Category: Pizza

Strengths

Unusual menu choices

Since its establishment, Karam Pizza has seen a tremendous growth because of the extraordinary menu choices its clients have. Karam Pizza brings together wide variety of Italian and Indian cuisines. This extraordinary menu is the Karam’s biggest strength that increases its competitive advantage.

Quality food

Along with providing unique menu, the pizzerias are also committed to providing quality products to its customers. Given the fact that the competitors are capable of copying and introducing the pizzeria unique menu, the only way to differentiate its food is through quality. This will ensure the customers sustainability.

Large customer base accruing from the working vicinity

The large pull of customers is strength to the business. The customer base consists of the delivery businesses as well as the increasing number of the office workers. These large pools of customers will result into increases in pizzeria sales revenues. This will eventually be used for its expansion and growth.

Strong reputation

The reputation of the business as the only restaurant that offers unique and best quality is another strength of the business. The reputation ensures increased clientele as well as helping in building the brand loyalty. The strong reputation the business has built in the last three years will help it retain its customers. It will also aid the business gain the needed competitive edge.

Weaknesses

Incapacity to service the incoming customers

The pizzeria-limited capacity to service large pool of walk-in customers contributes negatively to its sales revenues. As the restaurant reputation grew the capacity to serve its customers especially during dinnertime was limited.

The limitations were seen in terms of the quantity of food as well as efficiency in delivering services. Order delays together with low food productions have made the restaurant lose some of its customers who made it succeed.

Limited funds

The restaurant lack of funds is a hindrance to its rapid expansion. Karam Pizza is just a mere one-shop restaurant. Therefore, it has not generated enough pool of capital to expand on its operations. Moreover, the restaurant is not large enough to benefit from the economies of scale. Lack of enough capital has a negative effect on its capacity to deliver services to its clientele

Very focused on specific kinds of food

Another weakness the restaurant is facing is the lack of diversification. The restaurant specializes only on one of its combined cuisines. Unlike its competitors that have diversified offers, the restaurant only offers one best combination.

This would lead the restaurant into losing its competitive edge. This is because some independent competitors are adding favorite items into their menus thus luring more customers who are loyal to Karam Pizza.

Opportunities

Rapid growth reported in the market segment

There is growth potential in the restaurant business as more and more cuisines are needed. Moreover, the growing number of the working class in the community the restaurant operates provides a new opportunity for the business growth. Besides the growing number in the walk-in customers, there is simultaneous growth in the number of business within the area. This also presents a growth opportunity for the business.

New menus that are without direct competitors

The restaurant has an opportunity to offer new menus that are not presented by other competitors. Offering a new menu that is different from those in the market can provide the restaurant with an increased competitive edge. The opportunity to offer new menu with no direct competitors will increase the demand for its food items thereby increasing the customer base.

Increased demand for take away

The restaurant should take advantage of the increasing demand for take-away. The increasing number of take-away customers that throng the restaurant during evening hours offers an incentive for the growth of the restaurant. The restaurant should increase its capacity to meet the rising demand that will eventually provide revenues for expansion.

The potential to expand the business

There are several opportunities for the business to expand particularly into new areas. Moreover, the business can expand its services into the business-to-business basis. Other areas where the business can expand its services are the business functions including sales meetings and birthday lunches.

Threats

Competition emerging from well-established restaurants

The biggest threat facing the restaurant is competition from large and well- established restaurants. These restaurants already have networks around the town where Karam is operating. Moreover, independent competitors that offer some of its combinations also pose serious threats to the business.

Competitors are likely to adopt the same menu

The combinations that are being offered by the pizzeria can easily be copied by other restaurants. Currently, the independent is already offering some of its combinations luring some of its customers to their businesses. This result is reduced number of its customers and sales revenue. Besides, the pizzerias are facing the threat of increases in prices of inputs as well as the cost of doing business.

Alternatives that would meet pizzerias’ objectives

Increase its capacity and efficiency

Karam Pizza has the alternative of increasing its capacity to meet the needs of all its customers. In essence, the restaurant should thrive to ensure that both the walk-in and business customers are serviced as required. The advantage is that the business will continue to expand its sales at the same time building its reputation and brand image.

Another advantage is that the business will not continue to lose its customers instead, increase its customer base. However, increasing the capacity can be costly to the business. The other disadvantage is that the pizzeria will be forced to charge different prices. Lower prices will be charged to individual walk-in customers while higher prices will be charged to business deliveries.

Expand into the business-to- business deals

Though the business-to-business deals might not be potential now, it offers the best opportunity for the future. As the number of business increases, the business-to-business deliveries are viable for the future growth. The advantage of business-to-business deliveries is that they are highly priced thereby increasing revenue for the business.

Another advantage is that such deliveries are undemanding since they only require a few staffs to accomplish. The disadvantage with these kinds of businesses is that they are prone to competition. Furthermore, they may take long before making any payments.

Reducing prices

With increased competition from independent pizzerias offering similar combination of cuisines, Karam Pizza can opt for price reductions. However, to attain the reduced prices objective, the business must offer large quantity of food at the same time increasing its efficiency.

Mass production will cover the cost while ensuring that the business enjoys economies of scale. However, in situations where the customer base reduces, the reduction of prices will not be viable. Moreover, the competitors can also reduce their prices. This will have an adverse effect on the business strategy.

Introduction

This essay is a case study of a pizza franchise that is still new in the industry. The initiator of this business is an alumni of La Trobe University who decided to create a part-time job for himself. The business is picking up and Tien is worried because he lacks the necessary experience to manage the business. He therefore, seeks for our help in the following areas: to prepare a weighted cost of capital and the net present value of the business.

Weighted average cost of capital

The cost of capital is the price a company pays for being financed. In other words, it is the reward to lenders and shareholders for sacrificing a portion of their wealth to finance the operations of a business. Therefore, the weighted average cost of capital is the expression of the market value of a source of finance with respect to its contribution to the total capital base of a business. Concerning the pizza franchise, the cost of equity is estimated to be 6.5% and the cost of debt is 6.5%. Tien has decided to have a capital structure that comprises of 30% debt and 70% equity capital. This means that 30% of the businesses’ capital is contributed by debt and the remaining 70%, by equity. Therefore, the weighted average cost of capital is estimated as follows: 6.5 (0.7) + 6.5 (0.3) = 6.5%. Consequently, the after-tax weighted average cost of capital is 6.5%.

