Managment of International Business, Expanding Pizza Express Into Turkey



Management of International Business

Expanding Pizza Express into Turkey

Executive summary 3

Introduction 4

Chosen country to expand into 5

PEST analysis 6

SWOT analysis 8

Competitive environment 9

Internationalization Advantages 9

Entry mode selection 11

Conclusion 12

References 13

Executive Summary

“The motivation for expansion internationally is to make the investing firm more profitable and competitive in the markets it serves or intends to serve.” Luo, Y (1999).

Pizza Express are a well known pizza brand in most parts of the world. They are known for serving freshly made Italian pizzas and playing jazz music at their restaurants.

They were found in 1965 in London by Peter Boizot. Now there are more than 300 Pizza Express restaurants just in the UK.

I will be looking for a Country that Pizza Express restaurants chain can expand into and what advantages it would bring to the company

Introduction

Long before the recent opening of his home-town restaurant in Peterborough, Peter Boizot started the first Pizza Express in London, 1965. However his first taste of pizza was in 1948 whilst in Northern Italy. From there, he found himself in Germany where he witnessed pizzaiolos dressed in blue and white striped shirts tossing the dough high into the air. This was accompanied by opera, classical and jazz music all played off a juke machine. On returning to London and finding no good pizzas, Peter invested in a Signora Notaro oven from Italy, got an exclusive deal with London 's only mozzarella maker, Margaret Zampi and took over her ailing pizza shop, Pizza Express. Soon a second restaurant was opened and the beginnings of Pizza Express started.

The chain expanded, initially as a franchise operation. In 1993 the company was brought to the London Stock Exchange by way of a reverse into a small shell company organised by Luke Johnson, Hugh Osmond and David Page.

They expanded the company both organically and by buying in the franchisees. By 2003 there were more than 300 restaurants in the UK, as well as outlets in Ireland, where it trades as Milano, and Spain and France where the brand name is Pizza Milano. In other countries the business is branded as Pizza Marzano. The company was acquired by private equity group Cinven in 2007 for £900m.

Peter Boizot recently won a lifetime achievement award for his role in the industry. “Peter Boizot famed in the restaurant industry for his role as the founder of the pizza chain, Pizza Express, was recognised by the Peach Factory Hero and Icon Awards last week with a lifetime achievement award for the outstanding contribution he’s made to the restaurant and dining industry over the years.” Kate, B. (2010).

Pizza Express offers unique dining experience to its customers, they want their customers to be relaxed and more comfortable during their visit at any of their restaurants. They use a lot of different techniques to achieve this aim, this year they have trained their staff to flirt (subtly) to make their customers feel more relaxed. “The family-friendly restaurant, famous for serving up "bambinoccinos" – a cappuccino without the coffee for kids – has recruited classically trained actor Karl James to teach flirting and the art of chit-chat to staff to help them to butter up the restaurant 's customers.” Louisa Peacock. (2010).

Chosen country to expand into

I think the county of Turkey is a perfect location for Pizza Express to expand into. Turkey’s economy has been growing vastly lately and they have many tourists visiting the country throughout the year.

Other foreign fast food companies have moved to Turkey decades ago and they have been successful. Pizza Express have a very good reputation because of their service, food and their prices.

“Turkey 's economy grew by 8.9 percent in 2010, thus becoming one of the fastest growing economies in the world. According to recently released data by the Turkish Statistical Institute (TurkStat), the Turkish economy has continued its strong growth trend in the 4th quarter of 2010, reaching 9.2 percent, well over market estimations. With the overall growth rate of 8.9 percent, Turkey has left Europe behind, becoming one of the fastest growing economies in the world in 2010. The country 's GDP has risen to TRY 1.1 trillion (approx. USD 735 billion) in current prices, while GDP per capita exceeded USD 10,000.” Larry, M. (2011).
PEST Analysis

I will do a PEST analysis to find out about the Political, Economical, Social and Technological factors.

