3. INDIVIDUAL CASE ANALYSIS 1 3
16 Netincome/Shareholders'equity Return on Stockholders' Equity
6,178/22,294 0.28
17 Netincome/numberof sharesof commonstockoutstanding Earnings per share
6,178/1,544 4.00
18 Market price pershare/earningspershare Price-earningsRatio
Cannotbe determinedbecausedividendinformationisnotavailable NA
(Netincome-Preferreddividends)/#sharescommonstockoutstanding Market price pershare
NA NA
19 2012 Sales- 2011 Sales/2011 Sales SalesGrowth Ratio
(65,492-66,504)/66,504 -1.52%
20 (2012 EPS/2011 EPS)-1 EPS Growth Ratio
(6,178/1544)/(6443/1565)-1 -2.81%
4. INDIVIDUAL CASE ANALYSIS 1 4
Case 1 Domino’s Pizza
Should the firm continue its aggressive market development strategies and accept the risk
associatedwith expanding into markets it has little expertise operating within?
Dominoes has undergone significant changes in the past few years. In 2009 they began a
radical campaign to change their pizza company image (David & David, 2015, p. 372). This
involved changing the old Domino’s recipe and adopting an almost unheard of marketing
campaign – to be brutally honest (Oches, 2010). After the new recipe was introduced to the
company’s domestic franchises, they had to market the product. Chief Marketing Officer Russel
Weiner said about the approach, “you can’t really say, ‘Hey, we have a new and improved
pizza,’ and anyone’s going to really care about it, because the words new and improved are
pretty overused from a marketing standpoint” (Oches, 2010). Using a series of focus groups,
asking for customer feedback through social media, the company reached out to its supporters
and was able to make large gains in the first quarter of 2010. (Oches, 2010). Since then, the
company has experienced fourteen consecutive quarters of growth (Symington, 2014).
Based on these results, yes, Dominos should continue using their aggressive marketing
strategy. As for expansion into unfamiliar markets, they are already doing this.
Recently, the fast food giant opened a restaurant in Italy. Competitors such as Pizza Hut
or Papa John’s have yet to follow suite, mostly because such expansion is considered unwise
(Mahdawi, 2015). Italy is well-known to be the birthplace of pizza, and typically
“Americanized” versions of a product do not do well in the country of origin. Taco Bell tried
twice to open franchises in Mexico and failed. An article in The Guardian US compared this to
offering ice cubes for sale in Antarctica (Mahdawi, 2015). Not to say that Dominos cannot
successfully break into the Italian market, but it is probably their riskiest current venture.
5. INDIVIDUAL CASE ANALYSIS 1 5
Other ventures include expansion into Brazil and China, where the company claims it is
doing very well (Lutz, 2013). To compete globally, Dominos has to accept the risk of market
expansion. It is not a question of whether it should accept the risk or not. It has to. If it fails to
keep opening stores, it will lose the market to competitors.
Besides maintaining its competitive edge, Dominos would be unwise not to expand as
much as possible in developing countries. According to one article, there is a new industrial
revolution taking place is set to dwarf the original Industrial Revolution by billions of people
(Feature, 2013). The answer is an emphatic yes, Domino’s must enter new markets. There is too
much to lose.
What new geographic locations or regions should Domino’s focus?
Speaking of the new industrial revolution in terms of billions of people, the most obvious
geographic locations to focus on are the places where the greatest number of people are. India
and China. The company has already begun entering these countries, with 989 stores in India
(Domino’s Pizza, 2015, p. 12), and 60 stores in China (Sozzi, 2015) Compared to the United
States, the combined population of India and China is ten times greater. Currently, there are
about 5,000 stores in the U.S. (Domino’s Pizza, 2015, p. 2) and only the market capacity for
about 1,000 more (Sozzi, 2015), Expansion internationally solves that growth problem. While
progress in China has been slow so far (Sozzi, 2015), India has quickly adapted to the pizza
delivery model.
