Category: Domino’s Pizza

Domino’s Pizza Inc. is one of the giants in the pizza chains sector. This industry has witnessed significant incorporation of technology to foster the realization of substantial market share. In this view, Domino’s expansion strategy has forced it to consider various aspects of the environment in which it operates. Effective strategic management requires organizations to deploy tools such as PESTEL and Porter’s Five Forces to analyze their business settings. In this respect, this paper identifies business environment aspects that stand out for the case of Dominoes.

One Segment of Domino’s General Environment

Political, economic, socio-cultural, technological, environmental, demographic, and legal aspects characterize the general business environment in which an organization operates (Grant, 2015). The technological segment stands out for the case of Domino’s broad business setting. This organization continually seeks to improve its competitiveness in the pizza industry by integrating automated methods into its operations. According to Aley (2017), the notable digital ordering avenues employed by Domino’s include the use of social media platforms such as Twitter, Facebook, and the zero-click app. This strategy aims at minimizing human contact in the ordering process to facilitate the realization of greater efficiency and, consequently, business profitability.

Porter’s Five Forces: Competition

According to Grant (2015), Porter’s Five-Force model of analysis facilitates the assessment of factors that account for the ability of industrial players to sustain different profitability levels. In Domino’s case, the level of competition in the industry stands out as one of the elements of Porter’s Five-Force framework. Patrick Doyle who manages Domino’s American-based businesses asserts, “We had somehow created a situation where people liked our pizza less if they knew it was from us…So yeah, that was a problem” (Aley, 2017, para. 1).

The perception created by customers implies that rivals, including Pizza Hut, had a better competitive edge compared to Domino’s. However, Aley (2017) reveals that the enhancement of Domino’s competitiveness through product development and the integration of technology to foster the ordering aspect have made Domino’s realize a remarkable 15% share of the pizza restaurant market in 2016 compared to the 9% allocation held in 2009. Therefore, market competitiveness influences Domino’s strategic approaches.

Innovation Enactment

The integration of the zero-click app is one of the ways that demonstrate the enactment of innovation at Dominoes. This technology fosters efficiency in the ordering process by allowing customers to use their phones to place an “Easy Order”. The automatic ordering feature of the application makes this app better because it helps to place orders on behalf of consumers after 10 seconds elapse (Aley, 2017). As such, this invention demonstrates the extent to which Domino’s deploys technology in its strategic business approaches.

Technology as Domino’s Cornerstone

The application of technology at Domino’s improved the quality of service delivery and, consequently, the size of this company’s client base. Hence, it has become the cornerstone of Domino’s strategy. As Aley (2017) indicates, the voice-activated tool and the zero-click app have streamlined the digital interaction of customers with Domino’s when placing orders. Consequently, the improved quality of service has attracted more customers for Dominoes to the extent of informing its decision to expand the number of pizza restaurants.

Conclusion

Domino’s is now one of the leading competitors in the pizza industry, thanks to the integration of technology into its strategic approaches. As such, Domino’s took account of the technological segment of the general business environment to ensure that it expands its market share. The most notable way in which the company enacted innovation is through the development of the zero-click application that enhances the convenience of placing orders. Domino’s ability to effectively analyze its operations environment has made it realize desirable profits.

References

Aley, J. (2017). Domino’s atoned for its crimes against pizza and built a $9 billion empire. Bloomberg. Web.

Grant, R. M. (2015). Contemporary strategy analysis: Text and cases edition (9th ed.). Hoboken, NJ: John Wiley & Sons.

Objectives of the paper

This paper attempts to carry out a demographic survey of Malaysia Market. It collects demand data and makes forecasts for Domino’s Pizza. Finally, it gives recommendations to the management of the company on whether to venture in to that market.

Demographics of Malaysia

The country’s total population was 23, 953,136 in 2005. The population growth rate was 1.8% in the 2005 census. The country’s per capita income is $9,700.

Economy of Malaysia

The country’s economy relies on service sector. Industrial productions make a larger proportion of both imports and exports. The table below shows the country’s GDP over the past five years.

Source of data – The World Bank Group, 2012

Independent and dependent variables

Demand curve depicts the inverse relationship between the quantity demanded and the price of goods (or services). There are several determinants of demand. Price of the good is a significant determinant of demand. Increase in price of the commodity causes a decline in demand. Price of related goods, either substitutes or complements, affects demand.

Increase in price of a substitute commodity leads to an increase in demand while a decrease in price of complement leads to a decline of quantity demanded. Secondly an increase in buyers leads to increase in demand. Customers’ future expectations also affect current demand. Customers reduce their current demand when they expect favorable future prices.

Advertisement affects demand positively. Regression analysis estimates the demand equation. The regression uses one dependent variable and six independent variables (McGuigan, Moyer, & Harris, 2008). The depended variable is the quantity demanded. The independent variables are price, advertisement, income, price of soda, future price changes, and price of pasta.

Demand equation

The regression line takes the form Y = b₀ + b₁X₁ + b₂X₂ + b₃X₃ + b₄X₄ + b₅X₅ + b₆X_6. The theoretical expectations are a₁ takes any value, b₂ >0, b₃ > 0, b₄ < 0, b₅ < 0, and b₆ > 0.

