THE SUCCESS STORY OF PIZZA HUT

INTERNATIONAL MARKETING

INDEX
TOPIC 1. Origin of the company 2. Areas and countries into which it was operating. 3. Areas and countries into which it is operating. 4. Economies and diseconomies of scale. 5. Joint venture, M & As etc. 6. Break even point. 7. Marketing Research conducted. 8. Strategy adopted 9. Application of all Ps of Marketing. 10. Product life cycle. 11. Outsourcing operation. 12. Source of finance. 13. Business cycle. 14. Cultural issues. 15. Political risks. 16. Legal issues. 17. Conclusion and recommendation. 18. References. PAGE No 3 4 5 7 9 13 16 17 21 24 26 26 28 29 30 31 33 34

1. ORIGIN OF THE COMPANY

The chain was founded in 1958 by Frank Carney. The Original Pizza Hut building was later relocated to the Wichita State University campus. Additional restaurants were opened, with the first franchise unit opening in 1959 in Topeka, Kansas. At the same time Pizza Hut was growing in and around Kansas, Shakey's Pizza was developing a stronghold along the West Coast. The competition provided Pizza Hut the impetus to evaluate its mission and direction. Dan and Frank Carney saw Shakey's expanding into their territory and realized that they needed to determine if Pizza Hut should be in the entertainment business or if it should be a neighborhood pizza restaurant. They decided to stick with the neighborhood business and realized that they needed to have a good standard image. The Carney brothers began to systematize operations and building designs to counter the competition from Shakey's. The franchise network continued to grow through friends and business associates, and by 1964 a unique standardized building appearance and layout was established for franchised and company-owned stores, creating a universal look that customers easily recognized.

The first Pizza Hut is located in Kansas at the Wichita State University Campus. It was opened in 1958 by Frank and Dan Carney, 2 brothers who studied at the university.

2. AREAS AND COUNTRIES INTO WHICH IT WAS OPERATING.

By 1972, with 314 stores nationwide, Pizza Hut went public on the New York Stock Exchange under the stock ticker symbol PIZ. In 1977, Pizza Hut was acquired by Pepsico, who later also bought KFC and Taco Bell. In 1997, the three restaurant chains were spun off into Tricon, and in 2002 joined with Long John Silver's and A&W Restaurants to become YUM! Brands. Pizza Hut has opened Pizza Hut Express which specialize in small 6" pizzas. The oldest continuously operating Pizza Hut in the world is in Manhattan, Kansas, in a shopping and tavern district known as Aggieville.

Major Market Share

Top Quick Service & Fast Food Chains Outlets McDonalds Burger King Wendys Asian Panda Express Pizza Hut Italian Olive Garden Quick Service Boston Market Sandwich Subway Steak/BBQ Outback Coffee/Snack Dairy Queen 13,099 8,248 5,315 Market Share 43% 19% 13% 31.81% 13.4% 33.35% 28.6% 30.8% 32.44% 20.60%

3. AREAS AND COUNTRIES INTO WHICH IT IS OPERATING (DIVERSIFICATION)

195 The first Pizza Hut restaurant opens in Wichita, Kansas, owned and operated by Dan 8 9 5 6 8 196 9 0 1 197 2 197 3 6 7 198 0 2 and Frank Carney. Kansas. musical jingle developed. Restaurants. International market entered with opening of Pizza Hut restaurant in Canada. Red roof adopted for restaurants. First Pizza Hut restaurant opened in Mexico. 195 Pizza Hut is incorporated in Kansas and the first franchise unit opens in Topeka, 196 Basic freestanding design of Pizza Hut restaurant adopted. "Putt-Putt to Pizza Hut" 196 First Home Office built in Wichita to handle business for the 145 Pizza Hut 196 International Pizza Hut Franchise Holders Association (IPHFHA) is organised.

197 Sandwiches added to basic menu of Thin "n' Crispy pizza, salad, beer and soft drinks. First restaurant opens in Belfield, Sydney during April. and number of restaurants. Pizza Hut, Inc. listed on New York Stock Exchange. Restaurant number 1,000 opens. Pizza Hut restaurants opened in Japan and England. 197 Pizza Hut becomes the number one pizza restaurant chain in the world in both sales

197 International Pizza Hut restaurants total 100 while entire system reaches 2,000. $10 million Pizza Hut Home Office building opens in Wichita. Pan Pizza is introduced throughout the system. Restaurant number 4.000 opens. 197 Pizza Hut, Inc. stockholders overwhelmingly approve merger with PepsiCo, Inc. New

198 New decor packages are designed and installation begins. Two hundred and sixtyseven Pizza Hut restaurants operate in Australia. 5

198 Pizza Hut Australia begins its Home Delivery operations in Brisbane, soon spreading 3 198 5 6 7 8 0 3 7 199 9 to every state in Australia. Sydney begins operations in Pizza Hut Home Delivery.

