Rethinking Domino's Expansion Plans
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Case Details:
Case Code : BSTR014
Case Length : 9 Pages
Period : 2001
Organization : Dominos Pizza India
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Food, Beverages & Tobacco
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
What Went Wrong?
Domino's officials felt that there was nothing wrong with increasing the number of outlets.
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Hari Bhartia said, "We needed to grow to effectively utilize the expensive back-end infrastructure (like distribution centres) that we had set up by March last year (1999)."
However, analysts felt that the growth had taken place on a business model that was not able to support it. Unlike other fast-food chains, Domino's operated on company-owned outlets basis, rather than franchisee route or a mix of both. (Refer Box for Pizza Hut's expansion strategy)
Domino's officials argued that this ensured quality and the ability to deliver on time, as the company promised...
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No Correlation Between Expansion and Sales
Pavan Bhatia's expansion plan would not have come under criticism had actual sales matched the projections.
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Hari Bhartia said that there was a gap between the two. According to some company officials, in mid 2001, the actual sales were half of projections. As the sales were poor, the burden of huge expenses impacted the bottomline. This led to serious cash flow problems. A few suppliers said that Domino's was either asking for an increase in the credit period or requested a go-slow on supplies. Others added that although they had no problems with payments, they heard that Domino's was going through a bad phase. Said one, "I too have heard adverse stories about the company. I also know that Domino's is undergoing reorganization. But that should be over in a few months' time and the company will be back on the course..." |
Excerpts Contd... >>
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