Results of regression

Source of data for analysis of demand – US Census Bureau, 2012

From the above table, the regression equation takes the form Y = 133.91 – 13.98X₁ + 9.46X₂ + 0.12X₃ – 0.38X₄ – 0.90X₅ + 1.61X_6.

Coefficient of determination

Coefficient of determinations shows the amount of variation of the dependent variable that the independent variables explain. For this regression, the value of coefficient of determination is 98.35%. This implies that the independent variables explain 98.35% of the variations in demand.

To improve on the value of the coefficient of determination, variables which are not statically significant need to be dropped. Alternatively, more variables can be included in the formulation.

Testing statistical significance of the variables

Testing statistical significance shows whether each variable is a significant determinant of demand. Testing the statistical significance of the variables makes use of t-test. This is because the sample size is small. Hypothesis testing uses a two tailed test at 90% level of confidence.

Null hypothesis: Ho: a_i = 0

Alternative hypothesis: Ho: a_i ≠ 0

Results of hypothesis testing

The null hypothesis implies that the coefficients are not significant determinants of demand. Rejecting null hypothesis implies that the variables are statically significant. From the table above, price and advertisement are the only statistically significant variables are 10% level of significance. The other four variables are not statistically significant at 10% confidence interval.

The demand equation formulated is not strong enough to predict future values. This is because only two are statistically significant. Addition of variables during formulation makes the estimated demand equation accurate for forecasting. In addition, the sample size should be increased.

Forecasts for the next four months

The table below summarizes the results of forecast for four months.

From the above table, demand grows over the four months period. The forecast assumes that advertisement grows at 20% while the remaining explanatory variables grow at 0.5833% per period. The growth rate takes the real rate of GDP growth rate in the country.

Recommendations

Management of Domino’s Pizza Company should go ahead and invest in the country. However, final decision should be made after carrying out comprehensive feasibility study of all aspects of the venture.

References

McGuigan, J. R., Moyer, R. C., & Harris, F. H. D. (2008). Managerial economics: Applications, strategy, and tactics. Mason, OH: South-Western Cengage Learning.

The World Bank Group, (2012). Data. Web.

US Census Bureau, (2012). Data access tools. Web.

Domino’s Pizza Case Study Analysis: Introduction

Domino’s Pizza is a fast food chain of restaurants that is headquartered in the United States of America, but it has a large network of international branches worldwide (Abc News, 2013, para 5). The firm was established in 1960 by two brothers, Tom Monaghan and James Doyle, following the duo’s successive takeover of Dominicks. The business changed its trade name to Domino’s Pizza, Inc. five years later, in 1965, following a decision arrived by its sole owner Tom Monaghan at the time.

The firm’s first franchise store opened in 1967 in Ypsilanti. This reflected its growth. The first international store opened up in early 1983 in Canada’s Winnipeg area in the Manitoba province. The chain presently has a presence in close to 70 countries across the world. It employs a workforce of more than 145,000. It is considered to be the leading global fast-food chain of restaurants with corporate, as well as franchised stores that exceed the 10,000 marks (Domino’s, 2013, para 1).

Case Study Domino’s Pizza: Competitive Challenges

Domino’s competes with other numerous fast food chains in the market that include both international and local market players. Domino’s is ranked second in the global market behind another American brand, Pizza Hut that is owned by YUM! Brands. Other established industry players include McDonald’s Corporation and Papa John’s International.

The rival firms have equally expanded their franchise networks and spread throughout the global market. The major competitive challenge has been maintaining lower operational costs in order to sustain higher profitability amidst the poor global economic situation. Consumers’ spending power was reduced significantly as many people considered spending their little disposable income on basic necessities only (Gluyas, 2013, para 2).

Domino’s Pizza Strategy Case Study: External Analysis

Positive market outlook

Consumer demands are also expected to increase with the overall global economy improving following poor performance in the recent past. According to Morning Star (2013, para. 6), restaurant industry sales in the US are expected to attain the $604 billion mark. This will represent a 3.6% annual growth.

This is critical, particularly coming immediately after a period of economic lull that lasted for about three years (Morning Star, 2013, para 7). The improving economic situation and conditions are enabling customers and potential buyers remain with a significant amount of disposable income that they can eventually spend on luxury products, such as buying and enjoying fast foods with their families and friends.

International market expansion

Domino’s eventual entry in 2010 into the German market has provided it with a great opportunity to enhance its profits and market performance in general.

A Master Franchise Agreement signed between the company and Yakir Gabay, the owner of over 3,000 residential units and a multiple number of hotels, offers a lucrative business opportunity for the restaurant chain. This has seen Domino’s grow to become the leading hotel operator in the entire German market. The growth is also attributed to Yakir’s extensive business network (Morning Star, 2013, para 3).

Growing health concerns

There has been growing concern among the consumers of fast foods that continued consumption of junk foods puts food users at greater risks health wise.

This situation could see quite a considerable number of potential customers lower their demand for the foods sold at Domino’s. In essence, the company will suffer losses as a result of diminished sales because its main focus is on pizza products (BizLeader, 2013, para 4).

Margin expansion

The fast food industry is one of the leading industries globally in terms of high competition. The existing players are well established and pose a great market challenge to each other. New entrants are also flocking the industry (BizLeader, 2013, para 4).

