Product-Market Growth Matrix Essay

Introduction Pizza Hut is based in Wichita, Kansas USA 19581. A woman and her two sons created pizza recipes. From here, a family friend advised the sons to open their own Pizza Parlor. 2. Pizza Hut is one of the flagship brands of Yum! Brands, Inc. , which also has KFC, Taco Bell, A&W and Long John Silver’s under its umbrella. Pizza Hut is the world’s largest pizza chain with over 12,500 restaurants across 91 countries 3. In India, Pizza Hut has 133 restaurants across 34 cities, including Delhi, Mumbai, Bangalore, Chennai, Kolkata, Hyderabad, Pune, and Chandigarh amongst others. Yum!is in the process of opening Pizza Hut restaurants at many more locations to service a larger customer base across the country 4. Borrowing $600 from their mother, the two brothers purchased second-hand equipment and rented a small building on a busy intersection in Wichita, Kansas. The result of their efforts was the first Pizza Hut and the foundation for what would become the largest and the most successful pizza restaurant in the world 5. Pizza Hut franchisees exemplify the entrepreneurial spirit, which launched their system back in 1958. Through interest and initiative, the Pizza Hut system was able to develop new territories in the United States and overseas. Today, franchisees and joint-venture partnerships account for more than half of the Pizza Hut system’s total units. Their development on the international front is a good indication of the growth that has characterized their system. Following the opening of the first international restaurant in Canada in 1968, the Pizza Hut restaurants quickly appeared in Mexico, South America, Australia, Europe, the Far East and Africa. Today, Pizza Hut operates in more than 100 countries and territories throughout the world 6. When Pizza Hut opened its outlet in Baroda, Gujarat they firstly thought that they should make a new pizza to the recipe of the local style in order to attract the local population. g They decided to provide the pizza according to the customer’s taste of choice7. This essay aims to answering the following question: â€Å"Should Pizza Hut open a new outlet in Baroda? † 1. http://www. pizzahut. com/OurStory. aspx 2. http://www. pizzahut. com/OurStory. aspx 3. http://220. 226. 195. 78/pizzahut. co. in/about_us. php 4. http://220. 226. 195. 78/pizzahut. co. in/about_us.php 5. http://www. pizzahut. com/OurStory. aspx 6. http://www. pizzahut. com/OurStory. aspx 7. (Manager of Pizza Hut). Personal interview RESEARCH QUESTION Pizza Hut is an established brand all over India. To increase the growth of the new outlet, Pizza Hut recently set up a new market research on the outskirts of Baroda with the investment of __ Basically, Pizza Hut firms in India send Managers to spread proper awareness about their new outlet among the customers through different types of advertising and keep the customers informed about their advancements in current outlets 10. Commercially, I expect that the opening of the new branch will lead to an increase in sales in Baroda, Gujarat, and could increase the market share of Pizza Hut. For this reason, they want to be able to successfully market their new firm when it is commercially launched. As previously mentioned, to increase its growth and successfully market their upcoming outlet, Pizza Hut has been reviewing various promotion strategies like price reduction, to increase the price in their marketing budget and increase in number of staffs 11. So increasing the production by opening the new outlet and to increase the number of staff to work in both of the outlets is a strategy that Pizza Hut is strongly considering in order to increase their growth in the domestic market 12. 8. (Manager of Pizza Hut). Personal interview 9. (Manager of Pizza Hut). Personal interview 10. (Manager of Pizza Hut). Personal interview 11. (Manager of Pizza Hut). Personal interview THEORETICAL FRAME WORK The Growth of a business can be measured in many different ways such as assets, sales revenue, operating profit, market share, value added, and number of employees 13. As information of pizzas is involved, Pizza Hut believes that what they bring new in the market is not compared with any of the products of any another firm which is selling pizza’s14. I commercially expect that the opening of the new firm will lead to increase in sales in Baroda, Gujarat, and could increase the market share of Pizza Hut. Due to this, they want to be able to successfully market their new firm when it is commercially launched. Pizza Hut aims to convince the customers to set down their new business, (target market) 15. The other promotional method used by Pizza Hut and to spread the awareness about their new outlet is to do market research. I did the market research for Pizza Hut so that they can locate their new outlet where there are more potential consumers. High income group was also asked about the opening of a new outlet, before it is brought up in the market. Pizza Hut believes that the methods used to research on opening a new outlet take hold of the attention of the customers for long time, so that they can visit the outlet frequently16. For reasons mentioned above, growth is widely regarded as the most favorable method to increase the profit level. 