Sample of assignment: Strategic Expansion Plan for Domino’s Pizza Malaysia

By | May 20, 2013

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List of figures

Figure 1 Porters model of competitive forces……………………………………………… 13

Figure 2 The GE/McKinsey Matrix…………………………………………………………… 18

Figure 3 A resource based model………………………………………………………………. 27

Figure 4 The flower of service model………………………………………………………… 30

List of tables

Table 1 Result of the five forces model analysis………………………………………….. 18

Table 2 Inflation growth statistics……………………………………………………………… 22

Table 3 The generic strategy framework…………………………………………………….. 24

Table 4 The Ansoff product-market scope matrix………………………………………… 27

Table 5 Gantt chart marketing plan (2012)…………………………………………………. 35

Table 6 Gantt chart marketing plan (2013)…………………………………………………. 36

Table 7 Gantt chart marketing plan (2014)…………………………………………………. 37

Table 8 Target monitoring………………………………………………………………………… 38

Content

Executive summary………………………………………………………………………………………….. 1

Acknowledgement…………………………………………………………………………………………… 2

List of figures………………………………………………………………………………………………….. 3

List of tables…………………………………………………………………………………………………… 4

Strategic Expansion Plan for Domino’s Pizza Malaysia……………………………………… 7

1.     Introduction……………………………………………………………………………………………… 7

1.1      Company profile & business expansion in Malaysia……………………………… 7

1.2      Product information…………………………………………………………………………. 7

2.     Report objectives………………………………………………………………………………………. 8

2.1      Provide a basic understanding of existing business of Domino’s Pizza in Malaysia       8

2.2      Carry out an environmental check on the macro and micro conditions of Domino’s Pizza Malaysia  8

2.3      Analyze the strategic formulation of Domino’s Pizza in Malaysia…………… 8

2.4      Propose an viable plan for the strategic implementation in Malaysia……….. 8

3.     Analysis……………………………………………………………………………………………………. 8

3.1      External analysis………………………………………………………………………………. 8

3.1.1     PESTEL analysis…………………………………………………………………….. 9

3.1.2     Industry and competition analysis…………………………………………… 14

3.1.3     Competitor analysis……………………………………………………………….. 18

3.1.4     GE Matrix/Mckinsey Matrix…………………………………………………… 19

3.2      Internal analysis……………………………………………………………………………… 20

3.2.1     SWOT analysis……………………………………………………………………… 20

3.2.2     Mission, vision and marketing objectives…………………………………. 23

3.3      Summary of analysis……………………………………………………………………….. 23

4.     Strategic formulation……………………………………………………………………………….. 24

4.1      Competitive positioning with Porter’s generic strategy framework……….. 24

4.1.1     Broad strategic scope of Domino’s Pizza………………………………….. 25

4.1.2     Differentiation in competitive advantage…………………………………. 26

4.2      The Ansoff Matrix………………………………………………………………………….. 27

4.3      Resource based view………………………………………………………………………. 28

4.4      Strategic methods…………………………………………………………………………… 30

4.5      Marketing strategy………………………………………………………………………….. 31

4.5.1     Product strategy……………………………………………………………………. 31

4.5.2     Price strategy………………………………………………………………………… 33

4.5.3     Place strategy……………………………………………………………………….. 33

4.5.4     Promotion strategy………………………………………………………………… 34

5.     Implementation……………………………………………………………………………………….. 34

5.1      Gantt chart marketing plan………………………………………………………………. 34

5.2      Monitoring success…………………………………………………………………………. 37

6.     Conclusion and critics of the report……………………………………………………………. 38

List of reference…………………………………………………………………………………………….. 40

Strategic Expansion Plan for Domino’s Pizza Malaysia

Domino's Pizza Malaysia

1.        Introduction

1.1    Company profile & business expansion in Malaysia

Domino’s Pizza started with just one store called “DomiNick’s” bought by brothers Tom and James Monaghan for $500 in 1960. James traded his half of the business to Tom in 1965, and as sole owner Tom renamed the business Domino’s Pizza Inc. In 1978 the 200th Domino’s store opened, and things really began to cook. By 1983 there were 1,000 Domino’s stores. The company landed in Malaysia in 1997. Launched by Tom Monaghan himself, Domino’s Pizza became an overnight sensation. As at end-July 2011, there are 63 stores operating all over Malaysia, with 47 in the Klang Valley, 4 stores in Johor, 4 in Penang, 3 in Negeri Sembilan, 3 in Ipoh and 2 in Melaka. (Dominos.com.my 2011). The Domino’s Pizza franchise company is a fast growing company, offering delicious food and fast delivery. Potential franchisees who are looking for a friendly and fast paced environment will find something that they enjoy in a warm inviting Domino’s Pizza franchise store.

1.2    Product information

Domino’s Pizza majorly provides various pizza with its own secret receipt in different taste such as hand-tossed crust (which is brushed with a rich, buttery garlic infused oil), cheesy double decker (Two crunchy thin crusts with a layer of creamy cheddar cheese sauce in between). In term of the ingredients of the pizza, Domino’s Pizza has been desiccated to the provision of the products of the best quality using the best ingredients. The company also diversifies the products by introducing new products with local favors which are tasty and with certified halal in Malaysia. One important added service around the core product of pizza is the stores’ fast and punctual delivery service that differentiates the brand with other competitors.

