In this part of the paper an external analysis regarding the California Pizza Kitchen (CPK) will be conducted. The main objective of this external analysis is that to scan the external environment for factors which might open up new opportunities or present threats to survival for California Pizza Kitchen. To do that an external analysis based on Porter’s Five Forces Model and a PEST analysis will be carried out.
Porter’s Five Forces Model
Porter’s Model of Five Forces is one of the most versatile frameworks to analyze the industry external environment. With the application of this model California Pizza Kitchen will be able to understand and get a handle on the competitive and market characteristics of the food and beverage industry
Bargaining Power of Suppliers
The supplier power is based on the concentration of suppliers and the availability of suppliers within the region where California Pizza Kitchen operates like China, USA or Japan etc. It is important for CPK to pay a close attention to the needs and the wants of their suppliers. (Cravens, 2000)
Bargaining Power of Customers
Here California Pizza Kitchen has to be careful because the customer’s influence increases over a company. it is extremely important for California Pizza Kitchen to lookout for the tastes and preferences of the customers so that they are able to cater to all their needs. For example, Pizza Hut when it opens a new franchise in any company, does product adaptation so that it would suit the local tastes, therefore this needs to be done by CPK as well. (Cravens, 2000)
Rivalry among Competitors
There is a great deal of competition between 2 similar companies in the same industry. For example, the biggest rival among the competitors of California Pizza Kitchen is Pizza Hut. Pizza Hut is one of the oldest and the most famous pizza chains all over the globe, it has somewhere around 34,000 franchise outlets, delivery units and kiosks all in over 100 countries.
Availability of Substitutes
A substitute product for any California Pizza Kitchen product can cause the company to lose its business. Any product that is available in the market has a substitute available and the substitute for pizza is burgers and fried food. For example, California Pizza Kitchen is easily substituted for Burger King, McDonalds, Subway or KFC. (Hollensen, 2003)
Threat of New Entrants
This is another one of the competitive forces that affects the company in a big way. For example, the entrance of Dominos within the food and beverage industry can cause California Pizza Kitchen to lose some of its business.
The abbreviation for PEST analysis is Political, Environmental, Social, and Technological analysis. This analysis will help California Pizza Kitchen to know its environmental challenges and in how to operate the company in the present and by helping it to prep itself for the future. This analysis will help California Pizza Kitchen to match its resources with its activities and to help it move in the right direction.
Here the political term refers to the global, national, regional and local trends, changes or events. Since CPK operates in somewhere around 10 countries around the globe, the company needs to adhere to the rules and regulations of that country in which it operates. California Pizza Kitchen needs to work with various special interest groups within the company and the market as well. (Kevin & Kotler, 2008)
California Pizza Kitchen is extremely committed to the environmental responsibility. The outlets of company follow the environment regulations and promote cleanliness in their surroundings. California Pizza Kitchen has a very clean and tidy environment and has a very proper system to dispose of the garbage.
The company supports charitable programs and takes the first steps for promoting, supporting and participating in the welfare of the community. California Pizza Kitchen has even sponsored educational programs in local community schools and the company also provides funds for different events like Fundraisers and the money collected at these fundraisers go to non-profit schools, which focus on children, youth sports and education. (Kevin & Kotler, 2008)
The social term in the analysis refers to the developments within the society that is means culture, behavior, the expectations of the customer, the attitude of the company towards the society etc. California Pizza Kitchen has introduced CPKids Programs under California Pizza Kitchen Foundation for children ranging 10 years and under in schools and a variety of organizations , for example, Restaurant Tours and Incentive Awards for outstanding accomplishments to Fundraising Events and Sports Team Partnerships. California Pizza Kitchen also has a great deal of programs for the community as well.
The technological term over here refers to the development, such as, the processing of the products, how the machines are operated. With the use of technology in the operations, CPK has been able to reduce the cost of production, the performance of the organization has increased, has helped the company with its supply chain operations. CPK needs to introduce multinational development teams so that it ensures that the system design needs the need of the company. With the help of parallel development CPK will be able to assign different parts of the system to different subsidiaries of the business. The manager needs to listen to the ideas of the employees as well. Change the department’s structure so that it would be able to fit the communication needs. (Kevin & Kotler, 2008)
The end result after conducting the environmental analysis is that California Pizza Kitchen needs to keep a lookout for the taste and preferences of its customers and it needs to follow trends and information revolution by leveraging greater consumer insight to deliver superior value products to the customers which in turn creates sustainable, yet incredible business results for the benefit of their stakeholders. The company needs to improve its technological aspects and it needs to follow all the rules and regulations. If they are able to do so then they would have a competitive advantage over their competitors, where they would lock-in customers and lock-out competitors.
Cravens, D W. (2000), Strategic Marketing. New York: McGraw Hill
Hollensen, S, (2003), Marketing Management: A Relationship Approach. Financial Times/Prentice Hall
Kevin, K. & Kotler, P. (2008), Marketing Management. Prentice Hall