A pizza good luck for Dominos
There are various external influences which can affect businesses, such as the downturn in national or world economies and the rising inflation being experienced at the present time. However, what is an ill effect for many companies has had a beneficial effect for Domino's Pizza UK & Ireland, the leading pizza delivery franchise. In the current economic climate, Domino's pizza sales in the first six weeks of 2008 are up 11% on the same period last year, as people cut back on eating out and phone for a pizza to eat in. Like-for-like sales rose 14.7% last year, despite a price rise across Domino's menu last autumn. (The Times, 20th February 2008)
Chris Moore, the chief executive, said: 'The results are proof that our price point is resilient in these economic times and that we are benefiting from the downturn in the restaurant sector. Instead of eating out three or four times a week, we are seeing real signs that [people] have cut that to once or twice. They are filling up that gap with pizza instead.' (The Times, 20 February 2008)
His comments came as the company announced plans to move up to the main market in order to obtain funds it has been unable to attract in the nine years it has spent on the Alternative Investment Market (AIM). Domino's shares have climbed 14-fold since the company floated in November 1999 and the group now has 501 sites across the UK and Ireland, with plans to open 50 more this year. Its aim is to have 1,000 by 2017. (The Times, 20th February 2008).
Domino's said sales had been boosted by new pizzas such as the Meateor and the rugby-themed Scrummy, as well as by new ways of ordering. These include e-commerce sales – orders taken online and by mobile phone texts – which have risen by 60.5%. Domino's predicts the trend for ordering-in food would continue this year. Look at the Times 100 case study on McCain Foods, another company in the food industry. The external environment today is changing fast. The external environment consists of everything outside the business. This case study shows how McCain Foods needs to identify changes in its external environment and then rise to the challenges posed by change.
The Times, 20 February 2008 (Print edition)
Potential Study Questions:
- Define 'inflation'.
- The faster and higher the inflation, the worse the effects are. Explain some of these effects.
- Changes in the current financial climate could reduce consumer spending power. Write a brief SLEPT analysis showing what factors McCain Foods might have to take into account to reduce the impact of the changes on sales.