Competitive strategies of international fast food companies in India on the example of Domino’s and Pizza Hut

The framework that represents the five forces affecting the fast food segment of India is illustrated in figure 4.

Figure 4. Five forces affecting Indian fast food segment. Reprinted from “Fast food industry, International marketing” by R. Sadhwani (2012, p.8)

To sum up, the fast food segment of the Indian foodservice industry is characterized by the high degree of rivalry representing monopolistic competition with a significant range of fast food companies with differentiated products struggling for sales volume increase and increase of market share. In order to expand their presence and pull other players out of the market, the leading fast food chains often initiate price wars, applying the lowest prices.

The segmentation of the Indian foodservice industry is illustrated in figure 5 (share in percent, by value).

Figure 5. India foodservice industry category segmentation 2017. Reprinted from “The changing landscape of the retail food service industry”. PWC (2018)

The internet journal “Retail Industry snapshot” (2014) informs about growing taste for American fast food in India, especially among the young population, that forms the major part of the total Indian population. The “Retail industry snapshot” informs as well that annually more and more people enter the workforce, increasing middle-class spending power in India. Moreover, Indian consumers increase their exposure to international cuisine through traveling, social media and TV, that in turn makes India targetable destination for fast food companies looking for new foreign markets.

Besides, Indian fast food sector is characterized by the high price elasticity of demand due to relatively low incomes of consumers. According to Euromonitor country report (2018), despite India's rapid economic growth, a large share of the population still has to live on low incomes. Due to low average incomes of Indian consumers, there is a substantial market for budget-priced basic necessities (food, non-alcoholic beverages, clothing). According to “The Economist” online journal, so-called "Big Mac index" (Index that reflects purchasing power in different countries based on an average price for Big Mac in McDonald`s) in India corresponds to $2.82 (Rs180). For comparison, this index in China is $3,17 and $5,28 in the USA. Thus, due to low purchasing power in India, fast food operators have to serve their customers for relatively low prices.

In 2016 KPMG published the report titled "India`s food service industry: Growth recipe" where it is stipulated that Indian foodservice industry is one of the most fast-growing segments today due to changes in Indian demographics, urbanization, and growth of organized retail. It is stressed out in the report: “Indian governments take great steps toward prioritizing foodservice industry as a part of its liberal economic reforms, which attracted substantial investments from foreign countries. Thus, the course of economic policy is aimed to create attractive business opportunities for the investors” (KPMG, 2016).

The KPMG report (2016) explains the growth of the fast food segment in food structure of India by the following reasons:

· Large share of the young population. More than 45% of Indian population is below the age of 25 years (The World Factbook, 2016). This category of youth is expected to reach 465 million by 2021 (Foodservice industry, 2016);

· Increasing disposable income levels and growing middle class. Indian average household income is forecasted to increase from $3824 in 2015 to $5445 by 2020 growing at CAGR of 7.3% for the period from 2015 to 2020. The households from the middle class group with annual income between $5000-10000 has grown at CAGR of 17% over the period from 2011 to 2016 and is further forecasted to grow at the rate of 12% at CAGR to reach 109 million in 2020. The households with average annual incomes between $10000-50000 has grown at CAGR of 20% for the period from 2011 to 2016. The expanding share of the middle class is leading to the increase in expenditure on eating out and other consumption categories (Dabas, Lunawat, 2017). “The middle-class population in the country is expected to grow rapidly in the next decade, and by 2027, the size of this group is expected to be larger than that of China, the United States, and Europe”( Abhijit Roy, 2018).

· Changing consumer lifestyle. With the significant inflow of foreign companies to the Indian market and increasing of living standards, Indian`s lifestyle is gradually changing with the expansion of middle-class share;

· Increasing urban working woman population. Urbanization of the working force leads to consumption increase, especially in the food sector. Moreover, the more urban women spend time at work, the less time they have to cook at home. Thus, ready to eat food is the most suitable option.

Along with the reasons stated above, the work “Global Fast Food Retailing In India - A Way Ahead” (2018) by M.S. Anitharaj as well reveals some other factors for the rapid growth of the fast food segment in India. The factors are the following:

· Economic growth. In 1991 the economic liberalization came in force in India that attracted substantial number of foreign companies that entered India and led to increase of income generated by Indian residents. “More income in the hands of the citizens results in more savings and more savings means more investment, which helps in the overall growth of the economy. The growth of the economy attracts foreign retailers to set up their outlets in the country” (M.S. Anitharaj, 2018) .

· Large population. As a second largest country in the world by population, India has significant consumption potential in all markets of products and services that results in emergence of international retailing companies, global food producers as well as international fast food companies.

· Relaxation of regulations. Most tariff and non-tariff barriers were eliminated for the purpose of the economic liberalization started in 1991. “This helped MNCs significantly to enter the country. Recently the country is allowing 100% relaxation in FDI limits for food processing industries” (M.S. Anitharaj, 2018).

