Pizza Patron Entering the Mexican Market

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Table of Contents

Intensity of Competition
Market winning capabilities
Institutional differences
Entry to Mexico
References

Intensity of Competition

According to the daily breeze (2010) Porter’s five forces framework of competition is composed of the following elements; supplier power, barriers to entry, threats from substitutes, rivalry and buyer power (p. 17). The similarities and differences between USA and Mexico can are summarized by the following table:

Strategy	USA	Mexico
Supplier power	There is a strong supply of raw materials and labor, suppliers are concentrated, high costs of switching suppliers, consumers are powerful and a huge threat of forward integration by suppliers	Strong supply of labor and raw materials, weak consumers, concentrated purchasers, huge threat to backward integration by consumers and high costs of switching suppliers.
Barriers to entry	Easy entry and exit because of low threshold, easy access to distribution channels, common technology and little brand franchise.	Entry is difficult because of difficulty of brand switching, high scale threshold and limited access to distribution channels
Threats from substitutes	A lot of substitutes of high quality exist posing a high threat.	Substitutes exist in the market but the quality is slightly different.
Rivalry	Rivalry is intense especially from dominos, Little Caesars, Papa John and Pizza Hut	Rivalry is not that intense since the market does not have many established restaurant chains.
Buyer power	Buyers are concentrated, can buy products from competitors and purchase a high percentage of the output.	Buyers are concentrated, can buy products from competitors and purchase a high percentage of the output.

The pizza industry accounts for around 10% of the total food sales which occurred in the United States between June 2009 and June 2010 (Franchise direct, 2011). This proves that the industry is very viable and earns a lot of revenue therefore attracting a lot of companies in the industry.

In USA there are over 25 pizza chains in the industry which is mainly dominated by Domino’s, Little Caesars, Papa John, Pizza Patron and Pizza Hut who control about 36% of the entire industry (Pizza today, 2009). The situation in Mexico is not any different. Due to the high returns earned from the industry, several new pizza restaurants have been coming up increasing the competition (Porter 2010, p. 88).

Market winning capabilities

Market winning capabilities are strategies which a business can use to win consumers in a competitive market. For a business to be successful, it must understand the consumers needs (Jugger 2009, p. 53).

It is through this knowledge that the business knows what the consumers want, how they want it and when they want it. If the information is applied effectively then the consumer will end up being satisfied by the product thus earning his loyalty into the brand.

The business also needs to produce products of a high quality and maintain these standards. By doing so, consumers will always come back to purchase the product and will also spread the word to other people in the market about the high quality products the business has. This is because of the superiority the product has over the other substitutes that are present in the market (Krohn, 2011).

Lastly, the products should be within a certain price range that if affordable to the consumers (Haubul 2010, p. 7). Having expensive products is always a turnoff to customers especially if it is beyond their purchasing power. Selling goods at a low price will lead the business into losses due to poor sales returns.

Therefore, the best way is to sell the product at a reasonable price where the price is not so much for the consumer to pay and will earn the business a reasonable profit (Romaniuk & Hartnett 2010).

Institutional differences

In the works of Peter et al (2009) institutional framework is the organization of entities, financial procedures and practices which should be followed and the regulation and supervision of a market or an industry. Institutional frameworks consist of rules, regulations, procedures and standards which are to be followed while conducting a business within a certain industry (Portada 2011).

These rules and regulations have been set up to ensure that professionalism is adhered to while businesses conduct their activities so as to avoid issues like monopolies or price fixing (Solomon et al 2009, p. 14).

The institutional frameworks in USA have come about due to specific historical, political and economical circumstances. The market in USA has got an easy entry and exit mode although a lot of legal requirement have to be met. Mexico on the other hand has got strong institutional frameworks its enforcement is very poor. People tend to breach the rules and guidelines that have been stipulated by law in order to achieve their goals.

Pizza Patron has tried as much as possible to ensure that there is consistency in the manner in which all its restaurants operate both in the United States and in Mexico. However, there are slight differences regarding to the manner in which operations are conducted (Peter et al, 2009). This is because the management wants the restaurant to reflect the community in which it is based in.

Therefore, the restaurants located in USA have got an American style while the restaurants located in Mexico have got a Latin style (Portada 2011). This aims at attracting the customers and making them to feel at home while at the restaurant. Although the restaurants have a Spanish culture, they also try to carter for the needs of other Americans too.

Entry to Mexico

Pizza Patron can enter the Mexican market through joint ventures, direct production or indirect productions (Gofman and Mets 2010, p. 157). Through joint ventures, they can form partnerships with restaurants that have been already established in Mexico thus it will be easy to gather customers. However, its brand name will not be fully recognized due to the partnership effect.

Pizza Patron can also decide to enter the market directly and work on its own. By doing so, it will have a high chance of making its brand name grow in the new market although this will take a long time. It will also be tricky to gather consumers in the new market because the brand has got no influence (Lou, 2010).

The best way for the brand to enter Mexico is through a joint venture since it entails sharing of financial costs and risks. These are factors which are to be considered when entering a new market (King 2011, p. 3).

References

Franchise Direct. (2011) Pizza Franchise. Web.

Gofman, A and Mets, T. (2010) Consumer Behavior. Journal of Consumer Marketing, 27 (2), 157–168.

Haubul, G. (2010) Consumer Decision Making in Online Shopping Environments: The Effects of Interactive Decision Aids. Journal of Marketing Science, 19 (1), 4- 21.

Jugger, S. (2009) The Power of Consumers. Admap Magazine, 14 (2), 51-55.

King, M. (2011) Public Policy and the Corporation. London, Chapman and Hall Ltd.

Krohn, L. (2011) Consumer protection and the law: a dictionary. Manhattan, ABC- CLIO.

Lou, Y. (2010) Entry and Cooperative Strategies in International Business Expansion. London, Greenwood Publishing Group.

Romaniuk, J. and Hartnett, N. (2010) Understanding, Identifying and Building Distinctive Brand Assets. Adelaide , Ehrenberg-Bass Institute for Marketing Science.

Peter. J.P., Olsen. J.C. and Grunet. K.G. (2009) Consumer Behaviour and Marketing Strategy. European Edition, Mcgraw-Hill international.

Pizza Patrón Locations. (2010) Pizza Patrón. Web.

Pizza Today. (2009) Pizza Patron, Pizza Today. Web.

Portada Online. (2011) The Pizza Industry. Portada. Web.

Porter, M. (2009) The Five Competitive Forces that Shape Strategy. Harvard Business Review. nd. 3(2), 86-104.

Solomon, P., Bamossy, S. and Askegarrd, H. (2009) Consumer Behaviour: A European Perspective. 3^rd Edition, Prentice Hall.

The Daily Breeze. (2010) Pizza Patron. The Daily Breeze. NW. nd. 2(1), 17-18.

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