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Domino’s Pizza Inc. Strategies

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1st March, 2019

Strategic Management Report

Domino’s Pizza Inc. Strategies

Rishoo Mittal
Student Id-03905

Strategic Management - MCO204-MUC03932

Prof. Zsofia Balazsfi

Domino’s Pizza Strategy Strategic Management

1. INTRODUCTION ....................................................................................................................... 3
1.1 BACKGROUND ................................................................................................................................... 3
1.1.1 History ............................................................................................................................... 3
1.1.2 Business Model ................................................................................................................. 3
1.1.3 Current Scenario ................................................................................................................ 4
1.2 THE PURPOSE ................................................................................................................................... 4
1.3 THE SCOPE ....................................................................................................................................... 4
1.4 METHOD OF INVESTIGATION ................................................................................................................ 4
2. STRATEGIC ISSUES IDENTIFICATION ......................................................................................... 5
PESTEL ANALYSIS ................................................................................................................................... 5
Political ........................................................................................................................................... 5
Economic ........................................................................................................................................ 5
Social .............................................................................................................................................. 5
Technology Factors ........................................................................................................................ 5
Environmental Factors ................................................................................................................... 6
Legal Factors .................................................................................................................................. 6
PORTER 5 FORCES ................................................................................................................................... 7
Threat of New Entrants .................................................................................................................. 7
Power of buyers ............................................................................................................................. 7
Power of suppliers .......................................................................................................................... 7
Degree of rivalry ............................................................................................................................ 7
The substitute threat ..................................................................................................................... 7
3. STRATEGIC RESPONSES ........................................................................................................... 8
Business Level ................................................................................................................................. 8
Corporate Level .............................................................................................................................. 8
4. RESULTS DISCUSSION .............................................................................................................. 9
VRIO ANALYSIS ...................................................................................................................................... 9
5. RECOMMENDATIONS ............................................................................................................ 11
6. CONCLUSION ......................................................................................................................... 12
7. BIBLIOGRAPHY ...................................................................................................................... 12

Domino’s Pizza Strategy Strategic Management

1. Introduction
1.1 Background
Domino’s pizza has been a legacy company in preparing pizza and delivering them to
customers. But, the period between 2007-2010 was a major struggle for it. The overall growth
of company went slow, declined sales and the stock price was stuck at $8.76 per share, it
almost went down to 3$ per share. The customers were giving never ending negative reviews
on quality and service: such as crust can be compared to cardboard and sauce to ketchup. The
company had to reinvent itself to survive in the competitive market (Taylor, 2016). The
company had rebounded back considerably well from the slow down and is heading towards
a positive business outlook. As the business model of Domino’s is oriented towards home
deliveries of pizza in a stipulated time, the speed of preparing the pizza and on-time delivery
are the key success factors. During the sales decline the company made some changes to top
level management. So far, these changes have benefitted it very well. In October 2008, Russell
Weiner joined as Chief Marketing Officer and in 2010 Patrick Doyle Joined as CEO. The result
can be seen with current stock price of around $260 (Dominos, 2019).

1.1.1 History
“DomiNick’s” pizza restaurant was bought for 900$ by Tom and James brothers in 1960 to
enter pizza business. In 1965, Tom renamed the store as “Domino’s Pizza”. Within a span of
13 years, the company grew to 200 outlets. In 1989, company opened its 5,000th store and in
1990, it signed it’s 1000th franchise. In 1996, the company launched its online website and
reached 2.8 billion dollars in sales. In 1998, Tom sold 93% of its stake to Bain Capital, and also
Domino’s launched its Heat wave bag, a patented innovation which helped them to deliver
hot pizza at customer doorstep. In 2004, the Domino’s Pizza Inc. became a public traded
company on New York Stock Exchange (NYSE). In 2017, Domino's and Ford have teamed up to
see the way self-driving vehicles can be used for pizza delivery (Dominos, 2019).

