BM6024: Domino's Pizza Case Study - Strategic Analysis and Growth

This case study report analyzes the strategic situation of Domino's Pizza, focusing on its operations in the UK and international markets. It begins with an introduction to Domino's and its market presence, followed by an in-depth PESTLE analysis of the external environment in the UK, identifying political, economic, social, technological, legal, and environmental challenges. The report then assesses Domino's internal business situation using the VRIO framework, evaluating its valuable, rare, imitable, and organized resources. A Porter's Five Forces analysis is conducted to understand the competitive environment, including buyer power, supplier power, new entrants, substitutes, and competitive rivalry. Finally, the report explores strategic options for future growth, applying Ansoff's Matrix to suggest market penetration, product development, market development, and diversification strategies. The report provides a comprehensive assessment of Domino's strategic position and offers recommendations for future growth and development.

Case Study

Contents
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
1. Analyse the key challenges facing the company in the external environment in the UK.......1
2. Analyse the internal business situation and resources of the company in the UK..................2
3. Analyse the competitive environment of the company in the UK and the international
markets.........................................................................................................................................4
4. What strategic options and directions could the company pursue for the future growth both
in the UK and the international markets ?...................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Dominos is an American international pizza restaurant chain which was founded in the year
1960. The company has 1,126 stores in UK and generated a revenue of £1,210.9m in the year
2019 (Domino’s Pizza Group Plc Annual reports and accounts, 2019). In the following project
report, an attempt has been made to identify the key challenges being faced by the company in
UK, analyse the internal resources and competitive environment to prepare and recommend a
future strategic direction for business growth and development.
TASK
1. Analyse the key challenges facing the company in the external environment in the UK.
PESTLE Analysis of Domino’s UK:
There are many factors in the external environment of any business organisation which
affects the process of strategic managerial decision-making. PESTLE Analysis is a tool or a
framework which is used by the managers to analyse the factors of external environment and
their likely impact on the business operations to identify any opportunities or challenges (Perera,
2017). Here is a PESTLE Analysis of Domino’s UK to determine the challenges facing the
company in the external environment:
Political Factors: Factors such as political instability and uncertainty present a challenge for
the management of the company. Due to Brexit, the management of Domino’s are facing the
challenges of procuring from local suppliers in the country which has also increased the
operational costs for the company. Obesity control programs and plans implemented by the
Government of UK have also presented a challenge in the form of external political environment
for the management of Domino’s Pizza UK.
Economic Factors: Economic factors such as level of income, tax rates, import-export duty
also presents challenges for the management of Domino’s in UK. However, with the rising level
of income of the people in the UK, there has been an increase in the expenditure on fast food
markets which is an opportunity for the company. But the Government of UK has introduced
Goods & Service Tax on fast food markets as well which has been a challenge for the
management of Domino’s in UK.
Social Factors: Social factors translate to trends and changes in consumption behaviour
patterns of the people. External environment factors related to trends of consumption in the
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society have been a challenge for the management of Domino’s in UK. People are becoming
more aware and concerned about the healthy eating habits which might prevent them from eating
out. Increasing awareness amongst the people in the UK related to junk eating and bad impacts
on health has been one of the major concern and challenges for the company (Domino’s Pizza
Group Plc Annual reports and accounts, 2019). Current pandemic and uncertainty of Covid19
also presents a major challenge for the company.
Technological Factors: It can be said that this decade has witnessed one of the biggest
waves in technological changes and innovations that have almost disrupted the operations in
every industry. Keeping up with the technological developments and adapting these changes in
the company operations has been a major challenge for the management of Domino’s in UK
(Pepitone, 2013). Online presence and sales is one of the most important factors which
determines its overall revenue. As a measure of promoting technological innovations, huge
investments in app development and in-store technology have been made. Over 90% of the
delivery orders for the company in UK are now being made online.
Legal Factors: Legal factors and rules and regulations have been one of the major
challenges which is being faced by Domino’s in UK. Brexit and other political matters have also
brought a lot of changes in the current rules and regulations regarding suppliers and distributors.
