How Benchmarking Facilitates Innovation in the Business Environment

3. RESEARCH METHODOLOGY

3.1 Introduction

This chapter describes techniques of employed in the collection of data. It outlines the approach of research strategy, method of data collection and conceptual framework. The research design explains the procedure used in carrying out the research. Method of data collection outlines the techniques of amassing data as well as its analysis. Lastly the conceptual framework outlines the analytical tools used to explain the variations used in the research context such as establishing the metrics for independent innovation of the franchise enterprises and investigation of the performance level of innovative leading or competitive companies in the industry.

3.2 Research Strategy

This research seeks to elaborate the difference in innovative franchise organizations and non-innovative franchise business firms. According to Crabtree and Miller (2014, n.p), a multiple qualitative case study is the most appropriate research strategy for clarification of a phenomena still not understood. The author further proposes that for comprehension of prodigies which cannot be separated from a given context then case studies should be employed. As a result, rendering it the most appropriate technique for this research study. Case-based studies also have the advantage of achieving in-depth insight responses as research questions are designed to fully reflect on the complexity of the manifestations under study (Eisenhadrt, 2016, p 540).

For this study, a retrospective case study technique is employed to determine backward risks and protection elements that are related to development and adoption of technological upheavals in the franchise sector. In his article Eisenhadrt, (2016, p 542). Crabtree and Miller (2014, n.p) suggests that retrospective case studies are the best method for investigation of the historical data of any business enterprise for performance evaluation. Even though multiple case studies will be carried out, the main objective of this study is not to examine pervasive findings across cases (David, 2000, p99). Instead, this study aims to establish apparent differences under which effective practices can be developed by contrasting innovative and non-innovative organizations operating in different sectors. A generic methodology benchmark will be employed to identify the most significant operational differences in these two exceedingly various case studies (Crabtree and Miller, 2014, n.p).

3.3 Analysis of Benchmarking

Benchmarking is an administration instrument and hardly used as a method of research. However, it can be incorporated in qualitative and quantitative surveys through case studies, when there is a need to subject the topic under investigation to rigorous analysis (David, 2000, p100). It is mainly used for the comparison of two different parties by studying their patterns of operations, managerial structure, and anomalies leading to either the success or failure of the parties.

Incorporating benchmarking with case studies as research approaches in this survey was considered to be appropriate as it is perfect for pinpointing the highest possible levels of excellence (David, 2000, p100). It can, therefore, be employed to amass relevant business practices concerning formulation and implementation of innovative techniques in franchise organizations. Generic benchmark method is used in this research study to compare organizations from different industries.

For this research study, two extreme case studies were carried out by one organization being most innovative while the other lags behind in innovation methods. The two organizations were compared, and the gaps between them analyzed. Best work methods were then developed based on the identified niches. The following are some of the aspects of the organizations that were taken into consideration during the study: market capitalization, annual financial income, online sales and percentage average of online transactions.

3.4 Data Collection

To obtain a better understanding of the topic under survey; evidence-based analysis was conducted based on secondary data. The secondary research was carried out by analyzing written commentaries researched on franchise internet sites, online articles, and historical annual reports of the organizations of interest. Observations made were systematically cataloged based on case basis. Data accuracy and authenticity was improved by presentation of research data to Domino’s Pizza’s Enterprises and Pizza Hut. The following data were collected:

3.4.1 Total Expenditure on R&D

a) Pizza Hut total expenditure in R&D, data retrieved from the company’s profile:

YEAR 2013 2014 2015 2016 2017 AVERAGE
R&D EXPENSES in million dollars 31 25 25 24 22 25.4

b) Domino’s Pizza Enterprises total expenditure in R&D,

YEAR 2013 2014 2015 2016 2017 AVERAGE
R&D EXPENSES in million dollars 44.5 40 45.5 39 46 43

Graphical comparison between the two companies based on the average R&D Expenditure after five years:

