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Question: Based on your opinion, explain how Domino’s strategy differed from its competitors.

Question: Based on your opinion, explain how Domino’s strategy differed from its competitors.

Understanding Business
Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
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Question: Based on your opinion, explain how Domino’s strategy differed from its competitors. 

Store managers cause employees to stick around-or not, said Rob Cecere, a regional manager for Domino's. Employees can go to McDonald's or Pizza Hut and make as much as they make at Domino's. "You've got to make sure they are happy to come to work for you," Cecere explained. Domino's also worked harder to promote a culture of "fun" via its World's Fastest Pizza competition and other initiatives. Brandon thought employees were so crucial that he renamed the company's HR department the "People First" department. HR wasn't the only part of the recipe Domino's had to change, however. It also had to create a new value proposition for its food. In 2009, it embarked on an effort and associated marketing campaign it dubbed the "pizza turnaround" to do precisely that. As part of the effort, the company developed a new recipe for its pizza crusts; began using fresher, gourmet types of ingredients; and began offering new products, such as artisan pizzas, pasta, and desserts. It also remodelled stores and added in-store dining. Domino's chief strength still lies in its systems and technology. The biggest department at the firm's headquarters in Ann Arbor, Michigan, is its technology department. The department has built novel applications over the years, such as an online ordering application that allows customers to "build" their pizzas online and track their preparation, cooking, and delivery times. The department has also developed mobile apps for 95 percent of the smartphones on the market. Computer and mobile ordering now make up 40 percent of all Domino's sales. In 2011, technology employees built a popular game called Domino's Pizza Hero, which challenges players to learn the demanding job of pizza making and do it fast. Players who are good at the game are then prompted to apply for jobs with Domino's. Is Domino's new recipe working? By most accounts, yes. Turnover dropped by more than 100 percent following Brandon's initiatives. Customer satisfaction scores have jumped up too. On this score, Domino's is now tied for the lead among its competitors in the pizza business. Wall Street has noticed and rewarded the firm with an all- time stock price high. Still, strategy changes and their implementation are continually evolving challenges for firms, and Domino's is no exception. - Managing Human Resources 80 puzzle and ensuring that its strategy is aligned all the way down the food chain. In 2011, the company received a raft of negative publicity after two Domino's workers posted a YouTube video of themselves deliberately contaminating a pizza in a very disgusting way. In 2013, 20 Domino's workers in Manhattan were fired for taking part in a nationwide food strike. The workers claimed they were being paid less than the legal minimum wage. Recently, the company made news after it asked the European Union to relax immigration laws so the firm could bring in unskilled workers from abroad to meet its needs. An immigration official suggested that Domino's could solve its problem by paying workers more. Would paying hourly-wage employees a little more buy Domino's a little more loyalty and prevent negative publicity for the company-loyalty its CEO at one time didn't think was needed? And if so, would the costs have been worth the benefits? And who should incur these costs since most of the stores are privately owned? These questions are food for thought, ones that Domino's will have to resolve. After all, even with the best technologies and systems, pizzas don't cook and deliver themselves. People do.