The management has incurred a huge cost for legal advice and guidance on various matters such
as production methods, legal product and the requirements of Energy Savings Opportunities
Schemes. As the products offered by the company have a direct impact on the health of people,
the company is also required to comply with various rules and regulations of safe product and
food items which is another serious challenge.
Environmental Factors: Over the past few years, the dimension of external environment
related to ecological balance and nature protection has come upfront which has put the onus on
companies like Domino’s to reduce and mitigate the carbon footprints and emission of green
house gases. Energy consumption in stores and the production processes of the company create a
harmful impact on the environment and this presents a huge challenge for the company to
improve its sustainability standing and eco-friendliness.
2. Analyse the internal business situation and resources of the company in the UK.
VRIO Framework for Domino’s UK:
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VRIO Framework is an important tool which can be used to analyse the strength and
capacity of the internal resources and business situation of Domino’s in the UK as a source of
competitive advantage (Knott, 2015). VRIO framework comprises of four important dimensions
used to evaluate resources of a company which are valuable, rare, imitable and organisation.
Here is an application of this framework for Domino’s in the UK:
Valuable: Internal resources which are held by the company with relevance to United
Kingdom are highly valuable. A strong base of financial resources helps the company to deal
with the threats which emerge from external environment and helps in investing into
opportunities of growth and expansion. Employees and human resources of the company in UK
are also a valuable resource for the company and the company currently has more than 2,000
employees in the UK (Domino’s Pizza Group Plc Annual reports and accounts, 2019).
Moreover, an efficient and effective network of distributors is also another valuable resource for
the company. Although, the company’s cost structure is not a valuable resources since it reduces
the profitability of the company as a result of high production costs.
Rare: Financial resources held by the company are found to be rare since there are only a
few other companies in the industry with such a strong base of financial resources. Employees
and a strong distribution network is also another rare resource of the company which has the
potential of providing competitive edge for the company in the long-term business environment.
Imitable: Financial resources of the company have been built as a result of years of
operations and profits which is very difficult to imitate for any new player or firm which enters
the industry (Hartley, 2015). Strong network of distributors is also another resources which is not
easy to imitate. Trained and highly skilled employees can be imitated without much efforts by
any company with adopting right kind of training and development programs for its employees
and the workforce.
Organisation: The most important resources of the company are well-organised which gives
the leverage to the management of Domino’s in the UK to use these resources for deriving a
competitive edge for the company. Financial resources and a strong network of distributions is
organised in a way by the managers which provides them ability to use it for the growth and
profitability in the operations along with other resources of the company.
On the basis of above VRIO Analysis, it can be observed that the management of Domino’s
in the UK have a strong competitive advantage based on the huge financial resources of the
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company which is one of the biggest strengths of the company as well. An effective distribution
network is also another internal strength of the company and a valuable resource which is not
easy to imitate and provides a competitive advantage to the company.
3. Analyse the competitive environment of the company in the UK and the international markets.
Porter’s Five Force Analysis of Domino’s:
Porter’s five force analysis is a tool of strategic management which can be used by the
managers of a business organisation to identify the strength of five market forces which
determine the competitive position of any company in an industry (Dobbs, 2014). This tool can
be used to understand the competitive environment of Domino’s in UK and the international
markets:
Bargaining power of buyers: Bargaining power of buyers in case of Domino’s with
reference to both international markets as well as the markets of UK is a high force as there are
number of options which are available for the customer and the switching costs are also very low
which gives a very dominant position to the buyers of the company.
Bargaining power of suppliers: Bargaining power of suppliers in context of international
markets is almost negligible or very low for Domino’s as there are a number of options or
alternatives which are available for the company which helps the company to procure materials
at the best prices and of the best quality (Sheehan, 2014). In case of markets in UK, the
bargaining power of buyers is low to moderate since the Brexit has forced the company to make
significant changes in its supply-chain management which has also given some power to the
buyers.
Threat of new entrants: Threat of new entrants in case of both the international markets
as well as markets in United Kingdom for Domino’s is a high operating force primarily because
of a large number of firms and companies entering into the fast food industry with great value
propositions for the customers. Companies and restaurants entering the industry at local level in
UK presents a threat for the company and increases competition as the risk of losing market
share at local level to these rivals increases (Domino’s Pizza Group Plc Annual reports and
accounts, 2019).