All the players face the challenge of affecting their respective margin expansion as internationalization remains the obvious option to sustain the competition. The firms are spending huge capital amounts to sustain the expansion. This eventually puts the firms at the risk of failing to recoup substantial returns (PR Newswire, 2013, para 3).

Domino’s Pizza Analysis: Internal Factors

Great innovation

Domino’s Pizza is renowned for its ability to study its experiences and make corrective measures to enhance its future market performance. This has enabled the company to increase its innovation ability. This innovative approach led to a timely solution to the cold pizza delivery problem. The firm has also earned itself the tag of being a leading market trend setter. Domino’s main focus is on satisfying customers and achieving better customer experience (Pizza Marketplace.com, 2013, para. 4).

Robust brand name

Domino’s Pizza is a strong brand name that is renowned for its pioneering pizza delivery business (PR Newswire, 2013, para 5). This, in turn, influences its power to retain and build loyal customers. It also enables the firm to constantly introduce new products.

For instance, the company has introduced several brands of its food products, including Domino’s Oven Baked Sandwiches, Domino’s BreadBowl Pats, as well as Chocolate Lave Crunch Cakes, among many others over a very short span of time (PR Newswire, 2013, para 6).

Given the goodwill that the brand has managed to build in the market, Domino’s can afford to introduce many products and still benefit from immediate customer acceptance. This reduces the possibility of encountering losses as a result of products taking too long in the market introduction and familiarization phase.

Poor advertising skills

Domino’s committed a blunder in its marketing and advertising strategy when the company informed its consumers that it was able to deliver fresh and hot pizza irrespective of cold weather conditions. The villainous character, “The Noid”, was annoying and fictitious (Montgomery, 2013, para 3). It caused more confusion in the company’s marketing strategy, although it was short-lived.

Competitive Challenge

The situation of the credit markets in the US has been of major concern in limiting Domino’s from achieving maximum market growth in the country. In close to ten years now, Domino’s has not been able to expand its operations in the US market through expanding its network of stores. As Buss (2013, p. 2) notes, only as little as 1,000 new stores are being planned for the US market by the company’s management.

This contrasts heavily with its external market plans that have so far lined up thousands of new stores for opening. The company is continuously reducing its number of stores in the US market. This affects its ability and power to compete in the world’s leading fast food market (Buss, 2013, p. 2).

With the US economy only having emerged from a financial crisis that spread all over the world, there are limited chances that the situation will normalize in the very near future in order to boost the company’s competitive power in the market. Thus, it implies that the single-unit operators within the American market are curtailed from opening up new branches to contain the challenge being posed by other rival firms, such as McDonalds.

It is worth noting that only 10 percent of Domino’s outlets in the US are company-owned, with the remaining 90 percent being franchised-owned (Buss, 2013, p. 1). It is a more challenging fact for Domino’s to fail to expand its market presence within this lucrative market, with the US market being by far the largest pizza market in the whole world (Buss, 2013, p. 1).

Current Strategies

Domino’s is currently combining a series of strategies to formulate its major market strategy that has helped in enhancing its market operations and performance. With the advent of information technology, the firm has focused on developing a digital marketing technology that it has integrated with social media to increase interactivity with its mainly youthful clientele.

Additionally, the company is combining this with consistent pricing strategies for its menu as a means of sustaining its sales momentum that it has managed to enjoy for the last few years.

Digital platform

Domino’s has established a mobile-optimized website that is intended for use in making orders online. The firm has also pursued a plan that has eventually seen it introduce both Smartphone, as well as tablet apps intended for use in making orders (Marshall, 2013, para 6).

The Pizza Hero game software that was launched for iPad use underscores the great determination by the company to make use of digital capabilities in enhancing market performance. With the majority of fast food consumers mainly being youthful people, the company is relying on the group’s admiration for IT to attract them and eventually influence its market performance.

The popularity of social media websites, Facebook and Twitter, has also been inculcated into Domino’s market strategy as the company uses these platforms to increase its interactivity with customers. Potential customers are also attracted by the social marketing power upon reading sentiments and recommendations by the company’s long-standing customers. In other words, the company is utilizing the power of social media to reduce its advertising costs as the platform achieves the same results (Speedy, 2013, para 5).

Domino’s Pizza Case Study: Strategic Management Recommendations

Direct store ownership

Domino’s should consider involving itself directly in owning stores, especially within the lucrative American market. Waiting and hoping that the credit market situation in the country will stabilize in the near future to enable the franchisers the opportunity to borrow funds and expand their outlets is impractical.

Instead, Domino’s should invest part of its capital in opening up company-owned outlets to boost its overall presence in the market. This will give the firm a greater footing, similar to its main rivals.

In case running too many company-owned outlets poses a management challenge for the company, the organization can make arrangements with its individual market partners to hand them the shops. Such an arrangement would see the individual entrepreneurs run and manage the outlets as though they owned them personally, but submitting the resultant profits to the franchiser and receiving quotas from the same.

This will help in spearheading expansion in the market, while also empowering the franchise to grow their businesses. With Domino’s setting the quota-based system on the franchisee’s performance in the market, most of the franchisees will work hard to ensure that the businesses they manage grow bigger.

