A Report on Domino’s Pizza

Study Case

Introduction

Domino’s Pizza is a familiar name for pizza lovers, having around 9,300 outlets across the globe.
It was started when Tom and James Monahan bought a little pizza tenant named Dominick’s with
loaned money. They started the business with around US$ 1,400 of funds. Along the way, James
then decided to leave the business. Several years later, with Tom in charge, Dominick’s had a rapid
growth instead. The success of his business drove Tom to expand and came up with a plan to open
2 new branches. Unfortunately, the owner of Dominick’s didn’t give Tom permission to expand
using the brand. It was the moment when the brand Domino’s Pizza came up. That situation
forced Tom to change the name of Dominick’s to Domino’s Pizza

There are many competitors in pizza business. Dominos’ is placed in number 2 while Pizza Hut
took place in number 1 and the other competitors such as Papa John and Little Rascal are in
number 3 and 4. The biggest market share is held by independent stores. The paper is discussing
about the environment of Dominos Pizza. In order to find the core competencies of Dominos’ this
paper also discuss about Dominos’ Pizza activites. In the end, this paper also propose about
recommendation for Dominos’ management in order to reach the company’s goal.

An analysis of External Environment

Environmental scanning is an overarching term encompassing the monitoring, evaluation, and

dissemination of informnt relevant to the organizational development of strategy (Thomas L.
Wheelen; J. David Hunger; Alan N. Hoffman; Charles E. Bamford, 2015). A corporation uses this
tool to avoid strategic surprise and to ensure its long-term health.

The enviromental scanning consist of both internal and external environment around the
company. Internal factors such as: capital, human resources, production tools, capability of
organization, and core competency can give the ideas on its strengths and weaknesses (Gofur,
2012). On the other hand, external factor consists of politic, economy ,technology, law, and
ecology (John A. Pierce; Richard Robinson Jr., 2013). These external factors will be explained
below.

Political – Legal Factors

The political factor refers to limitation of both informal and formal polices which is implemented
surround the organization. This factors include foreign trade regulation,tax policy, stability of
government and many more which is about legal – act implementation. In this case, there is no
significant political condition which influence the development of Domino’s Pizza. However, as a
franchise restaurant which is opened in many countries needs to pay attention on legal/act which
is applied in every country.

Economic factors

The economic factors consist of economic development, per capita income, climate, GDP trends
monetary and fiscal policies, unemployment levels, currencey convertability, wage levels, nature
of competition, membership in regional economic assosiations – e.g. E.U, NAFTA, ASEAN, ,
membership in WTO, outsourcing capability, and global financial system (Thomas L. Wheelen; J.
David Hunger; Alan N. Hoffman; Charles E. Bamford, 2015).

It is mentioned that there was a decrease in domestic revenue from year-end 2005 through year-
end 2009. The economic recession was blamed for its lagging financial performance. There are
two definitions of recession. First, recession means a negative economic growth for two quarters
in a row. Second, recession mean as a significan decrease on national economy activies which is
along a few months. Not only bringing the low buying power of customer, recession is also
marked by high unemployment, stagnant wages, and fall in retail sales, a recession generally does
not last longer than one year and is much milder than a depression (WebFinance Inc, 2018).
However, this condition influence Domino’s pizza only for several months. It is shown by the sales
ranking below.

There was a decreasing of Domino’s sales on 2009 about 0,2% which was lower than its rival,
Pizza Hut. Furthermore, this decreasing was not significant which means that people still came to
Domino and bought its product though they have recession. Although others competitor have
positive precentage of sales, it did not change the rank of Domino’s sales. While for the next year,
2010, the financial matrics through year-end 2010 show significant gain. In conclusion, this factor
did not give significant impact to the company.

Sociocultural Factors

The sociocultural factors consist of lifestyle changes, career expectation, consumer activism, rate
of family formation growth, rate of population growth rate of population, age distribution of
population, regional shifts in population, life expetancies, birthrates, pension plans, health care,
level of education, living wage, and unionization (Thomas L. Wheelen; J. David Hunger; Alan N.
Hoffman; Charles E. Bamford, 2015)

It is mentioned that consumers continue to become more and more educated about obesity and
diet related health concerns. Furthermore, they also complained about Domino’s Pizza which is
lacked taste and quality ingridients with poor quality delivery pizza. It shows that there is an
awareness of consumer about what they eat in order to keep their health. They are not only
thinking about full stomach but also their consider the health. This condition gave impact toward
the company itself. As a response, the company offered an entirely redesigned crist recipe, fresh
ingredients, new sauce and real shredded cheesse. They socialize its changing through
advertising and campaigne which was about redesigned the recipe.

