Pizza Competition Goes Hi-Tech
The buying and selling of pizza makes up a large portion of the fast food industry. Pizza companies range from globe spanning companies to a traditional pizzeria owned and operated by a single owner or family. Three large companies currently dominate the pizza industry. These companies include Papa John's Pizza, Dominos Pizza, and Pizza Hut. There are other companies and chains but they are not as large or as successful as the three previously named companies are. There are also many local pizzerias, which are successful as well, but they do not have the market share the three large companies possess.
Years ago, most pizza shops were dine-in eating establishments. Competition and life style changes caused the addition of more services. These services included pick up or carry out and delivery services. As the large pizza companies increased local franchises, the elimination of the dine-in feature was a costs savings.
The Internet has changed the way many companies do business. Companies saw a competitive edge in using the Internet and information technology systems. The pizza industry also took advantage of e-commerce and e-business. This paper examines how the pizza industry is using e-commerce as part of its business strategies. This paper also examines how is the Internet used, what strategies are used, and how information technology trends are used.
The primary means of researching this paper was the review of various Internet sources. Internet search engines provided data from industry websites. These websites included the e-business front-end websites and the corporate back-end sites where additional business information is located. Information such as menus and coupons are located on the e-business front-end along with the means to order online. The back-end sites contained corporate data such as general company information, corporate mission and strategy statements, corporate news articles, and information archives.
Another research tool was the EBSCOhost. The EBSCOhost conducts searches of various different online databases of academic journals and writings. This research revealed studies and data pertaining to legal cases, business practices, and business history of the pizza industry.
The Yum! Corporation owns Pizza Hut. Pizza Hut is largest pizza company in the pizza industry. Pizza Hut has over 6,200 restaurants in the United States and more than 4,000 restaurants in other countries (2007, June 5). The main rivals of Pizza Hut are Papa John's Pizza and Domino's Pizza. For Pizza Hut the buyer power is high due to the competition. Buyers can choose from local pizzerias, or one of the other large pizza chains. To draw in customers and reduce buyer power Pizza Hut offers coupons, specials, and other discounts. Pizza Huts posts discounts and specials at www.pizzahut.com.
Pizza Hut is part of the Yum! Corporations supply chain. The company policy is to adhere to a strict supplier code of conduct. A portion of this code of conduct quotes as "Our suppliers are selected, assessed, and rewarded through the Supplier Tracking and Recognition (STAR) system. It is a rigorous, industry-recognized audit system that sets and monitors standards for all of our brands' key suppliers. All of our restaurants, regardless of their ownership structure or location, must adhere to our strict food quality and safety standards. The guidelines are translated to local market requirements and regulations where appropriate and without compromising the standards" (Yum!, 2010). Pizza Hut's keeps supplier power low by owning or regulating its supply chain. Pizza Hut has no problems with supplier power.
Pizza Hut does face the threat of substitute items from its competitors. Pizza Hut combats this threat by offering services that keep current customers and attempts to draw in new customers. Some of these services are in the form of discounts and specials and others are in the form of e-business strategies.
The threat of new entrants to Pizza Hut is low. The larger pizza companies are already established and competing for market share. The threat to Pizza Hut is on the local level. Existing small business pizza restaurants and by new startup restaurants can draw away customers who prefer the services of a local pizzeria.
The rivalry amongst competitors is high in the pizza industry. Since Pizza Hut is the largest company it is constantly competing with Papa John's and Domino's Pizza. The three companies are constantly trying to outdo the others. A 2004 article states, "However you slice it, at $27.3 billion in 2004, pizza is big business. Pizza Hut did $5.3 billion in sales in 2004, Domino's $3.2 billion and Papa John's $1.7 billion, per Technomic, Chicago. Papa John's operates 2,888 restaurants in 20 countries. Pizza Hut, Dallas, has some 12,000 locations in 86 countries. Domino's, Ann Arbor, Mich., has 7,750 outlets in 50 countries" (Hein, 2004).
Domino's Pizza is the second largest pizza chain. Domino's shares the same buyer power problem as Pizza Hut. Customers have a number of places they can buy pizza. To reduce buyer power, Domino's also offers coupons and discounts to attract and keep customers. At one time, Domino's Pizza offered a service 30 minute delivery guarantee or the pizza was free. The company discontinued the service for safety reasons but it drew in many customers.
Domino's Pizza maintains its own supply chain. All franchises are required to use the Domino's supply and distribution system. This keeps supplier power low in the supply chain. It also allows Domino's have high supplier power in regards to its customers.
