of comparative advantage and value addition to business
- Efforts of building competitive advantage and its retention for consistent growth.
Once this recommendation can be put into practice then it is highly possible that Pizza Hut can start establishing its successful journey in the food industry. With the involvement of technology and better quality checking mechanism, the restaurant business can roll ahead with success in the future (Stead & Stead, 2014).
Summary of Recommendation
Any strategic issue if is not addressed properly can eat into the long built reputation of the business. This holds relevance for the business of pizza hut to work on its strategy to gain back its reputation among customers for making them sure of better nutritional content in products to avoid health-related concerns. The business must consider the excessive competition with Domino’s and McDonald’s and to concentrate on building the efficiency depending on resource-based view (Gamble, Thompson, & Peteraf, 2013). This is an adoption of the fitting theoretical assumption for solving the strategic issue of the firm. Innovation and technology need to be amalgamated proportionately for making it confirm that products are more quality enriched and checking of products go through several automated processes. Moreover, the technology could be of huge help in this matter for the firm. Products need to be of different appearances with low sugar and low-fat content along with some healthy or nutritional filling. These must have different tastes and customers if feel good and get assured of the nutritional aspects of the products to be of their expected qualities then sale could be improved and reputation can be gained back by overcoming low perception kind of difficulty related to the products of the firm.
Stakeholders are the key associates of business who have concerns and interests regarding business performance with some degrees of expectations (Rothaermel, 2015). They are either direct associates or indirect business partners. Stakeholders are of two types - internal stakeholders and external stakeholders.
Stakeholders of pizza Hut are customers, suppliers, employees, government, community, and partners.
Main affected stakeholders seemingly from the issues are customers, community, government, food regulatory authorities.
Internal stakeholders of the firm are employees who are engaged in putting their efforts to serve customers by making foods that are in demand.
Stakeholder analysis is on basis of the metrics like people with high influence and high interest and performance relates to them is like manage closely. Another is high influence less interest and they are generally sort of satisfied. Low influence and low-interest people are kept informed and they are identified with a performance like monitoring with less effort (Bettis et al, 2014). From the analysis, in connection to stakeholder map, the most influenced and high-interest stakeholders are customers, suppliers, food regulation authority or government.
They are employees of the firm and managing committee. Their level of motivation is worst hit by the strategic issues described above. As they are directly engaged in the organizational work low performance and low profitability take a toll in their mindset.
From the above recommendation put in practice, their motivation could be lifted and they can contribute to the organizational development by means of hard work and better performance.
Employee engagement will be on the rise and the firm could thrive based on a group of motivated employees with highly eager management of Pizza Hut to prosper in the food industry (Hitt & Duane Ireland, 2017).
As mentioned in the above discussion, external stakeholders of Pizza Hut include customers, government, suppliers, and community.
The issues discussed above have varied effects on different types of stakeholders.
Customers develop a low perception of products of the firm since prices got slashed. Moreover, they need to understand their needs and accordingly require selecting their products. Customers who are fond of ethical aspects of business may lose interest if come to know of noncompliance issue of Pizza Hut (Doz, 2017).
Suppliers become skeptics of the profitability of the firm and may start worrying of late payment due to low profits or loss of reputation and related outcome like loss of sales (Eden & Ackermann, 2013).
Community or society may not be able to develop a higher perception of the firm due to its non-profitable function from the low perception of products.
The government has some expectations like employment generation by the firm and help the government to develop community programs and economic assistance. These cannot be ensured by the firm if business profitability is hampered due to low products perception based on the low nutritional value of products. The government also wants business houses to run their operation by complying with all legal aspects (Hill, Jones, & Schilling, 2015)).
With the recommendations put into practice, all these stakeholders will start having faith in Pizza Hut and business will gain their confidence. Customers will start thinking of availing food products and other stakeholders will feel good as important associates of Pizza Hut.
Pizza Hut is one of the famous restaurant chains in America. The firm has its business in Australia with success except for some troubles. The industry is highly competitive and the firm was confronted with an issue like focus by consumers in Australia on nutritional aspects of products. Several strategies have been recommended in this report so that the above issues based on the case study can be solved. Pizza Hut has many stakeholders like internal stakeholder including employees and management officials. External stakeholders are customers, suppliers, government or food-related regulatory authority. They are more or less affected by the above issue and can be satisfied if the recommendations can be put into practice.
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