Reference no: EM132833447
Topic: Cultural Differences and Strategy Domino's PizzaTM
Review the case study of in Chapter 16 of your text, and discuss the following:
- Discuss the significance of cultural differences to Domino'sTM product attributes strategy.
- Strategically, why is it critical for Domino'sTM management to correctly determine which attributes to change and which ones to retain as the firm enters a new country?
CASE STUDY
Domino's made its name by pioneering home delivery service of pizza in the United States. The company was founded in 1960 in Ypsilanti, Michigan, by Tom Monaghan and his brother, Jim. Domino's Pizza was sold to Bain Capital in 1998 and went public in 2004. Before that, on May 12, 1983, Domino's opened its first store internationally-in Winnipeg, Canada. And, in 2012, Domino's Pizza removed the word "Pizza" from the logo to emphasize its non-pizza products. Its current menu features a variety of Italian-American entrées, side dishes, and desserts.
You can now order Domino's with your Apple iPhone, with Amazon's Echo, and of course in any way you want online. "Ordering via Amazon Echo marks Domino's eighth platform in the suite of AnyWare technology," said Dennis Maloney, Domino's vice president and chief digital officer. "We want to continue making ordering pizza as convenient as possible, and this is no exception."* Domino's has been constantly adding new ways to order items in recent years, including options to order via emoji, Twitter, text, and smart TV.
Strategically, beyond digitalization of ordering, the growth for Domino's has been overseas. With the U.S. fast-food market saturated and consumer demand weak, Domino's has been looking to international markets for growth opportunities. Today, almost all new store openings are outside the United States. On August 3, 2015, Domino's opened its 12,000th store, and they now have about 5,000 stores the United States, 750 in the United Kingdom, 650 in India, 400 in Canada, and the remaining spread out in 80 countries. On October 5, 2015, Dominos even opened its first store in Milan, Italy-the birthplace of pizza. "I am beyond excited to celebrate this huge milestone for Domino's," said Patrick Doyle, Domino's president and CEO. "We've been opening new stores around the world at a steady clip-building beautiful and customer-friendly pizza theaters with our new image."*
Its plans call for 4 to 6 percent growth in stores per year for the next few years (some 500 new stores annually, with the majority in foreign markets). Given this expansion and clear international growth strategy, perhaps even more amazing is the 76 straight quarters of same-store sales growth in Domino's international stores. The company reported global retail sales of more than $8.9 billion in the last year, comprised of more than $4.1 billion in the United States and nearly $4.8 billion internationally. Perhaps more impressive, Domino's has opened more than 3,000 new stores around the globe since March 2010.
As Domino's expands its international businesses, there are some things that the company has kept the same as in the United States, and there are some things that are very different. What is the same is the basic business model of home delivery. This sets it apart from many of its rivals, which changed their basic offering when they entered foreign markets. For example, when Yum! Brands Inc. introduced Pizza Hut into China, it radically altered the format, establishing Pizza Hut Casual Dining, a chain that offers a vast selection of American fare-including ribs, spaghetti, and steak-in a full-service setting. Pizza Hut adopted this format because table service was what the locals were used to, but Domino's isn't interested. "We go in there with a tried-and-true business model of delivery and carry-out pizza that we deploy around the world," stated Richard Allison, Domino's executive vice president-international. "In emerging markets, we've got more tables than you would find in the U.S., but we have no plans to lean toward a casual dining model where the server comes out and takes an order."*
This general strategy is backed up by CEO Doyle, who said, "The joy of pizza is that bread, sauce, and cheese works fundamentally everywhere, except maybe China, where dairy wasn't a big part of their diet until lately." He continued, "It's easy to just change toppings market to market . . . in Asia, it's seafood and fish . . . it's curry in India . . . but half the toppings are standard offerings around the world." Only eight restaurant chains worldwide have more than 10,000 outlets, and Domino's is one of them. "Local knowledge and ownership are critical to our success overseas,"* Doyle said.