Conclusion of Domino’s Pizza Case Study

Domino’s Pizza is a leading global fast-food restaurant chain whose headquarters and foundations are based in the USA, but it has an enlarged network covering over 70 countries. The chain is currently considered as the second-best performing in the market after another American brand Pizza Hut. Domino’s greatest strength is in its innovation skills and capabilities that have seen it emerge as a market pioneer in many instances.

However, it’s advertising and marketing strategies have hampered its market performance following its promise to the market that it would manage to deliver hot and fresh pizza to its clientele during the cold season. Improving the global financial situation, especially after a long-term crisis, is proving to be of benefit to the company as it offers added opportunities for growth. Equally, the international expansion of the company is influencing its overall market performance by expanding the market and increasing sales volume.

The greatest market challenges for the firm are the failure of its US-based franchises to access credit and expand their business operations. This is affecting the overall business performance because the American market is by far the largest globally in as far as pizza sales are concerned.

Thus, any firm must take the American market seriously if it intends to compete effectively. As a remedy, the firm should invest directly in opening up branches in the country and invite franchisees to manage the branches on its behalf, instead of wasting time in waiting for the normalization of the domestic credit market.

List of References

Abc News, 2013, Domino’s Pizza® wants select startups, great ideas to be #PoweredByPizza, Web.

BizLeader, 2013, Domino’s Pizza® online ordering is faster than ever with launch of pizza profiles, Web.

Buss, D., 2013, ‘Domino’s global growth feeds Pizza chain’s rising success’, Forbes, Web.

Domino’s, 2013, About Pizza, Web.

Gluyas, R., 2013, ‘Meij delivers larger slice of Domino’s pie’, The Australian, Web.

Marshall, R., 2013, ‘Domino’s Buderim CEO aiming high‘, Sunshine Coast Daily, Web.

Montgomery, R., 2013, ‘Investors find Domino’s is topping out’, The Australian, Web.

Morning Star, 2013, Pittsburgh Domino’s Pizza franchise owner reaps national accolade, Web.

Pizza Marketplace.com, 2013, Domino’s new store design hits New Orleans market, Web.

PR Newswire, 2013, New Orleans Domino’s Pizza opens first new store design in the West Bank Area, Web.

Speedy, B., 2013, ‘Domino’s lifts profit, eyes expansion into Japan’, The Austrian, Web.

Introduction

The plan for the day was to have an outing within town. However, we wanted to complement the outing with some snacks. We settled on having vanilla, the ice cream we realized was only offered at Domino Pizza. As a matter of fact, Domino Pizza is one of the restaurants in town that offer variety of fast food products and a mixture of services. We settled on Domino Pizza due to the exemplary services delivery, affordability, and the quality of services being offered.

The pre-purchase stage

According to services consumption, the pre-procurement phase in the restaurant services consumption starts from touching the requirements of the clientele, which continue through the examination of info, as well as assessing the available options to the final decision concerning the procurement of specific services (Marsden & Littler, 1998). The final decision to buy the service will depend on the level of the need of the consumer to buy that service (Hunt, 2004).

The need awareness

We wanted something that was more of a snack and suitable for the outdoor outing. Moreover, we wanted a snack that is fashionable and affordable according to our pre-planned outing within the town center. When we were setting out, we had not decided yet on which restaurant we will visit or what kind of snack we will buy.

However, we knew that at some point we would need some snacks. Our need for a snack was not only aroused by the physical well-being, but also in the manner by which Domino Pizza has been advertizing its ice creams on the television (Shashikala & Suresh, 2013).

The advert claims that it is stylish and fashionable only when an outing was complemented with the ice creams. Nevertheless, our need for the ice cream was motivated by combined factors. According to McColl-Kennedy and Fetter (1999), the consumer needs can be aroused by the physical well-being or condition of the individual, aspirations, as well as external sources.

However, we could shift our wants depending on the situation on the ground and the type of services the ice cream dealers will provide. Gabbott and Hogg (2005) argue that fast food dealers’ knowledge of shifting the attitude of the consumer offers an opportunity to understand and meet the changing needs of the consumer.

Information search

Once we already agreed on the ice cream, we embarked on the search for the type of ice creams available and the restaurants that offered such types of the ice creams. The information search we embarked on was in line with Kim et al. (2010) assertions that once the customer has identified the need, he will be driven to search for information and evaluate the alternatives before the final decision could be made. In addition, the recognition that we wanted an ice cream motivated our search for the resolution.

The process of looking for the best restaurant that offers the best ice cream is what constituted our information search (Marsden & Littler, 2008). We were not only looking for the best restaurant but also restaurants that were affordable and offered quality services.

Exploring solutions

The fact that we wanted affordable ice creams that were of high quality prompted us to look for a restaurant that offered vanilla. Thus, the recognition of this need motivated us to look for the best solutions. According to Alba and Hutchinson (2008), the solution should suit our need.

We were looking for a restaurant that not only serve Vanilla flavors but also had better services. After identifying the need, we began looking for the best restaurant.