3.4.2 Online sales

a) Average online order sales

b) Percentage total of online sales

c) Pizza Hut Market Capitalization

c) Domino’s Pizza Enterprises Ltd Market Capitalization

d) Domino’s Annual Income data

Figure 1. Domino’s Annual Income Data. Retrieved from S&P Global Market Intelligence

e) Pizza Hut Annual Income Data

3.6 Conceptual Framework

3.6.1 Sampling Technique and Sample Size

An appropriate exemplar and anomalar organizations were selected based on statistics listed in Forbes’- ‘The world’s most innovative growing companies in 2016’. Focusing on the food retailing business enterprises DPEL (Dominos’ Pizza’s Enterprises Ltd) was among the top twenty most technologically progressive food retailing industries globally (Forbes, 2017, May). Domino’s Pizza (exemplar) metrics data were obtained and compared with Pizza Hut (Anomalar) as shown in the bar charts in the data collection section.

3.6.2 Domino’s Pizza’s Enterprise Ltd (DPE)

DPE is the largest food retailing business that deals with pizza in Australia. It has several affiliated stores and sales making it the largest global franchisee for Domino’s Pizza trademark. DPE is the sole franchise master for the Dominos trademark across Australia, Netherlands, Denmark, Belgium, and many more countries with over two-thousand four hundred stores (DPE, 2015).

In the year 2016 the revenue of DPE increased by a total percentage of 32.4% translating to 930.2 million dollars, a growth which was mainly fueled by organic inflation, technological procurement and hyper-speed techniques to capture the first-mover advantage and acquire market share (Cowin, 2016, n.p). Technological innovations were a significant driving concept in accomplishments of DPE. In the year 2016, Domino’s launched different vital, innovative techniques in most of its branches in different geographical locations with New Zealand and Australia, beginning self-reliant delivery vehicles (Cowin, 2016, n.p). During their annual reports, the CEO of Dominos revealed that they are more focused on enhancing their growth through incorporation of innovative techniques in their managerial structure, and their first step would be introduction of digital platforms. Three respondents from Benelux headquarters were interviewed on phone.

3.6.3 Pizza Hut

This is an American based franchise restaurant which is specialized in Pizza delivery services. It was founded in the year 1958 by a renewed economists Dan and Frank Carney. In addition to Pizza, the company also provides other dishes such as pasta, desserts, and side dishes (Pizza Hut, 2016). As at 31st December 2018, Pizza Hut had a total of eighteen thousand four hundred and one restaurants globally, making it the world’s pizza restaurant depending on geographical distribution of its branches. By 1970, it had total sales of one million with three hundred and ten locations. This fueled its chances of being included in NYSE (New York Stock Exchange) as PIZ as it had a promising future. It first Introduced its first delivery service in the year 1986, a customer service which had not been used by any other restaurant. This was the main attributor to its success.

Pizza Hut employs various restaurant formats such as; dine-in formats as the original family mode, display case deliveries and carries out formats and a combination of the above. In other locations, the franchise has employed a buffet format based on the all-you-can-eat marketing slogan. This unveiled its first upscale in the year 2004 with most sales made in Italiano Bistro. In 2005, the organization had expanded its branches to China. To gain customer loyalty, Pizza Hut introduced a customer hotline in the year 1995 to receive customer’s perspectives on their services delivery, was coupled with a call-back strategy, where customers were called back after thirty-six hours for follow-ups (Johnson and Weinsten, 2004, n.p).

4. RESULTS ANALYSIS AND DISCUSSION

4.1 Results Analysis

The following can be deduced based on the data collected in the above section based on percentage average sales, market capitalization, online sales, and annual financial data metrics:

a)     Total Expenditure on R&D

Research and development expenditures can be described as the expenses that are incurred in the development of product and manufacturing processes (Macrotrends, 2019, n.p). From the above graphs it is evident that Domino’s Pizza tends to allocate more revenue for research and development as compared to Pizza Hut. Due to its straightforward business model it has earned the position of the best pizza franchise which serves quality pizza at competitive prices (DPE, 2015)

  • Annual Income data

Figure 2. Domino’s Annual Income Data. Retrieved from S&P Global Market Intelligence

The above graph indicates Domino’s financial annual income data showcasing its future financial outlook for the year 2020 and 2021. It shows that sales have been increasing steadily since the year 2016 except for the year 2018 where the sales sharply dropped to approximately 15.4%. On the contrary, the net income is steadily increasing at a much slower rate a fact that might have been contributed to by financial troubles.

