Domino's Pizza and Papa John's Term Paper
- Length: 11 pages
- Sources: 5
- Subject: Business
- Type: Term Paper
- Paper: #54132938
Excerpt from Term Paper :
(Horovitz) This is important, because it shows how the strategy that made the company successful in the past; would help contribute to the various issues that they were wrestling with. At which point, it would begin to have an impact upon how they were viewed by customers.
When you put these different elements together, this shows how Domino's was facing severe challenges from rising costs and declining sales. This is because they were not changing their business strategy, which helped contribute to their image problem. As a result, some kind of drastic improvements were necessary, to address the underlying challenges that the company was facing.
To overcome these different challenges, Dominos would begin examining the entire organization. What happened was the severe economic challenges and loss of market share that the company was experiencing, would begin to have a negative impact upon profit margins. To counter these effects, they would hire a new CEO (Patrick Doyle). He would focus on improving the overall quality and the image of the company, by introducing a new recipe along with marketing campaign. This would have a dramatic impact upon first quarter profits, by increasing them by14.3% (the largest quarterly improvement in company's history). At the same time, other pizza delivery businesses and frozen pizza manufacturers reported a 3% decrease in sales. (Horovitz) This is significant, because it would show how the strategy that was implemented by Doyle would address: the pricing pressures, declining sales and the image problem that the company had. In many ways, one could argue that this emphasis would help Domino's be able to standout in the minds of consumers, contributing to the increase in sales.
In the case of Papa John's, they have been facing similar challenges as Domino's. Where, the company has been wrestling with rising prices for various related commodities (i.e. cheese as well as other ingredients) and a sharp implosion in consumer spending. Evidence of the total impact of these two factors on the company can be seen, by looking no further than their recent quarterly earnings results. As earnings would come in at $.30 cents versus $.42 cents at the same time one year ago, while domestic same stores sales would decline by .6%. ("Papa John's Announced Third Quarter Results ") This is significant, because it shows how Papa John's has been wrestling with the same challenges facing the industry. At the same time, Domino's Pizza is reinventing itself and seeing an upsurge in sales, as this strategy could siphon market share away from the company. When you put these different elements together, this highlights how a change is taking place in the industry, which is having adverse effects on the overall bottom line of Papa John's.
To mitigate these effects, the company has begun using multiple strategies simultaneously. As far as rising prices are concerned, cheese was the biggest cost that the company was facing. To address this issue, Papa John's entered into a purchasing agreement with BIBP (a franchise owned entity), where they are providing them with cheese, for each location at a discount. The way this works is BIBP make large purchases in the market for cheese. They then offer a discount to franchisees, as the various fees help offset any increases in cheese prices. This is significant, because it shows how the company is aggressively focused on reducing the total impact that rising prices could have on its bottom line. ("Pizza Lovers")
To improve the image of the company and keep up with the changes Domino's introduced; Papa John's responded with the Pizza Challenge. This is where the company would challenge customers, to create their own 14-inch pizza over the summer. The winner would have a chance to meet the founder of Papa John's and will have their pizza featured as a main pie in the restaurants. This is significant, because it shows how the company is adjusting to the changes from the competition, by creating their own unique menus. Based on the recent quarterly results, this has helped to reduce the large implosion in sales, yet it has not translated into the same kind of success that Domino's would see earlier in the year. (Stickney 655)
When you analyze both companies, it is clear that they are facing similar kinds of challenges. As Domino's is responding by changing their menu and the way they market the company. While Papa John's, is involved in reducing the costs that they are paying for cheese and the overall types of pizzas they offer. This is significant, because it shows how both organizations are adapting to the various changes, by using unique strategies, to respond to external challenges and those faced by competitors.
The comparative statistics will tell us the underlying strengths and weakness of both companies going forward. Where, we will look at a number of different factors to include: annual sales, market share, employees, the total amount of stores, types of products / services being provided and the various sources of revenue. Once this takes place, it will provide a more complete picture as to the underlying strengths and weakness of each organization.
In the case of Domino's Pizza, the company has been aggressively adapting to changes that are occurring in the industry. Where, annual sales have been weak for a number of years, as they would decline between 2006 and 2009. During this time, they would come in at $551 million (for 2006) and continue their decline until 2009 (when sales would come in at $443.6 million). The total market share that Domino's accounts for is 18.4%. The number of employees that currently work at the company is 10,200. The overall amount of stores that the company has worldwide is 8,553. There are a number of different products / services that they offer to include: beverages, deserts, pizza, sandwiches, Buffalo wings, pasta, cinnamon sticks and home delivery services. The company earns their revenues through sales at various corporate owned locations and they make a 5.5% royalty fee off of their independent franchises. ("Domino's Pizza Inc.") This is significant, because it shows how Domino's has been wrestling with various issues related to their size and declining sales. As their income stream is limited mainly to same store sales (at company owned stores) and the franchise fee that they receive from independently owned locations.
When you look at Papa John's, they have also been adapting to the various changes that have been taking place. Where, annual sales would decline between 2008 and 2009 by .5%. (" Papa John's Announces Full Year and Fourth Quarter Earnings") the total market share of that is controlled by the company is between 6 and 7%. (Eagles) the overall amount of employees that work at Papa John's is 16,000. The number of retail locations open is: 3,491 restaurants. The different products / services that company provides includes: pizza, breadsticks, cheese sticks, chicken strips, wings, deserts and cheese. At the same time they offer: dine in, takeout and delivery services. Their main sources are from: same store sales and the franchise fee that the company receives from it indecently owned locations. ("Papa John's International Data Monitior") This is significant, because it shows how Papa John's is wrestling with similar issues as Domino's Pizza.
When you compare the various statistics, it is obvious that Papa John's and Domino's are similar as far as: products as well as income streams are concerned. The biggest difference between the two is the overall market share and size, with Domino's being the larger pizza restaurant. As a result, this highlights the overall rivalry between both, with one trying to create strategies to outperform the other (because they occupy the number two and three spots).
Specific Competitive Advantages held by Each Company
In the case of Domino's Pizza, they have a number of distinct advantages that they can use to help increase market share as well as profitability to include: strong franchises, a well-known name and their outstanding delivery service. These different advantages are important, because they highlight how the company has a strong presence in the U.S. pizza market. ("Domino's Pizza Inc.") When you combine this with new innovations (such as: changing the recipe / improving the image of the organization), these different advantages allow Domino's to see significant increases in sales. Where, the two different elements are allowing the company to distinguish itself from competitors. This is important, because it highlights how the largest advantages are: their overall size and the basic foundation that they have established over the years. At which point, this would help the company to realize a 14.3% improvement in sales (Horovitz).
As far as Papa John's is concerned, their largest advantages are: the ability of the company to control costs and to adapt to competitive forces. Controlling costs is a major part of the company's strategy for maintaining profitability. Where, they use the BPIP…