Task-1

Introduction

The study of international business focuses on the particular problems and opportunities that
emerge because a firm is operating in more than one country. In a very real sense, international
business involves the broadest and most generalised study of the field of business, adapted to a
fairly unique across the border environment. Many of the parameters and environmental
variables that are very important in international business are either largely irrelevant to domestic
business or are so reduced in range and complexity as to be of greatly diminished significance.
Dominos Pizza is the world’s leading pizza delivery chain both in store number and unit sales.
Ranked amongst the world’s top restaurant brands, Domino’s has been offering customers
globally a slice of pizza heaven since 1960. With over 10,800 outlets in 70 countries, Domino’s
delivers more than one million pizzas across the globe every day. Under license to Taste Food
Franchising (Pty) Limited, a division of Taste Holdings Limited, the first Domino’s Pizza store
in South Africa opened in 2014.

Now with over 80 stores, Domino’s Pizza is delivering their delicious pizzas to customers across
the country. The Domino’s key differentiators in the South African market rest upon three pillars
— the brand’s global expertise and heritage, their in-store difference, and technology leadership.
The Domino’s Pizza economic model is built on strong cash-on-cash returns. Their industry-
leading technology platform enables online ordering, direct email marketing, cost controls and
store management. Service excellence is a key driver for the business, with aspects such as their
‘FREE delivery in 30 minutes’ promise and the in-store ‘pizza theatre’ concept being integral to
their operations. Lastly, the Domino’s industry-leading technology platform has enabled the
rapid introduction of innovations such as online ordering and the Pizza Tracker®, which is
available both on the web and the Domino’s Pizza mobile app. Dominos have been successful in
being top of the mind brand in the Fast food industry. In year 2009 it has released its video under
“Oh yes we did” campaign claiming it as a turnaround strategy where different stakeholders
explained how they handled the critics.

Company also communicated through it the innovating strategies they are following to cater the
customers changing needs. Pizza, being the core product, was just not good enough and
consumers were not happy with that. In fact, you can have the best marketing in the world, but
without the good core product, everything is worthless. By reinventing pizza or by adding
different ingredients can have a positive impact for the business. When it comes to building a
brand, then you also have to give some value to the consumer. Even though, Domino provided
good value, they now, with the new marketing strategy, are considered as a company with good-
quality food. Providing the value and the quality to the end consumer increases the brand
recognition and brand equity. In the past, Domino’s pizza was very thick and only college
students have enjoyed it. It slowly adjusted its recipe and made its crust thinner which made its
pizza tastier. Now, with the new strategy, Domino’s pizza is even better and it really has
broadened its range of consumers. Another important aspect to look at is additional product that
is offered along with the main product. “Specialty chicken” that customers order with pizza is
additional revenue generator that help Domino stay on top.

Task-2

Macro Environment Analysis

 Political factors

After World War II, the communists under Mao Zedong established political independence and
an autocratic socialist system that, while ensuring China's sovereignty, imposed strict controls
over everyday life. Mao focused on political revolution, instead of economic development. China
has little experience for drafting e-commerce legislation for topics like intellectual property
rights protection and tax. There aren’t any regulations supporting the privacy, recognition of
digital signatures, consumer rights and validation of electronic contracts yet. Xi Jinping focuses
on pushing China investment abroad and pulling foreign investment to China for industries
which China hasn't had the expertise yet. For much of the population, living standards have
improved dramatically and the room for personal choice has expanded, yet political controls
remain tight.

 Economic factors

China’s economic performance over the past four decades has been impressive. China is now the
world’s second largest economy in terms of GDP. China’s GDP rate suggests that each citizen is
adding more and more values to the society. This is in turn increasing consumers’ purchasing
power. The labor cost in China is extremely low. The growth rate is impressive, but it can slow
down. China’s old growth model is unsustainable, and may bring them to the “middle income
trap”. Also, China is over-reliance on exports and fixed capital investments. The export oriented
strategy is challenged by sluggish recovery in foreign demand, stronger RMB, and rising unit
labor costs.

 Social factors

The social and cultural aspect of China plays an important role as the demographics constantly
change. Population growth and age distribution fluctuate. Population aging leads to higher
dependency ratios and shrinking labor force. These can alter social trends and cultural values.
Family size and social behaviors often impact how decisions are taken. China emphasizes on
education, and majority of the nation are literate. The literacy rate in China is over 90%. China
considers education as investment in human capital, and a proxy for long-term prospects for
economic growth. There are 420 million Internet users in the country. As there is internet access,
Chinese people often shop online. Taobao is the largest local e-commerce website, and many
people spend a lot of their things from the site. It might in the long run lead to a stronger
academic performance by Chinese universities, as many Chinese students will return to China
after their studies in the US, participating in the Chinese economy and strengthening the
foundations of Chinese universities.

 Technological factors

There are 420 million internet users in the country. Mobile internet is a driving force behind
industry subversion in every business, and connects everyone to each other; anything can be
shared at no communication cost. Trades through e-commerce can be done freely and easily. As
there is internet access, Chinese consumers often shop online. Taobao is the largest local e-
commerce website, and many people spend a lot of their things from the site. E-commerce has
changed how local consumers see and do shopping. Boston Consulting Group predicts that the
volume will increase in near future. However, there is still a group who wish to avoid the
perceived risk associated with online shopping. They prefer physical shopping and like the face-
to-face contact. All that said, this new Domino’s foray will still face an uphill battle due to lack
of awareness of the brand among Chinese consumers.

