Oxbridge Free Essays & Dissertations | Business Dissertations | Pizza Industry Food
Pizza Industry Food
Introduction
Pizza is a popular fast food in the western, and pizza industry is growing faster and faster. Pizza is an established convenience food that is a great family meal, suitable for just one or for entertaining, and this role is unlikely to change.
The consumer will continue to be attracted by new innovations and promotions, and will continue to rely on pizza as the ultimate back up meal. A report from Mintel says the pizza market is showing strong growth which is over 6% from 2007 to 2008(Mintel, 2008). There are numbers of brands in pizza industry. Domino’s, beyond doubt, is one of the largest pizza brand in the world.
Domino’s: Domino's Pizza, Inc. is an international fast food pizza delivery corporation headquartered just outside Ann Arbor, Michigan, United States. It was founded by Tom Monaghan. As of 2006, it had 8,000 corporate and franchised stores in more than 54 countries. It was the second-largest pizza chain in the United States.
Domino’s Pizza began in 1960 when Tom Monaghan and his brother James bought "Dominick's Pizza", a small pizzeria in Ypsilanti, Michigan. The deal was secured by a $75 down payment and the brothers borrowed $500 to pay for the store. Eight months later, James quit the partnership and traded his half of the business to Tom for a used Volkswagen Beetle. With Tom as the sole owner of the company, Dominick's Pizza became Domino's Pizza.
Aims: This project will in search of how Domino’s could successfully in a fiercer competed global environment. This analysis will use the theories of Porter’s national competitive advantage as a tool. At the same time, transnational organization and cross-culture management theories will be used to analyze the challenge faced by firms through the company analysis of Domino’s.
Methodology: I will use the theories from academic books to support my ideas, and will collect information from websites, newspapers, and some internal magazines of Domino’s. In addition, I got a part time job in Domino’s, and I worked there for 11 months which is very helpful for my project.
Project layout: This project will structured as follow: Firstly, some definition and introduction will be given in literature overview which includes Porter’s Diamond, theories of transnational management and culture dimensions from Hofstede. Secondly, I will analyze Domino’s operation from aspects of competitive, strategies, and how Domino’s deal with its challenges. Then, there will be a summary for Dominos’ success as a conclusion.
Literature review
Determinants of national competitive advantage
The ways that firms create and sustain competitive advantage in global industries provide the necessary foundation for understanding the role of home nation in the process (Porter.M, 1990). Porter also pointed that there are several premises which can help to understanding this role. First, the nature of competition and the sources of competitive advantage differ widely among industries and even industry segments.
Second, global competitors often perform some activities in the value chain outside their home country. Third, firms gain and sustain competitive advantage in international competition through improvement, innovation, and upgrading. Finally, firms that gain competitive advantage in an industry are often those that not only perceive a new market need or potential of new technology but move early and most aggressively to exploit it.
Porter gave the reasons why does a nation achieve international success in a particular industry. Porter’s Diamond suggests there are four interacting determinants of national, or home base, advantage in particular industries (these four determinants together make up a diamond-shaped figure). And it helps explain why some nations tend to produce firms with sustained competitive advantages in some industries more than others (Johnson, Scholes& Whittington, 2008).
The home base determinants are:
Factor conditions. These refer to the ‘factors of production’ that go into making a product or service. Each nation possesses what economists have termed factors of production. Factors of production are nothing more than the inputs necessary to compete in any industry, such as labor, arable land, nature resources, capital, and infrastructure.
The standard theory of trade rests on factors of production. According to the theory, nations are endowed with differing stocks of factors. A nation will export those goods which make intensive use of the factors with which it is relatively well endowed. The United States, for example, has been a substantial exporter of agricultural goods, reflecting in part its unusual abundance of large tracts of arable land.
Local disadvantages in factors of production force innovation. Adverse conditions such as labor shortages or scarce raw materials force firms to develop new methods, and this innovation often leads to a national competitive advantage. Simple, factor condition advantages at a national level can translate into general competitive advantages for national firms in international markets.
Demand conditions. The second broad determinant of national competitive advantage in an industry is home demand conditions for the industry’s product or service (Porter.M. 1990). Porter also indicated that home demand, through its influence on economies of scale, can confer static efficiencies, its far more important influence is dynamic. It shapes the rate and character on improvement and innovation by a nation’s firm.
It means that the nature of the domestic customers can become a source of competitive advantage. Dealing with sophisticated and demanding customers at home helps train a company to be effective overseas. Three broad attributes of home demand are significant: the composition (or nature of buyer needs) of home demand, the size and pattern of growth of home demand, and the mechanisms by which a nation’s domestic preferences are transmitted to foreign markets. A strong, trend-setting local market helps local firms anticipate global trends.
