Domino's Pizza, Inc. Porter Five Forces Analysis

Domino's Pizza, Inc.
Porter Five
Forces Analysis
Have selected Domino's Pizza, to understand how the Porter Five
competitive forces influence profitability and develop a strategy for
enhancing Domino's Pizza, Inc. competitive advantage and long term
profitability in Restaurants industry.
Brief overview of Domino's Pizza, Inc.
• Company Background
• Overview
• Domino's Pizza, Inc. is one of the leading firms in the Restaurants. Over the years Domino's Pizza, Inc. has
redefined the ways of doing business in Services. Domino's Pizza, Inc. is listed at New York Stock Exchange (NYSE)
and have a market cap 10.08B USD.
• Domino’s is the second largest pizza restaurant in the world and operates in more than 85 markets.
• On average, Domino’s sales are more than 1.5 pizzas each day globally.
• Tom and James brothers purchase the “DomiNick’s” pizza stores and entered the pizza business in 1960. In 1965,
Tom was the only owner and renamed the store as “Domino’s Pizza”. The company has franchising system that has
200 stores in 1978. Today, Domino’s has more than 13,800 stores and 5,000 of them are at outside the US.
• Domino’s Pizza consists of four business segments that are:
• Domestic Company-Owned Stores
• Domestic Franchise
• Domestic Supply Chain
• International
• The main competitors of the company are Pizza Hut, Papa John’s, Little Caesars, and local pizza producers. In
addition, there are many substitute product that compete with Domino’s Pizza. These are McDonald’s, KFC and so
forth.
Porter Five Forces Analysis is a strategic management tool to
analyze industry and understand underlying levers of
profitability in a given industry.
Have applied Porter Five Forces on - how Domino's Pizza, Inc. can
build a sustainable competitive advantage in Restaurants industry.
Managers at Domino's Pizza, Inc. can not only use Porter Five Forces
to develop a strategic position with in Restaurants industry but also
can explore profitable opportunities in whole Services sector.
Porter Five (5) Forces Analysis on Domino's Pizza, Inc.
Threats of New Entrants : Medium
• Making an entry into the local fast food industry requires less capital
investment as compared to the international one.
• Companies that are aiming to develop a global market presence may find
this industry a capital intensive one due to this factor.
• Contrary to the global fast food chains, a local fast food business
involving the production of Pizza, burger and other fast food menu items
faces low entry barrier.
• Domino’s Pizza is operating on global scale, therefore, it is a part of an
industry that is marked by moderate level of threat of new entrants.
How Domino's Pizza, Inc. tackles the Threats of New
Entrants
Domino’s Pizza has adopted following strategies to tackle the new
entrants barrier :
• Innovation
• Sales Volume
• Reducing cost
• Combo offers
• On time home delivery service
• Cash back
Bargaining Power of Suppliers : Low
• All most all the companies in the Restaurants industry buy their raw
material from numerous suppliers.
• Suppliers in dominant position can decrease the margins Domino's
Pizza, Inc. can earn in the market.
• Powerful suppliers in Services sector use their negotiating power to
extract higher prices from the firms in Restaurants field.
• The overall impact of higher supplier bargaining power is that it lowers
the overall profitability of Restaurants.
• However based on the overall analysis it is seen that in case of
Domino’s Pizza the suppliers have low bargaining power.
How Domino's Pizza, Inc. is tackling Bargaining
Power of the Suppliers
• Have build efficient supply chain.

• Always experimenting with product designs
• Developed dedicated suppliers
• Also had a contract with suppliers –
Bargaining Power of Buyers : Medium
• Buyers in fast food industry seek quality, price & innovation of menu items,
which can give them some level of bargaining power.
• Buyers are often a demanding lot. They want to buy the best offerings
available by paying the minimum price as possible. This put pressure on
Domino's Pizza, Inc. profitability in the long run.
• The smaller and more powerful the customer base is of Domino's Pizza, Inc.
the higher the bargaining power of the customers and higher their ability to
seek increasing discounts and offers.
• The presence of other entities offering similar items adds to consumer
power, therefore, the buyers can be regarded as having moderate bargaining
power in this context.
How Domino's Pizza, Inc. is tackling the
Bargaining Power of Buyers
• In order to maintain buyer’s interest in the menu and continue their
purchase from the company, the management focuses on developing
new items.
• They focused on product innovation combined with quick delivery
time gives the company an edge over other fast food organizations.
• Moreover, the price structure offered by Domino’s Pizza is developed
keeping the consumer spending trends and affordability in to
consideration.
Threats of Substitute (Products or Services) : High
• When a new product or service meets a similar customer needs in different ways, industry
profitability suffers.
• The substitute products in case of Domino’s Pizza includes other businesses offering similar fast
food items which are available at the company’s outlets.
• In case of Domino’s Pizza, customers incur low switching cost, which increases risk of customer
deciding to shift from Domino’s to a competitor offering similar products.
• In addition to this, the quality standards being offered by Domino’s Pizza has been replicated by
other firms in the fast food industry. There are many alternatives from which a customer can
choose, thus increasing the threat of customer switching the fast food company.
• For example road side vendors offer Hamburger, chicken burger , many restaurants offer Pizza
and varieties of sandwich at lower prices.
• These factors have contributed to the development of a high threat of substitute products
How Domino's Pizza, Inc. can tackle the Treat of Substitute
Products / Services
• Domino’s Pizza is an also an service oriented firm rather than just

