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Domino’s Pizza Corporation

Executive Summary

The report is focused on the strategic analysis of Domino’s Pizza Corporation. Domino’s corporation is multinational organization based in America and is known worldwide for its quality and delicious pizzas. Domino’s Pizza is one of the largest chains for pizza delivery in the national and international market and operates through a network of over 7800 stores in the United States and across the world. Domino’s Pizza Corporation operates through both company owned outlets and franchise owned stores in the national as well as in other international markets

The report divulges in brief history of organization and studies the current market dynamics and suggests possible strategic options available with firm and possible implementation strategy. The report analyses the micro and macro environment of the firm to understand the strategic positioning of firm and market environment. The report undertakes the SWOT analysis to evaluate the internal and external environment of the company by identifying the strengths and weaknesses of the company along with the opportunities available and prospective threats. The Appendix 1 and Appendix 2 studies the macro environment of the Market through SPECTACLES model and Industry environment and competition has been analysed through Porter’s five forces model.The report also tries to suggest possible expansion strategies and future course of action for the Firm.

 Introduction

Domino’s Pizza is an American multinational restaurant chain or international franchise pizza delivery conglomerate. The company is the second largest pizza chain in the Unites States and operates in almost 70 countries of the world. Domino’s Pizza is the leader in pizza delivery in the international market and operates a network of more than 7800 stores in the United States and all around the world. The company is recognised as the world leader in pizza delivery and functions through a network of company owned and franchise owned stores in the US as well as in other international markets. Domino’s Pizza trades in NYSE under the name of DPZ and is headquartered in Ann Arbor, Michigan, in the US and employs 205,000 people (Data monitor, 2009).

The company operates in the fast food industry which is growing rapidly not only in the US market, but also in other international markets. Companies in the fast food industry serve food to customers who order and pay at counter. The examples of such companies are McDonalds, KFC, Pizza Hut, etc.  The fast food market mainly serves quick serving foods and drinks to customers for immediate consumption either on their premises or in designated eating areas shared with other foodservice operators (Data monitor, 2012). The fast food industry presents bright prospects for companies and it has been expected that till the year 2016 the volume of the industry will be 27.7% and its value will be 31.2%.

Domino’s Pizza was founded by Tom Monaghan and his brother James in the year 1960 after their purchase of Dominick’s, which was a small pizza store in Michigan. This was later renamed as Domino’s Pizza Inc. in the year 1965. Since, its inception in the year 1960, Domino’s Pizza has grown rapidly from strength to strength. The company started its franchise business in the year 1967 when it opened its first store in Ypsilanti. Domino’s Pizza went international in the year 1983 when it initiated its first international store on May in Manitoba, Canada.Domino’s grew rapidly and one of the examples of the greatest achievement in the history of Domino’s Pizza in regard to expansion is when it opened seven stores across five continents in merely one day (Domino biz, n.d).

Dominos has put strong emphasis on technology and has adopted the technology to remain customer centric. In the year 2007, Dominos rolled out its mobile and online ordering services. These proceedings made a major impact on the company and pushed its operations a notch higher. Dominos has recently launched its app for smartphones that resulted in 80% ordering and in the year 2012, the total number of employees employed by the company is 205,000 (Domino’s Pizza Group PLC, 2013).

Strategic planning is well crafted chart of organization to achieve its vision and mission. Strategic planning is process of defining its strategic objective and goals and allocating financial, physical, and organizational and human resources to achieve the strategy (Barney, 1995). The strategy planning also defines the key performance indicators and control measures required to achieve the objectives. So strategic planning is blue print of organization’s performance and actions.

