PESTEL and VRINE Analysis for Papa John's

Muhammad Aqdas Muzaffar

Background

PESTEL in China

VRINE

Recommendation

References

Background PESTEL VRINE Recommendation References

Introduction• Papa john’s is the third largest take-out and pizza

delivery restaurant chain in the world with headquarters in Jeffersontown, Kentucky.

• Brand slogan: Better Ingredients. Better Pizza. • Papa john’s was founded by John Schnatter at age of 22

and the first papa john’s store was opened in 1985• Internationally, there are over 4,600 Papa John's

establishments, including over 3,200 in the U.S. and the remainder spread among 34 other countries. In china, Papa john’s has more than 200 brunches, and this country became the biggest market of Papa john’s outside the United States


Papa John’s in China


PESTEL Analysis of the Chinese Market


Political

• Political environment is stable• In 2004, trade agreement with WTO to

encourage the development of the tertiary industry including fast-food industry

• In 2010, “Notice on further improving the food industry”

• Pointed the significance of developing food industry.

• “National food industry development plan”


Economic

• China’s economy is developing greatly, which is the world’s no.2 economy

• Suffered from Severe economic condition since 2008


Economic

• GDP


Economic

• GDP per capita


Economic

• Chinese disposable income per capita


Economic

• National Bureau of Statistics of China: January-October in 2015, Chinese food industry revenue reached 2.6246 trillion RMB, increased by 11.8% compared to same time in 2014.


Sociocultural

• Trend of having western fast food——pizza become a popular food

• More and more Chinese people tend to go to restaurants rather than cooking by themselves

• Chinese people like to dine in rather than take out

• Chinese cities are crowded


Technological

• The development of Internet:• Social media (weibo, wechat, etc.)• Online order• App (Experience sharing app like

Dazhongdianping, etc.)


Environmental

• Pollution of food packaging is severe• Green packaging and environmental

friendly processes became popular.• Save water and energy in stores is

important


Legal

• In 2009, Implement the new “Food safety law”

• In 2015, the revised version of the “Food safety law”

• Government enhanced the monitor and control of the food industry.


Effective Operating System • Commissary System and Domestic QC Centre

SystemValuable? • High quality pizza with fresh ingredients

• Economies and efficiencies of scale

Rare? • Scarce• Equally (or more) effective operating system not very

common

Inimitable & Non-substitutable?

• Difficult and costly to imitate• Almost inimitable for small companies in the industry• No patents or copyrights

Exploitable? • Well-organized to exploit the system• Long presence in market and established relations with

suppliers



Arenas

Current Situation:• Food industry: western food, pizza• Market segments: young people• Geographic area: Chinese market


Vehicles

Current Situation:• Some franchised stores are explored to

the expired ingredient and Husi rotted-meat scandal in China


Vehicles

Recommendation• Use high quality franchisee:• Choose franchisee under specific rules:

Lowest net capital, current asset, cash flow and previous performance

• More monitor and control on individual stores


Differentiators

Current Situation:• Papa John’s dose not express its

differentiators to Chinese customers and can not compete with rivals effectively

Recommendation:• Set the image of high quality pizza in

Chinese market


Staging and Pacing

Current Situation:• Planned to open 20 more stores per year.

In recent two years, more than 60 stores closed down.

Recommendation:• Slow down the pace of expansion


Economic Logic

• Cost side: Remain the same• Revenue side:• Advertising:• 1. Cooperate with search engine like

Baidu• 2. Social media like weibo and wechat


Chines Business, (2015). To reverse the tide pizza magnate Papa John let go of Beijing and Tianjin guide. [online] Available at: http://www.cb.com.cn/info/2015_1121/1153943.html [Accessed 25 Nov. 2015].

Fortunechina.com, (2015). Papa John's lessons. [online] Available at: http://www.fortunechina.com/business/c/2013-05/27/content_157731.htm [Accessed 25 Nov. 2015].

Kraneshares (2015), International Monetary Fund 2015 Forecast- China Largest Contributor to Global GDP Growth. [Online] Available at: http://www.etftrends.com/2015/04/international-monetary-fund-2015-forecast-china-largest-contributor-to-global-gdp-growth/ (Accessed: 24 November 2015 ).

Lutz, A. (2015). Papa John's just made subtle dig at Domino's. [online] Business Insider. Available at: http://uk.businessinsider.com/papa-johns-is-focusing-on-pizza-2015-5?r=US&IR=T [Accessed 25 Nov. 2015].


National Bureau of Statistics of China (2015), The Total Revenue of Social Consumption Increased By 11% in October, 2015. [Online] Available at:http://www.stats.gov.cn/tjsj/zxfb/201511/t20151111_1271251.html (Accessed: 24 November 2015).

Statista, (2015). Papa John's: restaurants in China 2014 | Statistic. [online] Available at: http://www.statista.com/statistics/279095/number-of-papa-johns-restaurants-in-china/ [Accessed 25 Nov. 2015].

Wong, V. (2014). How Papa John’s Turned Beijing Into a Money Pit. [online] Businessweek.com. Available at: http://www.bloomberg.com/bw/articles/2014-11-07/how-papa-john-s-turned-beijing-into-a-money-pit [Accessed 25 Nov. 2015].