198 Pizza Hut celebrates the opening of its 5,000th restaurant, located in Dallas, Texas. Delivery service, as a new concept, is widely initiated. establishing Pizza Hut Australia as the national leader in the fast food industry. and delivery units worldwide. restaurant. Extensive development throughout the world continues. There are over 10,000 Pizza Hut units throughout 25 countries. Restaurant chain with KFC and Taco Bell spinning from PepsiCo. Pizza Hut has the greatest number of outlets of any Australian Convenience food company with a total of 464 outlets in Australia and New Zealand (230 Restaurants, 185 Delivery Units, 19 Express Units and 30 Kiosk Units). advanced delivery systems, keeping deliveries hotter and fresher than ever. 198 PepsiCo Australia, merged with the Dial-a-Dino's network of Home Delivery Units, 198 Pizza Hut celebrates its 30th anniversary with a total of more than 6,000 restaurants 199 Gorky St Pizza Hut Moscow opens, seating 400 customers over 3 floors of the 199 Pizza Hut Inc. Worldwide system retail sales at $6.4 Billion (PepsiCo $17.4 Billion). 199 Yum! Restaurants is formed, making Pizza Hut a part of the world's largest

200 Pizza Hut introduces Inferno Heated Pizza Pack, which uses the most technological 1

4. Economies and diseconomies of scale.

Economies and diseconomies of scale are two opposite concepts. An economy of scale is the point at which the quantity produced by the company gives the company the low cost advantage and at this point the company incurs the minimum cost advantage. On the 6

other hand when the production is less than the proportion of the input then the costs of production increases and it leads to diseconomies of scale. Average cost is high in the diseconomies of scale. For example, if a fast food restaurant buys potato in bulk and it produces French fries from it. If the outlet buys potato in bulk then up to a certain level it will be economy of scale while if it buys a huge bulk and it does not incur much sales then the investment in input is the extra cost incurred which is diseconomies of scale Say you buy a building to start a restaurant. Even as business starts picking up, you do not need to buy a new building. Rather you need to buy more ingredients and hire more cooks (these purchases are considered Variable Costs). People frequent restaurants because of good food, good service, convenience or other more perverse incentives like attractive waitresses. Good food, service, and convenience can be provided by good chefs, fresh ingredients, attentive servers, and efficient bus boys. Hiring the staff and buying ingredients are considered variable costs because the number of employees you need varies with your number of daily customers. The building the restaurant is in, while important, does not define the quality of the restaurant's actual business. Because the variable costs like buying ingredients are more important to the restaurant industry than fixed costs like rent, economies of scale rarely arise. People going to restaurants expect to pay extra for their food because of the service and the taste, not because of the quality of machinery in the kitchen, or the size of the restaurant. Prices do not need to be extremely low to draw customers. Because fixed costs and low-ball pricing schemes do not dominate the restaurant industry's business, you do not see economies of scale. On the other hand, think of the low-quality snack food industry. People looking to buy salty, fatty snacks are clearly not seeking a candlelit dining setting. Rather, they are looking to pay the lowest price for the highest short term gratification. Chefs do not prepare Cheez-Its, but rather large machines do. Machines allow major snack food conglomerates like Kraft Foods (KFT) to make tasty treats at an extremely low price. 7

Better machines mean better made and more plentiful snacks, which mean lower pricing, greater market share, and higher revenue. Fixed costs and low-ball pricing schemes do tend to dominate the low-quality snack food industry, and so you see economies of scale. These examples show us that the industries in which economies of scale arise are those that define their business by the use of heavy machinery, large factories, and price cutting. Price cutting strategies generally imply lower quality products. Any industry that specializes in the sale of luxury goods or services at a premium is less likely to mass produce its products, and therefore less likely to have fixed costs as the dominant business expense, and less likely to develop economies of scale.

5. JOINT VENTURE, ACQUISITIONS, MERGERS, LICENSING, FRANCHISING ETC.

Franchising of pizza hut
Fifteen years later, we opened the first UK restaurant and since then we've become the biggest Pizza Company on the planet! 8

2008: We bought Godfather's Pizza in Ireland with 28 stores. We also launched our Pepperoni Stuffed Crust & Garlic Crust pizzas, larger 4 for ALL and a new range of Tuscani pastas in the UK.

Chicken Alfredo

2007: We brought out our Thick n Thin Pizza and began to re-franchise our dinein restaurants. 2006: Whitbread sold their share of the joint venture to Yum! Brands Inc. Pizza Hut UK Ltd was now 100% owned by Yum! Cheesy Bites was launched! There were now 697 restaurants in the UK, with 154 stores as a franchise owned by 61 franchises.

2005: The 4forALL was launched. Over 600 restaurants were open in the UK, 70 of them as Franchise units. 2004: Pizza Hut launched The Big New Yorker. 2003: 500 restaurants were now open throughout the UK, employing over 20,000 people. 2002: Tricon Global became YUM! Brands Inc. The Quad Pizza was launched in the UK, as Pizza Hut opens its 500th restaurant. A & W and Long John Silver's join the Yum brand.