We came up with various options and started to look for the pros and cons of each restaurant. The process took some time before settling on the final restaurant. From the available internet information, we decided to settle on Domino Pizza because of its quality vanilla and services rendered to the clients. In fact, their prices were affordable according to the amounts we wanted to spend on the ice creams.

Evaluating various alternative service providers

Vanilla and other types of ice creams were served on various restaurants around town. However, we settled on Domino Pizza because of its quality and prices. We found out that the vanilla we wanted was affordable and was served with candy-coated creams, an extra flavor that other restaurants did not have.

In addition, the physical environment, the furnishings of the rooms, the packages, and the quality of supportive services met our expectations. Hirschman (2003) asserts that customers will have to evaluate different service offerings when faced with various alternatives. Besides these attributes, we realized that the restaurant was safer as opposed to what we expected. Hogg (2004) argues that most of the restaurant customers are risk averse and will always prefer safer options.

The purchase decision

We decided to purchase the Domino Pizza products after we had already assessed the physical environment including the furnishings and other attributes such as the prices and the quality of supportive services. However, prices were fundamental consideration before making the final purchasing decision.

We compared the prices of various Vanilla flavors and settle on the one that was affordable. According to Hjorth-Andersen (2007), the final decision to purchase the services comes after the customers have assessed the performance of the important attributes of the competing services providers, the perceived risks, and the predicted level of the satisfaction with the service. In fact, the quality of services within Domino Pizza was beyond our expectation.

The service encounter stage

The stage is amongst the core of the services consumption experience. In this stage, the customer experience direct interaction with the services providers. The duration of interaction will depend on the type of services being consumed (Holbrook, 2007). In fact, our encounter with the Domino Pizza personnel began from the point we made an inquiry of the available choices of ice cream flavors. The decision to buy the Vanilla, a type of ice cream that we wanted was because of the way the steward presented herself. The Vanilla was elegant and was served with candy-coated creams that explode in the mouth.

Generally, the restaurant personnel, furnishings, equipment, packaging, and the type of flavors were beyond reproach. We decided immediately that this is the place to visit whenever we need ice creams. The steward serving us decided to offer another type of vanilla with dried fruit for free to find if it tasted good.

She explained that they wanted to introduce the new flavor and the flavor was found only in Russia. We were so pleased and the flavor tasted so good that we decided that we would buy immediately when on sale. In this first visit, we already developed long-term relations with this restaurant.

Throughout our stay within the restaurant, consumption experience was appealing in terms of the physical environment and the interaction with the restaurant personnel. As expected, during the stay in the restaurant, the physical clues about the restaurant became distinguishable.

Indeed, everything was appealing. The equipment and furnishings, the behavior and appearance of the restaurant personnel were beyond criticism. In fact, the restaurant has utilized the “moment of truth” model to ensure that they provided satisfactory services to their customers.

Post-encounter stage

In this stage, consumers evaluate the performance of the experienced services against their expectations (Holbrook & Hirschman, 2002). In the context of restaurant services, the affirmation or non-affirmation of the pre-utilization prospects become indispensable co-determinants of consumer contentment.

In other words, consumers of the services have predetermined levels of satisfaction before the consumption (Holbrook, 2007). The predicted levels of services are the result of the information search and choice processes. The post service satisfaction depends on the pre-consumption expectations.

Going to Domino Pizza was informed by the expectation that they offered the best ice creams around town. Besides, apart from various brands of ice creams that met our expectations, the restaurant had the best services. The restaurant stewards are very fast in their services delivery. No queues and crowding that characterize the normal ice cream shops within town. From the information received from the internet, Domino Pizza packages are attractive and sparkling clean.

Within the restaurant, tables, service equipment, and even the way the personnel presented themselves are beyond reproof. The expected extra services Domino Pizza was offering were drawn from the information that was searched about the restaurant rooms. In fact, it was pleasurable to find out that Domino Pizza offered such services beyond our expectations. The likelihood that the restaurant will be revisited and recommended to other students is high.

Recommendations

Since Domino Pizza has services with high-end attributes, consumers have difficulties in their evaluation processes before they make their purchases (Hudson & Murray, 2006). Most of the products and services offered by Domino Pizza have increased amount of acceptance characteristics that it becomes a problem for most of customers to appraise before making the final decision for purchase (Gould, 2005).

Since most of the customers could not evaluate the products before making purchase, they felt that it would be risky to buy what they have not tasted. Therefore, Domino Pizza should occasionally offer gifts particularly on the new products they introduce in the market since customers would prefer going for their usual brands instead of new brands of pizza.

In addition, the services being offered by Domino Pizza are high-end and therefore they are challenging to the customers (Barry & Howard, 2000). Domino Pizza personnel have many points in which they interact with the customers. Therefore, the management should ensure that the personnel manage these various points of contact properly to ensure satisfactory services delivery.

Proper management can be achieved by developing appropriate services delivery system. When developing their services delivery system, Domino Pizza should ensure that the backstage activities are well coordinated with the front state activities to increase the satisfaction experience to the customers.

Domino Pizza should be aware of the shifting attitude of its customers in order to offer services that meet their changing needs. Satisfied customers will make repeat purchases and recommend such services to other people. In fact, Domino Pizza should ensure that their services are pleasurable and surprising, offer positive disconfirmation, and exceed the desired levels of their customers.