2.        Report objectives

2.1    Provide a basic understanding of existing business of Domino’s Pizza in Malaysia

2.2    Carry out an environmental check on the macro and micro conditions of Domino’s Pizza Malaysia

2.3    Analyze the strategic formulation of Domino’s Pizza in Malaysia

2.4    Propose an viable plan for the strategic implementation in Malaysia

3.        Analysis

As known to us, organizations do not operate in a vacuum and a key to effective strategic management is to make decisions that will enable actions to correspond positively with the context in which those actions will ultimately take place. To some extent, a company’s internal conditions in particularly the strengths, weaknesses, resources and core competitiveness would decide the company behaviors; and to some extent a company’s external conditions also influence the decision making process. Hence, environmental factors affect the entire strategic management process (Bensoussan & Fleisher 2008, p.171). In following, we will perform both external and internal analysis on Domino’s Pizza Malaysia.

3.1    External analysis

3.1.1            PESTEL analysis

When considering the future strategy of an organization, according to Barry Haynes,Nick Nunnington (2010, p.13), it is useful to start by identifying external factors that may have an impact on that future strategy. And the PESTEL analysis is one of the most frequently used analytical tools to identifying the following external factors in a structured way: Political factors, Economic factors, Social and cultural factors, Technological factors, Environmental factors and Legislative factors.

3.1.1.1      Political factors

Political factors refer to regulations and policies set by local and national governments, such as trade barriers, tax rates and political stability (Lockström 2007, p.101). Malaysia’s political stability and economic strength coupled with an efficient,business friendly government have supported a conducive environment for business growth (Business and investment opportunities year book 2008, p. 79). The well known political stability in the Malaysian market has ensured the continual investment for many large multinational corporate and it also implies positive factors for Domino’s Pizza Malaysia to expand their investment and expansion activities in Malaysian market. As a matter of fact, though recently there had been a protest against Prime Minister Najib Razak’s government in which over 1400 people were arrested (reuters.com 2011), after all the protest was held in a well arranged manner with no harm to the normal business operations. In my own understanding, the peaceful protest actually suggests that there is a normal channel for people to express their different opinion which is necessary in a politically stable society.

3.1.1.2
Economic factors

Figure 1.0 The GDP per capita of Malaysia

Figure 2.0 Annual growth rate of Malaysia GDP

Though experienced an economy downturn during the US led global financial crisis during 2008 to 2009, like many other Asian economies, Malaysia managed to make a turnaround. Since the beginning of 2010, the Malaysian economy too has enjoyed a robust recovery, and the proactive policies of the authorities have helped to limit the downturn and set the stage for a sustainable expansion (Singh 2011). Even though the economy recovery seems to slow down in 2011, the continual steady growth of the per capita GDP has supported a healthy economy performance. The economy recovery back to a pre-crisis growth rate and also a continuously growing per capita GDP both suggest that the economy conditions in Malaysia are healthy and suitable to support an expanding market size in the fast food industry because as proposed by Riad A. Ajami,and G. Jason Goddard (2006, p.158) that the growth trends of an economy generally have a direct relation to the market size for different products and services in the country. A faster growth rate would indicate more rapid industrial development. What is more the government has a long term plan for the economy of the country in 2020 which is known as the Economic Transformation Programme. Launched on September 21, 2010, the Economic Transformation Programme is a comprehensive economic transformation plan to propel Malaysia’s economy into high income economy. The program will lift Malaysia’s Gross National Income (GNI) to US$523 billion by 2020, and raise per capita income from US$6,700 to at least US$15,000, meeting the World Bank’s threshold for high income nation (International Monetary Fund 2010). With the government’s ambition to turn the economy into a developed economy and also based on the HSBC’s prediction which suggests that Malaysia will be the top 20 economies by 2050 (fundweb.co.uk 2011), we can conclude that the economy condition in the coming future will be good for business expansion with the anticipated rapid economic growth the rise of the income level.

3.1.1.3      Social and cultural factors

In term of social and cultural factors, in an early comparing study done in 2007 among the three neighboring countries, Malaysia, Brunei and Singapore, the average salary in Malaysia is very low (USD 900) compared to that of Singapore (USD 11, 300) and Brunei (USD 8, 760) but the living cost in Malaysia is the lowest resulting in relatively comfortable live in the region (Richmond 2007, p.46). In this region, there is an increasing Westernisation[1] and the living pace of the modern life are changing the cultures systems among these countries, nevertheless the traditional customs and religious values are still influential in people’s life. For example in these three countries, the Malays are commonly following the Islam devoutly and also following the historical rituals and the spiritual beliefs together with a village based social system which is known as adat which could also be found in the major cities (Joseph & Najmabadi 2003). For companies that operate in these countries, these social cultures, conventions and norms should be considered while making strategic decisions to avoid possible conflicts.

3.1.1.4      Technological factors

Technology has created a society which expects instant results. This technological revolution has increased the rate at which information and goods are exchanged between stakeholders. A faster exchange of information and physical goods can benefit businesses as they are able to react quickly to changes within their operating environment (learnmarketing.net 2009). Ranked 35th for its air transport infrastructure, Malaysia has a large number of operating airlines, high-quality air transport infrastructure, and an international air transport network that provides connections to the country’s key international oversea markets and oversea resource transportation (Hausmann, Austin & Mia 2009). It should be seen that Malaysia has advantages in attracting business activities because it has a good transportation network that enable rapid and low cost good transportation.

