External Environment Analysis

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Joseph N Laperriere Module 2 Case Dr. Kenneth McGee MGT 599 December 17, 2010

Porter’s Five Forces Suppliers maintain a certain amount of power. CPK enjoys little supplier power and threat of substitution due to the multitude of suppliers available to them and unique menu they offer. but should not impact CPK negatively in any immediate fashion. Additionally. How much their entry affects business will depend on several factors. but in the restaurant business there are a multitude of choices available. so I do not believe that they will pose a large threat. This will result in a return to more comfortable lifestyles for many. The company has survived through this recession. I recommend that CPK explores new technology to make their already unique environment even more unique. They do have to contend with rivals such as Dominos and Pizza Hut who buyers can choose to save a few dollars. The economy is currently recovering and the recent tax cuts ensure further growth by putting more money into the consumers’ pockets. Anyone with capital and some knowledge of the restraint industry can enter the industry relatively quickly. but there has been no growth. yet. highlighting opportunities and threats. CPK prides themselves on . Technological advances cannot be ignored.External Environment Analysis 2 California Pizza Kitchen (CPK): Porter’s 5 Forces and PEST Analysis Executive Summary This report is written to complete an external analysis for CPK. Foodservice. using the Porter 5-Forces Model and a PEST Analysis.com lists 60 companies as suppliers of pizza products and I am sure there are many more not listed on the website. They should consider saturating the market everywhere their demographic requirements are met. The biggest threat that CPK faces is that the economy stays the same. the economy has shown indications that it has started to recover and expansion opportunities will be plentiful. This can attract new customers as well as assist in retaining current ones. New entries into the industry occur routinely.

If they are organized. 2008). CPK thrives on the niche it has developed. forcing CPK to pay higher prices regardless of who they choose. CPK is considered the originator of premium pizza and this title cannot be removed by substitution alone. The local suppliers of products do present the ability to dictate prices somewhat. these suppliers could agree not to bottom out prices. CPK’s choice of suppliers will be more limited. Fortunately. high quality pizzas” (Annual Report. This uniqueness keeps buyers from straying elsewhere. removing much of their power to influence prices. To maintain their quality product. Consumers . I believe that there will still be an abundance of local suppliers who can meet CPK’s needs without altering prices significantly. which does have BBQ sauce on it. The threat of substitution is evaluated as low for one main reason. but their “specialty” pizzas do not match the uniqueness of CPK’s. 2008). As with any industry.External Environment Analysis 3 being the leader in “selling innovative. but they will be unable to fulfill their palates desire for the unique taste of CPK’s premium products. CPK does not open restaurants which fail to meet its strict demographic requirements (Annual Report. Restaurant giant Pizza Hut (2010) and delivery pizza king Domino’s (2010) offer the traditional pizzas. stability is the key to survival and a supplier who attempts to exert power will certainly lose business. Switching to a competitor’s product may save the buyer a few dollars. buyers maintain a great deal of power in the restaurant business. which removes much of the buyer’s power. Based on this fact. CPK has a relatively unique menu. providing an opportunity for leverage on the suppliers’ side. An example would be Domino’s Memphis BBQ Chicken Pizza. however I do not foresee this occurring. but does not offer premium ingredients like smoked Gouda cheese and fresh cilantro like CPK does. In today’s economy. Buyer power is evaluated as medium. Compared to other options. Supplier power is evaluated as low.

Are there better products on the market than Coke or Pepsi? Yes. reducing profits. I surmise these companies are listed for their niche appeal as well. They maintain a sense of exclusivity by sticking to strict demographic requirements when opening . as competitors. but these companies are so well established that they will not be knocked from their positions anytime soon. the odds are stacked against them.External Environment Analysis 4 consider names they recognize first before looking to substitutes because it makes them comfortable. CPK’s competitors make a lot of profit by quantities sold vice quality. Domino’s and Pizza Hut. As mentioned previously. The threat of new entry is quite high: if anyone looks as if they're making a sustained profit. Inc. and P. Capital is about the only thing restricting anyone from entering the restaurant industry. Chipotle Mexican Grill. Hoover’s (2010) suggests businesses such as The Cheesecake Factory Inc. CPK has not saturated every area with their restaurant. In addition. While small businesses can certainly compete with a larger company. new competitors can come into the industry easily. Making pizza is not exactly rocket science and there is certainly no technological restriction limiting anyone from entering the industry. It is difficult to rival the combination of superior ingredients. The one factor which distinguishes CPK from these other companies is their unique menu and dedication to providing premium products. If you are opening a franchise then training will be provided to provide the best opportunity for success. variety of selections and environment that CPK offers.. Is it possible that a smaller company has mimicked CPK and been able to produce a better product? Certainly. there are numerous industry competitors such as Papa John’s.F. but I feel as though these companies are not substitute threats for CPK. Chang's China Bistro. Inc. Competitive rivalry is considered medium.