12. http://www. tutor2u.net/business/presentations/strategy/businessgrowth/default. html 13. (Manager of Pizza Hut). Personal interview 14. _________ 15. (Manager of Pizza Hut). Personal interview 16. (Manager of Pizza Hut). Personal interview METHODOLOGY To reach a suitable conclusion, an in-depth qualitative and quantitative analysis shall be conducted by using different business tools to the primary data as well as the secondary data collected. The primary data contains the interview of the Manager of the Pizza Hut outlet which already exists, the opinion of the customers who visit the exiting outlet and a few other people. Market research: This will contain the content of the market research and what it entails. This was conducted by me. Analysis of market research: This will contain the graph and an explanation about how many people will visit the new outlet (assumption) from the old outlets daily earning. Swot analysis: This will contain the strength, weakness, opportunity, and threats of the business for opening the new outlet. Ansoff’s matrix: A model which identifies growth strategies for a business and it is based on an analysis of their products and their market. Pest-g: This will identify the political, economical, social and technological, as well as the environmental problem of the firm. Cost analysis: Cost analysis will be conducted to find out the quantifiable and unquantifiable cost involved in increasing the personal selling. MARKET RESEARCH Market research is the collection, collation and analysis of the data relating to the marketing and consumption of the goods and the services18. Market research helps in opening the new outlet, tells us were we stand in the market and how we can improve. How many times does the customer visit Pizza Hut? |Group of people |More than once a week |Once a week |Fortnight |Monthly or less | |Family |04 |20 |45 |25 | |College students |35 |50 |36 |19 | |Above 50 |00 |05 |36 |30 | |Teenagers |40 |45 |26 |17 | (18) Here the market research data is organized according to age group. |Market research done of the location |Yes |No | | |(%) |(%) | |Sayajigunj |66 |34 | |Karelibaug |68 |32 | [pic] Here I have conducted the market research for the two different areas and I have come to a conclusion that in Karelibaug there are 90% of people saying yes to open the new outlet 20. This is due to one outlet of Pizza Hut not providing delivery services to distant areas21. So if it is in that area then many people can visit the outlet and this will give more profit to Pizza Hut. As people from Fathegunj, Sayajigunj, city area and Karelibaug can visit as it will be nearer to them 22. 17. market research done by interviewing different people 18. business studies book by Dave hall pg 147 19. interviewing different age group of people 20. People gave reason that why in these two areas. 21. Told by the people staying in that area. ANALYSIS OF THE PRIMARY DATA The finding of the market research which I have done for Pizza Hut will be analyzed to identify specific market attributes such as the manner in which the customer will respond more. In addition to this, it will identify important information such as the effectiveness of the market research results given by the customers will be discovered. From this data, it will be possible to judge the weaknesses of Pizza Hut. Recommendations will then be made by me on methods which Pizza Hut can adopt to overcome these weaknesses. Once Pizza Hut overcomes these weaknesses, it will have a better chance to successfully market their new outlet, and at the same time increase the sales from their current outlet. The graph below compares the frequency of teenagers who visit Pizza Hut as opposed to college students. [pic] 22 The ratio of college student is more than teenagers23. This means that on an average, college students visit Pizza Hut more compared to the teenagers. This graph tells us how many families and those above 50 wish to go to Pizza Hut. [pic]24 22. market research done by interviewing different people 23. (Manager of Pizza Hut). Personal interview 24. market research done by interviewing different people SWOT ANALYSIS Swot analysis: swot analysis is an analysis of the internal strength and weaknesses and the external threats and opportunities that Pizza Hut faces. The swot analyses will illustrates how the external opportunities and the threats can be matched with the Pizza Hut’s internal strength and weaknesses to result in a set of possible strategic alternative. This would identify Pizza Hut’s distinctive competencies and the opportunities that the Pizza Hut is not currently taking a due to lack of appropriate resources swot means : S-strength W-weaknesses O- Opportunities T-threats Strength(S): these are the things which I observed, Pizza Hut and their staff do and which is the strength for them: They are well known for their pizzas 26. They provide good quality, taste and quick service 27. Their good service; grooming, cleanliness, and good interaction with the customers make customers want to visit them again 28. Due to their good taste and grooming, the other domestic pizza outlets try to compete and learn from Pizza Hut 29. Reputed brand, market excepted very easily, Due to the above, Pizza Hut makes good profit30. Pizza Hut has the ability to provide it’s customers with deals, offers and specials so that they can save money and get more value. This is a strength for the organization as it makes customers purchase more while