The environment around a company is more important than the company itself, and as business environment becomes more complex, strategic management is more important than ever before (Sanders, 1992). It is hard to implement a strategy without knowing the surroundings, so to understand the economic environment around a business is a necessity. Round Table Pizza has been in the pizza serving industry for over 50 years and has over 500 franchised and company-owned locations around the world. Round Table is known to be the 14th largest pizza industry in the business (Kuhl, 2008). The location specific that was closer looked at was the one located in Temecula, CA. Just at this location alone, there were many competitors within walking distance, making it hard to run a successful pizza place. General Environment
The external environment towards Round Table Pizza was complex. The economic dimension alone is enough to put this business into a deep hole, and the struggle is existent. It is hard for a food business to stay up in the recession that our nation is currently in. Upon talking to a manager at Round Table, numbers have decreased deeply which is due to the lack of spending power the customers have and the doubt in many people’s minds. There are many salient factors that can contribute to these issues, and it is easy to see the effect that it has on Round Table Pizza.
As of now, the economy is struggling deeply. Our debt is increasing at an exponential rate and for every dollar the government spends; 36 cent of it is borrowed (Jackson, 2012). Market uncertainty is near an all-time high, but has recently turned around. The debt now is much different than the last recession and this makes it much more complicated for the US to handle it (Gokhale, 2012). We are in a very unstable time and for any business to succeed is challenge enough. These hard economic times can only be countered by effective and strong leadership. The economy is very closely correlated to how many people are comfortable enough to eat out.
(Norris, 2012). Interesting enough, the GDP of our nation is nearly identical to the spending habits of consumers during an economic time. Unemployment numbers keep dropping as well, with numbers going to 7.8% in September (Gregory, 2012). In February 2011, Round Table Pizza filed for Chapter 11 bankruptcy. At the time, the company listed their debts around $10 million to $50 million, and blamed it on the financial troubles of expanding during a recession (Saam, 2011). Round table was able to recover from their bankruptcy and in December 2011 was able to emerge from bankruptcy. They were able to improve cash flow and overall business results. Round Table was able to pay off all of their creditors (Anderson, 2011).
Focusing on the Five-Forces Model, there is a strong sense of substitutes in the small area around. There are many salient components that can be applied towards this company. One of the big things because of the weak economy is the harsh impact on the buyers. Most buyers are very price sensitive and do not want to spend a lot on their food. Looking at the prices at Round Table Pizza, they were slightly higher than what most people expect. Buyers have the option of not spending a lot of money on a meal they can make much cheaper themselves. The atmosphere around does not even make up for the expensive price paid for their pizzas, as the prices were way too high. Substitutes are another easy choice that customers are making. Many people would call in and refuse to order after hearing the bottom line price, either deciding to eat at home or eat somewhere else. Round Table does use fresh ingredients which I believe is different than local competitors, but the average customer would not know the difference because there is no advertisement for that. Round Table might have been much more successful years ago, but they really need to start adapting to the economy and learning that people want an affordable pizza over the fresh ingredients.
Another big issue on this specific round table is the industry competitors around. Just within walking distance I could choose two different pizza places other than Round Table. Not only were the competitors easy to get to, they also had much better deals at the time. Since the competition is so harsh, Round Table Pizza needs to competitively price their pizzas and be able to adapt to their surrounding environments. The deals that Round Table put forward did not seem like deals at all. Even with the deals, customers would complain about the high cost and threaten to go elsewhere. General Environment
Also having talked to this manager, there are many technological problems within the external environment. Most of the equipment being used is dated and the television sets are not up to par with what a pizza place should have. While visiting Round Table, a call came in with a customer asking about if the football game would be televised in their store. The manager politely told him that they did not get the channel. Business is lost in the shuffle since they are unable to watch their favorite football game because of the lack of cable and a working television set. Pizza Hut was also able to roll out a mobile ordering application that helps create an order anytime anywhere. Pizza Hut deployed a mobile ordering system to reach the younger generations and use the latest technologies available (Baertlein, 2008). The mobile ordering idea was introduced in January of 2008, yet Round Table has yet to start a mobile ordering program for their customers. Another part is the movement towards social media, and companies such as Papa Johns are all over the internet promoting themselves daily. Just a look at their Facebook page and they have contact with millions of loyal pizza eaters. They can push anything they want towards their loyal customers, even their political and social views (Hsu, 2012). Round Table has a big problem to adapting towards the future. All of the systems being used there are still very dated, including the online ordering system. Online ordering is the way of the future, yet Round Table’s system is such a disaster when it comes to that. Looking at competitor’s websites and Round Table’s website, you can see why many people will just not take the time to figure out how to place an order. Not only is it hard for the customer to place the order, but when the order is received at the store, it is independent from the stores ordering system. Both the payment and order sheet is separate, so the order has to be put in manually. A nearby competitor (Pizza Hut) has a much more efficient online ordering system, which automatically prints and sets up the order as if it was ordered in the store, requiring little to no effort from the employee. The drivers complained about the technology within the business as well, having unrealistic expectations and failed deliveries because of it. The delivery time for a pizza is set at a certain time, and a driver has five minutes to make it back no matter how far the distance. If this time is not met, the computer automatically marks it as a failed delivery, marking the store high risk. Round Table seems to be lacking any time of influence from the environment. They should utilize a strategic response and alter the status quo in which the company is functioning currently. This level of effectiveness is one of the biggest and most important issues surrounding them. With all of these problems plaguing Round Table, it must be hard to stay afloat in the fast food business. Round Table needs to effectively spend their money and resources on running a pizza place as efficient as possible. The overemployed staff, overpriced pizza, unutilized resources, and outdated technology will not help this cause. To stay competitive in this business environment, changes need to be made or Round Table could find itself in deep trouble very soon.
Anderson, M. (2011, December 19). Round table pizza coming out of bankruptcy. Retrieved from http://www.bizjournals.com/sacramento/news/2011/12/19/round-table-pizza-out-of-bankruptcy.html Baertlein, L. (2008, January 16). Pizza hut rolls out nationwide mobile ordering. Retrieved from http://www.reuters.com/article/2008/01/16/us-yum-pizzahut-idUSN1664850120080116 Gokhale, N. (2012, September 01). Us markets have turned the corner, but uncertainty stays. Retrieved from http://articles.economictimes.indiatimes.com/2012-09-01/news/33535491_1_bond-yields-debt-situation-treasury-market Gregory, M. (2012, October 14). Sept. unemployment numbers drop to 7.8 percent. Retrieved from http://www.wthitv.com/dpp/economy/sept-unemployment-numbers-drop-to-78-percen