Domino’s Pizza, the company and its innovations
Development of new products to cater to the needs of customers have become empirical for companies to maintain their global positions. The paper would explore new product development of the American multinational fast food giant, Domino’s Pizza. The paper would start with discussions of four new product development framework and then go on to study the macroeconomic contexts under which Domino’s Pizza functions namely, political, economic, social and technological. The next section would view the strengths and weaknesses of the company followed by a gap analysis. The study would end with recommendations for the company in the areas of innovation.
Domino’s Pizza is one of the largest restaurant chains in the world by revenue and has its headquarters in the United States. It is a public limited company traded primarily on NYSE and has secondary listing in other major stock exchanges like Australian Securities Exchange. The company was founded in 1960 and operates globally under the leadership of J. Partick Doyle, CEO and David A. Brandon as its chairperson. The company sells burger, sandwiches, salads, drinks, desserts and shakes. Domino’s Pizza is present in around hundred countries in the world and brings about innovative new food products according to the tastes. The main competitor of Domino’s Pizza are KFC and Burger King. The company in addition to these international competitors which challenge its global position and revenue generation capacity (dominos.com, 2018).
New product development or NPD refers to the processes which business organizations use to introduce new products in the market. The processes of NPD is applicable for organizations making either goods (tangible products), services (intangible products) or both. The following are the four new product development models which different companies apply:
The sequential new product development model consist of distinct steps which leads o the final product development. The steps are designing and developing the product, testing of the product, launching of the product in the market and commercializing it. The main characteristic this process as the name suggest is sequential and isolated processes in which one process leads to the next. The companies using this method take into account the needs of their customers in terms of product specifications and cost while launching products (Wowak et al., 2016).
The parallel NPD framework consist of integration of information gained from several communication channels. The companies gain information like customer expectations from their upcoming products which they integrate into the new product development stages. Parallel NPD is actually integration of several sequential NPD frameworks. The aim of the process is to integrate and incorporate maximum possible customer expectations while developing products. The process unlike the sequential NPD emphasizes on the customer expectations, utility of the product, impact on the society and even disposal of the product. It is multifunctional activity involving several teams working together to meet maximum expectations of the customers (Marion et al., 2015).
Frameworks of new production development
Chaotic NPD framework is an extension of the parallel NPD framework where different departments collaborate to develop new products. This results in a revolutionary innovation where decisions of different departments of collide and contradict to ultimately arrive at the final product design. The chaos prevails in the beginning of the process when different departments express ideas which ultimately bring about innovation. The chaos clears towards the end of the process which involves taking of the decisions regarding the final product to develop. The chaotic NPD framework is suitable for companies which seek to bring about revolutionary products (Hwangbo, Cooper & Tsekleves, 2015).
The multinational companies like Domino’s Pizza use the linear model of new product development which integrates the parallel NPD and the chaotic NPD. These companies integrate several feedback loops which enables the organization gain a more in depth knowledge about the expected qualities of the product being developed. This is development of more dynamic products which are designed to meet the dynamic requirements of the customers (Roper et al., 2016). The NPD process stands on two models namely, technology driven innovation model and market driven innovation model.
Political factors impacting the multinational companies consist of laws and policies formed by governments. The multinational companies have to follow the laws formed by both home and host countries. The MNCs also have to comply with bilateral agreements between countries. MNCs while operating in the market also have to abide by international policies formed by the WTO and the EU, especially when functioning in the member nations (Pries et al., 2016).
The operations of Domino’s Pizza and its product innovation strategies come heavily under influences of political factors not only in force in its home country, the United States of America but also in its host countries. As discussed above Domino’s Pizza uses linear innovation model which integrates technology driven innovation and market driven innovation. The multinational company is headquartered in the United States has to abide by the food laws issued by the US Food and Drug Administration (fda.gov, 2018). Again while operating in the EU nations the company has to oblige by the General Law Regulation issued by the European Parliament and Council (ec.europa.eu, 2018). Domino’s Pizza in addition to these international food laws, have to comply with the food laws in force within the national boundaries of its host countries. The bilateral diplomatic ties the US has with other countries like the UK, France and Asian countries allow Domino’s Pizza to expand into these markets. This allows the food giant to enter into open innovation with various food laboratories situated in different countries. These opportunities enable the company to introduce food products suited to particular countries. This power to integrate global business strategies with the local market conditions has allowed Domino’s Pizza to cater to a huge customer base across the world, thus generating immense income (Pugliese et al., 2017).