· Menu diversification. High-context culture of India pushes fast food providers to localize their products for local tastes and preferences launching special products for Indian market. That, in turn, increases the interest of residents for fast food.

Based on the facts stipulated above, the major target audience for the companies that operates in quick service restaurant sector in India includes young people below 25 years representing students and teenagers that regard fast food as a popular trend, young families with children considering fast food meals as joint evening leisure and urban working people, who have no time for cooking at home.

Leading companies

Stressing out the segment leaders is an integral part of the research. In 2018 “Euromonitor International” published an outlay of brand shares in Indian fast food market, where eight brands constitute 58,2% of Indian fast food segment. The brand shares of Indian fast food market are illustrated in figure 6.

Figure 6. Compiled by the author based on “Fast food in India country report”. Euromonitor International (2018)

“SIMCON blog” of the “SIMCON SIMSREE” consulting club informs that the share of Indian brands in the structure of Indian quick service restaurant segment occupies 37% of the market with foreign world famous fast food chain capturing another 63%. It is stipulated that the pizza segment dominates Indian fast food segment accounting for nearly 50% of the revenue generated by quick service restaurants in comparison with 36% generated by the burger segment. Another fast food chains account for the last 14 % of the revenue. “Express Food & Hospitality” website informs that in 2017 more than 120 brands of QSR restaurants with more than 4000 outlets were counted in India.

Barriers for new entrants.

“Organized fast food industry research” published in SIMCON Blog in 2014 also concluded that as far as Indian economy is opened for foreign investments especially in the food sector, the entry to the Indian fast food market doesn`t require enormous capital accumulation. Establishing a single fast food outlet in India is within the means of many people in the country. However, while entering Indian market, international QSR companies face significant barriers and obstacles:

* Brand power of key players. Such chains as McDonald`s, Burger King, Pizza Hut and Domino`s pizza have cemented their position in the Indian market and keep expanding their presence.

* Low prices market. As it was mentioned before, despite the fact that the average disposable income of the population gradually grows, it is still quite low in comparison with regional averages (Euromonitor country report, 2018).

* Price wars and dumping. The most challenging obstacle for market entry that newcomers could face is intense price competition. In attempts to attract consumers with low price and special offers, the key players launch a price-reducing race that sometimes results in pulling several players out of the market. In such an environment, it is challenging for new entrants to withstand competition and succeed.

* Threat of substitutes. Another profitable and growing niche in the Indian foodservice industry representing the main rival for fast food companies is food retail that includes ready meals, frozen re-heating products, and healthy food. Taking into account that fast food is often being criticized for unhealthiness and the fact that substitute product as a healthy ready meal is quite cheap, affordable and of high quality, it makes the producers of such food strong competitors towards quick service restaurants.

* Competition from local street food. Local street vendors providing traditional Indian food represent strong competition for existing fast food chains and new entrants. Affordability and huge diversity are the main factors that attract consumers (Sood, Mishra, 2016).

However, there is a strong likelihood of new entrants penetrating Indian fast food sector. Despite the fact, that there are several obstacles for newcomers and many fast food brands have already cemented their presence in the industry, Indian fast food segment is expected to grow on account of new fast-food chains entrance from other than just American regions. Moreover, the article “QSR market: Investment growth in India” published in 2017 at Express Food & Hospitality website informs that foreign brand has an easy first quarter of operations in India due to its popularity as being international that attracts the significant inflow of consumers right after the entrance to the Indian market.

Regulation of the fast food segment

According to SIMCON blog, the fast food segment in India is regulated by the Food Safety and Standards Act (FSSA) adopted in New Delhi in 2006. The act regulates the aspects of sanitation, licensing and permissions that are required to start a new business in the Indian foodservice industry. The blog also reports that the Food Safety Standards Authority of India was created in order to develop the solid regulatory ground, scientific methods and standards for the food industry in all spheres from cooking, storing and distribution to sales and imports. It is crucial to pinpoint that based on the principles of openness of Indian economy to direct foreign investment, this act does not imply special requirements and restrictions in relation to foreign companies and does not create severe barriers for entry into the industry and particularly fast food segment.

The next paragraphs are devoted to Domino`s and Pizza Hut case studies and their competitive and growth strategies as well as comparative analysis.

2.2 Domino`s case study

According to the company profile, Domino's Pizza Inc. is an international QSR corporation headquartered in Michigan, United States. Domino`s was founded in 1960 and currently represents the second largest pizza maker in the world with more than 16000 restaurants in 85 markets.

Domino`s business model is to handcraft and serve quality food at a competitive price, with easy ordering access and efficient service (Domino`s company profile). Although Domino`s possesses dine-in outlets, their business model is based on home delivery, that comprises about 50% of total revenues (A. Bansal, 2015). The main streams of revenues for Domino`s are earnings by charging royalties to franchisees (percent-of-sales fees), revenues from sales of food and equipment to franchisees in the USA and Canada and finally revenues from operating company-owned outlets. Regional master franchisees are empowered with geographical rights representing the brand Domino`s in international markets. Regional master franchisees benefit from running Domino`s outlets and often by sub-franchising (Domino`s company profile).