Domino's competes well against substitute products and services. It has done this by adding new products to its menu, such as Buffalo Chicken Kickers (Domino's History, 2007). This and other product rollouts have minimized this threat to the company.
The threat of new entrants to the market is minimal to Domino's Pizza. As with Pizza Hut, its greatest threat would appear in the form of a local restaurant. A pizzeria that offered specialty pies such as New York style or Chicago style pizzas and other menu items could draw customers away from the large franchise pizza companies.
In the pizza industry, rivalry is very high. To meet the increased rivalry Domino's has started a business and advertising campaign called the "Pizza Turnaround". The company took all of the criticism from customers and made a complete recipe and menu change (Garfield, 2010). Some view this as good turn around for a pizza company that critics claimed the pizza tasted like ketchup on cardboard, others view the change negatively because for years Domino's had knowingly sold a substandard product (Garfield, 2010).
Papa John's Pizza is the third largest pizza chain. Papa John's started out of a broom closet of the CEO's father's tavern and grew to be the multinational entity it is today (Papa John Story, 2010). The CEO, John Schnatter, has a very dynamic leadership style. His innovation and core values make Papa John's Pizza a highly competitive business in the pizza industry. Papa John's Pizza faces high buyer power in the industry. Like the other pizza chains, it offers coupons, specials, and other discounts. In addition to those programs, Papa John's has a brand promise of "Better Ingredients. Better Pizza" to attract buyers (Papa John's Story, 2010).
Papa John's has created its own supply and distribution company called PJ Food Service. According to information from the Papa John's franchise site all franchises use this service. The Papa John's franchise site states the following about this supplier "PJ Food Service provides one-stop shopping for virtually all of the ingredients and supplies used in Papa John's restaurants. Our traditional, fresh pizza dough is made at PJ Food Service's ten U.S. Quality Control Centers and is typically delivered (along with other ingredients, paper items, smallwares and even cleaning supplies) twice per week to each restaurant. The PJ Food Service team is committed to providing the entire Papa John's family of restaurants with superior service and the finest quality ingredients at the best possible prices" (Papa John's Franchise, 2010). This keeps supplier power low for Papa John's Pizza.
Papa John's Pizza and its main competitors are constantly engaged in a battle of one-upmanship. At any time, one of its rivals could rollout a new product or service. Once the new product is out, Papa John's Pizza will have to react to the new product or service.
The threat of new entrants to the market is low for Papa John's Pizza. At the large-scale level, the industry is stable with its two main competitors. As with the other chains, Papa John's Pizza could face competition from a local or specialty pizzeria that could draw away customers.
Papa John's Pizza is a very competitive company. In a 1998 article called "This Ain't No Pizza Party" Roth states that "Pizza Hut and Papa John's are engaged in a Kentucky blood feud. At stake: the future of pizza pies" (Roth, 1998). The competition and ad campaigns (mudslinging) ended in a court battle between Pizza Hut and Papa John's. Pizza Hut sued Papa John's for having a deceptive advertising campaign (Roth, 1998). Papa John's remains highly competitive. Papa John's Pizza was the sponsor of the 2010 Superbowl football game. Prior to the game Papa John's Pizza launched a marketing campaign which sold any large pizza on the menu for ten dollars. This caused its two main competitors to lower the price of a large pizza to ten dollars as well.
Pizza Hut was the first in the pizza industry to use e-business in its business strategy. According to Pizza Hut, online ordering became available in Santa Cruz, California in 1994 (Pizza Hut, 2007). By 2007, Pizza Hut had enabled online ordering to all of its locations in the United States. To increase its expansion into e-business Pizza Hut created its Total Mobile Access program. Working closely with QuikOrder Incorporated, a world-class Internet technology company, Pizza Hut developed a system that required as little effort as possible by customers (Pizza Hut, 2008). Table 1 below shows Pizza Huts services compared to the other pizza chains.
Pizza Hut also expanded into social networking. In 2009 Pizza Hut started a Twitter account. Pizza Hut even provides an internship devoted to Twitter and employs a full time "Tweetologist" (Pizza Hut, 2009). Additionally, Pizza Hut created iPhone and iPod apps that allowed customers to order from their iPhones and iPods (Pizza Hut, 2009).
Domino's Pizza went into e-business by launching its website in 1996. Domino's has accounts on both Facebook and Twitter. From the Domino's Pizza website complete menus and online ordering is available. Domino's even offers a Pizza tracker that shows you the status of your order from preparation to delivery. Domino's Pizza also has the options to order via cell phone apps and text messaging.