Sequential NPD framework
The economic factors consists of utilization of resources to conduct business operations and comes directly under the influences of the political factors. The economic factors play very important role for the MNCs because they operate in several countries, each having different economic attributes like per capita income, supply chains and financial infrastructure. The next section would show how Domino’s Pizza use the economic factors to operate in the global and bring about innovation in its product lines (Schut et al., 2016).
The first important economic factor under whose influence Domino’s Pizza comes is per capita income in its home and host countries. For example, its home country, the USA and host countries like France are developed nations having high per capita income. The company is slowly strengthening its presence in Asian markets like India and China which are among the fastest growing markets in the world. These countries have laboratories and infrastructure like technology and skillful human resources which the company can use to bring about open innovations in its products. This is evident in the innovative products of the company which are suited to the individual tastes of the residents in these countries (Naudé, 2014). However, under developed markets like Guyana provides limited opportunities to bring about innovation.
The second economic factor impacting Domino’s Pizza is international exchange rates since it operates in several foreign each having their own currency. The multinational food giant acquires raw materials for its innovative products and also to develop new food products from all over the world. This shows that exchange rate impacts even the NPD innovation of the food giant. For example, as per the graph below as on March 31, 2018, the GBP to USD stands 1.40321 which means 1 GBP is equal $1.4. This means if Domino’s Pizza imports raw materials from Britain of value $100, it would have to pay $140 since the value of USD would decrease compared to GBP. This means that the price the company pays to import raw materials to make new products is dependent on the exchange rate.
The third economic factor which Domino’s Pizza depend on while bringing about innovation in its product line and introduce new food products, is the availability of trained human resources. The company in order to introduce new food items often collaborates with laboratories, chefs and food experts from the host countries. The developed and emerging countries can provide the company with trained experts to bring about NPD suited to their local tastes. The supply chains in these countries provide the company with exotic local spices which go into making its patented food products and recipes (Chang & Taylor, 2016).
Parallel NPD framework
The fourth impact which economic factors have on NPD of Domino’s Pizza is diversification and investment opportunities. Development of new food items and recipes is extremely expensive and requires immense investment from Domino’s Pizza. The global economic market provides the base to sell its products in scores of market. This allows the company to diversify the losses incurred due to failed NPD in one market over the revenue earned in other markets (Leenders & Dolfsma, 2016). The company can also invest in foreign assets and currencies and take advantage of the differences of returns of investments (ROIs), thereby financing its expensive experiments towards NPDs. However, weakening of Dollar as compared to other foreign currencies like Japanese Yen as shown in the figure, purchasing raw materials more expensive. The next economic challenge which Domino’s Pizza is facing is growing dependence of its main markets, North America and Europe on Asia. The Asian market already has strong competitors which are forcing the food giant to invest in NPD exclusively for the Asian customers, which is making NPD extremely expensive.
The social factors which impact the new product development in MNCs are growing demand for new products. Another important social factors are perceptions among customers regarding products which stem from their culture. Growing income, changing lifestyle and increasing population of young customers who demand new products are also among the main social factors on the new product development in MNCs depend (Acs, Szerb & Lloyd, 2017).
Domino’s Pizza sell food and that is why culture of the people of the host countries play very significant role in new product development. It even supersedes the income factor as far as NPD is concerned in case of Domino’s Pizza. The Hofstede’s tool above shows cultural dimensions of the United States, the United Kingdom, China and Japan. The tool shows that the US and the UK are culturally closer like, power distance in these two nations are lower than the power distance between the two eastern nations Japan and China. This means the products which would be successful for Domino’s Pizza in the US, its home country, are also likely to be successful in the UK owing to similarity in the cultural aspects. Again, the US and the UK show more individualism compared to China and Japan. This means that individuals like the two eastern countries, like most of the other Asian nations give more importance to collective beliefs including religious rules compared to the individual freedom of choice. This means that while carrying out NPD, Domino’s Pizza should consider the religious perceptions and beliefs of the people (Jamal & Sharifuddin, 2015). For example, Muslims abstain from eating pork, Hindus from, beef and Buddhists prefer vegetarian food, in general. It must be noted that population of these three Asian groups are increasing in the west. This means that Domino’s Pizza must incorporate these beliefs accordingly while conducting NPDs in both in its western markets and eastern markets. It must be noted that hurting religious perceptions might results in uprising and causing serious business losses to the multinational food giant (dominos.com, 2018).
