Domino’s pizza

Through the operation of a network of franchise-owned and company-owned stores in the United States of America and other countries, Domino's Pizza Company has grown to become one of the top businesses in the pizza delivery industry since its founding. The organization currently has more than 9,300 outlets spread over more than 65 countries. Dominoes is the largest pizza delivery service and the second-largest pizza restaurant after Pizza Hut. The business trails Pizza Hut in the market for pizza restaurants but tops it in the delivery category. However, over the recent years Domino’s pizza has been experiencing a number of challenges ranging from decrease in revenue growth, negative reputation and stiff competition from companies like Papa John’s Pizza Hut and Little Caesars (Duane, Robert Hoskisson, Michael, 2012). This paper takes a deep analysis of Domino’s pizza focusing mainly on external environment affecting the company, competition, organizational capabilities and its direction of growth.

Domino’s External Environment Analysis

Domino’s Pizza Company operates in a highly competitive environment that is there are also other companies offering the same services and products. Pizza hut, Papa John’s and Little Caesars are the most important competitors that rival Domino’s pizza. Pizza hut operates with five different restaurant brand names for example, Taco Bell, KFC, Long John Silver’s and A&W restaurants. Pizza Hut Company operates in 95 nations with 13000 stores in those countries. The company focuses on providing ready to eat pizza products moreover it also provides a variety of commodities ranging from chicken wings, sandwiches and pasta. In the year 2010, the company reported a 4.7% increase in revenues as compared to year 2009 while on the other hand the operating profits increased by 11.3 and 8.1% over the year 2009 (E.Dobbs, 2014).

This shows that pizza hut remains at the top spot in pizza section representing 13.78% while Domino’s maintains the top spot in deliveries. Furthermore, focused mainly on getting decent meals for their customers through quick serve points thus enjoying good reputation of the best quick serve company in the United States. Papa John’s is another pizza company that provides stiff competition against the Domino’s pizza company. Papa John’s comes third in providing pizza delivery after pizza hut and domino’s pizza with 3646 restaurants in 32 countries all over the world. It major commodities were chicken strips, wings, pizza, breadsticks dessert items and beverages. Through its variety of products, Papa John’s pizza company accounted for a 5.67% of the total pizza sales in the United States in the year 2009.

Little Caesar, which is a family, owned enterprise operates 2,600 branches in America and 11 other nations worldwide. Although the company owned only 4% of the United States pizza stores, it was still a major rival to the Domino’s pizza company even though it did not offer delivery services. In the year 2009, the Techonomic Inc. ranked Little Caesar as the fastest growing pizza outlet in the US. Little Caesar Company installed 80% of their stores in popular shopping areas and malls and offered pizza with a variety of other commodities such as cheese bread, Caesar dips, churros, crazy bread and sauce, and party catering services. Although the company suffered a number of setbacks in the 90s, the company still offered stiff competition against the Domino’s pizza company (Duane, Robert Hoskisson, Michael, 2012).

Key External Factors Influencing the Company

The PESTEL Analysis Model

A popular analytical method used when considering how the external environment Dominos exists in could impact the company, particularly when facing potential change (Yüksel, 2012).

Political

Having a presence in 65 countries means Dominos will continue to be extremely aware of the political and legal environment in which they function in each country, as there will be some similarities, and other stipulations will differ in each country and it will be important to maintain a positive international trade relationship. Pizza Hut is on the 100 Best Global Brands list, giving them significantly strong negotiating power when entering new markets compared with Domino’s, especially in emerging markets like China.

Economic

Increased cost of living and unemployment, and decreased disposable income, there has been little room for growth and increased competition from more affordable competitors such as frozen pizza. Financial highlights show overall higher increase in domestic market compared with international, this could partly be due to fluctuating value of USD compared with other currencies. Overall interest expense of $55 million in 2006 to $96 million in 201, and total debt increasing from $741.6 million in 2006 to $1452.2 million in 2011shows additional pressures on Domino’s due to change in economy. Domino’s is one of the market leaders in its industry across multiple countries (Duane, Robert Hoskisson, Michael, 2012).

