Introduction
Conducting an internal and external analysis of a company is very important to properly plan and execute medium and long-term strategies. Internal and external factors analysis help determine a company’s strengths, weaknesses, opportunities, strength which are useful in identifying strategies. This paper will analyze the internal and external factors of Domino’s Pizza, one of the leading providers of pizzas in the world. It discusses the pizza industry, the competitive environment, and the sound strategies for Domino’s Pizza.
The report used extensive desk researches, qualitative, and qualitative analysis. The premise is that Domino’s Pizza may be less competitive as it only ranked second among the industry players. However, further analysis revealed that Domino’s Pizza is growing faster than its competitors, has stronger competitive profile, and will more likely achieve its goal to be the number one pizza company in the future.
Comprehensive Written Analysis
External Environmental Analysis
Industry Analysis
The pizza industry is worth USD 40 billion as pizza is one of the most preferred foods of the Americans consuming 100 acres of pizza a day (Franchise Help, 2016). According to an article in The Economist (2015), the pizza industry is benefiting to the health and wellness trend making the pizza chains profitable gaining share against the cheap fast food stores such as Mc. Donalds.
The industry also benefited from its cost-efficient and convenient delivery services as it help the consumers save from eating out expenses, and the players’ menu innovation and new variations help allure and maintain consumers’ interest and loyalty (The Economist). The pizza industry is currently doing well and has a promising future in the foodservice sector.
The pizza industry is quite fragmented with about five key pizza chains and several small stores/specialized pizza providers. Millenials are the best target market for pizza as they are active in social media and can easily advertise and post pictures of various pizza products they purchase, according to Mallory Schlossberg (2015) of the Business Insider.
Competitive Analysis
A Pizza Day (2015) news article revealed that Domino’s Pizza is the second largest pizza store in the United States next to Pizza Hut but ranks before the third largest player, Little Caesar. The company registered USD 485 million in revenue by September 2015 and net income of USD 130 million by the end of the third quarter of 2015, a 6.5 percent growth from the previous year (Arbor, 2015). The registered revenue accounted for more than 1 percent of the industry’s market size/value of USD 40 billion.
Domino’s Pizza revenue growth was attributed to its global store reimaging, higher domestic sales, services innovation, and increase in store count of 194 (Arbor, 2015). However the 6.5 percent growth in 2015 was lower than the 14 percent registered in 2014 (Arbor, 2015). Kattie Little (2015) said that pizza orders through smartphone accounted for almost 50 percent of Domino’s Pizza’s sales.
The company’s closest competitor, Pizza Hut, experienced 1 percent decline in the early part/ February of 2015 despite its aggressive product innovation and release of new menus in its specialty pizza lines in November 2014 (Nichols, 2015). The decline is higher in the United States when the sales fell 3 percent, but the new products were said to attract the market segment of millennial (Nichols, 2015). The overall sales of Pizza Hut, Nichols (2015) noted, was affected by the 5 percent decline in the store sales in China due to supply issues.
Monica Watrous (2015) reported that Pizza Hut registered 2 percent growth in revenue in the first quarter of 2015, but the operating profit was only USD 81 million, a 2 percent decline from the previous year. The decline was despite its adaption to digital order trend and is attributed to less effective marketing campaign and too much focus on millennial as target market that suffered sales from the mainstream pizza eaters (Watrous2015).
Little Caesar refused to adapt the technology of smartphones as a means to receive orders from consumers although it applies coupon code entries through smartphones for loyalty programs (Little, 2015). There was a little information obtained about the financials of Little Caesar and the latest available is the 2013 sales record of USD 3.07 billion.
The information obtained above showed that Domino’s Pizza is the second largest pizza provider but is also the fastest growing in terms of revenue and profit and may lead in the pizza industry if its innovation continuous to place a competitive edge for the company.
Threats and Opportunities
A marketing website recently analyzed the threats and opportunities of Domino’s Pizza. It stated that the threats include increasingly becoming stiff competition among the key players and other foodservice sectors, increasing awareness on pizza calories that can reverse the impact of health and wellness to Domino’s Pizza, and increasing cost of pizza production and store operation (Marketing 91, 2016).
In addition, the company’s potential threats include high brand recall of the key competitor, Pizza Hut, in the emerging markets as it has higher and older presence, increasing number of specialized pizza stores that offers unique and good tasting pizza products, slow economic growth in China and European markets, and higher preferences of the high income consumers on specialized pizza stores due to its exclusivity appeal.
Domino’s Pizza’s considerable opportunities include competitive expansion in the emerging market due to consumers’ higher disposable income, target market expansion by creating a wholly- owned subsidiary pizza store targeting the high net worth consumers attributed to presence of premium trend, more aggressive marketing campaign to be the most preferred brands of the corporate clients as it is a huge and growing market segment due to team building activities, more mobile apps and social networking partnership for order processing, and positive perception acceptance to the pizza industry.
