In any industry, businesses experience cases that affect their daily activities. The circumstances cause firms either to thrive or to stagger depending on the direction of their effects. To anchor itself in the right position, managers use several economic models that help reveal the origin of the factors, their trend and impacts, and possible solutions. This work analyses Domino's pizza environment regarding its attractiveness, its products chain, and the reasonable measures to threats that would help the secure access competitive advantage in the industry.
Domino's Pizza boasts of both first rank on Pizza Delivery list and the sure pizza delivery experts in the world. The case postulates that Domino's Pizza is an active player in both the US and international market. Since 1960, the firm successfully expanded and owns up to 9,350 stores worldwide. However, the company faces the danger of collapse triggered by its negative reputation in the market (p.84).
Economists suggest several approaches that business managers employ to assess the progress of business and determine possible measures to prevent business deterioration. An examination of such models will elaborate on the condition of the Domino's Pizza. These approaches include the PESTEL Model, Porter's Five Forces Framework, Ansoff's Products, and Market matrix, and Value Chain of business products and services.
PESTEL Analysis and The Domino's Pizza
Developed by Harvard professor Francis Aguilar, PESTEL analysis helps marketers to analyze and monitor the external factors that impact on a business. These factors are the Political, Environmental, Economic, Technological, Social, and Legal factors. Depending on the company, specific factors will influence its operation - the results of the analysis help in Value Chain Analysis. From the Domino's pizza case, Economic, Social, and technological factors control the firm.
Many economic factors influence the works of the Domino's Company. These factors include unemployment rates, trade patterns, level of consumer disposable income, and stock market trends (p. 89) Due to the high level of unemployment; there is little flow of cash in the economy leading to calculated expenditure. This condition lowers the ability of buyers. Also, the case illustrates that the fluctuating nature of the dollar affects the Domino's Pizza. When the dollar depreciates, there exists elemental inflation that leads to an increase in the cost of raw material.
The western culture in the US affects the Dominos activities to a great extent. Due to unemployment low-class customers rises, while middle- and upper-class results from the employed. However, the general lifestyle is constant haste occasioned by current job demands. The classes cultural standards and views propagate movement of the notion of low-quality pizza which takes the Dominos under consumer fire (p. 84). Also, the company suffers from a negative reputation due to the low quality and inferior ingredients. Looking at exhibit xxx, large section of the US population has an interest in pizza consumption. The community liking organic foods and the work lifestyle makes them many restaurants visitors.
Each of the Domino's Pizza franchise is independently accountable for its own legal and regulatory obedience, and the operation of its stores (p. 84). The franchisee handles all non-compliance and other issues resulting from transactions with the franchise products, as the party for them from the Websites. This responsibility makes every Domino's Franchisee solely answerable for all products that customers purchase from their respective stores.
Serves an of the critical factors controlling the industry. The US boasts of advanced technology from as early as 1960 periods. In this type of a society, there exist free and rapid spread of information as spearheaded by social platforms - the range of the low information quality of the Domino's pizza spread through Facebook (p. 98). As such, the Dominos choose the internet as the primary vehicle for their marketing. This method allows them to interact with their consumers on a real-time basis. Such technological factors like the basic knowledge of internet use lead to less spending on research and development and heighten communication level. As a result, the Domino's decides to dedicate resources on Internet campaign. The company develops a website for product promotion. The site has videos of the company including the campaign video.
Environmental factors are also a critical external environment that affects the industry. The atmosphere in which Domino's Pizza operates has different environmental perspectives that influence its progress. The is plenty of substitutes and several competing firms. From the case, other business-like retailers major in products that pizza users would substitute for the pizza (p. 89). Also, the firm encounters tough competition from stronger firms like the Pizza Hut, Little Caesars and Papa Johns. Pizza Hut offers what the industry considers the best quality, a condition that makes the Dominos turn to product differentiation to that establishes its position in the Pizza industry.
Regarding the economic situation, Domino's Pizza sales increase because of the home delivery services instead of going for eating outs. This situation necessitates the rise in like-for-like sales despite the average price rise of commodities across the world. The economies of the world and the ever-rising inflation rate are the most common factors that affect the Domino's Pizza.
Porter's Five Forces Framework
Michael E. Porter suggests a tool to analyses attractiveness of an industry. The device evaluates the intensity of competition in trade and indicates industry profitability by explaining the role of five fundamental competitive forces. The five strengths include the powers of the suppliers, restriction to the entry of new competitors in the industry, threats of substitutes, the bargaining power of buyers, and the general industry rivalry. The figure below a summary of the pizza industry as the case portrays.
