Papa Johns Case Study
Document Type:Creative Writing
Although Papa John’s experienced outstanding achievements, there were a few issues the case showed they were facing (Abney, 2015). Issue 1: Buyers’ Need for Healthier Options Even though the original strategy (See Appendix F) was to provide high quality pizza only, customer preferences started to gradually shift requiring for the brand to expand their menu options (See Appendix I). Items had to start complementing the pizza like desserts. They had to introduce creative menus to support their clients’ need to go healthy. The case shows that from 2010, there was a growing trend of people going for healthy choices when eating out. Substitutes like frozen pizza along with other alternative brands were offering their pizzas at cheaper prices. They had evolved to the point where clients started questioning the need to purchase pizza at high prices.
The economy was not getting any better and people started going for things that saved them money. Cheap but quality pizza started becoming the norm. Pizza is a very big deal in some countries with the largest consumers being Americans. Cheese price increase was mainly caused by the higher pricing of milk which is the main component of cheese. When cheese prices went up, it caused huge problems for the organization. Up to 40% of their costs goes to purchasing cheese for their pizzas, therefore, one can see how much of a problem it had caused. The high prices of cheese simply put pressure on the organization and the logical thing to do is to raise the price of their pizzas or buy the other pizza ingredients at very low cost.
This would mean risking to compromise on the quality of the Papa John pizza. They will be doing a community service to the people in those areas in terms of health. People all over the world are already making pizza their go-to meal, especially when they want to chill out. Knowing that they are consuming something that is helping, and not wrecking, their bodies will do a lot for Papa John’s. Expansion for the organization also means minimizing lost profits and using more to purchase healthy ingredients. The profit margin had reduced from 2016 to 2017, but the company can recover and still make huge strides to profit growth (See Appendix J). But if Papa John’s will only be able to penetrate the upper class who are usually in love with high quality products, they can still maximize on that strength and beat their competition.
Remember this is the class that is greatly affected by health issues. Appendix A PESTEL Analysis Appendix B Dominant Economic Characteristics Market Size & Growth Rate: In 2017, Papa John’s announced $0. 6 per diluted share compared to 2016’s $0. 5 share which showed 5. Economies of Scale: As opposed to what their competitors are doing, Papa John’s has not fallen under the pressures of reducing the quality of their pizzas by purchasing cheap ingredients. Instead they have improved their production processes for increased efficiency. Learning/Experience Curve Effects: Papa John’s has become very accustomed to hiring experienced operators and supporting them to expand and grow the business. This model has helped them to experience incredible growth since they started in the 80s. Appendix C Five Forces Analysis Appendix D Drivers of Change in the Industry Technology: Unlike most pizza companies, Papa John’s desires to be considered a tech company instead of a traditional pizza chain.
Appendix E Competitor Analysis Competitor Identification & Strategy: They operate at number 3 pizza chain, just behind Domino’s in first place and Pizza Hut in second. They have around 4,893 outlets across America and about 39 outlets internationally. Their restaurants provide many different styles of pizza and topping choices. Additionally, they specialize in a few pies like The Meats and The Works. Their largest competitors are: 1. They also add high quality vegetable toppings on their pizzas. Creative Marketing: Papa John’s marketing strategy is made up of local, national, and international components. Locally, their marketing includes newspaper and television advertising, direct mail, social media, and print flyers targeting customers within their area of delivery. They are also heavily involved in community activities within sport venues, schools, and other national companies.
Internationally, they use the same local approach of targeting customers within their area of delivery. That way, even more people will be drawn to their pizzas. Strengths • High product quality • Marketing innovations • Conventional systems of ordering • NFL sponsor • Active in the community • Excellent programs for training and development Weaknesses • Franchise management • Limited menus • Low distribution channel • Limited dining establishments • Poor exposure internationally Opportunities • Market their product as healthy • Expand their menus • Incorporate new dining establishments • Expand into new countries • Improve their brand awareness and marketing strategies Threats • Upcoming health trends • Emerging pizzerias • Lower competitor prices • Expanded menus and distribution by competitors Appendix J Financial Analysis Compound Annual Growth 2013 2012 2011 Operating profit margin 7. 1% Net Profit 5. 8% Current Ratio 2. 6 Operating profit margin = (Operating income / Sales revenue) x 100 For year 2013; Operating profit margin = (106,503 / 1,439,022) x 100 = 7.
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