7%. Technological factors do not greatly affect CPK. Extending Bush-era tax cuts is significant politically and economically. If you’ve eaten at CPK you would understand the ambiance it emanates. This is in direct contrast to their rivals who throw up a store just about anywhere people are. Economic growth (Bureau of Economic Analysis. I believe that their target market was not affected greatly by the recent economic downturn and many of their loyal patrons were not forced to give up visiting CPK.. This year the GDP has seen moderate gains (News Release. Lifestyles and income distribution will be altered and business will continue to improve for CPK. PEST Analysis Today the House came to an agreement on extending the tax cuts established by the Bush administration and moments ago President Obama signed into law the bill (Taxes. I associate yuppies as middle to higher income individuals. but energy costs. My concern is that the GDP did not increase with these same tax cuts implemented previously. These tax cuts will affect the overall economy by putting more money in the pockets of the consumers. consumers will soon be able to enjoy many of the items they were not able to previously. Not to be crass or stereotypical. so the steady business flow for CPK makes perfect sense to me. 2010) and extending the tax cuts should help by increasing consumer confidence. With more money in their pockets. 2. 2010) has declined for the four previous years (2006-2009). it actually declined. recent trends and inventions should be paid attention to. A prime example would be if Pizza Hut started offering .9%. 0% and -2.External Environment Analysis 5 locations. 2010). but it has sort of a yuppie feel to it. I assess that this time around the tax cuts will impact the GDP positively and increase consumer spending in the economy. however it will simultaneously put a burden on reducing the deficit. 1.6%.

A great example can be shown with the iPad. This affected the sale of the Nook. .External Environment Analysis 6 free Wi-Fi and a new touch screen electronic menu that did not require server interaction with the exception of delivering food and drinks. Although the price was outrageous. The same could easily happen to CPK they ignored technological advances. consumers went ballistic for it. Kindle and other ereaders. This could have a profound impact on business because consumers and the newest and coolest technologies at their disposal immediately.

December 17). from http://www.com. Why Now is the Time to Open a Restaurant. October 16). 2010.cfm?companyid=CPKI&fileid=352062&filekey=5143AB B8-AACE-4DB0-BF02-847A8F1A8D0E&filename=California_Pizza_Kitchen_ 2008_Annual_Report. (2010. Pizza Products: Food and Beverage Manufacturers and Suppliers.dominos. Retrieved October 13. Competitors.com/foodshow/companyresults.pdf. from http://www. 2010.gizmag. Bureau of Economic Analysis. (2010. Retrieved December 17.cpk. California Pizza Kitchen. (2009.com.eia. (2010.com. November).cfm? companyid=0&start=41&show=40&keyword=&ListingType=1&subcatid=113.doe.htm. Retrieved September 16. Annual Report. pizzahut. Domino’s. from http://www. gizmag. (2008. foodservice. from http://www.html. September 30). from http://www. Bureau of Economic Analysis. . Retrieved October 11. Gizmag | New and Emerging Technology News. Energy Information Administration (EIA) | State Energy Profiles | Energy Data.com. 2010.gov/state/. (2010.com/pages/menu. Inc. dominos.S.pizzahut. Retrieved October 16.cpk. December 17). 2010. from http://www.pdf.com/. Pizza Hut.gov/ newsreleases/national/gdp/gdpnewsrelease. The Future Now.popsci. October 14). 2010.hoovers. (2010. Retrieved October 13.com/company/ California_Pizza_Kitchen_Inc/ckjjsi-1-1njea3. Entrepreneur Magazine.entrepreneur. Energy Information Administration. December 14).com/ magazine/entrepreneur/2009/november/203700. Hoovers. Schrambling. popsci. (2010.com/menu/pizzas/. 2010. from http://www. R. (2010).com. Foodservice.foodservice. Retrieved October 16. from http://www.jsp#all.bea. 2010. Retrieved December 17. (2010. 2010. Innovative Pizzas on the Menu. October 11). Science News. December 17). 2010. from http://investor. from http://www. and Maps.com/pizza. News Release: Gross Domestic Product (GDP) and Corporate Profits.bea. California Pizza Kitchen.com/ common/download/download. from http://www. (2010. Popular Science | New Technology. Retrieved October 11. 2010. Retrieved October 16. Information. (2010. October 15). Retrieved December 17.html.com. from http://www. 2010.com. Retrieved December 17.gov/newsreleases/ industry/gdpindustry/2010/pdf/gdpind09_rev_fax.com/. U. March 12).External Environment Analysis 7 References 2009 Decline Widespread Across Industries. 2010.html.

taxpolicycenter. Retrieved October 13. taxpolicycenter.cnbc.External Environment Analysis 8 Taxes: Obama Signs Tax Compromise With GOP Into Law. from http://www. cnbc. from http://www.com/id/40722443. Retrieved December 17.org/legislation/index. (2010).com. . December 17). Tax Legistlation | Legislation. 2010.org.cfm. 2010. (2010.

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