1.1.2 Business Model

STOCKHOLDERS

DOMINO’S -
DOMINO’S PUBLIC LISTED FRANCHISEE CUSTOMER
PIZZA INC. COMPANY S S

Technolo
Brand
gy

Supply Corporate
Chain Stores
(Investor Dominos UK, 2018)
Domino’s Pizza Strategy Strategic Management

1.1.3 Current Scenario

Domino’s Pizza Inc. is spread around the globe in 85 markets and is also one of largest pizza
restaurant in world with more than 14,800 locations. The company works in form of large
network of franchise and company-owned stores. The company average sales are 2.5 million
pizza unit each day (Dominos Annual Report 2017, 2018).
Domino’s through its business model works upon handcrafting its product and serve the
quality food at competitive price. With efficient technology, innovations and resources at
place the company focuses on providing the customer with good service experience.
Vision Statement
To be the #1 Pizza company in every neighborhood.
Mission and Goals
- Wants to be customer favorite delivery and takeaway brand.
- The Customer should be able to order easily.
- Wants to provide good customer service and value for product.
- The customer should be able to easily access its good-looking stores.
(Investor Dominos UK, 2018)
1.2 The Purpose
The purpose of report is to identify the strategic planning issues which Domino’s Pizza is
looking forward to achieve or it is already undertaking to achieve within given span of next
three to five years. Also, we analyze the last 10 years of company’s market response to curb
the effect of slowdown in sale, due to bad quality, service and rising competition in 2007-
2010. The way strategic decisions taken during the period of 2007-2010 have paved a future
growth for company. We look into the way company is heading forward to achieve it’s set
goals and objectives. With help of this study, we will also come out with long term and
essential recommendations for the company to achieve its goals.
1.3 The Scope
The Scope of this report is to see the way Domino’s Pizza Inc. can improve its strategies to
achieve its mission and goals. Also, the company had some quality, operational issues in the
past. Therefore, we also look into the way company has overcome those challenges. And
certain things which do not behave in the manner as desired by the organization.
1.4 Method of Investigation
The method of investigation has been on secondary basis and the sources are studied and
selected from books, journals, renowned institutions, corporation websites, business
magazines and reviews.
Certain renowned institutions, corporation and business magazines are not world accepted
and lot of information is double edged, hence, not confirmed resource, hence, sources like
those, were put aside.
The theories used are PESTEL, Porters five forces, Ansoff matrix, VRIO Analysis, SAFe tests as
these are very in-depth way to put a strategy report. The SWOT analysis is not done as it is
almost a highlight of PESTEL and Porters five.
Domino’s Pizza Strategy Strategic Management

2. Strategic Issues Identification

PESTEL Analysis
Political
Being a globalized organization, the company has to work in the host country’s
regulatory/judicial framework. Political factors such as: taxation, wage legislation, industrial
safety regulations, intellectual property protection are which impact the company (Dominos
Annual Report 2017, 2018). For instance:
a. After introduction of Goods and Service tax in India 2016, the Domino’s had to stop
down a lucrative offer for its customer i.e. buy 1 get 1 free, as the government policy
stated, the company has to pay taxes on the giveaway free products also (Bhushan,
2017). Also, the company got caught by Directorate General of Anti-Profiteering for not
passing the benefits to consumers from the GST rate cut (Sikarwar and Bhushan,
2018).- Taxation.
b. The United states department of Agriculture does a small assessment on milk and
raises money from it. The raised money, is being spent to promote milk and cheese
products. The one-quarter of cheese in United states is used by pizza makers. A
partnership between Domino’s and Dairy Management Inc. (A USDA funded
corporation) took place in between 2009 to 2011. And this helped Domino’s for more
pizza sales (U.S. Department of Agriculture, 2011). – Favored Trading Partners.
As populism is rising in the global world, there is a possibility of instability coming for Dominos
in its existing market.
Economic
The Macro and Micro economic factors are of major concerns for Domino’s business for
instance, if GDP of a country is not good, the people will not have more money to spend. Even
the Franchisees ability to pay royalties or amounts owed will be troublesome. But, Dominos
have performed better in case of economic disturbances (Dominos Annual Report 2017,
2018).
In 2008, rising inflation was a concern for businesses in UK and Ireland. But, at the time of
this food industry recession dominos had an increase in sale of 11% (Ramnarayan, 2009). This
was analyzed in way that, as most people preferred for home deliveries and dominos has
been a leader in it. Also, according to company, the rise was also due to technology in place.
They could take order electronically, through phone or text messages, and it also added new
pizza in its menu (Bowers, 2009). But, also in recent times, managing skilled workforce, labor
costs and productivity has been challenging for the company.
Social
The leadership of dominos have to analyze following social factors: Skill level of population,
culture, class structure, Entrepreneurial spirit and more. These factors will decide the
organization environment and customer attitude in the market (Dominos Annual Report 2017,
2018).
Technology Factors
Certain things the company needs to keep pondering in technology areas are: The recent
technological advancements by its competitors, the impact of technology on product they
offer, way technology impacts the overall product cost and more.
Domino’s Pizza Strategy Strategic Management

