domino’s pizza in australia
TRANSCRIPT
DOMINO’S PIZZA IN AUSTRALIA
Analysis with PESTLE, SWOT, 5 Forces ,and STP
domino’s can use in Australia
INTRODUCTIONF
ounded in 1960, Domino's Pizza is the recognized world leader in pizza delivery operating a network
of company-owned and franchise-owned stores in the United States and international markets.
Domino's Pizza's Vision illustrates a company of exceptional people on a mission to be the best pizza
delivery company in the world.
T
hey pioneered the pizza delivery business, and their total system sells more than 400 million pizzas
worldwide every year. Domino’s currently has over 4,000 stores outside of the United States in over 60
international markets, and they’re still growing!
O
n 16 May 2005, Domino’s successfully listed on the Australian Stock Exchange, following an
oversubscribed offer, becoming the first and only publicly listed Australian pizza maker
INTRODUCTION
• Products Domino’s Pizza offers Crunchy Thin Crust, Ultimate Deep Dish and
Classic Hand Tossed pizzas with a wide variety of toppings. Side items include Bread Sticks, Cheesy Bread, Cinna Stix®, Buffalo Wings and Boneless Chicken. We also proudly serve icy cold Coca-Cola® products. Domino’s has recently expanded its menu significantly to also include Domino’s American Legends™ specialty pizzas, Oven Baked Sandwiches, BreadBowl Pastas™ and Chocolate Lava Crunch Cakes. In late 2009, Domino’s debuted its ―Inspired New Pizza‖ – a permanent change to its core hand-tossed product, reinvented from the crust up with new sauce, cheese and garlic-seasoned crust.
SWOT
S
WOT analysis is a strategic planning method used to evaluate the
Strengths, Weaknesses, Opportunities, and Threats involved in a
project or in a business venture. It involves specifying the objective
of the business venture or project and identifying the internal and
external factors that are favourable and unfavourable to achieve
that objective.
STRENGTH
I
nternational Expansion: On may 12th 1983, Domino’s opened its first
international store in Canada, that same year Domino’s opened its 1000th store
overall and by 1995 they had a thousand international locations. In 1997
Domino’s opened its 1500th international location, opening five stores in one
day across five continents.
P
osition. Presently Domino’s is the second largest pizza chain in US has nearly
9000 corporate and franchise stores in 60 countries and all 50 U S states
STRENGTH
Acquisition Strategy: Domino’s boosted its store numbers with the acquisition of 16 Big
Daddy pizza stores in Melbourne and 30 pizza Haven stores in New Zealand.
O
n march 2008, Domino’s announced it had purchased Pinky’s pizza, a pizza chain which
operates 27 stores in Victoria, New South Wales and South Australia.
H
ealth consciousness: In Feb 2010, Domino’s launched a range of health options. Teaming up
with popular reality show the Biggest Loser and their trainer Shannon Ponton, Domino’s
launch their good choice range consisting of seven nutrition conscious calorie - controller
STRENGTHS
trong Brand: Domino’s pizza Inc strong brand equity gives it a competitive advantage over other
industry players. The intelligent marketing strategy and heavy advertising is a key strength to
make its brand image retained and differentiated in the minds of its customers. In August 2004
Domino’s became the number one Pizza company in Australia in terms of net work store
numbers and the network sales with the opening of its 300th store in Bayswater, Melbourne.
I
nnovative skills: In 2002, Domino’s became the first and only pizza maker in Australia to use hot
cell bags, an electronic portable oven which ensures which ensures pizza is delivered up to
20% hotter. Also in 2002 Domino’s became the first Australian pizza maker to launch the
classic crust.
STRENGTH
Efficient and Effective Supply Chain Management:
Domino’s platform for on line ordering averages 25% of sales generally
Diversification strategy
Fat menu: The Menu features both vegetarian and meat pizzas and including stuffed
crust both chicken wings and boneless chicken , potato wedges, garlic breads and a variety
of dessert items including chocolate pots, cookies and waffles, Ben and Jerry’s ice cream
and a variety of soft drinks coca cola, fanta and sprite. Its core strength is delivering a
quality pizza in a timely manner. Sells over 1 million pizzas a day
Their ability to remain unscathed despite the competition. Hard work, persistence and
thinking outside the pizza box have been their success formula. Domino’s is celebrating its
27th anniversary of selling pizzas in Australia.
WEAKNESSB
ad publicity: The market momentum was quickly lost when a woman in St Louis was involved in an automobile
accident with a Domino’s pizza delivery driver. News turned in to bad publicity and in 1993 the 30 minute was
discontinued.
M
anaging all franchise effectively
T
he company was faced with crucial issues of weakening bottom lines due to slow growth and decline in sales.