Related and supporting industries. The third broad determinant of national advantage in an industry is the presence in the nation of supplier industries or related industries that are internationally competitive (Porter.M. 1990). Competitive advantage in some supplier industries confers potential advantages on a nation’s firms in many other industries, because they produce inputs that are widely used and important to innovation or to internationalization.
Semiconductors, software, and trading, for example, are industries that have important impacts on many others. When local supporting industries are competitive, firms enjoy more cost effective and innovative inputs. And this effect is strengthened when the suppliers themselves are strong global competitors.
Home-based competitiveness in related industries provides similar benefits: information flow and technical interchange speed the rate of innovation and upgrading. A home-based related industry also increase the likelihood that companies will embrace new skills, and it also provides a source of entrants who will bring a novel approach to competing(Bartlett and Ghoshal, 2000).
Firm strategy, structure, and rivalry. The fourth broad determinant of national competitive advantage in an industry is the context in which firms are created, organized and managed as well as the nature of domestic rivalry (Porter.M. 1990). According to Johnson, Scholes& Whittington(2008), they explain the Porter’s Diamond that the characteristic strategies, industry structures and rivalries in different countries can also be bases of advantage.
The goals, strategies, and ways of organizing firms in industries vary widely among nations. National advantage results from a good match between these choices and the sources of competitive advantage in a particular industry. Local conditions affect firm strategy. For example, German companies tend to be hierarchical. Such strategy and structure helps to determine in which types of industries a nation’s firms will excel.
The pattern of rivalry at home also has a profound role to play in the process of innovation and the ultimate prospects for international success. In Porter’s five Forces model, low rivalry made an industry attractive. While at a single point in time a firm prefers less rivalry, over the long run more local rivalry is better since it puts pressure on firms to innovate and improve. In fact, high local rivalry results in less global rivalry. At the same time, local rivalry forces firms to move beyond basic advantages that the home country may enjoy, such as low factor costs.
Beyond the aspects above, two additional variables can influence the national system in important ways, and are necessary to complete the theory. They are chance and government. Chance events are developments outside the control of firms, such as pure inventions, breakthroughs in basic technologies, wars, external political developments, and major shifts in foreign market demand.
They have played an important role in shifting competitive advantage in many industries. Government, at all levels, can improve or detract from the national advantage. This role is seen most clearly by examining how policies influence each of the determinants. For example, government purchases can stimulate related and supporting industries; investment in education can change factor conditions.
In sum, the determinants which mentioned above create the national competitive environment. Companies started to learn how to compete. The ideas on the Porter’s diamond constitute a system which affects essential ingredients for achieving international competitive success.
Criticism. Although Porter’s model is renowned in the world, it has a number of critics. As Dunning stated, there is nothing new in Porter’s analysis (Ball and McCulloch, 1999, p.94). Moreover, Dunning(1993), Rugman and D’Cruz(1993), Hodgetts(1993) and Carywright(1993) argued that Porter’s Diamond Model under-estimated the important of foreign direct investment. The single diamond framework was inadequate to explain the global competitiveness of countries, especially the developing countries, which depend heavily on foreign direct investment and the access to a triad market (Japan, the United Stated and the European Union) (Lee,1998, p.14).
Amplification of these four criticism mentioned above is explained in the following:
Dunning commented that the competitive advantages of a country has been affected by the globalization of production and markets (Dunning,1993). He argued that the value generating assets of a country has been taking the form of created assets like the human capital but not the natural assets like land and untrained labor.
Depend on the globalization of the world economy, Dunning commented that Porter’s national diamond of competitive advantages which confines the determinants of national competitiveness to domestic resource and capabilities, is needed to be transnationalised (Dunning, 1993)
Moreover, Rugman and D’Cruz argued that a major problem of Porter’s model is Porter’s flawed understanding on the two-way nature of foreign direct incastments (FDI) (Lee, 1998, p.15). Rugman and D’Cruz suggested that Porter’s model is incomplete when applying to small economics which are not parts of the triad nations and is only applicable to triad nation (Lee, 1998).
Porter defined that only outward FDI as being valuable in cresting competitive advantages and foreign subsidiaries were a source of competitive disadvantages (Porter, 1990, p.18). Hence, Rugman and D’Cruz thought that Porter only took into account the exports and outward FDI of Canada’s ‘home’ industries and neglected the sales abroad by the foreign subsidiaries of Canadian-owned MNE (Lee, 1998, p.15). Porter’s theory seems to be little empirical evidence to support that claim.
