Table of Contents

1.0 Introduction.....................................................................................................2
2.0 Background.....................................................................................................3
3.0 Situation Analysis...........................................................................................3
3.1 General environment analysis.....................................................................3
3.2 Industry Conditions (Porters Five Forces Analysis)..................................6
3.3 SWOT Analysis...........................................................................................7
3.4 Value Chain Analysis...................................................................................9
4.0 Strategic options for Pizza Hut.....................................................................13
5.0 Key selection criteria....................................................................................13
6.0 Recommendation..........................................................................................14
7.0 Conclusion....................................................................................................15
8.0 References.....................................................................................................16

1.0 INTRODUCTION
Pizza Hut is one of the flagship brands of Yum! Restaurants International which also has
KFC, Taco Bell, A&W and Long John Silvers under its umbrella. It is the worlds largest
pizza chain with over 12,500 restaurants across 91 countries. Pizza Hut was started in 1958,
by two brothers Frank and Dan Carney in Wichita, Kansas. They had the idea to open a pizza
parlor. They borrowed $600 from their mother, and opened the very first Pizza Hut. In 1959,
the first franchise unit opened in Topeka, Kansas. Almost ten years later, Pizza Hut was
serving one million customers a week in their 310 locations. In 1970, Pizza Hut was put on
the New York Stock Exchange under the ticker symbol PIZ. In 1986, Pizza Hut introduced
delivery service, something no other restaurant was doing. The first Indian outlet was opened
in June 1996 in Bangalore. In India, Pizza Hut has 139 restaurants across 36 cities. Pizza Hut
is known for quality, innovation and category leadership.

OBJECTIVES
1. To identify the general environment using Porters 5 forces model.
2. To analyze the organizations internal as well as external environment and the
competitors.
3. To identify organizations strengths, core competencies, weaknesses, opportunities,
threats and current environmental conditions.

SCOPE
In this assignment, we able to look at the general environment and its industry conditions by
using the Porters 5 model. Moreover, we have analysed the organisations internal and
external environment include its key competitor using SWOT analysis (strength, weakness,
opportunities and threat). We also performed value chain analysis and find out the business
level strategy. We able to find that the organization is consistent with the organisations
strengths, core competencies, weaknesses, opportunities, threats and current environmental
conditions. Other than that, by listing out the key selection criteria we can identify the affect
selection of strategies for the organization to develop action plans to implement the strategies.

2.0 BACKGROUND
The history of Pizza hut began in 1958, when what is now the world's largest pizza franchise
was born. Pizza Hut is the world's largest pizza restaurant chain and is a subsidiary of Yum!
Brands, Inc., whose restaurants total approximately 34,000 restaurants. The whole history of
pizza hut has been achieved through innovation, but the history of pizza hut really took off
with amalgamation into the Pepsi Company and more aggressive marketing techniques
especially in the take out market. It was founded in 1958 by Dan and Frank Carney. Their
friend suggested opening a pizza parlor they agreed with the idea that it could prove
successful, so that they borrowed $600 form their mother to start a business. At that time the
original Pizza hut was at Wichita State University with 25 seats.
When making the sign for the restaurant they only had enough room for nine letters and
because they made pizza's they wanted pizza in the name, that only left 3 letters and because
the restaurant looked like a hut they named it Pizza Hut. Their first franchise was opened in
1959 in Topeka, Kansas. In 1977, Pizza Hut was acquired by Pepsi co. On April 1, 2008,
Pizza Hut sent emails to customers advertising that they now offer pasta items on their menu.
The email (and similar advertising on the company's website) stated "Pasta so good we've
changed our name to 'Pasta Hut'.