Transcribed Image Text:Store managers cause employees to stick around-or not, said Rob Cecere, a regional manager for Domino's. Employees can go to McDonald's or Pizza Hut and make as much as they make at Domino's. "You've got to make sure they are happy to come to work for you," Cecere explained. Domino's also worked harder to promote a culture of "fun" via its World's Fastest Pizza competition and other initiatives. Brandon thought employees were so crucial that he renamed the company's HR department the "People First" department. HR wasn't the only part of the recipe Domino's had to change, however. It also had to create a new value proposition for its food. In 2009, it embarked on an effort and associated marketing campaign it dubbed the "pizza turnaround" to do precisely that. As part of the effort, the company developed a new recipe for its pizza crusts; began using fresher, gourmet types of ingredients; and began offering new products, such as artisan pizzas, pasta, and desserts. It also remodelled stores and added in-store dining. Domino's chief strength still lies in its systems and technology. The biggest department at the firm's headquarters in Ann Arbor, Michigan, is its technology department. The department has built novel applications over the years, such as an online ordering application that allows customers to "build" their pizzas online and track their preparation, cooking, and delivery times. The department has also developed mobile apps for 95 percent of the smartphones on the market. Computer and mobile ordering now make up 40 percent of all Domino's sales. In 2011, technology employees built a popular game called Domino's Pizza Hero, which challenges players to learn the demanding job of pizza making and do it fast. Players who are good at the game are then prompted to apply for jobs with Domino's. Is Domino's new recipe working? By most accounts, yes. Turnover dropped by more than 100 percent following Brandon's initiatives. Customer satisfaction scores have jumped up too. On this score, Domino's is now tied for the lead among its competitors in the pizza business. Wall Street has noticed and rewarded the firm with an all- time stock price high. Still, strategy changes and their implementation are continually evolving challenges for firms, and Domino's is no exception. - Managing Human Resources 80 puzzle and ensuring that its strategy is aligned all the way down the food chain. In 2011, the company received a raft of negative publicity after two Domino's workers posted a YouTube video of themselves deliberately contaminating a pizza in a very disgusting way. In 2013, 20 Domino's workers in Manhattan were fired for taking part in a nationwide food strike. The workers claimed they were being paid less than the legal minimum wage. Recently, the company made news after it asked the European Union to relax immigration laws so the firm could bring in unskilled workers from abroad to meet its needs. An immigration official suggested that Domino's could solve its problem by paying workers more. Would paying hourly-wage employees a little more buy Domino's a little more loyalty and prevent negative publicity for the company-loyalty its CEO at one time didn't think was needed? And if so, would the costs have been worth the benefits? And who should incur these costs since most of the stores are privately owned? These questions are food for thought, ones that Domino's will have to resolve. After all, even with the best technologies and systems, pizzas don't cook and deliver themselves. People do.
DOMINO'S TRIES TO GET ITS STRATEGIC RECIPE RIGHT Believe it or not, years ago it was normal for people to have to wait an hour or more to get their pizzas delivered. But those were the years B.D.-before Domino's. Started by Tom Monahan and his brother in Ypsilanti, Michigan, in the 1960s, Domino's created a value proposition people were hungering for: pizza delivered in 30 minutes or less. Better yet, if a Domino's pizza wasn't delivered in 30 minutes, it was free. That was unheard of in the pizza business. Monahan changed the pizza industry not because Domino's created a better product but because it was able to offer a different value proposition than anyone else was offering, as well as align its people, processes, and systems to deliver against that promise. Domino's used assembly line-based systems and standardized processes to improve efficiency and reduce pizza preparation times. For example, it was the first to use conveyor- belt oven technology to ensure uniform temperatures and reduce baking times. - Managing Human Resources 79 deliverables by emphasizing and encouraging fast pizza making and delivery. Annually, the company holds a "World's Fastest Pizza Maker" competition in which its pizza makers compete for cash and other prizes. As important as what Domino's did is what it did not do. Strategy is about making choices. Domino's did not focus on great pizza-it focused on fast pizza. It did not customize every order but prepared them all in advance. It didn't hire premiere pizza chefs who tossed pizza dough into the air to make lighter crusts. It didn't use the wood-fired stoves to give the pizza an old-world taste. And it didn't offer in- store dining. Each of the ingredients in Monahan's formula was aligned around its value proposition of fast delivery-a strategy that worked well for Domino's for decades. This strategy and a franchise model helped the company grow by leaps and bounds. Today, there are over 10,000 Domino's pizza stores, which are in 70-plus countries around the world. Over time, however, Domino's competitive environment changed. Other companies began delivering pizzas in about 30 minutes, and consumers began wanting more than fast pizza: they wanted good pizza. The problem was that Domino's wasn't delivering on that score. In taste tests, customers complained that Domino's pizzas tasted like cardboard. At one point, the firm's customer satisfaction scores in terms of its food and service were lower than those of any other pizza chain. Perhaps not surprisingly, the firm's stock price reflected as much. To turn things around, the company had to rethink its value proposition. That included revamping not only its food but also its HR strategies and policies. One problem Domino's suffered from is rampant in the fast-food industry: employee turnover. Domino's turnover rate was 158 percent annually. In other words, for every employee hired during a year, another 1.5 employees quit. Domino's CEO at the time, David Brandon, wasn't convinced that higher pay for hourly wage employees was the solution, however. "If we could have increased everybody's pay 20 percent, could we have moved the needle a little bit to buy some loyalty? Maybe, but that's not a long-term solution." Moreover, because most Domino's stores are individually owned rather than corporate owned, the individual owners must decide for themselves whether to increase hourly wages. Instead, Brandon focused on the quality of store managers-choosing better ones, finding ways to retain good ones, and coaching them to train and motivate employees by being respectful and polite. The company also began offering managers stock options for growing their store revenues.