The company experienced decline in its operating and net profits during the year 2007 as compared to previous
years report 9.5% drop down in operating profits and about 64.3% decrease in net profits was recorded.
OPPORTUNITY
O
pportunity for growth on its on line business since there is easy internet access
across Australia – use of mobile internet, making it easy and convenient for
customers
U
se of iPhone apps:
D
omino’s target market in Australia is the general population especially the youth. Its
opportunity in Melbourne is the faster growing population than any other Australian
city ( Australian Bureau of Statistics). The figures show Melbourne's population
boom accounted for one third of the nation’s growth 2009-2 2010.
THREATC
ompetitors: Domino’s operates with Quick Service Restaurant (Q S R) Pizza segment of the first food market in
Australia. The company’s biggest threats on the pizza segment are Eagle Boys and Pizza Hut
O
ther Quick service Restaurant threats on other food segments include Subway, Mc Donald's, KFC, Red
Rooster , Hungry Jack’s and Chicken Treat Domino’s is the 6th largest QSR chain in Australia by net work sales
behind Mc Donald’s, KFC, Hungry Jack’s, Subway, Red Roster and Chicken Treat
D
omino’s diversification strategy would be seen as threat since it increases chances of rivalry in the market
T
he major threat of Domino’s pizza inc is the increasing consumer awareness about harmful health implications
high calorie fast food items, in addition potential harmful effects associated with the
THREAT
artificial additives, flavours and preservatives added to fast foods pose a threat to Domino’s
like all fast food restaurants
Rising food and Energy costs shrink margins
Domino’s margins are dependant on food prices. Particularly wheat, corn, beef, poultry.
The prices of these key inputs can rise significantly, impacting on the company’s margins
Rising energy costs: Domino’s is also affected by the prices of oil which has risen four –
fold since 2001. Oil is used to produce food as well as to transport it all over the world. More
importantly the company covers over 10 million miles per week in pizza deliveries, making it
a large consumer of gas. Because of this, increased costs shrink margins and hurt profitability
PESTLE
P
ESTLE analysis, an acronym (Political, Economical, Social,
Technological, Environmental, and Legal) that help to understand
the overall market environment (market risks, market growth or
decline, etc.) for a particular industry, business, product, or project.
It is often a key part of strategic, marketing, and/or business
planning.
POLITICAL
T
he Australian government support trading and business
A
ustralian government in good relationship with the USA and UK
government
C
urrently government are controlling the marketing of fast food restaurant
because of health concerns.
ECONOMICAL
R
ise on energy and gas cost.
F
uel price increase
T
he value of Australian food exports declined largely due to drought and changes in import demand from
overseas countries.
S
ince the early 1990s, inflation targeting has been the main objective of Australia's monetary policy
framework as controlling inflation preserves the value of money.
T
he current inflation rate is 2.80% and the RBA has set policy to achieve an inflation rate of 2-3 per cent
on average.
SOCIAL
A
ustralia has a diverse cultural and life style with 22million
population.
H
ealth concern
A
gricultural country
TECHNOLOGY
Research and development:
●Australia’s strong business performance in recent years was due to record of
innovation and a longstanding commitment to research and development (R&D),
aimed at increasing productivity, building new markets and boosting international
competitiveness.
●The Australian Government supports R&D through direct funding as well as
providing significant tax concessions to encourage private sector investment.
●Australia got great communication technology
●Online ordering has also been great in this era of time, where internet has completely
taken over communication.
ENVIRONMENT
●A
ustralia has a business-friendly regulatory environment and
favourable time zone.
●
The Australian Government has announced its plan for a clean
energy future to help Australia meet the environmental and
economic challenges of competing in a low-pollution world.
LEGAL
M
ust be licenced to operate:
PORTER’S 5 FORCES
5 forces was developed by M.E.Porter in 1979. This helps
organizations to analyze its competitive strength and position in the
industry. According to Porter, ’the state of competition is an
industry depends on five forces’
THREAT OF NEW ENTRANTST
hreat of new entrants -Barriers to entry- High
The level of profits the industry is earning and the entry barriers are the factors that will determine the attractiveness of the industry for a new entrant (Wickham, 2000)
1) Market share (as of 2010)
Domino’s Pizza 46%
Pizza Hat 29%
Eagle Boys 17%
Others 8%
There are over 3500 independent pizza shops and 3,000 chain pizza shops in Australia
2
)Brand Identity- The existing market leaders (the brands mentioned above) have strong brand identification and royal customers
ENTRY BARRIER
A
ccess to distribution- It is difficult for new comers to access the distribution channel
T
he Government policy: The government’s dialogue to work with quick service restaurant sector and public
health groups to help all Australians to improve their poor dietary habits and to make healthier food choices.