3.0 SITUATION ANALYSIS

3.1 General environment analysis
One approach to do natural filtering for the particular business or firm is through General
Environment Analysis. When we talk about General Environment Analysis, we are actually
covers the bigger picture of the external environment (MACRO) of the business or firm.
There are six segments of General Environment Analysis which are known as PESTEL.
PESTEL is stand for politic, economy, social, technology, environment and lastly legal
requirement. This six components are normally beyond the ability to control of the firm itself
however can give an immense effect to the firm success or failure. Because of that, it is
essential for Pizza Hut to take this analysis as their consideration on their business strategy
setup, their product development furthermore on each decision that they need to make.
The first component of General Environment Analysis is Politic. Pizza Hut has successfully
entered the Malaysia market in the past three decades and until now Pizza Hut has been

survived for all the political factors in Malaysia that can impact their businesses. The
statements by the 6th prime minister of Malaysia Dato' Sri Haji Mohammad Najib bin Tun
Haji Abdul Razak with respect to implementation of GST (Good and Service Tax), which
started on April 1, 2015 is another challenge to Pizza Hut. GST is a tax required by the
government for enterprise that are operating in Malaysia include Pizza Hut with the rate of
6% for every supplies of good and services except for items that have been excluded.
Basically Pizza hut are facing two major difficulties caused by the implementation which is
first in regards to the increment of the cost of material to produce product and machine to
operate and second the potential reduction in demand by the consumer for the pizza as the
amount to be paid to get the pizza is now increase by 6% than previous. Pizza Hut need to
give careful consideration to this factors and think approaches to deal with it.
Second component of General Environment Analysis is Economic. Malaysia are currently
confronting turbulent time of economy. Inflation rate and exchange rate of currency are keep
increasing time by time. According to Central Bank of Malaysia Website shows the exchange
rate pattern are increasing drastically starting in mid-2015 until now and as 16/12/2015, one
ringgit Malaysia is proportionate to 4.3090 USD. As the currency decline, consumer are
having less purchasing power and for Pizza Hut, it is not a good sign for their business.
Demand for Pizza Hut will surely decrease as their product is consider as normal goods. In a
simple word, consumer will demand less for their product if the income is decreasing. The
unemployment rate in Malaysia has also increased, adding another challenge for Pizza Hut to
generate sales. Pizza Hut need to find strategies to attract more customers to purchase their
products.

From Central Bank of Malaysia, Official Portal

Next component is Social. Pizza Hut was founded by Dan Carney and Frank Carney in
Wichita, Kansas. An American restaurant chain and international franchise that has entered 91
countries with more than 12,500 restaurants. As we all know, pizza was not the staple food of
people in Malaysia. However, Malaysian citizen are adapting food from other culture/country
especially for the young generation. Furthermore, young couple nowadays are tend to simply
having take-out meal rather than cook at home. Basically Pizza Hut does not facing a major
difficulties for social but maybe Pizza Hut can put a variety in their menu and also include the
menu that are likely similar to local food so that can attract more customer in all level of age
and races.
Technology is also one of the component in general environment analysis. As we all know
Pizza Hut is the first restaurant chain and franchise international that provide delivery
services for their product. Technology like advance Management Information Systems can
help Pizza Hut to store and retrieve data and information regarding the delivery service to
ensure the smoothness of the services. Also, technology has invented vehicle that use less fuel
(hybrid) and this type of transport is suitable to be use by Pizza Hut to cut cost for their pizza
delivery services. Lastly, technology advancement help businesses disseminate information
about their product. Social network like Facebook and Twitter can help Pizza Hut to spread
information to market their product.
Fifth component of General Environment Analysis is Environmental factor. Protecting the
environment is everyone's responsibility so that all firms in every industry need to be
responsible for their action that can impact the environment. As restaurant chain, Pizza Hut
need to know what they are going to do with their waste product. They can make use the
waste product to be something that are valuable (recycle) and not simply discard it. Pizza Hut
can joint environmental campaign like Go Green and give support to ensure the
environmental wellbeing.
The last component of General Environment Analysis is Legal Requirement. In Malaysia
there is no special legal requirement set by the government for restaurant chain and
international franchise like Pizza Hut so far. For the time being, all regulations that has been
set up by government is just a normal regulations just like what has been implement to many
other countries. For example, Pizza Hut need to follow regulations that has been set in
Employment Act 1955 which discussing on the term of employment and conditions of work
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in order to operate legally. Besides, Pizza Hut needs to follow Operational Safety and Health
act of 1970 to ensure the safety of the workplace and environment that they provide for their
worker and all customers.