3.1.1.5      Environmental factors

Environmental issues are self explanatory and may include laws on waste disposal, energy consumption, pollution monitoring, etc. Companies in a global wide scale are increasingly aware and are proactively tackling these areas in order to be socially responsible or to save on energy and waste disposal costs (Jeffs 2008, p. 30). For a natural resource driven economy like in Malaysia, environmental factors are of critical importance for development. Malaysia is one of the 12 countries in the world identified as a “megadiversity#” region. Today there are serious concerns that Malaysia could lose the “mega” prefix as a downward environmental trend is now in full swing (suite101.com 2010). And as of today, both the government and many NGOs (none governmental organizations) have invested great efforts and resources to increase the public (mainly consumer) environmental awareness to protect the country’s megadiversity status.

3.1.1.6      Legislative factors

Malaysia’s legal system is based on English common law which were former colonies or territories of England. Malaysia also has a secondary legal system concurrently affecting certain sections of the law, such as Islamic law and customary law. They use the judicial review of legislative acts in the Supreme Court at request of Supreme head of the federation. Islamic law is applied to Muslims, which make up 60.4% of the population, in the country in matters of family law and religion issues (Palumbo-Liu, Robbins & Tanoukhi 2011, p. 189). With a complex legal system, it is important for companies to have employed professional legal services and monitor the organization’s business behaviors to make the company operating strictly within the constraints of the legal systems and relative policies and regulations.

3.1.1.7      Conclusions of the PESTEL analysis

From a macro environment perspective, the above PESTEL analysis that examines the key field of the macro environmental factors shows us that though Malaysia is considered to be middle income country and its economy is much lagged behind its neighboring two countries, Singapore and Brunei, the fast growing pace and seemingly health political governance provides business sector with great business opportunities despite that the legal system and social and cultural systems could be complex. But considering only the PESTEL analysis, in a word, the Malaysia is a good market for strategic expansion.

3.1.2            Industry and competition analysis

Figure 1 Porters model of competitive forces

Source: notesdesk.com 2009

Porter’s model of competitive forces assumes that there are five competitive forces that identifies the competitive power in a business situation. These five competitive forces identified by the Michael Porter are: Threat of substitute products, Threat of new entrants, Intense rivalry among existing players, Bargaining power of suppliers and Bargaining power of Buyers. Porter’s Five Forces model can be used to understand how profitable a target industry might be and to understand the forces impacting upon the current industry’s profitability (Graham & Allan 2008, p. 40). After the PESTEL analysis that evaluates the macro forces, in following let’s evaluate the fast food industry in Malaysia with the help of the famous five forces model proposed by Michael E. Porter (1980).

3.1.2.1      Threat of substitute products

Threat of substitutes refers to other products in other industries that could be substituted for the fast food that the companies in the industry offer (Desmond 2004, p.33). Despite the fact that the pizza that Domino’s Pizza provides to the customers has many substitutes such as other fast food like burgers and hot dog and also other local food, because the Domino’s Pizza is famous for its important added service which is around the core product of pizza, the stores’ fast and punctual delivery service has helped the company to differentiates the brand compared with other competitors, the overall threat of the substitute products is considered to be in a middle level.

3.1.2.2      Threat of new entrants

The threat of new entrants may be determined by several different factors. One such factor may be capital requirements (financing needs to establish operations and pay start-up losses) and another potential factor is the product differentiation, for example, if existing firms already have unique products with great consumer loyalty, a new firm will have difficulty in getting a foothold in the market and one more factor is the switching costs which refer to the negative costs that a consumer incurs as a result of changing suppliers, brands or products (Wikström 2004, p. 52). We consider the threat of the new entrants in the fast food industry as strong for several reasons: firstly, the capital requirement to start a fast food industry is not high enough to stop the possible new entrants’ interest. Though it would be difficult for the new entrants to expand into the market and have a large number of outlets, the new entrants could start from several outlets to establish their presence first before the next step of market penetration; secondly, though the products and services offered by Domino’s Pizza Malaysia are to some extent differentiated from the competitors, but there have not been strong enough of differentiation that enable the company to have the product uniqueness that the existing and new competitors could not copy at all and help the company to create strong customer loyalty; third, the switching cost for the consumer should be considered as very low because making a different choices would not be too much of a difficulty of most consumers.

3.1.2.3      Rivalry among existing players

According to George Stonehouse and David Campbell (2004, p. 122) rivalry among the players in an industry can take several forms. The most common are price competition, product development, product differentiation, promotion and advertising. The intensity of the existing rivalry can be related to various, some of them are listed here:

the number of competitors in the industry;
similarity of the size of the competitors;
the overall rate of the industry growth;
the extent of differentiation and brand loyalty among the consumers;
the cost to competitors of the existing the industry (exit costs)

The rivalry among the existing players in the fast food industry in Malaysia is high for several reasons. Firstly, the industry is rather developed and many fast food giants have already establish them in the Malaysian market. And also because of the existence of the other local small scale fast food brands, the total number of competitors is not small; secondly, the cost of the competitors could also be large if the competitors’ business scale is not small.