Social

Research in 2011 shows that 40% of adults eat pizza at least once a month, with the highest demographic being those aged 30-49, and higher for those who are married and have children. Expanding into international markets, Domino’s should consider acceptable practices in these counties, such as serving alcohol and certain meats in restaurants in different counties can be taboo. Favourable market Australia and Canada, Domino’s pizza adapted itself to the beliefs and cultural values hence making it easier for the company to operate in these countries. Continuing to the be most popular pizza delivery and second most popular pizza restaurant in the US also speaks to how multicultural it is as well as social norms across lower income through to affluent households and the large population that continues to increase. Through sales they established customers want more simple pizzas, and to have non pizza based items such as chicken wings, now this is an expectation.

Technological

In 1973 started the ’30 minutes or it’s free’ guarantee discontinued due to limitations of delivery driver technology and associated accidents, to the satisfaction guarantee offering customers a new pizza or a refund of their money if they were not completely satisfied in 1993 – extremely important to show customers they can maintain fast delivery and high quality with a larger range of products. Increase in organic and diverse range of food for people with dietary requirements means evolving menu, so new recipes, web ordering social media integration. Continuous improvements being made to already existing processes using technology, such as the development of the meat grinder and dough maker to increase efficiency. Therefore, the company must put various mechanism in place to make sure that they continually keep to date with the latest technology in the market. The use of technology also helps the company to continue evolving and move forward with the loyal customers. Technology also promotes new ways of marketing such as telemarketing, internet, online ordering and advertising thus improving the movement of commodities in a much faster rate (Duane, Robert Hoskisson, Michael, 2012). The computer system also stores customer data that helps in decision making future forecasting and transactions.

Legal

International company so laws of other countries, potential embargos or sanctions that could be placed on different countries since moving into international markets in 1983. Operating laws to control pollution and surrounding employees will evolve and be different in different sites.

Environmental

Carbon footprint – pizza production and delivery will both create CO2, quality of fresh increments and water used, climate change and waste produced in expanding business.

Porter’s Five Forces Framework

This will identify, describe and evaluate the five competitive forces that frame industries and help to determine the prominent strengths and weaknesses in each environment (Vining, 2011). Most of the organisations use this model to determine the organisations growth strategies and structural patterns that help in making the company more attractive and improving profitability.

 The Risk of Entry by Potential Rival Companies

Domino’s faces a high volume of potential new competitors entering the fast food and specifically pizza restaurant industry as it has shown to be a popular service used by many, relatively varied, consumers worldwide. Entrance to the market can be blocked by entry barriers (Basu, 2014), there are few entry barriers in the US large scale pizza restaurant and delivery service, as seen by Pizza Hut and Dominos’ continued popularity whilst Little Caesar’s entered after and Papa John’s after them again, as they continue to increase in popularity, the top 50 companies are listed in the case study, whilst it is not specified how many exist in the US in total, it is clear that from the large number of chains, the barriers to entry are not significant so risk of entry is extremely high. Some of the reasons for continued success of entering rival companies are that consumers want more from fast food, and more variety, so rivals offering diversity whilst maintaining high quality, have had success. The costs incurred venturing in new businesses the fast foods sector is significantly lower than a high-end restaurant. Larger competitors like Dominos can secure prime locations such as main streets, densely populated areas and where their most used customers are based such as university campuses and areas with young families.

Rivalry among Established Firms

Pizza Hut is the most popular pizza restaurant in US, sales figures in 2009 show 5,000,000 x 1000 sales, compared with Dominos of 3,030,779 x 1000 in sales, whilst this had decreased from 2008 for both companies, and more significantly for Pizza Hut than Dominos, it still demonstrates Pizza Hut is significantly more popular than Dominos. The same table, however shows other established rivals Papa John’s and Little Ceasars, whilst both have lower overall sales figures (2,057,267 x 1000 and 1,130,000 x 1000 respectively) they both also showed growth, rather than a reduction compared with 2008. Little Ceasar’s showed significant growth of 7.1% overall making it the fastest developing pizza restaurant in the US in 2009, growth in market share whilst Dominoes reduced market share makes both Papa John’s and Little Ceasar’s significant rivals for Dominos (Vining, 2011). Pizza Hut, as part of Yum! Brands, adapted to customers’ needs for variety apart from pizza by introducing chicken wings, a product already offered at a subsidiary restaurant.

