Strategic Analysis of the California Pizza Kitchen (CPK)

| February 4, 2014

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The case in this course is a “ongoing” case, which means that we will be taking an intense look at one company over the course of 5 modules. This term, we will be conducting a strategic analysis of the California Pizza Kitchen (CPK). In order to be best prepared and perform well on the cases, you should complete the background readings and the SLP before writing the case. The objective for this case is to complete an external analysis for CPK, using the Porter 5-Forces Model and a PEST Analysis. Ulimately, this analysis will lead to some conclusions about opportunities and threats facing the company. (First part of the SWOT analysis) For some background information on SWOT analysis, please review the following: SWOT analysis: Lesson. (2009). Retrieved from Marketing Teacher. Web site: http://marketingteacher.com/Lessons/lesson_swot.htm Zahorsky, D. (2009). A business owner’s secret weapon: SWOT analysis. Retrieved from About.com: Small Business Information. Web site: http://sbinformation.about.com/cs/bestpractices/a/swot.htm Obviously, this can be a very extensive undertaking, requiring far more time and resources than we have for this course. So you will want to limit your analysis to the identification and evaluation of one or two key items in each element of the two models, as described in the background readings for this module. Step One: Determine the scope of your analysis (entire company, selected business division?) and find the appropriate NAICS code. Step Two: Using the sources you identified in the SLP, collect some data to support an industry analysis of each of the 5 Forces in Porter’s Model. Step Three: Using the sources you identified in the SLP, collect some data to support an analysis of each of the 4 elements in the PEST analysis. When considering economic data, use the most current data you can find. Step Four: In a 4-5 page paper, write up the results of your external analysis, and be sure to label each of the 5 Forces as either high, low or moderate. Taken together, the 5 Forces analysis and the PEST analysis should lead to conclusions about the opportunities and threats facing CPK as revealed by your research. The data you report from the 5 Forces and PEST analysis must be properly cited through intext citations and a reference list, or footnotes. Case Expectations: Consider the Case as a formal business report that you are developing for the Board of Directors and CEO as CPK’s company consultant. This is a professional document. · Executive summary: a synopsis of the main points, conclusions and recommendations made in the longer report. If you have never written an executive summary before, or would like a refresher, check this website http://www.highendfinance.com/CommercialLoans/Docs/07-4%20ES%20Guidelines.doc · Introduction: State the main purpose of the paper (thesis statement), what you hope to accomplish, and how you will go about doing it. · Main Body: The “meat” of the paper. Emphasize analysis, not just description. Delineate separate topics or sections with headings. and properly cite the sources for all information that you do not come up with as a result of your own individual reasoning. · Conclusion: Summarize paper in the light of your thesis statement. Module 2 – Background External Environment Analysis The next two modules will involve creating a SWOT analysis. SWOT Analysis SWOT stands for: Strengths, Weaknesses, Opportunities, and Threats. The first two relate to an analysis of the internal organization (module 3), and the latter two to analysis of the external environment (module 2). The purpose of an external analysis is to scan the outside environment for factors which might open up new opportunities for the business – or present threats to survival. Then company managers and executives can formulate plans to take advantage of the opportunities and ward off or respond to potential threats. There are many, many elements outside of company that can have an effect on its sustainability. Customers, competitors, and suppliers are all pretty obvious entities that can affect profitability and practice. If we think a little more deeply, we can see that current as well as potential customers should be considered to look for opportunities and threats in terms of changing consumer tastes and preferences – which will in turn affect strategic choices about products and services. What about technology? Advances in technology can affect all three of our “obvious” external concerns: product features, how products are made and sold, what services are offered and how they are delivered, supply chains, inventory controls, and on and on… A failure to monitor the technological environment can spell obsolescence for a business in no time! Ease of substitution is something we always think of when considering competitors. How easy would it be to switch flying on one airline to another, for example? But thinking more creatively about substitution, we can see that teleconferencing and video conferencing (virtual worlds?) can eliminate the need for much business travel – thus acting as a substitute to airline tickets. Failure to think broadly enough would cause a planner to completely miss a MAJOR threat just on the horizon. The sheer number of possible external influences creating opportunities and threats is mind-boggling. This is why most strategic planners use analytic models to structure their thinking and help avoid perceptual biases which can interfere with clear and objective identification of opportunities and threats. In this class, we will be using two different models that approach the external environment from two different perspectives: 1. Industry environment – Porter’s Five Forces Model 2. Macroenvironment – PEST Analysis Industry-level Environment Porter’s Model of Five Forces is one of the most versatile frameworks to analyze the industry external environment. Employed by a variety of academics and business practitioners for over 3 decades, the Five Forces Model has proved its usefulness in a variety of arenas. The Porter model helps the user get a handle on the competitive and market characteristics of a specific industry. The factors covered by the Five Forces Model are: Threat of new entrants Bargaining power of suppliers Bargaining power of customers Availability of substitutes Degree of rivalry among competitors Macro-level Environment While the Porter analysis looks at the conditions in a specific industry, the PEST analysis looks at factors that affect the greater business environment. The factors addressed by this model include: Political (including regulatory) Economic Socio-cultural Technical REQUIRED MATERIALS: For a general introduction to the 5 forces, the following video interview with Michael Porter is very helpful for putting the exxternal analysis into perspective: The Five Competitive Forces That Shape Strategy. (2008) Harvard Business Publishing. http://www.youtube.com/watch?v=mYF2_FBCvXw The following chapter is rather long, but has a very detailed explanation of how to use the 5-Forces Model, and what data measures the Five Forces, which are essential in preparing your SLP and case. It also has a long section on internal analysis which we will return to in Module 3. To access this article, you will need to register with this site, but there is no fee involved. Read the first part of Chapter Two (starting on page 23) which deals with the external analysis: Comeford, R., & Callaghan, D. Environmental, industry, and internal analysis. Retrieved from University of Rhode Island. Web site: http://www.scribd.com/doc/19448976/STRATEGICMGMTCOMERFORD Connelley, D. (2005). Strategy for the External Environment. Power Point Presentation. Key forces in the external environment. (2009). Retrieved from The International Development Research Centre. Web site: http://www.idrc.ca/en/ev-28364-201-1-DO_TOPIC.html PEST analysis (2009). Retrieved from Value Based Management. Web site: http://www.valuebasedmanagement.net/methods_PEST_analysis.html Porter’s Five Forces: A model for industry analysis. (2007). Retrieved from QuickMBA. Web site: http://www.quickmba.com/strategy/porter.shtml Case
Readings: SWOT analysis: Lesson. (2009). Retrieved from Marketing Teacher. Web site: http://marketingteacher.com/Lessons/lesson_swot.htm Zahorsky, D. (2009). A business owner’s secret weapon: SWOT analysis. Retrieved from About.com: Small Business Information. Web site: http://sbinformation.about.com/cs/bestpractices/a/swot.htm Optional Materials: Carrying out a PEST analysis (2005). Retrieved from The Free Library. Web site: http://www.thefreelibrary.com/Carrying+out+a+PEST+analysis-a0141751272 PEST analysis. (2007). Retrieved from QuickMBA. Web site: http://www.quickmba.com/strategy/pest/ Porter’s Five Forces. (2009). Retrieved from Mind Tools. Web site: http://www.mindtools.com/pages/article/newTMC_08.htm Porter’s Five Forces (2007). Retrieved from Themanager.org. Web site: http://www.themanager.org/Models/p5f.htm
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STRATEGIC ANALYSIS OF CALIFORNIA PIZZA KITCHEN

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