3.1.2.4      Bargaining power of suppliers

The balance of power between suppliers and the supplied industry is a function of the degree of fragmentation of that industry. For instance, in an industry with many small suppliers and few large buyers, the bargaining power of the supplier will be weak (Chapman 2006). This is exactly the scenario in the fast food industry. There are large fast food suppliers that dominate the industry such as the KFC and McDonald, and they tend to have stronger bargaining power over the suppliers. But in contrast the suppliers are many and they tend to provide a single product to the large supplied companies. What is more, in the fast food industry where the inputs are more standardized and there is abundant availability of substitute products, and also the switching cost is relatively low due to the standardization of the inputs, all these contribute to a low bargaining power of the suppliers in the fast food industry in Malaysia like many other markets in other parts of the world.

3.1.2.5      Bargaining power of Buyers

Bargaining power of buyers relates to the ability of the prospective buyers to seek discounts or better deals and prices given certain conditions favorable to them. Buyers are considered weak under the following scenarios or situations: a) buyer switching costs to competing brand are high; b) there is a surge in buyer demand; and c) seller-buyer collaboration or partnering provides attractive win-win opportunities (Orcullo 2008, p. 57). The bargaining power of the buyers is in a middle level. Firstly, the buyers in the fast food industry are large in numbers and also they would not purchase food together intentionally; secondly, the buyers switching cost is low as changing to a new fast food provider or substitute product is easy; thirdly, after the financial crisis, though people going out to dine more frequently but there could not be a surge of demand for the fast food. In sum, we would say that the bargaining power of the buyers is in a middle level.

3.1.2.6      Evaluation of the five forces model analysis

Forces Level
Threat of new entrants High level
Threat of substitute products Middle level
Rivalry among existing players High level
Bargaining power of suppliers Low level
Bargaining power of Buyers Middle level
Table 1 Result of the five forces model analysis
With the results of the five forces model analysis, we conclude that the industry attractiveness in the fast food industry in Malaysia will be in a middle level because of the averaging level of the five forces is in a middle level.

3.1.3            Competitor analysis

Local companies and brands dominate consumer food service. QSR Brands, Golden Arches and Secret Recipe Cakes & Café dominated consumer food service in Malaysia. They have consistently marketed their products with a range of promotional marketing campaigns, for instance, a tea-time offering from 15.00 hours to 18.00 hours by Secret Recipe Cakes & Café. Continuous innovation of the company’s menu caused it to be able to outperform other competitors in consumer food service in Malaysia. Furthermore, Secret Recipe Cakes & Café expanded aggressively with more new outlets throughout Malaysia in 2010 which helped it to gain a high value share. In terms of multinational brands, KFC and McDonald’s opened more drive-thru outlets to capture more customers that demand the convenience provided by such eateries (euromonitor.com 2011).

3.1.4            GE Matrix/Mckinsey Matrix

Figure 2 The GE/McKinsey Matrix

Source: zanthus.com 2010

A GE Matrix has been used to identify the attractiveness and competitive position of the markets that Amazon.com operates in, using the indictors as identified by Johnson et al (2006, p. 320). The GE/McKinsey Matrix was developed in the 1970s by the management consulting firm McKinsey & Co. as a tool to screen General Electric’s large portfolio of strategic business units (SBUs). The idea behind the matrix (a.k.a., the GE Business Screen or GE Strategic Planning Grid) is to evaluate businesses along two composite dimensions: industry attractiveness and industry strength. Conceptually, this matrix is similar to the BCG Growth-Share Matrix in that it maps SBUs on a grid of the industry and, at the same time, marks their competitive position (zanthus.com 2010). As we have concluded above, the industry attractiveness in the fast food industry in Malaysia will be in a middle level because of the averaging level of the five forces is in a middle level. And on the other dimension, the business unit strength, because of the company’s strong brand equity (though it is still not good enough compared to McDonald, KFC, Pizza Hub and some leading global brands) and a rapid market share growth (the company has increased the number of the outlets from 42 on 7 Apr 2010 to 63 stores as at end of July this year) (dominos.com.my 2011), the strategic business unit strength is in a high level. And with a high / medium position in the GE/McKinsey Matrix, the company is in the shadowed fields among the three in the upper left corner. According to the model, if the business unit falls in this area, it will be favorable for the company to focus on the business growth in the market because the industrial attractiveness is fine while the company enjoys core competitiveness in the market.

3.2    Internal analysis

3.2.1            SWOT analysis

SWOT analysis refers to strength, weaknesses, opportunities and threats. Strengths and weaknesses refer to the organization’s internal environment over which the firm has control. Strengths are areas where the organization excels in comparison with its competitors while weakness is areas where the firms may be at a comparative disadvantage. Opportunities and threats refer to the company’s external environments over which company would have less control (Henry 2008, p. 61).

3.2.1.1      Strength analysis

The company has a trade-mark rapid pizza delivery service which takes only 30 minutes, while the Domino’s Pizza Malaysia does not follow the policy that it applies in the United States market to provide free of charge (FOC) if the order is not delivered within 30 minutes, the Malaysia sector instead does provide vultures to the customers if the order is not finished within half an hour. The 30 minute time limitation does show that the Domino’s Pizza Malaysia will still deliver the swift pizza delivery service which is less than the 45 minute delivery given by McDonald in Malaysian market. Another strength that the company has is high global brand equity. According to Keller, two sources of brand equity are brand awareness and brand image. A positive brand image is created by creating strong, favorable, unique and consistent brand association (Keller 2003). As an international pizza delivery corporation, Domino’s Pizza has a global famous brand and also it is positively and strongly associated with the outstanding pizza delivery service. And as one of the most recognizable pizza brands in the world, the company also has wide brand awareness in the Malaysian market. And the positive brand image with consistent brand association and also wide brand awareness contribute to a high brand equity of the Domino’s Pizza which is a key strength to the company.