receiving more value for their money. Customers use these vouchers and specials when ordering in bulk or for everyday orders. Weaknesses (W): these are the things which I observed and Pizza Hut does poorly and in which they can be affected are: During the weekends, Pizza Hut is full of customers, during that time the service is poor 31. There is little to no place for the people to sit who are waiting to be seated32. Availability of other multinational outlets like Mac Donald and Dominos will be the competitors of Pizza Hut too. 33 Opportunities (O): the directions which the business could take in future like: By opening a new outlet there will be an opportunity for growth of the business and development for employees34. If a person was previously employed by Pizza Hut and has passed the Pizza Hut course with the appropriate certificate, then they are able to receive double their salary35. Pizza Hut is a branded and a multi-national chain, therefore it allows staff salaries to be double that which is offered to other staff in other company’s36. Threats (T): the threats to a business arise from the activity of the competitors and failing to take opportunities like: Pizza Inn is the domestic pizza outlet in Baroda; both of them are doing very good profit-wise therefore Pizza Inn is a threat for Pizza Hut37. Pizza Inn is a well-known organization to the Baroda community as it also provides good quality and taste and this is a threat to Pizza Hut as this is one of Pizza Hut’s strengths. 25. business studies book by Dave hall pg 38 26. http://www. tutor2u. net/business/strategy/SWOT_analysis. htm 27. (Manager of Pizza Hut). Personal interview 28. (Manager of Pizza Hut). Personal interview 29. (Manager of Pizza Hut). Personal interview 30. (Manager of Pizza Hut). Personal interview 31. (Manager of Pizza Hut). Personal interview 32. (Manager of Pizza Hut). Personal interview 33. (Manager of Pizza Hut). Personal interview 34. interview taken while doing market research 35. (Manager of Pizza Hut). Personal interview 36. (Manager of Pizza Hut). Personal interview 37. (Manager of Pizza Hut). Personal interview 38. (Manager of Pizza Hut). Personal interview THE ANSOFFS MATRIX The ansoff matrix: The Ansoff Growth matrix is a tool that helps businesses decide their product and market growth strategy38. Ansoff’s matrix will allow the firm to consider the alternatives open to it for entering a new market or entering new product into the market39. Product | |Existing |New | |Existing |Market penetration |Product development | |New |Market development |diversification | Market Market penetration: market penetration is used to achieve the growth in the existing market with the existing product40. Market penetration uses the marketing mix to push the product which is gaining as much as market share and as quickly as possible41. Market penetration seeks to achieve four main objectives: Increase usage by existing customers, maintain or increase the market share of current products42. Pizza Hut is the branded outlet so that people use the substitute outlet less (Pizza Inn, u s pizza, Uncle Sam’s Pizza, and Dominos). Pizza Hut encourages customers to use their outlet more regularly by providing new taste to the customers43. Product development: this is concerned with marketing new or modified products in the market for the customers 44 like: Normal pizzas intend to act as a replacement for the new product which will be introduced45. Market development: this involves the marketing of the existing product in the new market such as: As Pizza Hut has one outlet already in the market, they will open a new outlet in Baroda but in a different area. They will introduce some new products when they open their new outlet. However, they will need to continue the marketing of their old and classic products along with the new products46. Diversification: this will occur when the product is developed for the new market. Diversification allows a business to move away from the trust upon the present market and product47. 38http://www. tutor2u. net/business/strategy/ansoff_matrix.htm 39oxford study course book by jo toy pg 32 39. http://www. tutor2u. net/business/strategy/ansoff_matrix. htm 40. business studies book by Dave hall pg 239 41. oxford study course book by jo toy pg 32 42. http://www. tutor2u. net/business/strategy/ansoff_matrix. htm 43. (Manager of Pizza Hut). Personal interview 44. (Manager of Pizza Hut). Personal interview 45. Manager of Pizza Hut). Personal interview 46. business studies book by Dave hall pg 239 PEST –G ANALYSIS Pest g: this will look at the external environment and the global factors that may or will affect a business. It can provide a quick and visual representation. It is usually divided into five external influences on a business-political, economic, social, and technological and green46. Political: this is concerned with how political developments, regionally, nationally and internationally might affect a business’s strategy47. Political development is not so relevant in this instance as Pizza Hut has an existing established branch which is not affected by this external factor, the political issues are not so important because they do have the outlet in India and Baroda. For opening the new outlet government factors are not important as it already has opened one outlet48. Economic: this might include the analysis of a variety