Domino’s is a part of the fast food industry in the US, with the different retail outlets operating internationally. The company specializes in making Pizza and serves customers in more than 90 countries. The PESTLE analysis of Domino’s illustrates the way different environmental forces shape the industry setting and effect the company’s decisions.
Political Factors
Political climate of a country determines the stability an organization is likely to experience in managing its operations. Unstable political condition creates a high risk environment which makes it difficult to maintain efficiency and productivity levels. In the US, Domino’s has a stable political environment; however the similar situation is not present in other regions.
Russia Ukraine war had a negative effect on Domino’s operations in the war ridden areas as the conflict lowered the profits earned. Moreover, the highly volatile business environment put the employees at risk. The management was contemplating closure of its more than 170 branches in Russia (Jordan, 2022).
Trading of raw material is not only dependent on the level of political stability, but the prices of the items are also affected by the volatile political environment. Due to Russian invasion of Ukraine, the price structure of wheat was altered. Since it is a core ingredient in the products manufactured at Domino’s the raising price of wheat increased cost incurred by the company.
Economic Factors
The economic prosperity of the country is determined by GDP which suggests growing businesses and higher employment. The US is considered to have the highest GDP which implies a strong economic environment. Domino’s is able to benefit from the stable US economy and maintain profitable business operations.
However, changes such as economic slowdown cause a decline in sales made by the company, which ultimately affects its revenues. A lower income among the households creates a focus on necessary items and buyers refrain from spending extra income. Domino’s has experienced lower sales as customers consider delivery charges an additional and unnecessary cost.
Price changes of supply chain have negatively affected the cost of business operations for Domino’s as the company had to deal with increased price of wheat and oil. Along with that the rising labor cost added an additional expense to the company. The higher price of fuel has also caused an increase in the transportation expenditure of Domino’s showing effects of inflation (Sophia, 2022).
Social Factors
Rising obesity rates have highlighted the need to consume less fatty and high calorie diet. Consumers demand shifted towards healthy food that doesn’t contribute to health issues. Domino’s has responded to this social trend by incorporating healthy items as a part of its menu. An example in this regard is the inclusion of salad in the retail stores in the US.
COVID had a favorable impact on the fast food industry as people were more inclined to purchase such items as a source of comfort. Domino’s was able to gain higher sales during the pandemic due to this social trend. In addition, people bought more fast food during the festive season, leading to higher demand for fast food.
Another change that was initiated after the pandemic started was related to the protocol of delivering orders to the customer’s house. Since buyers preferred contact-less delivery, the process was modified to address the social distancing needs. The employees also adhered to the safety guidelines by wearing face masks and followed other precautionary measures (Kollewe, 2021).
Technological Factors
Technology helps an organization to manage customer data and make useful inferences from the analysis of that data. These results guide the management from making business related decisions that help the company to move in a positive direction. Domino’s is using different technologies PULSE for handling customer data and understanding market trends (Domino’s Pizza, 2021).
Machine learning tools are helping the company in making production decisions, allowing the employees to identify the required pace of production. Moreover, the company has developed its app to keep with the trend of digitalization of businesses, gaining 75% of the sales through online platform.
Technology assists the company in handling its inventory in an effective manner. Domino’s has also integrated technological developments to maintain good quality of its products. For instance, Heatwave hot bags were used to ensure the freshness of the items during delivery. DOMINO’S DXP also reflects the way technology has shaped the operations at the company (Domino’s, 2022).
Legal Factors
Domino’s operations are managed under the guidelines by US Food and Drug Authority. The quality of food has to be maintained to show compliance with these regulations. The company needs to maintain fresh and hygienic food standards across all of its outlets. In one instance, a fine of $116,000 was imposed on the restaurant that was deviating from hygienic standards.
Customer rights and equal treatment of all customers without any bias constitutes an important part of the legal framework. Domino’s faced legal troubles when it overlooked the importance of developing an app that is user friendly for all people. The company faced litigations on the grounds that the app didn’t support the people with visual disability (Higgins, 2019).
Furthermore, employment laws related to the region are applicable for Domino’s. In case of the US, the company has to offer equal job chances without any discrimination, adhere to working hours limit and maintain wage structure in accordance to the legal standards. Failure to follow the related laws can lead to legal complications.
Environmental Factors
The US fast food companies are increasingly embracing the eco friendly business practices. The company is following the sustainable operations strategy and focusing on the achievement of net zero carbon emissions goal (Domino’s Pizza, 2021). The management has also included recycling as a part of the company’s initiatives to lower the environmental impact.
Besides controlling the emissions and lowering them to the standards, the management is investing in renewable energy sources. Energy audits provide an overview of the company’s energy usage patterns and the improvements required in this domain. The management also encourages its suppliers to uphold environment friendly practices.
Conclusion
Domino’s business operations are significantly affected by the external environment, as evident through the effect of political and economic changes. Domino’s is able to leverage technological advancements to establish a strong position in the market. Overall, the external environment is moderately favorable for the company.
References
Domino’s (2022). Innovations. Retrieved from: https://biz.dominos.com/about-us/innovations/
Domino’s Pizza (2021). Annual Report. Retrieved from: https://ir.dominos.com/static-files/4daec873-268e-4456-b541-3871f28288e2
Higgins, T. (2019). Supreme Court hands victory to blind man who sued Domino’s over site accessibility. CNBC. Retrieved from: https://www.cnbc.com/2019/10/07/dominos-supreme-court.html
Jordan, D. (2022). Domino’s Pizza considers selling Russian business. BBC. Retrieved from: https://www.bbc.com/news/business-64107699
Kollewe, J. (2021). Domino’s Pizza plans more outlets as Covid-19 lockdown fuels sales. The Guardian. Retrieved from: https://www.theguardian.com/business/2021/mar/09/dominos-pizza-covid-19-lockdown-fuels-demand
Sophia, D. M. (2022). Domino’s Pizza profit sliced by higher costs, labor crunch. Reuters. Retrieved from: https://www.reuters.com/business/retail-consumer/dominos-pizza-sales-drop-less-than-expected-staffing-crunch-eases-2022-07-21/