The research "India's pizza wars" by S. Prasso, (2008) provides the history of pizza culture in India. It informs that Domino`s entered Indian fast food market in 1996 through a franchise agreement with Vam Bhartia Corp (later Jubilant Foodworks) with the first outlet in Delhi. When the company entered India the culture of pizza delivery was only at initial stages and Domino`s became the pioneer in home delivery of pizza taking the leading position in that segment and by 2000 having a presence in all main cities of India. The main concept of Domino`s namely “30 minutes or free” became the visit card of the company in the Indian fast food sector. According to the report provided by Indian Franchise Network at the end of 2015, Jubilant Foodworks, India is the second biggest market of Domino's Pizza's in the world after US (Business Standard, 2015).

According to Aditya (2019), as a master franchisee of Domino`s, Jubilant Foodworks can sub-franchise or directly run stores in India. “The royalty fees or the service charge fees for the Domino's pizza franchise is around 5.5% of store's weekly royalty sales, $1000 for training and $1500 for transfer” (Franchise India, 2019).

Taking into account the intense rivalry in the Indian QSR segment, both competitive and growth strategies are relevant for Domino`s to capture the leading position in the market.

The article “7 Reasons Why Domino's is Winning in India” published in Tech story business website in 2016 stress out the main factors of Domino`s success in India:

Aggressive expansion strategy. Domino`s in India is expanding with an aggressive pace of 150 new outlets per year. The aim of this strategy is to cover more cities for delivery and pick up. Such aggressive expansion is being conducted through a master franchise owned by Jubilant Foods. Having an optimized supply chain system with centralized entity planning and executing has enabled them to move fast driving down costs.

Low price. High price sensitivity of Indian customers pushes fast food chains to cut costs. India has the lowest priced Domino`s pizza in the world. To compare the prices a small plain cheese costs $8,62 in the UK, $5,04 in Australia, $5,99 in the USA and $1,47 in India. This is the example of the cost leadership strategy in action that facilitates the implementation of the market penetration strategy, attracting price-sensitive customers with the lowest prices.

The principle “30 minutes or it`s free”. Domino`s delivery system in India is recognized as one of the fastest in the world. On average, the delivery process takes 23 minutes to leave buffer time for unforeseen traffic. The company uses motorbikes, which are more convenient than a car in cluttered Indian roads. The riders are required to have outstanding orientation skills in a sector where they operate (A. Bansal, 2015). The principle “30 minutes or it`s free” is the differentiation strategy of Domino`s.

Social media fan leader. Domino`s has five times the engagement compared to the next competitor. Active promotion through social media support facilitates market penetration through sales increase.

High engagement in local culture. Being a pioneer in standardized pizza making and delivery Domino`s managed to create a whole pizza culture from 1996 till present days. The western concept with a perfectly localized menu fit in the local culture and accepted by Indian customers who love sharing meals and eat with hands.

Localized recipes for the Indian Palette. Taking into account the necessity of menu localization for Indian consumers, Domino`s successfully implemented this process in the Indian market. More than 50% of Indian customers are vegetarians, however, they love pizza.

Focus on mobile ordering. A significant share of customers orders pizza through mobile devices. It is forecasted that by 2021, India will have 810 million smartphone users. Domino's uses such innovative technology as “Zippr”, which allows customers ordering quickly and tracking the orders easily (A. Bansal, 2015).

The supply chain of Domino`s in India is another essential aspect that mainly consists of the fast food outlets, the distribution system and ingredient suppliers. The article “Supply chain practices at Domino`s” (2014) informs that Domino`s in India have four commissaries (Regional centralized facilities). These commissaries allow sustaining consistency in quality and timely delivery of ingredients. According to the conclusions of the research stated, the supply chain of Domino`s contributes to the cost reduction process through a centralized purchasing system, warehousing and distribution centers as well as dough production commissaries. Domino`s supply chain in India is based on the “cold chain” principle that is vital for keeping the decent quality of ingredients transported, thus Domino`s use refrigerated trucks for distribution. Another essential feature of Domino`s supply chain is that all distribution and manufacturing commissaries are located within a one-day delivery from the outlets they serve that allows reducing transportation costs. The “cold chain” system of Domino`s was borrowed from McDonald`s but with a commitment to home delivery orientation (Supply chain practices at Domino`s, 2014).

As far as the subject of this work represents competitive and growth strategies of international fast food companies in India, the main strategies this work is devoted to should be stressed out. In the case study above the author made particular emphasis on the fact that Domino`s in India provides the cheapest pizza in comparison to other regions where it operates. Firstly, the company implements the cost leadership strategy to meet the needs of price-sensitive customers and increase sales. Another strategy that distinguishes the company from competitors is the differentiation strategy based on the principle “30 minutes, or it`s free” that has made many customers loyal. Thus, Domino`s in India implements integrated generic strategy.