In addition, Hodgetts(1993) criticized the insufficiency of the application of Porter’s single diamond model to Mexico’s international competitiveness. In view of the Mexico’s situation, Hodgetts pointed out the inapplicability of Porter’s model to Mexico owing to the negligence on the consideration of inbound FDI and the inadequate treatment of the role of MNEs(Lee, 1998, p.16).
Finally, in Cartwright’s analysis of the New Zealand industries, he also pointed out the Porter’s home-based model of international competitiveness was not applicable. Porter emphasizes on home-based customers and competition, however, New Zealand only possesses small local market demand. Cartwright (1993) found that Porter’s diamond could not fully describe the New Zealand case. Meanwhile, Bosh&Proijen(1992) emphasized the importance of nature when analyzing the international competitive advantages.
They argued that Porter’s framework should also cover the factor of nature. And Ball and McCulloch (1999) also criticized Porter’s Diamond. They thought that Model Porter’s evidence is anecdotal and there is no empirical evidence yet. Otherwise, it is an ex-post model and therefore has no predictive powers, also the number of variables involved weakens any predictions, in particular the inclusion of ‘chance’ into the equation.
As a result, I think that we need to focus on one point when we analyze a nation’s competitive advantage using Porter’s theory. We need to consider both theory and practice when making a critical evaluation of this theory.
Competitive advantage
Bartlett and Ghoshal (2000) suggested that companies which want to achieve sustainable competitive advantage need for global-scale efficiency and the flexibility of multinational corporations, and in the world on the basis of the development of the ability to create leverage knowledge and innovation. Each of the different provisions focus on one or other of different strategic objectives: Most of the companies are facing the challenge of achieving all the goals at the same time (Bartlett and Ghoshal, 2000, pp346).
The MNE’s strategic challenge is to use all three sources of global competitive advantage – the differences between the countries, the scope of economics, and economies of scale - in order to optimize the efficiency of the world, multinational flexibility, and worldwide learning (Bartlett and Ghoshal, 2000, pp346). In other words, in order to develop the advantages of the rest of the world, a company must achieve the three main strategic objectives.
The key point is that competitive advantage lies in the management of the interaction between the different objectives and different means. Moreover, Hout, Porter and Rudden (1982) presented that exploiting economies of scale through global volume, through the rapid and massive investment to achieve the objective of preemptive, and management of interdependence in order to achieve synergies in a variety of activities are some of the more important measures, which is to win the world must seize the strategist.
In addition, Levitt (1983) held the view that the core of the global strategy for the development of producing standardized products and around the world the same way sales. Whereas, Hamel (1990) and Prahalad’s view for a global strategy contradicted that of Levitt even more sharply.
They dispute that with many varieties of products and a broad product portfolio, investments in technologies and marketing channels can be shared. Related to Bartlett and Ghoshal’s framework, some of major characteristics of four types of MNEs can be described as follow in Table.
Collaborative challenge
As the global environment grows increasingly complicated, the ability to gain adequate resources and to develop and sustain the worldwide competitive advantages of many companies is being doubted, which also affects a variety of other parties (Bartlett et al. 2008).
The most significant symbol of the growing importance of collaborative strategies lies in the phenomenon named as strategic alliances, which are the cooperative relationships between MNEs with their competitors (Bartlett et al. 2008). Bartlett (2008) stated that “strategic alliances had become central components of most MNE strategies”
Daniels et al. (2007) separated alliances into two types: scale alliances and link alliances. However, Griffin and Pustay (2005) stated that there are two broad categories of alliances: comprehensive and functional alliance. The latter include production alliance, marketing alliances, financial alliances and R&D alliances.
Bartlett et al. (2008) held the view that alliances include a various types, for example, cooperation agreement, franchising and joint venture. They also found the differences between the traditional joint venture and the new forms of strategic alliances.
Compared with the traditional form between a senior multinational firm in an industrialized country and a junior local partner in a less-developed or less-industrialized country, the modern strategic alliances are frequently between firms in industrialized countries, and often focus on the creation of new products and technologies rather than the distribution of existing ones. Nevertheless, today’s alliances tend to last only for a not long period of time.
Companies establish collaborative arrangement for different reasons. Daniels et al. (2007) identified two groups of motivations. The first is general reasons including spread and reduce costs, specialize in competencies, avoid or counter competition, secure vertical and horizontal links, and learn from other companies.
The second is internationally specific reasons, including gain location-specific assets, overcome legal constraints, diversify geographically, and minimize exposure in risky environments. However, Bartlett et al. (2008) introduced five key motivations encouraging the building of strategic alliances: technology exchange, global competition, industry convergence, economies of scale and reduction of risk, and alliances as an alternative to merger.