Technological factors

This factor consist of total government spending for R&D, total industry spending for R7d, focus
on thecnological efforts, patent protection, new products, new development in technology
transfer from lab to marketplace, productivity improvements through automation, internet
availability, telecommunication infrastructure, and computer hacking activity (Thomas L.
Wheelen; J. David Hunger; Alan N. Hoffman; Charles E. Bamford, 2015).

The development of techonolgy brought huge impact to this company. It is mentioned that
Dominos’ Pizza used advertising to advertise and campaign their product. Dominos’ also created
new product Oven Baked Sandwiches which is effectively growing its customer base and lunch
time revenues. Furthermore there are also many efforts which has been done by Dominos’ using
the technological development such as using internet to provide streamlined online ordering and
bring the e-commerce efforts in – house to respond more quickly the changing of technology. This
changing bring good financial matriks fro Dominos’ Pizza.

Ecological

The factor consist of environmental protection laws, global warming impacts, non-governmental
organization, pollution impacts, reuse, triple bottom line and recycling. In this case, there is no
significant ecological condition which influence the development of Domino’s Pizza.

From above PESTEL analysis, the technological factor gave the biggest impact to this company.
This factor helped company to market the product and do the campaigne. While, the economy
and social culture also gave the impact to the company. Though, for the economy factor, there was
a decrease on sales, but it was still fine since it influenced only for short time.
Industrial Environmental Analysis

According to Michael Potter, there are 5 forces which are influencing the industry. They are threat
of new entrants, competition among the companies, threat of substitute product or service, the
bargainng power of buyers and the bargaining powers of suppliers (John A. Pierce; Richard
Robinson Jr., 2013). The stronger each of these forces are, the more limited companies are in their
ability to raise prices and earn greater profits.

Threat of new entrants

New entrants to an industry typically bring it new capacity, a desire to gain market share, and
potentially substantial. Therefore, they are threats to the established companies. From the data,
there are 50 pizza companies competed and shared the market. It means pizza is loved by many
people. Therefore, it is possible for people to open new pizza business as long as they can handle
the entry barriers such as economies of scale, product differentiation, capital requirements,
switching costs, access to distribution channels, cost disadvantages independent of size and
government policy (Thomas L. Wheelen; J. David Hunger; Alan N. Hoffman; Charles E. Bamford,
2015). However, so far Dominos’ Pizza is able to manage this threat since it always tries to make
a breakthrough such as new item on its menu, guarantee for the delivery service, use the
technology to improve it sales, etc. It shows that Dominos’ is always trying to give the best for the
customer and it is hard to be beat by the new entrants.

Competition among the companies

There are 50 companies place the rank pizza restaurant, but there are many more companies
which have the same business with Dominos’ since the 51.66% pizza sales are controled by he
independent company. It is written that the most significant competitors for Dominos’ are Pizza
Hut, Papa John’s and Little Caesars. Pizza Hut is putting itself in number 1 rank while Papa John
and Little Caesars are in number 3 and 4.

There are 40% of American eat pizza at least once per month with adult ages 30 to 49 the most
frequent consumers. Furthermore, the married adults and parents are more likely to use takeout
than unmaried one. The pizza segment itself represent acount for more than 10% of all food
service sales. These data shows that pizza is loved by the American which means the market
demand is high. Though the 51,66% sales is controled by independent one, it is still very possible
to increase Dominos’ sales as long as Dominos’ still commit to do inovation through its product
and service.
Threat of substitute product or service

A substitute product is a producat that appears to be different but can satisfy the same need as
another product (Thomas L. Wheelen; J. David Hunger; Alan N. Hoffman; Charles E. Bamford,
2015). For example tea can be a substitute for coffee, if the coffee price goes high enough, the
buyer slowly replace it with tea.

In Dominos’ case, it is also possible to have a substitute product when consumer bored with the
product. In order to encounter this threat Dominos Pizza launched new items on its menu such
as sandwhiches, breadbowl pasta, crunch cakes, and boneless chicken and wings. They also
improved their delivery service and founded The College of Pizzarology. These strategies were
good enough to keep consumer buying its product. However this threat is quite high since there
are many companies work in the same business.