3.2.1.2      Weakness analysis

Though the company may have wide brand awareness, but one key weakness that Domino’s Pizza Malaysia has is the low market share that the company has right now compared to the large scale competitors. For example, McDonald’s Malaysia aimed to have 300 restaurants nationwide by 2014 from 213 now, adding it would spend RM4 million for each new restaurant. Most recently, McDonald’s Malaysia planned to spend RM112 million this year for 20 new outlets and also to remodel 13 existing ones, adding that it was also looking to open 25 new restaurants next year (btimes.com.my 2011). Hence the low market share and small number of outlet has constrained the spreading of the brand and accumulation of customer base in Malaysia.

3.2.1.3      Opportunity analysis

With the above mentioned increasing awareness of the environmental, one opportunity that Domino’s Pizza Malaysia for the future development is through adoption of technologies and production processes to further reduce the energy consumption and minimize the waste and finally keep the business more environmentally friendly. According to an earlier survey done in the Food Industry in Malaysia, three is a growing awareness among consumers in nutrition value has generated demand for healthy, minimally processed fresh food, organic food and natural food flavors from plants and seafood (tradechakra.com 2009). And this demand for healthier and more nutritious food is also could be seen from the fast food industry. And because the pizza products are generally believed to be healthier and nutritious than the burgers (McDonald) and fried chickens (KFC), there would be great chance and opportunities for Domino’s Pizza Malaysia to utilize this customer behavior trend and thinking to better benefit and expand the business.

3.2.1.4      Threat analysis

Table 2 Inflation growth statistics

Source: Buletinonline.net 2011

As mentioned above, the threat of new entrants is high because the new entrants could start from several outlets to establish their presence first before the next step of market development, hence the new entrants could bring a lot of threat to the business. Another threat comes from the fast growing food price in Malaysia. According to the recent inflation statistics, 2011 will register the second highest food price increase for the people to bear since 2006. This will repeat the pain of 2008 when food prices increased by 8.8% due to a sudden hike in petrol and fuel prices. Food prices in Malaysia increase at more than twice the rate of global food prices in the first four months of 2011. A comparison of consumer price index (CPI) for global food prices published by United Nation’s Food and Agricultural Organization (FAO) (Buletinonline.net 2011). The rapidly growing food price will certainly bring in threat to most business companies that focus on food industry because the price of the raw material products such as eggs will also see an increase if the inflation and food price growth continues.

3.2.2            Mission, vision and marketing objectives

A mission or vision statement declares a purpose or goal that all stakeholders can subscribe to. Domino’s Pizza’s mission of “Exceptional people on a mission to be the best pizza delivery company in the world” is considered as a worthwhile goal with enormous rewards for all stakeholders and all customers, employees, and investors can all subscribe to the mission. And this mission with well implementation will attract customers, employees and inventors who all profit from organizational loyalty (Lawfer 2004, p. 198). In term of marketing objectives, the Domino’s Pizza Malaysia’s plan is to increase the number of the franchise stores from 63 to 120 in the next three years and increase the net profit by 120% and the customer awareness by 30%.

3.3    Summary of analysis

The analysis of the Domino’s Pizza Malaysia’s external and internal environments suggests that the business environment is suitable for expansion in the Malaysian market. Firstly, the fast growing economy pace and seemingly health and stable political governance provides business sector with great business opportunities together with a stable well established legal system; as suggested by an averaging level of the five forces which is in a middle level, the industry attractiveness in the fast food industry in Malaysia will be in a middle level which is also not bad for strategic expansion though it could means some difficulties such as the high competition among the established competitors; thirdly, based on the analysis of the model GE/McKinsey Matrix, since the business unit falls in a high / medium position of the model, it will be favorable for the company to focus on the business growth in the market because the industrial attractiveness is fine while the company enjoys core competitiveness in the market; fourthly, according to the results of the SWOT analysis, the company has a high brand equity contributed by a positive brand image with consistent brand association and also a wide brand awareness and also the opportunities of the increased awareness of the environmental protection and also the focus on having more nutritious and fresh food provides the company with chance to outperform the existing powerful fast food competitors.

4.        Strategic formulation

4.1    Competitive positioning with Porter’s generic strategy framework

Table 3 The generic strategy framework

Source: Stonehouse & Campbell 2004, p. 175

Michael Porter’s generic strategies matrix as shown in the figure above, demonstrates that some markets are inherently more prone to lack of differentiation in products and service. In such cases, the attainment of low costs must be a corporate goal if adequate margins are to be obtained. The ultimate strategy for commodity market situations, where there is no differentiation or cost advantage, is to move to either a cost leadership or niche strategy. A niche position is achieved through offering added value, whereas in a cost leadership position, the values offered are cost competitive.

For Domino’s Pizza Malaysia, the group is using and it is advisable that the company would still choose the competitive strategy of differentiation because of the nature of the product and services that the company provides and customer base situation. Below we will look into the rationality of such competitive positioning in term of competitive scope and competitive advantage. Strategic scope refers to the market penetration while strategic strength refers to the firm’s sustainable competitive advantage (Mehta 2009, p. 305).

