Domino's Pizza: Strategic Analysis

This assignment presents a comprehensive strategic analysis of Domino's Pizza. Utilizing various frameworks such as the industry life cycle, value chain analysis, and Porter's Five Forces, the document examines key aspects of Domino's business model. It delves into their pricing strategy, market share, core competencies, and competitive landscape. Additionally, the assignment explores Domino's position within the broader pizza industry and its potential for future growth.

Strategic Management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1) Financial position of Domino's...............................................................................................1
2) Market share...........................................................................................................................2
3) Industry life cycle...................................................................................................................3
4) Briefing about evidence..........................................................................................................4
5) Balance in the report...............................................................................................................5
6) Key success factors of Domino's company.............................................................................5
7) Analysis of competitive, internal and external resource and capabilities of Domino's..........7
8) PESTLE analysis Of Domino's.............................................................................................10
9) Ratio analysis of Domino's balance sheet.............................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business strategy is a vital aspect for a company as it aids in achieving the desired
results. It is an art of formulating, implementing and evaluating the cross functional decisions of
business by which firm is able to achieve its specified objectives. It directs an enterprise
regarding how to work in an effective and efficient manner so that it can achieve competitive
advantages over its rivals as well as long term goals or targets (Chandes and Paché, 2010).
Business strategy entails that what should be done or not by which company can achieve its
desired result or outcome as well as tells about action plan that should be taken for reaching to its
decided destination.. This project is based on Domino's which is a large American pizza
restaurant chain that is founded in 1960. Its head office is in Ann Arbour, Michigan, United
States. It provides the best quality of services to its consumers so that their needs or wants can
be satisfied. This report will explain about the competitive strategy by which Domino's can
develop its current competitive position and will state about its strategy that is currently being
used by it for achieving the specified objectives.
1) Financial position of Domino's
For analysis financial position of the company, firm can take help of competitors and five
force model. In competitive analysis, firm analyses the position or market share of rivals as well
their policies that helps in achieving competitive advantages over its competitors because after
knowing about rivals, firm can make their strategy accordingly and will get attention of large
number of customers. Domino's main competitors are pizza Hut etc. At present, Domino's
financial position in the market is as follows-
Domino's Pizza is a multinational company which is operating their business through a
network of 9351 company owned and franchise whose store is located approx. in fifty states or
throughout the world. On 3rd March 2016, a preliminary announcement was done in which
Domino's stated that it has posted some documents for stakeholders and submitted to them in
National Storage Mechanism. Those papers are as follows-
 Annual Report and Accounts for the 52 weeks ended 27th December 2015
 Circular relating to the Annual General Meeting that are going to held on 20 April 2016
 Proxy forms for shareholders so that they can vote at AGM
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From the report, it is concluded that it is working as a winning streak with first quarter
earnings in 2015. They are also trying to adopt the latest technology so that it can capture large
market share with Uber style pizza delivery tracking for smartphones and a pizza design service
called Pizza Mogul in which people creates themselves for earning money for sales. This
strategy is very helpful in recording high level earnings and share prices (CHUANG and Liao,
2010).
It is analysed that Domino's is a highly profitable company in a fast food retail industry.
In 2014, company started to raise their prices because of increasing its revenue but after some
time, they stopped to increase their charges, unsurprisingly, cash flow growth reduced. In June
2017, its net profit margin was 10.46%.
From above graph, it can be understood that in 2012 and 2013, Domino's gross profit is
increased by 4 and 2% while it was minimize by 1% in 2014 year just because of not having
good services.
So Domino's should focus on the quality of products or services so that it can generate
more revenue.
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(Source 1: Domino's Pizza pricing policy, 2017)

