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Domino’s Pizza

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Nook Warittha Suthammetha

on 17 October 2013

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Transcript of Domino’s Pizza

Domino's Pizza
Problems
Alternatives
Contents
Company background
Situation analysis
Problems
Alternatives
Recommendation
Action plan
Situation analysis
Company current situation
Analysis
Competitive advantage
Domino's pizza is currently second in terms of sales and number of stores (after Pizza Hut)
Laphassarint S. 5280954
Current Situation
SWOT analysis
Domino's pizza, founded in 1960 by Tom and James Monaghan in Michigan, is now in global pizza industry, operating under more than 10,000 stores in 70 countries, offering pizza delivery and take-out (no dine-in or Bake 'n' Take). It has 3 segments driving sales and growth, which are domestic stores, domestic supply chain services, and international. 99% of stores owned through franchise. There are 16 regional dough manufacturers, each of which supplies approximately 300 stores. Domino’s is the fourth largest international business. It has been public company since July 2004, when it entered NYSE, under the symbol DPZ. Current President and CEO is Patrick Doyle.
Strength

Domino’s is ISO (International Standard Organization) certified
Position as leader in pizza delivery – free home delivery service
Staffs’ attitude towards internal changes as they see them as opportunities
Close relationship between staffs and the owner of the business since there is a program called ‘Lunch with Dave,’ where 12 Domino’s employees, randomly selected monthly, would have a meeting lunch with Brandon
Continuous emphasis the need for employees to be flexible to changes in food industry
Management of treating staffs individually
Close relationship with its supplier more than 20 years
Weakness

Inability to keep cost down overtime will cause many problems, including equity and debt ratio (in perspective of investors), decrease chances of expansion (accumulative debts) and loss in market share
Does not have restaurants to capture those who eat out
Having difficulties in adapting Eastern tastes
Opportunities

Globalization allows any firms to expand in other countries, especially in emerging countries, namely, China and India
Introduction of new products to justify regional market
Threat

Loss market share to Pizza Hut as it was the first mover in China market as well as to other brand in general picture, however Domino’s has its own advantage, which is lower price
Changing demands from consumers for a healthier alternative and that organic food is 20 to 100% more expensive than a conventional counterpart
Demographic changes – awareness of obesity and health consciousness
Technological changes – the ways customers communicate
Natural disaster – avian flu
Changes in laws regarding health, pollution, and employment (can incur more costs to the firm)

Competitive advantages
Free delivery
Service guarantee
Low but competitive price
Convenience
Position itself as the leader of pizza delivery
1. Unable to lower costs overtime
2. High debt
3. Low Revenue/store (when compared to other brand)
4. Domestic sales grow slower than international sales

Mission: Domino's Pizza is committed to an inclusive culture which values the contributions of our customers, team members, suppliers, and neighbors
Recommendation
1. Unable to lower cost

- Can come from delivery cost (free) --> CANNOT charge because it is Competitive Advantage
- Might be due to inflation (increase uncontrollably every year)
- EoS (Domino's has passed through half a century)
- Bargain price with suppliers (NOT sustain)
- Find new suppliers with lower price (might deal with low quality supplies and switching cost)
- Buy more efficient machines (affecting debt ratio and cash flow)

4. Domestic sales grow slower than international sales

- Open more stores in US (the market is already concentrated)
- Boost sales by providing paper discounts and membership card (CANNOT track paper discount)
- offer new product (i.g. organic products to capture health-oriented customers --> cost 20-100% more)
- Open more international stores (outside US) ***
2. High debt

* No detail in debt-equity structure in case study*
3. Low revenue per store

- Lower cost --> back to alternatives in the first problem
- Boost sales --> same alternatives as problem number 4
International sales grow faster --> choose to open more international stores (not concentrated and potential growth)
In corporate level --> Transitional strategy
In business level --> Differentiation
Action Plan
1. Factor of production
- Basic = land, location
- Advance = digital communication system, educated workforce
2. Demand condition --> look at large size of market (target market is low-income individual and office workers)
3. Supporting industries --> look at diversified agricultural industries
4. Specific economic --> look at ease of law enforcement

- Open more stores in US (the market is already concentrated)
- Boost sales by providing paper discounts and membership card (CANNOT track paper discount)
- offer new product (i.g. organic products to capture health-oriented customers --> cost 20-100% more)
- Open more international stores (outside US) ***
Opportunity
What?
- Expand stores overseas
Who?
- Targeted market is low to medium income earners and office workers
- JV with Beijing Paclantic Company Limited
Where?
- Beijing, China (near international college and business areas) --> International College Beijing

[ Shanghai (Shanghai Yuan Zhi Tong Industry Co., Ltd.), Guangdong (Guangdong Tayo Motorcycle Technology Co., Ltd.) ]
When?
- Before AEC starts in 2015
How?
- JV with suppliers in China, and through franchise in other countries
Projection
Company Background
Net income was up 18.4% for the second quarter this year when compared to the same period last year, which was resulted from 10.1% increase of revenues for the second quarter versus the prior year period. Number of international stores went up by +6.7%
Under joint venture, Domino's only supplies raw materials for producing pizza as well as machine for producing products while the other joint venture company takes care of distribution channels and marketing promotions
Full transcript