The Corporate presentation of Jubilant Foodworks published in 2016 also informs that operational excellence discipline represents the main competitive discipline of the company that is being driven through constant review mechanism, best practices and robust infrastructure.

Concerning the growth strategy of Domino`s in India, the core growth vector for Domino`s is perfectly tuned master franchise program providing aggressive growth. While being supportive growth strategy, market penetration allows Domino`s increasing sales volumes in already existing locations through promotional efforts and cost reduction.

Finally, the cheapest Domino`s pizza with the fastest delivery system and high density of outlets successfully fits the concept of Indian fast food, taking the leading position in the segment. It is challenging for the rivals to expand their market share competing with such a giant.

However, on the way to success, Domino`s experienced significant downfall. The article “The Curious case of Domino`s India” published in “The restaurant times” website describes the downfall of the company and how Domino`s managed to restore its position by reinforcing the strategic approach. The source informs: “Jubilant Foodworks lost half their valuation and dropped from a peak value of Rs 12,700 crores in mid-2015 to Rs 6,500 crores in mid-2016”. Many factors explained such hardship for the company”. In 2016 many vital workers resigned from the company including the CEO of Jubilant Foodworks that caused internal instability. The article as well pinpoints that one of the major reasons for downfall was obsolesce of food delivery system, which nullified Domino's major USP: quick and easy food delivery. The source informs that intense rivalry in Indian QSR made other fast food companies improve delivery services through introduction of new options and applications for ordering food, outperforming Domino`s in this field. Other negative factors were the growth of Pizza Hut market share, the direct competitor of Domino`s and a decrease in quality that pushed many loyal customers to shift their preferences to other fast food operators.

Moreover, according to the source, the Centre for Science and Environment (CSE) conducted the research on the quality of ingredients and revealed that Domino`s products contain banned components as potassium bromate and potassium iodate that may cause cancer and other diseases. As indicated in previous chapters, the health concern trend continues to gain popularity in the Indian QSR sector making Indian consumers selective and cautious towards ingredients used by their favorite fast food providers. Such quality consciousness of Indian consumers was neglected by Domino`s, that costed the company reputation and the loss of a large share of loyal customers.

“The restaurant times” stresses out that in August 2017, Domino`s implemented the new strategy based on product improvement. Press release of Jubilant Foodworks informed that the main changes implied new soft and high-quality crust, baking pizza free from harmful components, adding a more considerable amount of toppings, more cheese and new tomato sauce reinvented according to higher quality standards. Moreover, the advertising campaign was launched and new packages of blue and white were introduced to highlight the changes. To reestablish the company`s position after the dramatic loss, the management decided to cut costs by optimizing human resources, reducing the number of staff per outlet from 25 to 22 and closing some of their outlets. The company also announced to slow down the pace of growth, opening 40-50 outlets per year instead of previous rate adding 150 outlets annually. Moreover, the new online delivery applications were elaborated. Finally, the reinforced strategy showed results, and Domino`s restored its position capturing the largest market share.

The conclusion is that giving considerable attention to only operational excellence competitive discipline, and cost leadership strategy the management of Domino`s shifted emphasis from such discipline as product leadership that led to decrease in quality and obsolescence of delivery systems and mobile applications pushing customers to switch to another fast food operators. The quality of ingredients was not only weak but contained harmful elements while delivery systems stopped to be updating and improving that let rivals to override Domino`s with new apps and delivery opportunities. The authors of “The Discipline of market leaders” theory (M. Treacy, F. Wiersema, 1995) claim that the company should concentrate main efforts on only one discipline, making it prior, but it doesn`t mean that the other two should be absolutely neglected. Indeed, after reviving quality control, software upgrade and product improvement operations, Domino`s didn`t change the prioritization from operational efficiency, but it just made product leadership discipline supportive strategy, investing more in quality control, updating software system, enhancing marketing efforts. Such actions allowed the company to regain its initial position and recover from the loss through meeting the needs of quality and price sensitive Indian consumers.

According to the “Fast food in India, country report” (Euromonitor, 2018), Domino's Pizza still remains the leading brand in Indian fast food sector, capturing the largest market share largely due to the highest number of outlets in India.

Besides, Euromonitor informs that Jubilant Foodworks also benefits from offering consumers a wide range of discounts and promotional offers reflecting the main dimension for market penetration strategy. It makes Domino`s popular among younger millennials looking for more affordable options. On average, two people can eat at Domino's for around $5.