YUM! Brands inc 9

2001: Pizza Hut began a franchising programme with its delivery stores. 2000: Pizza Hut introduced The Edge, a thin pizza with toppings all the way round the edge. 1999: Pizza Hut had over 400 restaurants, employing 14000 people. The Italian Pizza was launched in the UK.

The Edge

1998: Pan Pizza was relaunched as Grand Pan. 1997: PepsiCo decided to focus on their drinks business. As a result, Tricon Global Restaurants was born, creating the largest restaurant brand in the World. Tricon became the partner company with Whitbread. The Sicilian Pizza was launched in the UK, where there were 277 restaurants and 100 delivery stores.

1995: Stuffed Crust was launched in the UK.

Stuffed Crust

1994: 10,000 Pizza Huts were open for business. 1993: There were 300 restaurants and delivery stores in the UK. 1992: There were 9,000 restaurants in 84 countries. 10

1990: Pizza Hut warmed the cold shores of Russia. In the UK there were now 200 restaurants. 1989: The first restaurant was converted into a Restaurant Based Delivery store.

Delivery Unit

1988: The UK's first delivery unit was opened in Kingsbury, London. 1987: An average of one restaurant opened each week in the UK. 1986: By now, there were 100 restaurants in the UK and 5000 world wide. 1984: Over 50 restaurants so far in the UK. 1982: The UK joint venture started between PepsiCo and Whitbread.

Pan Pizza

1980: Pan Pizza was Introduced. 1977: PepsiCo bought Pizza Hut. 1973: Pizza Hut went international with restaurants in Japan, Canada & England. The first UK Pizza Hut opened in Islington, London. 1972: 1000 restaurants are open throughout the USA. 1958: Frank and Dan Carney open the first Pizza Hut in Wichita, Kansas. 11

Frank & Dan Carney

6. Break Even Point

Definition of Breakeven Point The Breakeven point literally means the amount of Total Revenue (Gross Profit) is equal to the amount of Total Expense (Costs). Thus, there are no losses or gains in that particular point. Anything above the breakeven point is considered profitable, and below is loss. Breakeven could also be termed in another way as the point where previous investments (on the restaurant) were already covered, and losses are already covered. How to use these data? Often when a restaurant's business hit the breakeven point, it's a joyful thing. And the earlier the business hits the breakeven point, the better it is. Simply for the fact that this is 12

the time where money is made - All previous investments are covered by profits made (below the breakeven point). As you can see, this Sample Business here took almost 7 months to break even. (1 Quarter = 3 months) Accounts should always record costs and profits in the restaurant cost sheet. Among documentations that are included with this chart are: 1. Invoices and receipts. 2. Expenditure Statements. 3. Income Statements. 4. Monthly and Quarterly Report (Information and data length & size varies, respectively) 5. Risk Analysis & Ongoing Viability Log (Quarterly) These data can be used to: 1. Assess pricing structure of the menu 2. Estimate miscellaneous costing (accidents, staff turnover, bonuses, extra fixed costs) 3. Assess managerial abilities and skills of the Operations Management team 4. Understand market trends throughout the whole year 5. Analyze viability of changes made (if any) to the operations in the restaurant 6. Speculate next season's gross profits 7. Assess investment abilities for expansion, improvement and marketing. (Or more) These are the primary usage of this data, and will not just be concluded of those five (5) key points stated above. Depending on the Restaurant Manager, he could include additional data like Objective Planning, Estimated Sales after Improvisation, etc. Restaurant Cost Sheet The restaurant cost sheet is divided into a few sections: Restaurant Sales

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* Food Sales * Beverage Sales * Miscellaneous Sales Cost of Sales * Food Cost * Beverage Cost * Miscellaneous Cost GROSS PROFIT Restaurant Sales - Cost of Sales = Gross Profit (Positive/Negative) Operating Costs * Labor Costs * Variable Utensils, Equipments and Cutleries * Gas * Laundry * Credit Card Fees * Operating Supplies * Marketing and Advertising * Utilities * Repairs and Maintenance [ TOTAL OPERATING COSTS ] Fixed Costs * Rent * Taxes 14

* Insurance * Interests * Depreciation Value [ TOTAL FIXED COSTS ] NETT PROFIT Gross Profit - (Total Operating Costs + Total Fixed Costs) = NETT PROFIT

7. Marketing Research Conducted

To determine the habits of people who purchase frozen pizzas, 10 people were surveyed to get their insight on the industry. They were asked questions about variety, quality, styles, frequency and favorites. After running statistical software, some interesting results emerged. To understand how Pizza Hut should position its frozen pizza, a positioning map was created. The two variables chosen for the map were quality and frequency. Quality was chosen because of the current movement in gourmet-frozen pizza. This is why California Pizza, Freschetta, and DiGiorno were chosen.

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The three expensive pizzas were then compared to their cheaper cousins, Tombstone, Red Barron and Tonys. To see how Pizza Hut should market their frozen product, the cheaper pizzas were compared to the high-quality pizzas by the second variable, frequency of purchase. If high-quality pizzas were purchased more frequently, then Pizza Hut should emphasize its frozen pizza as a high quality product.

