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Strategic Management

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Khaled Al Neaimi

on 21 June 2013

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Transcript of Strategic Management

Khaled Al Nuaimi
Saleh Al Taher
Bader Rajab
Company Overview
•John Schnatter founded papa John in the year 1984.

•First restaurant opening was in 1985, and been going strong since the start.

•Recognized lead of the Pizza Category with more than 3,800 restaurants in all 50 states and 29 Countries.

•Papa Johns Headquarters is located in Jefferson town, Kentucky

•As of December 2011, there were approximately 16,500 employees.
John Schnatter and partner Bob Ehringer begin selling pizza out of a converted broom closet of Mick's Lounge in Jeffersonville, Indiana.
Franchising of Papa John's begins.
Company headquarters are shifted to Louisville, Kentucky
Papa John's goes public, raising about $12 million through an initial public offering
The Thousand Papa John's is opened
Schnatter opens the first Papa John's restaurant in a retail space next to the bar.
International expansion begins with opening of units in Mexico and Puerto Rico.
Company opens the 2,000th Papa John's restaurant; the U.K. pizza chain Perfect Pizza Holdings, Ltd. is acquired; Papa John's moves into third place among U.S. pizza chains.
Nigel Travis is hired as president and CEO, with Schnatter remaining chairman.
Mission Statement
Papa John's will create superior brand loyalty, i.e. "raving fans", through

1- Authentic, superior-quality products

2- Legendary customer service and

3- Exceptional community service.
Visible in Mission Statement
Mission Statement Evaluation Matrix
Product or Service
Concern for Survival Growth Profit
Concern for Public image
Concern for Employees
Core Values
Keep the Main Thing
Consistently deliver a traditional Papa John's superior-quality pizza.
Do what we say we are going to do when we say we are going to do it.
Earn the right to hold others to a higher level of accountability by being accountable to ourselves, our customers and our business partners.
Customer satisfaction must be consistent



Excellent expectation

The "best in its class" in everything we do.
People Are Priority Always.

Success our ability

Team work to achieve goals and expectations
Constant improvement
Positive mental attitude

Reflection of the value

Update the successful team members

Proactive and passionate about everything they do.
Never stop trying to surpass our previous best.

No matter how good we are, we will always get better
Vision & Objectives
“To be the best pizza restaurant chain in the world through quality and consistency while caring for our shareholders, customers and products.”
To continue expanding worldwide
To reduce labor cost and waste
Current Strategies
Competitive Rivalry
Supplier Power
Threat of New Entry
Buyer Power
Threat of Substitution
Porter's Five Forces Model
Buyer Power
Buyer Power
Threat of New Entry
• High entrants to industry because of open resources to open multiple stores.

• Low cost of threat because cost is high to open a pizza restaurant.
Competitive Rivalry
•Rivalry is High when comes to nationally owned pizza restaurants,
•Locally owned pizza is Higher since they are a lot of local owned pizza restaurants.
Buyer Power
Supplier Power
•Bargaining power of suppliers is High.
•Prices are high for locally owned pizza restaurant because they do not purchase resource in big amount.
•Bargaining power of suppliers is Low for nationally owned restaurants because they can demand lower prices from suppliers
Threat of Substitution
•Big market and varies from locally owned pizza restaurants to nationally owned.
•High threat since customers have a lot of choice on which restaurant pizza to dine in.
Buyer Power
•Bargaining power of buyers is High.
•If one-outlet prices are high compared to others then the customer will dine somewhere else.
•Customers prefer a restaurant with good prices and tempting promotion.
1. Product Development

Papa johns are trying to implement a new sandwich and salad Line called “PJ’s lite fair”.
- By implementing the new product line , Papa Johns will steadily increase the sales and target in the competitive industry.

