Environmental analysis for Dominos Pizza

Domino’s Pizza was founded in 1960 and operates a network of company-owned and franchise-owned stores in the U.S.A. and internationally. Domino’s is recognized world wide as the leader in pizza delivery, Reinforced by their well-known slogan, “Get the door. It’s Domino’s.”

In order to effectively do an environmental analysis, one must look at the company’s external environment. The external environment has 3 components: the remote environment, the industry environment, and the operating environment. Each of those three components have their own subcategories.

In this paper I will describe some of the external factors that will affect Domino’s external environment over the next ten years. In the remote environment I will discuss the economic, social, and technological issues that will affect Domino’s over the next decade. For the industry environment I will discuss the substitute availability and competitive rivalry facing Domino’s. Finally, for the operating environment, I will be discussing the competitors, customers, and suppliers.

When combining all of the information, I will be able to project some long term objectives for Domino’s Pizza. To achieve long-term prosperity, strategic planners commonly establish long-term objectives in seven areas: Profitability, productivity, competitive position, employee development, employee, relations, technological leadership, and public responsibility. I will use a few of these objectives in order to formulate a plan for Domino’s Pizza.

Remote Environment

Economic factors concern the nature and direction of the economy in which a firm operates. Because consumption patterns are affected by the relative affluence of various market segments, each firm must consider economic trends in the segments that affect its industry.

World events can affect the consumers purchasing habits in a negative or positive way. Recent events such as Hurricane Katrina, and the attacks on the world trade center. These events had a negative effect on our economy, and consumers were spending less money. However, in the next ten years the economy is forecasted to improve, allowing consumers to spend more.

Consumers are forecasted to have higher levels of disposable income over the next few years. Real disposable household income is expected to increase by nearly 12% over the next five years resulting in more opportunity for expenditure on home delivered food.

Over a twenty to thirty year period, the numbers of older people will continue to increase. The research suggests that firms in the home delivery market can benefit from this by building and keeping brand loyalty amongst a generation of people who have grown up as pizza consumers and whose incomes and affluence are likely to grow.

The social factors that affect a firm involve the beliefs, values, attitudes, opinions, and lifestyles of persons in the firm’s external environment, as developed from cultural, ecological, demographic, religious, educational, and ethnic conditioning. As social attitudes change, so does the demand for delivery pizza.

The research shows that, on average, adults in the US eat out and/or eat delivered/take-away meals around 80 times a year. Researchers look at the impact of freeing up time normally spent on preparing food at home, as ‘creating a time oasis’. As Americans become busier with their careers and lives, they have less time to prepare meals at home, and the amount of people eating out or ordering in will increase.

To avoid obsolescence and promote innovation, a firm must be aware of technological changes that might influence its industry. Creative technological adaptations can suggest possibilities for new products, for improvements in existing products, or in manufacturing and marketing techniques. A technological breakthrough can have a sudden and dramatic effect on a firm’s environment.

In the short term more people will have access to interactive technologies, up from 70% today to 90%, and the number of broadband users will rise. These people will become better at and more confident about e-commerce and buying food online. The report indicates that home food delivery firms already active in this area are likely to be especially successful.

Industry Environment

Brand identification creates a barrier by forcing entrants to spend heavily to overcome customer loyalty. Advertising, customer service, being first in the industry, and product differences are among the factors fostering brand identification. Domino’s Pizza is a proven entity with a 44-year history. They are reinforced by their slogan, “Get the door. It’s Domino’s.”

Operating Environment.

Although the exact criteria used in constructing a competitor’s profile are largely determined by situational factors, the following criteria are often included:

1. Market share.

2. Breadth of product line.

3. Effectiveness of sales distribution.

4. Proprietary and key-account advantages.

5. Price competitiveness.

6. Advertising and promotion effectiveness.

7. Location and age of facility.

8. Capacity and productivity.

9. Experience.

10. Raw materials costs.

11. Financial position.

12. Relative product quality.

13. R&D advantages position.

14. Caliber of personnel.

15. General images.

16. Customer profile.

17. Patents and copyrights.

18. Union relations.

19. Technological position.

20. Community reputation.

In reviewing each of these items, Pizza Hut is the only competitor Dominos’ has that even remotely compares to Domino’s Pizza. Domino’s Pizza is the number one Pizza Delivery company in the United States.

Perhaps the most important aspect of a company’s success is their customers. Domino’s exists to fulfill a basic need for their customers – to provide a high quality, freshly prepared, hot meal delivered on time, every time.

Dependable relationships between a firm and its suppliers are essential to the firm’s long-term survival and growth. A firm regularly relies on its
suppliers for financial support, services, materials, and equipment. In addition, it occasionally is forced to make special requests for such favors as quick delivery, liberal credit terms, or broken-lot orders.

Domino’s Pizza prefers to develop long-term partnerships with proactive suppliers who anticipate their needs, generate cost-saving measures and solve problems to create mutually advantageous outcomes.

Domino’s is always interested in the potential to establish similar working relationships with new suppliers. They will award business on a competitive basis. Careful source review and selection is important. Pricing is not the only criteria. They demand the very best from our suppliers. Our decisions are based on the ability of suppliers to meet our needs – competitive pricing, high product quality and exceptional service levels.

Domino’s is committed to developing mutually beneficial relationships with a diverse group of suppliers, including minority- and women-owned businesses. We know that having a diverse supplier base makes both Domino’s and the diverse businesses stronger in their communities.

With the trends predicted above, Dominos will have a positive prediction for their future. Their long term objectives will include increased profitability, increased productivity, increased competitive advantage, and an even stronger foothold in the advances of technology.

References:

www.dominos.com

http://www.findarticles.com/p/articles/mi_m0CMN/is_n12_v28/ai_11942750

Pearce, J., Robinson, R., (2005) Strategic Management: Formulation, Implementation, and Control. (9th ed.) New York: McGraw-Hill. Chapters 3, 6,7. University of Phoenix, eResource. Retracted December 4, 2005.