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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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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"It is a lesson for every retailer. Unviable units should be shut down. A pizza joint or a burger joint should realize that in a fast expanding market, they are not just competing with outlets which have similar interests but also with other kinds of food outlets as well."

- Arvind Singhal, MD, KSA Technopak.

In May 2001, Pavan Bhatia, CEO, Domino's Pizza India Ltd.¹ (Domino's) stepped down from his post.

Earlier, in March 2001, at a board meeting, Domino's top management concluded that 'Pavan Bhatia's performance during his 18-month tenure was not up to the mark.'

The board felt that Pavan Bhatia had initiated an expansion strategy that was 'reckless and not properly thought out.' However, many analysts did not agree with the board' conclusion.

They felt that the board was not considering the possible long-term benefits of Pavan Bhatia's strategy.

Business Strategy | Case Study in Management, Operations, Strategies, Business Strategy, Case Studies

During March 2000-January 2001, Pavan Bhatia opened Domino's outlets in small towns and cities.

Pizza consumption in these places was very low. Analysts felt that even those willing to opt for the product found the price unacceptable.

The cost per meal was too high. In September 2001, due to low footfalls² and lower volumes, Hari Bhartia³ planned to shut down Domino's outlets not only in some small cities⁴ but also a delivery outlet in the wealthy Gujranwala Town in North Delhi.

One of the two outlets in Ludihiana was also planned to be shut down. (Refer Exhibit I for post Pavan Bhatia strategy of Domino's)

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1] Domino's Pizza India Ltd. was the Indian franchisee of Domino's Pizza Inc. Domino's, Inc. entered into a franchisee agreement with Vam Hari Bhartia Corp., (promoted by Bhartia brothers - Shyam and Hari) to enter the Indian market. Domino's entered India in 1996.

2] Number of consumers visiting an outlet

3] Co-Chairman, Domino's

4] Bareilly (Uttar Pradesh), Meerut (Uttar Pradesh), Moradabad (Uttar Pradesh) and Gwalior (Madhya Pradesh)