Bottom line, Domino's is the overall pizza-sales leader in the global marketplace and has established operations with some 7,000 store units worldwide. At this time, Domino's is also making a run for the top pizza spot in the United States, which now is held by Pizza Hut (with Papa John's at number three). This entrepreneurial leadership is best captured by Ronnie Asmar, director of new store development for STA Management in Southfield, Michigan, which owns 33 Domino's outlets. He said, "We come from an entrepreneurial family in the hospitality industry, and Domino's has been an awesome partner."*
And Domino's appear to lead the market in other ways as well. Domino's appear to have captured, integrated, and found an edge in the social media world we live in now better than its competition. For example, Mitch Speiser, a securities analyst for Buckingham Research in New York said, "Domino's mobile app for ordering pizza is better than its rivals'."* Information technology also helps drive sales for Domino's vis-à-vis local pizza entrepreneurs. At this time, about 58 percent of Domino's orders are digital in the United Kingdom and about 40 percent in the United States.
On the other hand, some things vary from country to country. In the United States, pizza is viewed as casual food, frequently mentioned in the same breath as beer and football. In Japan, it's viewed as more upscale fare. This is reflected in the offering. Japanese pizzas come with toppings that the average American couldn't fathom. Domino's has sold a $50 pizza in Japan featuring foie gras. Other premium toppings include snow crab, Mangalitsa pork with Bordeaux sauce, and beef stew with fresh mozzarella. Japanese consumers value aesthetics and really care about the look of food, so presentation is key. Patrons expect every slice to have precisely the same amount of toppings, which must be uniformly spaced. Shrimp, for example, are angled with the tails pointing the same way. Domino's developed their business in South Korea in much the same manner as in Japan.
Now, even with these unique toppings in Japan, pizza consumption is relatively low in Japan: the average Japanese pizza customer only consumes the product four times a year. To boost this, Domino's has been working to create more occasions to enjoy it. For example, on Valentine's Day, its Japanese stores deliver heart-shaped pizzas in pink boxes. Heart-shaped pizzas also appear on Mother's Day. This culture of superb pizzas with high-quality toppings was actually an initiative that was initially demanded by their U.S customer base; over an 18-month period during 2009 to 2011, Domino's remade itself and its pizzas-at the same time, it stayed short of adding more than 10 percent in cost to the pizza ingredients.
But back to Japan! To promote the offering in Japan, rather than spending money on commercials, Domino's tried to create news, such as topics that people talk about. If the topic is fun and hot, Domino's believes that people will talk about it, which ultimately translates into better sales. One promotion in particular received heavy coverage.
The chain offered 2.5 million yen (about $31,000) for one hour's work at a Domino's store. In all, about 12,000 people applied for the "job." The lucky winner was a rural housewife who had never eaten pizza. She flew to a small island to deliver pizza to schoolchildren, who were also new to pizza. The event received heavy news coverage-free advertising, in other words! As its international focus is now larger and advertisement funds are being allocated accordingly, Domino's is moving much more toward TV commercials in its promotional efforts to complement other promotional efforts. This includes efforts in Japan, India, and a variety of countries.
Domino's today has focused on branding itself with high-quality ingredients, efficiency but at a speed that fosters quality, and a devotion to maintaining a cultural fabric that allows for a strong entrepreneurial mindset among employees and franchisees. The company captures the global marketplace effectively, either as a first-mover or as a strong follower. "For Domino's the development and eventual channelization of industries is important strategically," said Michael Lawton, then CFO of Domino's. He continued: "It led the company to decide in some foreign markets that the best alternative was to let someone else introduce the pizza category with a sit-down concept and then Domino's moved in and captured their part of the industry as delivery and carry-out developed."* In other cases, Domino's led the market entry into foreign countries. These decision choices make for great global strategy. Domino's has certainly captured the "taste" of the global marketplace!