QUALITY
Results reviled DiGiorno as the highest quality pizza with a mean score of 3.9. As stated in the situational analysis, DiGiorno had the market share. I believe this is why DiGiorno scored the highest. Behind DiGiorno was Freschetta with a score of 3.6 and Tombstone with an average score of 3.2 for quality. Surprisingly, California Pizza, Red Barron and Tonys finished out the bottom three with average scores of 3.1, 3.0, and 1.9 respectively. I believe California Pizza scored so low because its not marketed to those who took the survey, all college students. Overall, the averages for quality were ok at best and did not indicate that the people surveyed were not completely satisfied with any of the frozen pizzas.

FREQUENCY
Frequency results also showed an interesting pattern. While many averages were close, respondents said the pizzas purchased most were among some of the lowest in quality. Red Barron was purchased most by respondents with a mean score of 2.1. Tonys, the pizza with the lowest quality, and Tombstone were tied for second with an average purchase score of 1.9. They were followed by DiGiorno with 1.8, Freschetta with 1.6 and California Pizza with 1.5. Again, I believe the reason some pizzas did better than others is because of the nature of the population sampled. The positioning map revealed five of the six brands were in one quadrant. This indicates they are all perceived as similar and there might be an audience to target in such a competitive market.

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8. Strategy adopted (Country wise) referring to all business models adopted.

Pizza Hut, India
In 1996, Pizza hut came to India with a dine-in restaurant in Banglore that had special vegetarian pizzas. In additional to traditional Italian toppings, it incorporated Indian favorites such as Chicken tikka, Lamb korma etc., in its list of innovative toppings. Along with pizzas, the menu featured appetizers like garlic bread and soups, fresh salads, oven baked pastas and choice of ice-cream sundaes (www.pizzahut.co.in). In 2006, Pizza Hut launched The Great Indian Treat, catering to the specific tastes of the Indian public. The sales have shown a significant increase with the launch of this menu. The menu includes Kebabs, Curry Pizzas etc. Pizza Hut presented a good blend of the traditional Italian toppings with the Indian curries.

Why did Pizza Hut choose to expand in Brazil?

Pizza Hut sees Brazil as its second or third largest market in the world in the future because of its location-specific advantages: Massive size Relatively stable democracy Stabilizing currency Falling trade restrictions

How is Pizza Huts expansion in Brazil different from its expansion strategy in other countries/markets? Brazil is the only region serviced solely by franchises Benefits?

Less costly to enter this market Less risky to enter this market, since the franchisees are providing all the capital (particularly beneficial in a time of high inflation) 17

Costs?

Pizza Hut has little knowledge about the operations of its stores in Brazil It is difficult for Pizza Hut to come up with a strategy to boost its sales if it has so little knowledge about the operation of its franchises. Pizza Hut surrenders a lot of the control over how the chain is ran in Brazil to the large franchisees. What was Pizza Huts strategy to deal with its lack of operating knowledge in Brazil? Buy UFCs 35 stores in Sao Paulo. Is Pizza Hut considered a US multinational before it purchased UFCs stores?

No. Pizza Hut has no equity interest before it purchased UFCs stores. Is Pizza Huts expansion in Brazil a horizontal or vertical FDI?

Horizontal FDI Is it a greenfield investment or an acquisition?

Acquisition. What problems did Pizza Hut encounter after it purchased the 35 stores from UFC? Differences in management culture Staff at the stores were more numerous than Pizza Hut management realized. This was hidden from Pizza Hut during the initial negotiation stage Inflation Management bonus, purchases and mall leases were paid using devalued money during high inflation, this benefits disappeared after inflation is stabilized. Consumers became more knowledgeable about prices after inflation is stabilized and realized that Pizza Hut was overpriced compared to its competitors After inflation is stabilized, Pizza Hut reduced its prices in an untimely fashion and promoted it using traditional samba music (contrary to its western image) 18

Moscow - May 1991

Two Pizza Huts to open in Moscow -- Toe in the water for Western business Pizza Hut - 49% partner in joint venture Key Issue: Foreign companies cannot repatriate their earnings (ruble earnings could not be converted to hard currencies) Difficulties: Communication was difficult Different concepts of restaurants Hygiene days vs. routine hygiene Construction difficult due to lack of supplies Even nuts and bolts needed to be imported Difficult to get suppliers

70% USSR sourcing desired to ensure long-term viability Difficulty with winter shortages Mozzarella unavailable Couldnt be made due to poor quality cows Cows had to be raised differently

Difficulties: Quality, reliability unavailable from meat plants Refrigerated trucks unavailable

Two restaurants set up: ruble restaurant and hard currency restaurant Hard currency restaurant more expensive for same items, better service Hedge against exchange rate risk, get hard currency

Human Resources 19

Extremely well educated staff Unfamiliar with western concepts of quality Incentive systems critical Two separate staffs - more qualified in hard currency restaurant Catalog for tips

Initial operations Government randomly shut down the facilities several times Prices changed rapidly and without warning Even with relatively low employee turnover -- one new employee a day Incentive programs didnt work

