Domino Pizza Case

In: Business and Management

Submitted By cray
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Domino’s Pizza Case: Geographical integration facing local specificities The U.S. Pizza Industry is not really attractive due to a lack of concentration¹ in the domestic market according to Porter’s five forces analysis. Despite this obvious lack of attractiveness, Domino’s Pizza (later referred to as «Domino’s») were able to make a 8% profit² relying on an inimitable competitive advantage: the 30-minute delivery guarantee made possible by a very specific computer system developed by the company. Facing few growth opportunities in the domestic market, the company decided to adopt a geographical integration strategy in order to increase market shares. Since market entry is riskier when there are cultural differences between the company and the new market, Domino’s adopted a master franchise model of operations that allowed the company to minimize its risks in foreign markets while earning higher returns through the royalties system. This memo addresses the question why Domino’s Pizza have been so successful in some countries and failed miserably in others whereas it was using the same franchising agreement system in every foreign country. To this end, we will highlight key success factors of geographical expansion through the franchise system: the company’s ability to transfer their resources to franchisees and to adapt to local tastes. We will then suggest Domino’s to improve their appraisal of the local environment and ensure better respect of their procedures to achieve higher returns in the foreign market. In Appendix 4, we notice that profitability is low in Europe but quite high in Asia. Especially, we can see that Domino’s have been very successful in Taïwan, Mexico and Japan³ but failed miserably in other foreign countries. Further study of the appendix shows that Domino’s have not been successful in countries where they tried to enter the market…...

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