Threat of substitutes: There is a high threat of substitute products from other fast food
companies and food joints in both the international markets as well as markets in UK for the
Domino’s. Decision of a customer to shift from the product being offered by the company to the
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other substitutes available in the market is primarily influenced by the quality, price and the
switching costs which is insignificant in this case. Hence, threat of substitutes is a high force for
Domino’s.
Competitive Rivalry: Competitive rivalry and extent of competition for the company is
very high in the markets in UK as well as international markets. More players and companies are
entering into the food industry than ever because of its attractiveness and increasing customer
demand. However, to give competition to a company like Domino’s at international level is not
an easy task but the competition at local and national levels still exists which is a lot to reduce
the sales, revenue and market share of the company (Domino’s Pizza Group Plc Annual reports
and accounts, 2019). There are many local pizza shops and companies in UK which give
immense competition to Domino’s.
It can be concluded that the competitive position of Domino’s in international market as
well as markets in the UK is not very strong as there is a high competition and the management
of the company needs to adopt policies and formulate strategies for improving the competitive
edge for the company.
4. What strategic options and directions could the company pursue for the future growth both in
the UK and the international markets ?
Ansoff’s Matrix for Domino’s:
Ansoff Matrix is a tool which is used by the management of any organisation in planning
and strategic formulation of policies for future growth and business development. The tool
provides four different strategies of market growth and expansion for any business organisation
which are market penetration, product development, market development and diversification
(Schawel and Billing, 2012).
Market penetration refers to the use of tools of sales promotion and marketing to sell more of the
existing products of the company to the existing customer base.
Product development as a strategic direction for growth refers to offering new products and
services to the existing customers of the company for higher revenue and growth.
Market development refers to offering existing products in a new market.
Diversification refers to launching new products in a new market.
The management of Domino’s should focus on market penetration which involves using
sales promotion tools for additional sales in the markets of UK and the current existing internal
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markets. This strategy can help the company in attracting more customers and increasing the
revenue of the company. Higher revenue and market share can help in future growth and
development of the company’s business. Along with market penetration, product development
strategy of business growth is also required for the company to improve its competitive position
in the international markets and in the market of UK (He, Zha and Li, 2013). Rapidly changing
environment and innovations have forced the company to launch new products and food items
which have the power to attract more people and customers and can help the company in fighting
the completion in the international and in the markets of UK and creating the base for future
growth and development in both the markets.
CONCLUSION
On the basis of above report, it can be concluded that external environment of Domino’s UK
presents many challenges for the company such as political uncertainty, rising taxes, changing
consumer eating habits, technological innovations, legal complications and impact of company
operations on nature and ecological balance. It can also be said that the internal business
situation and resources of the company provides it an edge in the market and its industrial
environment. At last, it can be concluded that the management of the company should adopt cost
leadership strategy along with differentiation strategy for obtaining the position of leader in the
industry and improve the competitive position of the company in its industry.
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REFERENCES
Books and Journals
Dobbs, M.E., 2014. Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review.
Hartley, S., 2015. Domino's dominate with digital design. Busidate. 23(3). p.2.
He, W., Zha, S. and Li, L., 2013. Social media competitive analysis and text mining: A case
study in the pizza industry. International Journal of Information Management. 33(3).
pp.464-472.
Knott, P.J., 2015. Does VRIO help managers evaluate a firm’s resources?. Management
Decision.
Pepitone, J., 2013. Domino's tests drone pizza delivery. CNNMoney, June, 4.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Schawel, C. and Billing, F., 2012. Ansoff-Matrix. In Top 100 Management Tools (pp. 22-24).
Gabler Verlag, Wiesbaden.
Sheehan, N.T., 2014. Pizza, Pizza, Pizza: A Competitive Strategy Exercise. Organization
Management Journal. 11(1). pp.40-46.
Online
Domino’s Pizza Group Plc Annual reports and accounts. 2019. [Online] Available thru
<https://investors.dominos.co.uk/system/files/uploads/financialdocs/dominos-ar19.pdf>
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