Domino’s Pizza can also benefit from creating new products that can satisfy the health and wellness trend, celebrations tie-up and promotions, making way to cost-efficient production through investments on farm lands for cheaper cost of ingredients, and apply energy efficiency policy for lower operational cost and higher revenue growth.
External Factors Evaluation
Below is the External Factors Evaluation Matrix which shows the responsiveness of the company in the external factors or opportunities and threat. The matrix was rated between 0 to 4. Zero means not responsive, while 1 is low responsiveness, 2 means average responsiveness, 3 translates to more responsiveness, while 4 means high responsiveness. The total weighted score of Domino Pizza is 4.536 which mean that the company is highly responsive to external forces.
Competitive Profile Matrices
The following matrices were based on the structure proposed by the Strategic Management Insight (Ovidijus, 2013). The matrices show the competitive profile scores of the three companies in the critical success factors. The scores are interpreted as 1- major weakness, 2- minor weaknesses, 3- minor strength, and 4- major strength. Domino’s Pizza scored the highest strength of 3.94 which can be translated to major strength due to its continuous success, sales growth, and vibrant performance.
Pizza Hut had the second highest score of 3.49 owing to its huge market share and higher volume sales. However, its decline in profit and slow revenue growth made it scored lower than Domino’s Pizza despite having higher market share. The new products of Pizza Hut were unsuccessful. Little Caesar scored the list due to lower market share and less usage of technology in its sales process.
Trends Significant to the Industry and the Company
Based on the information obtained above, the significant trends affecting the health and wellness industry include health and wellness, products and services innovation/technology usage, cost of pizza production and distribution, adequate raw materials supply, and economic health of a country/market.
The trends affecting Domino’s Pizza are premium trend, global expansion particularly to emerging markets, technology, and health and wellness trend. The company is also affected with the growing trend on celebrations, business synergy, and the trend for cost effective/renewable resources.
Key Areas of Trends/Events Uncertainty that can Impact Strategy
Economic uncertainty in Europe, China, and Middle East may affect the strategy and business growth of Domino’s Pizza. The political turmoil in the Middle East may have negative economic impact in the region as well as the North America and Europe which may affect the company’s sales. The potential popularity of increasingly becoming popular specialty pizza providers may also eat up share against Domino’s Pizza.
Internal Environmental Analysis
Domino’s Pizza Mission and Vision
Domino Pizza’s website (2015) stated that his mission is to the best and number one pizza company in the world. Its website revealed no vision statement and objectives. The company’s mission statement can be improved by adding customer welfare related statement to its leadership, and it must have a vision stating it’s mid and long term goals and objectives.
Hence, the mission statement can be restated as: To be the best and number one pizza company in the world and to provide every households the best tasting and healthy pizza for better well-being and life. The vision should be stated as: To assume global leadership in the pizza industry, and to be the most preferred brand of all time. The objective is provide quality food for the consumers.
Company Background
Domino Pizza is one of the leading producers and distributors of pizza in the United States. The company was established in 1960 with several networks of franchised-owned branches nationwide and international markets (Domino Pizza, 2016). It started as operating as one store in 1960, and by 2014, Domino Pizza (2016) had a total of 11,000 stores across the globe.
Internal Analysis- Corporate Level Strategy
One of the key factors of Domino’s Pizza’s is its recent distribution pizzas in Italy (Waish, 2015). The company also applies synergy strategy as it has its own dough manufacturing plant that helps reduce operational cost, and has a reliable business model with cost-efficient process and supply chain (Domino’s Pizza, 2016).
Internal Analysis- Business Unit Level Strategy
Domino’s Pizza, one of the largest players, innovates its pizza products and sales services, which are the key factors to its dramatic success. The company’s stock price grew 12 folds from 2010 to 2015, from USD 8.76 to USD 104.52.
Dominos Pizza’s Chief Executive Officer Patrick Doyle attributed the success to strategies that are unexpected for a pizza company which include launching of pizza delivery car and sales through emoji texts. The said strategies are innovative and customer-centric (Waish, 2015).
Internal Analysis- Functional Level Strategy
The company maximizes the strength of its market research and marketing departments as it continuously bank on advertising for brand recall, new product developments, and most useful and trendy services.
Company’s Interaction
Domino’s Pizza has excellent interaction with its stakeholders as reflected in its updated financial reports, press releases about its current corporate and product developments, operational success which reflects proper coordination with its corporate departments, suppliers, and franchisees. Its innovative services, new product ranges, and advertisements reflect is unrelenting interaction with customers according to their needs and wants.
Strengths and Weaknesses
One of the evident strengths of Domino’s Pizza is innovation in its services such as usage of pizza delivery car and sales through emoji texts, the key factor in its sales and stock price growth. Domino’s Pizza (2016)’s website listed the company’ strengths which include strong recall of its brand owing to its advertising efforts, tested and reliable business structure, adaption of technology for the provision of services, new product varieties, and synergy of its own dough manufacturing to help reduce manufacturing cost and enable an efficient supply chain.