2) Market share
For capturing a large market share, company is adopting the latest technology so that it
can satisfy needs or wants of consumers and convert them into brand loyal customers. It is the
largest pizza chain throughout the world which provides fastest services to its consumers.
(Cinquini and Tenucci, 2010). In 2016, it has generated around 2.5 billion Euro. In United
Kingdom, It has approx. 7.60 market share while its main competitor like Pizza Hut has captured
approx. 11.65%.
Company's Name Market share
Domino's 7.60%
Pizza Hut 11.65%
Papa John's 4.23%
Little Caesar 4.00%
Other Top chains 14.52%
Independent 58.00%
Interpretation- From above table and graph, it can be understood that how much market
share is captured by Domino's as well as by its competitors. As shown in above table that cited
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(Source 2: Market share of Domino's, 2017)

firm has captured 7.60% market share (approx) while remaining share is captured by its
competitors. Like- Pizza hut has 11.65%, Papa John has 4.23%, Little Caesar has 4%, other has
14. 52% and independent outlet has captured 58% market share.
3) Industry life cycle
Industry life cycle is not same like product life cycle because in an enterprise, there is
continuous updating of goods or services. It includes four stages which are given as below- Introduction- In this stage, there are less number of competition in the market because at
this period, industry is new. Here, power of buyer is low because of having monopoly of
sellers. In this, they can set the price of their products according to its wish. Growth- At this stage, number of competitors increase rapidly as other firms also enter in
growing industry. Here, buyer also has limited power because of having high volume of
demand. Often, it is assumed that growth of company leads to high profitability while at
this period of time, firms earn more surplus (Doz and Kosonen, 2010). Maturity- When company moves towards maturity stage, it increases the power of
purchaser because their demand is equal to supply. In contrast, supplier’s strengths
become low because of increasing number of competitors. At this time, firms try to
consolidate with other enterprises through mergers, acquisitions, etc.
 Decline- It is the last stage of industry life cycle which includes lots of challenges. Here,
company's capacity increases as there is less supply of merchandise. If any outlet is not
producing expected results then it will be better for the firm to withdraw that from
market. Unprofitable company can ask to government and other agencies to protect from
declining (Eden and Ackermann, 2013).
It can also be understood by an example that is given below-
If Domino's is introducing new innovative products then it can set price according to their
comfort because at this time there is less competition. When product comes to growth stage, firm
can earn high amount of profit because at this step, there is huge amount of demand and buyer
has limited buying power because there is no availability of substitute. When product reaches to
maturity stage then buying power of buyer becomes strong because here will be more
competitors of Domino's and at last at decline stage, company has to face various challenges
because there will be no demand of its products.
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4) Briefing about evidence
Domino's is the best service provider in fast food retail sector which serves consumers
according to their requirements. From the above study, it can said that in 2014, it has kept their
working capital to a manageable 11 net trade cycle days that means firm converts their assets
into cash with in 11 days. (Freeman, 2010).
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(Source 3: Industry life cycle, 2017)
Illustration 1: Dominos core competencies, 2017

Because of having above core competencies in Domino's, it is the best service provider in
UK.
5) Balance in the report
Interpretation- According to company's financial report, it is observed that Domino's
generated huge amount of profit in 2016 as compared to 2015. It earns 2473 million while in
2015, it was 2217 million approximately. Its gross profit was 683 million in 2015 but in 2016, it
increased by approximately 83 million that means its profit was 768 in 2016. Its operating
income has also increased in 2016 that means its income was 454 million approximately while in
2015 that was only 405 million approx. Overall, it can be said that its net income is increasing
day by day as in 2015, it was only 193 million approx. while in 2016, it is around 215 million.
So, from above interpretation, it can be concluded that Domino's is moving towards the success
of path (Gooner, Morgan and Perreault Jr, 2011).
From a survey, it also came to know, cited company charged extra amount for large
cheese and tomato pizza which was mistake of it. But after realising of mistake, Lioyds bank
refunded extra amount to that person as well as also give 100 Euro to him as a compensation.
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(Source 4: Domino's Net Trade Cycle, 2017)