The concept of delivery pizza seems to work no matter where one is on the globe (Shah,
2012). Domino’s uses the franchise model for most of its stores, which allows local
entrepreneur’s to try their hand at running a business. On an international scale, it allows local
people to adapt the food to their country’s food. The menu for an Indian Domino’s features lots
6. INDIVIDUAL CASE ANALYSIS 1 6
of vegetarian options – given that 10% of the population do not eat meat, and 30% of the
population avoid it 5 days a month (Shah, 2012). Instead of Parmesan cheese, spice packets are
featured to add to one’s pizza, reflecting the cultural preference of India (Shah, 2012). Given
that competitor Pizza Hut has successfully opened over 1500 locations in China, there is a
market (Sozzi, 2015). Domino’s will simply have to apply the right marketing approach to
continue opening more locations in China. This will involve adapting to the Chines culture in
the same way they have adapted to Indian culture.
Should Domino’s simply follow Pizza Hut’s international rollout of stores?
No, for three reasons. First, Domino’s already recognizes the need to expand.
“In contrast to the U.S., international pizza delivery is relatively underdeveloped, with
only Domino’s and two other competitors having a significant global presence. We
believe that demand for pizza and pizza delivery is large and growing throughout the
world, driven by international consumers’ increasing emphasis on convenience, and the
proven success of our 30 years of conducting business abroad.”
(Domino’s Pizza, 2015, p. 3)
With over 80 markets and more locations coming out each year, Domino’s already has a plan for
its international rollout. Second, Domino’s is not a sit-down restaurant, and Pizza Hut is (David
& David, 2015, p. 378). They operate from a slightly different model. Domino’s focus is almost
entirely on the delivery aspect of pizza, while Pizza Hut offers delivery as a part of their business
plan. Third, it seems to be a poor business plan to merely mimic what a competitor is doing.
How would it benefit Domino’s to follow the exact roll out of Pizza Hut? They would have a
competing store for every location of their competitor, but Domino’s would not be setting the
7. INDIVIDUAL CASE ANALYSIS 1 7
pace, Pizza Hut would be. It seems a much better strategy to follow their own plan and expand
internationally based on their own decisions, not based on Pizza Hut’s roll-out.
How would this expansion affect the corporate structure of Domino’s?
Even if they were to follow Pizza Hut’s expansion plan, this would have little effect on
the corporate structure of Domino’s. The company has its hierarchy of corporate executives, but
with few exceptions, the day-to-day running of its international franchises are managed by
master franchisees (Domino’s Pizza, 2015, p. 5). This model allows the company to expand
indefinitely with negligible impact on the current structure. With each expansion into a new
region, they would simply hire on a master franchisee to manage the new operations.
Would restructuring by geographic division and thus establishing offices in Asia, the
Middle East, and South America better enable them to manage these more risky
environments?
It is evident from the 2015 annual report that the company already structures its
franchises by geographic master franchisees (Domino’s Pizza, 2015, p. 5). As shown through
their success in India, the most important way to reduce risk is to get local experts involved in
their company. Establishing more corporate offices in international locations is not their
business model. Domino’s does not assume that they understand a particular culture and all the
risks. A great example of this is in India. “Understanding that they are not an expert in India…
they partnered with a strong team [Jubilant Foodworks] that truly understands India to help grow
their business there” (Shah, 2012). The adaption to culture through indigenous people is key to
success in riskier markets.
Can Domino’s afford this financially?
8. INDIVIDUAL CASE ANALYSIS 1 8
With $54.8 million available in cash and cash equivalents (per the 2012 balance sheet
provided in the textbook) and net income of $112 million, one would think Domino’s cannot
afford a major expansion. With $1.53 Billion in long-term debt and Goodwill at $16 million
(David & David, 2015, p. 377), their expansion efforts would seem to be limited. Yet Domino’s
owns very few of its own stores as seen in its recent annual report (Domino’s Pizza, 2015, p. 2).
Most of its stores are franchised, and the upfront costs are assumed by the local owner.
Therefore, Domino’s has set itself up for rapid expansion at low cost. So yes, they can afford
this type of expansion into riskier markets.
Should Domino’s consider offering salads or a line of healthy menu options?
Dominos has built themselves on the model of pizza delivery. This business model has
allowed them to compete against other pizza companies notwithstanding their inferior product.
The unique speed at which they could deliver pizzas, initially based on a 30-minute marketing
strategy, has proved very successful. There would be no reason to change their menu options
unless there was a decline in sales, less growth, or no growth. Offering alternative menu items is
a part of related diversification, in which a company senses the need to shift its emphasis to
achieve better sales (David & David, 2015, p. 140).
