Strategic Management A Competitive Advantage Approach, Concepts and Cases
(Global Edition) 16e Fred David, Forest David (Solutions Manual All Chapters,
100% Original Verified, A+ Grade)
Krispy Kreme Doughnuts Inc. – 2015
Forest R. David
A. Case Abstract
Headquartered in Winston-Salem, North Carolina, Krispy Kreme Doughnuts (KKD) serves doughnuts
and coffee as well as other snack items. The company has locations in 23 countries. Many Krispy
Kreme shops are factory shops where customers can watch doughnuts being made and purchase fresh
hot doughnuts as well. The factory stores are responsible for servicing local grocery stores and
convenience stores. The KK Supply Chain provides raw materials for both franchise and company-
owned stores in the doughnut-making process. Krispy Kreme storeowners must purchase all materials
from KK Supply Chain. Krispy Kreme reported total revenues in fiscal year end February 2015 of
$490 million with about 90 percent of revenues derived from the United States.
B. Vision Statement (proposed)
Krispy Kreme strives to be the best doughnut and coffee brand in the world.
C. Mission Statement (actual)
“Consumers (1) are our lifeblood, the center of the doughnut. (2)
There is no substitute for quality in our service to consumers.
Impeccable presentation is critical (7) wherever Krispy Kreme is sold.
We must produce a collaborative team effort that is unexcelled.
We must cast the best possible image in all that we do. (8)
We must never settle for "second best;" we deliver on our commitments.
We must coach our team (9) to ever-better results. (5)”
(Proposed)
Krispy Kreme Doughnuts provides people of all ages (1) the highest quality doughnuts and coffee (2)
in the industry. We actively serve customers across the United States and globally in more than twenty
countries (3). We are proud of our Doughnut Theaters (7), where customers watch fresh hot doughnuts
being made and order them while they are still hot. We work diligently with many nonprofits including
schools and churches to help with fundraising activities (8). We continually upgrade our production
technology (4). We provide our employees with meaningful employment, fair wages, and an ethical
workplace (6, 9), while providing a fair return on investment for our shareholders. (98 words)
1. Customers
2. Products or services
3. Markets
4. Technology
5. Concern for survival, growth, and profitability
6. Philosophy
1
Copyright © 2017 Pearson Education Limited
, 7. Self-concept
8. Concern for public image
9. Concern for employees
D. External Audit
Opportunities
1. The US doughnut market is a $13 billion industry with about 25% of sales coming from bulk
doughnuts in the 1 dozen-size box and up.
2. The outlook for doughnut shops remains positive, especially outside of North America, where the
market is not saturated.
3. A growing middle class in developing countries has created many new customers.
4. In early 2015, Jollibee Foods Corp., based in the Philippines, was considered by many analysts to
be a serious contender to purchase KKD, as Jollibee management looks to add an American-based
food company to its portfolio.
5. Many people around the world prefer eating healthier snacks, with reduced calories.
6. Coffee prices as of 2015 were 75% lower than their all-time highs in 2011.
7. Growing familiarity of US products in Latin America from advertising and immigration.
8. Schools, churches, and other not-for-profits are often looking for fundraising options.
9. Breakfast sandwiches are the new burgers: Breakfast sales at fast-food chains increased by 4.8%
annually from 2007-2012.
10. In 2014, international sales for Dunkin' Donuts decreased 2% and Baskin Robbins decreased
1.2%.
Threats
1. Major rival Dunkin’ Brands reported $260 million more in revenue than KKD.
2. Both in the US and globally, people are becoming more health conscious in their diet and food
choices, in particular, low carb diets are increasingly popular.
3. Competitors of KKD, including Dunkin’ Brands and Starbucks, have already diversified their
menu options to include healthier choices.
4. Like many commodities, the price of coffee is subject to wild price fluctuations. Recent droughts
and fungal infections may reduce the coffee supply by 40% by 2020.
5. Some cities and other governments around the world are imposing laws that restrict portion sizes
of soft drinks and other sugar-laden snack sizes.
6. Also, a global acceptance to “fair trade” providing farmers a fair wage and educational programs
for their farming efforts has also contributed to higher prices.
7. There are over 850 Tim Hortons locations throughout the US that generated over $600 million in
revenue in 2014.
8. Starbucks is the world’s largest specialty coffee retailer with over 18,000 stores in 60 different
countries.
9. Barriers to entry are relatively low for the restaurant industry, but rivalry (competitiveness) among
firms is exceptionally high.
10. In the restaurant industry, the bargaining power of consumers is quite powerful, availability of
restaurant options in most places is abundant, and consequently there is intense price
competitiveness among rival firms.