Conclusion

Restaurants like Domino Pizza should understand how individuals recognize the need for services they provide, seek out for alternative solutions, attend to the apparent threats, choose, utilize, and experience particular services. Finally, Domino Pizza must comprehend how customers assess their services experiences depending on the perceived outcome.

In essence, managing the behavior of customers within the three stages of services consumption is central towards creating value to meet the needs of customers. In the context of restaurants that need repeat business, satisfying customers is vital in building the required long-term relations.

References

Alba, J. & Hutchinson, J. (2008). Dimensions of consumer expertise. Journal of Consumer Research, 13 (2), 411-454.

Barry, T. & Howard, D. (2000). A review and critique of the hierarchy of effects in advertising. International Journal of Advertising, 9(3), 121-135.

Gabbott, M. & Hogg, G. (2005). Consumer behavior and services: A review. Journal of Marketing Management, 10(4), 311 – 324.

Gould, S. (2005). Researcher introspection as a method in consumer research: Applications, issues and implications. Journal of Consumer Research, 21(4), 719-722.

Hirschman, E. (2003). Ideology in consumer research 1980 and 1990: A Marxist and feminist critique. Journal of Consumer Research, 19(3), 537-555.

Hjorth-Andersen, C. (2007). Price as a risk indicator. Journal of Consumer Policy, 10 (3), 267-281.

Hogg, M. (2004). Anti-constellations: Exploring the impact of negation on consumption. Journal of Marketing Management, 14(1), 133-158.

Holbrook, M. & Hirschman, E. (2002). The experiential aspects of consumption: Consumer fantasies, feelings, and fun. Journal of Consumer Research, 9(1), 132-140.

Holbrook, M. (2007). What is consumer research? Journal of Consumer Research, 14(2), 130.

Hudson, L. & Murray, J. (2006). Methodological limitations of the hedonic consumption paradigm and a possible alternative: A subjective approach. Advances in Consumer Research, 13(2), 343-348.

Hunt, S.D. (2004). On rethinking marketing: Our discipline, our practice, our methods. European Journal of Marketing, 28(3), 13-25.

Kim, M, Wang, C. & Mattila, A. (2010). The relationship between consumer complaining behavior and service recovery: An integrative review. International Journal of Contemporary Hospitality Management, 22(7), 975–991.

Marsden, D. & Littler, D. (2008). Positioning alternative perspectives of consumer behavior. Journal of Marketing Management, 14(1), 3-28.

Marsden, D. & Littler, D. (1998). Positioning alternative perspectives of consumer behavior. Journal of Marketing Management, 14(3), 3-28.

McColl-Kennedy, J. & Fetter, R. (1999). Dimensions of consumer search behavior in services. Journal of Services Marketing, 13(3), 242 – 265.

Shashikala, R. & Suresh, A. (2013). Role of ‘servicescape’ in influencing service consumer behavior: A literature review. ZENITH International Journal of Multidisciplinary Research, 3(4), 2231-5780.

Revenue and profit streams, core activities, and geographical sources of the revenues

About Dominos’ Pizza

Domino’s Pizza, founded on June 10, 1960, is based in Michigan, United States. The company deals with the delivery of desserts, chicken wings, pasta, and Pizza. It is the second-largest Pizza Delivery channel in the United States. The company trades on the New York Stock Exchange. Its subsidiaries such as Domino’s Pizza UK and Ireland trades on the London Stock Exchange (Thomson Reuters 2013). The company has a presence in over 70 countries. Out of the 70, 50 are located within the stated in the United States. The company ranks second in the United States after the Pizza Hut. The heavy presence of the company in various countries can be attributed to franchising. The company owns about ten thousand stores across the world. Most of these stores are franchises. This paper will focus on analysing the Domino’s Pizza UK & Ireland Limited (Domino’s Pizza UK & Ireland Limited 2013a.)

Domino’s Pizza UK & Ireland Limited

It is a subsidiary of Domino’s Pizza Group Inc. The subsidiary has engaged about 24,000 employees and team members. The mission of the Subsidiary “is to be the best pizza delivery company in the UK, the Republic of Ireland, Germany and Switzerland” (Domino’s Pizza UK & Ireland Limited 2013a, p.1). The group has about 124 franchises. Each franchisee owns about 6.3 stores. The subsidiary operates in the United Kingdom, Republic of Ireland, Luxembourg, Liechtenstein, Germany, and Switzerland. The table below summarises the number of stores in the various regions within the United Kingdom and Ireland (Domino’s Pizza UK & Ireland Limited 2013a).

Source of data – Domino’s Pizza UK & Ireland Limited 2013b, p. 21

England regions have the highest number of stores followed by Scotland, Republic of Ireland, and Wales. The Pie chart below illustrates the share of the number of stores in each region.

Source of revenue

Domino’s Pizza UK & Ireland Limited generates revenue from three primary sources. The first source is from Royalties and sales of franchises. This mainly comprises of revenue from “sale of pizza, sale of commissary food, equipment and delivery charges to franchises” (Domino’s Pizza UK & Ireland Limited 2013b, p. 19). It also includes commissions that arise from the sale of stores to customers. The second category of revenue is rental income. The company earns rental income from the leasehold properties it holds. The third category is the finance lease income. It arises from “interest income from financing provided to franchises or finance leases” (Domino’s Pizza UK & Ireland Limited 2013b, p. 19). The table below summarises the key financial data for the company.