2.Market Development
- Opening Franchise stores around the world.
- The company offers franchisees incentives for opening new restaurants before the end of 2013.
Major Competitors
Uncertainty of international governments
International governments may move to limit the number of U.S. firms
Low consumer confidence
Low spending
Gas prices fluctuation
Reduced dining out
Home cooking increase
Health awareness
Part-time employees
Disagreement with workers.
Defending the trademarks
Disagreement with suppliers.
1.Popular brand name (822 restaurants)
2.High quality control of pizza ingredients
3.Revenue was 1,217,882 in 2011, (increase of 8.12%). 1,126,397 in 2010
4.Home delivery service only within pizza restaurant chain in USA.
5.Strong Employee Training Program
6.Efficient restaurant layout since customers can see the entire store and watch pizza is being made.
7.Net Income increased from 51,940 in 2010 to 55,655 in 2011. (6.7%)
8.Sales (growth ratio) increased in 2010 from 0.04 to 0.08 in 2011.
1.number of outlets is smaller than major competitors (822 vs 13, 747 (pizza hut) and 8,000 (dominos)
2.Total Cost and Expenses increased in 2011 by 91,212 compared to 2010.
3.Our profit margin is 0.5% compared to the 0.6% percent of domino’s pizza out of the industry average percent of 0.23%
4.Focus on carry-out and delivery service therefore they do not have strong service culture in Papa Johns’ restaurant.
5.The focus on a differentiation strategy (similar rivals also engaging in a low-cost strategy value-menu)
6.Limited menu items comparing to competitors (healthy products, pizza is core, no salads)
7.Current Ratio decreased between 2010-2011 from 1.54 to 1.17.
8.Leverage ratio in 2011 comparing to 2010 showed growth because of debt increase from 0.18% to 0.20%.
1.Growing interest in health among customers (chicken wings, salads, etc)
2.Increase in technological advances for ordering food (25% of profit comes from internet orders)
3.Fairly untapped market outside US
4.Economy forcing people to trade down; i.e., choose less expensive options.
5.Diversification of food/flavor concepts
6.Busy lifestyle therefore people dine fast food
7.Americans eat 90 acres of pizza per day
8.Italian food is the 2nd most popular cuisine in the world.
1.Unstable economic environment around the world
2.Law suits that reduce the good image of company
3.Large numbers of competitors
4.Increase in cost of food ingredients
5.Evolving consumer tastes and preferences
6.Media attention to fast food & negative effects
7.Dependence on a sole or limited amount of suppliers
8.Low barriers to entry
Strengths / Opportunities
(S8 / O6)
Increase marketing efforts to attract more customers.
(Market Penetration)
(S2 / O1)

Introduce new, healthy menu items (whole wheat dough)
(Product Development)
(S4 / O2)

e awareness of ordering opportunities for customers through advertisement
(Market Penetration)
(S6 / O5)

oduction of calorie counting and organic ingredients
(Product Development)
(S7 / O6)

se marketing activities to attract new customers, increase number of outlets outside the us
(Market Penetration)
Strengths / Threats
(S5 / T6)
Good service will result with good feedback from the media
(Product Development)

(S1 / T8)
Gaining ownership of fresh competitors in the market
(Horizontal Integration)
(S2 / T5)
Quality control personnel in each area to maintain the cleanliness and Value of menu items
(Product Development)

(S7 / T8)
Create a new brand to attract people with different taste
(Related Diversification)

Weaknesses / Opportunities
(W3 / O3)
Increase number of franchises outside U.S
(Market Development)

(W5 / O7,8)
Increase marketing, create differentiation from rivals
(Market penetration, Product Development)
(W4 / O4)
ase outlets in the U.S. and improve staff training
(Product development, Market Development)

Weaknesses / Threats
(W1 / T2)
Involve in Corporate social responsibility activities, improve public relations
(Market Penetration)
(W2 / T4)
Own farms to produce goods to reduce cost
(Backward Integration)

(W6 / T5)
Introduce new menu items which is going to cover up the region (Ex kafta pizza)
(Unrelated Diversification)
(W7,8 / T1)
reduce costs by purchasing cheaper ingredients from local farmers
(Product Development)

SWOT Analysis
FS+ES=3.25+ (-3.75) =-0.5 (Y) CA+IS= (-2.75)+3.50=0.75 (X)
SPACE Matrix
- 1
- 2
- 3
- 4
- 5
- 6
Competitive Strategies
Backward Integration
Horizontal Integration
Forward Integration
Market Penetration
Market Development
Product Development
Relative Market Share
BCG Matrix
Market Growth Rate
Cash Generation
Cash Usage
Question Marks
Cash Cows
Low Market Share

High Market Grow rate
Recommended Strategy from the BCG Matrix
- Market Penetration