Political

The government in Turkey is a democratic republic which advocates the separation of state and religion, therefore although 90% of the population is Muslim, many other beliefs are actively present in the country, such as Christianity, Judaism, etc. The President of the Republic is the head of state and represents the republic and the unity of the Turkish nation, as well as upholding the Turkish constitution and overseeing the workings of the organs of state. Executive power is held by the government, the head of which is the Prime Minister. Legislative power is shared between the government and the Grand National Assembly of Turkey whereas the Judiciary is independent and protected by the constitution. The government of Turkey is pro-western and are actively working towards the integration of Turkey into the European Union. They have implemented actions towards a major economic reform which, as can be seen by the growing economy are working to improve the conditions in the country. The government has been in office since the end of 2002

Economical

Turkish economy is showing a very positive outlook for the coming years. With a yearly average increase of 8% between 2002 and 2004, and as one of the top ten countries in the world with regards to agricultural production output, the spectacular growth of the Tourism sector can be considered the “icing on the cake” which makes Turkey such an attractive location to invest in. Inflation is at the lowest it has been in over three and a half decades and with the government actively promoting foreign investment into real estate in the country, all indicators point to the fact that the time to purchase property in Turkey is now. Commercial real estate in Turkey is being seriously promoted with senior financial analysts advising that the over the next five years as many as 200 commercial centres may be built throughout the country. The stable political situation in Turkey means the continuation of the economic reforms which have been actively promoted by the Turkish government over the past years and which have resulted in the positive outlook we see today, as well as the continuation of working towards EU membership and the continuation of the secular governance.

Social

Turkey have been improving their social structure over the past few years. Their health care wasn’t as good as it is now until last decade. The health has improved and the health department is improving. The country is growing economically and they have a bigger budget to spend on health care to improve the populations health.

Labour is still not very expensive in Turkey and there are a lot of firms that own factories in different locations. This provides jobs for local people in the area and it is also an advantage for international businesses as they can keep their costs to a minimum.

Technological

Turkey have improved their technological abilities lately and they have been producing many different modern equipments for all sectors. Turkey are known for making good quality clothing.

Having the latest technology to produce goods and equipments can help Turkey to save revenue because they do not have to import as much.

“The Turkish Technology market was around USD 45 billion (USD 28 billion ICT Market and USD 15 billion Consumer Electronics Market) in 2010. Turkey is the only country that hosts all five major international technology retailers (Best Buy, Media Markt, Electro World, Darty and Saturn).” Alpay, F. (2010).

SWOT ANALISYS

Strengths

Pizza Express are a very well established brand all over the world.
They are known for offering good quality original Italian style Pizzas.
Good lifestyle image.
Consistency of food.
Pizza Express have won a lot of different awards.
They offer vegetarian dishes.

Pizza Express are a very well established brand with restaurants all over the world. It wouldn’t take long for Pizza Express to be recognised in Turkey. They offer good and unique food which stands out from the rest of the competition.

Weakness

Lack of marketing activities
Competition.
Prices on the menu, which might not be affordable.
They operate under different brand names in some countries.

Although Turkish economy is growing and the GDP is increasing every year, the prices on the menu could be classed as expensive in Turkey. Pizza Express also need to do promotions and marketing activities to get peoples attention because it’s a new brand.

Opportunity

Growing market.
Open to experiment with food.
Unique style of pizza.

There are some other foreign pizza franchises in Turkey and they have all been successful. Pizza express offer fresh thin Italian pizza and keeping customers satisfied is very important for them. With these two elements in mind they can be successful in Turkey as they have been in many other countries.

Threats

Strength of competition.
More health-conscious consumers.
Loyalty enjoyed by the present competitors.

Other franchises like Pizza Hut and Dominos Pizza have been there for a long time and it might be hard for Pizza Express to compete with them at beginning because they are well recognised.