Strategic planning starts by understanding the macro environment of market which can be done using the SPECTACLES model which studies the social, political, economical, cultural, technical, aesthetic, legal, environmental aspect of market to give a fair idea of market conditions. The Porter’s 5force analysis helps to understand the industry dynamics, threats and rivalry prevailing in the industry in which company is operating. The SWOT analysis studies the weaknesses and strength that can hinder or help the company’s chances to cash the opportunity and combat the threats posed by industry and economy.The study of SWOT, PORTER’S Forces and SPECTACLES helps the organization to set strategic objective in line with vision and mission of company and allocate necessary resources. The company based on this information can use Ansoff matrix to decide the future market condition and use BCG matrix to optimally align resources in profitable ventures.

 SWOT Analysis

Strengths:

  • Strong Franchise chain– The Company has strong franchise chain spread across the globe and has over 7800 self-owned or franchise stores.
  • Presence: Opened in Universities and motorways to reach new customers (Mintel, 2013) The company also has strong presence in Emerging markets especially India, china and African countries which are quickly becoming promising markets for company
  • Growing Revenue: Domestic supply chain’s revenue in year 2013 was $1.01 Billion and company has Strong earnings model. Dominos has goodwill of $16,598,000 and it has total assets of $478,197,000 including both tangible and intangible.
  • Human resource: Highly experienced staff and strong company policy to support its employees. Company offers Retirement savings plan for employees
  • Strong technical platform: the company has robust ordering and customization platform available online and also in mobile and smart phone app making it easier for customer to order.
  • Economic slowdown: The fast food products offered by dominos are reasonable in prices and hence are highly sought after (Hassanien, Dale & Clarke, 2010).
  • Supply chain: Dominos has its own supply chain that comprises of 16 regional dough manufacturing suppliers and company focuses on strong local supplier relations. Dominos has contractual relationship with its suppliers (Annual Report, 2013).

Weakness:

  • Less options: No Gluten Free options (Domino’s):
  • Lack of Healthy food options: Despite strong growing awareness and demand towards healthy food options company has maintained a wait-and-see attitude towards healthy food trends (Datamonitor, 2004)
  • Weak International presence: Competitors lead in international markets, Domino’s has a Weak international presence.
  • Poor vendor relations: No long term contract with suppliers and domestic suppliers, supply resources to all the owned stores of Dominos and its 99% domestic franchise stores.

Opportunity:

  • Lifestyle changes: The people have a busy lifestyle, and they are more inclined towards food products that are served quickly and are ready to eat, the trend of eating at home is also growing (Joy and Nassar, 2013). MCD makes 13% of its sales in Breakfast (keynote, 2013) and Pizza fans have increased in African countries (CNN News) showing a positive change in terms of Domino’s consumption.
  • Emerging markets: Republic of china and India are home to roughly 1/3 of world population and fastest growing market and India is expected to become 5th largest consumer market (Mckinsey, 2007; Keynote, 2013). The emerging markets have strong youth population and they have strong inclination towards fast food but it’s important to create products suiting the particular culture and income levels
  • Strong response to promotional campaign: 22% of diners say that they wait until the venue is offering a price promotion before they visit it (Mintel, 2013).
  • Growth in online ordering: the improvement in online retail and presence of strong online and mobile apps present strong opportunity for dominos to create centres in interior where they can reduce rental cost and focus on increasing sales through online ordering.

Threat

  • Competition: Dominos faces competition in the national and international market from Pizza and Pasta restaurants that are highly fragmented (Mintel, 2013). The direct competitors of the company in the industry are brands like KFC, Pizza Hut, Taco Bell, Papa John’s etc. However, there are other indirect competitors too that serve fast food, such as pubs, restaurants, supermarkets as well as local shops (KC Ifeanyi, n.d; Karagiannapoulos, Georgopoulos & Nikolopoulos, 2005).
  • Economic slowdown: Shadow of recession still on UK (Keynote, 2013): The economic slowdown has resulted in reduction of salary and disposable income and hence a slump in consumption in European and American markets (Hassanien, Dale & Clarke, 2010).
  • Negative trends: Growth of takeaway/home delivery segment slowed in 2013 (Mintel, 2013) since 32% of customers are looking for something different in menu not what they can eat at home, more healthy options and gluten free options (Mintel, 2013)
  • Currency Devaluation (Market line, 2013): the devaluation of currency in emerging markets have reduced the profits  from emerging markets
  • Limited Customer segment: Ordering/eating out drops out with age and hence the customer segment is limited (Mintel, 2013)
  • Health awareness: The people’s inclination towards healthy food options and wants to have eatables that are healthy and hygienic (Harrison &Enz, 2005).
  • Minimum wages: The minimum wage norms will push the cost of firm (Hucker, 2013).
  • Growing Customer expectation: essential to maintain an appropriate company image by working in a socially responsible manner and requirement of online communication and fast delivery of products to customers for their convenience (SMO, 2011). This causes strong cost pressure on company’s operations.

