Compensation and Benefit Systems n Dominos Pizza in the US - Essay Example

Compensation and Benefit Systems Table of contents 1. Introduction 2. The system and sources of compensation and benefit in Domino’s Pizza in the United States 3. Critical appraisal of the current strategy, recommendations for development 4. Conclusion 1. The company chosen for this paper is Domino’s Pizza as this is one of the world biggest companies of pizza production and delivery. The company was founded in the USA in 1960 by Tom Monaghan. Since that time Domino’s Pizza Company became one of the leading fast food delivery companies in the world: “We have been delivering quality, affordable pizza to our customers since 1960 when brothers Thomas and James Monaghan borrowed $900 and purchased a small pizza store in Ypsilanti, Michigan. Since that time, our store count and geographic reach have grown substantially” (Domino’s Pizza). Domino’s Pizza combines some methods of international expansion and development, but there are some most effective ones which provide the best penetration to the international markets. The paper will discuss the system and sources of compensation and benefit in Domino’s Pizza in the United States. The paper will also critically appraise the current strategy and give appropriate recommendations for further development. 2. Compensation and benefit systems of Domino’s Pizza in the United States are tightly connected with its methods of international expansion. The most important parts of the system are licensing and franchising: “We have developed a large, global, diversified and committed franchise network that is a critical component of our system-wide success and our leading position in pizza delivery. As of March 21, 2004, our franchise store network consisted of 6,878 stores, 63% of which were located in the contiguous United States” (Domino’s Pizza). These system has doubtless advantages namely for such global international company as Domino’s Pizza. The franchise system allows minimizing such negative barriers of international expansion as language barrier, local governmental measures and the registration of trademark. The system also provides the adaptation of Domino’s Pizza rights and regulations to the cultural differentiations of various countries. Domino’s Pizza quick service restaurants in different countries are not a wholly subsidiary of Domino Pizza Company (like McDonald’s in the UK). They are based on Franchising Agreement with Domino’s Pizza International, Inc. A franchisee must have appropriate local market, business strategies and experience knowledge. Through well developed franchising system Domino’s Pizza Company gains constant royalty payments which allow the company to develop and expand to international markets. The growth and benefit of Domino’s Pizza is mainly provided by its franchising system development and royalty payments from numerous stores throughout the world. This system provides competitive compensation and appropriate benefit for the company: “All the other HR processes and systems, like competitive compensation, appropriate benefits and providing a learning environment, add to that” (Whitney K., 2005). The company has chosen the most appropriate method of international expansion. Domino’s Pizza makes franchising agreements with appropriate firms working in relevant market segments and having local market features knowledge. This mode of international expansion protects Domino’s Pizza from superfluous financial costs connected with wholly owned subsidiaries. To increase franchisee compensation and benefit and support the brand image of Domino’s Pizza, the company provides different kinds of franchisee supporting programs. The training course gives appropriate knowledge of Domino’s Pizza functioning, its rules and policy, as well as other relevant elements of Domino’s Pizza business. One of the most important moments in Domino’s Pizza international expansion is franchisees attraction as franchising and licensing system is the key-point mode of Domino’s Pizza international market entry and development. For attracting new franchisees Franchise Development Services provides appropriate franchisees recruitment strategy: “FDS publications like The Franchise Magazine are the right vehicle to carry editorial that reports on facts as provided by the Domino’s Pizza franchisees. This alerts readers that are searching for the brand and system that will form the ideal vehicle with which to achieve business success” (Domino's Pizza Celebrates 20 Successful Years of Franchising). For its international expansion increasing Domino’s Pizza actively work with local pizza chains throughout the world. Domino’s Pizza coverts different local pizza chains to its own brand. Domino’s pizza uses other modes of international market expansion and development, such as company-owned stores, but very few comparing to franchise stores, because Domino’s Pizza business experience shows that licensing and franchising international expansion system is the most advantageous and the best way of compensation and benefit providing: “The principal sources of revenues from our international operations are royalty payments generated by retail sales from franchise stores, sales of food and supplies to franchisees in certain markets and, to a lesser extent, company-owned store retail sales and fees from master franchise agreements and store openings” (Domino’s Pizza). 3. As was shown above, the principal mode of Domino’s Pizza international expansion, as well as compensation and benefit providing is licensing and franchising agreements. But other methods might be suitable for the company as well. Collaborative ventures can be useful for international expansion to well-known markets – it can increase investments for the company and provide higher revenue for shareholders. Collaborative ventures can also promote more effective approach to the local market and local business strategy development. They can help to adapt Domino’s Pizza production to the relevant market through the collaborative work of the people involved. Wholly owned subsidiaries can also be effective for Domino’s Pizza international expansion, but to not well-known markets. The company could organize joint ventures with suppliers and its own outlets, as McDonald’s in the UK did. Wholly owned subsidiaries can create their own sales market and win a good reputation of quality goods producer. Domino’s Pizza would also better explore potential targeted markets through wholly owned subsidiaries, and after that it can provide its licensing and franchising system. Management contracts also can be available for Domino’s Pizza international expansion, especially for the initial stage of relevant market development. Effective management could promote appropriate store work functioning and provide necessary Domino’s Pizza management and marketing measures realization. Domino’s Pizza licensing and franchising strategy implementation has its own risks dependent and independent on the company. To avoid such risks for Domino’s Pizza international development and for more effective different markets expansion, the company should combine different methods of international expansion, such as licensing and franchising, management contracts, collaborative ventures and wholly owned subsidiaries. 4. The paper discussed about Domino’s Pizza International, Inc., and its methods of international expansion as the main parts of its compensation and benefit system. As was shown above, the most effective method of Domino’s Pizza compensation and benefit system is licensing and franchising system which provides the world growth of its stores chain. But critical analysis of the international expansion strategy allows asserting that such modes of international market entry and development as management contracts, collaborative ventures and wholly owned subsidiaries can also provide the company’s growth. But in spite of this fact Domino’s Pizza International, Inc. licensing and franchising system is the best way of its international expansion and development. Sources Domino's Pizza Celebrates 20 Successful Years of Franchising. (http://www.advertisingsurvival.com/content/view/118/2/) Domino’s Pizza. Inc. Common stock. Prospectus. (July 12, 2004). (http://www.hoovers.com/free/co/secdoc.xhtml?ID=40131&ipage=2889231&doc=0&attach=on) Management's Discussion and Analysis of Financial Condition and Results of Operations. (2005). Annual Report. Form 10-K for DOMINOS PIZZA INC. (http://biz.yahoo.com/e/050317/dpz10-k.html) Whitney K. (2005). Insight Domino’s Pizza: Delivering To Performance, One Slice at a Time. (http://www.wpsmag.com/content/anmviewer.asp?a=362&print=yes) Read More