The bargaining power of buyer

Buyers affect an industry through their ability to force down prices, bargain for higher quaility or
more services (Thomas L. Wheelen; J. David Hunger; Alan N. Hoffman; Charles E. Bamford, 2015).
According to Wheelen and friends, there were some factors which are able to make the bargaining
power high such as the ability to produce the product and the availability of substitute supplier.

Pizza is food that easy to make. Moreover the pizza recipe is easy to find using the internet.
Furthermore, there are many companies as the substituter. To encounter these threads Dominos’
Pizza did good strategy. Dominos’ heard its consumer dissastisfaction about the taste and quality
ingredients. It then redesigned the recipes and maintain the ingridients to keep it fresh. They did
the campaign well so that consumer felt Dominos’ had special taste which was better than
previous one. The other strategy was by giving a guarantee to the consumer to ensure that
consumer will get the correct pizza and good service. These strategies can decrease the
bargaining power of buyer. Moreover, Dominos’ has thousand stores which ease the consumer to
get its product.

The bargaining power of supplier

Supplier can affect an industry through their ability to raise prices or reduce the quailty of
purchased goods and service (Thomas L. Wheelen; J. David Hunger; Alan N. Hoffman; Charles E.
Bamford, 2015). In Dominos’ case this threat does not give great impact since it has its own supply
chain services which consist of dough manufacturing and supply chain centers. This supply chain
center provides equipment , operational good supplies,and also processing vegetable.

Value Chain Analysis

A value chain describes the categories of actvities within an organization which, together, create
a product or service (Gerry Johnson; Kevan Scholes; Richard Whittington, 2008). Gerry Johnson
et all also said primary activites are directly concerned with the creation or delivery of a product
or service. Porter proposes that a manfacturing firm’s primary activites usually begin with
inbound logistic, go through an operation process, continue to outbound activites, marketing and
sales and finally to service (Thomas L. Wheelen; J. David Hunger; Alan N. Hoffman; Charles E.
Bamford, 2015).
In Dominos the primary activites are described below :
(1) Inbound logistic which relates to raw materials handling and warehousing. It is
mentioned that it has its own domestic supply chain services. The supply chain consist
of dough manufacturing and supply chain centers. This is one of Dominos’ strengths.
The ability of having supply chain centers will reduce many production cost since they
can provide the logistic needs by themselve. They can control the price of their
product, control the stock, ensure the quality, and cuting cost production.
(2) Operation process which is a product is manufactured. The main competitors of
Dominos’ such as Pizza Hut, Papa John’s, and Little Caesars have their own strength.
Both Pizza Hut and Papa John’s have variant menu to offer their customer, while Little
Rascal not only provides variant pizza and side dish but also party catering service.
On the other hand, Dominos’ only provided limited menu featured ne crust type,
eleven topping options and one drink. This is the weakness of Dominos’ since they are
lack of having research and development in making new product.
(3) Outbound activities consist of collect, store and distribute the product to customers,
for example warehousing, materials handling, distribution, etc. In order to ease the
customer in reaching Dominos’ Pizza has built 9300 stores, while Pizza Hut already
opened 13000 stores. This become one of the weakness since Dominos’ Pizza has less
stores than Pizza Hut. Furthermore, the effort of giving quick delivery to consumen
using “30-minutes or it’s free” should be appreciated. This program enforces
employees to work fast so that they focus on their job.
(4) Marketing and sales provide the means whereby consumers/users are made aware of
the product or service and are able to purchase it. This includes sales administration,
advertising and selling. Dominos’ strategy in marketing and sales needs to be
 appreciated. Through the campaign Dominos’ tried to rebuilt their image and
customer satisfaction. It is shown through “Oh yes we did” campaign which showed
that they already make an improvement of their product. Furthermore, Dominos’ also
founded The College of Pizzarology to train potential franchisees which becomes the
special project to widen its company. These activites become the streght of Dominos’
since it raise the brand awareness
(5) Service includes those activities that enhance or maintain the value of a product or
service, such as installation, repair, training and spares. Giving guarantee of good
product for customer is a good poin to add value of product. The guarantee of fast
delivery service and ensure costumer satisfaction becomes the additional value for
the product.