 Micro Analysis “Porter 5 Forces” Model

Industrial Rivalry:The industrial rivalry in the fast food industry is intense that presents high risk for Dominos. Dominos faces competition in the national and international market from Pizza and Pasta restaurants that are highly fragmented (Mintel, 2013). The direct competitors of the company in the industry are brands like KFC, Pizza Hut, Taco Bell, Papa John’s etc. However, there are other indirect competitors too that serve fast food, such as pubs, restaurants, supermarkets as well as local shops (KC Ifeanyi, n.d).

Threat from Buyers:The power of buyers in the fast food industry is medium as 27% of users mention that they prefer a pizza and pasta for regular treat. However, 15% of users mention that they want to have snacking options and grab and go options if they get for pizza and pasta restaurants and takeaways (Mintel, 2013).

Threat from Suppliers:Dominos has its own supply chain that comprises of 16 regional dough manufacturing suppliers. Moreover, domestic suppliers also supply resources to all the owned stores of Dominos and its 99% domestic franchise stores. Thus, the power of suppliers in the industry is low as globally the company has lot of suppliers for resources and can also buy products from other resources. Dominos has contractual relationship with its suppliers (Annual Report, 2013).

Threat of Substitutes: The threat of substitutes is high for Dominos because it is the second largest pizza company in the international market. Additionally, there are several substitutes available in the market for the products of Dominos, such as supermarkets, papa john’s, pizza hut and local fast food stores (Karagiannapoulos, Georgopoulos&Nikolopoulos, 2005).

Threat of New Market Entrants:Although, there are a lot of market entrants in the industry, but the company has tons of experience as it is in the industry since 1960. In addition, Dominos also has goodwill of $16,598,000 and it has total assets of $478,197,000 including both tangible and intangible. Thus, threat of new market entrants is low in the industry.

 

Ideas and Recommendations

In light of the above mentioned options it can be mentioned that Dominos has a strong market presence in the international market, but due to continuous pressure from competitors and highly competitive business environment it is essential for the company to refer innovative strategic options. Thus, the following are the short, medium and long term strategic options that are open to Domino’s Pizza and mentioned is the implications of choosing these options:

Emerging market: As we discussed in SWOT analysis the growth opportunities are increasing in Indian and Chinese markets and acceptance of pizza is increasing in African countries as well so as per prime long term recommendation for the company it should focus on enhancing its network coverage in the emerging markets especially Indian and Chinese market. These two economies are growing at a fast pace and demand for fast food is also enhancing in these countries, and thus, Dominos has chance to grab the looming opportunity in the two pertinent emerging economiesself-effectiveness 2011). Dominos does not have large stores in Indi and China and both the countries contain less than 2% of the total stores of the Domino’s company. Thus, the prime strategic suggestion for Domino’s Pizza is that it should enhance the number of stores to at least more than 20% in the coming three years for the purpose of meeting the expansion strategy that Dominos is currently pursuing. The implication for this recommendation is significant for the company as it will allow the company to grab share in two most prominent Asian markets, which will amplify its position, sales and profit.