of economic factors and their effect on business they include: consumer activity, economic variable, government policy, the effect of change in product and labor markets49. Pizza Hut’s outlet which is Baroda, Gujarat – has competitors in Baroda, Gujarat50 however, these are not Pizza Hut branches – they are other competitors such as Dominos and Pizza Inn. These have an economic external influence as it affects the consumer activity as customers may prefer to go to Dominos if there is better service, quality and price offered. The new place suggested trough market research, there mainly the people with their families and above 30 will visit. It is not that the youth’s wont visit but there are less youth’s in that area compare to the area where the current Pizza Hut is located. Social: how is Pizza Hut affected socially? It is not likely that Pizza Hut will be affected socially as each age group visit’s Pizza Hut51. Due to the location of the old Pizza Hut site (located near commercial places) it attracts a lot variety of consumers. The new site will be located in a suburb where there are families therefore the market will be families. When a whole family eats a meal at Pizza Hut, they tend to splurge on extras such as drinks and sides. This is positive for the organization in terms of profit. However, in Karelibaug, families won’t come daily or once a week to have pizza’s so it can be affected socially. Generally in the new outlet older segment people will visite. Technological: Businesses operate in a world of rapid technological change. The organization needs to regularly review the impact of new technologies upon their activities. The product can become old-fashioned quickly. The production method can become out of date52. Pizza Hut looks that how they are different from other firms such as Pizza Inn, Domino’s pizza, us pizza and many other domestic outlets for pizza’s. Even Mac Donald’s is a competitor. One technological factor which could effect the environment is how Pizza Hut creates its products such as the production line in which a pizza is made. 47. business studies book by Dave hall pg 38 48. business studies book by Dave hall pg 38 49. (Manager of Pizza Hut). Personal interview 50. business studies book by Dave hall pg 38 51. (Manager of Pizza Hut). Personal interview 52. (Manager of Pizza Hut). Personal interview53. business studies book by Dave hall pg 38 COST ANALYSIS Cost analysis is currently a some what controversial set of methods in program of evaluation one reason for the controversy is that these terms cover a wide range of method, but are often used interchangeably. There are two types of cost associated with hiring new place. They are fixed cost and variable cost. Both these cot will be identified to check the financial growth of the undergoing new outlet. Both are classified as below: Fixed cost Hiring charges foe the new place Salary of the staff Minimum hiring charges of telephone. Variable cost Production cost Office usage Approximately amount of profit for the new outlet May by through which you will be able to fine out pbit (profit before interest and tax), pbt (profit before tax), pat (profit after tax). | | |Per month |Per annum | |Sales | |1350 |16200 | |- variable | |60 |720 | | |contribution |1290 |15480 | |- fixed cost | |45 |540 | | |PBIT |1245 |14940 | |- interest | |78 |940 | | |PBT |1167 |14000 | |- tax | |350 |4200 | | |PAT |817 |9800 | 55 From the above assumption we can conclude that profit on pbit is approximately equals to 65. 60% |1260 |720 | |100 |? | |= 57. 14 | This is the variable cost |1260 |540 | |100 |? | |= 42. 58 | And this is the fixed cost. Variable cost of new outlet is higher than its fixed cost about 14. 12. Contribution of new outlet is about 96% which can be calculated by following formula: |Sales |contribution | |16200 |15480 | |100 |? | |= 96 | 56 Variable cost depends upon number of units of new outlet but the fixed cost is fixed. Cost may also be defined in different class For example: production cost office cost selling and distribution cost We can include raw material cost for the pizza’s and service cost for the pizzas. In production cost all the administration expense and legal and professional charges in office expense. We can bifurcate the transportation of the delivery man and advertisement expenses as selling and distribution charges. Selling and distribution charges can depend on number of unit sold and cost up till cost of goods sold always depends on goods sold57. 55. (Manager of Pizza Hut). Personal interview 56. (Manager of Pizza Hut). Personal interview 57. (Manager of Pizza Hut). Personal interview INVESTMENT APPRAISAL Investment appraisal is the evaluation of an investment project to determine whether or not it is likely to be worthwhile. It is essential to appraise the investment Pizza Hut will undertake and to establish weather it is going to be beneficial. Below are the techniques, which will assist appraising the investment: †¢ Pay back period and †¢ Net present value Pay back period This technique assesses the number of years it will take foe the Pizza Hut to recover all their initial costs. This is a very simple tool as it ignores most of the costs the firm would incur due to opening a new outlet. The cash flow is also an approximate estimate when there are too many variable then Pizza Hut cannot control. They assume that they