Would the offering of healthy food items be in line with the company’s current mission
statement?
Domino’s mission statement is to be the “best pizza delivery company in the world.”
(David & David, 2015, p. 372). Whether the offering of healthy food items is in line with that
statement depends on what they mean by “best”. Do they mean healthiest pizza delivery
company in the world? Do they mean most tasty pizza delivery company in the world? Do they
mean fastest pizza delivery company in the world? The company has been able to beat
9. INDIVIDUAL CASE ANALYSIS 1 9
competitors so far in speed. They are number one for delivery pizza in the U.S. with $9.7 Billion
in delivery pizza sales - a 29% share of the market domestically (Domino’s Pizza, 2015, p. 3).
By that account, Domino’s is the best delivery pizza company in the world, and does not need to
add a line of healthy food items to keep with its mission statement. If the mission statement
could be defined as best tasting, then Domino’s could say making their pizza’s taste better
(which they have strived for in the past 5 years) is their mission. If the mission statement meant
“best for you”, then the introduction of healthier items would be in keeping with its mission.
Should Domino’s purchase trucks to deliver its products rather than incurring such heavy
leasing expenses?
Domestically, Domino’s uses 16 supply chain manufacturers and “leases a fleet of more
than 400 trucks to aid in delivering products to stores twice a week” (David & David, 2015, p.
374). Assuming their statement of income includes the cost of leasing trucks in their supply
chain, the business model is sustainable. The purpose of the delivery trucks is to supply their
domestic franchises.
They do not force their franchises to purchase from Domino’s, but 99% of the stores do
(David & David, 2015, p. 374). According to the 2012, Domino’s received $942 million through
its domestic supply chain at a cost of $843 million (David & David, 2015, p. 376). Assuming the
$843 million covers leasing expenses, this is a wise decision on Domino’s part. Purchasing its
own trucks adds a lot of other expenses such as maintenance costs and depreciation expenses.
By leasing, they are able to maintain their fleet through their provider and, from the looks of
their income statement over the past three years, are able to maintain a fair profit margin each
year. In short, Domino’s should not buy its own trucks.
10. INDIVIDUAL CASE ANALYSIS 1 10
References
David, F. R., & David, F. R. (2015). Strategic management: A competitive advantage approach,
concepts and cases (15th ed.). Boston, MA: Pearson
Domino's Pizza. (2015). Domino's Pizza 2015 Annual Report. Retrieved from
https://materials.proxyvote.com/Approved/25754A/20160307/AR_274940/pubData/sour
ce/2015_DP_Annual%20Report_8%205x11%20finalversion_v2.pdf
Feature: Developing countries experiencing unprecedented growth, says UN report. (2013,
March 14). UN News Centre. Retrieved from
http://www.un.org/apps/news/story.asp?NewsID=44371#.VxcVV0wrLIU
Lutz, A. (2015, April 13). Domino's made 3 changes to become the world's top pizza
chain.Business Insider. Retrieved from http://www.businessinsider.com/dominos-
turnaround-strategy-2015-4
Mahdawi, A. (2015, October 9). Can Domino’s grab a pizza the Italian market? The Guardian
US [New York]. Retrieved from
http://www.theguardian.com/commentisfree/2015/oct/09/dominos-pizza-launches-italy-
brands-culture-difference
Oches, S. (2010, August). The many acts of Domino's Pizza. Retrieved from
https://www.qsrmagazine.com/menu-innovations/many-acts-domino-s-pizza
Shah, R. (2012, February 8). How Domino's Pizza is taking a bite out of India. Retrieved from
http://www.gettingmoreawesome.com/2012/02/08/how-dominos-is-taking-a-bite-out-of-
india/
11. INDIVIDUAL CASE ANALYSIS 1 11
Sozzi, B. (2015, March 7). Where Domino's Pizza sees its next huge growth market. Retrieved
from http://www.thestreet.com/story/13102522/1/where-dominos-pizza-sees-its-next-
huge-growth-market.html
Symington, S. (2014, October 19). Domino's isn't lying about its improved pizza quality.
Retrieved from http://www.fool.com/investing/general/2014/10/19/dominos-isnt-lying-
about-its-improved-pizza-qualit.aspx