product oriented, so on time delivery is there agenda.
• They understand the core need of the customer rather than what the
customer is buying.
• By increasing the switching cost for the customers.
Rivalry among the Existing Competitors :
High
• There are many companies which are operating in fast food industry including both local
businesses and international fast food chains creating a high threat of competitive rivalry.
• There are some leading corporations in the fast food industry which can negatively affect
the market share of Domino’s Piazza . For eg : Pizza Hut remains a top competitor for the
company as they offer a wide range of pizzas, which is a core menu item for Domino’s.
• Apart from Piazza Hut, Papa john’s poses significant threat to the company’s market
share.
• If the rivalry among the existing players in an industry is intense then it will drive down
prices and decrease the overall profitability of the industry. Domino's Pizza, Inc. operates
in a very competitive Restaurants industry. This competition does take toll on the overall
long term profitability of the organization.
How Domino's Pizza, Inc. is handling Intense Rivalry
among the Existing Competitors in Restaurants industry
• They have build up a sustainable differentiation with respect to
competitors.
• By building scale so that it can compete better
• Main focus on increasing the efficiency of its production and delivery
time.
• Collaborating with competitors to increase the market size rather than
just competing for small market.
• These are some key step which Domino’s Pizza took up for
sustainability
Implications of Porter Five Forces on
Domino's Pizza, Inc.
• By analyzing all the five competitive forces Domino's Pizza, Inc.
strategists can gain a complete picture of what impacts the
profitability of the organization in Restaurants industry. They can
identify game changing trends early on and can swiftly respond to
exploit the emerging opportunity. By understanding the Porter Five
Forces in great detail Domino's Pizza, Inc. 's managers can shape
those forces in their favor.
Porter's Generic Competitive Strategies
(ways of competing)
• A firm's relative position within its industry determines whether a firm's
profitability is above or below the industry average.
• The fundamental basis of above average profitability in the long run is
sustainable competitive advantage.
• There are two basic types of competitive advantage a firm can possess: low
cost or differentiation.
• The two basic types of competitive advantage combined with the scope of
activities for which a firm seeks to achieve them, lead to three generic
strategies for achieving above average performance in an industry: cost
leadership, differentiation, and focus.
• The focus strategy has two variants, cost focus and differentiation focus.
• . Cost Leadership
• In cost leadership, a firm sets out to become the low cost producer in
its industry. The sources of cost advantage are varied and depend on
the structure of the industry. They may include the pursuit of
economies of scale, proprietary technology, preferential access to raw
materials and other factors. A low cost producer must find and exploit
all sources of cost advantage. if a firm can achieve and sustain overall
cost leadership, then it will be an above average performer in its
industry, provided it can command prices at or near the industry
average.
• 2. Differentiation
• In a differentiation strategy a firm seeks to be unique in its industry
along some dimensions that are widely valued by buyers. It selects
one or more attributes that many buyers in an industry perceive as
important, and uniquely positions itself to meet those needs. It is
rewarded for its uniqueness with a premium price.
• Focus
• The generic strategy of focus rests on the choice of a narrow competitive scope within an
industry. The focuser selects a segment or group of segments in the industry and tailors its
strategy to serving them to the exclusion of others.
• The focus strategy has two variants.
• (a) In cost focus a firm seeks a cost advantage in its target segment, while in
• (b) differentiation focus a firm seeks differentiation in its target segment. Both variants of
the focus strategy rest on differences between a focuser's target segment and other
segments in the industry. The target segments must either have buyers with unusual needs
or else the production and delivery system that best serves the target segment must differ
from that of other industry segments. Cost focus exploits differences in cost behaviour in
some segments, while differentiation focus exploits the special needs of buyers in certain
segments.

Domino's Pizza, Inc. Porter Five Forces Analysis

Uploaded by

Copyright:

Available Formats

Domino's Pizza, Inc. Porter Five Forces Analysis

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Domino's Pizza, Inc. Porter Five Forces Analysis

Uploaded by

Copyright:

Available Formats

What are the main competitive strategies discussed in the document?

What are Porter's three generic competitive strategies?

Domino's Pizza, Inc.

Threats of New Entrants : Medium

• Have build efficient supply chain.

• Domino’s Pizza is an also an service oriented firm rather than just

You might also like