Competitive environment

Although Pizza Express are unique Pizzeria offering unique type of pizzas, they have two major competitors in the market. Their main competitors in the Turkish market are Pizza Hut and Dominos Pizza. These two companies have been in Turkey for long time and they are well established. Pizza Express restaurants don’t just make the customers feel like they are at a fast food restaurant, the design and the decor of the restaurant makes it feel more like an “upmarket” restaurant although the prices are very similar to their competitors. This makes the customers feel more special and encourages them to come back in the future. Although there are other pizza restaurants in Turkey, most of them are very different to Pizza Express and this makes them unique. Their Pizza are always fresh and they are always trying to be more healthy. In 2009 they launched 500 calorie pizza “As part of a collaboration with Weight Watchers, Pizza Express has today launched a new ‘salad pizza’ to tempt out calorie-wary diners. Consisting of just 500 calories and less than 5g saturated fat, the salad pizzas, which are regular pizzas with 50g of dough removed from the middle that is replaced by a healthy salad, will become part of the chain’s new Leggera or `light` range.” Paskin, B. (2009).

Internationalization Advantages

The important steps to a globalization are first to develop a core strategy for the home country, then internationalizing the core strategy and finally globalize the international strategy.

“As an identifiable concept, globalization may be represented by the movement of goods, services, capital and labour around the globe in a coordinated and institutionalized interconnectedness, in which a set of global relations are established that ensure efficiency in the use of the worlds scarce resources.” Milward, B (2003).

By expanding internationally Pizza Express can attract more customers and increase their sales revenue. Pizza express already exists in UK, Poland, Indonesia, Cyprus, China, France, UAE, Oman, Spain, India, Hong Kong, Gibraltar, Andorra, Japan, Kuwait, Qatar, Hungary and Shanghai.

“Turkey’s economy is almost one-third bigger than previous estimates, boosting the government’s per capita income targets and increasing the prospect its credit rating will be raised.

According to official figures released on Saturday, Turkey’s gross domestic product was TL758bn ($606bn, £300bn) in 2006, a 31.6 per cent rise on the previous estimate of TL576bn. Per capita income for that year was raised sharply, from $5,480 to nearly $7,500.” Boland, V. (2008).

By expanding into Turkey, Pizza Express can increase their sales revenue because Turkey is growing rapidly economically and GDP per capita is on the rise. People have more money to spend compare to 10 years ago. Pizza Express offers a unique type of pizza to its customers and they have a good reputation worldwide. Comparing to their competitors Pizza Express are more healthy and they contain lower amount of calories. The theme of the restaurant is more “upmarket” which makes the customers feel more special and their prices are similar to their competitors.

Turkey is visited by a large number of tourists each year and tourists can be potential customers for Pizza Express. Most of the tourists that come over to Turkey from overseas are most likely to know about Pizza Express and because of their reputation tourists would visit Pizza Express. “According to “Turkey Tourism Industry Forecast to 2012”, Turkey’s tourism industry is the largest and the fastest growing tourism industry in the Middle East region. Tourism industry is one of the most important sectors of the Turkish economy. The number of international tourist arrivals in the country has reported a significant growth momentum during the past few years. Moreover, with the growing economic conditions, rising income levels, and the government support, the number of tourist arrival is expected to increase in near future. It is anticipated that the international tourist arrivals in the country will grow at a CAGR of around 6.5% during 2009-2012.” Aston.W (2011).

Good food and service are the key elements for a restaurant to be successful and pizza express want to keep everything the same when expanding internationally. They always play jazz music at their restaurants and they would want to keep that theme when opening new restaurants overseas. This is another advantage over their competitors because none of them offer live music.

“Pizza Express also intends to treat its restaurants as venues and introduce a calendar of events tailored to the local demographic. It will build on its jazz heritage by hosting live music nights targeting young professionals, and will run a Play Dough Hour to appeal to families with young children using its restaurants.” Baker, R. (2011).