The graph above shows Pizza Hut’s financial Annual income data. It can be seen that the sales have been steadily increasing since the year 2016. However, comparing Domino’s financial income data with Pizza Hut financial data, it can be seen that, Domino’s still has a higher annual income as compared to Pizza Hub. The same applies to market capitalization and percentage average total sales metrics data.

  • Average online order sales

From the average online sales graph, it can be seen that in the year 2018 Pizza Hut of Domino’s with an average online order sales of 21 million dollars and 19 million dollars respectively. However, it seems these online orders did not translate to actual sales, as the percentage average sales graph shows that Domino’s made 16.9% average sales and Pizza Hut had 14.1% average sales as shown in the second graph.

4.2 Discussion

4.2.1 Policies Employed by Domino’s Pizza Enterprises

By doing a situational analysis of Economic metrics of financial annual data, average online sales, total r&d expenditure, percentage average sales and market capitalization based on Domino’s Annual report of financial year 2018, it can be seen that the revenue increased by 3.5% which is 46% of the carryout accounts. The CEO of Domino’s Pizza argued that their sales have been growing steadily due to its innovative techniques which are incorporated in the managerial structure and corporate strategy. Most pizza franchises are not focused on developing their branches outside United States unlike Domino’s which is globally developed. Basing their marketing strategies on bimodal distribution of the population, Domino’s has been able to gain a large bargain-minded population by targeting the higher-end consumers. This population is majorly concerned with quality which Domino’s has enhanced through the following techniques: value co-creation, innovative capabilities, and technological changes and technological implementation.

a)     Innovative Technology

Domino has a savvy foundation that is solely responsible for its technological development. Some of the Domino’s leading technological advances include intellectual ownership of point sales and digital ordering system. The zero-click application used by Domino’s has enhanced customer loyalty. This is because upon clicking on the app, a kitchen timer appears for ten seconds. Purchasers only need to wait for ten seconds then an existing preferred pizza order is automatically placed for conveyance based on their thirty-minute delivery policy. This has helped in increasing its annual net sales. Also, Domino’s is committed to providing quality goods and services through using clean vegetables and ingredients, implementing customer loyalty programs, adoption of local ingredients, and demand for delivery.

b)    Innovative Capability

DPE is one of the predominantly innovative organizations that first launched autonomous pizza delivery vehicles six decades ago in the United States. At the time of its establishment it first started insulated containers and conveyor belt baking chambers in the year 1993. The organization believes that constant innovation is the key to strategy to easily win the business environment. According to Hakanen and Jaakkola (2012, p595). Change is utterly essential for survival in the food industry as it is a subject to fierce competition. The fastest in transition is the leader in any business environment. Based on the DPE annual reports, one of the fundamental aspect of corporate goals in strategic management. The same report also indicated that in the past six 8years, Dominos’ Pizza’s Enterprises made full remarks to the accomplished innovations during the financial year.