The Ex-CEO of Domino’s Patrick Doyle says that we are tech-company that sells pizzas. Certain
initiatives in this regard can be seen. Such as:
a. The company is able to deliver customers with no address using hotspots, such as on
beach (Handley, 2018).
b. In November 2016, the company became the first one to be able to deliver pizza by
using a drone (Reid, 2016).
c. In March 2017, the company partnered with a technology company to deliver pizza
using robots in Hamburg, Germany (ABRAMSON, 2017).
d. With Ford, they are testing driverless cars for delivery (Dominos, 2019).
e. The company is taking automated phone orders using Artificial intelligence. And it says,
they are on a path, that they can take all orders digitally (Kelso, 2019).
Hence, looking into these technological advancements, Domino’s is definitely trying to move
ahead of curve and gaining a competitive advantage.
Environmental Factors
The certain factors which influence domino’s in this case are: weather, climate change, laws
regulating environmental pollution, attitude towards green products, recycling, animal
welfare and more (Dominos Pizza, 2014), (Dominos Social Commitment, 2018).
The company has a well outlined environmental impact report.
a. The company has worked in smart energy reduction strategies with help of energy
consultants. It also has energy analysis team for its franchisee. In terms of Fuel
Consumption, the company got Smartway certified in 2012. In some of its stores the
company is replacing gasoline powered scooters to electric scooters (Dominos Pizza,
2014).
b. The company has also taken initiatives in using recycling cardboard and plastic bags
used in deliveries (Dominos Pizza, 2014).
c. In January 2019, Domino’s was slammed by World Animal Protection, North America
for failing in chicken welfare. According to report, Domino’s doesn’t have any targets,
policies and reports pertaining to improving chicken welfare. Domino’s is last among
all it’s fast food competitors. As of now, Dominos has not come up with any strategic
response with regard to this issue. The Environmental report of company does say
about the way company looks into Animal Welfare (Protection, W. ,2019).
Legal Factors
The legal factors which dominos administration needs to look into while entering in any
markets can be: patents, copyright, employment laws, Health and safety laws, Data protection
and more (Dominos Annual Report 2017, 2018).
The company has been recently into certain legal issues, pertaining to breach of employment
laws.
a. A company’s franchise in Mississauga, Ontario has been penalized by Ontario’s
Ministry of labor. As for 4 years, the franchise has given the wages to an employee
below minimum wage (Merali, 2018).
b. Also across 4 cities in Australia an investigation was conducted by Fair Work
Ombudsman. It was found that the workers are being payed less for the hours they
work, hence, non-compliance of workplace legislation laws (FWO, 2018).
In both of the above issues, the company has taken adequate steps in dealing with the
franchisee and making sure that legal laws are abided in future.
Domino’s Pizza Strategy Strategic Management

Porter 5 Forces
Threat of New Entrants
To enter pizza preparing and delivery industry doesn’t seem tough. As the ingredients used
are common items and basic cooking equipment and transport can be used, the threat of new
entrant is high. Domino’s has been loyal to its customers and have been consistently
expanding and investing in marketing to reach out its customers, hence, mitigating the threat
of a new competition from market. To curb this, Dominos keeps launching new lines of menu.
a. Now in America the company is running “Paving for Pizza” campaign, hence, trying to
fix potholes in US states roads with help of local management. As it believes, that can
help them to deliver pizza in good condition to the customers (Hunter, 2018).
In 2009, the company launched sandwiches and went in competition with subway. By giving
good quality and prices, and they were successful. Also during same time in America, the
company launched new pizzas with combination of certain ingredients. This helped in an
increased sale for the company (OCHES, 2010).
Power of buyers
With competitive giants such as Pizza hut (Yum Brands), Papa Johns, Eagle Boys in the picture,
Dominos needs to be at its toes. It has to keep on paving its effort in product innovations and
adapt to customers changing demands and tastes. Dominos has also expanded itself at a very
rapid pace and come up with innovative way of pizza delivery to be a market leader. Also with
rising awareness on healthy food products among people, the company needs to segment
itself in competitive pricing.
Power of suppliers
The major ingredients purchased by dominos are: flour, sauce, cheese, pizza boxes and thin
crust bread. These are delivered to their statistically placed distribution stores. The key
suppliers of dominos with respect to US markets are Leprino’s Foods (Cheese provider),
Ardent Mills (flour provider), Domino’s thin crust bread (Manufactured at central distribution
centers) (Sorvino, 2017), (Schroeder, 2015), (Dominos Annual Report 2017, 2018).
Developing a pool of dedicated dependent business third party suppliers has helped dominos
to reduce its suppliers bargaining power.
But also, as Domino’s do not have available alternatives towards these ingredients, hence, if
price of a commodity goes high, it affects its revenues and due to competitive market, it is
tough for it to increase selling price.
Degree of rivalry
As several service companies (such as: Uber eat, Google Aero) have become active in market
to deliver food at home and there are regular promotional deals available from these
companies and other pizza manufacturer, the high potential of rivalry can be seen in the
industry (Kashyap, 2017).
The substitute threat
Being in fast food industry, all available meal options post a threat to the company. If the
company looks into increasing the price, the customer can substitute and may look into buying
a frozen pizza. Also with healthy food products coming into the limelight, people leaning
towards healthy lifestyle is an emerging threat for the company (Dominos Annual Report
2017, 2018).
After analyzing the Porter 5 forces it can be summarized that:
Domino’s Pizza Strategy Strategic Management

