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ENTREPRENEIRSHIP ASSIGNMENT

SEMESTER ABROAD PROGRAMME-SINGAPORE

SUBMITTED BY:
NAINA SETH (A1802013033)
MBA-IB (SECTION D)
2013-2015
AMITY INTERNATIONAL BUSINESS SCHOOL
GROUP: DELTA

CHAPTER 1. MARKET RESEARCH:


1.1 INTRODUCTION
Market Research is a systematic, objective collection and analysis of data about a
particular target market, competition, and/or environment. It always incorporates some
form of data collection whether it be secondary research (often referred to as desk
research) or primary research which is collected direct from a respondent.
The purpose of any market research project is to achieve an increased understanding of
the subject matter. With markets throughout the world becoming increasingly more
competitive, market research is now on the agenda of many organisations, whether they
be large or small
1.2 Market Analysis
The market analysis section of your business plan should illustrate your industry and market
knowledge as well as any of your research findings and conclusions. This section is usually
presented after the company description.
1.3 What to Include in Your Market Analysis
Industry Description and Outlook Describe your industry, including its current size and
historic growth rate as well as other trends and characteristics (e.g., life cycle stage, projected
growth rate). Next, list the major customer groups within your industry.
Information About Your Target Market Narrow your target market to a manageable size.
Many businesses make the mistake of trying to appeal to too many target markets. Research
and include the following information about your market:
Distinguishing characteristics What are the critical needs of your potential customers?
Are those needs being met? What are the demographics of the group and where are they
located? Are there any seasonal or cyclical purchasing trends that may impact your business?
Size of the primary target market In addition to the size of your market, what data can
you include about the annual purchases your market makes in your industry? What is the
forecasted market growth for this group? For more information, see our market research
guide for tips and free government resources that can help you build a market profile.

How much market share can you gain? What is the market share percentage and number
of customers you expect to obtain in a defined geographic area? Explain the logic behind
your calculation.
Pricing and gross margin targets Define your pricing structure, gross margin levels, and
any discount that you plan to use.
When you include information about any of the market tests or research studies you have
completed, be sure to focus only on the results of these tests. Any other details should be
included in the appendix.
Competitive Analysis Your competitive analysis should identify your competition by
product line or service and market segment. Assess the following characteristics of the
competitive landscape:

Market share

Strengths and weaknesses

How important is your target market to your competitors?

Are there any barriers that may hinder you as you enter the market?

What is your window of opportunity to enter the market?

Are there any indirect or secondary competitors who may impact your success?

What barriers to market are there (e.g., changing technology, high investment cost,
lack of quality personnel)?

Regulatory Restrictions Include any customer or governmental regulatory requirements


affecting your business, and how youll comply. Also, cite any operational or cost impact the
compliance process will have on your business.

MARKET RESEARCH FOR OPENNG A FAST FOOD JOINT: WITH SPECIAL


REFERENCE TO PAPA JOHN;S PIZZA
2.0 MARKET OVERVIEW
2.1

MARKET SIZE & GROWTH

The pizza industry is experiencing a steady


level of growth as the number of units among
local,

regional

and

national

operators

continues to rise. As seen in figure 1, 2012 had


over 70,000 operating pizza stores, where more
than half were independently owned (Barret,
2012).
Recently, Little Caesars Pizza was responsible for almost 58 percent of new pizza stores
opened thus far in 2013. In second place, Papa John's added 110 restaurants while Pizza Hut
added 58 new locations after having closed 24 U.S. locations in 2011 (Coomes, 2013).
Growth internationally is expected to accelerate up till 2016, as continued expansions in
Latin America and Asia allow chains to maintain and recoup revenue losses from struggling
U.S. markets ("All things to," 2012). As a result, differentiation becomes a critical factor
within the pizza industry as some chains continue to invest in remodeling their restaurants
while others, such as CiCis pizza, offer buffet catering to their consumers.
2.2

Sales Volume of Total Market

Although fast food consumption in the U.S. declined during the recession, the gradual
recovery of the economy, compounded by cheap and innovative menu options, have fueled
pizza sales (Research and markets, 2011).Sales at pizza restaurants reached $36.1 billion in
2012, up 3.8 percent from 2011 (Its delivery, 2013).Sales have increased over the past two
years as pizza operators revamp their menus to include more specialty pizzas, side dishes, and
desserts in an effort to increase traffic (Technomic, 2012).This is a clear indication that there
is more room for growth for pizza chains in the face of stiff competition among other fastfood operators that compete for the same consumers.