Additionally, the financial reports explicitly indicated that further growth and expansion of DPE is anticipated if future changes will be implemented. Technological upheaval is one of the corporate goals that are integrated into strategic management plans. In January 2017, Domino’s Pizza from its Benelux headquarters took an initiative of educating consumers about tracking features of Domino’s Pizza App, a step that significantly improved its customer trust.

c)     Product Reinvention

In the year 2009, Domino’s introduced a new pizza recipe in addition to distributing fresh dough to its stores, and its sales have soared since then (DPE, 2016). Improving the quality of a product is a significant aspect

8of the success of any business. In addition to pizza, the enterprise added other side dishes such as pasta, sandwiches, and specialty chicken. Enhancing the menu has played a significant role in helping DPE take over its rivals, such as Pizza Hut and Papa John’s.

d)    Co-creation

According to DPE participants co-creating in this business, the firm is considered as an opportunity for customers to equip the management by innovation ideas. Dominos’ Pizza’s Enterprise, however, is experimenting on creating value by incorporating customers’ beliefs in their corporate strategy. In the year 2015, DPE ran a campaign in a Dutch broadcasting facility 538, where consumers were allowed to submit their opinions on their preferred pizza recipes. The winning method was used to make Dominos’ Pizza for one month (Hakanen and Jaakkola, 2012, p595).

e)     Technological Changes and Technological Implementation

Dominos’ Pizza’s Enterprises employs open innovation technique to amass ideas from both inside and outside the business enterprise. For instance, a new recipe can either be variant or shims. Main innovative ideas always originate from its headquarters either in Australia or in the Netherlands. To enhance its innovative techniques, Dominos’ Pizza’s Enterprises created DLab in one of its Amsterdam headquarters to facilitate joint production of technological innovations with other business firms (DPE 2016). These labs were started to promote the implementation of technological changes. According to one of the CEOs of DPE Benelux headquarters, this lab has been too useful, and it’s one of the reliable sources of innovative ideas. Also, DPE employs the open network technique to meet customers unexpected demands (Enkel et al., 2009, p313). The following is the process of innovation adoption employed by Dominos’ Pizza’s Enterprise.

4.2.3 Recommendation for Pizza Hut

In the year 1970, Pizza Hut created customer hotline service with a follow-up call to add values to its services. However, this step towards building customer loyalty was cut-throat by incompetence by the management as they resorted to rewarding restaurants based on service provision instead of satisfying customers. This should be changed to focus on value creation and value score, as these are components of revenue that are technologically based. By co-creating value with customers, the customer service, and eventually sales would go up, as customer satisfaction will be achieved. Value co-creation, innovation capability, and technological changes and implementation can all be used for product marketing in given segments. To be ahead of other pizza providing organizations, Pizza Hub should revolutionize their internet pizza ordering techniques, through open innovation and better innovation adoption process. this will increase their market shares, and perceived quality of products will be increased, and introduction of new products will be met with more success. In a nutshell, open innovative network technique, value co-creation with customers and incorporation of innovation in companies’ corporate strategy should be considered to increase sales thus annual financial income.

4.3 Conclusion

By comparing the two companies; Domino’s Pizza Enterprises Ltd and Pizza Hub, the percentage average online purchases, average online orders, market capitalization and financial annual data income, which were shown in bar charts. It can be deduced that Pizza Hub has an innovation gap that makes it lag behind Domino’s in average sales and annual financial income. This benchmarking was useful and facilitated innovation by basing its analysis of the economic aspect of both organizations.

References

Author not available (2006). Pizza Hut.

Cowin, J. (2016). Jack-Cowin-Domino’s Annual Report 2016.

David Lonbottom. (2000). Benchmarking in the UK: an empirical study of practitioners and academics. Benchmarking: An International Journal, 7(2),98-117.

DPE. (2015). Domino’s Corporate-Domino’s Pizza.

DPE. (2016). DPE Annual Report, 2016.

Enkel, E., Gassmann, O., & Chesbrough, H. (2009). Open R&D and open innovation: exploring the phenomenon. R&D Management, 39(4),311-316.

Forbes. (2017, March). Most Innovative Growth Companies.

Hakanen, T., & Jaakkola, E. (2012). Co-creating customer-focused solutions within business networks: a services perspective. Journal of Service Management, 23(4), 593-611.

Johnson & Weinstein, W. C., A. (2004). Superior Customer Value in the New Economy, Concepts, and Cases. Boca Raton, FL: CRC Press.

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