Bartlett et al. (2008) also identified the risks and costs of collaboration. It is possible that the collaborative alliances provide opportunities for one or both partners to develop a competitive advantage over the other, and there is the risk that “collaborating with a competitor might be a precursor to a takeover by one of the final” (Bartlett et al. 2008) Thus, successful collaborative ventures require companies to gain the ability to manage the relationship between partners.
Bartlett et al. (2008) pointed out three greatest challenges regarding to this capability: managing the boundary, managing knowledge flows, and providing strategic directions. However, Hamel et al. (1989) showed a set of principles, adhere to which companies benefit most from competitive collaborations. The principles are: collaboration is competition in a different form; harmony is not the most important measure of success; cooperation has limits; learning from partners is paramount.
Criticism
Hedlund and Ridderstrale (1997) stated that “the empirical grounding of Bartlett and Ghoshal’s study was sparse and impressionistic, and perhaps colored mainly by the pioneers among the MNCs rather that a more representative sample.” Similarly, Harzing (2000) argued that their research was only based on nine MNCs, and also did not discuss the characteristics of the various types of MNCs in a systemic way.
He also mentioned that many authors do not distinguish international firms from other types of firms, which are Multinational, Global and Transnational companies. Meanwhile, Sundaram and Black (1992) pointed out that some authors simply equated it with the Transnational Company and while other authors (Ghoshal and Nohria, 1993) regarded it as low integration and low responsiveness.
Otherwise, Grote (2002) doubted on the validity of Bartlett and Ghoshal’s competitive challenge theory. He said that the two scholars opine that almost all industries are facing the challenge of a transnational environment, but surely the degree and intensity of the three distinct dimensions of trans-nationality must vary.
Due to the danger of disintegration, the costs of coordination and high control of a transnational company, Hill (1994) argued, “Unless there is some way of reducing these costs, the higher profitability associated with a transactional strategy could be cancelled out by the higher costs of control.” For firms in multi-domestic industries, Taoka and Beeman (1991) thought that regional strategies were more appropriate than globalization sometimes because the competitiveness is determined on a country-by-country basis rather than a global basis.
Culture
From the research of Greet Hofstede (2000) that there are five culture dimensions that help to explain how and why people from various cultures behave as they do. He divided cultures into five catalogs which are power distance, uncertainty avoidance, individualism, masculinity and long-term orientation. The ‘external environment of the organization, including national culture and country institutions, is likely to be a powerful molder of organizational and operations’ (Khandwalla, 1977. P.268).
Power distance dimension
Power distance can be defined as “the extent to which less powerful members of institutions and organization accept that power is distributed unequally” (Hofstede, 1984). Hofstede (2006) argued that countries in which people blindly obey the orders of their superiors have high power distance.
It seems that in a high power distance culture, people accept inequality readily. On the contrary, a low power distance culture indicates that the society de-emphasis’s the differences between citizen’s power and wealth leading to equality and opportunity for everyone.
Individualism and collectivism dimension
Hofstede (1991) pointed that ‘individualism focuses on the degree the society reinforces individual or collective, achievement and interpersonal relationships’.
Masculinity dimension
Hofstede (1991) believed that ‘masculinity focuses on the degree the society reinforces, or does not reinforce, the traditional masculine work role model of male achievement, control, and power’.
Furthermore a high proportion of men indicate that the country experiences a high degree of gender differentiation. In these cultures, males dominate a significant portion of the society and power structure and females suffer from this domination.
Hodgetts (2006) the school system is geared toward encouraging high performance. There is also great stress in the workplace and individual conflict is common.
Uncertainty Avoidance dimension
Hofstede (1991) argued that ‘uncertainty avoidance focuses on the level of tolerance for uncertainty and ambiguity within the society- i.e. unstructured situations’.
Long-Term Orientation
Hofstede(1991) thought that ‘long-term orientation focuses on the degree the society embraces, or does not embrace, lpng-term devotion to traditional, forward thinking values’.
Hofstede’s research has been criticised on a number of counts. Tayeb (1996) objects to the methodology. The research is entirely based on an attitude-survey questionnaire, which Tayeb contends is the least appropriate way of studying culture.
However, we would argue that for comparative purposes involving many countries Hofstede’s survey-based approach is highly efficient.
A second criticism is that the sample is not representative, because it is drawn from a single company comprising middle-class employees (Robinson, 1983). Hofstede’s response has been to argue that IBM employees in different countries constitute suitably matched samples so that the workvalue distance between an average IBM employee in Germany and one in the UK is equivalent to that between an average German adult and an average UK adult.
The question is, though, whether IBM, which has a powerful US-derived organisation culture, may have socialised its employees so powerfully that their values do not reflect aspects of local national cultures. Hofstede’s (1994:10) riposte is to argue that work organisations are not "total institutions" and "that the values of employees cannot be changed by an employer because they were acquired when the employees were children."