Price value and product variety have mainly been the key factors in garnering greater sales
volume for many top U.S. pizza chains.As figure 2 illustrates,chained operators accounted for
more than one third of sales in 2011("Papa John's
International," 2012). That trend continued into
2012 asPizza Hut was the top earner with $5.7
billion in U.S. sales holding Domino's Pizza with
$3.6 billion in sales - in second place. Pizza Huts
introduction of new product recipes and innovative
marketing campaigns played key roles in their
success (Coomes, 2012).The top brands overall
have experienced average growth in the U.S. market, with sales increasing to 3.9 percent
comparable to 3.6 percent a year ago("Papa John's International," 2012).Quality menu items
that offer good value for money should continue to be key drivers of growth, as consumers
seek maximum return on food purchases.
2.3

Market Trends

Restaurants are embracing customizable pizza concepts as consumers demand the freedom to
add as many toppings of their choosing for a set price. Similarly, customized pizzas with
fresh ingredients madein just a few minutes aregrowing at an impressive rate (Ruggless,
2012). Other novel trends worth mentioning are the growth in popularity of pizza trucks and
mobile pizzerias;most recently, businesses have been offering healthier optionsincluding
gluten-free pizza in addition to whole wheat pizza(Ruggless, 2012).Also, some pizza
operators have focused on delivering higher quality items to their customers, a position that
Dominos Pizza and Papa Johns have used with great success("All things to," 2012).
Finally, although it has become a staple within the pizza industry, online ordering continues
to be a necessity in customer ordering. The success of the top pizza companies can be
attributed to their adoption and execution of technology for greater customer convenience
and flexibility. In 2010, 6 percent of pizza orders were placed online, doubling what it was
three years earlier (Ziobro, 2010).The growth of online ordering will be further examined
later in this report.
2.4

International Expansion and Growth

The top U.S. pizza brands have begun


rapidly expanding overseas as the
domestic

market

saturated.As

becomes

figure

highly

illustrates,

Australia, Latin America, Middle East


and Asia stand out as

important

emerging markets(Barret, 2012).


As nations gradually recover from the
recession, large U.S. chains are hoping
international operations can maintain and increase revenue. Pizza Hut's 500+ units in China
make it that countrys market's pizza leader, while Domino's 300+ units in India make it that
nation's largest restaurant chain. Domino's India operations will become a key international
subsidy as it posted 69 straight quarters of positivesalesgrowth (Coomes, 2011).Similarly,
Domino's Pizza has become a top player in the UK through strong locations and marketing
initiatives("Papa John's International," 2012).Some chains even have more international
stores than United States-based units.
3.0 COMPETITORS
3.1

Market Share

The pizza industry is dominated by three companies: Pizza Hut, Dominos Pizza and Papa
Johns, which all rank top in sales and unit counts. In 2012, within the U.S. market, Pizza Hut
gained the most market share, capturing 14.68 percent of all U.S. pizza sales(Barret,
2012). In 2013 thus far, however, Pizza Hut earned 11.65 percent market share value, while
Dominos made up 7.60% and Papa Johns came in at 4.23 percent (He, Zha& Li, 2013). The
dominance of Pizza Hut and Domino's Pizza is striking, as these two chains' combined for
$18 billion in sales in 2011, more than doubling the earnings achieved by the next eight
largest pizza players put together ("All things to," 2012). This report will focus on these top
two pizza chains as Pizza Hut and Dominos Pizzahave continued to innovate in ways that
have allowed them to achieve and maintainsuccess in a highly competitive industry.
Pricing Strategy:

Domino's Pizza and Pizza Hut have seen big increases in store sales based on price value
strategies. Pizza Hut offers almost all of its pizzas for $8, $10 or $12, easily attracting value
cost customers and thereby stimulating business (Dominos profit, 2010). Domino's has
also offered their products at discount prices, promoting two medium, two-topping pizzas for
$5.99 as well as featuring deals that include specialty pizzas for $7.99(Ziobro, 2010).
Tempting consumers with value based pricing is benefiting these two chains bottom line.
Domino's domestic same-store sales grew 3.5 percent in 2012 while Pizza Hut had fourthquarter sales gains of 6 percent in the same year (Morrison, 2012).
Menu Changes:

During the periods of recession and consequent high unemployment rates among its target
markets, Dominos adjusted accordingly by broadening its menu beyond pizza with its new
subs and pasta lines, and introducing higher quality pizzas with new recipe changes at a
cheap price (Research and markets, 2010).Domino's sales have been rising since it began
featuring a pizza rebuilt from the dough up with a thicker crust with garlic seasoning, a new
mix of cheese and sauce. U.S. same-store sales rose more than 14 percent in the company's
first quarter in 2010 (OLeary, 2010).
Pizza Hut has also reinvented itself, especially for their international markets to
accommodate different consumer preferences. For example, Pizza Hut in China offersa high
variety of pizza selections, as well as ribs, spaghetti and steak, and cafe lattes (Gasparro,
2012).In 2008, as a direct response to changes in consumer trends, Pizza Hut started its "The
Natural" pizza conversion, implementing all-natural ingredients in their foods. They also
introduced higher-priced dinner items to increase visits to their restaurants including pasta
dishes and chicken wings (OLeary, 2010).
4.0 BUSINESS CONDITIONS
4.1

Rising Commodities Cost and Volatility

Pizza players are being hit particularly hard as the costs of many pizza ingredients - wheat,
pork, beef and dairy - remain high, while many operators continue to offer discount prices.
Wheat crop shortfalls in Russian, Ukraine, Argentina and Australia have tightened supplies of

low quality wheat used in livestock feed, and that's shifted demand onto corn supplies to
make up the difference. Higher corn prices translate into higher feed prices from dairy and
beef producers (Coomes, 2010). Through 2017, the price of milk and wheat is predicted to
increase, causing operators ingredients costs to rise("Papa John's International,"
2012).Some restaurants will be forced to increase prices to help with the rise in expenses,
while others will cope by changing some of their menu offerings.
4.2

Consumer Confidence

The impact of the recession has played a part in increasing pizza operators revenues, leading
more consumers to eat in while boosting delivery sales in the process(All things to," 2012).
However, the industry is healthier when more people are working with greater disposable
income. With increasing unemployment rates, reduced access to credit, as well as economic
uncertainty, such factors could cause consumers to spend less on food or shift to lower priced
products(Coomes, 2011).
4.2

Government policies and regulations

Pizza stores are subjected to a variety of federal, state and local laws affecting their
businesses. Licensing and regulation include health, safety, sanitation and other laws in which
the pizza store is located in. The failure to obtain required licenses or approvals can delay or
prevent the opening of a new restaurant in a particular area. Also, further increases in
minimum

wage

rateswould

increase

labor

cost("Papa

John's

International,"

2012).Additionally, the industry continues to wait for the widespread menu labeling laws that
were outlined in the Patient Protection and Affordable Care Act of 2010 to take effect. The
law would require all pizzerias with more than 20 locations to provide nutritional information
that labels an entire pizza as one serving. The menu-labeling standards and national health
care policies set to take effect in 2014 can negatively impact sales and revenues(Coomes,
2011).
4.3

Saturated Fast Food Industry

In addition to competition among other pizza


operators, pizza chains compete in a highly saturated
fast food industry.As table 1 demonstrates, of the top
10 global players, only Yum! Brands is involved in
pizza; however,their position is derived from its KFC
operation("All things to," 2012). Within a rapidly
increasing competitive food industry, companies are
now working towards greater menu variety (including
healthier and different pricing menu items), snacks
and speciality beverages, and longer dine-in hours.
5.0

DEMOGRAHPICS

&

CONSUMER

BEHAVIOUR
5.1

Rising youth population with disposable income

Changes in family structures and patterns have also impacted the pizza industry to a large
degree. Only 60 percent of all meals today are prepared and eaten in the home, largely
because the increasing number of two working parentand single-parent households means
less time to cook (Singh &Goyal, 2011).More recently, pizza sales are largely fuelled by the
rising youth population with greater disposable income(Research and markets, 2011).A 2011
consumer report further supported this conclusion as they noted the core pizza consumer is
aged 18 to 44, accounting for 77% of pizza restaurant customers. And those with an annual
income of $75,000 to $99,900 are the biggest pizza users, as are households with children
(Barret, 2012). Due to this large consumer demographic coupled with the versatility of pizza
to be consumed at various occasions, the opportunities in discovering new target segments
are extremely high("All things to," 2012).
5.1

Healthy Lifestyle Choices

Changes in consumer preferences and trends such as avoiding foods that are perceived as
unhealthy, high calorie content and little nutritional value could adversely affect pizza
restaurants. The same 2011 consumer report revealed that nearly 1/3 of women indicated that
they expect nutrition labeling to change what they order (Barret, 2012). As a result, pizza

operators should take into consideration diet, health and weight concerns as they develop new
products as well as subsequent marketing initiatives to address such issues.
5.2