Western chains like Starbucks (Nasdaq: SBUX), KFC and McDonalds have all enjoyed strong
success in the market, but only after years of brand building and savvy promotions aimed at
value and image-conscious Chinese consumers. And for every brand that’s succeeded, there are
numerous ones like Papa John’s pizza, Carl’s Jr hamburgers and Krispy Kreme donuts that
struggle in the market due to lack of awareness. Pizza is certainly a product that has found a
market in China, as evidenced by the strong success of Pizza Hut, whose stores depend mostly
on Chinese consumers for their success. The Chinese fondness for delivered food should also
help. But at the end of the day, Domino’s will also have to find the right mix of promotions and
image building to succeed, a tough challenge for both domestic and foreign firms trying to build
new fast food brands in China.

Task-3

China’s Culture impact towards Dominos

In the business environment is it integral to understand the differences in cultures,

attitudes, environments etc. that requires firms to view their companies through a range
of indices. Fast food came into China in the early of 1980s. And it received great success in a
short time. At the beginning “Fast food” was popular in teenager, until now all the people like to
eat “Fast food”, such as the young and the old. But there are some differences that people often
wait for a line to buy “Fast food”. And it seldom happens in the USA. Some people think that
“Fast food” is not fast. People realize that “Fast food” cannot save the time, instead, spend much
more time. However, most people still like eating “Fast food”. Chinese people always love
eating, and people think that “Fast food” means fashion. Further, people find “Fast food” is very
delicious. For a while some mediums claim that “Fast food” is not unhealthy food and it can
caused lots of health issues. The news gave a big beat to “Fast food”, like McDonald’s and KFC.
But a silent period later, “Fast food” was active again with a new “face”-new advertisements and
new values.

Now people often go to McDonald’s and KFC with whole family or closed friends to share the
happiness and sorrow. In fact, “Fast food”, some food is pocketed for taking away has existed for
a long time in China but people cannot realize it. In people’s mind, “Fast food” means
McDonald’s or KFC, actually the traditional snack bars beside the McDonald’s or KFC also
belong to “Fast food”. With the popular of the McDonald’s or KFC, Chinese Fast food, like the
traditional snack bar, also has fast development, but limited by some resistance force. The rise of
pizza delivery in China is one of those remarkable developments that says a lot about where the
country is heading. Domino’s Pizza has a comparatively higher degree of standardization in its
website layout in all four countries as compared to the websites of Pizza Hut and Papa John’s
Pizza. Domino’s website background colour is mainly white in all four countries unlike Pizza
Hut and Papa John’s which have adapted their background colours in accordance to the culture
of the respective countries.

Domino’s have also adopted an identical ad in two of our chosen country being China, wherein
the commercial speaks about the product changes that have been made in order to improve the
quality of the pizzas. This global prototype ad has been adapted locally being locally responsive
(Ghauri and Cateora, 2010). Domino’s has also adopted a standardised pattern throughout its
operations in different countries although there are elements of adaptations that can be seen
through their differing taglines etc. Domino’s has also been alert to meet cultural imperatives in
countries like China in terms of “guan-xi” as the commercials focus on relationships and
friendships being established with the brand, this tends to positively affect sales (Ghauri and
Cateora, 2010). Another interesting finding has been the fact that Domino’s throughout its
operations in both international and home markets have focused their attention to their
fundamental delivery model as they gain a competitive advantage from delivery in the pizza
business.

Task-4

Market Entry Strategies

There are a variety of ways in which a Dominos can enter a Chinese market. No one market
entry strategy works for all international markets. Direct exporting may be the most appropriate
strategy in one market while in another you may need to set up a joint venture and in another,
company may well license your manufacturing. There will be a number of factors that will
influence company’s choice of strategy, including, but not limited to, tariff rates, the degree of
adaptation of your product required, marketing and transportation costs. While these factors may
well increase company’s costs it is expected the increase in sales will offset these costs. The
following strategies are the main entry options open to you.

 Licensing
Licensing is a relatively sophisticated arrangement where a firm transfers the rights to the use of
a product or service to another firm. It is a particularly useful strategy if the purchaser of the
license has a relatively large market share in the market you want to enter. Licenses can be for
marketing or production licensing. Franchising is a typical North American process (it is part of
Licensing) for rapid market expansion but it is gaining traction in other parts of the world.
Franchising works well for firms that have a repeatable business model (eg. food outlets) that can
be easily transferred into other markets. Two caveats are required when considering using the
franchise model.

The first is that your business model should either be very unique or have strong brand
recognition that can be utilized internationally and secondly you may be creating your future
competition in your franchisee. 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 developments are there, but, slow.

Justification

Unlike an “old-fashioned” franchise model, Domino’s Pizza controls the supply chain on top of
its franchising operations, which encourages a more cohesive economic tie between the
franchisor and its franchisees. A franchise contract renewal rate of 99% (in the U.S. in fiscal
2018) strongly indicates the robustness of the partnership. Looking at the sales promotions
adopted by Domino’s in order to gain a short-term response in increased sales this company have
been greatly responsive to differences in cultural norms, their target markets and government
regulations in dissimilar markets sales. This is how Domino’s Pizza brings the restaurant
franchise model to the next level – one store offering two businesses (i.e. delivery and carryout)
with low initial capital expenditures, smaller space requirements and same-store-sales growth
potential.

Conclusion-

Despite the profound benefits brought by standardization this report lays emphasis on the fact
that in the fast food industry- the pizza market, companies need to be increasingly careful with
their marketing activities, as standardization could not bring long-term benefits for the company
in an international boundary. This is affected by the fact that cultural differences play a
significant role on the success of a product in an international country. According to analysis of
the strategic options for Domino’s, the future of the company appears to have a greater potential
to generate revenue to ease the high leverage ratio the company holds. Strategic marketing and
positioning has been the best strategic tool that the company can use to maximize its potential of
becoming the market leader.

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