Transcribed Image Text:DOMINO'S TRIES TO GET ITS STRATEGIC RECIPE RIGHT Believe it or not, years ago it was normal for people to have to wait an hour or more to get their pizzas delivered. But those were the years B.D.-before Domino's. Started by Tom Monahan and his brother in Ypsilanti, Michigan, in the 1960s, Domino's created a value proposition people were hungering for: pizza delivered in 30 minutes or less. Better yet, if a Domino's pizza wasn't delivered in 30 minutes, it was free. That was unheard of in the pizza business. Monahan changed the pizza industry not because Domino's created a better product but because it was able to offer a different value proposition than anyone else was offering, as well as align its people, processes, and systems to deliver against that promise. Domino's used assembly line-based systems and standardized processes to improve efficiency and reduce pizza preparation times. For example, it was the first to use conveyor- belt oven technology to ensure uniform temperatures and reduce baking times. - Managing Human Resources 79 deliverables by emphasizing and encouraging fast pizza making and delivery. Annually, the company holds a "World's Fastest Pizza Maker" competition in which its pizza makers compete for cash and other prizes. As important as what Domino's did is what it did not do. Strategy is about making choices. Domino's did not focus on great pizza-it focused on fast pizza. It did not customize every order but prepared them all in advance. It didn't hire premiere pizza chefs who tossed pizza dough into the air to make lighter crusts. It didn't use the wood-fired stoves to give the pizza an old-world taste. And it didn't offer in- store dining. Each of the ingredients in Monahan's formula was aligned around its value proposition of fast delivery-a strategy that worked well for Domino's for decades. This strategy and a franchise model helped the company grow by leaps and bounds. Today, there are over 10,000 Domino's pizza stores, which are in 70-plus countries around the world. Over time, however, Domino's competitive environment changed. Other companies began delivering pizzas in about 30 minutes, and consumers began wanting more than fast pizza: they wanted good pizza. The problem was that Domino's wasn't delivering on that score. In taste tests, customers complained that Domino's pizzas tasted like cardboard. At one point, the firm's customer satisfaction scores in terms of its food and service were lower than those of any other pizza chain. Perhaps not surprisingly, the firm's stock price reflected as much. To turn things around, the company had to rethink its value proposition. That included revamping not only its food but also its HR strategies and policies. One problem Domino's suffered from is rampant in the fast-food industry: employee turnover. Domino's turnover rate was 158 percent annually. In other words, for every employee hired during a year, another 1.5 employees quit. Domino's CEO at the time, David Brandon, wasn't convinced that higher pay for hourly wage employees was the solution, however. "If we could have increased everybody's pay 20 percent, could we have moved the needle a little bit to buy some loyalty? Maybe, but that's not a long-term solution." Moreover, because most Domino's stores are individually owned rather than corporate owned, the individual owners must decide for themselves whether to increase hourly wages. Instead, Brandon focused on the quality of store managers-choosing better ones, finding ways to retain good ones, and coaching them to train and motivate employees by being respectful and polite. The company also began offering managers stock options for growing their store revenues.
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