Threat of new entrant’s High level

Threat of substitute products Middle level
Rivalry among existing players High level
Bargaining power of supplier’s Low level
Bargaining power of Buyers Middle level
3. Strategic Responses
In 2009, Domino’s was last in the national pizza test-taste. And also, there was a controversial
issue of Domino’s employees posting a YouTube video in 2008, showing abusing the pizza in
unsanitary manner before sending to customer. This has made it go all down in consumer
pizza quality. The company had to look for a major turnaround during this phase. But, also in
recent years there had been certain issues related to employee welfare and animal welfare,
which the company needs to respond strategically in order to be well established in the
market. Some of the examples of strategic responses which the company has taken are
already stated in the above PESTEL and Porters 5 forces. The innovation and technology are
helping the company to achieve its strategic goals too. The company is always applying its
strategies based on demographic and geographic factors.
In 2012, the company took steps to go for Digital transformation (E-commerce) (Wong, K. ,2018).
The three main approaches were:
• The management from top-down were on board and though company as ecommerce
company, which sells pizza.
• They had relentlessly measure results of every tool implemented
• The company had to market around telling customers about technological investment.
(Wong, K. , 2018)
To curb certain issues the company has looked into strategies at business level, corporate
level.
Business Level
The company seems to be following a hybrid strategy at business level. They have always come
with following ways at business level to curb the competition:
- New Recipe,
- Lucrative Offers for customers
- Customized Pizza and Assorted pizza options
- Competitive pricing or Product Mix Pricing
- Service Differentiation (Deliver within 30 mins, order through technology)
Corporate Level
At corporate level Domino’s has executed the Ansoff Matrix in Existing Market pretty well. In
Existing market, they can certainly do more Market Penetration and consolidation, product
development and market development is still taken care very well. The company still has a
good scope to improve in its existing market (Johnson, Scholes and Whittington, 2008).
In case of New Market development, the company is continuously active and expanding. They
are adding up more franchisee and company owned stores. The new product development
are there, but, slow.
Domino’s Pizza Strategy Strategic Management

In Diversification, the company has not shown any strong signs, wherein it is seems to be a
right time to look into it.
The image below shows the Market Penetration & Consolidation in existing market for
dominos:

Source: (Dominos Investor Day, 2018)

4. Results Discussion
VRIO Analysis

Organizatio Competitive
Resources Value Rare Imitation
n Advantage
Yes, the
Yes, the The
company has
customer has ethnicity, These
been able to
been jointly culture and The data provide very
Customer build a
helping community reflects lot of robust
Community continuous
company to dedication, is upside. Competitive
relationship
create the very difficult benefits.
with
products. to imitate.
customer.
No, Yes, firm
Yes, the The
Competitors has a good Competitive
Domino’s firms are competitors
are also well hold of benefits
Pizza Market using are often
experienced, decades of seem
Experience differentiatio able to
giants and its internal temporary.
n to compete match the
they know expertise
Domino’s Pizza Strategy Strategic Management

in the the market costing

industry. well enough strategy
No, the Digital
Yes, As the competitors strategy has
company has are also become
The
Prosperous extensive having large critical in the
Easily company is a
execution of digital amounts of industry but
imitable by leader in its
Digital strategy, funds it can't
adversary field
Program therefore it is invested in provide
easier for it digitalizing sustainable
to compete their competitive
operations advantage
Skillful
resource for
managing Adversary
Not critical
administrativ Yes No can easily Yes
factor
e and legal imitate
responsibiliti
es
Can provide
Still there is
sustainable
lot of
Sales Force Can be competitive
potential to
and Channel Yes No imitated by advantage.
utilize the
Management competitors Potential is
excellent
certainly
sales force
there.