The Bargaining Power of Customers

The power of bargaining of the consumers is the ability of buyers to come into agreement and develop favourable conditions for them. Any industry within a given market place becomes more fairly if its buyers have a reasonable low power of bargaining (Dälken, 2014). Though it is true that customers of the buyers are mostly specifically customers whose personal choice would not bring too much impact to the Domino’s Pizza company operations, the customers’ power of bargaining are moderate (Basu, 2014). This is because the market competition is very high and the customers have a variety of choices to make on which restaurant to dine from depending on what they want. If Domino’s pizza store is not the customer’s choice, the customers has the right to identify other pizza points such as Papa john’s pizza store and this kind of bargaining power of the buyers enhances by gathering information with regard to different restaurants in the cities that may offer similar services.

The Bargaining Power of the Suppliers

The power of bargaining by the suppliers is the ability of an organization to compel suppliers to their organization to incur the cost, that is, to pass along cost increases to the suppliers. The power of bargaining of the Domino’s Pizza suppliers in the United States is fair in the fast food sector for two main reasons, on one hand with over 660 locations of the company stores in an increasing number of cities and towns all over the world (Dälken, 2014). The large market share of the Domino’s Pizza store in the United States will offer effective business opportunities to the suppliers and hence the power of bargaining from the suppliers will decrease; but the best quality uniqueness and requirement of the commodities and also a fixed commodities favour known by the consumers will enhance the power of bargaining. Based on the above two reasons we conclude that the suppliers power of bargaining is at a medium rate.

The Threat of Substitutes

Threat of alternatives refers to commodities from other organizations that could serve as an alternative for the fast food that the firms in the market offer. Although the pizza that Domino’s offers has many alternatives like chicken wing (pizza hut) and cheese bread (Little Caesar), the range of risk of the alternatives might be at a lower temperate level. This is because of two main reasons, one; the Domino’s Pizza store offers not only pizza but also a rapid delivery service which has fewer range of alternative products especially with the time limits. Secondly, the major service and product offered by domino’s Pizza store in the United States as illustrated is to provide best quality freshly prepared and hot meals. The company delivers products on time, every time, and such fresh and nutritious food delivery could have lesser alternatives specifically in the fast environments where the working and daily life involves fast paced movements for example the United States citizens.

SWOT Analysis

This model helps an organization in identifying the key strengths, weaknesses, opportunities and threats analysing them to enable the company to maintain a high level of competitiveness in a given environment.

Strengths

Domino’s pizza is the leading pizza delivery firm in the United States of America. Secondly, the company is the leading pizza company in terms of delivery in the world with 9300 pizza point in 65 nations. The company has a variety of brands backed by great investment on marketing and advertising campaigns.

Weaknesses

The organization has a limited number of eating joints to cater for customers who would want to take their lunch on that particular spot.

Opportunity

The company can invest on installing as many eating joints as possible to compete with other players in the market such Pizza Hut, Little Caesar and Papa John’s Pizza. The company can also open other markets in different countries of the world due the growing number of customers in the countries that the company operates. The company can also ascend into the distribution systems and supply chain to recommend new commodities in the market.

Threats

Companies such as Pizza Hut, Papa John’s and Little Caesar pose a stiff competition to Domino’s pizza. Secondly, currency fluctuations may sometimes pose a threat to the businesses operations. Moreover, many customers may change thus shifting their focus and habits into eating healthier foods of their choices.

