MOSCOW (Reuters) - Global pizza brands Domino\'s and Papa John\'s are preparing
ID: 376195 • Letter: M
Question
MOSCOW (Reuters) - Global pizza brands Domino's and Papa John's are preparing an assault on Russia's provinces, betting they can turn a profit far from Moscow as online card payments become more widespread and consumers get to know foreign brands better. While stay-at-home Muscovites can order an array of international pizza brands from Sbarro to Domino's to Papa John's, regional cities such as Rostov-on-Don and Nizhny Novgorod are still chiefly the preserve of small local chains. Multiple challenges have kept global fast food brands wedded to major Russian cities, including patchy transport links, bureaucratic delays, finding an army of chefs who can maintain quality, as well as the sheer cost of shipping often perishable ingredients across a vast country that spans 11 time zones.
Western fast food chains have also had to adapt menus to suit Russian palates better, once the allure of new foreign tastes has worn off. One of Domino's best-selling pizzas is the "Russian" with 13 toppings including potato, beef, pork, bacon, mushrooms, pepperoni and cheese to help ward off the cold. But Domino's Pizza's Russian franchisee, DP Eurasia , believes the time is now right to expand beyond Moscow, where sales at the 76 outlets it had at the end of March are far outstripping growth in its main market Turkey. Sales in Russia have risen 30.1 percent this year up to May 21, whereas the comparable figure for Turkey was 6.3 percent growth.
Domino's was Russia's third-largest pizza chain last year yet its share of the fragmented market stood at less than 2 percent. DP Eurasia's Russian head, said he saw room for 1,500 Domino's outlets in the longer term. For now, the company is using part of the $192 million it raised listing shares in London in June to add 40 outlets this year, venturing as far as Krasnodar 750 miles south of Moscow.
Domino's closest rival is not standing idle. The Russian franchise of U.S. chain Papa John's International Inc , the fourth biggest player in the country in 2016, sees room for 60-80 store openings each year over the next five years. "We still see potential in Moscow. I think we could open a further 40-50 stores there, but we are also embarking on an aggressive expansion to small towns," Christopher Wynne, the chief executive of Papa John's franchisee, told Reuters.
Another U.S. brand Sbarro was the market leader with a 4 percent market share in 2016, followed by DoDo Pizza, a Russian chain with a presence in former Soviet states as well as China and the US. Sbarro's Russian franchise had 88 stores last year, including in provincial cities. However, it was hit by a Russian food import ban and a drop in the rouble () as Sbarro refused to let it replace imports with local products and the franchising agreement was terminated, Russia's RBC daily has reported.
Wynne said Papa John's Russia had imported 90 percent of products before the 2014 food ban came in but had replaced all its suppliers within six months. DP Eurasia acknowledged the restrictions could adversely affect its business, even though it too had managed to replace the banned imports. It also said there could be challenges in rolling out the franchise in places with less dense populations than Moscow but believes it can stay profitable thanks to greater purchasing power and economies of scale.
Question 1 (0.333333 points)
How does this article illustrate globalization? Support your answer.
Explanation / Answer
Hello,
The pizza industry is a highly competitive and mature market. There are many pizza makers ranging from local pizzerias to international franchises such as Domino’s and Pizza Hut. With the current health kick in today’s society as well as economic downturn, many companies are being forced to make healthier, cheaper products. Many other companies are introducing salads into their menu. The popularity of the Internet as well as mobile commerce is transforming the original ways of ordering a pizza. Dominos competes with both fast food companies such as McDonald’s, as well as other pizza makers like Pizza Hut or Papa John’s. McDonald’s brand image is very strong throughout all 2 parts of the world. Papa John’s compete directly with one another. Recently, Papa John’s is increasing competition to Domino’s because of their rising popularity.
All the biggest Pizzeria’s in the world had first established their stores in the United States. Post that, they have globalized into the other countries seeing potential for huge turovers. Domino’s, Pizza Hut and Papa John’ s even customize menu’s suiting the taste buds of the native countries.
The given article focuses on how the popular pizza chains have only opened stores in the major cities of Russia such as Moscow. They are more than willing to expand multiple chains in small cities and towns as well. However, Russia isn’t much in favor of the growth in popularity of these Western Food chains than it’s local chains. So much so, Russia had effected a ban on food imports. Sbarro Pizza had refused to comply with the ban and purchase from local suppliers, hence their contract was terminated. Papa John’s and Domino’s Pizza Eurasia were zestful enough to comply with the ban and replace their suppliers with the local one’s. This shows that, U.S. food chains are keen on globalizing their market and earning huge profits as they are futuristic and can foresee huge economies of scale due to high purchasing power amongst the people despite less dense population.
Thus this article illustrates Globalization by this wonderful example.
Hope this helps !
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.