The net present value

It is a method of evaluating whether a business is worthy of investment. It is a technique used to discount the cash flows of a business in order to estimate its value. In regards to Tien’s business, the four-year cash flows should be discounted using a factor of 6.5% because it is the cost of finance. The figures are as follows:

Present values of the cash inflows= (-51,768/1.065¹) + (-21,651/1.065²) + (8466/1.065³) + (38,584/1.065⁴) = – 30696.5.

The net present value = (- 30696.5- 620,000) = – 650,696.5

The present value accept or reject rule states that a good investment is that whose present value of cash inflows exceed the present values of cash outflows. Concerning Domino Pizza enterprise, it is not wise to make an investment into the business because it has a negative NPV. Negative NPV shows that a business would make losses in the future while a positive NPV reflects profitability. Therefore, in four year’s time, the value of Tien’s business will be negative.

Risk Identification and Management

Introduction

Business risk is any occurrence that can hurt a business, with the impacts occasionally hard enough that the business finds it difficult to fund its normal operations (Cagno et al, 2007). Consequently, entrepreneurs must use effective management strategies to mitigate the impacts of risks that may affect their business performances. Using a pizza business enterprise as an example, this report identifies common risks that affect businesses and possible management approaches for the mitigation of the identified risks.

Risk Identification and Mitigation

Table 1 given below shows a summary of the risks identified in the planned pizza business, the possibility of the risks occurring, and the overall impact they may have on the business.

Table 1: Identified risks and their mitigation measures.

As can be seen from the table above, fire safety has the highest risk. This is particularly because pizza preparation involves the use of fire, which may result in fire accidents. To mitigate the risk, the entrepreneur should install fire safety systems, such as fire extinguishers. It may also involve taking an insurance cover to indemnify the business in case of fire. The employees must similarly be trained on how to handle pizza preparation to avoid burns (Bolvin et al, 2005).

Structure and Management

Organizational Structure

A proper organizational structure needs to be in a place where a business enterprise is to delineate policies, lines of communication, responsibilities, and authority (Committee for European Banking Supervisors, 2005). The structure additionally determines the method through which information flows, and how authority is exercised. As the case organization is relatively small, it should use a flat business structure, which requires less supervision and reduces management costs by eliminating middle-management salaries and allowances (Ostroff, 1999). Moreover, the smaller size of the organization warrants a smaller number of employees, possibly a driver, two chefs, a waiter, a deliveryman, a cashier, and an accountant. The shareholders should be a part of management and should use their skills and expertise to help in managing the business. The table given below is a possible organizational structure of a business.

As the business grows and more branches are opened, this structure may change from flat to hierarchical. This happens because the business will employ more workers and promote senior employees as a motivational tool (Montana and Charnov, 1993).

Key Personnel and Management

The key personnel in the management of the pizza business are shareholders. Such a decision is taken to reduce expenditure on labor and to give shareholders a chance to display their talent and expertise. Raid, as the Managing Director, has a Master’s Degree in Business Administration and has worked in a renowned fast-food company for over six years. Andy has a Bachelor’s Degree in Marketing and has worked as a marketer for about two years. Willow has a Degree in Accounting and has seven months of experience in a fast food finance department. Beliz has a diploma in Food Production and has worked as a supervisor in a food store for three years. Finally, Quinuo and Michelle both have a Degree in Economics and have only worked as interns with a local bank.

Conclusion

Given a careful integration of risk identification, risk mitigation, and effective management structure, the proposed pizza business is likely to succeed. The identified processes, however, require the stakeholders and the organizational employees to commit themselves to the goals and objectives of the business.

References List

Bolvin C., Farret, R., Salvi, O. 2007. Convergence towards integrated risk management: results from the European SHAPE-RISK project and other initiatives. Proc. ESREL (44)1683 – 1687.

Cagno, E., Caron, F., Mancini, M. 2007. A multi-dimensional analysis of major risks in complex projects. Risk Management: (45) 1–18.

Committee for European Banking Supervisors. 2005. Consultation Paper on the Supervisory Review Process under Pillar II of the Revised Basel Accord. Basel II Publication.

Montana, P. and Charnov, B. 1993. Management: A Streamlined Course for Students and Business People. Barron’s Business Review Series, pp. 155-169

Ostroff, F. 1999. The Horizontal Organization. New York: Oxford University Press.

Brief Synopsis of the Issue

The purpose of this paper is to determine the most appropriate strategies that Pizza Express can use to enter the Nigerian market. The emerging technologies have turned the world into a small global village, and firms are struggling to expand their market share by finding new international markets.

In this study, Porter’s Diamond model will be used to conduct an evaluation of the Nigerian hospitality industry in order to determine some of the benefits, associated risks and costs of operating in this country.

This information will provide a basis of coming up with an appropriate market entry strategy that can be effective enough for this firm to enter the Nigerian market. As Schlosser (2012, p. 67) notes, the strategy chosen should always be cost effective, less risky, and able to yield maximum output.

The aim is to find a strategy that will cost this firm a less amount of initial capital investment, but able to yield the value that this firm desires in its globalization strategies.

Given the fact that Nigeria is one of the emerging markets, a direct market entry would be the most appropriate strategy for this firm. The competition in the market is not very stiff, and this makes it more advisable for this firm to make a direct entry in order to wholly control its operations in this country.

Recommendations

In order to succeed in this foreign market, Pizza Express needs to observe the following recommendations.

• The marketing management should start by conducting an extensive research in order to understand tastes and preferences of the local market in Nigeria (Smith 2006, p. 89).
• The menu that Pizza Express plans to use in the Nigerian market should reflect the main local dishes in the country.
• The market entry strategy should be based upon a comprehensive research in order to maximize on the value generated from the process.
• The management of this firm should consider employing the host country national who understands the market dynamics in the Nigerian market (Jakle & Sculle 2002, p. 34).