2.3 Pizza hut case study

According to the company profile, Pizza Hut was established in 1958 by brothers Dan and Frank Carney in Kansas, USA. According to B. Mike and J. Slocum (2003), in 1977 Pizza Hut merged with PepsiCo, the giant in FMCG industry that significantly raised sales and increased brand visibility of Pizza Hut. However, giving an excellent start for Pizza Hut, a “performance-based, consumer packaged goods company like PepsiCo was not a natural ?t with the restaurant business” (Mike & Slocum, 2003). Finally, in 1997 PepsiCo ceased partnership with Pizza Hut after spinning off its restaurant division, under the name Tricon Global Restaurants, Inc., that finally led to the creation of independent company today known as Yum! Brands that includes such restaurant brands as Pizza Hut, Taco Bell and KFC. On average The Yum! Brands opens over seven restaurants every day worldwide capturing one of the leading position in global retail development (Yum! corporate overview, 2019).

The website “Cleverism” provides the following information about the business model and revenue source of Yum! Brands. The company has a mass-market business model, targeting the customers who search convenience in fast food. The principal value propositions of Yum! Brands are affordability and status. The revenue stream for Yum! Brands includes revenues from operating company-owned restaurants and revenues from royalties charged from franchisees. The average cost of opening franchised Pizza Hut in India is about $20000, while the royalties constitute 6.5% of the overall profit paid by each franchisee (Franchise India Web).

The work “Win in India: An Analysis of Market Entry Strategy into India's Food and Beverage Industry” by Greer (2018) describes the entrance of Pizza Hut to India with further activity. It informs that being a division of Yum! Brands Pizza Hut entered India in 1996 with the opening of its first franchised restaurant in New Delhi. Starting with company-operated outlets, Pizza Hut have been gradually shifting to franchising program. (Greer, 2018). The management chose franchising as it was the most rational way to expand in the Indian market with minimum risk and investments. The company established four franchisees in India: Pizzeria Pure Foods, Devyani International, Wybridge, and Dodsal (Swati Bharadwaj Chand, 2002).

Pizza Hut was opening dine-in restaurants serving around 40 000 customers daily with further opening of Pizza Hut Express points. Each dine - in restaurant was 2000 square feet with 120-200 seats. However, being the first comer in Indian pizza market the company`s offerings were met with confusion as the customers hesitated whether to treat pizza as a snack or meal option (T Phani Madhav & G Srikanth, 2004). Accompanied by high prices these factors deterred the clients from visiting Pizza Hut dine-in restaurants. Moreover, the competition from other companies providing pizza, especially Domino`s endangered the position of Pizza Hut even more. As Domino`s quickly positioned itself as the quick service restaurant that delivered pizza quickly to the customer`s home and expanded aggressively, Pizza Hut began losing its customer base (T Phani Madhav & G Srikanth, 2004). Competing against main rivals in Indian QSR segment including Domino`s, Pizza Hut started elaborating competitive and growth strategies.

While Domino's continues to maintain concentrating on home delivery, Pizza Hut as well has a delivery system, however, the company has been giving great emphasis on providing wider menu options including such dishes as pasta, rice, dessert, and beverages serving customers like in full-service restaurants. This strategy represents differentiation from Domino`s whose core competitive advantage has been home delivery (Khicha, 2011). The management of Pizza Hut in India found the opportunities for future growth in the constant introduction of new products and gradually moving customers over to higher price points (Greer, 2018). Such an approach was gradually accepted by Indian customers when Pizza culture was finally fitted in the Indian dining experience.

Pizza Hut positioned itself as a family restaurant providing dining experience on a high level, serving high quality branded pizza and other dishes. When customers visit Pizza Hut, some outlets have restaurant hostess who assign them tables and introduce the steward who takes care of clients. (Anand Dhawan, 2010).

Such positioning shows that Pizza Hut competitive strategy comes down to Differentiation strategy if considering it in terms of Porter`s Generic strategies matrix, as being a family restaurant with a significant variety of food options and higher than ordinary fast food outlet service, the company distinguishes itself from the rivals making it a unique selling proposition. Cost leadership strategy is implied by Pizza Hut as well but as a supportive strategy aimed to sustain affordable prices. Finally, Pizza Hut prices are higher than in Domino`s, however, it is explained by better service, ingredients, quality of pizza and variety like in a restaurant.

From the angle of “The Discipline of market leaders” competitive approach, Pizza Hut despite other fast food operators shifts its emphasis from operational excellence discipline to the product leadership discipline. The main product leadership instruments in Pizza Hut are constant launch of new products, efficient talent management, specialized training programs for employees, result driven rewarding system for motivation. All these elements allow enhancing quality, service and variety, referring Pizza Hut to premium pizza maker and charging a higher price. According to Dhawan (2010), the price for Margherita in Pizza Hut is 245 Rs, while the price for the same pizza in Domino`s is about 75-130 Rs. However, the size of standard Margherita, as well as cheese amount in Pizza Hut, is bigger than in Domino`s (A. Dhawan, 2010).

