SWOT Analysis of Domino’s Pizza
2016 was an year of fast international expansion for Domino’s. Apart from its great pizza, Domino’s is known for great service. Couple these things with digital innovation and what spells out is international success. In 2016, it saw strong sales domestically and internationally. Globally, it added 1281 new stores. The brand is also using best in class technology to serve its customers. This second largest Pizza chain of the world was founded in the year 1960. Today, it has grown an impressive presence globally with its 13800 stores operating across 85 markets. Domino’s sells average 2 million pizzas everyday through its global Pizza system. Apart from having a number of its own stores, the brand earns revenue and profits from its franchisees. Here is a SWOT analysis highlighting its strengths, weaknesses, opportunities and threats.
| Name of the brand: Domino’s Pizza |
| Industry sector: Quick service restaurant (Pizza segment) |
| Name of CEO: J Patrick Doyle |
| Chief competitors: Pizza Hut, Papa John’s, Little Caesar’s Pizza |
| Number of direct employees: 14100 approximately. |
| Total number of people working in the Domino’s system: 290,000 (including franchisees) |
| Number of markets served – 85 |
| Number of total stores: 13800 |
| Revenue in 2016: $2.47 Billion |
Strengths:
- Strong brand equity
Domino’s apart from being the world’s second largest pizza brand is one of the most recognized consumer brands of the world. Apart from being recognized as the world leader in Pizza delivery, it has a significant stake in carry out business. Globally, its business is associated with good quality food and timely deliveries. It has strengthened its brand image through affiliations with brands like Coca Cola.
- Strong and proven business model
Domino’s has developed a strong business model through its years of operations. Its business model is comprised of domestic and international franchise royalties and fees, revenue from supply chain and revenue from retail sales at Company-owned stores. The franchise system of Domino’s has also continued to produce strong and consistent earnings for it through royalty payments and supply chain revenues.
Domino’s has developed a cost efficient store model that is mainly delivery and carry out oriented. At the store level too the simplicity and efficiency of its store operations gives it a significant advantage over its competitors.
- Investment in technological innovation
Over the years Domino’s has continued to invest in technological innovation for the sake of long term growth. Technology affects competition in the pizza industry too. Digital ordering is critical to its success. In 2016, more than 50% of Domino’s sales took place through its digital platforms. It also introduced zero click ordering in 2016 apart from adding Google Home, Facebook Messenger, Apple Watch, and Amazon Echo to its ordering platforms.
- Product innovation
Dominos’ focus has also remained on product innovation to attract new customers and retain the old ones. Its more than 50 years of innovation have given birth to several new and highly popular product developments. Some of the most recent product innovations include Handmade Pan Pizza, Specialty Chicken, Parmesan Bread Bites, Stuffed Cheesy Bread, and Marbled Cookie Brownie.
- Internal dough manufacturing and supply chain system
Its internal dough manufacturing and supply chain system is an important advantage for the brand. Apart from generating significant revenues and earnings in Canada and US, the vertically integrated system also enhances the quality and consistency of its products and helps it leverage economies of scale to offer low costs at its stores. The store managers are relieved of their responsibility related to the mixing of dough which allows them to focus on customer service and other areas. It has also led to better relationships with both franchisees and customers.
Weaknesses :
Low number of stores:
Compared to its closest rival, Pizza hut, the number of Domino’s stores is still very low. While Pizza hut operates across 100 markets with its more than 16000 stores, even after fast expansion internationally in 2016, Domino’s has only 13800 in approximately 85 markets.
Franchisee related issues:
Despite being innovative in its business model Domino’s has been dealing with franchisee related issues. Recently, it was under the legal scanner for helping franchisees cheat workers of their pay.
Operational difficulties:
Dominos’ has established an innovative business model. However, due to the number of franchised outlets being high, it has to deal with quality control and other operational issues.
Opportunities:
Market Expansion:
Market expansion can bring great new opportunities for Domino’s. In the Asian markets while it has a significant presence in India, the number of dominos stores in China is nearly negligible. China does not figure in its top ten markets. It is operating in only 85 markets against Pizza hut’s 100.
Low calorie menu:
Adding more low calorie items to its menu can be a great option for Domino’s. It can help at attracting health conscious people to the stores. Apart from that it will help at creating a better brand image.
Changing demographic and economic trends:
The changing demographic trends also bring new opportunities for Domino’s. Its focus must particularly be on serving the millennials. Apart from that a rising middle class with dispensable income is some good news. The world economy is in better condition now and the condition of employment globally has also improved. It all means people will have more dispensable income to spend on fast food.
Threats:
Intense competition in QSR category:
One of the most important threat for Domino’s is the intense competition from Pizza hut and other brands in the Pizza and Quick Service category.
Regulatory pressures:
Regulatory pressures related to product quality and other factors have also increased. Domino’s has also faced pressure related to staff salaries. Its stores are subject to a number of licensing laws and regulations by several government authorities.
Costs of operation and raw material:
Increased costs of labor and raw material are also a significant threat for the brands like Domino’s.
Lack of long term contracts with key suppliers:
Domino’s does not have long term contracts with several of its suppliers. Though it has not faced any problems in the past such suppliers could still seek to increase costs significantly in the future.
Health conscious trends:
The sweeping health consciousness has impacted the entire QSR sector. People want low calorie food at affordable prices. This can be a threat to Domino’s and lead to reduced demand.
Sources:
Domino’s annual report 2016