Thirdly, some researchers have contended that the research on cultural dimensions conducted by Hofstede and his associates has been culturally biased (Roberts and Boyacigiller, 1984).
The team comprised Europeans and Americans, whereas the studies include many countries from other parts of the world. However, in the context of this article, where the aim is to challenge Hofstede’s findings on a European basis, this does not constitute any problem.
A fourth criticism involves seeming anomalies in Hofstede’s research. For example Trompenaars’ (1997) research suggests that German corporate culture is substantially more hierarchical than Hofstede’s finding suggest.
Finally, Hofstede’s research has been criticized as being outdated (Mead, 1994). It is argued that because of globalization younger people in particular are converging around a common set of values. Hofstede (1980, 1999) has been sceptical of this viewpoint, arguing that culture changes slowly. It is this criticism we address by presenting a study of work-related values among business school students.
(http://geert-hofstede.international-business-center.com/gooderham.shtml)
American is a courageous and freedom-loving nation. They originally came from areas all over the world, many different cultural, ethnic and religious. They are proud of being Americans after a long period of coexistence. Special history makes American’s life special. They take pride in ‘straight forwardness’ and a free-style life which can be analyzed by Hofstede’ culture dimensions.
In Hofstede’s research, these five dimensions of U.S. get the scores as 40, 91,62,46,29. Chinese national culture can be expressed as high power-distance tolerance, low individualism (high collectivism), high masculinity, moderate uncertainty avoidance, and high long-term orientation.
It can be show as figure (Figure 1) below:
According to this data, American national culture can be expressed as low power-distance tolerance, high individualism (low collectivism), high masculinity, low uncertainty avoidance, and low long-term orientation.
Company analysis
America’s National Diamond and the Fast-Food Industry
Looking at the summary of the national diamond significant to the fast-food industry shows that the determinants provide a good home base for a fast-food company.
Factor Conditions
The industry has benefited from:
FACTORS |
TYPE OF FACTOR |
|
Human Resources |
Categories include food technicians, operations specialists, food processors, architects. Work ethic based around ‘American Dream’, if you work hard enough you can be successful, motivated workforce. Large component of unskilled casual workers, ideal for the fast-food industry which makes use of part-time workers. |
Advanced: highly educated personnel. Specialized, related directly to food e.g. food process Architects are generalized. Generalized. Generalized, basic. |
Physical Resource |
US is known for its agricultural Expertise. Its land mass produces variety of quality products (e.g. Russet potatoes, beef). US is self-sufficient, doesn’t need to import food products, also has resources to support the industry e.g. timber for packaging. |
Basic. Advanced in sense that basic advantages have been developed to produce goods with particular qualities e.g. Russet potato ideal for French fries. |
Knowledge resources |
Highly developed nation in terms of knowledge about agriculture. Private research of suppliers in addition to developed network of colleges. |
Advanced and specialized |
Capital resources |
Successful in start-ups that require venture capital, encouraged by government e.g. franchises. |
Generalized. |
Infrastructure |
Transportation system well developed, roads and railways. |
Generalized. |
Factor disadvantage: due to US climate and seasonality, Russet potatoes (best for making fries) were only available nine months of the year. Together with WWⅡ (chance) and the difficultly of obtaining fertilizer, the demand for an alternative to fresh potatoes motivated Jack Simplot to create frozen potatoes.
Demand Conditions
America has very sophisticated and demanding buyers. Love (1987) states that the ‘centerpiece’ of American industry is the service sector. It is the land of customer service. Americans were experienced in the concept of ‘eating-out’ when it was ‘an uncommon experience in most foreign markets’ (Love, 1987).
Therefore, consumers have higher demands that must be met, motivating innovation. The home market is large, encouraging economics of scale and investment in production facilities, an advantage when moving to smaller nations. American needs are highly anticipatory.
In addition to expecting more, the initial target market was teenagers, a demographic segment that arguably originated in America. Therefore, their needs would anticipate future teenagers’ worldwide. Nations (e.g. Japan) have developed a desire for all things Western, therefore sophisticated (earlier) home buyers provide experience and indicators of future international needs.
Related & Supporting Industries
The fast-food industry has many related and supporting industries that enable it to draw on home base strengths, including:
- Agriculture
- Cooking equipment manufacturers
- Food technicians and processors
- Packaging
The supporting industries, all identified in Factor Conditions, give the industru a high-quality base of support to enable it to develop over and abve foreign competitors.