The growth rate of Pizza Hut in India is much lower than of Domino`s. However, the article “India system sales second fastest growing market for Pizza Hut” published in “The Economic Times” (2018) informs: “In India, Pizza Hut operations are entirely franchised, and split up largely between RJ Corp-promoted Devyani International and Sapphire Foods India, a consortium of funds led by Samara Capital”. With more than two times less in the number of restaurants in India comparing with Domino`s, Pizza Hut concentrates on product development as primary growth strategy constantly launching new products and growth through franchising as the supportive strategy increasing the number of restaurants in big cities steadily, having its own customer base and loyal clients. The “Business Line” website informs that Yum Brands-owned pizza chain Pizza Hut India plans to open over 200 more outlets in India by 2022 to expand its presence. Currently, Pizza Hut counts 377 restaurants in India (Pizza Hut Company profile). Undoubtedly, such a rate of growth is significantly lower comparing with Domino`s. However, instead of following the leader measures, Pizza Hut management realizes that copying the market leader strategies will remain the company in Domino`s shadow. For that reason, as well as in competitive approach, in growth strategy Pizza Hut implement different to its main rival strategies, concentrating on the product development. “Franchise Business” website informs that Pizza Hut has a product development team and chef who spend their days researching what it is that consumers want. Such operations on R&D increase costs that is reflected in higher prices (if comparing with Domino`s average prices), but allow gaining an advantage over rivals through having a wide range of items in menu meeting a larger group of customers` preferences.

In conclusion, it should be mentioned that even though entering India initially was not successful for Pizza Hut that stayed in the shadow of Domino`s for the first years, the management made the right and unordinary decision. The company positioned itself as a family restaurant fast food chain, providing premium service and quality in the pizza market at higher prices for fast food segment targeting middle-class customers. Product leadership competitive discipline and differentiation generic strategy as well as product development growth strategy resulted in the perception of the company by customers as premium dine-in restaurants with a strong brand, wide range of products and the mark of quality. However, according to FRPT- Retail Snapshot (2015) the management of Pizza Hut in India revised the strategy shifting from fine-dining concept to smaller format stores aimed to serve densely populated areas and improving delivery service.

3. Results and Practical outcome of the case studies

3.1 Findings and outcomes

After analyzing the Indian economy, the fast food sector and the case studies of the two largest competitors in the pizza market, the results of the work should be determined. The theoretical base of this work allows considering competitive and growth strategies from different angles and identify the peculiarities of its implementation. Theoretical overview showed that in terms of competitive strategies the implementation of cost leadership and differentiation generic strategies from the Porter`s generic matrix is suitable for fast food segment worldwide. The Porter`s five forces industry analysis of Indian fast food segment showed that intense competition, medium to high threat of new entrants and substitutes along with high price sensitivity of customers and low switching costs make cost leadership the primary strategy used by fast food chains in India to withstand rivalry and attract customers. Differentiation strategy is usually considered as a supportive strategy aimed to distinguish the company from rivals stressing out the uniqueness. The example of such strategy portfolio is Domino`s strategies with a focus on cost leadership, providing low price pizza and differentiation that plays the role of positioning itself as the pizza chain with the fastest delivery system. However, in case of Pizza Hut, vice versa, the focus is shifted from cost leadership strategy to differentiation, through which the company positions itself as family dine-in restaurants with premium quality products and a significant variety of menu items. Pizza Hut managed to create strong brand power and have loyal customers that are ready to pay an extra price for high-quality pizza and service. Cost leadership strategy is used by Pizza Hut to set affordable prices rather than the lowest ones in the segment.

In terms of “The Discipline of market leaders” theory, the approaches to competitive strategies of Pizza Hut and Domino`s differ as well. Pizza Hut makes emphasis on product leadership discipline aiming to provide excellent service and the considerable variety of food options, pizza of high quality as well as comfortable atmosphere. Domino`s, previously concentrating on operational excellence discipline that partially led to the company`s downfall in 2016, has started balancing between operational excellence through standardized production, economies of scale and minimum table service and product leadership through enhancement of marketing efforts, updating online delivery systems and spending more on quality control operations. Such strategy portfolio helped Domino`s to restore its position in the Indian fast food segment.

The difference in the strategies` portfolio of these companies is not limited to the difference in their approaches to competition. The approaches to growth strategies are different as well. Domino`s is known to grow aggressively through franchising supported by market penetration strategies opening around 150 new outlets per year covering more cities for delivery and pick up options, while Pizza Hut goes steady planning to open 200 more outlets by 2022 due to the emphasis on product development strategy rather than the hybrid growth strategy through franchising. Product development strategy allows Pizza Hut to attract a larger target audience widening the product range and enhancing service.