Income statement items

Source of data–Domino’s Pizza UK & Ireland Limited 2013b, p.67

The net profit margin of the company increases from £26,466,000 in 2011 to £30,307,000 in 2012. This is a 14.51% increase. It is consistent with the director’s statement “the Group profit for the period after taxation was £30,307,000 (2011: £26,466,000). This is after a taxation charge of £12,062,000 (2011: £12,323,000) representing an effective tax rate of 28.5% (2011: 31.8%)” (Domino’s Pizza UK & Ireland Limited 2013b, p.32). From the table, it is clear that all the items in the income statement of the company grew over the two years. The values are also consistent with the highlights provided by the Chief Finance Officer review p22.

Balance sheet items

Source of data – Domino’s Pizza UK & Ireland Limited 2013b, p. 68

The balance sheet items also increased over the period. Total assets increase by 18.48%; total liabilities increased by 18.87% and shareholder’s equity increased by 17.87%.

Classification of revenue

The table below summarises the source of revenue as per the three critical sources mentioned above.

From the table above, it is evident that about 93% of total revenue is generated from the core activities of the business. These are royalties and sales of franchises. It is followed by revenue from rental income on leasehold and property at about 6%. Revenue from Finance lease income only contributes 0.15% of the total income. It is quite negligible. The pie charts below show the amount contributed by the various sources in 2011 and 2012.

Financial analysis

The reported financial statements of the company do not give an in-depth analysis of the strengths and weaknesses of the company. Therefore, it is necessary to carry out an in-depth analysis of the financial statements to have a better view of the company. Further, an analysis of the company helps in making an informed decision. Ratio analysis is a standard tool used to carry out financial analysis. It breaks down the financial data into various components for a better understanding of the financial strengths and weaknesses of the company (Collier 2009, p. 10; Brigham & Ehrhardth 2009, p. 273). Ratio analysis will focus on the profitability, liquidity and the gearing level of the company.

Profitability

Profitability ratios indicate the earning capacity of an entity. The ratios measure the effectiveness of a company in meeting the profit objectives both in the long run and short run. The ratios show how well a company employs its resources to generate returns. Commonly used profitability ratios comprise of gross profit margin, operating profit margin, net profit margin, the return on asset ratio, and the return on equity. The table below summarises the profitability ratios of the company for the past one year.

The profitability ratios for the company were relatively high. The gross profit margin was 36.59%. The operating profit margin was 17.74%, and the net profit margin amounted to 12.60%. Return on assets was 16.67% while the return on equity was 43.09%. The ratios measure the efficiency of management in using resources to generate sales and revenue.

Liquidity ratios

Liquidity ratios show the ability of an organisation to maintain positive cash flow while satisfying immediate obligations, that is, the availability of cash to pay current debt. It is necessary to maintain optimal liquidity ratios since either low or very high ratios are not favourable (Holmes & Sugden 2008, p. 76). The table below summarises the liquidity ratios of the company for the past one year.

The current ratio of the company was 1.322. This implies that the current liabilities can be paid off using current assets. However, the quick ratios were quite low. This implies that the current liabilities cannot be paid off using quick assets.

Gearing ratios

A company’s leverage is explained by the amount of debt financing it holds. The ratios are vital since they show the investor the extent of exposure to equity financing. A commonly used ratio is the debt to equity ratio. A high leverage ratio is not favourable since it scares away capital providers. It is because high ratios imply an increase in interest expense. This reduces the income attributable to shareholders. On the other hand, very low ratios are not favourable since it shows that the management of the company is not willing to exploit the potentials of the company (McLaney & Atrill 2008, p. 26). The table below summarises the gearing ratios of the company for the past one year.

The debt to equity ratio shows that the amount of equity in the capital structure of the company is quite low. This implies that the company has room for taking more debt and expanding the size of the business. Further, the interest coverage ratio was quite high at 30.55 times. This implies that the earnings before interest and taxes can cover interest expense 30 times. This is quite favourable. It also gives the company room to take more debt. Management should be cautious of the amount of debt in the capital structure since too much debt can scare away potential investors. A lot of debt reduces the amount of net income attributed to shareholders. This, in turn, increases the cost of equity (Financial Times Limited 2013).

In summary, the results above show that the company is in a sound financial position, as indicated by the high profitability ratios and efficiency ratios. The management of the company needs to work on the liquidity ratios. There are several ways of improving liquidity. First is by increasing the current assets. The companies may reduce the average collection period. This is the time it takes for the company to receive payment from its debtors. Lesser collection periods are always preferred. This reduces the amount of time of changing debtors to cash. The companies may also increase their levels of cash and cash equivalents. The focus should not be on improving the stocks since there are associated costs that accrue when holding inventory.

Current economic conditions of a country where Domino’s Pizza operates

Analysis of the United Kingdom

The section will analyse the economy of the United Kingdom market. From the reviews above, it is evident that over 70% of sales for the company is generated from the United Kingdom market. The table below summarises the total sales for the UK region.