Program started with bonus, decreased if goals not met Salary floor was higher than typical salary Difficult to establish team ethic Absenteeism a problem Soviet (2 day on, 2 day off) schedule hard to work with

9. Application of all Ps of Marketing.

PRODUCT Stuffed Crust Pizza Launched 1995

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The commercial for the Garlic, Herb and Cheese Stuffed Crust Pizza started with Jonathan Ross and Caprice. 135 pizzas were needed to shoot the ad, as fresh pizzas were bought onto the set every 5minutes. Sicilian Pizza Launched 1997 The then Chelsea supremo Ruud Gullit was the big name star to feature in an hilarious Pizza Hut ad. The ad promoted Pizza Huts sensational Sicilian pizza the first pizza with corners. It only took 7 takes before Ruud was delivering his lines to perfection. It certainly compared favourably with Gareth Southgate, who took 27 takes for just one scene! Grand Pan Pizza Launched 1998 Pizza Hut reunited the classic comedy duo The Two Ronnies in an amusing ad campaign to mark the relaunch of Grand Pan. Ronnie Corbett is seen in the ad devouring a giant pizza, which measured 5 feet in diameter and had to be carried on set by 3 members of the film crew. Over the 5 days it took to shoot the commercial, 6 team members cooked an astonishing 550 Grand Pan pizzas. The Italian Launched 1999 In 1999 Pizza Hut launched a new thinner, lighter pizza in the traditional style. Soon it was accounting for 1 in every 4 Pizza Hut pizzas sold. The advertising campaign featured a chef gaining inspiration for the thin pizzas from flattened objects ranging from hats to flying saucers.

The Edge Launched 2000 In 2000 Pizza Hut took consumers to The Edge with a new pizza which had no crust and loads of toppings all the way to the edge. The advertising captured excitement of the pizza and the unique cut with 16 pieces, which makes it great for sharing.

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Twisted Crust Launched 2001 Twisted Crust is a favourite with a seasoned twisted crust that can be ripped and then dipped into 2 delicious sauces. Pizza Hut invested over 3m in a multi media campaign to support the new pizza with advertising on TV, Radio, Outdoors and Print. The Quad Launched 2002 In May 2002 Pizza Hut launched the first UK developed new product. The Quad is four delicious pizzas in one, so when you cant decide have them all! Pizza Hut invested 3.5m in a multi media campaign to support the new pizza with advertising on TV that featured the infamous Pop Idol Judges. The Big New Yorker Launched 2004 Pizza Hut launches its BIGGEST ever pizza! At the BIG value price of just 9.99 its a staggering 50% bigger than a large Pizza Hut pizza making it the hottest and widest import since J-Lo first hit the UK shores.10 4forALL Launched 2005 The 4forALL is 4 delicious square pizzas, individually topped with Pepperoni, Chicken Supreme, Vegetable Supreme and Margherita. It is the perfect product for Pizza Hut as it offers great tasting combinations of toppings to share and engages our customers in an exciting and interactive way. The Dipper Launched 2006 The Pizza Hut Dipper is the perfect pizza for sharing, with sixteen pieces which you can dunk, dip, dab and dollop into a selection of delicious dips including BBQ, Sour Cream and Sweet Chilli. Only suitable for people who are deeply dippy about pizza! Cheesy Bites Launched 2006 Calling all small kids, big kids, Mums, Dads,sisters and brothers to RIP, POP and SHARE the fun with Pizza Huts latest invention the new Cheesy Bites pizza. Heralded as Pizza Hutsmost innovative pizza EVER, Cheesy Bites is perfect for popping with 28 delicious cheesy filled bites coated with yummy garlic butter. 22

PROMOTION The Retail Marketing Team are responsible for creating awareness and bringing the new product to life. Marketing agencies are asked to develop creative ideas for advertising, instore point of sale material, leaflets and online promotion. Lets take the recent launch of Cheesy Bites as an example. The TV advertising campaign ran for two months and was based around a family sharing quality time together over the fantastic Cheesy Bites pizza! All printed marketing materials showed close-up eat-me-now shots of the pizza along with a cheeky strapline. Customers who signed up to the website also received the Beat the Monster Cheesy Bites game as part of a viral marketing campaign. The success of this campaign was reflected by the proportion of Cheesy Bites sold as a percentage of total pizza sales, which climbed to 24% at peak. The success of the launch is not only due to the marketing activity. A lot happens behind the scenes to make sure that we achieve another of our values, executional excellence. The Finance team investigate the financial implications; the Operations team check that the idea will work in practice; Supply Chain source the ingredients or kitchen equipment and the HR team conduct training programmes for the teams in store. Pizza Hut adopts a truly integrated approach.

PLACE

Franchise

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At the beginning of 2001 Pizza Hut had 13 Franchise units in Ireland. Due to the success of franchising in Ireland, we decided to expand the Franchise Business into mainland UK and on the 25th February 2001 our first Home Service Franchise unit opened in Norwood (near Croydon). We now have over 150 Franchise stores in mainland UK and Ireland. The first step for anyone wishing to become a Pizza Hut Franchise partner is to complete an application form on our Franchise website, www.pizzahutfranchise.co.uk. All applicants go through a rigorous engagement process including two interviews, an on-job experience, and a business-planning meeting before becoming approved. If successful our business development team start looking for a site for the applicants future store, as they start their weeks of intensive in-store training.

