Four Market Entry Strategies for Domino's Pizza in Hangzhou, China

Managing International
Business
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Contents
INTRODUCTION......................................................................................................................1
Four market entry strategies that could be used by Domino......................................................1
External environment influences................................................................................................3
Conclusion..................................................................................................................................5
REFERENCES...........................................................................................................................6

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INTRODUCTION
Today’s era of business has become very much competitive and in this era, it has become
crucial for the companies to make strategies that are effective. Global expansion is one of
those things that must be considered by the company very carefully. The way in which
company expands in any market and the mode of entry they select plays a crucial role in
success of the firm. Before entering into any market, the first and the most basic thing on
which companies must reflect upon is the environment of that country (Morschett, Schramm-
Klein and Swoboda, 2010). This is an essential part of the expansion. Domino’s is one of the
biggest fast food firms in the world and their products are highly loved by many people
around the world. Domino’s is a pizza restaurant chain from America that was founded in
1960. In terms of sales, this company became one of the biggest pizza sellers in the whole
world in February 2018 (Witsil, 2018).On the April 23, 1963, Tom and James Monaghan
opened the first “DomiNick’s” store in Michigan, USA. Just year after Tom traded his car for
his brother’s share of the store and later renamed the company as Domino’s pizza. It is
operating in 13,811 locations throughout the world. Product line includes Chicken Wings,
Pizza, Dessert, submarine sandwiches, pasta. It has generated revenue of US$2.47 billion.
There are around 14,100 employees working company’s owned stores while there are
290,000 workers working under franchise (Meyersohn, 2018). China is one of the fastest
developing nations in the world and Domino can expand its business in the city Hangzhou.
This report analyses the four entry strategies that can be used by Domino’s Pizza. It also
analyses the external environment of the China so as to analyse the success it could achieve
in its expansion in Hangzhou.
Four market entry strategies that could be used by Domino
Before analysing the expansion of Domino in new city it is essential to understand the
expansion of the company in previous years. The first international store of Domino was
opened in 1983 in Winnipeg, Manitoba, Canada. It was the same year when Domino opened
its 100th store, which was first in Vancouver, Washington. In United Kingdom it opened its

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first store in 1985. It was the same year when it opened its store in Tokyo, Japan. Till 1995,
they opened its stores at 1000 international locations. Till 1997, Domino opened its 1500th
store in International location which consists of seven stores that opened in one day. Till
2014, company has expanded its business in more than 6000 international locations. Alone in
India, company has opened its 1000th store in February 2016.
There are different types of market entry modes that companies use for expanding their
business. It depends on the risk that is posed when company chooses particular approach. The
commitment and control of the resources they require for entering into certain market is the
two major bases on which company must rely on while entering (Tulung, 2017). The
selection of the entry mode also depends on the return on investment they promise. Basically
there are two major entry modes in any market namely equity and non-equity modes.
China being a country that attracts many companies due to its policies will help the firm to
manage its operations. The four entry mode strategies that Domino can use in entering into
Hangzhou, China are:
Foreign direct investment
FDI is an investment that is made by the company where company controls its business in
other country while being present in other nation. Here company itself invests in setting up
the whole unit i.e. they buy land, set up the restaurant, put operations at place, buy
inventories, recruit and select people, does marketing and sales on their own. FDI is generally
understood as sum of equity capital, short-term capital and long term capital as shown in the
balance of payments (Lu, Karpova and Fiore, 2011). In World’s Investment Report of 2018,
China was second largest FDI recipient after USA. The liberalisation plan of government
along with rapid development of hi-tech sector and establishment of free zones helped the
company in creating better business environment, structure and distribution of investment.
The cost of such kind of Investment is high.
Since Chinese currency is weaker than USD hence Domino will remain profitable while
investing in China but in the long term it will have to tackle the business carefully so as to
remain profitable. Company has huge capital balance hence they will not face problems in
adopting this entry mode. This is beneficial in the market of China as it will help company to
maintain its quality. It will also help the company to understand the dynamics of market
where they can expand its business. Since there are many cities of China where Domino still