Customer loyalty: As per SWOT analysis we realized the customers are moving towards other options, looking for health conscious and gluten free options and the segment of customers is limited so the Dominos should concentrate on improving customer loyalty. The reason for pursuing this recommendation is that in the current business environment the best competitive advantage by which companies can survive in the fiercely competitive environment is loyal customers (Cartweright, 2001). Thus, Dominos should insisting on quality of products and ensure that all its stores in the national and international market should serve best delicacies to customers. Dominos should direct all its stores to strictly follow these guidelines on quality if the company wants to attain good results in coming years the company must provide its customer with more healthy options and gluten free options to improve its customer segment and getback health conscious customers. (Kotler, 1998).  The focus on promotions must be maintained as 22% customer purchase is based on promotional offers.

Redevise competitive strategy: As discussed in SWOT analysis company has poor market presence as compared to its competitor mainly McDonalds. It is suggested that Dominos Incorporation should thinkusing their smart advertising techniques to concentrate on all the competitors in the market rather than focusing on only one competitor, Subways. It is notable that merely concentrating on one competitor may bring severe consequences to the company in particular where recognized businesses like McDonalds can come up with resourceful strategies. These clever strategies in future will affect the steadiness of Dominos and its growth in common. Following this strategic option will enable the company to attract customers in a better manner in relation to its competitors (Porter, 2004)

Focus on online markets: The biggest strength of company is ability to adopt technology and with growing focus on online retail it’s important for Domino’s Pizza is that it should work on improving its innovative strategies in relation to online marketing and selling. It has been observed from the Macro and Micro environmental analysis that online selling presents vital opportunities for Dominos. It is notable that Pizza Hut has performed better in comparison to Domino’s Pizza in terms of online rewards in spite ofinvestingapproximately the same amount of money in the online services segment (Rainey, 2006).

Improvement on brand image: the SWOT analysis Shows Company needs to take into consideration is the exceedingly dynamic socio-cultural change or the altering lifestyles of the people in the United States as well as across the globe as well. The company has strong market presence and brand. In order to strengthen its brand image, the prime factor which Dominos should consider that its products should imitate these changes. Domino’s Pizza should concentrate on enhancing its brand image. The major strength of Dominos is its brand image and it can be attained by constant intensification and reinforcement of the brand in the market. The Domino’s mustalso focus to train its employees to comply with the demands of changing lifestyles and young customer’s behaviour (Thompson, 2001).

The recommendations or suggestion mentioned above for the strategic direction of Domino’s Pizza reflectsthe current strengths and opportunities of the company and are designed at overcoming the threats and the weaknesses that have observed in the SWOT analysis of the company.

 

 Strategy

The company can use the Ansoff matrix to decide the future strategy. As per Ansoff matrix study along with development of understanding from SWOT Analysis Company can opt for market penetration strategy (Porter, 1987). The market penetration can help in increasing sales and can be achieved by focusing on online sales and focus on emerging markets.

Dominos Incorporation should emphasize on online sales and emerging markets. THE company must redefine the in-store dining strategies so that it can match with the online growth in selling. Thus, from the above mentioned strategic options for the company the best suitable strategic action for the company is that it should focus on online sale and emerging markets. It is notable that the use of internet in todays is escalating at a faster rate and the enlargement in online sales of the company will take it at the forefront of the fast food industry (Winterman, 2011) and the emerging markets are growing at brisk speed.

Consequently, along with special offers and coupons, Domino’s Pizza should augment its customer base by enhancing their online ordering procedures. For instance, Dominos can execute a strategy that will aid customers who are looking towards Domino’s for parties or other special events. In online selling, the company can facilitate user to create an order and with a specific on which the pizza’s or other delicacies are required (Tutt, 2012).

The company can provide option to user to enter certain criteria, such as the number of people attending, type of pizza(s) required a contact number on which the company can confirm the order before sending pizzas. Dominos could put efforts to implement this online ordering strategy across all its international and domestic stores. This will aid Dominos in becoming more competitive in the market and flexible, as well, with the requirements of customers.

