Assignment 1: Environment Analysis
Domino’s pizza is considered as one of the most prominent organizations around the world. Domino’s pizza offers both types of services i.e. dine-in as well as door-to-door delivery service of fresh Pizza from their eatery. At present, Domino’s Pizza have more than 10,000 franchises spread over more than 70 countries and can also be found at almost every major urban locations of U.S. Domino’s Pizza aims to satisfy food cravings of their customers with ultimate Italian - American sustenance. Its goal is to always maintain the aptitude of using fresh and super-crispy ingredients while entertaining the food cravings of its customers with a wide variety of choices (Domino’s Pizza, 2016).
The global food industry is complex, highly dynamic and increasingly competitive. Therefore, in order to manage in this competitive business environment, every firm has to develop efficient and responsive strategies to establish and defend its market position. Domino's pizza is not an exception. However, effective strategic implementations primarily call for an in-depth analysis of internal and external environment of the organization. It assists to evaluate internal strengths, weaknesses as well as opportunities and threats. These analyses are crucial for developing a perfect strategic blend for enhancing firm’s competitive position in the industry (Paeratakul, 2015). This paper focuses on conducting a detailed internal and external analysis of Domino’s Pizza by using EFE and CPM matrix, which will help in demonstrating how Domino’s Pizza is managing in its respective competition. This analysis is followed by some strategic recommendations that will facilitate Domino’s pizza to improve its flaws and capitalize on its strong points.
External Environmental Analysis
Industry analysis is also referred as the Porter’s five forces analysis, which is considered as an effective tool for developing business strategies. Industry analysis is typically based on the structure and the growth attractiveness/potential of the industry. Porter's five forces help to determine industry attractiveness and also provide a beginning point for strategy formulation. These forces include bargaining power of the buyers, bargaining power of the suppliers, rivalry within the industry, barriers to industry entry and threats of substitutes (Gamble & Thompson, 2014). Below mentioned is the analysis of these five forces for Domino’s Pizza.
Intensity of Rivalry: As the food industry is rapidly growing and generating exponential revenue, it is more aversive to competition. Therefore, the aggregate size of the industry is growing. The finest strategy to grow in the industry with slower growth rate is to grab a share of the market from the rivals. The fast growth of the food industry posts significantly constructive impact on Domino’s Pizza. The overall rivalry within the industry is very high, as there are a large number of direct and indirect competitors; therefore, Domino's Pizza needs to grab the share to defend its market position (Gamble & Thompson, 2014).
Bargaining Power of Suppliers: There is a high competition among the suppliers and large numbers of substitutes are available for Domino's Pizza. Moreover, the switching cost is very low, which means that finding a substitute for Domino’s Pizza is easy. That’s why bargaining power of the suppliers is also likely to be low (Gamble & Thompson, 2014).
Customers’ Bargaining Power: Domino’s Pizza has large numbers of customers and low level of dependency over its distributors. However, the switching cost among the substitutes is very low and the products in demands are available in high volume with a low level of differentiation. In other words, the bargaining power of the customers is high as they have numerous alternative to choose from and have the benefit of low switching cost (Gamble & Thompson, 2014).
Threats of Substitutes: The industry is highly dynamic with plenty of direct and indirect substitutes available in the market to satisfy customers making threats of substitute to be extremely high (Paeratakul, 2015).
Threats of Potential Market Entrants: Overall, Domino’s Pizza has a powerful brand image and product visibility within the food industry. Its strong brand name contributes to its significant sales volume. Moreover, the existing competition in the industry has set the bar rather high and therefore, the barriers to entry are fairly high.
Here demonstrated the EFE matrix of Domino’s Pizza, which identifies the key external factors of the organization. The analysis from the matrix demonstrates the potential threats and opportunities for the organization within the food industry as compared to its major competitors i.e. Little Caesars and Pizza Jet.
This is the CPM matrix, which shows the five major critical success factors for Domino’s Pizza along with respective weightage given to them.
Competition & Market Trends
Although the biggest competitor of Domino’s Pizza is Pizza Hut, however, Little Caesars and Jet Pizza are also gaining popularity, and have the potential to further grab Domino’s market share. This means that the current focus of Domino’s is to secure its existing market share from them. Currently, healthier eating trends are prevailing in the industry, which is significantly resulting in declining sales for the fast food industry from the past few year (Gilbert, 2014). Customers have now become increasingly health conscious while preferring organic and healthy food items. To address the demand, competitors have expanded their menu with salad and other healthier offerings at cheaper rates. Additionally, the rivalry is intense within the industry and there are numerous pizza substitutes ranging from international brands to domestic pizza-makers. Marketing channels have also transformed the means of communication and required Domino’s Pizza to be aggressive and using omnichannel marketing to optimize the communication by all the mediums that are used by existing and potential customers (Gamble & Thompson, 2014).