Word of mouth helped Pizza Express a lot, this is one of the best types of advisement for a business because it does not cost any money. Everyone who visited Pizza Express restaurant were happy with the food and the service they received so they recommended it to their friends.

Pizza Express also offer live music at their restaurants which non of their major competitors do. They play live Jazz music which creates a very relaxed and warm atmosphere for the customers while they are dining.

Entry Mode selection

I have chosen Franchising as a way of market entry into Turkey. This is the way Pizza Express can enter the Turkish market. Franchising is a good way of entering a new country because Pizza Express can have the restaurants running exactly same as everywhere else. The quality of the food would be the same because they will be the distributors.

“Franchising is a specific form of licensing. Franchising is the licensing of a good or service and business model to partners for specified fees (usually a signing fee and a percentage of the franchisee’s revenues or profits). The franchisor provides trademarks, operating systems, and well known products as well as service support such as advertising, specialized training, and quality assurance programs.” R. Duane Ireland, Robert E. Hoskisson, Michael A. Hitt (2008).

This way Pizza Express can set up restaurants in different locations all over Turkey, having the staff trained the way they want them to operate the business. They provide all the operating systems so every restaurant is the same. All the packaging and the raw materials comes from Pizza Express itself. This is an advantage for Pizza Express because they can provide good quality food for their restaurant chains. If they didn’t proceed this way, managers or owners of the franchises could order the goods from a cheaper supplier to keep costs down. The problem with this is if the quality decreases in one restaurant, this would make all Pizza Express restaurants look unpleasant. Conclusion

Pizza Express is a well established pizza restaurant that started in London in 1965. They now have over 300 restaurants in England alone, they have also expanded internationally into many different countries. They attract both lower and upper end of the market because their prices are similar to their competitors for e.g. Pizza Hut and Dominos Pizza. They not only offer similar prices but their restaurants look more modern and “upmarket” meaning customers get more value for their money.

My research showed me that there are no Pizza Express restaurants located in Turkey. Pizza Express have expanded to near by countries around the area for example Cyprus and UAE but they are still not expanded into Pizza Express.

Turkey’s economically improving every year and their GDP per capita is on the rise. Pizza Express’s two main competitors Pizza Hut and Dominos Pizza already exist in Turkey and they have been very successful. This shows me that with the right promotional activities Pizza Express can be successful too because not only they provide their customers with healthier food their food is also more fresh. In 2009 they have introduced 50 calorie pizza which non of their competitors do.

Turkey is also a touristy country with thousands of tourists visiting the country every year. Most of the tourists are already familiar with Pizza Express and this is a good promotion for the company. “The number of international tourist arrivals in the country has reported a significant growth momentum during the past few years. Moreover, with the growing economic conditions, rising income levels, and the government support, the number of tourist arrival is expected to increase in near future.” Aston.W (2011).

“Turkey could see a wave of foreign direct investment from 70 international companies seeking growth and profitability in the wake of the global recession in the next year, according to Turkish-language magazine Capital.” Cetin,A. (2011).

As you can see above there are many different foreign companies making investments in Turkey because they are constantly becoming more stable and improving their economy.

I think Pizza Express should open a franchise in Turkey because they provide good food and good service to their customer and their prices are similar or significantly lower then their competitors. This way they can continue their success and make even more profit in the upcoming years.

References

Louisa Peacock. (2010). Pizza Express teaching staff to flirt with customers. Available: http://www.telegraph.co.uk/finance/jobs/8059994/Pizza-Express-teaching-staff-to-flirt-with-customers.html. Last accessed 15th Apr 2011.

Luo, Y (1999). Entry and cooperative strategies in international business expansion. USA: Greenwood Publishing Group. 9.

Kate, B. (2010). Pizza Express founder wins lifetime achievement award. Available: http://www.pizzanews.co.uk/pizza-express-founder-wins-lifetime-achievement-award-71900/. Last accessed 15th Apr 2011.