Background

Pizza Express is one of the most successful restaurants in the United Kingdom. Started by Peter Boizot in 1965, this restaurant has experienced massive growth over the years, and currently operates over 400 restaurants within the United Kingdom (Scherer 2010, p. 45).

This firm has also been very successful in the European markets. Pizza Express also has a strong presence in India, Hong Kong, and the Middle East markets (Johansen 2012, p. 38). It has been making considerations on how to make entries into some of the emerging markets in Africa. Nigeria is one of the most attractive markets in Africa because of its large population and the rapidly expanding economy.

Currently, it is ranked the highest African economy, surpassing South Africa and Egypt which have been in that top position for decades. The Nigerian economy is one of the emerging economies in the world (Smith 2012, p. 66).

As stated previously, the level of competition in this country is gaining pace, but it can sustain the operations of this firm if it decides to make a direct market entry. The general cost of production, including the cost of labour, rental costs, and the raw products, are considerable law as compared to that in Europe.

However, the purchasing power of the individual customers is also low, making it necessary for this firm to control all its operations in the country. When this firm is fully in charge, it becomes easy to determine the most appropriate prices for its products that will make its products attractive while still allowing its strategies to remain sustainable.

Analysis of Market Opportunities in Nigeria

According to Olaloku (1999, p. 75), with a population of 174.5 million people, Nigeria is the most populous country in Africa and the seventh most populous country in the world. The country also has the largest economy in Africa, making it a very attractive market for a firm such as Pizza Express.

In order to analyze the market opportunities in Nigeria, it is important to use Porter’s Diamond Model to identify some of the unique factors that this firm can benefit from in order to achieve success in this region.

As shown in the above model, there are four specific areas that need some serious considerations when analyzing a country. The following areas need to be analyzed in order to understand how Pizza Express stands to benefit from the Nigerian market.

Factor conditions

According to Abdullahi (2008, p. 94), “Factor conditions can be seen as advantageous factors found within a country that are subsequently build upon by companies to more advanced factors of competition.” With a population of 174.5 million people, the country has enough workforces that can help this firm to achieve its strategic objectives in the market.

Most of the Nigerian youths have vocational training, and this means that Pizza Express will have enough skilled workforces to hire. The main language in this country’s major cities is English, a fact that eliminates language barrier (Hargreave & Hill 2001, p. 66) Most of the raw materials needed for the company’s products are also readily available within the country.

Demand conditions

Nigeria has a large population, with a large number of people staying in the cities of Lagos and Abuja (Diejomaoh 2005, p. 88). The hospitality industry in Nigeria has experienced massive growth over the years. This massive population creates a very attractive demand for the products that is offered by Pizza Express.

There are high chances that the products from this firm will have enough local demand in Nigeria if they meet local requirements. As Pendrys (2011, p. 82) notes, most of the multinationals have not exploited the opportunities in the emerging markets fully. This is demonstrated in the data below. Pizza Express should avoid this trend

Related and supporting industries

The hoteliers heavily rely in the tourism industry to support its operations. Tourism industry in Nigeria has experienced massive growth over the past one decade. The government has been supporting tourism industry by marketing the tourism products in the country to the international market (Sacco & Schott 2011, p. 52). Local tourism has also been expanding, further boosting the hospitality industry.

Firm Strategy, Structure, and Rivalry

According to McDonald & Burton 2002, p. 53), the strategy that a firm uses in different markets may make it succeed or fail depending on the nature of that particular market. This means that it is important to understand the market before coming up with an appropriate management structure. The following is the management structure used by Pizza Express in its global operations.

As shown in the diagram above, the regional directors are answerable to the marketing director of the firm. Although they are given the powers to make independent decision that is informed by the local forces, all strategic decision always need the approval by the marketing director.

Given the expected rivalry expected in the Nigerian market, it is necessary to embrace a more decentralized management approach (Wales & Reaich 2004, p. 75). The director of the firm in the Nigerian market should be allowed to make decisions based on the local forces in the country in order to make the firm to be relevant in the local context.

Country Attractiveness

It is always important to investigate attractiveness of a country before making a decision to make an entry into it (Aaseng 2001, p. 36). Although it is a fact that Nigeria is the most populous country in Africa and with the largest economy, this does not make it automatically attractive.

There are some factors that need to be considered before considering this country as an attractive market for Pizza Express’ products. The attractiveness of the country can be analyzed in a tabular form as shown in the table below.

Attractiveness of the Nigerian Market

Company Situation Analysis

In order to manage some of the external forces in the environment as identified in the above analysis, Pizza Express needs to have appropriate strategies and capabilities that may make superior in market management. The following SWOT Analysis Model can help understand the internal factors of this firm

Readiness to go overseas

Pizza Express has made positive progress in the European markets within the past one decade. The firm has also made successful entry into India, Middle East, and Hong Kong. This success means that this firm has the capacity to make successful entry into the Nigerian markets in its quest to expand its market.

The firm has enough financial strength and a team of experts in international marketing that can enable it to make a successful entry into the Nigeria market. Its many years of experience in this industry put it at even better position to achieve success in the Nigeria market.

Global Sourcing and Production

According to Pendrys (2011, p. 85), the sourcing strategies applied by a firm will always determine its capacity to succeed in the new market. Global sourcing is always attractive when the local raw materials are more expensive than the international prices. In such cases, Pizza Express may need to outsource these materials from other countries where the prices are cheaper.

Products that can cheaply be available within the country should be purchased locally. At the firm level, the management should identify products that it can easily manufacture on its own, and those that require sourcing from other suppliers at reduced costs.

The production strategy should focus on the quality of the products, the costs associated with the production, and the needs of the local market. The firm should be able to produce high quality products that meet the expectations of the market at affordable costs.

Market Entry Strategy

There are a number of market entry options that a firm can use when making an entry into the global market. Some of the most popular entry modes in the market include direct market entry, joint venture, use of subsidiaries, franchising, or mergers and acquisitions. Each of these strategies has its own strengths and weaknesses.

The strategy chosen for the entry into the Nigerian market is the direct entry approach (Dalgleish 2006, 87). This firm should consider pulling its resources to make a direct entry into this market because of a number of reasons.