10. Product Life Cycle (PLC) Introduction stage of product life cycle:
This product life cycle reflects sales and profits of a product over different phases of its life. Generally, most products show an established path which forms an S shaped curve. It is important to understand how the product contributes to profit and sales in different phases. During an introduction phase of product life cycle , there are many costs involved in order to introduce the product into the market. For example, new product development cost (also termed as NPD), expense involved in promotional activities, high operational costs etc. Due to this in majority of cases during introduction phase products tend to contribute negligibly towards profits. Rather at this time it is an expense involved (could be termed as loss). The other reason is that as the product is new and even suppliers of the raw material for the product are not very confident about the success of the product so they often tend to resist giving credits and the dealing has to be done all in cash.

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Growth stage of product life cycle:

As the introduction stage of product life cycle ends, the product has spent considerably moderate time into the market where customers / consumers get familiar to the product and start buying the product (or consuming it). As the product is now into the market it becomes more strengthened and faces more intense competition. This competition now offers greater choice to the customer in the form of different product type, packaging and price. The market base expands as more customers by the product. More trade channels are now willing to keep the product and one generally observes softening of prices. At this time the company soon starts operation on economic levels. There are les product bottlenecks hence cost is low. To remain competitive over a period of time the firm initiates product improvement or modification in the product to stay in the market, but profits taper off at the end of this phase.

Maturity Stage of product life cycle:

This now brings the product to its maturity stage. There can be ample number of reasons for product getting mature. For example, entry of a new product that may be offering better quality at a cheaper price which has induced the consumer to shift. This calls for some great marketing strategies that could revitalize the product so that the product stays in the market. But at this point, its difficult to survive, as there are new entrants that are now offering better priced products. This maturity often leads to death of the product and this is the time when company is incurring losses due to its production (no sign of profits). Remember, till the time a product is contribution to the growth of the company, the product is continued to be produced. But when the carrying cost increase than cost of production the production is stopped.

11. Outsourcing operations

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The call for pizza... hot, fresh and fast, activates an intelligent network call treatment that uses the callers number (CLI) to retrieve data from the Pizza Hut database server ( 3C). Automatic Call Distribution (ACD) in the TelstraClear network and Genesys Computer Telephony Integration (CTI) are used to deliver the call to the next available Call Centre Agent and the callers address as a ScreenPop to their monitor. Address and payment details are checked, the Call Centre Agent notes the callers preferences for certain types of pizza. This knowledge strengthens the friendly Hello from the Pizza Hut Call Centre. The Call Centre Agent can offer specials, and then assess the delivery time.

The order is then placed, via data transfer, to the callers nearest Pizza Hut. Now the callers local Pizza Hut plays their part in theprocess. Each pizza is individually crafted, cooked, cut, boxes and packed into inferno pouches for delivery.

12. SOURCE OF FINANCE (CAPITAL).

In support of our business goals, the Pizza Hut Finance function is split into three teams: Control, Planning and SCM. The overall role of Financial Control is to ensure that our financial statements are accurate and reflect a true and fair view of our business performance. It ensures that all transactions entered into by Pizza Hut are appropriately recorded. It also has the responsibility to ensure that our assets are protected, through appropriate controls and processes. Within Financial Control, we have teams that are responsible for the following: 1. Preparing and reporting accurate data to senior management, Yum and 2. Statutory Bodies 3. Supporting the expansion programmes of the Franchising and Business 4. Development teams.

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5. Analyzing variances from Plan and Forecasts to facilitate and influence decisionmaking. 6. Paying over 18,500 employees on a weekly basis and 15,000 employees every four weeks, ensuring the related tax and statutory responsibilities are discharged. 7. Paying suppliers who supply food, drink and the services that we need to run our restaurants. 8. Treasury and Tax management. 9. Insurance and Estates management. 10. Loss Prevention We also have specialised tax expertise to ensure that our Corporation, VAT, PAYE, NI and all relevant tax liabilities to the government is calculated properly. Plannings role is to ensure that our underlying business performance is analysed and understood, that our business and units have suitably stretching performance targets and that our continual drive to improve our business return is well on track. Structurally, Planning is split into three teams: 1. Business Planning, who manage the total business and individual unit budgeting process, as well as providing commercial analytical support for our operations. 2. Sales & Marketing Planning, who ensure that Marketing initiatives are rigourously evaluated and aligned with our strategic and financial goals. 3. Capital Planning, where our focus on returns is displayed through control of investment processes.