4.1.1            Broad strategic scope of Domino’s Pizza

In the dimension of strategic scope over which the company should compete, Domino’s Pizza Malaysia need to choose to compete in the mass market with a broad scope because of the product nature and customer based. First of all, pizzas are widely accepted by the public and, because of their popularity, are easily promoted by any age groups, hence the product nature enables the company to focus on a mass market rather than a niche market; secondly, because of the wide popularity of the pizza products the company could have a broad customer based; thirdly, though the company has adopted a differentiation strategy to make the product more valuable to the customers but still the operating efficiency is very important as the customer extend faster delivery service to customers, but such high efficiency would incur high cost which require the company to expand more customer base to keep the business profitable.

4.1.2            Differentiation in competitive advantage

In term of the competitive advantage, the company’s long term adopted strategic orientation is to offer differentiated product and services to develop a position that the potential customers will consider the products and services as unique thus add extra perceived value to the company’s offerings. Regarding the product differentiation which refers to the modification of a product which is usually in minor ways to make it more attractive to the target market and to differentiate it from the competitors’ products (Talloo 2007, p. 149), Domino’s Pizza Malaysia could further differentiate the products by researching and applying some local style pizza and deserts or offering food products that are of greater nutrition to the customers to make them feel the food is unique and different from the competitors. And in term of the service differentiation, at present the company has already offered the following special services:

30-Minutes Delivery Guarantee!
Domino’s is the only pizza company that guarantees your order will arrive within 30 minutes or we’ll give you a free Regular Pizza voucher!

Product Satisfaction Guarantee
Domino’s guarantees satisfaction! Your pizza is guaranteed to be hot, fresh, and great tasting when it arrives at your doorstep, otherwise we’ll replace your order or refund your money.

15-Minute Take-Away Guarantee
Domino’s guarantees you’ll receive your Take-Away orders within 15 minutes or we’ll give you a RM10 off your next pizza purchase voucher

Nett Pricing
Domino’s pricing is all inclusive. We do not add any extra charges for delivery. So what you see is what you pay. No surprises! (dominos.com.my 2011)

As said earlier, as an international pizza delivery corporation, Domino’s Pizza has a global famous brand and also it is positively and strongly associated with the outstanding pizza delivery service, the above special services are all associated with the company’s core product, the pizza delivery services. In the plan for the future, the company could continue to enhance these special services and develop new services that fit in the customer needs.

4.2    The Ansoff Matrix

Table 4
The Ansoff product-market scope matrix

Source: Barnwell 2008, p. 141

The Ansoff product-market scope matrix as shown in the figure above demonstrates the choices of strategic direction open to a company by locating the business into the matrix in two dimensions: product and market. The matrix provides four product market strategies: market penetration strategy, product development strategy, market development strategies and diversification strategies.

For Domino’s Pizza Malaysia, it is strategic expansion in the local Malaysian market should be considered as a market penetration strategy. This is because the product “pizza delivery” is not new and the company have been focusing on providing the product for a long time and also there is already a well established industry there and also in term of the market strategy, the company in this plan will aim at expand  its market share in Malaysia market which means that the market to be focused is also not new. According to Tony Morden (2007, p. 522), for company that uses a market penetration strategy to grow its business, it will imply a strategy of increasing market share within existing markets and segments. Increasing promotional and sales expenditure might be used to achieve this objective. There are two major ways that Domino’s Pizza Malaysia will gain more business growth: the first way is to gain business growth together with the growth the fast food industry in Malaysia though it is slow; the second way is to take over some of the competitors’ maker share to add to the company’s share which is an important and key way to a rather matured market like the fast food industry in Malaysia. By adopting this strategy as the direction of business growth, it would imply a series of relative marketing effort such as more using penetration pricing, promotional activities and distribution channel expansion and maintenance.

4.3    Resource based view

Figure 3
A resource based model

Source: Marketingteacher.com 2010

C. K. Prahalad and Gary hamel popularized the resource-based view of the firm by proposing thatthe competitive advantage derives from an ability to build, less expensively and more rapidly than competitors, the core competencies that spawn unanticipated products and the tangible link between identified core competencies and end products is what they call the core products which represent the core competencies, and the senior managers should develop the strategies that establish the objectives for competency building (Hax 2010, p. 218). From a resource-based view, insights into the market structure can be leveraged to determine which resources need to be developed to create sustainable competitive advantage; the resource-based view is different from a market-based view in which resource is considered as the basis for positioning advantages (Poser 2003, p. 32).

One simple resource based model is described in the figure above which suggests that intangible resources are the core competitiveness that is most difficult for the competitors to imitate followed by human resources and material resources. In Domino’s Pizza Malaysia, regarding the material resource, the equipments and production processes could be such kind of resources. And regarding the human resource, as a franchise business, the organization have a professional team made up of various to provide intellectual support to the franchisees in term of training the staffs, management skills teaching, standardization and quality and safety monitoring and also other support service required by the franchisees. Such human resource is considered to be hard to achieve. And regarding the intangible resource, most obvious resource of this kind is the recipe of the pizza and the deserts and also the standard process of making these food products, and according to the resource based view, the intangible resources could be very difficult to be achieved and once achieved it will be difficult for other competitors to follow. Another intangible resource belongs to the company its brand equity which is well increased along the long history of operation of the company. One more intangible resource is the company’s various service such as the mentioned 30 minute home delivery service and 15 minute take-away order service (Domino’s guarantees customers will receive the take-away orders within 15 minutes or the store will provide a free personal pizza voucher),  these services are also difficult to be imitated because they are functioning with the support of a number of management skills, controlling framework, logistic management systems and other functional systems.