The market in Nigeria is very attractive not only because of its large population, but also the rapidly expanding economy. Being an emerging market, this country has few established firms that will offer stiff competition to Pizza Express. The graph below shows some of the leading industries in this country.

It is clear from the above data that hospitality industry does not have stiff competition as compared to other industries. This makes it more desirable to use direct market entry because it will take a short period to establish itself if it uses appropriate technologies. The main strength of making a direct market entry is that Pizza Express will have full control over its operations locally, unlike in cases of partnership.

The management will have the independence to make strategic decisions based on its market analysis, and the strategies used by the firm. The firm will also enjoy all the profits without sharing it with other parties. However, there are some weaknesses of this entry mode that may pose some serious challenges.

Direct entry will mean that the firm will need to spend more in putting up the structures, hiring of the right staff, and conducting an extensive research on the market. All the losses that the firm may incur in its operations will also be paid by the firm. However, these weaknesses can be managed through effective strategies by the regional management unit.

Implementation of Market Entry Strategy

According to Carney (1995, p.48), effective strategies can only be beneficial if they are applied effectively within a given context. When making direct market entry, the management should follow some specific steps in order to achieve the desired results. The first step when using this strategy is to conduct a market research in order to understand the local environmental forces.

The management should then recruit the relevant workforce, mostly the host country nationals who will take part in the implementation of the strategies. When this is done successfully, the firm will need to rent outlets within strategic locations in the major cities. Abuja and Lagos would be the first two locations that this firm should target. Finally the business can be launched based on the set strategies discussed above.

List of References

Aaseng, L. & Aaseng, L. 2001, Business builders in fast food, Oliver Press, Minneapolis. Web.

Abdullahi, H. 2008, History and structure of the Nigerian economy: Pre-colonial period to 2007 and beyond, Usmanu Danfodiyo University Sokoto, Lagos.

African Economic Outlook 2012, Nigeria. Web.

Carney, G. 1995, Fast food, stock cars, and rock ‘n’ roll: Place and space in American pop culture, Rowman & Littlefield Publishers, Lanham. Web.

Cate, A. 2011, The fast food detox: The 14-day plan to help you eat clean and get lean, HarperCollins, Pymble.

Cook, S. 2004, Measuring customer service effectiveness, Gower, Burlington. Web.

Culc 2014, Global Market Assessment: Nation-Level Explanations: From Local to Global: Strategies for International Development, Coventry University, London.

Dalgleish, S. 2006, Fast food, Smart Apple Media, North Mankato.

Dana, L. 2010, Entrepreneurship and Religion, Edward Elgar Pub, Chicago. Web.

Diejomaoh, V. 2005, Economic development in Nigeria: Its problems, challenges, and prospects, Princeton, New Jersey.

Duram, L. 2010, Encyclopedia of organic, sustainable, and local food, Greenwood Santa, Barbara. Web.

Emerson, R. 2009, Fast food: The endless shakeout, Lebhar-Friedman Books, New York.

Hargreave, J. & Hill, T. 2001, Fast food Felicity, Nelson Thornes, Cheltenham.

Hayes, D. & Laudan, R. 2009, Food and nutrition/ editorial advisers, Dayle Hayes, Rachel Laudan, Marshall Cavendish Reference, New York.

Jakle, J. & Sculle, K. 2002, Fast food: Roadside restaurants in the automobile age, Johns Hopkins University Press, Baltimore. Web.

Johansen, L. 2012, Fast food vindication: The story you haven’t been told, Murray Press, Los Angeles.

Lambo, T. 2007, Nigerian economy: A textbook of applied economics, Evans Brothers, Ibadan.

McDonald, F. & Burton, F. 2002, International business, Thomson Learning, London.

Olaloku, F. 1999, Structure of the Nigerian economy, Macmillan, London.

Oshikoya, T. 1990, The Nigerian economy: A macroeconomic and input-output model, Praeger, New York.

Pendrys, E. 2011, Memoirs of a fast food man, Cengage, New York. Web.

Rosoman, C. 2008, Therapy To Go: Gourmet Fast Food Handouts for Working with Adult Clients, Jessica Kingsley Publishers, London.

Sacco, P. & Schott, J. 2011, Fast food dating: Your 2 cents: over one thousand served, DoctorZed Publishing, Adelaide. Web.

Scherer, L. 2010, Fast food, Greenhaven Press, Detroit.

Schlosser, E. 2012, Fast food nation: The dark side of the all-American meal, Mariner Books, Boston.

Smith, A. 2006, Encyclopedia of junk food and fast food, Greenwood Press, Westport. Web.

Smith, A. 2012, Fast food and junk food: An encyclopedia of what we love to eat, Greenwood, Santa Barbara.

Thornes, C., Adedeji, A., Sheu S. & Vollrath, D. 2014, Structural Change in the Nigerian Economy. Web.

Torelli, S. 2011, The fast-food kitchen, Harvest House Publishers, Eugene.

Wales, J. & Reaich, N. 2004, Business studies AS: The complete companion, Nelson

World Bank 2013, Nigerian Economic Report, World Bank, New York. Web.

The supply chain for Dough Pizza will involve cooperation with local producers and foreign suppliers: flour, meat and sausages, greenery, and vegetables will be bought from local suppliers, and cheeses will be exported from Italy. The supply chain will adhere to the principles of sustainability, which is highly significant due to the elimination of a negative impact on the environment (Emamisaleh & Rahmani, 2017). It will be necessary to arrange trustworthy relationships with suppliers, warehouses, and delivery services at local and international levels to maximize the quality of the final product and reach the highest level of customer satisfaction.

Dough Pizza needs to take into account its major competitors when analyzing its supply chain potential. The company intends to employ trucks and other vehicles to bring fresh products to pizzerias as well as deliver the final product to customers (once the delivery service is launched). In this respect, it is crucial to single out the major competitors of Dough Pizza and analyze their disruptive power.

