Ganesh Jain eBiz 40 

 
Kopal Gupta eBiz 41 
 
Value Chain Analysis : Pizza Hut 
Strategic Cost Management 
 
Pizza Hut entered India in 1996, and opened its first restaurant in Bangalore. Since then it has
captured a dominant and significant share of the pizza market and has maintained an
impressive growth rate of over 40 per cent per annum. Pizza Hut now has 95 outlets across 24
cities in India; and employed nearly 4,000 people by the end of 2004. Yum! has invested about
US$ 25 million in India so far; this is over and above investments made by franchisees. Yum!
Brands Inc is the owner of the Pizza Hut chain worldwide. A Fortune 300 company, Yum!
Brands owns Kentucky Fried Chicken, Pizza Hut, Taco Bell, A&W and Long John Silver’s
restaurants worldwide.

Pizza Hut is believed to have close to 50 per cent market share of the organised pizza-retailing
segment in India.

The Value Chain is a systematic approach to examine the development of competitive

advantage. It was developed in 1985 by Micheal Porter. It is used as a tool to identify various
ways to create Customer Value. The chain consists of a series of activities that create and build
value. According to this the activities are divided into two broad categories:
a) Primary Activities
b) Support Activities

Primary Activities 
 
● Inbound Logistics -
○ Purchasing the raw materials which include sauces, cheese, dough, fruits and
vegetables, etc.

● Operations -
○ Preparation of the food items like assembling the pizza, setting it up for baking,
etc.
○ Making pastas and salads as per the order

● Outbound Logistics -
○ Transporting the pizza bases to pizza hut outlet for assembling the pizzas as per
customization of orders
○ Serving the food items hot to the customers at the outlet or at their doorstep
 ● Marketing & Sales -
○ Segmentation of the target market
○ Branding
○ Redefining the menu
○ Advertising through hoardings
○ Pricing as per the market demand

● Service & Support -

○ Provide / Serve pizzas hot to the customers
○ Provide good service to the customers by making them feel comfortable
○ Helping the customers to ease their process of making choices
○ Ordering online services

Support Activities 
 
● Procurement -
○ It basically deals with how to get the required resources
○ It imports the main ingredients like pepperoni, mozzarella cheese from Australia
and Spain respectively.
○ Their strategy to take some ingredients from the local market and get some
imported helps them maintain the quality as well as low prices (as required
especially by the Indian market).

● Technology Development -
○ Maintaining databases of customers so that they can be contacted at the time of
festivals and for promotional offers.
○ Reaching out to the corporates and colleges through emails and over the net
communication, for setting up of stalls during the fests and events for increased
sales, enlarging the customer base
○ Usage of the computers and other advanced electronic items which help keep
them a check on: -Billing information -The Inventory -Sales -Readily available
Employees details
○ Temperature controlled trucks for the transportation of the raw materials and
prepared bases at a controlled temperature can be done

● Human Resource Management -

○ Focuses on hiring of the new employees.
○ Provides them the required training so that they can perform as per the
expectations set for them on the job.
○ Gives annual appraisals as per the performance of the employees. This also
helps the employees get the motivation and work hard to get the appraisals
○ The employees are able to handle some critical situations and take decisions
accordingly. This thus even provides them the freedom of decision making