Introduction
Domino's is one of the biggest Pizza business in the USA with a turnover of over $220 Million and over 10000 branches worldwide and 20,000 employees. For such a massive business venture it is crucial to prepare a BCG matrix, Grand strategy matrix and a QSPM for analyzing the best business strategies to steer its growth and earn profits.
BCG matrix for Domino’s pizza
As Melton, Dave, and Tim (67) wrote in their journal; the BCG matrix is a portfolio planning model for businesses that is done by modeling a company’s portfolio into four classes: Stars, question marks, cash cows and dogs.
Stars: This class entails the commodity of trade of Domino's that generate the biggest revenues. It also includes the command of the largest market share. The brand is best known for pizzas. Of the 2.2 billion revenues, 80% comes from the sale of pizzas, and it has a market command of 65% after edging out pizza hut to clinch its top position globally. Before the business had a break-even in the early 1950's, the Pizzas generated most revenues and equally the greatest cost, however, after the 1960 there was a turnaround for the stars which became a cash cow for the business venture which has been the case up to now. The greatest reason for the breakthrough of the business venture was the decision to invest heavily on Pizzas for the efficiency of services; the business was able to acquire and secure its market share for pizzas.
(a)
High Low
High
Low
(b)
Arrow (a) is the relative market share
Arrow (b) is the market growth rate
Stars: This class entails the commodity of trade of Domino’s that generate the biggest revenues. It also includes the command of the largest market share. The brand is best known for pizzas. Of the 2.2 billion revenues, 80% comes from the sale of pizzas, and it has a market command of 65% after edging out pizza hut to clinch its top position globally. Before the business had a break-even in the early 1950’s, the Pizzas generated most revenues and equally the greatest cost, however, after the 1960’s there was a turnaround for the stars which became a cash cow for the business venture which has been the case up to now. The greatest reason for the breakthrough of the business venture was the decision to invest heavily on Pizzas for the efficiency of services; the business was able to acquire and secure its market share for pizzas.
Cash cows: Cash cows are the most lucrative components of a business venture they eventually generate more cash than production costs. Pizzas are the cash cows because they generate the biggest revenues; however, they fall into the class of cash cows because they have no prospects for future growth other than be expansion into the international markets. The organization has been on record by using the proceeds from pizza sales to cover the administrative costs of the company, to fund innovation ventures and development of the organization.
Dogs: Also defined as pets, dogs are a class or products units that have a combination of a small market share and a slow growth rate. The dogs of Dominos are coca colas that accompany pizzas. Although the coke has already broken even and earns a profit for the firm, the product neither earns nor consumes a lot of production costs.
Question marks: These classes of businesses have the potential for growth but a very small market share. They result in high operation costs but have small proportional returns. In this business, the main areas of question marks are the expansion strategies into Africa, Kenya in particular. A low purchasing power characterizes these markets in customers. However, in the coming years, the venture into this market will be a star since these markets are in growing economies with positive expectation in the future.
Grand strategy matrix for Domino
Llanas, Sheila and Tom (24) defined the grand strategy matrix as an instrument for creating strategies for firms, and the matrix has four quadrants. A firm must fall into one of the quadrants which have the characteristics of the organization.
Rapid market growth
Quadrant 2 Quadrant 1
Development of the product Development of the product and market
Market development Penetration of the market
Penetration of the market Backward integration
Horizontal/vertical organization Forward integration
Divestiture Concentric diversification
Weak competitive position strong competitive growth
Quadrant 3 Quadrant 4
Retrenchment Related or Unrelated diversification
Related or Unrelated diversification Horizontal/vertical integration
Conglomerate diversification Conglomerate diversification
Divestiture Joint ventures
Slow competitive growth
Domino’s business falls in Quadrant 1. The fast food market is growing at a very slow pace in the country. This is because of the slow population growth in the market and additionally the spirited efforts by health specialists to sensitize the people about the health side effects of eating fast foods that are the main products of Domino's. Domino's commands a huge share of the fast foods markets in many places where it exists primarily due to its concentration on Pizzas as the main commodity of production.