- Market Development

- Product Development
Grand Strategy Matrix
Rapid Market Growth
Quadrant 2
Quadrant 1
Quadrant 3
Quadrant 4
Weak Competitive Positioning
Strong Competitive Positioning
Slow Market Growth
- Retrenchment

- Related Diversification

- Unrelated diversification

- Divestiture

- Liquidation
Recommended Strategy from the Grand Strategy Matrix
Strategy Selection
EFE Total Weight: 2.24
- Hold and maintain

The Strategies Suggested from the IE Matrix

- Product Development
- Market Penetration
Delivery, Carryout, Dine-in
Operates in 86 countries
7,500 Units in the U.S.
4,774 Units Internationally
Delivery service concept called Wing Street
Dine-in service called Pizza Hut Bistro
Multi-brand stores
2004 Sales $8.7 billion
5 year growth of 3%
Target Markets
25 to 50 Years old
10 Crust Types
Sandwiches & Salads
Dessert Pizzas
Key Strengths
Multi-Brand units; Example Pizza Hut and KFC in one Building
Strong Franchise Relations
Fresh dough made daily
Book-it a program to get kids to read
Key Weaknesses
Unattractive Stores
Company is pushing to remodel all the stores to make them more inviting
Delivery, Carryout, Dine-in
Operates in 50 countries
5008 Units in the U.S.
2749 Units Internationally
This company expects to add between 200 to 250 stores per year
2004 Sales $4.63 billion
5 year growth 6.6%
Target Markets
College Students, Low income Families
3 Types of Crust
Key Strengths
Strong and proven growth and earnings model
Strong store-level economics
Strong and well-diversified franchise system
Key Weaknesses
Poor brand recognition with families
Limited product offerings
Premium Meat & Cheese
Pizza Available within 20 min time
Fresh Cut Vegetables
Differentiated food menu
Speed of Production
High Productivity + Well Trained Staff
Passionate towards their work
All Natural Sauce
Efficiency in Technology
Online Ordering System
Online Menu Availability
Easy Website Surfing
Hand toasted original crust
Strong Management
Brand Identity
Local Focused (United States)
Corporate Social Responsibility
Activity Map
External Factor Evaluation Matrix (EFE)
Income Statement (Vertical Analysis)
Income Statement (Horizontal Analysis)
Balance Sheet (Horizontal Analysis)
Financial Ratios
Explanation of Financial Ratios
Internal Factor Evaluation (IFE)
Online ordering
Credit card payments
Homemade pizza making
Online store communication
Demographic: Male-Female 20-45 with or without families
Middle to upper income.Geographic: All geographic areas.Psychographic: All people who enjoy quality pizza.Product Usage: Consumed at individuals home, office or dorms.
Liquidity Ratio
1.Papa John’s has a weak liquidity position with the current ratio of 1.17
2.Quick (acid) ratio, Papa John’s has a lower ratio of 0.92 which decreased from 1.31.
Leverage ratios
1.In terms of the debt to total assets ratio, Papa John’s increased by 2%
2.Debt to equity ratios, Papa John’s managed to be on the same percentage as per previous year.
Activity Ratios
1.The total assets turnover increased from 2010 by 3.13.
2.The inventory turnover decreased compared to the previous year which is due to the increase in inventory from 17,402 to 20,091 million.
Profitability ratios
1.The return on total assets has been increased by 0.02
2.The profit margin has not changed comparing to two years
Growth ratios
1.The EPS increased from $0.4 to $0.8, increase of more than 100%.
2.In 2011, the company’s revenues were up by 8%.
IFE Total Weight: 2.61
Advantages & Disadvantages of Selected Strategies
5.565 (10%) of net income to be used to increase appearance on local TV channels and radio.
Create “healthy friendly” menu by introducing calorie counting in the menu and a whole wheat dough
Quantitative Strategic Planning Matrix
Long Term Objectives:

Increase sales by 22% annually to reach a total revenue increase of approximately 3 million in 2 years through the introduction of new menu items
R&D annual objective:

Develop appropriate whole wheat dough that is to be introduced within 5 months period.
Marketing annual objectives:

Increase customer awareness by 15%
Purchasing annual objectives:
Arrange delivery of the needed ingredients (whole wheat) for the best available price
Hierarchy of Aims
HR annual objective:

Design a training program for waiters
Operations annual objectives:
Use various selling techniques to reach minimum of 10% quota on the new dough pizza sales.
Research new design of the menu that will include calorie count within 3 month time period. Calculate calorie value of all menu items within 2 month time frame
Aggressively advertising new healthy menu options, organic ingredients and on the company website, publications and social media in 1 year time frame
Through contacting local farmers that produce organic food
On new menu items, up selling techniques. For kitchen staff: on dough recipe
Internal Issues
Create “healthy friendly” menu by introducing calorie counting in the menu and a whole-wheat dough.
Human Resources Issues
•Training employees on healthy menu items instead of hiring new to cut on cost.
•Motivation plan
•Up selling techniques
Marketing Issues
•Advertising will increase by 3%.
•New product items will be marketed in every papa john branch.
•Advertising will need to attract all market segments.
Papa Johns Production and Operation Issues
•Finding specific suppliers to provide with healthy items.
•Cost of healthy products is more costly.
Human Resources
Develop appropriate whole wheat dough that is to be introduced within 5 months period. Research new design of the menu (include calorie count) during 3 month time period. Calculate calorie value of all menu items within 2 month time frame
•Ensure that each product meets all regulations, legal requirements, and the highest standards in quality control.

•Submit a report on calorie count of all food items used to prepare pizza and other menu items.

•Develop outlines of required additions of supplies, training requirements within 1 month period.
Increase customer awareness by 15% by aggressively advertising new healthy menu options and organic ingredients on the company website, in publications and social media in 1 year time frame
• Submission of a monthly report on customer awareness on healthy options available
•Quarterly submission of advertising campaign
Use various selling techniques to reach minimum of 10% quota on the new dough pizza sales. Create a supplier base of the needed ingredients (whole wheat) for the best available price through contacting local farmers that produce organic food.
•Submit number of available suppliers within 1 month time frame
•submit average market prices of needed additional food items within 1 month
•submit 5 most desirable price\availability options within 1 month
•Employees need actively promote new menu item
•Monitor the quality of food on a daily\weekly\quarterly basis and submit reports accordingly and summary report at the end of the fiscal year.
Use 10% of total revenue to finance the project (Provide $3 million to R&D, $3 million to production (new product purchasing), $2 million to marketing, $4 million for training purposes.)
•Create proposed financial statements for all departments of the company to reduce the risk of acquiring long-term debt.
•Distribute required amounts according to the annual objectives
•Implement control measures to reduce possible unnecessary spending.
Design a training program for waiters: on new menu items, up selling techniques. For kitchen staff: on dough recipe.
•Submit report upon the completion of the training within 7 days.
•Ensure that all employees actively promote new menu item and monitor the success on monthly basis
•Ensure that employees are aware of the calorie count of all menu items
•Provide continuous training on food quality and customer service
Resources Allocation
$4 million to R&D (test dough, increase in personnel)

$3 million to production (new product purchasing)

$2 million to marketing (publications, social media)

$3 million for training purposes (training space, materials, and trainers)
Market Segmentation
Geographical Segmentation
Demographic Segmentation
Psychographic Segmentation
Behavioral Segmentation
•South and North America
•Middle East

•Young professionals
•Working parents

•Family oriented
Social Class:
•Upper middle
•Lower middle
Usage rate:
• Heavy
• Occasional
User status:
•Users of competitors’ products
Product Positioning
Before Implementation
High Quality Ingredients
Low Quality Ingredients
Low Customer Service
High Customer Service
High Quality Ingredients
Low Quality Ingredients
Low Customer Service
High Customer Service
After Implementation
John H. Schnatter

Founder, CEO, and Chairman
Christopher J. Sternberg

Senior VP,
Corporate Communications and General Counsel
Timothy C.O’Hern
Senior VP
Thomas V. Sterret
Senior VP, International
Anthony V. Thompson

Executive VP, Global Operations and President
Lance F. Tucker

Senior VP, Chief Financial Officer and Treasurer
Andrew M. Varga

Senior VP, Chief Marketing Officer
Organizational Chart
Projected Income Statement
Thank You For Listening
1. http://www.hoovers.com/company-information/cs/company-profile.Papa_Johns _International_Inc.d0629a775e51ce6d.html
Full transcript