3.2 Industry Conditions (Porters Five Forces Analysis)

In 1980, Michael Porter introduced a model of competitive strategy to explain an industrys
position in a complex strategic environment. Porter (1998) states that the nature of
competition in one industry depends on the basic competitive factors which consist of the
following competitive factors such as new sellers threat, the threat of substitute products, the
supplier`s bargaining force, the power exerted by the customers in the market and intensity
competition among competitors, whereby they reflect the fact that competition in one
industry is so much higher than the existence of current players. All of the above five factors,
determine the intensity of competition in industry and profitability with each other, basically
identifying the industrial structure is considered as the beginning point for strategic analysis.
The threat of rivalry depends on how much competition there is amongst pizza businesses.
Competitive rivalry for Pizza Hut is very high with many current and potential competitors.
Pizza Huts competitor such as Dominos Pizza and Papa John sells similar products and are
about the same size as Pizza Hut are in competition. In the year 2014, Dominos dazzled
investors this week with third-quarter results that showed sales at stores open at least a year
grew 7.7 percent in the United States and profits jumped 8 percent while Pizza Huts parent
company, Yum Brands, said last week that Pizza Huts same-store U.S. sales fell 2 percent in
the most recent quarter and that its operating profit for the full year is likely to fall short of
initial forecasts (Halzack, 2014). They all engage in international business, fast food
franchise, dine in and delivery service, which creates strong competition. Low levels of
product differentiation also increase rivalry. On the other hand, there are some other local
pizza restaurants in competition with Pizza Hut as well. They offer cheaper price and
customers likely to switch brands. Dominos Pizza and Papa John using vouchers and
promotions to make dining more appealing to customers.
The threat of new potential entrants is very high. Threat of new entrants level is based on how
easy it is for new businesses to enter the existing market competition. Pizza restaurants do not
need big amount of capital to enter into the market. So pizza franchises and family owned
pizzerias are continuously opening for those people who have enough capital. Pizza Huts
sales and popularity in the U.S. have been on the decline for years now (Poon, L., 2015).
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Numerous competitors are doing things differently than Pizza Hut. Dominos dropped pizza
from its name, signalling a change in their offerings and Papa Johns is aiming for higher
quality. Those competitors could be a threat to Pizza Hut because it can reduce the market
share and lower the profit of the company.
The threat of substitute products is low for Pizza Hut. A substitute product can be regarded as
something that satisfies the same need (Riley, 2015). Instant pizzas and sandwiches that have
pizza flavours can cause threats although Pizza Hut has low threat of substitutes. Besides, the
availability of pizza recipes online urges people to try homemade pizzas due to increased
health consciousness. There are also many local pizzerias, which are successful as well, but
they

do

not

have

the

market

share

the

three

large

companies

possess.

The bargaining power of buyers is high. Customers who are highly price sensitive have a lot
of power. Nowadays, many people are more cautious when spending their money. With
plenty of pizza outlets available currently such as Dominos and Papa John, if Pizza Huts
price is higher they will shop elsewhere that offer affordable price. So the buyer power is
high when this is proved that the consumers have able to influence the price when they have
many choices.

The bargaining power of supplier is moderately low. The supplier power is the capability of
the supplier to control the cost and supply raw material used in the market (Yunna & Yisheng,
2014). Suppliers find themselves in a powerful position when there are only a few large
suppliers and the resource they supply is scarce. As for the pizza industry, there is a large
amount of suppliers which will usually equate to lower costs. This is because Pizza Hut
mostly uses raw materials like flour and cheese to make their pizzas.

