Table of Contents

Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................2
Analysis...........................................................................................................................................3
SWOT Analysis............................................................................................................................3
Strengths...................................................................................................................................3
Weaknesses...............................................................................................................................4
Opportunities............................................................................................................................4
Threats......................................................................................................................................4
Porters Five Forces Model..............................................................................................................5
Bargaining Power of Buyers........................................................................................................5
Bargaining Power of Suppliers....................................................................................................5
Threat of Substitutes....................................................................................................................6
Threat of New Entrants................................................................................................................6
Rivalry among Existing Companies............................................................................................6
Action Plan......................................................................................................................................6
Strategic Alternatives.......................................................................................................................7
Option 1: Take Hold of all Franchises in Countries with Losses.................................................7
Option 2: Completely Shut Down Business in Countries of Losses............................................8
Option 3: Giving Rights of Master Franchisees to Domestic Companies...................................8
Choosing the Best Strategic Alternative..........................................................................................8
Conclusion.......................................................................................................................................9

Executive Summary
Domino Pizza International Inc. is one of the most renowned pizza chains in U.S. and recognized
globally as well. It operates more than 5,000 stores in U.S. and internationally. It has its presence
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in over 40 countries of the world providing its customers with supreme quality and taste of
pizzas. The company is considering its international operations to see where it is facing losses
and what their reasons are. The main reason identified in countries where the international
operation is going good is that the rights of master franchisee are given to a local business or
food chain. So as a strategic alternative it is suggested that Domino must consider its relationship
with its exiting master franchisees in countries where it is facing loss. Domino must give rights
of master franchisee to those companies or local businesses which have enough knowledge of
local market and domestic industry.
Introduction
Businesses operate in local and international markets to capture more market share. Various
strategies are pursued by companies to enter in foreign markets so that they can operate well in
markets which are different from their local markets. Domino Pizza International Inc. (DPII) is
operating in U.S. on a large scale. The company started its international operations in 1983 by
entering in Canada and Australia. It pursues franchising strategy for its international operations.
Currently it is operating more than 1,000 stores worldwide and more than 4,000 stores in U.S.
The case will analyze Dominos current position and the difficulties it is facing in some of its
international operations in some countries. Finally an action plan would be provided discussing
the recommended moves for Domino to make its international operations better.
Analysis
This section of report will include two kinds of models or analysis to determine the capabilities
of Domino and analysis of its market. First model will be SWOT analysis to examine internal

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and external environment of the company. The second model will be Porters Five Forces model
to determine the rivalry and competitiveness of the industry, Domino is operating in.
SWOT Analysis
This analysis includes identifying and examining Strengths, Weaknesses, Opportunities and
Threats for the company. Following are companys strengths and weaknesses followed by the
opportunities and threats available in the external environment.
Strengths

Domino is known as a leader in delivery segment of pizza industry in U.S. with 23.3%

share.
Second largest pizza chain in U.S. followed by Pizza Hut.
Operating more than 4,000 stores all over the U.S. and more than 1,000 internationally.
Dominos headquarters in Michigan was recognized as biggest pizza-delivery company.
Varieties of pizza products are available on Dominos menu for example Pan Pizza,

Twisty Bread, Thin Crust Pizza, and Buffalo Wings.

Excellent supply chain network and on-time delivery of raw material using dedicated

distribution channels called commissaries.

30-mintue strict pizza delivery to customers.
Domino maintains strict quality standards to provide its customers with exceptional

pizzas.
Efficient computer system is installed at Dominos stores to track each returning
customer.

Weaknesses

Some international operations are not as successful. For example operations in Czech
Republic and Germany were continuously reporting losses.

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Huge reliance on franchises for international operations led Domino to give away its
control over its international operations.

Opportunities

Rapid growth is expected in pizza industry. The growth rate was 80% from 1980 to 1990.
It slowed down to just 1.5% from 1991 to 1995 but it is expected that it would again gain

a pace in growth in coming years.

Internationally there are many opportunities in developing countries like Brazil, China,
and India. The population of these countries is increasing and their economies are also

developing so huge market is available in such countries.

Delivery segment of pizza industry is to be considered more by customers so this
particular segment provides more room for growth compared to the other two.

Threats

Intense competition is faced by Domino by Pizza Hut and Little Caesars in U.S. Pizza

Hut is one of the biggest competitors internationally too.

Pizza Hut is investing heavily to capture market share of deliver segment of pizza
industry. So it is reaching to Dominos 23.3% market share with 19.9% of market share

of delivery segment.
Small regional and national pizza chains like Papa Johns and Sbarros are also creating

competitive environment for Domino.

Poor international operations in some countries are creating bad image for company
internationally.