Risk of New Competing Firms
The refers to the likelihood of new companies producing substitutes to the products of an existing company to join the industry. In the case, many factors facilitate easy entry into the market. They include less dominant power from the current company, lack of government regulation to prevent entry of the firms, low customer loyalty, and nearly identical products. Due to week regulations, there exists much retail that offers pizza substitutes (p. 89). The Dominos team observes competition on roads.
Varying factors contribute to the level of threats from the entry of new firms. Firstly, as a stable market, customers are keen to try new out on new products, and the cost of starting a business in the market is comparatively low. Also, despite the difficulty for beginning firms to penetrate prime streets, they begin from outing streets, secure establishment and finally enter town centers. The new competitors do not rely on the existing marketing support but on the small share that propels them until they capture their market share.Rivalry between Existing Firms
Rivalry implies the competitive struggle for markets among firms offering related products in an industry. In this scenario, each firm fights to get the largest of market share. From this case, the Domino's Pizza faces stiff competition from the likes of Pizza Hut, Little Caesars and Papa Johns who are selling very well (p. 86). Also, rivalry among suppliers is the primary determinant on the survival of a firm. Dominos have to compete aggressively for market share leading to low profits. Among the three firms, the products difference is small, thus can be easily substituted. The case also reports that the Dominos face a low level of customer loyalty who smoothly shifts to the rivalry companies' products (p. 90).
Customers Bargaining Power
Bargaining power is the ability of buyers or customers to broke for favorable buying terms for themselves. The power of buyers increases when there are hold onto products but threaten to integrate with other providers. An industry is desirable if its buyers have less influence of products goods and services. Despite the buyers being individuals, whose personal choice has no great significance to the activities of a firm, in the pizza industry, their bargaining power strong due to the high industrial rivalry. If at a point the customers dislike Dominos products, they choose from other restaurants like Papa Johns.
Suppliers Bargaining Power
Supplier power refers to the capacity of a firm to force them bear costs of supplying their materials. The firms are passing the supply cost to the suppliers which ultimately gives them strength at the end of the chain. In the industry, there is high suppliers' power. Growing number of stores in up streets lowers Domino's Pizza large business scale leading to week business opportunity to the suppliers (p. 89). Due to the requirement of unique and high-quality pizza products, and the need for a predetermined product flavor known by the buyers, the bargaining control of the supplier's increases. This type of requirement implies that few of the suppliers will be able to meet the needs making them command the supply sector.
Threats of Substitutes
Refers to the availability of other products in the industry that consumers can choose instead of the pizza products. Domino's Pizza products face dangers of elimination from the market from other pizza companies. The little pizza campaign of two-for-one pizza, Papa John's broad menu and Pizza Huts super quality threats to silence the Domino's Pizza quests (p. 90). The only salvage the last gets is from its rapid delivery service. The service helps secure the Domino's Pizza market position as no other firm that manages the faster delivery services. The production of the freshly prepared pizza within the limited time constraint delivered during lunch hours boost the market position of the industry. All these services only facilitate a small number of substitute providers in the fast-paced US residents' economy (p. 91).
From the analysis, the Pizza industry is unattractive. The Unattractiveness results from the net effect of the five forces affecting the industry. Two remedies the case, relevant authority needs to balance the powers of the players, especially suppliers and buyers. This move necessitates purposeful business and generates profits from good pizza product prizes.
Value Chain Breakdown
Value chain breakdown refers to a process through which companies identifies their primary and supportive events that increases its product value and evaluates them to lower their costs and improve product differentiation. It denotes internal activities a company does when converting efforts into products and services. Domino's Pizza illustrates a firm with an excellent response to the value chain. The firm has several organizational capabilities that enable it to react positively towards customers opinions. After learning of customer complains of low-quality, the firm alters approach towards its products using both primary and secondary activities.
Three major primary activities contributing to its sustainability are its logistics, way of operation, marketing style and after-sales-services. In this case, logistics implies the movement of its goods from the production sector to the customers. Because of the nature of pizza, fresh deliveries taste great than an overdue product. Its customers order for the product, and the firm will work they get the products on time. This move facilitates Dominos to record an increase in its sales. The company employs its understanding of the internet impacts the eco...
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