In the recent past, the business venture diversified the production by incorporating products like boneless chicken, hamburgers and oven baked sandwiches to its line of production. Additionally, Domino's has been at the forefront of promoting its one line Pizza business by introducing the order delivery strategy that ensures the Pizzas are delivered on call order. The ordering system was made easy by the introduction of the special high capacity delivery cars in the early 2010s.
QSPM for Domino
Based on the Comerica’s Swot Analysis Journal, QSPM for Domino’s is illustrated below. It is the critique that evaluates the strategies that the entity will take in operation to determine their viability. The main strategies for Domino’s are global expansion and diversification of operations for the business.
Exhibit
A QSPM for Domino
The strategies are to expand globally or diversify the products.
Strategic alternatives
Going global Diversifying products
1 2
WEIGHT AS TAS AS TAS
Opportunities
1. Population of city growing 2% 0.15 4 0.60 2 0.30
2. Pizza Hut storesclosingup 0.05 2 0.10 4 0.20
3. Increased Human traffic of 4% 0.10 1 0.10 4 0.40
4. Celebrity campaigns 0.02 - -
5. Reduction of gas prices by 3% 0.09 - -
Threats
1. Anti-fast foods campaigns 0.10 4 0.40 3 0.30
2. Mass emigrations of population 0.05 - -
3. Increase of rents and input costs 0.05 4 0.20 1 0.10
4. New mall being built near 0.10 2 0.20 4 0.40
5. Gas prices up 1% 0.05 - -
6. Wage increases by 8% 0.05 - -
Strengths
1. Increase of purchases by 2% 0.05 - -
2. Market dominance by 65%0.062 0.14 4 0.28
3. Excellent brand name 0.05 - -
4. In-store promotions resulted
in 20% increase in sales 0.05 - -
5. Media advertising expenditures
Up by 3% 0.02 - -
Weaknesses
1. Increase in tax 0.01 - -
2. Refurbishments being costly 0.034 0.60 1 0.15
3. Vulnerability of the website 0.0210.02 4 0.08
4. Supply on-time- delivery 0.00 3 0.02 2 0.03
TOTAL 1.00 2.38 2.24
Analysis of possible strategies
According to Williams (27) QSPM model, the business should "Go global". The attractiveness score for diversifying the products will, however, have a lesser pay off subjectively because the Domino's Pizzas are the brand's product and customers might not be able to embrace the new products fully in the short run period. Going global on the other hand will have a higher pay off partly because of the worldwide socialization of many nations that American brands are the best and the trendsetters. Despite the higher pay-off for the globalization of Domino's, the pay- offs have a slight difference of 0.08 which can be corrected by adoption of the lesser paying strategy and re- thinking about it.
Cultural factors to be considered when choosing the alternative strategies
Melton et al. (76) say that there are a variety of factors to consider in choosing the alternatives among them being the beliefs and customs of the target market, population density, wealth, population size, cuisine habits, taxation and diversity of the population.
Best strategies to recommendation
The best strategy to be adopted and implemented is the globalization of Domino’s especially to socially westernized third world countries like Ghana, Kenya, and Nigeria. The business reward will be tremendous given that these economies’ wealth is growing steadily and their markets are huge and growing at a fast rate.
Conclusion
A market strategy that seeks to increase the revenues of Domino's by attracting new customers is the best. An elaborate model for strategy analysis should be used to make the right decision concerning the strategy to adopt. It is of great importance to always consider the long-term objective of Dominos of being the industry leader when drafting the strategies.
Works Cited
Williams, Chuck. Effective Management. Australia: South-Western, 2013.
Llanas, Sheila G. Tom Monaghan: Domino's Pizza Innovator. , 2015.
Melton, Dave, and Tim McIntyre. Hire the American Dream: How to Build Your Minimum Wage Workforce into a High-Performance, Customer-Focused Team: Lessons from Domino's Pizza, Where Deliverymen Become Millionaires. Hoboken, N.J: Wiley, 2009. Print
Comerica, Inc. Swot Analysis. London: Data monitorPlc., n.d.. Internet resource.