Papa John's Pizza offers many of the same e-business features as the other pizza chains. Customers can order products online at the Papa John's Pizza website. Papa John's Pizza has over 790,000 friends signed up in Facebook. In Twitter, they have over 10,000 followers on that site. Customers can also order via phone apps and text messaging on Internet enabled phones.
The three pizza giants are heavily invested in information technology infrastructure. As previously stated Pizza Hut has partnered with QuikOrder Incorporated. QuikOrder's ClickOrder product is a patented product and provides the backbone of Pizza Huts online ordering process. Pizza Hut relies on the Internet as the key to its network. All customers who want to utilize online, mobile, or text messaging ordering systems must first set up an account with Pizza Hut at www.pizzahut.com. Once Pizza Hut has all of the customer's information the customer is able to order from any of the previous listed methods (Khan, 2008). Pizza Hut uses coupons as a marketing technique. In the United States these coupons can be obtained from the mail, newspaper sales advertisements, or the Pizza Hut web site. There is limited information available on the Internet about the use of m-coupon. Pizza Hut is currently testing the use of m-coupons in the United Kingdom, but it is a small, limited test. Pizza Hut is currently the only large pizza company that offers dine-in restaurants. Pizza Hut offers wireless to its customers in the form of WI-FI hotspots at some of its franchises. This feature can be found at many of its overseas locations. It is becoming standard feature in its franchises in the United State.
Domino's pizza is also using information technology to leverage itself in the industry. The Domino's IT Director, Jane Kimberlin stated in a recent article that "The web site is, without a doubt, the most important thing we do - if something is taking up such a significant part of your delivered sales, you cannot afford for it to be down or not running properly" (Gyles, 2009). Online purchases at Domino's Pizza now account for about twenty-five percent of all home delivery sales (Gyles, 2009). Domino's success online is due to ease of use, reliability, and a robust infrastructure (in the form of load balancing and global load balancing solutions). A dedicated information technology team monitors the infrastructure especially during critical ordering periods (Gyles, 2009). Domino's Pizza offers coupons online, in newspaper sales advertisements, and in postal system mailing. There is no information available on the use of m-coupons with Domino's Pizza. Domino's does offer WI-FI hotspots at some locations. Many of these are located overseas, but there are some caf style restaurants set up in locations like airports or shopping malls in the United States that offer wireless networking to its customers.
Papa John's Pizza is using open source software to power its information technology infrastructure. During this year's Super Bowl game six million slices of pizza and one million wings were ordered over the online ordering systems with no errors (Dubie, 2010). Greg Horsman, the vice president of infrastructure, security, and support services at Papa John's stated "It's like having a double company for one day, but we absolutely do not have to double IT staff to support the demand. The network is actually what doesn't worry me during our biggest weekend of the year. It's actually the thing I don't even have to think about," says Greg Horsman, vice president of infrastructure, security and support services at Papa John's in Louisville, Ky. "The network, which supports our online ordering system, wasn't on the radar for this weekend because we always know OpenNMS has it covered" (Dubie, 2010). Papa John's is currently planning on increasing its infrastructure to support thirty four thousand nodes this year. Papa John's coupon program is similar to the other pizza companies. It extends coupons to users using the postal service, newspaper advertisements, and online at their website. There is no information available about the use of m-coupons. Papa John's, like the other pizza companies is utilizing WI-FI in its franchises. Like the other companies, it appears in the overseas restaurants more because that franchise could be the only one in the country. This makes going to Papa John's or any American brand franchise restaurant a big event for its customers. For example, there might be one Papa John's in Amman, Jordan but fifty in Atlanta, Georgia. The franchises in the United States that offer caf style or kiosk restaurants are adding WI-FI as a standard feature to draw in customers.
The pizza industry is taking steps to be where their customers are. This includes the 3d virtual world called Second Life and video sharing web site You Tube. Domino's Pizza and Pizza Hut have moved into Second Life. The Domino's IT director Jane Kimberlin said "Second Life is where Domino's customers are and therefore that's where the pizza company needs to be too" (Fetscherin, 2007). Now you can order pizza from Domino's and Pizza Hut from within the online world for home delivery. There is no information available at this time about Papa John's Pizza and Second Life. All three of the pizza giants are using You Tube. At You Tube you can view pizza commercials, pizza making sessions, and highly competitive advertising between the three companies. In addition, since You Tube is a video sharing site, You Tube users are sending in videos with mock advertisements, put downs of the companies, and other material related to the three pizza companies.
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