Finally, after comparison of Domino`s and Pizza Hut, two giants and main rivals in the Indian most popular sub-segment of the fast food sector, several conclusions should be made. Despite the fact, that Domino`s brand occupies more than 19% of the Indian fast food market, Pizza Hut is still perceived as the main competitor for Domino`s in India. Being a market leader, Domino`s has always used aggressive hybrid growth strategy expanding through franchising and market penetration organic growth strategy along with a substantial emphasis on cost leadership strategy and operational excellence discipline, paying less attention to product leadership discipline with corresponding lack of efforts to quality and service improvement. Cost reduction operations and rapid expansion for a long time have been perceived as a core strategic task shifting the attention of management to the idea of aggressive growth and cost leadership, leaving behind the improvement of operational systems in delivery, quality control and letting the rivals override the company in such aspects. Such an omission led to the downfall of Domino`s in 2016 causing huge loses that pushed the management to review the strategies closing some outlets, pay more attention to product leadership discipline and slow down the pace of growth starting to concentrate more on quality of products.

In case of Pizza Hut, that for a long time remained in the shadow of Domino`s, the company prioritized its efforts in differentiation strategy offering a high range of value food acting as a family restaurant with wider than ordinary fast food chain functions. However, it doesn't mean that the company neglected the cost side of the business, taking into account the high price sensitivity of customers in India. It is the question of priority between cost leadership and differentiation strategy, where Pizza Hut made more emphasis to the second one, understanding the fact that absolute cost leader position in pizza market is held by Domino`s. With the gradual improvement of living standards of citizens as well as the increase of their average incomes, Pizza Hut management understood that larger number of people entering the middle class were increasing their spending on food, expecting better quality and service. Thus, facing the needs of people who are ready to pay extra money for a restaurant dine-in experience, Pizza Hut came out of Domino`s shadow, capturing its own niche with its own positioning and customer base. It should be stressed out that with less aggressive pace of growth, using growth strategy through franchising as a supportive strategy, Pizza Hut sacrificed the market share letting Domino`s go far ahead. However, slower growth and emphasis on product development strategy allowed Pizza Hut to sustain stability, the quality of products and service, strengthening the customer loyalty as well as brand power and increasing client base. Nevertheless, far from the perfect delivery system and lack of cost optimization efforts continue to be the main directions for Pizza Hut improvement in the competitive race against rivals. Moreover, constant product development operations increase costs making prices higher, that in turn contradicts one of the main principles of competitive and growth principles for Indian QSR, namely low price strategy.

Competitive strategies relevant for Indian fast food segment

Thus, the results of the case studies have shown that approaches to competitive and growth strategies used by international fast food companies operating in India could be different, however, the main factors for competitive and growth strategies selection are the following:

Ш Intense competition in the segment;

Ш High price sensitivity of consumers explained by lower than average annual income;

Ш Low switching costs allowing consumers to choose from a considerable variety of fast food providers;

Ш High expectations of Indian consumers based on health concern that implies not only affordable price but high quality;

Ш Competition from local low price fast food outlets of unorganized fast food market;

Ш Threat of substitutes, especially providers of healthy food options;

Ш Threat of new entrants explained by ease of entering the market.

Taking into account all the factors stated and research conducted, it should be concluded that competitive strategy of an international fast food company operating in India should be built around so-called integrated strategy (combining the elements of cost leadership and differentiation generic strategies). Cost leadership strategy allows achieving affordability of products that is essential for Indian consumers while differentiation is aimed to highlight the uniqueness of fast food provider like “30 minutes or it`s free” or unlimited access to beverages, that helps not to get lost among resembling fast food providers.

It is also essential to choose between operational excellence and product leadership disciplines. The examples of case studies described above show that Domino`s (before reestablishing new competitive approach implying balancing between operational excellence and product leadership) with its operational excellence approach acted as the cheapest and fast delivery pizza maker, but lost quality control. While with focus on product leadership discipline, Pizza Hut could reach high quality and excellent service increasing brand power and gaining loyalty of customers, but losing the significant share of consumers that are not ready to pay higher price for premium quality and restaurant service.

Another important conclusion is that present consumers' behavior of Indian citizens in the QSR market is based on two main aspects namely price and quality. As it was already mentioned price sensitivity is the result of low average incomes of consumers while quality consciousness is based firstly on the present trend - health concern caused by the dramatic increase in the number of diseases like diabetes and cancer that makes people choose food of better quality. Secondly, gradually increasing middle class brings to the QSR market consumers with increased spending on food. Such customers are still in the minority but ready to pay extra as they have become less sensitive to price and more sensitive to service and quality. Thirdly, in a highly competitive environment as Indian QSR market with new entrants constantly appearing, it is imperative to repeatedly elaborate and update all the software especially in delivery service simplifying the processes like online ordering. The factors listed above indicate that from the competitive approach of “The discipline of market leaders” international fast food companies should balance between two competitive disciplines namely operational excellence that is linked to quick streamline standardized production and cost-cutting procedures to set affordable prices and product leadership that implies spending on R&D, better service, convenience and quality. The evidence is Domino's India case study. Changing of the overall competitive strategy after Domino`s downfall in 2016, with increased emphasis on product leadership discipline helped the company to regain its position and goodwill by introducing new recipes of pizza free of harmful ingredients, with more toppings of better quality and updated online ordering applications.