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Porters Five Forces Model

This model examines the industry in which the company operates. The purpose is to determine
the competitiveness of industry. This model includes the discussion of industry from five aspects.
These five aspects for pizza industry include the following.
Bargaining Power of Buyers
The bargaining power of suppliers in pizza industry is very high. Because there are many other
pizza stores or chains offering products so customers have a variety of pizza sellers to choose
from. This increases their bargaining power and makes the industry tough to operate in.
Bargaining Power of Suppliers
Bargaining power of suppliers is also high in this industry. This is because the suppliers of raw
material of pizza have options to supply raw material to various pizza chains. So this increases
their bargaining power. For example Mozzarella is purchased by Domino from New Zealand.
But if Domino refuses to pay a certain price of Mozzarella to the supplier, the supplier may offer
Pizza Hut to buy Mozzarella from it.
Threat of Substitutes
Although pizza is expected to replace hamburgers but still this threat is high for pizza industry.
Because other fast food chains like McDonalds and KFC are also increasing their businesses and
providing substitutes of pizzas. But this threat is nominal because a person who wishes to eat
pizza would rarely go for a hamburger or other fast food.

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Threat of New Entrants

Since this industry does not require any legal considerations to enter so the industry is easy to
enter for new businesses. Thus threat of new entrants is high for pizza industry. However the
existing competition is already very high which may make it difficult for new entrant to enter in
the industry but the threat is still high.
Rivalry among Existing Companies
The current competition in the industry is very intense. Domino leading the delivery segment of
the market with 23.3% of market share. Pizza Hut is leading carryout and eat-in segment with
overall market share of 22.7%. Other local and small food chains are also making the
competition very strong. Thus the existing competition in the industry is very extreme.
Action Plan
This part of the paper will enlist available strategic alternatives for Domino. Each of these
alternatives will be evaluated and finally the best alternative will be selected based on its benefits
for Domino.
Strategic Alternatives
Currently Domino is facing problems with its international operations where it is facing high
costs which are generating continuously net losses. Gary and Mike, managing director and vice
president of Domino respectively, are considering its international operations as how to manage
them to turn them into profits. Following are some strategic alternatives for Domino to manage
its international operations.

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Option 1: Take Hold of all Franchises in Countries with Losses

In some countries, Domino is working very well. For example in Japan Domino is gaining a 7%
profit of its price and gaining enough control on its cost. Currently the U.S. division of Domino
is generating a profit of 8% of price. Thus the operations in Japan are good enough. Also
company is getting better in Australia and France by controlling its costs and reducing its current
losses from double figure to single figure. But there are certain countries where company is
continuously facing bad situation and bearing heavy losses. For example Czech Republic and
Germany incurred a loss of -42% and -29% respectively in year 1996. So as a first alternative
company can take over all of its franchises in these countries. It can take hold of all of their
operations to control the cost and increase the profitability.
This option could be very risky because Domino uses franchise strategy to operate in other
countries because it is not aware of the culture of other countries. Taking control of all of its
operations all of a sudden may be difficult to handle and thus could result in further losses.
Option 2: Completely Shut Down Business in Countries of Losses
As a second option, Domino can completely close it operations in countries where it is
continuously facing losses. By doing so it can put its resources to some other countries where the
potential of growth is higher. This option is good because in this way Domino can stop wasting
its resources where it is not getting enough response by investing those resources.
Option 3: Giving Rights of Master Franchisees to Domestic Companies
This strategic alternative allows DPII to consider taking back the rights of master franchisee
from current companies in the countries where there has been a continuous loss and to give these

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rights to some local famous food chains. By doing so it would be able to get a closer look at the
culture of domestic market and will be able to control its cost.
Choosing the Best Strategic Alternative
One thing, which is very interesting and prominent in the case of DPIIs operations in France,
Australia and Japan, is that in all of these countries the right of master franchisee is given to
some local company or food chain. In Australia the initial results were not good when the rights
of master franchisee were given to one of the largest Dominos franchisee in U.S. Later on the
rights of master franchisee was taken back and given to local businessman who was already
doing business in the same industry. Same kind of thing was happened in France and Japan too.
In all of these countries initially the rights of master franchisee was given to some of the existing
franchisee of Domino in U.S. But later on the rights were given to some local food chain or
businessman. This shows that only those countries are showing performance where the
franchisees were operated by some local businessman or local food chain.
The analysis of current business operations in international markets suggests that the last option
is good for Domino. By taking the last option as a strategic alternative, company can consider its
relationships with its current master franchisees. It can offer the master franchisee rights to some
renowned local food chain or businessman. In this way it can capture more market share. Just
like Australia and France, company can give the rights of master franchisee to some local
business. Local businesses have better idea of domestic culture and working conditions. So it has
more knowledge of business operations in its local market. So it would be more beneficial for
Domino to give rights of master franchisee to some local business.

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Conclusion
Domino is doing very great in its local market but it is facing some problems internationally.
Some of its international operations are not producing good returns for the company. Company
has gained a good market share in its U.S. market and has over 5,000 stores in total including
U.S. and international market. The pizza industry of U.S. is very competitive. Very strong
competition exists in the market which is making the industry very competitive. Some of the
countries for Domino pizza are not producing good results which are Czech Republic and
Germany. So it has been suggested that company should consider replacing its master franchisees
in those countries. Domino should give the rights of master franchisee to any local food chain or
business who is in control of its domestic market and has enough knowledge of local market. The
reason for current successful operation in Japan, France and Australia is due to the reason that
the rights of master franchisee is given to a local food chain or business. In this way Domino can
turn its losses into financial profits and ultimately increasing the shareholders wealth which is
the ultimate goal of any organization.

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