The online option focus will help the company to open its store from main markets to slight interior and save on rental cost and accommodate for possible rise in cost of salary and wages. The online store will also help in increasing the reach of company to much larger audience by providing higher convenience.

 

 Implementation

In order to implement the above mentioned strategic options, Dominos have to consider several implementation issues in order to become successful. The following are the implementation issues that needs to be consider:

Management by objective:The top management must be involved regularly and objectives must be established and Key performance index must be established to evaluate the Strategic changes. The management and teams for all these changes needs to be established so that there will be no issue later during the implementation process of the strategy The management must insure its focus on improving sales from emerging markets and online sales (Rainey, 2006).

Allocation of Resources:the Company must Established Key performance index for the various departments and based on it must distribute the financial, physical, organizational and human assets. The company must put higher amount of resources in emerging markets to help them grow at quicker speed.(Thompson, 2001).

Research and Development:The Company must focus on improving their technology and mobile apps to make them more market centric and user friendly. The company must research for more business and franchise partners in the emerging markets.

Conduct Short-Term Reviews of Strategy: In addition, Dominos should also conduct short reviews to keep the strategic plan alive and re-energized. This will allow company in differentiating individuals who are getting things done effectively and those who are not. These reviews will allow the company to take a look at the original plan, find out whether strategic objectives are attained, and can agree on new action steps that are necessary. Moreover, in order to keep the strategic plan alive, the company must monitor it regularly. The progress can be reviewed on a monthly or quarterly basis, relying on the activities and time frame of the strategic plan.  (Witcher & Chau, 2010).

Establish Strategic Plan Milestones and KPI: In addition, for the implementation of the strategic option, Domino’s Pizza should also set strategic plan milestones and KPI  that need to be attained within a specific time frame. The company can do this on a monthly or on a weekly basis (Rainey, 2006). The KPI will help in evaluation of the strategic plans.

Optimum Way of Delivering:In order to espouse on an optimum way of delivering, it is essential that the progress of the strategic plan should be measured continuously. There are certain pertinent indicators, which Dominos can use for measuring the progress of strategic plan, such asgross sales, revenue, the number of new customers, market share, customer satisfaction, etc (Witcher&Chau, 2010).

Monitor the Strategic Plan:Moreover, in order to keep the strategic plan alive, the company must monitor it regularly. The progress can be reviewed on a monthly or quarterly basis, relying on the activities and time frame of the strategic plan.

Conclusion

Since the inception of Domino’s in 1960, it has proved to be a successful company. However, the turn down in the economy posed a threat for Domino’s Pizza along with people getting more health conscious. All this is forcing Domino’s to incline towards healthier options. Yet, the Domino’s has demonstrated that it is remaining competitive by intensifying internationally. The international sales of the company have been a large asset to their profitability. Similar to any other business, Domino’s Pizza face challenges of becoming internationalized in ways, for instance different preferences and menu items or delicacies.

Domino’s is working hard to enlarge into India and China and to other Asian countries, which is made it difficult for other companies to chase in its footsteps. Domino’s is making constant efforts to stay in front of its competitors, such as Pizza Hut, Papa John’s, KFC, etc. Domino’s Pizza remains to look capable in the future within the pizza industry and is becoming more popular. Along with its strong brand image that Domino’s has constructed over the years, the company is approaching to remain strong in the pizza industry. The discussion in the report presents the analysis of the macro and micro environment of the company along with external and internal analysis of the company.

The reasons for recommending these strategies are that the internet is growing at fast pace and emerging markets are growing fast. The consumers around the world are looking for convenient and quick food options. Thus, the intended strategies will allow the company to generate better business revenue and customer satisfaction, to make more loyal customers, grab large market share and so on. Consequently, the gross sales and profit margins of the company will go high and it will be able to get top position in the fast food industry.

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Appendices

Appendix 1: SPECTACLES Model

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Appendix 2: Porter’s 5 Forces Model

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Appendix 3: Group PowerPoint Presentation

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