Pizza Hut operates casual dining restaurants in China which means the customers can order the products and also consume them within the eating facility. In contrast, Domino’s is primarily focused on the pizza delivery model which means it doesn’t operate facilities that also enable customers to dine-in. While Domino’s is focused on pizza delivery model only, Pizza Hut has taken a more flexible approach and in addition to dining-in, it also offers delivery service to its customers at some stores. Whereas Pizza Hut studies individual markets including customers’ preferences and habits and adapt accordingly, Domino’s is focused on exporting the same model everywhere that has served it quite well in the U.S. and is also working in India.
Pizza Hut has been primarily exporting its brand power to other countries to build a quick presence and expand but Domino’s has been going an extra length to not only develop its brand in other countries where it is not as familiar as its rivals including McDonald’s KFC, and Pizza Hut but is also trying to take advantage of economies of scale by exporting business practices including operations instead of adapting to local needs.
If I am asked to build a team to develop China strategy, the team members responsible for operations and finance but HR and marketing personnel will come from China. Thus, roughly half of my team will be comprised of individuals from the U.S. and the other half will come from China. I will try to replicate the operating and cost efficiencies that Domino’s has achieved in the U.S. but will take a local approach when it comes to hiring individuals, creating compensation plans that inspire higher productivity, and developing distribution channels. It is apparent to Domino’s as to many other companies that their home markets have become saturated and the future growth will come from developing economies such as China that are still in infancy. Thus, there is an urgent need for Domino’s to build a strong presence and grab market share before rivals have developed a loyal client base which will be difficult to convince. This is why Domino’s need to reach customers to better understand their tastes and preferences including consumption patterns and preferred distribution networks and marketing team consisting of Chinese personnel will have an advantage over Americans in this regard. They may already be familiar with local habits and they will also know how to efficiently market products to locals.
Domino’s has been interpreting its success in India inaccurately and taking it as a sign of the universal appeal of delivery model. But it is apparent that customers in different countries have preference for different distribution channels. It may be that Chinese mostly consume pizza when they go out with families and enjoy the experience as much as the food itself while Indians are more concerned with the food than the overall experience.
This case reflects the issues companies face when they expand overseas and how cultural differences may pose challenges the companies might not have anticipated. It also teaches us that countries with similar customer characteristics are easier to enter and offer the most benefits of globalization while local approach may be better in countries with different customer characteristics as China demonstrates.