An alternative is the example of Pizza Hut that shifted more attention to the product leadership discipline leaving behind operational excellence. In such aspects as the quality of ingredients, the range of items in menus and service Pizza Hut outperformed Domino's, however premium level prices and poor delivery service made a company less popular than its main competitor dramatically shrinking the target audience to only those who can afford premium price segment fast food.

Due to the tendencies in the Indian QSR segment, it is vital for international fast food chains to maintain affordable price and reasonable quality for products as well as updated and convenient online ordering services that represent an uneasy challenge. The case studies revealed that the consumers of Indian QSR segment are sensitive not only to the price but to the quality of ingredients used in food and convenience of online ordering applications. The facts above allow concluding that international fast food companies operating in Indian QSR sector should concentrate not only on operational excellence discipline conventional for fast food, but use selected instruments from product leadership discipline. The research showed that from the all stated previously instruments of operational excellence discipline the most relevant for international fast food companies operating in Indian QSR segment are investments in production process with labor division to achieve streamline standardized production; focusing on value adding operations and outsourcing non-value adding activities for cost optimization to contribute to setting of affordable prices (Burger King India experience); substantial emphasis on management of transactions that accelerates processes between suppliers and a company and concentration on limited number of products (as according to Treacy and Wiersema (1995), “Variety kills efficiency”). As for the instruments of the product leadership discipline that should not be neglected by international fast food companies operating in Indian QSR segment, there are constant development and updating of all electronic systems including online ordering applications; investments in marketing team aimed to create unique selling proposition to distinguish a company from rivals (Differentiation strategy) and organizing of educational programs for employees to enhance quality of service. Thus, the best option is to balance the emphasis between two competitive disciplines depending on the specifics of the particular fast food provider. The hypothesis H2 is confirmed.

Growth strategies relevant for international companies in Indian fast food segment

Taking into account the research base and case studies, the growth strategies applied in Indian fast food segment by international companies usually go down to hybrid growth strategy through franchising as well as market penetration and product development organic growth strategies. While market development is less popular primarily due to expensiveness, higher risk and the absence of necessity for using this type of strategy that implies maturity of the existing market. As it was mentioned earlier, hybrid growth through franchising is perceived as the primary growth strategy that is especially relevant in India for the next reasons:

Ш High density of large population with a significant share of young people below 30 age that includes the main target audiences for fast food companies. Thus growth through franchising allows to cover larger target audience;

Ш High brand awareness of Indian customers;

Ш The tradition of sharing a meal with colleagues and friends;

Ш High interest of Indian consumers towards western tastes (with regard to proper localization);

Ш Rapid QSR sector growth of 8% at CAGR makes franchising the most effective instrument that could provide a company`s growth rate above the growth rate of the QSR sector with minimum risk and capital outlay.

Ш Local franchisees usually have knowledge of the local market which makes them likely to exploit those markets better;

Ш High flow of people that contributes to the boost of sales in prime time and weekends;

Ш Franchising in the food and beverage industry is popular among business people in India;

Ш Franchising programs are highly admired by authorities as franchising improves the business environment.

With the slow pace of growth in number of outlets established in the market, it is hardly possible to increase the market share in such highly competitive conditions as the growth of market share in Indian QSR segment goes down to increase in number of outlets. The reason is high demand for fast food, high density of population and significant consumption potential of the Indian market that brings up the necessity for external expansion through increasing of selling points or outlets. The theoretical basis of the research showed that the most preferable hybrid growth strategy for international fast food companies to expand in conditions of the rapid growth of Indian QSR segment is growth through franchising. Franchising provides the optimal combination of fast growth and reduced risk in comparison with other alternatives and does not require substantial capital outlay and financing unlike growth through company-owned outlets. Indeed, the solid proof is that such international fast food providers as McDonald`s, Domino's, Dunkin Donuts, KFC, Pizza Hut, Subway and some others are growing in India through franchising (S. Chacko and Dr. S.Verma, 2019). Another work “Retail Franchising” by Manish V. Sidhpuria as well stresses out that the well-known fast food providers as Domino`s, McDonald`s, O`Brian Sandwich Bar, Taco Bell and others are known to grow through franchising in the Indian QSR segment.

Undoubtedly, the factors listed above prove that a company gains undeniable advantage opening new outlets through franchising in India. There is almost no place, where a fast food provider fails to meet its customers unlike fast food producers acting in developed countries with lower population and density, where fast food chains could endanger the sales level opening an outlet in a location with weak demand for fast food. Moreover, taking into account the modest forecasts of the annual growth rate of the Indian QSR sector that constitutes 8% at CAGR up to the forthcoming 4-5 years, international fast food companies have to sustain the same growth rate at least to remain market share and exceed this rate to increase the presence.