4.4    Strategic methods

The most obvious and important strategy method that the company has used is franchising. Franchising is a method of market expansion utilized by a successful business entity wanting to expand its distribution of services or product through retail entities owned by independent operators using trademarks or service marks, marketing techniques and control of expanding business entity in return for the payment of fees and royalties from the retail outlet (Keup 2007, p. 5). The owner of a business-format franchise bought not only the right to sell a manufacturer’s product but also a complete package of services that typically include a fully equipped outlet, training, continued  advice, and regular assistance in virtually all areas of operation (Dicke 1992, p. 117). And because of the close link between the franchiser and franchisee, they share common interest and if the business operations fail, it would be detrimental to both parties. As for Domino’s Pizza Malaysia, it has already established an integrated management team that will be in charge of the functional activities such as marketing, operation management, human resource support and local product development. With the ambitious marketing and business targets to penetrate into the Malaysia market, the Domino’s Pizza Malaysia focus doing three kinds of jobs to grow the franchise business and smooth the franchising process and also reduce business failures of the franchisees in the Malaysia market. Firstly, the company should enhance the human resource management function by announcing a clears set of guidelines based on the new strategy for the employees to follow. It is also essential that the company let the employees remember the company’s vision and mission and also the marketing targets for them to achieve. What is more, the company need to achieve a good employer-employee relationship which is important to ensure a long-term success in the franchise business; secondly, the company needs to attract more mature and qualified inventors to join the business but still the strict selection procedures of the partners should be followed to make sure that the better partners are chosen; thirdly, the company need to expand the marketing effort of its brands and products to increase the brand equity and awareness.

4.5    Marketing strategy

4.5.1            Product strategy

Figure 4 The flower of service model

Source: Lovelock 1999
To Domino’s Pizza Malaysia, the group needs to consider two types of products: the food product and the supplementary services. In term of the food product, as analyzed earlier, because there is an increasing Westernisation and the living pace of the modern life are changing the cultures systems among these countries while the traditional customs and religious values are still influential in people’s life, it is important for Domino’s Pizza Malaysia to integrate some local features and develop new products that are welcome among the three major races: Malays, Chinese and Indians. But such product development by modification should basically through minor modification to ensure the product strategy consistency. What is more, the innovation and renewal of the menu should be more frequent to support a faster market penetration because the new products are usually a major content of the promotion and advertising.

And regarding the supplementary service, the service design and enhancement could usually be classified into Facilitating supplementary services (Information, Order taking, Billing and Payment) and Enhancing supplementary services (Consultation, Hospitality, Safekeeping and Exceptions) using a flower of service model. Below we will discuss some of this supplementary service surrounding the core product of pizza delivery. In the aspect of hospitality, there is improvement space for the website design for the member registration as many new customers have complaint that it is frustrating to sign up because the buttons are misleading and also some must filled areas have not been marked up resulting in the requirement of several trials for customers before one successful registration can be done; in the aspect of consultation, there could also be some improvements to be made. One is to extend the customer service enter office hour from the current 10:30 am – 10:00 to an 24 hours basis to better listen to the reflections and opinions of customers timely and avoid customer complaints. Another improvement is to respond more promptly to customers, investors and other stakeholders’’ enquiries and complaints once the on-line feedback forms and written letters are collected.

Both the services deign and product innovation will be targeting at achieve a product differentiation which has been set earlier in the generic strategy part.

4.5.2            Price strategy

Pricing strategy refers to one or more methods companies use to price their products or services (Bygrave & Zacharakis 2010). Based on the strategic formulation using the Ansoff Matrix, we have concluded that the company would adopt a a market penetration strategy to grow its business by increasing market share within existing markets and segments, there are several pricing strategies applicable to assist the penetration strategy. The first pricing strategy is penetration pricing which set the price low in order to attract customers and gain market share. This pricing strategy could be used several of the products to attract more customers and make customers perceive great value because the pricing is close to the cost of the products. But the price will later be raised if the target market share is reached. Another pricing strategy is the loss leader by adopting which the Domino’s Pizza shops sell a particular product at cost or even below the cost to increase the sale of other products. This pricing strategy could be mix used with the promotion strategy because a seemingly extreme low price of a pizza could be very attracting to the customers and could easily be understood as and also associated with a kind of promotion.