A marketing website identified Domino’s Pizza’s weaknesses and these include quality control issues due to large number of franchisees, lower sales in the older market, faster turnover rates due to people’s training issues, and insufficient number of restaurants as it invests more on delivery stations (Marketing 91, 2016). The company also suffers with less flexible target marketing as it fails to tap the market of the specialized pizza stores.
Internal Factor Evaluation
Below is the company’s weighted score on its strengths and weaknesses. The scores range from 1 to 4 being 1 as the major weakness and 4 as the major strength. The results revealed that Domino’s Pizza’s strengths overcome its weaknesses as it continued to have strong weighted score.
Financial Ratios
The following are the ten financial ratios of Domino’s Pizza from its financial statement in PR NewsWire (2015) and Market Watch (2015).
Strategies to capitalize on strengths
Domino’s Pizza need to continuously develop advertising campaigns fit on the current trend to maintain or even enhance the brand recall of the company. It should monitor its business model and apply changes when necessary or when the market conditions require it. The company needs to research and reinvent menus that will fit the taste of the target markets and meet the changes in the lifestyle and consumer preferences.
The company also needs to watch the increasingly becoming popular social networking sites, mobile applications, and emerging technology to continue link its services to the technological developments. It is advisable to invest in farmlands to create its own source of ingredients for a more cost-efficient supply chain.
Strategies to improve major weaknesses
Domino’s Pizza can create regional quality control offices to address its quality issues resulting from large number of franchises. It can solve other weaknesses by expand target to the emerging markets in terms of locations and consumer segment, providing training and room for growth for employees, and expanding eateries particularly to the underserved areas. It must also create varieties that can entice the taste of the niche market of the specialized pizza stores.
References
Domino’s Pizza. 2016. What We're About. Retrieved from https://biz.dominos.com/web/public/about
Waish, Tom. 2015. Domino's CEO rides audacity to top leadership award. Detroit Free Press. Retrieved from http://www.freep.com/story/money/business/columnists/tom-walsh/2015/11/21/dominos-doyle-leadership-award/76062024/
Schlossberg, Mallory. 2015. The pizza industry is experiencing an unprecedented divide. Business Insider. Retrieved from http://www.chd-expert.com/resource-center/the-u-s-pizza-market-a-large-slice-of-the-foodservice-industry
Franchise Help. 2016. Pizza Industry Analysis 2016 - Cost & Trends. Retrieved from https://www.franchisehelp.com/industry-reports/pizza-industry-report/
Pizza Today. 2015. The Top Five Pizza Companies are Pizza Today. Retrieved from http://www.pizzatoday.com/industry-news/the-top-five-pizza-companies-are/
Arbor, Ann. 2015. Domino's Pizza® Announces Third Quarter 2015 Financial Results. PR Newswire. Retrieved from http://www.prnewswire.com/news-releases/dominos-pizza-announces-third-quarter-2015-financial-results-300156370.html
The Economist. 2015. Rising dough in the pizza industry. Retrieved from http://www.economist.com/blogs/economist-explains/2015/02/economist-explains-24
Domino’s Pizza. 2016. Our mission. Retrieved from https://biz.dominos.com/web/public/about#start
Domino’s Pizza. 2016. Our strengths. Retrieved from http://phx.corporate-ir.net/phoenix.zhtml?c=135383&p=irol-whydominos
Nichols, Chris. 2015. Pizza Hut's new menu isn't helping sales much yet. Yahoo Finance. Retrieved from http://finance.yahoo.com/news/pizza-hut-s-new-menu-isn-t-helping-sales-much-yet-215832223.html
Watrous, Monica. 2015. Pizza Hut dishing disappointment. Food Business News. Retrieved from http://www.foodbusinessnews.net/articles/news_home/Financial-Performance/2015/04/Pizza_Hut_dishing_disappointme.aspx?ID=%7B4E15C742-3CB2-4DB2-A0D0-8524035BEE84%7D&cck=1
Little, Katie. 2015. Little Caesar's has no 'app for that'—and that's just how they like it. CNBC. Retrieved from http://www.cnbc.com/2015/03/12/little-caesars-has-no-app-for-that-and-thats-just-how-they-like-it.html
Statista. 2014. Sales of Little Caesars in the United States from 2008 to 2014 (in billion U.S. dollars). Retrieved from http://www.statista.com/statistics/261886/us-sales-of-the-pizza-chain-little-caesars/
Marketing 91. 2016. Dominos SWOT analysis – SWOT analysis of Dominos. Retrieved from http://www.marketing91.com/swot-analysis-of-dominos/
Jurevicius, Ovidijus. 2013. Strategic Management Insight. Retrieved from https://www.strategicmanagementinsight.com/tools/competitive-profile-matrix-cpm.html
Market Watch. 2016. Domino’s Pizza. Retrieved from http://www.marketwatch.com/investing/stock/dpz/profile