The two biggest rivals that can present a threat to Dough Pizza’s development are Domino’s and Pizza Hut. Both of these companies have many years of experience and can afford some technological innovations in their work which Dough Pizza currently cannot boast. For instance, Domino’s has invested in such a supply chain innovation as the use of drones for research and delivery (Bamburry, 2015). Meanwhile, Pizza Hut has engaged the humanoid robot, Pepper, in its work (Ivanov, Webster, & Berezina, 2017). With the help of artificial intelligence and voice recognition options, Pepper can take orders and communicate with customers. Taking into account the use of innovations by Pizza Hut and Domino’s, it seems that their supply chains are highly effective.

Dough Pizza should strive to gain access to more developed technologies once it has established its services and processes successfully at all levels. However, changes will only become possible in some time, upon reaching substantial income. Meanwhile, the company will strive to assure spiritual integration into the project, which will help to promote beneficial outcomes. For “He who supplies seed to the sower and bread for food will supply and multiply your seed for sowing and increase the harvest of your righteousness” (2 Corinthians 9:10). Thus, Dough Pizza will be considerate toward every participant and collaborator in the supply chain from food items delivery to warehousing to final product delivery to reach the best outcomes.

References

Bamburry, D. (2015). Drones: Designed for product delivery. DMI: Review – Design Management Institute, 26(1), 40-48.

Emamisaleh, K., & Rahmani, K. (2017). Sustainable supply chain in food industries: Drivers and strategic sustainability orientation. Cogent Business & Management, 1(4), n.p.

Ivanov, S., Webster, C., & Berezina, K. (2017). Adoption of robots and service automation by tourism and hospitality companies. Revista Tourismo & Desenvolvimento, 27-28, 1501-1517.

Executive Summary

The success of a business plan depends on the ability to carry out explicit research on applicability, sustainability, and proper market penetration. The main elements of a comprehensive marketing plan include a marketing approach, personnel planning, strategic operations, and positioning statement. In relation to the proposed K&M Pizza establishment, the proposed marketing plan will encompass a penetration strategy into the region of Nova Scotia.

This business plan attempts to address the above elements to successfully establish the K&M Pizza restaurant within the location of 263 Townsend Street, Nova Scotia. The business plan will target the customers in the low economic segment and corporate bodies around the region of Nova Scotia and beyond. The restaurant will have competitive prices besides attractive and delicious eating spaces. Since the restaurant targets to introduce unique ingredients in its pizza brands, it will face no competition since none of the potential competitors in the region of Nova Scotia offers similar services to customers. This aspect will form the primary competitive advantage of the restaurant as it seeks to penetrate the Nova Scotia market as an outstanding pizza establishment.

Background statement

The K&M Pizza Restaurant will be packaged as a unique establishment within the region of Nova Scotia. The restaurant will specialise in pizza and soft drinks to attract the targeted customers. The business will operate on the foundation of quality, affordability, and quick services to customers. Since the K&M Pizza Restaurant is the first establishment of such a kind in this type of business, the company will reap benefit derived from being the first mover of customised pizza services.

Currently, most businesses in the region do not specialise on pizza. As a result, there is a steady demand for customised pizza to serve the Nova Scotia market. The customers will pay through cash, Visa and MasterCard. The pizza will be of the highest quality and yet still very affordable. The restaurant’s price range will be from five to twenty dollars per pizza. The prices will increase for the corporate segment, depending on the number of pizzas ordered at one time. The main services at the restaurant will be ‘Walk-In Welcome’, ‘Good for Groups’, ‘Take Out’, ‘Delivery’ and ‘Planning a party’.

Mission statement

The K&M Pizza Restaurant’s mission is to be the most preferred centre with high-quality pizzas that are affordable. The mission of the business is to be the market leader and a friendly partner to clients who are looking for quality pizza. The company is interested in growing different brands out of the current pizza products. Besides, the company has plans for rolling out other stores. Product marketing will be rolled out through social and traditional media. In the next five years, the company targets to increase product visibility, distributing, and diversification in the Nova Scotia market. The mission statement of the K&M Pizza Restaurant is summarised as;

K&M Pizza Restaurant is your ideal eatery that sells customized pizza. The services are certified as clean and ideal to individual customers and families looking forward to spending a good time while enjoying a variety of pizza brands. Your satisfaction is our pride. Come and have a share of the unforgettable experience.

Business objectives

Short term objectives

1. The first objective of K&M Pizza Restaurant is to create a stable customer base by ensuring that it serves at least 150 customers at a time continually for the next two years. This objective will be the basis for testing the ability of the restaurant to penetrate the Nova Scotia market.
2. The second objective is to create the corporate customer segment by signing memorandum of understanding with private and public institutions across the region of Nova Scotia.
3. The K&M Pizza Restaurant also intend to lay down strategies that will include travelling customers as a part of the target market.

Long term objectives

1. The K&M Pizza Restaurant has a long term objective of expanding its current menu in order to include other pizza compliment meals and drinks after two years of a successful entry in the Nova Scotia region.
2. The K&M Pizza Restaurant will also widen its scope of operations by opening four more branches and stores in regions adjacent to Nova Scotia after three years of operations in the current location.
3. The K&M Pizza Restaurant will lay down strategies to ensure that it takes the position of the market leader through initiating mobile vending services for outside catering to customers within Nova Scotia and regions adjacent to the current location. This objective will be implemented at the beginning of the third year of operations.

Marketing approach

Target market

The K&M Pizza Restaurant will target customers within the low economic bracket by offering low-priced pizza. The rationale for targeting this segment was informed by the statistics that this class of customers is the majority in the Nova Scotia region.

Product features and benefits

Through product differentiation, the establishment will reap maximum benefits through packaging the pizza products as the first of its kind in the targeted region. It means that the company will gain from assuming the position of being the first mover of customised pizza brands. Besides, the company will gain from packaging its pizza brands as healthy since customers want to identify themselves with what is ideal. In the end, the company will gain from economies of scale as more customers embrace the affordable and high quality pizza.

Place

In order for the K&M Pizza Restaurant to effectively penetrate the appropriate market, the establishment will procure services of three automobile operators that are mounted with public address systems to publicize the menu of the restaurant across the targeted region. The automobiles will also be branded with images of different pizza brands that the restaurant sells. Specifically, the vehicles will be strategically located in areas perceived as experiencing low product visibility within Nova Scotia.