have more customers and 10% more profit throughout the year than what they had the previous year. There were a few assumptions made for the cash flow. These were that the machine they used to make pizza’s worked at 100% capacity and all products were sold. |Pay back period for the new outlet | |Year |Net cash flow | |0 |-10,00,000 | |1 |2,00,000 | |2 |6,00,000 | |3 |3,00,000 | |3,00,000 |12 months | |2,00,000 |? | |= 8 months | You can get 2,00,000 in 8 months so our net pay back period for investing RS 10,00,000 in new outlet is 2 years and 8 months. Analysis of pay back period. The pay back technique has shown us that it takes 2 years and 8 months to pay back for the new outlet. However, we learn form the market research and swot analysis that there are mainly people above 35 hence it would be smarter from them to do some thing which might attract the youth from other areas and influence them to visit that outlet too. Net present value Net present value incorporates the principle of time value of money by converting payments at different times to the equivalent values at the common reference time. The discount factor used is 4% as the interest they could have got from the bank currently is 4%. I then did NVP. |Year |Net cash flow |Discount factor 4$ |Present value | |0 |-10,00,000 |1 |10,00,000 | |1 |2,00,000 |0. 9615 |1,92,300 | |2 |6,00,000 |0. 9246 |5,54,760 | |3 |3,00,000 |0. 8890 |2,66,700 | Analysis of net present value The new outlet will generate ____ amount after 5 years. ORGANIZATIONAL CHANGES To effectively deal with the increase in the growth by expansion, it is necessary for there to be some internal changes. It is very necessary that the staff’s grooming should be done properly, so that they can serve the customers in a professional manner. When they open their second outlet from a single, Pizza Hut will have to keep some one on whom they can trust and can rely on and they have to shift a few staff from the present one to the opening one. As they opening a new outlet, they are turning from one into two outlets. Due to this the position of many of the staff’s have been will be changed. This change does not affect their work, they have an effective communication channels among the employees. This could be in the form of giving the staff a proper atmosphere in which they can settle easily, the changes in the outlet and the goals that the Pizza Hut wants to attain. RECOMMENDATION Starting up the new outlet, initially it will not give them that much profit but it will definitely give some. For this: 1. Pizza Hut should shift few of their staff and of course one of the leader to supervise from the existing outlet to the one which will open in the near future. 2. They should appoint few new staff for the existing outlet and also foe the future’s outlet so that the one who are new in the new outlet can get t know more from their seniors who are shifted from the existing business. 3. For marketing about their new outlet they should restructure they method in which the do the marketing. 4. The market research was done on few people in Baroda, Gujarat, and not in the whole of Baroda. So the extensive market research needs to be conducted across the whole Baroda, Gujarat to get the proper kind of information about the location. CONCULSION The report shows that Pizza Hut should pen the new outlet in Baroda, Gujarat, India. If Pizza Hut increases their staff, then it would be in a better position to serve the customers and if they shift few of their trained staff and give training to the new staff to whom they are going to appoint then they would also be in the better position. They should also shift one of the managers to the new outlet so that in case if any problem occurs then they will be able to handle it. The financial aspects of the undertaking are not the problem for the Pizza Hut as it is in a strong financial stage. But the recruitment of the new staff cold affects the staffs. The environment and the working portfolio of the staffs will be changed as Pizza Hut will reconstruct the marketing set-up. So before employing the new staff Pizza Hut should let the old staff settle into their working environment. As previously said, the personal interview were only conducted in Gujarat, and the result of this only represented he view of customers from Gujarat. Hence, the further market research needs to be done to get a broader perspective on this study. The indirect costs associated with the undertaking the project will have to ascertain. As previously mentioned, one indirect cost is that a large recruitment could lead to a decrease in the motivation of the existing staffs. Other indirect cost could be in the form of the training program for the new recruits to a specialist company, so that it is done efficiently. If the new recruits do their job well, serve the customers in the proper way, follow the training properly, are groomed very well and give the best service then this would motivate the customers to visit them again. Graph showing the frequency of visits to Pizza Hut by college students and teenagers 0 10 20 30 40 50 60 More than once a week Once a week Fortnight Monthly or less time period College students Teenagers graph showing the frequency of visit to Pizza Hut by families and people above 50 0 10 20 30 40 50 More than once a week Once a week Fortnight Monthly or less time period Family Above 50.