3.3 SWOT Analysis

SWOT analysis is a structure planning methods that use to evaluaf,f,ff,fklfte internal
(strengths and weaknesses) and external factor (opportunities and threats) that will involve in
a business. And SWOT analysis of Pizza Hut will be identify to help Pizza Hut to improve its
operation management to achieve efficient in management.

Strength
Pizza Hut is an international franchise and is one of the largest restaurants chain in the world
as Pizza Hut owns and runs more than 30 000 of restaurants in the world. Pizza Hut originally
is based on Texas, USA and the company is specializes in the American style that will give an
impressive taste and try for the world so with Malaysia. Pizza Hut is well known by everyone
and even has some strong competitor such as Domino Pizza, Pizza Hut still earn a larger
market share and advantages because of its strong network, own full service restaurants and
delivery services as they have many of media partners that will advertise advertising such as
buy 1 get 1 free and e-voucher that attracts people from various age. Besides that, Pizza Hut
is known for its innovation as the restaurants will offer variety type of pizza and side dishes
for customers, and every few month or seasons, it will come out something new or more
flavour of pizza to attract attention of customer. And Pizza Hut build their loyal customer as
they will provide set of family and individuals meals with a reasonable price.
Weaknesses
The loyal customer or potential customer of Pizza Hut feel that there is decline satisfaction on
the product of Pizza Hut since communication skill between worker and customer are bad. As
the customer service is bad and ingredients of food are not fresh enough make customer feel
that performance or what Pizza Hut promise are not meet their expectation. And sometimes,
Pizza Hut spending too much time than what Pizza Hut promise towards customer to deliver
pizza and when dining in the restaurants, customer need to wait a long time to be serve and to
be seated, this situation will make customer feel that they are not getting better enough of
services and loss of their royalty. As Pizza Hut is selling variety of product, customer will feel
the menu is too complicated when they make their purchase. Besides that, there are some
internal conflicts within the company that lead to high turnover among the employee and
make Pizza Hut cant provide a better service to their customer and make customer change to
the competitor. Another weakness of Pizza Hut is facing higher overhead costs than
competitor as Pizza Hut charges delivery fees while its competitor Domino do not have and
Pizza Hut need do more promotion to attract attention of customer.

Opportunity
Although Pizza Hut have many outlet around the world, the company still could expand their
business to new market or other different country that have potential customer for example
Pizza Hut could expand the restaurants in India to gain opportunity and increasing their
market share. Besides that, Pizza Hut could gain their opportunity if the company can come
up with a new flavour or recipes of crusts and size of pizza to attract the customer from its
competitor such as create eastern taste of pizza as the industry normally only focus on
western taste. As people on these days are more concern in health, Pizza Hut may introduce
healthy and fresh ingredients on new taste of pizza for customer. This strategy will create a
fresh try and attract customer to try a new taste of pizza as the pizza is good for health.
Threats
Preferable for availability and affordability of customer has makes the competition in the
pizza industry increasing and make Pizza Hut face serious threats. For example, Pizza Hut
competitor, Domino and other local restaurants that selling pizza at lower price and provides
pizza that suitable with local people taste have make Pizza Hut getting more complicate in
retain their customer as Pizza Hut is selling the pizza in higher price due to using special
ingredients like cheese that increase the production cost. Besides that, Pizza hut facing threats
when many of its competitor introducing similar kind of pizza and food to capture the market
share in the pizza industry and make Pizza Hut losing their market share and customer as the
customer have variety of choice to choose in the pizza industry.

