Strategic Management in a global context

Running header: Strategic Management in a global context 1
Strategic Management in a global context
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Strategic Management in a global context 2
Question 1.
Over the years, Domino’s pizza has maintained being a strong player in the pizza
marketplace despite different challenges it has faced such as the negative reputation in the
marketplace (Lambert, 2014). Besides, the company has refined its way of doing business by
improving elements such as its delivery service to customers. This has allowed the company to
grow extensively. In this section, we are going to analyze the attractiveness of the Pizza industry
in which Domino’s operates in by applying the Porter’s five forces model. The porters five
forces model observes forces such as the bargaining power of buyers, threat of new entrants,
threat from substitute products, bargaining power of suppliers, and rivalry among existing
players.
To begin with, we have the bargaining power of buyers. Buyers are considered a driving
force in any market and therefore, understanding the buyer behavior is crucial for any business
(Rothaermel, 2015). The pizza industry has been very lucrative over the years due to the
consumer demand. According to a survey completed by Rasmussen Reports in the year 2011,
about 40% of Americans eat pizza once per month with adults aged between 30 and 49 being the
most frequent customers. However, this has increased over time.
In addition, the pizza segment of the food industry represents about 11.7% of all the
restaurants and accounts for more than 10% of all food service sales. As a result, the pizza
industry focusses on individual customers since it is unlikely that a single customer would
purchase a large portion of sales. Due to this demand, the customers bargaining power is high.
Besides, the pizza industry is highly differentiated as well as customer are more sensitive to price
fluctuations. Therefore, different companies such Pizza hut, Domino’s and Papa John’s among
others have established different competitive strategies so as to provide the best customer
experience.
Secondly, we have the threat of new entrants. New entrants tend to bring innovation in
the market by putting pressure on existing organizations (Martin, 2014). Therefore, organizations
will have to restructure their operations such as the pricing strategy, new value to consumers and
lastly reduction of operating costs. The Pizza industry is very attractive therefore, opening of
pizza stores is very easy. However due to the market share that the big pizza chains have
acquired, the threat of new entrants is low. For example, Papa John’s has about three thousand

Strategic Management in a global context 3
stores worldwide with each making a revenue of about $313,000. On the other hand, Domino’s
has about nine thousand three hundred store each generating revenue of about $170,000.
Besides, since more people are focusing on organic foods due to issues of obesity and
health concerns, the Pizza industry may think to shift its position from a low-cost provider to a
more health-conscious approach with a higher price tag (Lambert, 2014). This might
revolutionize the pizza industry hence ensuring more innovation in this sector is introduced.
Thirdly, we have threats from substitute products. In a market, substitute products create
a competitive environment hence reducing the potential for profit (Martin, 2014). Pizza hut, the
largest pizza chain restaurant in the world, has been able to stay on top of the market due to its
variety of products it offers from chicken, sandwiches, pasta and cakes. In addition, after
Domino’s captured the market with its new pizza, the company had to introduce more products
so as to stay afloat. The pizza industry has many players and even if pizza remains to be the at
the to of the menu, other products such as sandwiches have brought competition. Therefore, by
introducing other substitute products in the main pizza restaurants, competition has been curbed
hence pizza taking the lead.
Fourthly, we have the bargaining power of suppliers. Supplier are key stakeholders in the
entire value chain. Suppliers are able to dictate terms, set prices, and also determine the
availability and timelines of raw materials (Martin, 2014). Most of the Pizza eateries control their
own supply chains including both local supply chains and international supply chains. Suppliers
have a low bargaining power since they have to operate under the pizza eateries conditions.
Therefore, fluctuation of prices is quite difficult. This means that there is no pressure from
anyone or control of the availability of raw materials. For example, Dominos controls all its
business segments from domestic stores, domestic supply chain services to international services.
This has allowed the company to be able to create value for its customers since much of supplier
expenses are reduced exponentially. Besides, the product costs have been reduced highly so as to
ensure high number of customers are attracted to the product.
Lastly, we have rivalry among existing players. This force describes the rivalry between
present companies in a market (QuickMBA, 2018). The competitive pressure influences the
profits, prices and strategy adopted by the companies. The competitive rivalry between Pizza hit,
Domino’s, Papa john and Little Caesars experience has remained to be high over the years since

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the companies have similar strategies. In addition, their products offer similar benefits hence the
costs of the products have also been affected. Since the top fifty independent restaurants
particularly in the United States, have no rivalry, they have managed to occupy the largest
market share. For example, in the US, independent pizza chains cover about 58% of the market
while the other top four pizza chains have occupied only 27.48% of the market (Lambert, 2014).
This makes the pizza industry more attractive even for new entrants.
Question 2.
Value chain analysis refers to the analysis of the normal activities that take place in an
organization for the purpose of determining the competitive strengths of the organization
(Smstudy, 2018). A value chain portrays the activities that primarily create value to the
customers of a given service or product. In conducting the value chain analysis of Domino’s, we
will consider both its primary activities and secondary activities. The primary activities involve
activities primarily concerned with the creating and delivery of a product or service (Smstudy,
2018). On the other hand, support activities involve activities that are not involved in production
but assist in enhancing the primary activities. A value chain analysis can be advantageous for a
business since a business that wishes to outperform its rivals can do that by differentiating itself
through performing its value chain activities better than its competitors.
Beginning with the primary activities, we have inbound logistics. Dominos has its very
own supply chain management team that is responsible for the procurement of both services and
products majorly for its stores, world resource center and supply chain centers (Ireland, Hitt, &
Hoskisson, 2008). Therefore, Dominos prefers developing long-term partnerships across
proactive suppliers hence generating cost-saving measures. Through these suppliers, Dominos is
able to buy all raw materials such as mozzarella cheese, sauce, wheat, vegetables, spices,
chicken, pepperoni and vegetables. This is a strength for Dominos.
Secondly, we have manufacturing operations. This primarily involves the preparation of
the pizza. After receiving the raw materials from the suppliers, Dominos restructures its
manufacturing in a specified manner. Dominos has a domestic supply chain segment that handles
the dough manufacturing and supply chain centers (Ireland, Hitt, & Hoskisson, 2008). This
allows the company to produce fresh dough on a daily basis hence ensuring the pizza stores
receive the dough in time. This helps reduce the time if the stores would individually produce