S
ales Growth
Domino’s Pizza announced a $10.2 million half-year Net Profit After Tax, up 16.9% on the corresponding
period previous year. (Feb, 2011). This might attract new entrant as this indicate that the industry is
profitable.
THREAT OF SUBSTITUTE T
hreat of substitute products – Medium
The customer may find that goods from a different industry will serve just as well. (Wickham, 2000)
1)Alternative price: If the price of pizza increases high enough, consumer might switch to frozen pizza from supermarket or other cheaper fast food such as Hamburgers, Fried Chickens and Chinese take away.
2) Change in buyer’s lifestyle and trend
Increase in recent health-conscious lifestyle and government’s engagement to encourage Australian people to have healthier diet, which could lead their consumer to have healthier alternatives.
Healthy noodle and sushi categories are booming.
BARGAINING POWER OF BUYER
‘Customer can force down prices, demand higher quality or more services.’
(Porter,1979)
Change in buyer’s lifestyle (such as increase in health conscious people demands for
healthier options)
Product price; buyers tend to be more price-sensitive especially when they are buying
undifferentiated products. (Pizza tends to be standard product.)
Buyer’s potential to integrate backwardly: If buyer decides to make home-made pizza
The average Australian eats pizza once a month totalling over 264 million pizzas a year
BARGAINING POWER OF SUP.T
he bargaining power of suppliers- Medium
‘Suppliers can exert bargaining power on participants in industry by raising prices or reducing the quality
of purchased goods or services.’(Porter,1979).
1) Suppliers can raise the prices of raw materials
Depends on the commodities that are used in production of Pizza such as wheat, cheese, vegetables and
meat.
E.G. If the wheat harvest performs poorly due to adverse weather, supplier might have to increase prices,
which force Domino’s Pizza to raise their prices or lose their margin.
2) Differentiated raw materials
-Domino’s Pizza is using 100% Aussie beef
-From January 2011, the company switched to new cheese supplier from San Joaquin Valley, which has
14% less fat but still taste full mozzarella cheese.
BARGAINING POWER OF SUPPT
hreat of forward integration
E.G. Their supplier of wheat might decide to produce pizza’s dough and sell them to the customers directly.
1) Suppliers can raise the prices of raw materials
Depends on the commodities that are used in production of Pizza such as wheat, cheese, vegetables and
meat.
E.G. If the wheat harvest performs poorly due to adverse weather, supplier might have to increase prices,
which force Domino’s Pizza to raise their prices or lose their margin.
D
ifferentiated raw materials
-Domino’s Pizza is using 100% Aussie beef
-From January 2011, the company switched to new cheese supplier from San Joaquin Valley, which has
14% less fat but still taste full mozzarella cheese.
RIVALRY R
ivalry among existing firms- High‘Intense rivalry is related to the presence of the factors such as products or service characteristics and differentiation strategy.’ (Porter,1979)
1)Rivals-Other Pizza Brands such as Pizza hat, Eagle boys as well as another brands from Quick Service Restaurant Segment such as McDonalds, Subway, and KFC.
2)Advertisement and promotion to differentiate its products in order to gain edge over its competitors.
E.G.
Use of Social Networking Site such as Facebook and Twitter to connect with their consumers
Domino’s Pizza launched iPhone application for online ordering, which was a big success with 350,000 downloads in the first 6 months, achieving A$2 million in sales in the first 12 weeks.
In March, 2010, Pizza Hut also introduced its own online ordering application and 70,000 of them were downloaded in the first 30 days.
SEGMENTATION
Market condition
More than 6.5 million migrants have settled in Australia since 1945
In good relation with America and UK
21 million population
Domino’s market demographic is culturally diverse. Domino’s
responded by adding several other variations of the basic pizza. Eg.
Hand tossed and thin crust pizzas were added to the menu to satisfy
demand in specific market areas and remain competitive.
SEGMENTATION
Customer segment
Life-style: Different menu to suit every Ability to customise your Pizza Cultural based: Market research had revealed that Domino’s
market demographic was culturally diverse.
Religion Halal meat Vegetarian etc.
TARGET GROUP
A
ge: 30years and under are Domino’s major target group
W
orking-class
T
ime constrain people
POSITIONING A
s customer focused firm: They have been able to succeed in non-traditional markets by
creating a cultural-specific product mix. Their product mix has evolved to include pizza,
salads, sandwiches, chicken wings, and specialty desserts.
P
rice strategy: Domino’s product pricing is competitive with others in the industry.
A
s conveniences firm: Taking advantage of an impatient consumer base, Domino’s touted,
“you get fresh, hot pizza delivered to your door in 30 minutes or less—or it’s free.”