Since the United Kingdom region generates the highest amount of sales for the company, it is vital to analyse the market condition for the country. First, it is essential to look at the GDP of the country. The table below summarises the GDP of the UK for the past five years.

Source of data – Guardian News 2013

The GDP of the country has been on an upward trend since 2007. However, it declined in 2009 due to the economic recession. The recession in2009 affected the performance of the business.

The economy has not fully recovered from the various recession that arose from a lot of debt that the economy could not support. This resulted in a slump in different institutions and businesses in the United Kingdom. Various analysts have reported a possibility of an economic recession in the coming years (BBC 2013a; BBC 2013b). This can be attributed to the inability of the economy to fully recover from the previous recession. Businesses anticipate reporting losses as a result of the recession. Management of the company needs to adequately plan for the recession so that the profitability of the company is not heavily impacted (Economic Watch 2013).

References

BBC 2013a, The UK economy to enter recession soon, says the report, Web.

BBC 2013b, UK economy grew more than thought in 2012, Web.

Brigham, EF & Ehrhardth, MC 2009,Financial management theory and practice, South-Western Cengage Learning, USA.

Collier, P 2009, Accounting for managers, John Wiley & Sons Ltd, London.

Domino’s Pizza UK & Ireland Limited 2013a, About us, Web..

Domino’s Pizza UK & Ireland Limited 2013b, Annual Report and accounts 2012, Web.

Economic Watch 2013, UK economic condition, Web.

Financial Times Limted 2013, Domino’s Pizza Group PLC, Web.

Guardian News 2013, UK GDP since 1955, Web.

Holmes, G & Sugden, A 2008, Interpreting company reports, Financial Times/Prentice Hall, Harlow.

McLaney, E & Atrill, P 2008, Financial accounting for decision makers, Prentice Hall Europe, Harlow.

Thomson Reuters 2013, Domino’s Pizza Group PLC, Web.

It is important to note that Domino’s Pizza is a strong multinational company with a large customer base comprised of many demographics, accessed through its vast network of franchises. The current competitive advantage is the result of the efficiency of production and distribution networks, brand loyalty, network effect, and economies of scale. An in-depth analysis of Domino’s Pizza revealed that the company could utilize its internal strengths to tap into the shifting health preferences of the public, accompanied by the willingness to pay premium prices. The company can develop its market by providing investors with a lower royalty percentage of 3.5%, which means there will be an incentive. Such an approach enables a widespread opening of stores on an international scale in the following years. Backward integration can also become a critical strategic element of the company, where expensive pieces of equipment are purchased to improve revenue and profitability in the long term.

Moreover, Domino’s Pizza has the internal capabilities to properly respond to an increasingly health-conscious consumer base, which is a threat under the current conditions. The company should boost its product development to provide a diversified selection to its customers with trendy and healthy options included. It should also conduct a horizontal integration with other competitive and promising chains because it is a plausible way to boost its market share revenues and further capitalize on its economies of scale. Since Domino’s Pizza’s current weakness is its image as an unhealthy food provider, it needs to change the public perception by ensuring that some of its products contain healthy options. In addition, the company should improve its business analytics methods to properly allocate its massive resources among regions, which is hindered by its weak database system. In order to minimize the effects of Domino’s Pizza’s external threats and internal weaknesses, the company should improve its cleanliness training among its staff and not be scrutinized by the media and public. Due to its large size and limited responsiveness, the company should always be aware of expected and current consumer preferences to avoid responding too late.

Therefore, the incorporation of the identified strategies will require leadership skills and styles which need to promote innovation. A study suggests that “numerous ‘positive’ leader approaches correlated positively and ‘negative’ leader approaches correlated negatively with creativity and innovation” (Hughes et al., 2018, p. 565). Another source also states that “in order to actively develop the exploratory and transformational learning processes, firms need to foster the presence of transformational leaders and leadership styles” (Darwish et al., 2018, p. 96). Therefore, transformational leadership skills and styles can be of paramount relevance in order to promote creativity and innovativeness, which are necessary to implement the proposed changes.

In the case of specific decisions company leadership can make in order to capitalize on untapped business opportunities, two key recommendations emerge. Firstly, Domino’s Pizza should open 1000 more international stores in both European and Latin markets within the following three years with an allocation of $20 million for each period. Secondly, the company should raise an additional $50 million to facilitate and invest in novel forms of advertising, research, and development. Alsea, a company operating restaurants of Domino’s Pizza in Latin and European regions, received a B1 rating (Moody’s, 2021). It means that the recommendations are even more plausible due to the higher likelihood of refinancing existing debts. The sources used are listed on the reference page.

References

Darwish, T. K., Zeng, J., Rezaei Zadeh, M., & Haak-Saheem, W. (2018). Organizational learning of absorptive capacity and innovation: Does leadership matter? European Management Review, 17(1), 83-100.

Hughes, D. J., Lee, A., Tian, A. W., Newman, A., & Legood, A. (2018). Leadership, creativity, and innovation: A critical review and practical recommendations. The Leadership Quarterly, 29(5), 549-569.

Moody’s. (2021). Rating action: Moody’s assigns B1 ratings to Alsea and its proposed notes; stable outlook [PDF document]. Web.