Related industries include:
- Drinks: ‘Domestic companies in related industries often share activities and sometimes forge formal alliances’ (Porter, 1998) e.g. Coca-Cola is sold in all Domino’s stores.
- Marketing: ‘The United States has long been the home of the most innovative and sophisticated media companies in the world’ (Porter, 1998). The fast-food industry utilizes this skill to gain competitive advantage at home and internationally.
- Media, entertainment and toy manufacturers: fast-food shares similar market segments to the film industry. Therefore, its links with such related industries are logical. Fast-food has often been able to drawn on America’s strong position in entertainment through promotions, including free toys for children, coinciding with film releases.
The fast-food industry has evolved as a highly collaborative industry. As detailed in depth in Collaborative Challenges, McDonald’s have benefited by influencing and upgrading their national cluster.
Firm Strategy, Structure and Rivalry
Porter highlights company and individual goals regarding how/what motivates people in different nations. At firm level this is focused on the Organizational Challenges which highlights significant moves McDonald’s has made in order to create and maintain a motivated workforce and become transnational by developing a positive attitude toward change
However, the success of this relates largely to the utilization of cultural elements of the US. US culture provides an ideal environment for the fast-food industry. Hofstede’s theory, detailed in Cultural Challenges, illustrates the challenges of working with other cultures. However, applying this theory to the industry as a whole gives Porter’s observations theoretical substance.
The fast-food industry relies on a franchise structure which, in turn, relies on individuals to risk their own money to start a store. Porter (1998) claims that the US is strongly motivated by money, reflected in individual reward systems. The US has very high Individualism, high Masculinity, how Power Distance and low Uncertainty Avoidance.
This provides an ideal home base for a franchise system as it appeals to high individualism where a person can gain personal financial rewards. High masculinity also indicates a competitive nature, suitable for the industry which becomes more competitive as many people have access to basic factors.
Low power-distance provides motivations to become innovative as it is believed that anyone can be the best. Low Uncertainty Avoidance aids the industry as individuals are willing to risk their own finances and companies are willing to experiment to gain monetary rewards.
In discussing Chance, Porter (1998) also acknowledges entrepreneurship, suggesting that it is not a result of chance, that the determinants play a major role in identifying where entrepreneurship is likely to occur. I suggest that the same US cultural dimensions that affect goals are also instrumental in providing an environment for entrepreneurs to thrive. McDonald’s success has been due to entrepreneurial thinkers. Overall, the US provides a desirable home base for the industry.
Competitive Challenges
Domino’s Pizza International, Inc., a wholly owned subsidiary of Domino’s Pizza LLC, began serving consumers outside the United States in 1983 when the first store opened in Winnipeg, Canada. Since that time, Domino’s Pizza International has extended its global reach to include more than 55 international markets serviced by more than 3,230 stores.
It could be argued that Domino’s pizza began as a hybrid organization. They focus on quality just like the saying from domino’s: Domino’s focus on quality includes you (employees), quality differentiates Domino’s Pizza from other national pizza companies.
At the same time, Dominos’ international strategy was used as innovation was always a strong characteristic, enabling cost efficiency through new process. McDonald’s has, therefore developed, through trial, error and experience, into a transactional organization that appreciates that, in order to be successful; it must be efficient, flexible and able to learn.
Domino’s Pizza uses “Global retail sales” to refer to total worldwide retail sales at Company-owned and franchise store. Management believes global retail sales information is useful in analyzing revenues, because franchisees pay royalties that are based on a percentage of franchise retail sales. Young people especially the students are target market of Domino’s Pizza.
The aiming of Domino’s Pizza is to provide products to the community by which they can make more profit. In this case Domino’s offers pizza/meals and take-away. At the same time, they maximize sales to put them in a strong position on the take-away market. Every year they offer free pizzas to the people living in shelters.
In 2007, the Domino’s system operates over 8,600 stores worldwide which located in 55 countries and drives over 10 million miles a week. From Domino’s was founded, they never stopped to creating and innovating to improve their pizzas, for example, they want to use less fat in their pizzas to make their pizza more healthy.
Domino’s does want to provide more services and produce new pizzas that the customers want. They do this by asking customers what kind of pizzas they want and increasing the area of which they deliver pizzas and try to offer other food e.g. ice cream and chicken. When a customer rings for a pizza order, they will usually ask whether he/she want to change the topping.
"In Domino's first 20 years, we had two sizes of pizza and one soft drink, Coke," said Litman, who's been with Domino's 30 years. "There's much more diversity now. With the growth of the Hispanic market, we're doing bilingual fliers."
Delivery is a significant creating for Domino’s which bring a higher profit to them. And they have 47 years branding around delivery. What is more, delivery is in an important aspect for pizza stores.
