Domino’s Pizza is a fast food chain of restaurants that is headquartered in the United States of America, but it has a large network of international branches worldwide (Abc News, 2013, para 5). The firm was established in 1960 by two brothers, Tom Monaghan and James Doyle, following the duo’s successive takeover of Dominicks. The business changed its trade name to Domino’s Pizza, Inc. five years later, in 1965, following a decision arrived by its sole owner Tom Monaghan at the time.
The firm’s first franchise store opened in 1967 in Ypsilanti. This reflected its growth. The first international store opened up in early 1983 in Canada’s Winnipeg area in the Manitoba province. The chain presently has a presence in close to 70 countries across the world. It employs a workforce of more than 145,000. It is considered to be the leading global fast-food chain of restaurants with corporate, as well as franchised stores that exceed the 10,000 marks (Domino’s, 2013, para 1).
Domino’s competes with other numerous fast food chains in the market that include both international and local market players. Domino’s is ranked second in the global market behind another American brand, Pizza Hut that is owned by YUM! Brands. Other established industry players include McDonald’s Corporation and Papa John’s International.
The rival firms have equally expanded their franchise networks and spread throughout the global market. The major competitive challenge has been maintaining lower operational costs in order to sustain higher profitability amidst the poor global economic situation. Consumers’ spending power was reduced significantly as many people considered spending their little disposable income on basic necessities only (Gluyas, 2013, para 2).
External Analysis of the Company
Positive market outlook
Consumer demands are also expected to increase with the overall global economy improving following poor performance in the recent past. According to Morning Star (2013, para. 6), restaurant industry sales in the US are expected to attain the $604 billion mark. This will represent a 3.6% annual growth.
This is critical, particularly coming immediately after a period of economic lull that lasted for about three years (Morning Star, 2013, para 7). The improving economic situation and conditions are enabling customers and potential buyers remain with a significant amount of disposable income that they can eventually spend on luxury products, such as buying and enjoying fast foods with their families and friends.
International market expansion
Domino’s eventual entry in 2010 into the German market has provided it with a great opportunity to enhance its profits and market performance in general.
A Master Franchise Agreement signed between the company and Yakir Gabay, the owner of over 3,000 residential units and a multiple number of hotels, offers a lucrative business opportunity for the restaurant chain. This has seen Domino’s grow to become the leading hotel operator in the entire German market. The growth is also attributed to Yakir’s extensive business network (Morning Star, 2013, para 3).
Growing health concerns
There has been growing concern among the consumers of fast foods that continued consumption of junk foods puts food users at greater risks health wise.
This situation could see quite a considerable number of potential customers lower their demand for the foods sold at Domino’s. In essence, the company will suffer losses as a result of diminished sales because its main focus is on pizza products (BizLeader, 2013, para 4).
The fast food industry is one of the leading industries globally in terms of high competition. The existing players are well established and pose a great market challenge to each other. New entrants are also flocking the industry (BizLeader, 2013, para 4).
All the players face the challenge of affecting their respective margin expansion as internationalization remains the obvious option to sustain the competition. The firms are spending huge capital amounts to sustain the expansion. This eventually puts the firms at the risk of failing to recoup substantial returns (PR Newswire, 2013, para 3).
Internal Analysis of the Company
Domino’s Pizza is renowned for its ability to study its experiences and make corrective measures to enhance its future market performance. This has enabled the company to increase its innovation ability. This innovative approach led to a timely solution to the cold pizza delivery problem. The firm has also earned itself the tag of being a leading market trend setter. Domino’s main focus is on satisfying customers and achieving better customer experience (Pizza Marketplace.com, 2013, para. 4).
Robust brand name
Domino’s Pizza is a strong brand name that is renowned for its pioneering pizza delivery business (PR Newswire, 2013, para 5). This, in turn, influences its power to retain and build loyal customers. It also enables the firm to constantly introduce new products.
For instance, the company has introduced several brands of its food products, including Domino’s Oven Baked Sandwiches, Domino’s BreadBowl Pats, as well as Chocolate Lave Crunch Cakes, among many others over a very short span of time (PR Newswire, 2013, para 6).
Given the goodwill that the brand has managed to build in the market, Domino’s can afford to introduce many products and still benefit from immediate customer acceptance. This reduces the possibility of encountering losses as a result of products taking too long in the market introduction and familiarization phase.
Poor advertising skills
Domino’s committed a blunder in its marketing and advertising strategy when the company informed its consumers that it was able to deliver fresh and hot pizza irrespective of cold weather conditions. The villainous character, “The Noid”, was annoying and fictitious (Montgomery, 2013, para 3). It caused more confusion in the company’s marketing strategy, although it was short-lived.
The situation of the credit markets in the US has been of major concern in limiting Domino’s from achieving maximum market growth in the country. In close to ten years now, Domino’s has not been able to expand its operations in the US market through expanding its network of stores. As Buss (2013, p. 2) notes, only as little as 1,000 new stores are being planned for the US market by the company’s management.
This contrasts heavily with its external market plans that have so far lined up thousands of new stores for opening. The company is continuously reducing its number of stores in the US market. This affects its ability and power to compete in the world’s leading fast food market (Buss, 2013, p. 2).