3.4 Value Chain Analysis

Success of Pizza Hut Company because of they are understood the importance of value chain
analysis. So, from that point of view this company will understand their competitor even at
any concept of business. Furthermore, value chain analysis also generates innovations and
improvement to maintain the stability of the business. Nowadays, many of the company like
to imitate the product and make it being differences from the original product.
Referring to Porters Value Chain Diagram the activities are divided into two broad
categories:
Primary Activities- Activities which relate directly to the actual creation, manufacture,
distribution, and sale of a product or service to the firms customers.

Support Activities- Economic activities which assist the firms primary activities.

Diagram 3.3 Value chain model from Michael E.Porters Competitive Advantage.
Explanation of Value Chain
Pizza Hut provides variety of orderings for their valued customers and it almost considered as
a pioneer of online food retailing, Pizza Hut has established an online business in three years
that produces hundreds of millions of dollars in revenue ( Kerin et al., 2011, p. 420).
Inbound Logistics
Purchasing all raw materials is required such as
1.
2.
3.
4.
5.
6.
7.
8.
9.

Cheese
Pepperoni
Sauce
Dough and Bread
Potato
Vegetables and fruits
Wheat
Spices
Chicken, Beef and Seafood

Operations
The responsibilities of Pizza Hut Restaurant General Manager have to run, manage and
maintain the business very well.
The function of some department will be conducted properly when all of the staff put on
being responsible and feeling of full ownership for their business. Such as:
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1.
2.
3.
4.
5.
6.

Managing the financial side

Product ordering
Production
Quality monitoring
Customer service
Training and development of staff.

Outbound Logitsics
Serving the customer with Hot and Oven Pizzas delivered strait to your door is tagline for
pizza hut restaurant. So, in order to make sure the tagline becomes real, Pizza hut have to
provide a good transportation to maintain their delivery services in good condition and
uniformity with the other franchise.
Marketing and Sales
Segmentation and Target Market Pizza Hut is family, working people, and student. While the
average age of the target customers is in between 16 to 35 years old. Pizza Hut has proven
their efficiency in working by conducting fasters services to the customer that have a hectic
lifestyle.
They always promote various menu that satisfied local tastes in multi-cultural customers in
Malaysia. The most important is they have to make sure all the ingredient having Halal
certificate from JAKIM. So, Muslim customer will be more confident and did not hesitate to
try any new product from Pizza Hut offered.
Competition is normal for fast food business. Pizza Hut in Malaysia discover a niche in full
service dine-in and take away restaurant compared to others fast food company. Basically,
customers most preferred good taste and high quality but at reasonable priced pizza. So, Pizza
hut have to increase productivity or lower cost and innovate continually to maintain its first
choice position among the customers.

Service
This company conducted services to their customers in many ways. Such as:
1. Motorway Service Area delivery service
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2.
3.
4.
5.

Online Order services : www.pizzahut.com.my

Pizza Hut Blog - blog.pizzahut.com
Updated social media like Twitter, Facebook and You tube
Customer Service Hotline Counter 1 300-88-2525

This showed the intensity of Pizza Hut to reach the customers is doing well. Even though,
there are some problems to settle with the customer when the customer services are respond
to their customers complaint.

4.0 STRATEGIC OPTIONS FOR PIZZA HUT

In order to ensure future success of the Pizza Hut chain, the following recommendations are
proposed:

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I.
II.
III.

Pizza Hut should start a customer loyalty program

Improve the menu
- Have better core product
Take & Bake
- Frozen, pre-made pizzas are available at the franchise and local grocery stores. This
service allows customers to take the pizza home and bake it at their own convenience.