Chaotic NPD framework
The second important social factor impacting NPD at Domino’s Pizza is rising income growing acceptances for fast food like burger which it sells. The rising income of the customers allow them to have fast food at international food joints like Domino’s Pizza. As pointed out earlier, people in countries experiencing high per capita income would as a result prefer eating out at Domino’s Pizza. The next social factor which is driving the new product development in case of Domino’s Pizza is growing young population, its main customers (Solomon et al., 2014). The young customers with more disposable income demand new products which encourages the food giant to carry on its innovations to develop new products. The increase of urbanization also acts as a driver because people in the cities prefer more fast food as a part of their lifestyle. Thus, increase in urbanization has driven the business of the company and boosted its product innovations (Acs, Szerb & Lloyd, 2017).
New product development in business organizations are dependent on technological factors like availability of modern technology to conduct research and development. They are also dependent on technology to integrate their globally spread branches to form centralized NPD strategies. Thus technology enables business organizations to integrate global and local market strategies to bring about new products. The greatest challenge which they face today is the need to update their technology to prevent data theft which increases their cost of operations by multiple times (Lall et al., 2016).
Domino’s Pizza uses technological factors to its advantage to development new products. The first usage of technology in NPD is while applying the linear NPD model. The company uses various ways like online surveys to gain information on the customers expect from new products. The company then uses these expected attributes to carry research and development to incorporate these in the new products. All these processes are dependent on technological advancements available in a particular market. It must be mentioned once again, that developed and emerging markets like the UK and India provide the company with more advanced technology compared to poor markets (Veselovsky et al., 2015). Thus, technological factors and NPD are very much dependent on economic conditions available in a particular market.
The next usage of technology by Domino’s Pizza while introducing new products is usage of food technology. The company uses food technology to make more innovative food items in accordance to the preferences of the customers. The company also uses advanced technology like cloud to facilitate global decision making process. However, as pointed out the company is under continuous threats from data stealing organizations which steal sensitive data about upcoming NPD (Zhang et al., 2014).
Linear NPD framework (for MNCs)
Following are the strengths and weaknesses of Domino’s Pizza as far as innovation is concerned:
Strength 1. Global presence:
As pointed out in the macroeconomic analysis above, Domino’s Pizza enjoys a strong presence in more than a hundred countries including the US, its home country. This global presence allows the multinational giant to collaborate with hundreds of food laboratories around the world and use advanced technology to pool information to bring about innovations towards NPD (Acs, Szerb & Lloyd, 2017).
Strength 2: Global financial base:
Domino’s Pizza is a public limited company listed on the NYSE which allows it raise capital to fund its expensive innovations. Moreover, the subsidiaries of Domino’s Pizza like Domino’s Pizza Australia Limited which is listed on the ASX. The company is traded as exchange traded external securities in various other stock exchanges which allows the company to amass its immense wealth to fund innovations in the host countries. The company sells its products to millions of customers in the world, which accounts for its revenue generation. These two factors led the company with immense financial base it required to carry out innovation on international levels (asx.com.au, 2018).
Weakness 1: Limited financial resources:
Global business operations requires Domino’s Pizza to carry on innovations all over the world but puts immense pressure on financial resources of the company. The company has to matchup to the changing preferences of the customers which puts immense pressure on the resources of the company (Brem & Wolfram, 2014).
Weakness 2: Failure to check data thefts totally:
The company has failed to prevent data theft which has resulted in leaking of sensitive NPD information to illicit groups. This failure of the company to check data theft has hampered its market image which has resulted its decreasing partnership in some markets, thus limiting innovation (ft.com, 2018).
Gap analysis refers to the difference between the aimed targets and the actual targets achieved. Multinational companies analyze the gap in their achieved performances on basis of usage and product position. For example, as far Domino’s Pizza is concerned, the company aims to generate the highest revenue in the market, being the top fast food brand internationally. However, owing it fails to achieve the target owing to presence of international and local competitors. The company would analyze the gap between the target and actual performances (Veselovsky et al., 2015).
The following are the recommendations that can be made to Domino’s Pizza regarding its innovations and NPD operations:
Contextual factors: Political
Domino’s Pizza must introduce more healthy food products in the market like burger with less oil and more vegetables. This would allow the company to cater to the health conscious customers as well.
Domino’s Pizza should carry on more sustainable innovative operations like recycling its wastes towards further generation of energy. Thus, the company would be able to generate a part of its own energy requirement to support its innovation and introduction of new products.
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