6) Key success factors of Domino's company
There are various factors which influence the success of company which are given as
below-
Key success factors Descriptions
Strong brand equity  It is the second largest pizza company
in the world.
 It has good brand identity in the market.
 It is famous for fastest services in
comparison to others.
 It has captured a large market share
throughout the world.
Strong and proven business model  It adopts franchise business strategy in
which it gets royalties and also
generates revenues from supply chain.
 Its model is cost efficient which is
characterized by a delivery and also
carry out oriented store design.
 Its production and delivery process
maximizes economies of scale on
purchases of principal food items.
Technological innovation  To adopt the latest technology will give
more opportunities to Domino's to
generate more revenue that is more than
50% approx.
 It has launched mobile application
which is a great effort for capturing
large market share (Greco, Cricelli, and
Grimaldi, 2013).
 It also introduced voice ordering
applications and Domino's Tracker
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which are available on the Pebble smart
watch platforms.
 For improving its operation efficiency,
it designed a PULSE point of sales
system.
Product Innovation  In 2009, it again introduced its core
pizza with new ingredient or recipe for
getting growth in customer reorder rate.
 It brings some innovation in their
products according to the
recommendation of master franchisees
as well as on the basis of requirement
of local market.
Internal Dough Manufacturing and Supply
Chain System
 Its management is focusing on
improving the quality and consistency
of their products and also, try to
maintain better relationship with
franchisee.
 It allows manager to focus on store
operations as well as on consumer
service (Greco, Cricelli and Grimaldi,
2013).
7) Analysis of competitive, internal and external resource and capabilities of Domino's
Competitive analysis- It is an important approach for every company because it aids an
enterprise in achieving competitive advantages over its rivals. In this, organisation analyses
strengths, weaknesses, policies, etc. of competitors so that it can make its strategy accordingly
and can attain its expected results (The Industry Life Cycle, 2017). Domino's main competitors
are like Pizza Hut, Papa John's, Subway. Competitive analysis matrix of Domino's and Pizza Hut
are as follows-
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Competitive information Domino's Pizza Hut
Products It provides various range of
goods such as pizza, pasta,
desserts, etc. It provides
various types of pizza like
supereme etc.
It serves pizza, buffalo wings
and hot sandwiches.
Products strengths  It serves pizza in an
innovative manner and
also, sells in four style
like personal, small,
medium and large.
 It provides an
expanded menu and
slightly more upscale
options.
 It has the fastest
delivery services.
 It provides guarantee
that it will deliver their
services within 30
minutes.
Its weaknesses  It is criticized when
provides some meals
which contains high
salt.
 It does not serve to
those persons who are
health conscious.
Its main drawback is that it
provides goods which have
overly sweet sauce.
Competitive advantage Store front delivery Its main competitive
advantages is having less price
of goods or services.
Competitive disadvantages  Slow services
 High price of products
Internal and external resources- Domino's has four types of resources which are as
follows-
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 Financial resources- It involves various source of income, funding and investment
opportunities. Its financial structure will decide how much company can bear monetary
risk (Value Chain Analysis, 2017). Physical resources- It involves equipment, locations and various facilities of company. It
is an important element of organisation because without having this, firm will not be able
to serve the consumers in an effective and efficient manner (Killen and et,al., 2012). Human resource- It involves staff of company who are the backbone of firm because
they aids an eneterprise achieving business objectives.
 Natural resources- It includes raw materials which are helpful in the production of pizza
such as flour, sugar, yeast, vegetables, etc.
Value Chain analysis- With the help of this analysis, it is described that how many
activities are carried out within an organisation by which products or services can be created. It
has main motive to identify the activities and their impact on business. In short, it evaluates that
which activities will create value for the company (Greco, Cricelli and Grimaldi, 2013).
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Primary activities-
 Inbound logistic- Company can purchase raw material which includes-
◦ Dough
◦ Cheese
◦ Vegetables
◦ Breads
◦ Sugar
◦ Oil etc. Operations- Pizza is prepared with the help of above mentioned sources according to the
requirements and expectations. Customization of pizza in which Domino's put flavour or
toppings according to the requirement of consumers. Outbound logistic- In this, pizza base is transported to Domino's outlet where they keep
it and used for customization as per order (Moutinho, 2011).
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(Source 5: Value chain analysis, 2017)