The primary activites are also supported by several support activites such as procurement,
technology development, human resource management and firm infrastructure (Thomas L.
Wheelen; J. David Hunger; Alan N. Hoffman; Charles E. Bamford, 2015).
1. Procurement. The processes that occur in many parts of the organisation for acquiring the
various resource inputs to the primary activities. The procurement consist of purchasing
raw materials, machines , supplies. In Domino case, the procurement of its material is
provided by its own chain supply services.
2. Technology development. Dominos’ also have technology development especially on
internet using and maximizing the use of production machine. Dominos’ offers online
ordering and and Iphone application to allow customers to place their order. It has
adapted well to the technology developmet. Furthermore they are also using social media
to get interact with the customer.Dominos also maximizing its production machine by
using a meat grinder to not only shred cheese but also mix dough which turn out it is 9
time faster than a standard mixer. It can increase the productivity level.
3. Human resource management. There are many program for the employees so that the can
keep communicate to the management. The program such as “What’s up, Domino’s” and
monthly meeting give influence to the leadership and organization. Those program helps
Brandon as the CEO and president built the strategies for Dominos’. Furthermore,
Dominos’ also empower all his staff includes the delivery staff which needs to be more
productive in the store while they are waiting for the delivery order.
4. Infrastructure Dominos’ was generally considered as cost leader in the market.
Unfortunatelly Dominos’ taste was not good enough according to the consumer.
Therefore, they always tray to hear the consumer critics (through stay in touch with the
 customer using the intermet, make campaign) and make improvement. This activity then
become the strength of Dominos’ itself.

Linkages are the connection between the way one value activity is performed and the cost of
performance of another activity. From the explaination about primary and support activities
there are some which connect each other.
1. Technology development which has linkage with marketing and sales. Using internet as
the media to market and sale the product is efficient and save cost since it is cheaper than
using conventional media (printed, tv advertising).
2. The use of technology also improve the productivity level through the using of meat
grinder as replacement of dough mixer. It is able to reduce the cost of production.
3. It can save the cost of advertising (marketing). Inbound logistic which is support the
procurement of stores. Dominos has its own supply chain system which ease the
procurement for raw material so that they can cut the cost of production.
4. Infrastructure which linkage to operation process. Hearing critic about their product is
good idea to improve the quality of their product. Therefore, they are able to create new
product
5. Human resource management which support the service. Through the program which is
helping in communicating between management, board and employees the organization
is able to find condition of the environment and plan the strategy for face the challange.

competencies Value Rarerity Imitability Nonsubstiable

Using internet (technology  - - -
development)
Supply chain centers    
Marketing    
(campaigne/communication)
Infrastructure (innovation)  -  -
Human resource    

From the diagram above, there are 3 activities which are able to be the core competencies, they
are : supply chain centers, human resource management, and marketing (communication).

Growth Direction

Based on Ansoff matrix as taken from Johnson et all (2008), there are 4 strategies direction :
 a. Market penetration: by pushing existing products in their current market segments.
b. Market development: by developing new markets for the existing products.
c. Product development: by developing new or modified products for the existing markets.
d. Diversification: by developing new products for new markets.
For Dominos’ Pizza the growth strategies direction refers to product development since they
always try to listen the market demand but do not change their market into new market. For
example Dominos’ got critic from their buyers about taste of Dominos’ product, they then make
an improvement of the taste by redesigning the recipe.
Recommendation for the managament:
1. To chase the sales rank, Dominos’ needs to widen their market to other countries just like
Pizza Hut did. The total stores for Domino is 9300, while Pizza Hut has 13000 stores.
2. In order to avoid market saturation, Dominos’ needs to have research and development
team which is responsible to make inovation continually and taking existing market share
from the competitors.
3. In order to raise employees performance, Dominos’ needs to consider about reward and
benefit for its employees since human resources are an investment of a company.
Furthermore, conducting training for the employees would also be a good idea so that
they can develop their capability and reach the organizational goals.

Conslusion

Environmental scanning involves monitoring, collecting and evaluating information in order to

understand the current trends. The information then is used to forecast whether these trends will
continue or take their place. Dominos’ uses the environmental scanning in order to make
organizational strategy so that they can survive in their position.
Bibliography
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John A. Pierce; Richard Robinson Jr. (2013). Strategic Management Frumulation, Implementation
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Thomas L. Wheelen; J. David Hunger; Alan N. Hoffman; Charles E. Bamford. (2015). Strategic
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