Today, Domino’s is the first pizza delivery company in the U.S. and they get the largest share of pizza delivery channel. Starting in 1973, Domino's Pizza had a guarantee that a customer would receive their pizza within 30 minutes of ordering, or they would receive the pizza free.
The guarantee was reduced to $3 off in the mid 1980s due to concerns over drivers breaking traffic laws and putting themselves and others at risk trying to fulfill the guarantee. To further reduce accidents and unsafe driving, Domino's didn't hold their drivers accountable for any late. Due to the fact above, Domino’s make numbers of profits and got a positive position in pizza delivery market.
The figure above shows vividly that the Domino’s is first pizza delivery store.
Innovation is important for all organizations, like Domino’s Pizza, because it has to keep the company alive with new ideas and keep it up to date with more changes in technology and the environment.
Throughout our history, in addition to pioneering the concept of efficient delivery of made-to-order pizzas, we have been part of innovations that have made significant impact on the pizza and delivery industries. Here’s a look at some of our innovative thinking.
For example, the new heat wave hot bag was invented in winter 1998 because the pizzas were getting cold before it reached the customers and consumers are not willing to buy.
Another fact in Domino’s to improve their competitive advantage is internal training. Like the regulation for employees, which says, ‘If a customer is not satisfied with their Domino’s Pizza order for any reason, we will replace the order or refund the customer’s money’.
Domino’s is similarly at skilled at developing successful reactive strategies, following the consumers want. Related to socio-cultural concerns about healthy eating, Domino’s work hard to produce new pizzas which made with less fat, and some other products which are more health. Domino's Pizza is dedicated to delivering hot, freshly made pizza to customers on time, every time.
Using fresh ingredients, a typical Domino's Pizza menu offers customers 88 million different pizza combinations, reaffirming pizza's long-held place as the worlds most flexible and appealing food. Domino's is the only national pizza delivery company to offer a one third reduced fat mozzarella cheese, Delight.
After discussed above, there can be a result that Domino’s Pizza’s strategies are efficiency, flexibility, and learned. So the strategies of Domino’s get competitive advantages.
Collaborative Challenges
The success of Domino’s Pizza outside the U.S. is due to its collaborative relationship between its exceptional franchisees and the corporate team that supports them. Together, they continuously strive to support a policy of “One Brand – One System” in order to be the best pizza delivery company in the world.
This dedication to a single brand and a single system assures that the same core strategy is followed wherever Domino’s Pizza operates.
- We build our brand through the consistent use of our registered marks and by executing against the same consumer promise.
- We execute flawlessly through the use of standard store layouts, training programs, operational evaluations, and a focus on our exceptional people.
- We maintain high standards through the use of the same core products, audit systems, and a proven supplier approval process.
In 05 May, 2005, Domino's Pizza had taken a huge bite out of New Zealand's fast food industry by merging with Christchurch-based Mad Dog Pizza. As the New Zealand's second-largest pizza chain, Domino's Pizza Australia New Zealand Ltd, will convert six Mad Dog Pizza stores to Domino's stores over the next two months.
This kind of merge is very useful for Domino’s Pizza, and there are a number of advantages. Firstly, low cost could helps Domino’s save a lot of money. At the same time, merges will let Domino’s share the distribution network with Mad Dog pizza’s.
Secondly, if Domino’s Pizza wants to open a store, it will cost it a lot time to prepare for the new store, Domino’s have to rent a house, buy the equipment, and select employees. But merging could reduce the circle period to open new stores. Thirdly, merge could reduce the risk when facing the pizza market.
Part of Domino’s success is because due to the collaborative relationship between their exceptional franchisees and the corporate team that supports them.
There are essentially two business opportunities available to potential investors: Master Franchising and Sub-Franchising.
Master Franchising Domino’s Pizza continues to selectively develop new international markets based on their potential. While smaller markets may be considered under extraordinary circumstances, Domino’s Pizza International prefers to allocate its resources to develop markets based on their relative size and potential for economic benefit.
In those markets selected for development, Domino’s Pizza International transfers market exclusivity to candidates who possess a track record of success, a strong knowledge of the target market, and substantial financial resources.
Typically, successful candidates invest multiple millions of dollars to establish the local organization that has the right to build stores, sub-franchise, and operate the supporting distribution system. In exchange for these rights, the Master Franchisee is responsible for meeting agreed upon store growth targets, the payment of royalties, and the maintenance of our organization’s operating standards.
Sub-Franchising In markets where Domino’s Pizza is currently operating, the Master Franchisee retains the right to choose the most appropriate local development strategy. In some cases, these Master Franchisees offer the opportunity to Sub-Franchise, but it is important to note that they are under no obligation to do so.