Alpay, F. (2010). Technology Public Relations in Turkey. Available: http://www.aboutpublicrelations.net/ucalpay2.htm. Last accessed 15/04/2011.

Larry, M. (2011). Turkey leads Europe in economic growth. Available: http://www.inlawco.com/en/turkey-leads-europe-in-economic-growth.html. Last accessed 17/04/2011.

Paskin, B. (2009). Pizza Express launches healthy ‘salad’ pizza range. Available: http://www.bighospitality.co.uk/New-Products/Pizza-Express-launches-healthy-salad-pizza-range. Last accessed 17/04/2011.

Milward, B (2003). Globalisation?: internationalisation and monopoly capitalism : historical . UK: Edward Elgar Publishing. 10.

Baker, R. (2011). Pizza Express rolls out fresh formats after successful trial. Available: http://www.marketingweek.co.uk/sectors/food-and-drink/food/pizza-express-rolls-out-fresh-formats-after-successful-trial/3023821.article. Last accessed 17/04/2011.

Boland, V. (2008). Turkey’s GDP revised up a third. Available: http://www.ft.com/cms/s/0/450c92c0-ee2f-11dc-a5c1-0000779fd2ac.htmlaxzz1Jo81PSwx. Last accessed 14/04/2011.

Ashton,W. (2011). Turkish Tourism Industry Set for Tremendous Growth. Available: http://beforeitsnews.com/story/342/569/Turkish_Tourism_Industry_Set_for_Tremendous_Growth.html. Last accessed 15/04/2011.

R. Duane Ireland, Robert E. Hoskisson, Michael A. Hitt (2008). Understanding Business Strategy: Concepts and Cases . USA: Cengage Learning. 159.

Cetin,A. (2011). New wave of foreign investments to make splash in Turkey . Available: http://www.invest.gov.tr/en-US/infocenter/news/Pages/050411-turkey-new-wave-foreign-investments-expected-2011.aspx. Last accessed 15/04/2011.

References: Louisa Peacock. (2010). Pizza Express teaching staff to flirt with customers. Available: http://www.telegraph.co.uk/finance/jobs/8059994/Pizza-Express-teaching-staff-to-flirt-with-customers.html. Last accessed 15th Apr 2011. Luo, Y (1999). Entry and cooperative strategies in international business expansion. USA: Greenwood Publishing Group. 9. Kate, B. (2010). Pizza Express founder wins lifetime achievement award. Available: http://www.pizzanews.co.uk/pizza-express-founder-wins-lifetime-achievement-award-71900/. Last accessed 15th Apr 2011. Alpay, F. (2010). Technology Public Relations in Turkey. Available: http://www.aboutpublicrelations.net/ucalpay2.htm. Last accessed 15/04/2011. Larry, M. (2011). Turkey leads Europe in economic growth. Available: http://www.inlawco.com/en/turkey-leads-europe-in-economic-growth.html. Last accessed 17/04/2011. Paskin, B Milward, B (2003). Globalisation?: internationalisation and monopoly capitalism : historical . UK: Edward Elgar Publishing. 10. Baker, R Boland, V. (2008). Turkey’s GDP revised up a third. Available: http://www.ft.com/cms/s/0/450c92c0-ee2f-11dc-a5c1-0000779fd2ac.htmlaxzz1Jo81PSwx. Last accessed 14/04/2011. Ashton,W R. Duane Ireland, Robert E. Hoskisson, Michael A. Hitt (2008). Understanding Business Strategy: Concepts and Cases . USA: Cengage Learning. 159. Cetin,A. (2011). New wave of foreign investments to make splash in Turkey . Available: http://www.invest.gov.tr/en-US/infocenter/news/Pages/050411-turkey-new-wave-foreign-investments-expected-2011.aspx. Last accessed 15/04/2011.