During these promotions, the benefits of the pizza brands will be presented to the clients. This will be achieved owing to a team of five contracted marketers who will be acting on behalf of the restaurant.

Pricing

The K&M Pizza Restaurant will endeavour to make the pizza products more affordable than the prices offered by competitors. The ideal pricing strategy for the restaurant will be ‘good, better, best’ prices in addition to different price cuts such as promotional discounts to ensure that customers perceive these prices as very friendly. As a result, the K&M Pizza Restaurant will be in a position to draw clients from different segments of customers. It will be possible since the ‘good, better, best’ pricing strategy is accommodative to different customer segments.

Product promotion

The product promotion strategy for the restaurant will be packaged around the principles of emotional appeal through traditional and modern media. Specifically, a larger percentage of promotions will be done through social media since it is affordable and the majority of targeted customers have access to it. In the end, the restaurant will become very visible within the targeted region since social media and other forms of promotion media will increase awareness among the customers. In the proposed billboards as a part of traditional media, the restaurant will contract a local sports celebrity to be the brand ambassador in order to win the support of customers who would want to associate with the excellence of such a celebrity. The promotion plan is summarised in the table below.

Social media advertising

Since social media is currently common in the online business arena, it is important for the restaurant to use Twitter and Facebook appropriately to promote its pizza culture among young clients. These platforms are ideal in building a strong customer base for the K&M Pizza Restaurant products in the region of Nova Scotia. Owing to the direct interaction with customers through these platforms, the restaurant will not only penetrate the market, but create room for menu improvements on the basis of customer feedback.

In the end, the restaurant will be able to track different perceptions of customers in terms of prices, quality, variety, and quantity from different live feedbacks. The Twitter and Facebook fun pages will help the business to reach the clients within the shortest time possible at minimal or no cost, depending on the way each of the platforms is modified.

Selection of location

The business will be located at 263 Townsend Street, Sydney, Nova Scotia. It is along the main street. The location is surrounded by commercial buildings and a nearby college. The rationale for choosing this location was informed by the high number of potential clients within the area.

Physical facilities

The location is well served with physical amenities such as electricity, proper transport network, and piped water system. There is a recreational park adjacent to the business location. There are several governmental and private institutions within a radius of one kilometre from the location of the pizza restaurant.

Plan for personnel

The personnel for the business will consist of a director, supervisor, chef, service attendees, and a marketing team. The job descriptions are summarised below.

Job descriptions

Director

• Managing the daily operation of the K&M Pizza Restaurant business.
• Providing the administrative roles.
• Planning the duties and responsibilities of the employees.
• Tracking the performance of the employees against the set targets.

Supervisor

• Managing the daily operation of the K&M Pizza Restaurant business.
• Providing the administrative roles.
• Planning the duties and responsibilities of the employees.
• Tracking the performance of the employees against the set targets.
• Briefing the directors of the concerns and success of each stage of the business.

Chef

• Generating different recipes for cooking different pizza brands.
• Cooking the meals and cuisines as requested by the customers.
• Ensuring the cleanliness of the restaurant.
• Planning the duties and responsibilities within the kitchen environment.
• Offering creativity in food decoration.

Restaurant Attendee

• Taking orders from the customers.
• Performing public relations exercise with the customers.
• Serving the customers.
• Registering the complains of the customers.
• Providing the administrative roles.
• Briefing the supervisor of the concerns and success of each stage of the business.

Marketing Personnel

• Providing the administrative roles.
• Planning the duties and responsibilities within the marketing plans.
• Marketing the products of the business.

Employee benefits

Pay satisfaction is a central element of employee attraction and retention. The aspect of equity will be a vital element in the pay satisfaction matrix for the K&M Pizza Restaurant. Equity aspect requires employees to be evaluated through the comparison of the ratio of their inputs and outputs with the ratio of input and output of other employees. The inputs take different forms, for instance, job contribution, extra role behaviour exhibited by the employee, and personal contributions.

Employees of the K&M Pizza Restaurant will be given all the necessary medical benefits depending on the position and remuneration of each job group in the restaurant. The aspect of equity will be entrenched in different remuneration standards that are dependent on experience, technical skills, and acceptable labour laws. The restaurant will also endeavour to empower the employees through creation of personnel shares given to the staff on the basis of the results on annual performance contract. The compensations will also comprise attractive packages for day-offs, direct employment benefits, and annual earnings.

Training of employees

The employees will be subjected to continuous training after every three months to ensure that quality assurance is maintained in the establishment. The proposed training module is summarised in the table below.

Summary of the employee training module.

Compensation

The K&M Pizza Restaurant has designed a comprehensive compensation plan through monetary gains and promotion. The compensation plan for the K&M Pizza Restaurant inspires optimal performance through job satisfaction since the total annual compensation and different benefits are relatively attractive. A satisfied employee, in terms of pay, may generally perform his duties efficiently and competently. Therefore, the restaurant can effectively commit to compliance and adoption of standard business practices since the benefits outweighs the cost implications for the employees. The compensation plan is summarised in the table below.

Managers should properly understand the capital structure of their organization since it plays a crucial role in influencing the overall performance of the entity. Having a deep insight into the capital structure is essential because it affects and allows a company to determine the cost of capital being used in operational activities (Le & Phan, 2017). Based on the concept of the free cash flow evaluation model, the total value of a firm is equivalent to the overall summation of its present free cash flow.

In the company, the capital structure affects the value of the firm. It impacts the free cash flow (FCF), which is the total amount of money available for an organization after deducting the capital expenditures incurred during the period of operation. The effect can also be realized on the corporation’s weighted average cost of capital (WACC). Similarly, it determines the percentage value of the business to be financed by debt (wd) and the cost for acquiring debt (rd).

VA = (FCF * [1 + g] / (WACC – g)

Business risk refers to the likelihood of various events interfering with the overall performance of the company, thus lowering the amount of revenue generated. It is also defined as the dangers that threaten a firm’s capability to reach its set objectives. Several factors influence the occurrences of business risk they include government regulations, the unpredictability of demand, the performance of the economy, sales volume and changes in customers preferences. For a company to mitigate the possible hazards, the financial management body should opt for a capital structure with a lower debt ratio to facilitate the firm’s ability to meet its debt.