Regardless, when inquiries are received for these markets, Domino’s Pizza International forwards the candidate’s contact information and initial correspondence to the offices of our Master Franchisee.
Under these circumstances, our local representative is generally free to determine the conditions of potential commercial relationships and manages their own internal qualification process. Many of our Master Franchisees that engage in Sub-Franchising have posted localized information on their websites.
Until today, Domino’s reached 3,513 franchised stores and none of them is company-owned store. Domino’s also has six dough manufacturing and distribution facilities.
Suppliers
Porter (1998) claims, ‘buyers and suppliers are allies’ and franchisees provide new thinking, partner selection is a key issue. Bartlett and Ghoshal (2000) emphasize the need to analyze partners’ physical assets, intangible assets and organizational capabilities.
In franchising, these need to be replaced with personal attributes, notes that selection becomes difficult when separated both geographically and there are significant differences in prior knowledge. Domino’s made a select system for its supplies. They need to ensure quality and consistency and allows stores to focus on sales and customer service.
International franchisor-franchisee relationships are perhaps the most challenging. Franchisees, as local operators, can strengthen competitive advantage and create/improve factors such as knowledge resource.
Culture challenges
While Porter pays little attention on culture, many people are ready to accept that national culture may influence the way people relate to each other. However, they underestimated that it can really affect nuts and bolts of organization.
Culture and institutions are separated conceptions (Peng, 2002). On the contrary, evolutionists such as Lewin and Kim (2004) insist that “culture influences all institutions and institutions mould culture” and they should be evolved together. Actually, culture and institutions interact and affect with each other.
America culture dimension
According to Buck’s theory (2006), the following table shows the impact of different institutions about Toyota acted by Japanese culture dimension:
Law |
Labour |
Education |
Politics/ Media |
|
High Individualism |
Protection of minorities |
Low TU membership |
No central curriculum |
No censorship |
High Risk- Aversion |
Civil law, not judges’ opinions |
Employee representation on boards |
Uniform school standards |
Heavy State control |
High Masculinity |
Codes, not vague precedents |
Measured performance |
All performance measured |
Strict rules on disclosure |
High Obedience |
Civil code not common law |
Authoritarian employment relations |
No student voice |
Authoritarian government |
High Long-Term Orientation |
Fixed codes |
Long-term training |
Massive investment |
Long tenure of regimes |
Source: Buck (2006)
The Domino’s culture
Domino’s Pizza is committed to an inclusive culture which values the contributions of our customers, team members, suppliers and neighbors. The culture of Domino’s is influenced by American culture. Domino’s Pizza people are essentially all the same.
We live for the thrill of being “Fast and Nice,” a phrase coined by our Chairman and CEO, Dave Brandon, in 2005. Imagine working with dedicated team members in more than 55 countries around the world, making and delivering delicious meals to families one million times a day!
We are the recognized world leader in pizza delivery, and we’re darn proud of it! Some people even say we have pizza sauce running through our veins.
Some companies tend to think ‘work’ is the antithesis of ‘fun’. Not Domino’s Pizza. Our motto is “Sell More Pizza, Have More Fun,” for goodness sake! We all make and sell pizza for a living... what’s more fun than that? This is our culture. We expect a lot from our team members and our team members deliver! In appreciation, we try to create an atmosphere that’s fun as well as productive.
While Domino’s operate a pizza store in western, like UK, they still pay more attention on pizza delivery. This fact is most because of the similar nation culture and the regulations. When it turning to China, Domino’s focus on the eating in store. In China, not everyone likes to eat pizza, because pizza in China is a little expensive and not everybody thinks it taste well. Contrast with China, pizza is a simple food in the UK, and some people even eat pizza every day.
Pizza is a traditional food in the UK, especially in special days and festivals. For example, lots of people order pizzas on Christmas Day. And pizza stores prefer opened longer to pay double salary to their employees. Last Christmas holiday, Domino’s only closed for one day and it opened until 9 o’clock on Christmas Eve. These all because of people from the UK have the habit to eat pizza.
All organizations should change to adapt to the new environment. The firm still carries the home base advantages but need to utilize them in a fashion that enhances and successfully translates their competitive advantage rather than segregates them.
To solve these culture-shock problems, Domino’s made many strategies like different culture different management. They allowed their oversea stores make their own strategies to pursue profit. The subsidiary company of Domino’s Pizza could create new products or change the topping of their pizzas to meet the customers’ need.
Subsidiary stores have right for their self-develop; however, the oversea stores should follow the key culture of its home company. If a subsidiary pizza store no longer pay attentions to their quality, or they do not focus on the product innovation, the store should be closed and the manager would be fired.
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