4.5.3            Place strategy

Place strategy refers to the company would distribute the product or service they are offering to the end user (learnmarketing.net 2010). Regarding the place strategy, one key problem in the coming implementation of an expansive business plan is the definition of the location of the new stores. In the past, Domino’s Pizza has been focusing on the customer demand so that they open more outlets in places where the company found out that there would be a maximum “pool” and cover as as more customer as possible within the reach of its delivery service. But in the coming few years, as the company is going the increase the business and the number of the outlets greatly, it is important to for the company to locate the new outlets in locations with strategic meanings and implications. For example, though some locations may not cover as many customers as like other points, they will still be chosen as the locations for the new shops if they are of strategic importance. Another issue concerns the company to reduce the waste during the delivery, though the paper packaging

4.5.4            Promotion strategy

Promotional strategy can be viewed as the way the company communicates with the target market which usually includes advertising, publicity, sales promotion, personal selling, and public relations (Harper 2002, p. 108). A mix of all these promotion channels could be used to promote the company’s products and the brand but with difference focus. Advertising will be the most important channel the promotion strategy uses. Mainstream newspaper, radio and magazine in Malaysia could be used as the channels to disseminate the promotion information, also with the increasing use of the Internet; online advertising will be another important channel. Sale promotion could be used time by time and also in the important holidays such as Christmas and Chinese New Year during which more customers would like to eat in restaurants. Also the company could actively participate in the charity activities and also engage in the corporate social responsibility building to increase the public relations. With a plan to expand the business quickly, the company would need to invest more in the promotion strategy in term of a more ambitious budgeting.

5.        Implementation

5.1    Gantt chart marketing plan

Below is the three year marketing plan in form of Gantt chart, and also the cost of each marketing activity is stated.

Unit: million MYR

Month 1 2 3 4 5 6 7 8 9 10 11 12 Cost
Marketing activities
Marketing research × × × ×         × × ×   1
New product development       × × ×     × ×     2
Advertising × × × × × × × × × × × × 7
Media Relations × ×           × × ×     0.2
Social Media   × × × × × ×           1
Sales force management × × ×       × × ×   × × 0.5
Brand management   × × × × × ×           3
Telephone sale × × × × × × × ×     × × 0.3
Total                         15
Table 5 Gantt chart marketing plan (2012)

Unit: million MYR

Month 1 2 3 4 5 6 7 8 9 10 11 12 Cost
Marketing activities
Marketing research × × × ×         × × ×   1.3
New product development       × × ×     × ×     2
Advertising × × × × × × × × × × × × 9
Media Relations × ×           × × ×     0.4
Social Media   × × × × × ×           2
Sales force management × × ×       × × ×   × × 0.8
Brand management   × × × × × ×           4
Telephone sale × × × × × × × ×     × × 0.5
Total                         20
Table 6 Gantt chart marketing plan (2013)

Unit: million MYR

Month 1 2 3 4 5 6 7 8 9 10 11 12 Cost
Marketing activities
Marketing research × × × ×         × × ×   2
New product development       × × ×     × ×     4
Advertising × × × × × × × × × × × × 14
Media Relations × ×           × × ×     0.4
Social Media   × × × × × ×           2
Sales force management × × ×       × × ×   × × 1
Brand management   × × × × × ×           6
Telephone sale × × × × × × × ×     × × 0.6
Total                         30
Table 7 Gantt chart marketing plan (2014)

5.2     Monitoring success

Planning and control will be derived by a top down management approach to focus on the strategic objectives set above and would be monitored as following:

Strategic objectives Measurement method
Increase the number of the franchise stores from 63 to 120 in the next three years Corporate finance reports
Increase the net profit by 120% in the next three years  Corporate finance reports
Increase the brand awareness by 30% Industrial analysis
Table 8 Target monitoring

The achievement of the earlier mentioned three major strategic objectives are set to be achieved within the coming three years from 2012 to 2014 together with other quantitative and qualitative targets that have not been named here, but since these are long term objectives, the company would need to established a target monitoring and control framework by dividing the targets into more detailed short term targets and achieve them in a gradual manner. After the control framework has been made, two major measurement tools have been listed above: corporate finance which could be used to measure the net profit growth and also the growth of the number of franchise stores and another measurement tool is using industrial analysis to monitor the increase of the brand awareness.

6.        Conclusion and critics of the report

With the above analysis, we have quite well achieved the objectives of this report that we have set at the beginning. Regarding the business environment of Domino’s Pizza in Malaysia, the external environment is stable with sufficient business opportunities and though the competition level in the industry could be considered as in middle to high degree, but with strong brand equity and the adoption of differentiation competitive strategy, the direct impact of the strong industrial competition should be reduced to some degree. In other words, the environment check has supported the strategic expansion of the company in the Malaysian market; regarding the strategic formulation, a continual usage of differentiation strategy is recommended by based on the analysis of the product nature and the company’s competiveness to differentiate the products and services to the mass market; and regarding the offering of a viable plan, with a lack of the actual data regarding the cost of the functional activities of the company, a general three years Gantt chart marketing plan is provided together with a control framework sample. But we should admit that the plan is not so much viable as we could have expected when we set one of the report objective as proposing a viable plan for the strategic implementation, and nevertheless the implementation process as proposed has shown a direction for the actual actions. Hence, the most obvious critics of the report will be a lack of access of some data of the company business operations in term of the detailed breakdown of the actual marketing cost. Another deficiency of the report is that some of the used data is not up-to-date which could be changed already in the fast changing business environments. As a result, more works and researches would need to be done before the actual application of this plan in the company of Domino’s Pizza Malaysia if it should be adopted.

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[1] Westernization or Westernisation (see spelling differences), also occidentalization or occidentalisation (from the Occident, meaning the Western World; see “occident” in the dictionary), is a process whereby societies come under or adopt Western culture in such matters as industry, technology, law, politics, economics, lifestyle, diet, language, alphabet, religion, philosophy, and/or values.

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