Internal Environmental Analysis
Domino’s Vision, Mission & Objectives
Domino’s vision is “To feed the world one slice at a time” and its mission is to sell more pizza to offer more fun. The organization has a mission to be the leading and the best pizza delivery service by gratifying the pizza lovers across the globe (Domino’s Pizza, 2016). The major objective of Domino’s is to offer the best and the most convenient options to its customers for ordering pizza by using most innovative technological solutions (Bowman & Vinyard, 2014).
Domino's Pizza is an international pizza delivery service that is currently serving in more than 70 countries with over 10,000 official outlets across the globe. The corporation was established by Tom Monaghan & James Monaghan in 1960 and headquartered in Michigan – U.S. In United States, it is one of the most dominant brands with its presence in 50 states (Domino's Pizza, 2016). The corporation made its initial public offering in 2004. It is the 2nd largest pizza chain across the United States preceded by Pizza Hut.
Corporate Level Strategy
The corporate level strategy of Domino’s Pizza is focused towards rapid growth and expansion of its market share while minimizing the operational cost and enhancing business efficiency along with operational processes. In long-term, it aims to open new franchises with an average of at least one store/week and growing the business to almost double of its existing size in terms of revenues within a coming few years (Bowman & Vinyard, 2014).
Business Unit Level Strategy
The business level strategy of Domino’s is inclined towards growing business further by having the best team along with development of attractive franchises to deliver the pizza service across the world. It focuses on developing and retaining exceptional workforce, and formulating strong operational infrastructure to support routine business activities (Gamble & Thompson, 2014).
Functional Level Strategy
The functional level strategy of Domino's Pizza is to minimize its operational cost and leveraging store locations to enhance delivery speed. This results in increased sales and eventually in maximized revenues. It further focuses towards enhancing order taking and delivery system through process innovation. Also, it is further evaluating options for menu with healthier options, better quality and lower price (Gamble & Thompson, 2014).
Domino’s Strengths & Weaknesses –IFE Matrix
Domino's Pizza should focus on market penetration by enhancing online methods of communication and marketing while expanding the platform of online ordering through a hotline. It should further focus on saturating the domestic and international market in order to expand rapidly by inducing market penetration strategies.
It should also increase its focus towards fundraising as it will help in gaining better brand awareness and brand recognition among the existing and potential customers.
Domino's Pizza should also focus on reducing its price in order to expand sales as compared to its competitors. This will help it achieving cost leadership through economies of scale.
In international markets, Domino’s Pizza can come up with products that are more sensitive to culture, for instance, by infusing the national taste of customary recipes etc.
In response to the latest healthy trends, Domino’s Pizza should expand its product line by focusing on product development to develop its reputation of being more responsible towards the society.
Domino’s Pizza should use its online ordering forum optimally to manage large placement of orders in order to increase sales.
Domino’s Pizza has already built a socially responsible image; therefore, it should further highlight its ethical business practices in the promotion and advertising.
The above internal and external analysis demonstrates that Domino’s Pizza needs to focus on its product development to penetrate further into the market and, therefore, their primary strategy should be inclined towards market penetration in order to expand its market share. As per its weighted scores in EFE and IFE matrix, it needs to focus on its operation and production to reduce cost and enhance production. The major factors of success for Domino’s Pizza lies within optimization of advertising, product range, quality, pricing, brand reputation and global expansion.
Bowman, S. A., & Vinyard, B. T. (2014) Fast food consumption of US adults: impact on energy and nutrient intakes and overweight status. Journal of the American College of Nutrition, Retrieved from http://www.tandfonline.com/doi/abs/10.1080/07315724.2004.10719357 on January 19, 2016
Domino’s Pizza. Official Website (2016) Data retrieved from https://biz.dominos.com/ on January 19, 2016
Gamble, J., & Thompson Jr, A. A. (2014). Essentials of strategic management. Irwin McGraw-Hill. Retrieved From http://library.perbanas.ac.id/images/book/PHKI11/essentials%20of%20strategic%20management.pdf on January 19, 2016
Gilbert, G. R., Veloutsou, C., Goode, M. M., & Moutinho, L. (2014). Measuring customer satisfaction in the fast food industry: a cross-national approach.Journal of Services Marketing, 18(5), 371-383. Retrieved From http://sdcc.vn/template/1745_measuringcustomersatisfactioninthefastfoodindustry.pdf on January 19, 2016
Paeratakul, S., Ferdinand, D., Champagne, C., Ryan, D. H., & Bray, G. (2015) Fast-Food Consumption among US Adults and Children: Dietary And Nutrient Intake Profile. Journal of the American Dietetic Association. Retrieved from http://www.journals.elsevierhealth.com/periodicals/yjada/article/S0002-8223(03)01086-1/abstract on January 19, 2016