In this take-home assessment, you are expected to produce a case analysis report based on a case study provided to you.
The objective of this take-home case study is to assess your ability to diagnose problems faced by multinational firms in conducting cross-border business and your ability to prescribe solutions in line with relevant theories and evidence from a given case study.
Case study: Domino’s Failure in Italy Dominds·
Domino’s, a leading global pizza chain, entered the Italian market with high hopes of capturing a share of the birthplace of pizza. However, despite its global success, Domino’s faced significant challenges and ultimately decided to exit the Italian market in August 2022.
Requirement:
In your opinion,
What is the underlying problem you see with Domino’s failure in Italy? There can be many reasons, however, for the purpose of this assessment, you are required to focus onlv. on one Qroblem).
- How do you think Domino’s can solve the problem you identified? Provide three alternative solutions.
- What is your recommendation
- Brief guidelines on implementing the recommended solution.
Format: Summative; Individual; Written report
Learning outcomes: 1. Apply theoretical concepts and analytical tools to analyse cross-border business scenarios.
2. Identify opportunities and risks entailed in various internationalisation decisions.
Instructions:
To perform well in this assessment, make sure you provide the following:
Deliverables: a report not exceeding 1500 words(+/- 10%) addressing the above requirements. You may follow the following indicative structure:
- Executive Summary
- Problem Identification and Analysis
- Evaluation of Alternative Solutions
- Recommendations
- Action Plan
- List of references
Deadline: 11:30 p.m. on 6th September (Friday) 2024 (week 7)
Assessment Brief – Individual Take-home Assessment-1.Qdf
Grading:
Refer to the rubric for a comprehensive assessment criterion.
Individual take-home assessment rubric.i:;2df
Case Study: Domino’s Failure in Italy
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Date
The American fast-food chain Domino’s Pizza expanded its operations to Italy in 2015 to open 880 outlets by the year 2030. However, this globalisation effort seemed to elude Domino’s Pizza, especially in Italy, a nation synonymous with pizza. Dominos pulled out of the market in 2022 due to competition from other local pizzerias, especially after the COVID-19 pandemic. The initial entrance strategy in Italy was to bring Americanized pizza with Italian ingredients but failed to beat the competition, especially with the pandemic. Thus, the primary objective of this report is to discuss the major reasons for Domino’s failure in Italy. The critical problem highlighted here is a lack of compatibility with the Italian pizza culture, thereby affecting Domino’s pizza sales. Three other possible courses of action are outlined, and the recommended approach aims to be more specific and empathetic to the culture prevalent in the country. In diagnosing Domino’s failure, this analysis uses the concepts from international business studies to offer recommendations for similar multinational firms.
Problem Identification and Analysis
Domino’s Pizza faced many challenges in Italy mainly because they did not have a good understanding of the Italian pizza market. While trying to cater to the Italian market using tactics such as using Prosciutto di Parma and Mozzarella di bufala, the pizzas offered by Domino’s were American style with options such as pineapples on pizzas contrasting sharply with Italian preferences in pizzas. Having strong culinary practices and being proud of pizza, Italy proved to be a difficult market for Domino’s, which mostly followed a globalised approach. This cultural difference was enforced by the fact that in Italy, pizza is more than just food or nourishment; it is a sort of expression of the people and their history.
Another weakness that Domino had was the aspect of pricing, where the firm was unable to come up with a proper pricing strategy that was in line with the market. Pizzerias in Italy imports the best traditional Italian pizzeria pizzas with some of them going for as low as five Euros per pizza. Still, Domino’s, which does provide delivery services, was never able to create enough of a difference between itself and the competition to either justify premiums or capture a large enough slice of the market (Giuffrida, 2022). The outbreak of the pandemic further exposed this problem because small local pizzerias quickly implemented home delivery services to counter Domino’s services.
The underlying issue is that Domino’s had a poor understanding of the cultural and market environment in Italy. While the one model for the company has proved effective other markets globally, it was unable to provide for the full range of the preferences of Italian consumers – accustomed to relying on quality, artisanship, and tradition over the convenience of standardisation. Also, the entrance of various food delivery companies, such as Glovo and Deliveroo, among others, increased competition pressure on Domino’s, which was ultimately unable to overcome all the challenges.
Therefore, the main lesson from this experience was the necessity to respect culture in the process of globalisation. Domino’s overlooked the challenges of neglecting these aspects, considering that the market is culturally and historically related to pizza. This misstep is a perfect illustration of a common problem of many multinationals; the underestimation of local consumers’ behaviour and competitors’ activities, regardless of overwhelming dominance in other parts of the world. Beugelsdijk et al. (2017) underscore how employing tools like Hofstede’s cultural dimensions theory to understand the important role of culture in internalisation efforts could have helped in understanding the issues associated with entering a resistant market such as Italy
Generation and Evaluation of Alternative Solutions
Localising the Product Offering
A strategy that can be considered an alternative solution is to adapt Domino’s product portfolio to include traditional Italian cuisine. This would entail developing pizza recipes that are closer to Italian culture, that include a set of basic ingredients, and eliminating toppings that are not preferred in Italy, such as pineapples. Another strategy that the company could apply is to avoid standardised ingredients available throughout the world and come up with regional ones that are more artistic. Table 1 summarises the possible positive and negative outcomes of localisation.
