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why porter five forces are important?

We can better understand about competitor position of Pizza hut using porter’s five forces analysis. Due to the growth, every organization can gain benefits from growth and globalization. According to the fast-food industry, play a major role in the economic activities of the world.

Pizza the hut is the world-famous fast-food company and it’s a franchises company doing its business operation worldwide. In this assignment, the fast-food industry always tries to cater to the huge customer base providing different and quality services to the customers. This industry rapidly changes and come up with innovation. When electronic commerce came to Sri Lanka Fast Food Company has become more competitive because all companies are trying to expand their business process using electronic commerce.

According to porter’s five forces analysis

Competitive rivalry

Due to the growth and pervasiveness of information technology all fast food companies become more technological companies. All of these companies are trying to keep the existing customer as well as they are more likely to cater to the new customer base. So fast food companies always differentiate their products and they are more innovative. Because of the present customers can easily compare with other fast-food companies in their product line. PIZZA hut also tries to expand its business providing different and quality products to their customer. The online purchasing concept is a better example and they implement this concept when it’s come to the fast-food industry. many Fast food companies are doing their operation. KFC, Burger King, Domino’s PIZZA, MacDonald, etc. these companies offer some kind of food for the market. Domino’s PIZZA is the direct competitor of the PIZZA hut. It also provides the same services relating the purchasing via the internet for the public. They also provide an online ordering system through a web site. So PIZZA Hut Company has a huge competition to cater to the customer. 

Threat to Entry

PIZZA Hut uses different types of technologies for its activities. These days they provide mobile apps for purchasing and online purchasing through the web site for their customers. They use to differentiate their services using mobile apps for smartphones. These are the latest technologies in the world. So these technologies are most expensive and advance for the newcomer to the industry, they have to spend a huge cost to implement these technologies. More capital required to enter the industry.  PIZZA hut use identifies to customer’s location when they are accessible to the web site using a tracking system. Therefore high threat to entry to the market and also experience is important to retain the market. PIZZA HUT has more experience than other food companies. Because of PIZZA HUT operating worldwide. Therefore PIZZA HUT has more experience.

PIZZA hut the company uses inventory handling management via the internet to identify the amount of their inventory in hand and according to the amount they order raw materials from their supplier through the e-commerce application call online inventory control. 

New entries cannot easily implement these types of internet-based technologies. Because of the differentiation of their services others cannot easily imitate without incurring a high cost.

Buyer power low

PIZZA Hut Company is the market leader of the fast-food industry. They maintain this position using their stranded and quality products and services. Because of the market leader position PIZZA HUT not facilitate bargaining to customers. According to this situation, buyer power is very law. But PIZZA HUT has to properly maintain their business strategies and competencies to gain a better advantage for the company and pricing strategies and quality is the most important to retain their position. Customers have more alternative choices to move to a competitor. These days customers are using the internet and they compare products with a competitor. They make decisions base on their opinion. According to this situation customer have some ability to affect to PIZZA HUT by the shift to Domino’s PIZZA etc.

Threat of Substitutes

many fast food companies are doing them the operation, among them, Domino’s pizza is the direct competitor of PIZZA hut. Domino’s pizza has the same capabilities to reach its customers compared with PIZZA HUT. They produce the same pizza for the public and some people are likely to buy Domino’s pizza because of the Domino’s pizza can buy a cheaper price compared with PIZZA HUT. So Domino’s pizza the direct affecting substitutes for the selected company. Some people are not like to consume pizza and they like to eat products of the KFC. So KFC also has a greater customer base.

KFC products affect the PIZZA HUT to reducing the customer base of PIZZA HUT.  KFC Company provides an online ordering system to combine with Kapruka.lk. Because of this substitute product of the PIZZA HUT has to maintain good.

competitive strategies to retain their customers. Above mention companies also use more technological equipment and e-commerce application to reach their customers

Supplier power

PIZZA HUT concern about quality products provides to their customers. So the company considers the quality of raw materials for its production process.  PIZZA HUT directly links with the international supplier, because PIZZA HUT is an international company. They import like cheese from the international supplier. So suppliers have more power because there is less number of quality raw materials suppliers in the market. Not only that PIZZA HUT buys raw materials from the Sri Lankan market. Flour buy from Prima and sausage get from the Keels Company. Recently PIZZA hut implements a system to identify their inventory and order raw materials through the internet using e-commerce application and all the outlets can purchase raw materials from above mention supplier. This concept is more efficient rather than raw materials coming from the head branch were the house. In this situation supplier power also high because there are less number of well-reputed companies in the market and PIZZA Hut Company cannot shift to another raw materials company without incurring a high cost.

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