13. BUSINESS CYCLE

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Pizza Hut faced several ups and downs and difficulties in global market and one of the challenges was to introduce online Pizza ordering, which mainly targeted the youngsters. One the case from Australia is discussed below: Challenge: Increase revenues and market share in Australian fast-food market by targeting 18- to 24-year-old consumers through the Internet Solution: B2C pizza-ordering Web site integrated with existing order processing system. Key Business Benefits: Faster customer service; 66% reduction in presentation-layer development costs; fast and easy online ordering and repeat ordering; 50% reduction in length of future development cycles. Case: In Australia, Sydney-based Pizza Hut operates 350 restaurants, which produce a total of 30 million pizzas every year. Still, the restaurant chains Australian management realized that, beyond innovative topping combinations and merchandising gimmicks, the ultimate way to boost order volume was to give customers what they craved the most: fast, convenient service. And nowhere is speedy service more critical to customer satisfaction than in delivery orders. With one of the worlds highest rates of computer and Internet usage, Australia is an attractive venue for online pizza ordering. An estimated 74 percent of Australian 18- to 24-year oldsthe most lucrative segment of pizza consumersuse the Internet. We wanted a dynamic, fast and fun Web site that would appeal to young adults, says Roger Eaton, Pizza Hut Australias general manager. But we werent about to change our time-tested order taking and delivery processes. The Web site had to mesh seamlessly with them. At the same time, the company wanted to be able to scale quickly with customer demand, while adding new features not only to maintain interest but also to increase its online customer base. Topped with everything from anchovies to zucchini, pizza may well be the worlds most adaptable dish. No wonder its a fast-food staple in almost every country. Indeed, the worlds largest pizza restaurant chain, Pizza Hut, has nearly 12,000 units and kiosks more than double

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McDonaldsserves approximately 4 million people every day in more than 88 countries. But with a smorgasbord of fast-food competitors, Pizza Hut needs every enticement it can muster to sustain the markets appetite for its fare.

14. CULTURAL AND RELIGIOUS ISSUES

Pizza Hut takes into account various cultural and religious issues like, McDonalds and Pizza Hut both modified their menu to take into account the religious beliefs of Hindus and Muslims in India by not serving beef and pork. In 1996, Pizza hut came to India with a dine-in restaurant in Banglore that had special vegetarian pizzas. In additional to traditional Italian toppings, it incorporated Indian favorites such as Chicken tikka, Lamb korma etc., in its list of innovative toppings. Along with pizzas, the menu featured appetizers like garlic bread and soups, fresh salads, oven baked pastas and choice of ice-cream sundaes. In 2006, Pizza Hut launched The Great Indian Treat, catering to the specific tastes of the Indian public. The sales have shown a significant increase with the launch of this menu. The menu includes Kebabs, Curry Pizzas etc. Pizza Hut presented a good blend of the traditional Italian toppings with the Indian curries. Pizza Hut has developed a menu especially for India with vegetarian selections to suit Indian tastes and preferences. Pizza Hut takes following stringent precautions in preparation of the vegetarian products: They are prepared separately, using dedicated equipment and utensils. Only pure vegetarian oil is used as a cooking medium. Cheese and sauces are completely vegetarian and egg less. Separation of vegetarian and non-vegetarian food products is maintained throughout the various stages of procurement, cooking and serving. Pizza hut customizes their products and processes when they go to different foreign countries with diversified cultural. As we know that trust is very important in Food and 29

Agribusiness industry since the risk attached with the industry is very high as compared to other industries like garments, electronic appliances etc. Customization according to the cultural diversity is essential to grow and gain trust of the people of a particular region. Customization strategies need to deal with adaptation to specific taste requirements of various regions. It is very important as every region has different taste requirements and one food item may be popular in one region and completely rejected by some other region, for example spicy food of India may not be liked by Chinese people. The end product should be appropriately modified so that it is according to the regions specific demands. This makes the product offering to be accepted by customers readily as they associate themselves with the brand and the product like The Great Indian treat of Pizza Hut was adopted successfully by the Indian public. Not only the food item has to be modified in terms of its ingredient or the cooking process to suit the taste buds of the local population but it also needs to be appropriately named so as to appeal the locals. For example, within India many south Indian dishes are now having hybrid names in north India: American Dosa, Chinese Dosa, Fried Dhokla, Fried Idlis etc.

15. Political Factor

Tell Pizza Hut to Stop Using Pictsweet Mushrooms
For 14 years, workers at Pictsweet Mushroom Farms in Ventura County have tried to negotiate a United Farm Workers contract. Pictsweet has ignored its workers desires and violated a host of state labor laws. Pizza Hut is still using these mushrooms to make their pizzas!

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Battle Over Pizza Puffery

A bitter legal battle being waged in a New Orleans courtroom could force some of the nations best-known companies to tone down some of the claims made in popular advertising jingles and slogans. The food fight focuses on Pizza Huts claim that the Better ingredients. Better pizza slogan of the rival Papa Johns chain crosses over into false advertising. The case has put many advertising industry executives on edge because it could prompt similar challenges against such well-known slogans as Burger Kings It just tastes better, Snapples Made from the best stuff on Earth, and, ironically, Pizza Huts own slogan Best pizza under one roof.

