History of Domino’s Pizza

Domino’s Pizza, founded in 1960 by two brothers named James and Tom, has grown to become one of the top providers of pizza delivery services thanks to the operation of a network of company-owned and franchised locations throughout the United States and other countries (Peeples & Vaughn, 2010). With more than 9,300 stores across those nations, the firm currently operates in more than 65 countries. Despite being #1 in the delivery business, the company trails only Pizza Hut in the market for pizza restaurants. However, in recent years Domino’s pizza has faced a variety of difficulties, including a decline in sales growth, a poor reputation, and fierce rivalry from businesses like companies like Papa John’s Pizza Hut and Little Caesars (Peeples & Vaughn, 2010). 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 provide 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 Technomic 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.

Key External Factors Influencing the Company

The Pestle Analysis Model

Many companies use this tactic to keep track of the environment they are conducting business in or are planning to introduce a certain service or project (Yüksel, 2012).

Political and Legal Environment

The political factors in the United States seem to favor Domino’s pizza because the company still exists in the industry and enjoys the title of the best company in terms of pizza delivery. Favorable business laws and political stability in Canada and Australia offered a significant opportunity for the Domino’s pizza company to operate in international markets in the year 1983. There must be operating laws to control pollution and employment that apply on any firm that Domino’s pizza must abide.

Economic Environment

After realizing that the customers were in need of their services, Monaghan expanded Franchise college campuses in the Midwest thus opening up five franchise points in the year 1968. Monaghan did this attract more customers to consume their products sand discover new markets.

Social Environment

Due to the favorable laws in 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. The United States society consists of people from different backgrounds that are the lower class, middle class and the upper class thus forming the social forms.

Technological Environment

The use consumer technology in the restaurant industry had a very positive impact on Domino’s pizza company because it provided the customers with information with regard to the new recipes, web ordering social media integration and customer satisfaction. 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. Moreover, the use of modern technology such as the meat grinder has made production easier and cheaper hence promoting efficiency in the company’s operations. 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 (Park & Jeong, 2012). The computer system also store customer data that helps in decision making future forecasting and transactions.

Porter’s Five Forces Framework

This is a mode of describing and evaluating the five competitive forces that frame every industry and helps in determining the main strengths and weaknesses in a given environment (Vining, 2011). Most of the organizations use this model to determine the organizations growth strategies and structural patterns that help in making the company more attractive and improving profitability.

 The Risk of Entry by Potential Rival Companies

The emergency of new opponents in the fast food industry is relatively high because they might provide substitute commodities that might find their way into the market although this depends with the existing entry barriers (Basu, 2014). Although there are a few barriers of entry in United States fast food industry, the respective government agencies may hinder the number of the emerging businesses of a specific category of fast food that may open, it is a rather than limiting them. Several factors contribute to the limited number of level of entry barriers. Firstly, it is evident that as a developed market, the fast food restaurants that one will always find that potential consumers always focus on trying new offerings.

Secondly, the costs incurred venturing in new businesses of the fast foods sector is significantly lower. Thirdly, sometimes it may seem much harder for one to venture new business of fast foods to enjoy the benefits of operating the best street joints. The new investors they could begin from streets that are far from the central best street site to be developed, and what’s more, it seems that the new opponents do not necessarily depend on the extensive marketing backup. In conclusion, the risk of entry by potential rivals in the United States of America fast food industry is at the best rate because of the limited levels of entry barriers.

Rivalry among Established Firms

Opposition among developed firms refers to the health competitive struggle between organizations in an industry to gain market share from each other for example Papa john’s pizza hut and Little Caesar (Vining, 2011). The stiff competition among the developed companies in the fast food industry is massive. Domino’s pizza store has enhanced its presence by dominating 50% of the market share, the healthy fast food group Eat boosted its portfolio by 36.4% and sandwich chain Prêt A Manger by 29.7% and in almost all the states analyzed by the report; sandwich chain Subway grew the most, improving its portfolio 734 units, by 25.9%.

The Bargaining Power of Customers

The power of bargaining of the consumers is the ability of buyers to come into agreement and develop favorable 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 favor 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 hand, 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 analyzing 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 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.

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. In this case, it is appropriate to say that the economic collapse was one of the reasons to its decline. 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 customers taste. 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.

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 ( Zha & Li, 2013).

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. Domino’s pizza also invested in establishing pizza supply centers 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 introduce 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. Still on the leadership segment, Brando 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.

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 stands 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’ behavior 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

Basu, S. (2014). Product market strategies and innovation types: finding the fit!. Strategic Direction, 30(3), 28-31.

Dälken, F. (2014). Are porter’s five competitive forces still applicable? a critical examination concerning the relevance for today’s business (Bachelor’s thesis, University of Twente).

E. Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45.

Fearne, A., Garcia Martinez, M., & Dent, B. (2012). Dimensions of sustainable value chains: implications for value chain analysis. Supply Chain Management: An International Journal, 17(6), 575-581.

He, W., Zha, S., & Li, L. (2013). Social media competitive analysis and text mining: A case study in the pizza industry. International Journal of Information Management, 33(3), 464-472.

Park, J., Cha, M., Kim, H., & Jeong, J. (2012). Managing Bad News in Social Media: A Case Study on Domino’s Pizza Crisis. ICWSM, 12, 282-289.

Peeples, A., & Vaughn, C. (2010). Domino’s ”special” delivery: Going viral through social media (Parts A & B). Arthur W. Page Society case study competition in corporate communications. Retrieved December 31, 2012.

Shaw, E. H. (2012). Marketing strategy: From the origin of the concept to the development of a conceptual framework. Journal of Historical Research in Marketing, 4(1), 30-55.

Vining, A. R. (2011). Public agency external analysis using a modified ”five forces” framework. International Public Management Journal, 14(1), 63-105.

Yüksel, İ. (2012). Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management, 7(24), 52.