Table 1: Positive and negative consequences of localisation
| Positives | Negatives |
| Localization of the product could greatly enhance consumers’ acceptance as it complies with Italian culinary culture, which calls for the authenticity of products | This strategy may water down the international image of Domino’s since it prides itself on the standardization of services it offers |
| Domino’s could also establish a better relationship with Italian consumers by respecting the traditions of Italy and thus not merely being an American fast food company | The process will also require high R&D investment in developing localised menus and procuring local ingredients, which may not produce profits in the short run. |
Focusing on Competitive Pricing and Promotions
The other strategy that Domino’s could implement is to use aggressive prices and coupons to battle local outlets. For example, Domino’s could reach out to the more price-sensitive groups through discounts or bundle deals in an attempt to garner sales and boost brand awareness (Datta et al., 2017). Such a strategy might then entail cheaper pizzas than those offered by the Italian pizza parlours.
Table 2: Positive and negative consequences of pricing strategies
| Positives | Negatives |
| Lower prices may increase people’s interest especially students and young employees. | Matching its competitors’ prices is dangerous as it not only threatens to reduce profit margins but also because the costs of labour and ingredients are significantly high in the US |
| The promotions would lead to short-term sales boosts, and brand awareness would go a long way in enhancing customer loyalty | This strategy could strengthen Domino’s position as the cheapest and the least-quality pizza takeaway, which is incongruent with the Italian perception of quality and homemade pizza |
Strategic Partnerships with Local Pizzerias
A third solution could be partnerships with established local pizza restaurants or other brands. This could be done by co-branding its products with the local pizzerias, the latter acting as a consumer reference point. This proposed collaboration model could also add more outlets to Domino’s without detracting from the patriotism associated with homegrown pizza.
Table 3: Positive and negative consequences of strategic partnerships
| Positives | Negatives |
| Partnering with well-established Italian pizzerias would help generate trust in a country that appreciates heritage, improving the image of Domino’s | Identifying the right partners and negotiating contracts with them could be challenging, and teamwork may compromise the company’s brand |
| Such partnerships would enable Domino’s to share the competitive forces with established players, making entry into the market easier | Partnering with local brands might deprive Domino’s of the opportunity to control its major value proposition, as the local partners may prefer conventional approaches instead of efficiency and scalability |
Recommendations
In light of this, the best strategy for Domino’s is to adapt the company’s menu to the preferences of the Italian market. This solution tackles the cultural incompatibility problem that Domino’s faces, chief to its problems in Italy. As such, with the appropriate pizza offerings that respect the norms of Italian cuisine and doing away with certain nonentities like pineapple, Domino’s can regain clients’ confidence and motivate positive word of mouth. Localisation is a long-lasting tactic that ensures that Domino’s fulfils its consumer’s needs without engaging in price-cutting strategies that can deteriorate the company’s profit margin (Cuervo‐Cazurra et al., 2020). Furthermore, localising the menu would mean that they value the traditions of the local population, which is essential in a country with a commitment to food. This approach not only solves the problem that led to the failure of Domino’s Pizza in Italy. It also allows the firm to re-expand its market in Italy from a new and culturally appropriate point of view. Other strategies, like pricing and partnership strategies, are also viable but do not solve the problem of cultural adaptation, which is essential for such a competitive market.
Research and Development (Months 1-3)
Domino’s should undertake a market study that will establish the current favoured pizza varieties in different areas of Italy. To achieve authenticity, it will be beneficial to engage local chefs and other food-related specialists to develop recipes for dishes that should be served in the restaurant. It will also be necessary to introduce changes in the sourcing of the raw materials as the R&D team will have to use locally produced products.
A pilot phase should be made in certain cities where dominos already dominate (for instance, Milan, Rome, and Bologna). Whenever launching new localised pizzas into the market, the firm should use test markets while at the same time getting feedback from consumers concerning the taste, price, and overall satisfaction. Advertisements will be conducted through social media and digital platforms, which will aim to create awareness of the new menu while at the same time emphasising its genuine Italian flavours.
Full-scale Implementation (Months 7-12)
Here, the results of the pilot will be used by Domino’s management to introduce the new menu in all the outlets. Strategies like localised promotions with special offers within the region and loyalty programs will be used to attract a broader clientele.
Monitoring and Continuous Improvement (Ongoing)
This is an ongoing process of checking the status of the performance indicators and making the necessary changes to enhance the organization’s operations. Domino’s must also observe the reactions of clients, sales results, and tendencies to make improvements to the menu and advertising. Maintaining a relationship with other partners and local chefs will help the brand to be in line with the preferences in the market.
Beugelsdijk, S. et al. (2017) ‘Cultural Distance and Firm Internationalization: A Meta-Analytical Review and Theoretical Implications,’ Journal of Management, 44(1), pp. 89–130. https://doi.org/10.1177/0149206317729027.
Cuervo‐Cazurra, A., Doz, Y. and Gaur, A. (2020) ‘Skepticism of globalization and global strategy: Increasing regulations and countervailing strategies,’ Global Strategy Journal, 10(1), pp. 3–31. https://doi.org/10.1002/gsj.1374.
Datta, H., Ailawadi, K.L. and Van Heerde, H.J. (2017) ‘How Well Does Consumer-Based Brand Equity Align with Sales-Based Brand Equity and Marketing-Mix Response?,’ Journal of Marketing, 81(3), pp. 1–20. https://doi.org/10.1509/jm.15.0340.
Giuffrida, A. (2022) ‘Domino’s retreats from Italy having failed to conquer the home of pizza,’ The Guardian, 11 August. https://www.theguardian.com/world/2022/aug/10/dominos-retreats-from-italy-having-failed-to-conquer-the-home-of-the-pizza.