Domino’s Value Chain Analysis

Companies use value chain analysis to illustrate the various activities that take place within the firm or company and give them a picture of the organization’s strength in relation to competition (Fearne & Dent, 2012). The value chain helps in identifying and setting apart of different value adding processes such as lower costs, meeting demands quickly and differentiating a product in a given organization. It describes various activities needed to generate value to customers of a certain commodity or service. The main aim of the value chain analysis is to identify the strengths and weaknesses of a company that can help the given firm thrive in a highly competitive business environment (West, Ford, Ibrahim, 2015). Domino Pizza company has been in the market for a long period and has competitors too. However, for it to sell its products, marketing strategies are crucial in ensuring that the products they offer are available to the customers and can sell amidst other similar company’s products.

Domino Pizza company has a number of competitors which produce the same product. For instance, Pizza Hut, Papa Jones, and Little Caesar. These are big companies whereas there are some local companies and also fast casual and delivery restaurants. The domino’s pizza had undergone a number of challenges for example declining revenue in the range of 16.3% from the year to the end of year 2009 which had crippled its development and extension of its market as its competitors would do. In this case, it is appropriate to say that the economic collapse was one of the reasons to its decline and made the Pizza Hut to take a large portion in the market as it created a monopoly. Nonetheless, the company was experiencing a negative opinion in the marketplace. For example, the enterprise delivered pizzas that did not meet the requirements of the customer’s taste (Duane, Robert Hoskisson, Michael, 2012). Therefore, the consumers of their products would use social media to air their grievances about the poor delivery of their products and their bad taste (Fearne & Dent, 2012).

Moreover, the customers had relevant information with regard to their eating patterns and had an increasing worry with the diets that they believed was the reason for obesity. Furthermore, all the challenges that the company was experiencing combined with the stiff competition they were facing from rival companies such as pizza hut, Papa john’s and Little Caesar, this made Pizza Domino’s to experience difficult economic times. For Domino’s pizza to overcome these challenges, the company recommended for the introduction of a new recipe together with involving a riskier method of advertising. The introduction of the recipe was a way of rebranding of their products with new ingredients that revamped their taste. As part of their advertising, the “oh yes we did” campaign attested consumer satisfaction alternatively they would refund back their money and drop another pizza free of charge (Duane, Robert Hoskisson, Michael, 2012).

Another important campaign that the company used is engaging real customers who took part in preparing pizza in televised commercials. The commercials begin by displaying the first discouraged then focused on the improvements made by the Domino’s chefs. The main aim of this campaign was to encourage the previously discontented customers to purchase the new pizza, even displaying live footage of chefs endorsing the new pizza. Moreover, the firm began expanding its menu in a more careful manner and in the year 2008, the Domino’s pizza introduced oved baked sandwiches thus increasing its market that boosted the lunchtime revenues. The introduction of American legend pizzas, chocolate Lava Crunch cakes, boneless chicken, and wings in year 2009 and 2011 respectively not only increased its market share but also offered a stiff head-to-head competition with rival companies.

The company made significant strides in maintaining consistency and its logistical services that lower the rate of overhead costs and providing a cheaper pizza as compared to other companies. The standardization of the prices is meant to fit the consumer’s needs in the market. It has been adapted as a strategy that will make the company to have larger sales and extend the market in the new environment. Domino’s pizza also invested in establishing pizza supply centres that made it easier to transport them to the franchise locations. The company also trained drivers to be productive in store whenever there is no delivery in waiting by arranging products according to their delivery dates and helping out in other activities such as mopping of floors and attending to phone calls. After David Brando took over as the chairman in the year 2010, he introduces the Get the door campaign in which its main aim was to bring everyone on board with regard to new management techniques.

Brandon also empowered other employees through creating critical changes and collection of feedbacks from the workers through various programs such as “what’s up Domino”, which was a program that gave employees a chance to listen to the organization’s management. The “Lunch with Dave” initiative provided opportunities for the workers to have lunch with the chairperson and share the challenges they were facing within the company. On the leadership segment, Brandon had s strategic capability of managing the people’s capital. He had the ability to manage all the firm employees and operations efficiently thus maintaining high performance over a long period. Brandon achieved this through teaching his employees on adapting to all kinds of leaderships in different working environments. He emphasized so much on employee flexibility on the ever-changing business conditions in the food industry. This motivated the workers to change a negative situation into an opportunity hence achieving success in return.

