Business Strategy: Domino's Pizza International Inc.

Thèmes abordés

Domino's pizza strategy case

Résumé du document

Thomas S. Monaghan began Domino's Pizza with one store in Ypsilanti, Michigan in 1960. To better serve his largest customer segment, i.e. University of Michigan students who were reluctant to go out for a pizza when preparing for exams, Monaghan began delivering to the customer's door. This concept was so successful that by 1996, the restaurant that Monaghan thought would pay for his college tuition had developed into a chain of 5,500 stores throughout the world generating sales of $2.75 billion and profits of $39 million. In the mid 90s, Domino's was the world's largest pizza-delivery company. In 1994, it sold 230 million pizzas, using 50,000 tons of mozzarella cheese, 77,000 tons of tomatoes, and 8,000 tons of pepperoni, the world's favorite topping.

1.Why has Domino's been very successful in some countries and failed miserably in others?
2.What can we suggest Domino's to do to improve its international operations?

Extraits

[...] This exhibit reveals that countries where Domino's has failed have relatively high fixed costs. To analyze this, we will study in detail the composition of fixed costs. The factor that seems critical in controlling fixed costs is our cost of labor. According to Exhibit on a base of 100 corresponding to the U.S., there are again two groups of countries. - Those with a cost of labor lower than or similar to that of U.S. - Those with cost of labor well above that of U.S.: Czech Republic, Germany and France and Australia in their infancy. [...]

[...] Giving some liberties to its franchisees allows Domino's not to bear all the risks in case of failure, as it turns out it is the master franchisees that take more risks in such a situation. Market penetration with master franchisees: a start on the right foot. The historical data of the company Domino's Pizza brings us to the conclusion that a successful implementation of DPII in a country depends on the choice of a master franchisee that knows perfectly the local market, and therefore takes measures to adapt the model basis to local specificities. [...]

[...] In addition, the implementation of JIT in the logistics system allows Domino's Daily to restock stores and optimize the efficiency of inventory. Cost of ingredients on the full cost of a pizza: Domino's is positioned on the catering industry. The quality of its raw materials is essential, and the resulting cost is a key factor. We have seen that the purchasing prices were standardized by the commissioners; that increases the bargaining power of the firm. However, we also note that countries whose costs of ingredients are the strongest are countries that have succeeded. [...]

[...] In the first case, this is due to standardization. In the second case, these results reflect the premium positioning/luxury products. In the case of France and Australia, the scores of restaurants have declined between 1993 and 1996. Consideration of local culture by adapting the basic model The successful implementation of DPII in a country therefore depends on choosing a master franchisee who knows the local market. This knowledge allows the master franchisee to adapt the basic model of DPII to local specificities as well as products offered, prices, geographical positioning, and marketing. [...]

[...] Using the basic model and methods of Domino's The main features of the U.S. market are: Control of fixed costs, particularly fixed costs of labor, Control of the cost and quality of ingredient, and Control of delivery time. These features provide the U.S. market a very high level of quality: 92%. Control of fixed costs On Exhibit we see that the U.S. has a share of fixed costs in their total costs of 20%.This share is the lowest worldwide. In the other hand, there are two categories of countries: - Those that have a share of fixed costs around the majority of countries. [...]