5.0 KEY SELECTION CRITERIA

Pizza Hut should start a customer loyalty program:
Customers will be able to gain points for orders placed through the stores or websites.
Customers will be able to use points for free pizzas and other items. With the technology that
Pizza Hut uses for customer orders the consumer will not have to worry about carrying a
card; all the customer will have to do is give their phone number when ordering. Additionally,
customers can register more than one phone number for the account; for example, home,
mobile and office number. Finally, customers will be able to check the point balance online.
Improve the menu
An updated menu design can give you a fresh perspective on your menu - try highlighting
customer favourites, or eliminating dishes that aren't big sellers. A current, seasonal,
attractive menu design proves your dedication to your establishment and your customers'
dining experience. Or recreate the pizza ingredient by ingredient. Pizza Hut should go back to
the basics of putting the best ingredients in their primary product and recommitting
themselves to first-rate customer service in bringing their pizza to the masses.
Take and Bake:
Pizza franchises are always inventing new innovations to the traditional pizza concept,
consistently keeping their business up to date with current trends in the food industry. For
instance, frozen pizza has become increasingly popular in Malaysian households and due to
the growing demand for faster-to-prepare foods. So Pizza Hut can take advantage of this
trend. It will be convenient to just grab a gourmet pizza on customers way home from work
and cook it in their oven at home. Take and bake pizzas are a great way to get a quality meal
when time is limited.

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6.0 RECOMMENDATIONS
After thoroughly studying Pizza Hut case in Malaysia, we recommend to the management
that Pizza Hut should implement customer loyalty program strategy as customers can earn
points for every purchase.
Objective
To accomplish the goal of increased profits through a customer loyalty program
Target Market
The target market for this program is existing Pizza Huts customers with a national rollout to
make non-customers aware.
Description of Program
1. Use a simple point system
This is the most common loyalty program methodology. Frequent customers earn points,
which translate into some type of reward.

Prototype for Promotion

About Pizza Hut Rewards Program:

Users will earn five points for every RM50 they spend on qualifying purchases at
Pizza Hut when they pay using an enrolled Pizza Hut Member Card.

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Once a user acquires 200 points, he obtains a coupon for a free medium pizza of his

choice that is redeemable at any of the participating Pizza Hut restaurants.

In addition to this, users will receive exclusive, personalized, special offers to earn

bonus points for specific food.

2. Get data insights on customers by using technology
Loyalty programs have come a long way since the stamp card. There are a myriad of apps,
social media platforms, customer management systems and even Point of Sale systems that
can provide data and analytics, which means as a bricks and mortar retailer, its become
easier than ever to figure out more information about your customers and their shopping
habits.
Use the data gathered by each of these platforms to connect with your customers through
targeted email campaigns, SMS or social media. For an example, Pizza Hut can send out an
eDM to a section of database on a Friday morning with a special promo code which
customers can redeem for specials on drinks.

7.0 CONCLUSION
The findings revealed that Pizza Hut must increase the customer satisfaction and loyalty to
retain the customers and to gain more profit. Pizza Hut should improve the brand appealing
strategy that relates to aspects of how Pizza Huts product can provide a solution to their
customers needs and expectation. Apart from enhancing customer satisfaction, Pizza Hut
should also guarantee quality assurance with the hope to attract more buyers through the
creation of consumer confidence, a reputation as a preferred restaurant, or a marketing edge
with a registered restaurant status. Lastly, inflation decreases people's ability to pay for goods.
So, marketing manager should design more incentive programs that increase consumer
likelihood of purchasing and recommending the restaurant to others.

8.0 REFERENCES

Washingtonpostcom. (2016). Washingtonpostcom. Retrieved 27

January,

2016, from

https://www.washingtonpost.com/news/business/wp/2014/10/16/dominos-vs-pizza-hut-one-ispiping-hot-and-one-needs-reheating/

15

Tutor2unet.

(2016).

Tutor2unet.

Retrieved

27

January,

2016,

from

http://www.tutor2u.net/business/reference/porters-model-of-industry-rivalry-five-forces
Lindsay kolowich. (2016, no-date). 7 Customer Loyalty Programs That Actually Add Value.
[Weblog].

Retrieved

27

January

2016,

from

http://blog.hubspot.com/blog/tabid/6307/bid/31990/7-Customer-Loyalty-Programs-ThatActually-Add-Value.aspx

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