According to Coombs (2014), communication is a key principle in an organization, Domino company is observed with core competence of communication strategies. Domino has the spokesperson to air the views of the workers, the top managers are friendly like the “Lunch with Dave” program which brings the employee and the managers together, therefore, the principle of employee motivation is highly embraced. For this reason, the leadership can easily monitor the workers as they are motivated to be flexible and responsible. The communication through the line of management shows that there is an efficient human resource department that monitors human capital.

Domino’s Pizza Ansoff’s Product and Market Matrix

Market Penetration

The company concentrated mainly on market penetration by investing heavily promotion and advertising for example the televised commercials involving the firm’s chefs. The Domino’s pizza focused so much on franchising so that their product became available to their customers in any place and at any time. After experiencing, the 16.3% drop in revenue growth and its image tainted because of serving low quality pizza with inferior gradients and lack of taste, in year 2005 to 2009 Domino’s pizza had to find alternative ways of reviving their business and become competitive in the industry (Shaw, 2012). The company had to address the issue of taste defect complaints and the growing demand for new products by introducing new pizza recipe by the end of year 2009. The company invested heavily on regaining their old and new customers by introducing new products such as the oven baked sandwiches and bread bowl pastas thus increasing customer base and the lunch time revenues.

The company also offers discounts and promotions to customers to retain and bring on board new customers. On the part of distribution, the company delivered the products within thirty minutes of the requested time therefore meeting their customers’ expectations. In 1968, Monaghan took an initiative of expanding college campuses in the Midwest hence establishing five franchise locations in order to attract more customers as a way of promoting the business and gain market penetration. On the other hand, as part of their advertising, the “oh yes we did” campaign attested consumer satisfaction alternatively they would refund back their money and drop another pizza free of charge.

Market Development

The company began investing in installation of dining restaurants to attract new market that prefer to have lunch outside rather than at their residences (Shaw, 2012). Moreover, the Domino’s pizza introduced deserts and pasta to attract new sections of consumers of their products.

Product Development

The company focuses so much on broadening its menu by introducing new types of products such as the desserts and pastas. They also concentrated on improving the tastes of their commodities by adding butter and herbs in the pizzas crust.

Recommendations

The company should concentrate on customer loyalty by emphasizing on product quality and making sure that all their outlets deliver products on time. The company should be strict on this segment to make sure the company achieves its desired goals. This recommendation stands to be among the best in this industry since it is a first growing industry. Secondly, the firm should focus on investing in creative methods of advertising and concentrate on key competitors and players in the industry rather than paying too much attention on a single competitor. Focusing on one opponent may pose a serious threat to the business especially in areas with developed business such as the Pizza Hut and Papa John’s Pizza store because them may come up with new tactics that may affect the business negatively thus dragging the company’s growth.

Thirdly, Domino’s pizza should concentrate on improving their innovation strategies like the ones they use in online selling and marketing. It is clear that Pizza Hut performed better compared to Dominos firm with regard to online rewards despite having used the same amount of capital on their online sections. In the current market, the estimates of the operating company hybrid model stand at 70% and 30% for the franchised and stores owned respectively. The company should adjust the numbers by reducing the costs of operation by adding the total number of the franchises to 85% for the firm to cut the total costs of operation. Moreover, the company should concentrate on increase the number of brands because it is one of the company’s strength. The organization can achieve this through reinforcing and strengthening of the young brands in the market.

Although the company should also consider the changing lifestyles of the United States’ population and the world as well. For the business to attain continuity, the company’s commodities should follow the changes as they help in meeting the customers’ demands thus satisfying their needs.

Conclusion

From the above analysis it is clear that Domino’s pizza has a good reputation despite the revenue problems and quality problem it had before. On the other hand, it stands to have the most effective advertising strategies and it is clear that the company sales improved hence the company maintained a high level of competitiveness. Secondly, the employees’ behaviour and motivation seems to play a critical part in influencing the customers thus enhancing the company’s profits. For that reason, the company has been able to maintain the largest market share in pizza delivery and their ever-growing international markets thus enjoying a valuable supply chain system.

References

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