 Marketing and sales- Its mainly target to those person who have age not more than 55
years which includes all families, working people, travellers etc.
 Services-
◦ Serve hot pizza to consumers so that their demand can be full filled.
◦ To tell about new menu to the customers in a polite manner.
Supporting activities- Procurement- It refers to those activities which are required for getting necessary
resources. Technological development- Domino's takes feedback from the consumers so that it can
improve their services. It also uses the latest technology such as new application by
which consumers can book their order online which saves their time and energy (Hill,
Jones and Schilling, 2014).
 Human resource management-
◦ It focuses on hiring of the new employees.
◦ Also provides training to them so that they can perform their job effectively and
efficiently.
8) PESTLE analysis Of Domino's
PESTLE analysis is used for analytical business planning. Many strategies using in
PESTEL analysis like tax changes, new laws, trade barriers etc. PESTLE stands for political,
economic, social, technological, legal and environmental. Domino's company make pizza and
provide a good quality of service to customers(Grewal, Janakiraman and Tolerico, 2010). The
following factors are explaining to Domino's company's PESTLE analysis: Political Factors: - There are many factors which influence business operation which
may have positive or negative manner. Domino's company also affects from all political
factors like tax rates, tariff barriers elections trends, bureaucracy, corruption (Mudambi
and Venzin, 2010). Economic factors: - Economic factors or economic structures also affects to Domino's
business which includes various elements like interest rate, foreign exchange rates,
employment. Condition of country etc. For example- if there will be recession period
then it will decrease sales of company.
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 Social factors: - It includes changing customer's need and wants, their attitude and
lifestyle. Domino's company can be role model for a customer if it serves a best quality
and hygienic pizza to them. Customers always expect to cited company that they will get
different taste of pizza every time. If there will be any change in their taste then
organisation has also changed their menu. Technological factors: - If Domino's use an old technology to make pizza and other
beverages then it will affect to company's business. So it should adopt latest equipment so
that it will be able to attract large customer’s base. It also introduces mobile applications
by which people can order. Legal factors: - It includes various legal factors like laws, regulations which affect to
business operation. There are various law like consumer’s law, employment law, safety
regulations etc. which affect Domino's performance (Parnell, 2010).
 Environmental factor: - It is another important factor for Domino's company which
includes climate change that is a big issue for the Domino's. Many gases, toxins affects
badly to environment during pizza making process.
9) Ratio analysis of Domino's balance sheet
 Current ratio: Current ratio/Current liabilities
In 2016- 1.23 %
In 2015- 1.60%
 Quick ratio: Current assets-stock/ Current liabilities
In 2016- .48 %
In 2015- .60 %
 Gross profit ratio: Gross profit / Net sales*100
In 2016- 31.05 %
In 2015- 30.82%
 Net profit ratio: Net profit / Net sales*100
In 2016- 8.68 %
In 2015- 37.04%
Interpretation- From the above calculation, it can be concluded that Domino's position is
good in the market. Its current ratio was 1.60 % in 2015 while in 2016, it was 1.23% which is a
good symbol for company because an ideal ratio of current ratio is 2:1 and its calculation is
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under this amount. In quick ratio, ideal ratio is 1:1 and Domino's has .48% which is good for the
success of company. In 2016, firm has 8.68 % while that was 37.04 % in 2015.
CONCLUSION
From the above report, it can be concluded that Domino's is developing day by day and
has captured approx. 7.06 % market share. It is the second largest pizza company in the world
which is the reason that it has to face intense competition in the market. Its main competitors are
Pizza Hut, Subway, etc. which are also the great leaders in market. Report has also stated about
firm’s key success factors which contributes in getting specified result or outcome such as
technological development, variety of products, etc.
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REFERENCES
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