Near
competitors
also have
Stretchable Keeps the
flexible Fully
logistics Yes Yes business
supply chain utilized
network running
and share
some of the
suppliers
Not based A strong
Management The
on competitive
has vision for adversary
Yes No information advantage
next set of cannot
provided in benefits can
challenges imitate this
the case be seen
Provide
Product Yes, it is
Most of the The firm has short term
Portfolio and valuable in the
competitors Can be used it to competitive
Synergy industry given
are trying to imitated by good effect, advantage
among the various
enter the the details can but requires
Various segmentations
lucrative competitors be found in constant
Product & consumer
segments case exhibit innovation
Lines preferences.
to sustain
Global and Yes, as it Can be Yes, it is
Providing
Local diversifies the Yes imitated by one of the
Strong
Presence revenue competitors most
Domino’s Pizza Strategy Strategic Management

streams and diversified Competitive

isolate companies Advantage
company's in its
balance sheet industry
from
economic
cycles
Yes, the e-
No, most of
Opportunities commerce The AI and In the long
the
in the E- space is in house run, it can
competitors It is just the
Commerce rapidly analytics provide
are investing start for the
Space using growing and can be sustainable
in IT to organization
Present IT firm can difficult to competitive
enter the
Capabilities leverage the imitate advantage
space
opportunities
Source : (Dominos Annual Report 2017, 2018),
(Johnson, Scholes and Whittington, 2008),

5. Recommendations
The company has continuous stable revenue growth after 2010. Therefore, to keep it in
momentum they can look into further market penetration to increase their customer base.
To do this they can start offering some lucrative offers such as: more coupons, combo offers,
happy hours and more. They can introduce more products specific to the local markets they
are in. This can help dominos in increasing a customer experience as the customers will like
their local customs and culture maintained. It can also help them to counter declining sales
in some underperforming markets. Also this mitigate their risk of changing customer
preferences.
The company should strive to develop more international markets, especially more into
developing countries in Asia and Africa.
They can also implement some strategies similar to competitors such as - Pizza hut has
‘P’Zone’ and Little Caesars has 10 mins’ pizza. These strategies can help them to get in
competition and gather more customers (Egypt.pizzahut.me. , 2019).
As there had been some problems related to employee welfare and animal welfare in recent
times, the company should work in bringing in more policies and regular audits of franchisee
to have a healthy business.
Definitely in technology, the company is almost ahead of curve, compared to its competitors.
But, there is still somewhere they can make it more better in terms for investing in technology
to improve quality of product for customers, recycling of the raw material, green logistics.
In line with its main course pizza, Domino’s can add soups and salads to its menu. Also, some
more additional varieties of deserts options can be added.
They should start looking into more healthy food options inside the pizza in form of new
ingredients such as more green vegetables, pulses, crust made of pulses or rice instead of
white flour. This can help them to get into a healthy food option.
The company should give regular visits, audits and training to franchisee stores, to make sure
the franchisee adhere with Dominos Pizza Inc. quality and ethics. As the issues from franchisee
stores if not taken care, the company faces a risk of loosing brand reputation.
Domino’s Pizza Strategy Strategic Management

6. Conclusion
In current scenario, globally the brand image of Domino's Pizza Incorporation is very good
among customers. The franchisee has a strong confidence on company and its management.
These can be looked upon as strong and motivating pillars for the company.
Also, the company has good innovating history despite a few regulatory and criticism issues
on quality and business operations. The strategies of company have a positive effect for its
business and shows a good social welfare for its loyal customer base. This has given the
company a return in form of good sales and become a market leader in its segment industry.
But, considering market conditions and competition, the company faces lot of threats and it
always needs to be at its toes. The future of company in this case will be put at dire test.
The social cultural changes in form of people lifestyle, can be seen around the globe and it
needs to be monitored and assessed meticulously to understand the changing market. With
each day, the amount of competition is rapidly going higher in fast food industry and retaining
the loyal customer base is a challenge and strategy for all the industries in the sector.
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Domino’s Pizza Strategy Strategic Management

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