With the US economy only having emerged from a financial crisis that spread all over the world, there are limited chances that the situation will normalize in the very near future in order to boost the company’s competitive power in the market. Thus, it implies that the single-unit operators within the American market are curtailed from opening up new branches to contain the challenge being posed by other rival firms, such as McDonalds.
It is worth noting that only 10 percent of Domino’s outlets in the US are company-owned, with the remaining 90 percent being franchised-owned (Buss, 2013, p. 1). It is a more challenging fact for Domino’s to fail to expand its market presence within this lucrative market, with the US market being by far the largest pizza market in the whole world (Buss, 2013, p. 1).
Domino’s is currently combining a series of strategies to formulate its major market strategy that has helped in enhancing its market operations and performance. With the advent of information technology, the firm has focused on developing a digital marketing technology that it has integrated with social media to increase interactivity with its mainly youthful clientele.
Additionally, the company is combining this with consistent pricing strategies for its menu as a means of sustaining its sales momentum that it has managed to enjoy for the last few years.
Domino’s has established a mobile-optimized website that is intended for use in making orders online. The firm has also pursued a plan that has eventually seen it introduce both Smartphone, as well as tablet apps intended for use in making orders (Marshall, 2013, para 6).
The Pizza Hero game software that was launched for iPad use underscores the great determination by the company to make use of digital capabilities in enhancing market performance. With the majority of fast food consumers mainly being youthful people, the company is relying on the group’s admiration for IT to attract them and eventually influence its market performance.
The popularity of social media websites, Facebook and Twitter, has also been inculcated into Domino’s market strategy as the company uses these platforms to increase its interactivity with customers. Potential customers are also attracted by the social marketing power upon reading sentiments and recommendations by the company’s long-standing customers. In other words, the company is utilizing the power of social media to reduce its advertising costs as the platform achieves the same results (Speedy, 2013, para 5).
Strategic Management Recommendations
Direct store ownership
Domino’s should consider involving itself directly in owning stores, especially within the lucrative American market. Waiting and hoping that the credit market situation in the country will stabilize in the near future to enable the franchisers the opportunity to borrow funds and expand their outlets is impractical.
Instead, Domino’s should invest part of its capital in opening up company-owned outlets to boost its overall presence in the market. This will give the firm a greater footing, similar to its main rivals.
In case running too many company-owned outlets poses a management challenge for the company, the organization can make arrangements with its individual market partners to hand them the shops. Such an arrangement would see the individual entrepreneurs run and manage the outlets as though they owned them personally, but submitting the resultant profits to the franchiser and receiving quotas from the same.
This will help in spearheading expansion in the market, while also empowering the franchise to grow their businesses. With Domino’s setting the quota-based system on the franchisee’s performance in the market, most of the franchisees will work hard to ensure that the businesses they manage grow bigger.
Domino’s Pizza is a leading global fast-food restaurant chain whose headquarters and foundations are based in the USA, but it has an enlarged network covering over 70 countries. The chain is currently considered as the second-best performing in the market after another American brand Pizza Hut. Domino’s greatest strength is in its innovation skills and capabilities that have seen it emerge as a market pioneer in many instances.
However, it’s advertising and marketing strategies have hampered its market performance following its promise to the market that it would manage to deliver hot and fresh pizza to its clientele during the cold season. Improving the global financial situation, especially after a long-term crisis, is proving to be of benefit to the company as it offers added opportunities for growth. Equally, the international expansion of the company is influencing its overall market performance by expanding the market and increasing sales volume.
The greatest market challenges for the firm are the failure of its US-based franchises to access credit and expand their business operations. This is affecting the overall business performance because the American market is by far the largest globally in as far as pizza sales are concerned.
Thus, any firm must take the American market seriously if it intends to compete effectively. As a remedy, the firm should invest directly in opening up branches in the country and invite franchisees to manage the branches on its behalf, instead of wasting time in waiting for the normalization of the domestic credit market.
List of References
Abc News, 2013, Domino’s Pizza® wants select startups, great ideas to be #PoweredByPizza, Web.
BizLeader, 2013, Domino’s Pizza® online ordering is faster than ever with launch of pizza profiles, Web.
Buss, D., 2013, ‘Domino’s global growth feeds Pizza chain’s rising success’, Forbes, Web.
Domino’s, 2013, About Pizza, Web.
Gluyas, R., 2013, ‘Meij delivers larger slice of Domino’s pie’, The Australian, Web.
Marshall, R., 2013, ‘Domino’s Buderim CEO aiming high‘, Sunshine Coast Daily, Web.
Montgomery, R., 2013, ‘Investors find Domino’s is topping out’, The Australian, Web.
Morning Star, 2013, Pittsburgh Domino’s Pizza franchise owner reaps national accolade, Web.
Pizza Marketplace.com, 2013, Domino’s new store design hits New Orleans market, Web.
PR Newswire, 2013, New Orleans Domino’s Pizza opens first new store design in the West Bank Area, Web.
Speedy, B., 2013, ‘Domino’s lifts profit, eyes expansion into Japan’, The Austrian, Web.