The term operating leverage refers to an accounting technique that determines the extent to which a business can raise its operating income by increasing its revenue. A company either has high or low operating leverage during its operational period in the market. Businesses that operate using a high degree of operating leverage have a more fixed cost to pay for irrespective of whether all the goods were sold as forecasted. Unlike firms that apply low operating leverage in their processes, they will have limited fixed costs to cover.

Higher operating leverage increases the business risk for a company because, within the capital structure, a large proportion of operating fixed costs will require the corporation to settle them upon receiving revenues. This will raise the firm’s expenditure irrespective of the amount of sales received during the fiscal period. On the contrary, low operating leverage leads to a reduced level of threats for the organization.

This is the level of production where the accumulated revenue is equal to the overall expenditures. Given the fixed cost to be $200, the sales unit is $15, and the variable cost is $10.

Operating Break-Even Point = total fixed costs / (sales price – variable costs)

= $200 / ($15 – $10)

= $200 / $5

= $40

The company should use debt to finance its operational activities. In most cases, firms enjoy a tax benefit advantage associated with using debt as a source of finance. If the entity is financed with about 30% debt, it will receive roughly 6% of the overall value of the capital. The approach allows the business to spend little money in repaying stockholders, thus leaving the organization with adequate free cash flow.

On the basis of corporate tax, debt financing is highly favoured over equity. During the operation process, the benefits of financial leverage surpass the risks since a more significant portion of earnings before interest and taxes is channelled to investors; hence limited amount is subjected to taxation (Abdullah & Tursoy, 2019). This would allow the business organization to have more money at the end of the trading period. For example, Pizza Palace has a tax rate of 25%, which imply for every dollar of the debt borrowed, 25 cents will be added to the value of the firm. Similarly, based on the pecking order theory, the corporation can use obligations to finance their operations because they have lower costs of floatation compared to equity.

Considering the advantages associated with using debts to finance business activities, Pizza Palace should shift from using its equities to securing obligations. The firm has a good tax rating thus is capable of reaping the benefits to boost its overall growth. Debits also enable companies to have the ability to invest in short-term development. This would ensure they generate more revenue hence increasing the free cash flow for the business.

In general, debt financing increases the financial health of a business. A company will be able to expand its operation if it opts to use loans to finance its core activities. Therefore, managers should understand how debt and taxes operate so that they can take tax benefit advantage to add value to the firm. A capital structure centred on debits rather than equity will provide more income to the investors and the company.

References

Abdullah, H., & Tursoy, T. (2019). Capital structure and firm performance: Evidence of Germany under IFRS adoption. Review of Managerial Science, 1-20. Web.

Le, T. P. V., & Phan, T. B. N. (2017). Capital structure and firm performance: Empirical evidence from a small transition country. Research in International Business and Finance, 42, 710-726. Web.

Introduction

Pizza Hut is a subsidiary of YUM brand and forms the largest restaurant chain in the world in terms of sales revenue and assets (Pizza Hut, n.d, p.1). The brand differentiates from its competitors through three major areas namely performance, quality and as the best place of employment. The restaurant operation is the face of the organization. The distinct role of operations is to be possessed with the quality of pizzas and the experience that customers receive.

These operations are defined by the different concepts in Pizza Hut including full service restaurants, home service restaurants, restaurant based delivery, express units and franchise outlets. The operations at Pizza hut cannot be highlighted for any single functional unit but is the collection of many sets of activities carried out within the units and bring success by turning customer expectations into reality. Pizza Hut operations work to the CHAMPS policies like cleanliness, hospitality, accuracy, maintenance, product and speed.

These policies become the key drivers of operations excellence into the business. Despite the feasibility of such operation policies, the capability of the operations manager to deal with the issues faced during implementation is the key success factor. Therefore, this paper presents the key strategic and operational issues faced by the operations managers in Pizza hut.

Product development

According to Hill and Hill (2011), product design is involved with the conversion of ideas into reality (p.28). Pizza Hut has to design, develop and introduce new pizzas as a survival and growth strategy. Designing and developing new products is the biggest issue faced by the operations managers in many organizations including Pizza Hut.

The whole process needs identification to manufacturers of physical products which involves three functions namely product development, manufacturing and marketing.

Product development transforms the needs of customers into technical specifications alongside designing the different features into the products. Manufacturing is responsible for the selection of the process through which the product can be realized. Product design and development links customer needs and expectation to the activities needed to produce the product.

In response to this, Pizza hut operations managers have the role of ensuring the survival and growth of the business through effective product design and development. Indeed, the success of the company is not a matter of detached activities but rather it is the restless efforts of the company to put innovation into realities by transforming customer wants and needs into the shape of products. This is achieved through product development team that runs focus group to research on the customer behaviors towards pizza choices.

Sometime, products are launched after conducting selected research of the chosen customer sample yet it fails to survive in the market. This usually causes occurrence of unexpected costs or wastages in the stores. For example, cheese bread, the four for all pizza, Indian pizza and Bombay wings are the failed products that led to unnecessary costs.

However, Pizza hut has also launched successful products. For example, cheese bite pizza offered has caused an increase of 24% in pizza sales revenue (Pizza Hut, n.d, p.2). Maintaining such a legacy would require the operations managers to spearhead strategic initiatives that enhance innovation capability of the company.

Process design, planning and control

Process design refers to the concept of operations management that deals with macroscopic decision making of the whole process route for transforming raw materials into finished products. These decisions entail the selection of the production process, choosing the right technology, and analyzing the process flow.

Therefore, the important decisions in Pizza hut’s process design are to analyze the workflow for transforming raw materials into final products and selecting the work station for each individual included in the work flow. The design process is a major operations issue as it determines the costs as a result of wasted materials and labor.

During the preparation process, all things that will help to perform the operations in the store are prepared. This process involves activities such as defrosting of dough, cheese and starters. Failure to put the following day operations up to the mark, it then becomes difficult or shortage of items occur delaying the conversion process.

Operations managers have the obligation of ensuring that the preparations are done on the basis of the business forecasts of the next day. Failure to prepare the forecasted goods for the following day operations, it becomes virtually difficult for the following shift manager to oversee the business operations.