Online Orders

As mentioned above, many pizza chains are heavily investing in e-commerce technology as
digital orders have become increasingly common among their main consumers. For example,
approximately 14 percent of all Dominos online sales come from wireless devices
(Dominos pizza, 2011).For stores and pizza operators without online ordering systems,
such a hindrance will cause chains with greater investments in technological ordering systems
to gain greater competitive advantage over these smaller independent operators. For top pizza
chains, this represents a massive opportunity in terms of expanding their online ordering
capabilities as consumers are likely to gravitate towards the most convenient, user-friendly
option ("All things to," 2012).This should also direct pizza chains to consider the significance
of online marketing strategies.

5.0

SOCIAL MEDIA

The U.S. pizza industry is one of the first industries that have entered the social media arena
for business purposes(He, Zha& Li, 2013). The top pizza operators- Dominos, Pizza Hut as
well as Papa Johns have all utilized social media (Facebook, Twitter, Youtube) to further
engage with their existing customers as well as market themselves to prospective patrons. For
example, the top three brands all had user comments, pictures, videos and company initiated
contests uploaded across their respective social media platforms. For an industry that is
characterized for its direct mail approach to marketing, social media represents a significant
paradigm shift. The 2010 pizza franchise report found that 85 percent of pizza-chain sales are
now tied to promotions and discounts acquired through social media sites ("Pizza franchise
report 2011," 2011). Additionally,Pizza Hut and Dominos have assigned specific staff
members to monitor and reply to content their customers posted online.
5.1

Pizza Hut

The underlying purpose of Pizza Huts social media strategy is to get customers to visitits
restaurants, instead of strictly ordering online. Mobile advertisements have been created to
increase traffic to their Facebook page and website with a focus on user engagement, content
heavy materials and location based promotions. For example,Pizza Hut urged customers to
create a Pizza Hut song and upload it to Facebook to be entered into the Pizza Hut Top
This! contest. After "liking" the Pizza Hut Facebook page, users can view the contest rules
for how to record and submit their videos. Also, the chain created an online community called
"HutLoves," where members are offeredproduct promotions at their nearest restaurant
(Pizza hut, 2012).
5.2

Dominos Pizza

Dominos Pizza uses social media as a direct marketing tool, with the goal to create faster
conversion rates to increase ecommerce sales. For instance, Dominos launched an
international online party that offered 50 percent off any menu priced pizza ordered online
through a specialized Facebook page(Dominos pizza, 2011).Dominos has also used
Facebook to offer exclusive deals to its Facebook fans. For example, the business launched
their new boneless ribs dish with an exclusive offer on their social network site (Dominos
pizza, 2011).
Dominos also uses social media to nurture their relationships with their customers. They
have begun posting direct customer feedback on their website, without screening positive or
negative comments. This is in addition to past initiatives that included displaying a photo of
an unacceptable pizza and an apology to a disgruntled customer on national television from
the CEO (Dominos pizza, 2011). These strategies helped in creating more honesty,
openness and transparency between the company and their customers.
5.3

Overall Online Customer Engagement

In a study examining the social media presence among top pizza chains during the month of
October 2011, He, Zha& Lifound that Dominos Pizza demonstrated a higherlevel of
commitment and consumer engagement than Pizza Hut and Papa Johns (2013).
The journal article found that Dominosresponded to user comments more quickly, uploaded
more photos/videos, as well as initiated more contests, clearly illustrating the chains strong

efforts in monitoring and handlingtheir social media activities.In addition, He, Zha& Lialso
noted that user engagement level on Facebookis much higher than the engagement level on
Twitter. This may be due to the fact that the threepizza chains offered more promotional and
user engagementactivities on Facebook than on Twitter. Research into the benefits of each
social media tool should be further analyzed in future research.
6.0

CONCLUSION

The growth in pizza units domestically and internationally is a testament to the innovative
strategies businesses areemploying. Menu changes and value priced products have been
important drivers to the success of many top pizza operators. With the rising youth population
and greater disposable income among households, investment in technological ordering
systems for customer convenience promises to be significant differentiators among a
saturated pizza industry. As the main pizza consumers, aged 18 to 44, increase their use of
online services, greater promotions tied to social mediapresent opportunities to increase sales
and garner more market share.