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Strategic Management Case Study - Papa John's

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Pauline Ford

on 1 March 2016

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Transcript of Strategic Management Case Study - Papa John's

Strategic Management
Case Study

By Adam, Alayna, Nikki & Pauline
Industry Forecast
Remote Environment:
Industry Environment:
Operating Environment:
Growth Strategy:
Confrontation Strategy:
When economy is down, consumers prefer take-out/delivery or frozen pizza.

Health concerns

Online ordering, social media, texts, emails
#1 meal of choice for Americans
93% of Americans ate pizza at least once a month

Industry Growth
Sales projected to grow from $42.8 billion (2012) to $49.5 billion (2017)
# of pizzerias expected to increase from 74,400 (2012) to 86,493 (2017)
Industry Environment
Barriers to Entry
Brand Loyalty: Bigger chains
Capital Requirements - Building, pizza ovens, ingredients
Not a tough barrier
Technology - Social media and online ordering
Must take advantage of them to stay competitive
Distribution Channels - Franchising system
Planned to add 220 to 250 locations a year
Tariffs - Not an issue
Quality Control Centers in several countries, tariffs shouldn’t be an issue

Threat of New Entrants

Supplier Power
Buyer Power

Substitute Availability
Perfect and imperfect substitutes are easily available
Competitors in "The Big Four"
Pizza Hut - Dine-in and Delivery, WingStreet sub-brand
Domino's - Delivery and Carry-out, had simpler menu but expanded in recent years
Little Caesars - Takeout, limited menu to focus on cutting costs instead of expanding product line
Other Competition - Independent pizzerias (48% market share)
Sit-down independent pizzerias expected to grow; offering healthier and more diverse products

Age Group: 25-44 age group (46.3% of consumers), 45-64 age group (22.8%), Under 25 (16.2%), Over 65 (14.7%)
7 out of 10 Consumers trying to eat healthier when eating out
Paying more attention to nutritional content and ordering healthier items
One of the fastest growing franchises in the world
Fresh, quality ingredients
Online ordering
Operating effeciency
NFL Sponsorship
Limited menu options
No dine-in option
Menu expansion
Healthier options
Consumer health-conscious trend
Major competition from the others in "The Big Four"
Pizza industry in slow/stagnant growth

Capitalize on the health trend - Focus on expanding healthier options

Retain customers as well as gain new ones
Positioning themselves as the healthier alternative to Pizza Hut, Domino's, and Little Caesar's

Will require heavy advertising
NFL Sponsorship - Peyton Manning

Directly identify who the "others' are in advertisements
Healthy living styles are becoming one of the top trends in our society, and it may cause a decline in demand for pizza and related products.
Papa John's faces intense competition from Pizza Hut, Domino's, and Little Caesars, who have all found ways to differentiate themselves.
Industry Forecast
Pizza industry will continue to grow slowly, but may start to decline soon due to consumers trying to eat healthier

Competitors will continue to find ways to differentiate themselves
Who, Why, Where, When, How?
John Schnatter’s pizza interest began in high school while working part-time as a dishwasher at a pizza and sandwich shop
While working at his father’s tavern after graduating with a business degree, the tavern began to struggle
Schnatter ended up selling his most prized possession- his 1983 Camaro- to bring in money
Saw this as an opportunity to savage his father's business for good while pursuing his own lifelong dream: owning his own pizza place
In 1984, age 22, he invested $1,600 in a used pizza oven; started selling pizza out of the back of his father’s tavern
Was almost immediately successful; opened the first Papa John’s later that year
Early success was founded on the ideas of superior customer service, a quality product, and a limited menu
The Start Up
Began franchising the concept in 1986
Launched an initial public offering that successfully raised $12 million
The 1000th Papa John’s opened in 1996
In 1997, Papa John’s accepted its first online order and by 2001, online ordering went nationwide
Expanded internationally in 1998 and by 1999 it had been expanded to 2,000 locations

The Come Up
Most identified NFL sponsor of 2013
Papa John’s became the world’s third-largest pizza chain and claimed a market share of 6 percent
Papa John’s’ headquarters, located in Louisville, Kentucky, operated 723 company-owned and 3,705 franchised establishments in all 50 states and 34 countries
Schnatter stepped down as CEO in 2005
In 2009, he found his Camaro he sold and bought it back for $250,000
Full transcript