The make table is another step that is worth manager’s consideration during the process design. This refers to making orders that are received from customers and appear on the micros system (Pizza Hut, n.d, p.2).

The managers need to determine when there are collection customers, otherwise order work on first-in-first-out (FIFO) system (collection time is 10-15 minutes while delivery time is 30-35 minutes). At Pizza hut, getting ready the make table is an important part of operations.

The right proportion of ingredients, sauces, condiments and products are prepared as specified. Operations managers must consider vitally that the make table elements character, freshness, aroma and taste are veracious and kept at right conditions.

The cut table is also a worthy step in ensuring minimal wastage and the associated costs. The operations managers ensure that the pizzas are cut according to the customer check as well as pouching them accordingly. More important is to ensure that the pouched order goes with the right customer check otherwise the flow of the cut table is broken down and may cause the mistake of the target customer.

Finally, dispatching is another critical procedure that requires the attention of the operations managers. This is tricky and important work especially when more orders have been placed and produced but the drivers are few. The geographic area is usually subdivided into zones according to the postcodes and the customer order deliveries with address and postcode.

Therefore, the operations managers’ keenness is to dispatch the orders that can be delivered in masses in order to save time and effort. Although, the time taken to deliver an order to a customer is usually less than 30 minutes, the managers can influence the speed by adjusting the number of works according to peak and off-peak hours.

Forecasting

As Mahadevan (2010) suggests, forecasting is a major consideration for operations management during the planning stage of operations (p.16). Forecasting the expected demand is the foundation for every operational activity in a business unit. Through this all factors get into touch with planning, organizing and controlling of the operational activities.

Eventually, this will lead to the total production of the business unit. Derek Waller (2003) is a famous management scholar and connotes that forecasting product and demand is the most essential activity for any business organization (pp.261-262). It is an imperative aspect to successfully push forward the business on set objectives until the point of efficiency is realized.

Similarly, forecasting at Pizza hut is a crucial item for the business success. Before operations manager develops a plan for human resource allocation or food checking, they must consider the forecast of sales as well as the anticipated upcoming event in the period. Resource allocation for the usual shifts works well in Pizza hut in relation to the plans but other external factors may influence the speed and service delivery. For instance, bad weather conditions and road hazards in the form of accidents and blockades can slow service ability.

In addition, unexpected orders can increase the demand for products while the availability of ready-made products may be inadequate according to the stipulated demand for the shift. Hence, the variation in the stipulated demand and the actual demand may cause the shortage of products and eventually make customers to feel dissatisfied with the service.

Good weather and special occasions such as sports, festivals and rituals can increase the demand. Given that all these variations relate to Pizza hut operations, it is the role of the managers to ensure minimal impact on the business through short-term strategies that adjust production consistent with the demand changes.

Providing customer with experience

Behind any business, customer care is the central point of concentration and should be treated with due respect. Most important is to discover the ways through which the customer needs and wants can be fulfilled. This begins from the top managers whereby they set procedures and policies that ensure proper interaction with customers (Bozarth & Handfield, 2008, p.5).

Customers do not look for a relationship in given brand but they rather want to be respected, understood and get their products when they want them. Thus, operational activities are best positioned to give customers the good experience and reassurance they want. So when the operation department facilitates the experience needed, the opportunity to develop necessary relationship follows.

Pizza hut sell pizzas in a market where other competitors are doing the same. Therefore, it is very important for the company to be differentiated against the competitors in order to ensure sustainable growth. The values and attitudes make important differentiations while operation policies and the quality of pizzas are key factors (Say et al, 2003).

In order to attain the desired outcomes, operations managers in Pizza hut must enhance the beneficial interaction between the team members and customers. One way of achieving this is to equip the order takers with essential skills as they form the link between the business and the customer. The other way is to ensure that the products are produced with the highest quality through the use of appropriate production gears and developing the skills of the individuals involved.

Quality assurance

Quality control can be defined as the method used by the operations management to maintain the desired level of quality in products. It can also be considered as the systematic control of different factors that leverage the quality of a product. For physical products, the aim is to prevent defects at the source while relying on an effective feedback system and corrective actions.

Quality control can also refer to the management method through which product of uniform quality is produced. This means that there should be the whole collection of operation activities which ensure the production of optimum quality products and services at minimum costs.

The aim of any business unit at Pizza hut is to achieve the complete operational polices practices. It is expected that optimal strength should be utilized into production process to get the maximum outcomes and maintain 100 percent product quality standard. This implies that all production activities should be timely and accurate.

In addition, quality without waste is the principle behind inventory levels and timing systems in the restaurant. Failure to follow the principle leads to the discrepancy of operations that eventually affect the quality of products and customer satisfaction.

In that perspective, the operations managers in Pizza hut have the obligation to ensure that the teams meet the desired quality. Therefore, throughout the supply chain the quality lies with the overall team. This must then be achieved if the managers set rigorous policies during product development.

One way through which the managers have ensured standards is by regular monitoring and auditing of the production system. Quality is checked through CHAMPS Excellence Review while quality assurance is attained by monitoring the complaints as well as corrections through available corrective methods.

Conclusion

Pizza hut have established several operation policies yet the operation managers are faced with many issues that requires professional and strategic responses to enhance the overall performance of the business. Right from the conception of an operational activity, the key point to consider is the wants and needs of the customers and thus the managers effectively influence the operation in that focus.

References

Bozarth, C. C. & Handfield, R. B. 2008. Introduction to operations and supply chain management. Upper Saddle River, NY: Pearson Prentice Hall.

Hill, A. & Hill, T. 2011. Essential operations management. Hampshire, UK: Palgrave Macmillan.

Mahadevan, B. 2010. Operations Management: Theory and Practice. New Delhi, India: Pearson Education India.

Pizza Hut. n.d. System makeover re-energizes Pizza giant’s sales and productivity. Web.

Say, M. et al. 2003. The Importance of the Customer Experience. Admap Magazine, Issue 440.

Waller, D. L. 2003. Operations Management A supply Chain Approach. Farmington Hills, MA: Thompson Learning.