international operations of Papa John s

Impact of Trade Barriers

There are several pizza franchises that operate internationally, and this is an opportunity open to Papa John's as well. Both Pizza Hut and Domino's have major international operations, and these have been facilitated by a reduction in trade barriers (Buss, 2013). International expansion, especially to emerging markets, has formed a part of the company's growth strategy since 2013 (Euromonitor, 2013). When trade barriers are reduced, this helps franchise businesses in a couple of key ways. First, it allows them to source inputs from anywhere it is cheapest. Papa John's might get its ingredients from America, but it may get its ovens from China, and its cardboard boxes from Canada – wherever is cheapest and trade makes foreign goods much cheaper than they otherwise would be without the reduction of those trade barriers. The other way that declining trade barriers help franchises like Papa John's is that it allows these companies to enter foreign markets, because there are fewer barriers on investment flows, and fewer barriers on things like moving managerial talent around the world. So if Papa John's wants to start in a country, it can send both the talent and money to that country to make that happen.

Impact of Technological Change

There are some very interesting applications for technological change here. One is that technology makes for better controls.

Things like RFID tracking help a company run a better supply chain, but even just improvements in telecommunications can help a company to run more efficiently in foreign markets. For example, the use of apps has made it easier for food delivery services to operate – or outsource. Such apps can lower the cost of entry into a foreign market, even in the emerging markets that Papa John's is targeting, because they allow the company to earn more money from fewer fixed resources.

Another way that technological change can help a company like Papa John's is that with the internet, more people are being exposed to different aspects of American culture. This was an ongoing trend before the Internet but has become even bigger since the Internet came into being. Today, someone in most countries can binge watch American TV just as if they are in the US, for example (Munzenreider, 2017). Why does this matter for Papa John's? Because pizza is a major part of American culture but in most of the world it is not an everyday food. As more people around the world are exposed to American culture, they are more likely to adopt other aspects of American culture, the pizza being one of those.

Impact of Currency Fluctuation

There are two main impacts of currency fluctuation – transactional and translational (Investopedia, 2018). Transactional risk would be when a foreign subsidiary needs to buy something from another country. Let's say Papa John's starts 100 shops in China. China doesn't make much mozzarella, and the stuff they make isn't good so these shops buy from the Papa John's HQ in America. It's cheaper and better, but cheese is a major cost, so if the currency changes a lot, the cost of a pizza could jump up quickly. If the change in ingredient cost is faster and bigger than what the company can do with its prices, there can be impacts on profits. Translational currency risk is similar – whatever profits made in foreign countries end up on the income statement for the company back home, but the value of those profits is affected by the prevailing exchange rates, so changes in those rates will affect the profitability in USD terms of the foreign subsidiaries, even if their profitability in local currency hasn't changed.

References

Buss, D. (2013). Domino's global growth feeds pizza chain's rising success. Forbes. Retrieved March 24, 2018 from https://www.forbes.com/sites/dalebuss/2013/03/09/dominos-global-growth-feeds-pizza-chains-growing-success/#4794c7643de4

Euromonitor (2013). Papa John's International. Euromonitor. Retrieved March 24, 2018 from http://www.euromonitor.com/papa-johns-international-inc-in-consumer-foodservice/report

Investopedia (2018). Foreign exchange risk. Investopedia. Retrieved March 24, 2018 from https://www.investopedia.com/terms/f/foreignexchangerisk.asp

Munzenreider, K. (2017). Netflix's American cultural imperialism is causing quite the scandal at the 2017 Cannes film festival. WM Magazine. Retrieved March 24, 2018 from https://www.wmagazine.com/story/netflix-2017-cannes-film-festival