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UK Domino's Pizza
UK Domino's Pizza
Domino's pizza PESTLE analysis
This section focuses on the UK's political, economic, social, technological, legal, and environmental factors influencing the operations of Domino's pizza.
Multinational firms in the fast food industry must adhere to particular political requirements like regulations of national minimum wages, which affect their costs. Quality and hygiene regulations vary between countries and influence the quality of items offered by companies such as Domino's pizza (Solomon & Nizan, 2009). In addition, different nations have varying regulations regarding packaging and labeling, which Domino's pizza must follow.
Despite the latest global economic recession and the decline in global consumer confidence, consumer spending on Domino's pizza has increased. This has been attributed to the company's low cost and convenience strategy. Consumers always look a convenient place to eat. They are also attracted to the low prices of Domino's pizza. The company has capitalized on the economic instability by making new additions to its already low priced menu (Enz, 2010).
Enhancing customer awareness about healthier eating habits has pressured Domino's pizza to provide healthier selections in their menu. The company is currently offering salads and low calorie options alongside burgers; this has prominently displayed their nutritional content within the UK market.
Consumers are increasingly becoming familiar with technology and thus, Domino's pizza is using channels like social media to engage with their customer base. Further, digital displays allow Domino's pizza to change their menu in an efficient manner, which suits the daytime. Their self-service ordering have reduced labor costs and increased service speed.
Through pressures from the UK government and environmental lobbyists, Domino's pizza has become a green company. Recycling has become a prominent issue globally, and in response, Domino's pizza has adopted the recyclable packaging. The increase in consumer awareness has served the company with an opportunity to position itself as a green company. This has enabled the company to consolidate customer loyalty in the UK market (Bangs, 2002).
Domino's pizza must comply with specific legislation and regulations in the UK. This includes taxation, opening hours, and rules governing employment like the national minimum wage. It should fulfill the national food standards like the requirements set by the Food and Drug Administration. Besides, concerned authorities are worried about the increasing childhood obesity. They have tightened the regulations relating to children consuming such foods. The company has to adhere to such regulations.
The likelihood of new entry: there are high barriers to enter this business industry. It will be much difficult for new players to introduce their brands as the industry is already being controlled by well-established brands. Existing companies have gripped the control of all supplies. Domino's pizza is a well-known brand and controls the entire industry; the threat of new entrant is minimal (Enz, 2010).
The power of buyers: the buyers have the power to make Domino's pizza go out of business. They have the power to buy substitute products and this threat forces Domino's pizza to bring better services and products in the market (Michman & Mazze, 2008).
The power of suppliers: in any business sector, customers are known to be a powerful force. They have the authority to pressure companies to pit against its competitors, lower their prices, and demand for better services for a company. This shows that they can influence the rise and fall of industry profits. According to Michael Porter, buyers will become powerful if the products they purchase in an industry are standard of undifferentiated (Pride & Ferrell, 2012). In the case of Domino's pizza, it is the only special product meaning that there is moderate bargaining power.
The degree of rivalry: in this industry, the players have set the high costs of leaving the industry due to high investments. This indicates that competing companies will battle hard to survive, as they cannot easily transfer their investment and resources elsewhere.
The substitute threat: the ease of switching to products that serve the same purpose depends on the costs involved. This will also depend on the customers' perceived value of the substitute products.
(1) Pizza hut
Pizza hut is the fiercest competitor in this sector. Local brands and companies dominate the consumer food market. Pizza hut has continued to dominate the consumer food segment in the country.
(2) Papa Jons
Papa Jons has consistently marketed its products with a wide range of promotional marketing campaigns such as secret recipes. It has expanded aggressively introducing new outlets across the country that helps to obtain a high value share (Solomon & Nizan, 2009).
Continuous innovation of Mac's menu gave it the ability to outperform other rivals in consumer food segment across the country.
In terms of international brands, McDonald's and KFC opened mobile outlets to capture more clients demanding convenience offered by such eateries.
Customer behavior towards the company and company performance
In the face of the economic recession, many consumers tend to downgrade their preferences for their financial lives to be viable. As seen from the performance of Domino's pizza, it is clear that Customers are changing their behavior towards the company. The company recorded a thirty percent increase in profits for the first half of 2013 (Ray, 2010). This result from cash strapped families choosing to eat homemade foodstuff instead of spending money at pubs and restaurants.