16. LEGAL ISSUE

The Milkweed detailed how Pizza Hut restaurants illegally claim to use Mozzarella cheese on certain menu items, when in fact, Pizza Huts salt, starch and water-laden Pizza Cheese does not conform to FDA standards of identity for Mozzarella. In this issue, writer John Bunting details how Pizza Huts cheese supplierLeprino Foodsuses a silicone-based industrial chemical in the patented manufacturing of Pizza Cheese. That chemicalPolymethylsiloxanehas no FDA approval for use as a food ingredient. Polymethylsiloxane is sold by Dow-Corning as Antifoam FG 10. THIS MATERIAL IS APPROVED BY FDA FOR USE IN FOOD PLANTS ONLY AS AN ANTI-FOAMING AGENT FOR BOILER WATER. In its patented manufacturing process, Leprino Foods liberally sprays Polydimethylsiloxane on cheese granules. Leprinos Pizza Cheese supplied to Pizza Huts contains about 900 parts per million of Polymethylsiloxane: 90 times higher residue 31

concentration than FDA allows when Polymethylsiloxane is used as a boiler water antifoaming agent. Repeat: Polydimethylsiloxane has no FDA approval as a safe food ingredient. It is a violation of FDA rules to use an unapproved ingredient in human foods. Silicone is amazing stuff. In its various forms, silicone may enhance the female anatomy (ala amply-endowed actress Pamela Anderson). Silicone products can caulk seams around the bathtub to seal out water. Silicone compounds are used for lubricants. However, using silicone products in human foods is a novel, if extra-legal, application. Leprino Foods, the worlds largest Italian cheese manufacturer, is the nearly exclusive supplier of Pizza Cheese to the 6000+ Pizza Hut restaurants in the U.S. Leprino is based in Denver, Colorado. To control costs (and boost profits), Leprino Foods uses patented manufacturing processes that add large volumes of water, salt and food starch to so-called granules of Pizza Cheese prior to flash-freezing. Food starch is a particularly profitable addition to processed foods, since food starch holds ten times its own weight in water. All that food starch, water and salt in the Leprinos Pizza Cheese creates problems for both cooking and refrigerated shelf-life. To solve these cooking problems, Leprinos patented process for making cheese granules sprays 1.75 parts of a water-based spray containing 0.05% Dow-Corning Antifoam FG 10 for each 100 parts cheese. Yield: 900 parts per million of Antifoam FG 10 (generically known as Polydimethylsiloxane) in the Pizza Cheese that Leprino sells to Pizza Hut. Polydimethylsiloxane is approved by FDA in food industry use only as an anti-foaming agent for boiler water in plants processing non-standardized foods. FDA permits no use of DowCorning Antifoam FG 10 directly in or on foods. FDA does allow up to 10 parts per million of Polydimethylsiloxane residues in food products, as residue from the products use as a boiler water anti-foaming agent. The 900 ppm of Polydimethylsiloxane in Leprinos Pizza Cheese that Pizza Hut puts on its pizzas is 90 times FDAs legal limit for indirect residues of that chemical in food products.

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17. RECOMMENDATIONS AND CONCLUSION

Key Learning As we know that trust is very important in Food and Agribusiness industry since the risk attached with the industry is very high as compared to other industries like garments, electronic appliances etc. The other key learning from the above cases are. . It is very important as every region has different taste requirements and one food item may be popular in one region and completely rejected by some other region, for example spicy food of India may not be liked by Chinese people. McDonalds and Pizza Hut both modified their menu to take into account the religious beliefs of Hindus and Muslims in India by not serving beef and pork. The end product should be appropriately modified so that it is according to the regions specific demands. This makes the product offering to be accepted by customers readily as they associate themselves with the brand and the product like The Great Indian treat of Pizza Hut was adopted successfully by the Indian public. Not only the food item has to be modified in terms of its ingredient or the cooking process to suit the taste buds of the local population but it also needs to be appropriately named so as to appeal the locals. For example, within India many south Indian dishes are now having hybrid names in north India: American Dosa, Chinese Dosa, Fried Dhokla, Fried Idlis etc. Using actors and celebrities of the region in the advertisements. McDonalds and Pizza Hut both have used this tool effectively as their advertisements and campaigns have Bollywood actors and themes. Connecting with the consumers of that region on an emotional level and also leverage its global position. This is the most important aspect that leads to the success of the company. The global position of the company makes the customers to try the product for the first time and later the localization aspect and strategies make the customer to come again.

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CONCLUSION
Glocalization should form a very important aspect in the expansion plans of the Global Food and Agribusiness firms. Glocalization attributes the success of a global product completely to localization of the product according the specific needs of that region. Many companies collapse, when a decision to launch in different locations simultaneously is taken without any prior estimation of the degree of adaptation needed. For example, Wal Mart failed in some parts of Europe due to the problem of not being able to adapt to the local conditions. The food and agribusiness multinational enterprises have to be particularly sensitive to these issues because challenges faced in this industry due to the cultural differences are more critical and complex as compared to the other industries.

REFERENCES
www.google.com www.wikipedia.com www.pizzahut.com

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