This suggests that Domino's pizza is feeling the sharp effects of the change in recession. Some estimated eighty percent of families say that they have avoided both drinking and eating outside the house (Michman & Mazze, 2008). Households are choosing to drink and eat at home; this has led to a reduction in the average spending of households at Domino's pizza. Therefore, the consumers' behavior has changed leading to a reduction in the company's sales. The following chart gives a summary of the company's performance in previous years and future projections.
Figure 1: Company Performance
Segmentation, Targeting & Positioning
The positioning of Domino's pizza brand through its versatile advertisements ensures the company with a high quality fresh pizza image, which is delivered on time. This way, customers have gotten to enjoy delicious pizzas within the shortest waiting time and just sitting at home. Therefore, Domino's pizza has formed a new niche in the pizza market through successful brand positioning. Domino's pizza dominates the fast foods market as the quickest and best service restaurants in the pizza segment. The company targets families and customers falling in the age group of 19-36 years and not children and kids (Sandhusen, 2008).
The target audience for Domino's pizza is very broad because it covers those customers who have reported a negative experience with the product. This strategy is aimed at capturing new customers while retaining existing customers. The company shows that its customer base is diverse. However, in demographic segment, the company is focusing on the ages 19-36 years. Additionally, it offers an easy and quick meal for working families, whereby both working wife and husband can eat. It aims at the income families, upper middle class and at the middle class families.
In geographic segment, Domino's Pizza targets countries, which do not have a Domino outlet. Initially, it opened outlets in upper class cities, but has slowly penetrated into metros and smaller towns (Panda, 2008).
In the behavioral segment, Domino's Pizza targets the first time users, as well as the regular users. The company has noticed a new segment, where it aims at corporate lunches and birthday events. It is targeting the first time users because it believes that their taste and quality will automatically make them loyal customers.
Chitty (2011) confirms that Domino's pizza was established in 1960 as a multinational pizza delivery brand and is headquartered in Michigan, United States. The brand enjoys a grand position because it is the second largest seller of pizzas with over one thousand of franchised and corporate stores worldwide. It provides a range of products to its clients such as pizza, baked sandwiches, pasta, salads, boneless chicken, breadsticks, and cheese sticks. It has lately added a new product called Choco lava cake.
Domino's target market includes young people who love to eat out and families. The customer segment enjoys and shares a warm pizza in the comfort of their homes. The peculiar choc lava is nearly appreciated by young children; hence, the menu is apt for the entire family. For this reason, Domino's pizza continues to enjoy the leading position in pizza delivery and is the most renowned pizza brand worldwide. Families where the husband and wife are working in the corporate sector can sit and enjoy tasty food in the comfort of their homes as they can order Domino's pizza (Panda, 2008). On the other hand, Domino's pizza is spanning to expand its target market base to a diversity of age groups.
The major point of difference between Domino's Pizza and its competitors such as pizza hut is that Dominos seeks to make fast home deliveries of pizza. Anytime customers'…[continue]
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However, the main segment of Pizza Hut customers is consisted of people aged 16-35, with medium incomes, medium education, and low gastronomic education. In addition to this, secondary segments are consisted op people aged 35-55, with medium to high incomes, and medium to high education. Pizza Hut is also addressing the vegetarian segment, by developing products for vegetarians, like Veggie lover's pizza, various types of salads and desserts. Also,
With Domino's UK, the company has in its annual report and in its press releases outlined its future expansion plans. There are figures readily available with respect to trends in its same store growth and with respect to its dividend policy. All of these factors should, in theory at least, be included in the current share price. The first step in valuing the company will be to ensure that
9% to 734 units (Khun, 2009) Additionally, James Moss, of Curzon Investment Property, has commented (Khun, 2009) that Dominos and Subway have been successful in the UK market as a result of their franchise models that are almost recession proof. In addition many investors (who want to own a franchise) have found these two chains to be exceptional investments. Additionally, many "Britons are also shunning posh business lunches and choosing instead
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2004) outlines some of the cultural mistakes that have come up when taking franchises overseas. He highlights that it is important to understand the different aspects of a foreign culture, for example what things are offensive to that culture and what things are not. Offending locals is a great way to fail in an overseas venture. The example of Richard Nixon basically flipping the bird to the Brazilians is
Pizza Hut, Domino's most dominant global competitor, was clearly way behind all three national pizza chains in 2005, with a very weak innovation story on new products to sell, and more re-shuffling of menu items with aggressive pricing and programs to bring in the lucrative in-store buyer. The net result from this lack of innovation was Pizza Hut losing significant market share. it's expected that Pizza Hut will be more