2
Copyright © 2017 Pearson Education Limited
,Competitive Profile Matrix
Krispy Kreme Starbucks Dunkin' Brands
Critical Success Factors Weight Rating Score Rating Score Rating Score
Advertising 0.06 1 0.06 4 0.24 2 0.12
Price Competitiveness 0.11 3 0.33 1 0.11 2 0.22
Financial Position 0.08 3 0.24 4 0.32 2 0.16
Customer Loyalty 0.10 2 0.20 3 0.30 4 0.40
Global Expansion 0.09 1 0.09 4 0.36 3 0.27
Market Share 0.12 1 0.12 4 0.48 3 0.36
Product Line 0.09 2 0.18 4 0.36 3 0.27
Store Locations 0.05 1 0.05 4 0.20 3 0.15
Customer Service 0.07 3 0.21 4 0.28 2 0.14
Product Quality 0.08 3 0.24 4 0.32 2 0.16
Debt Ratio 0.11 3 0.33 4 0.44 1 0.11
Employee Dedication 0.04 3 0.12 4 0.16 2 0.08
Totals 1.00 2.17 3.57 2.44
KKD trails both Starbucks and Dunkin’ on the total CPM score. KKD competes well with Dunkin’ in
its home market of the Southeast US but not nearly as well in the Northeast and other markets. Much
of KKD’s lower CPM score can be attributed to lower market share in both the US and international
markets.
EFE Matrix
Opportunities Weight Rating Weighted S core
1. The US doughnut market is a $13 billion industry with about
25% of sales coming from bulk doughnuts in the 1 dozen-size 0.10 4 0.40
box and up.
2. The outlook for doughnut shops remains positive, especially
0.05 2 0.10
outside of North America, where the market is not saturated.
3. A growing middle class in developing countries has created
0.05 2 0.10
many new customers.
4. In early 2015, Jollibee Foods Corp., based in the Philippines, was
considered by many analysts to be a serious contender to
0.05 1 0.05
purchase KKD, as Jollibee management looks to add an
American-based food company to its portfolio.
5. Many people around the world prefer eating healthier snacks,
0.05 1 0.05
with reduced calories.
6. Coffee prices as of 2015 were 75% lower than their all-time highs
0.05 2 0.10
in 2011.
7. Growing familiarity of US product in Latin America from
0.04 1 0.04
advertising and immigration.
8. Schools, churches, and other not for profits are often looking
0.03 4 0.12
for fund raising options.
9. Breakfast sandwiches are the new burgers: Breakfast sales at
0.04 1 0.04
fast-food chains increased by 4.8% annually from 2007-2012.
10. In 2014, international sales for Dunkin' Donuts decreased 2%
0.04 2 0.08
and Baskin Robbins decreased 1.2%.
3
Copyright © 2017 Pearson Education Limited
, Threats Weight Rating Weighted S core
1. Major rival Dunkin‘ Brands reported $260 million more in
0.10 2 0.20
revenue than KKD.
2. Both in the US and globally, people are becoming more health
conscious in their diet and food choices in particular, low carb 0.05 1 0.05
diets are increasingly popular.
3. Competitors of KKD, including Dunkin‘ Brands and Starbucks,
have already diversified their menu options to include healthier 0.06 1 0.06
choices.
4. Like many commodities, the price of coffee is subject to wild
price fluctuations. Recent droughts and fungal infections may 0.04 3 0.12
reduce the coffee supply by 40% by 2020.
5. Some cities and other governments around the world are
imposing laws that restrict portion sizes of soft drinks and other 0.01 1 0.01
sugary-laden snack sizes.
6. Also, a global acceptance to — fair trade“ providing farmers a fair
wage and educational programs for their farming efforts has also 0.02 2 0.04
contributed to higher prices.
7. There are over 850 Tim Hortons locations throughout the US
0.04 3 0.12
that generated over $600 million in revenue in 2014.
8. Starbucks is the world‘s largest specialty coffee retailer with
0.08 2 0.16
over 18,000 stores in 60 different countries.
9. Barriers to entry are relatively low for the restaurant industry,
0.05 2 0.10
but rivalry (competitiveness) among firms is exceptionally high.
10. In the restaurant industry, the bargaining power of consumers is
quite powerful, availability of restaurant options in most places
0.05 3 0.15
is abundant, and consequently there is intense price
competitiveness among rival firms.
TOTALS 1.00 2.09
With a total EFE score of 2.09, Krispy Kreme is performing below average on addressing key external
issues facing the firm. The most opportune area for Krispy Kreme to address is consumer desire for
healthy options (KKD offers none) or breakfast sandwich offerings. Krispy Kreme’s score was also
hurt significantly by larger rivals Starbucks and Dunkin’ Donuts.
E. Internal Audit
Strengths
1. Many KKD shops are factory shops where customers can watch doughnuts being made and purchase
fresh hot doughnuts.
2. KKD has long prided itself on hot fresh doughnuts and a one of a kind taste.
3. KKD are sold in KKD stores, grocery stores, convenience stores, gas stations, Wal-Mart, and Target
stores in the US.
4. The company is transitioning toward smaller factory shops that will focus on retail rather than
wholesale customers. In fiscal 2015, 51% of revenue is generated from wholesale.
5. KKD has long helped the communities with fundraisers, even offering special packaging at times.
6. As of February 2015, there were 278 KKD stores operating domestically in 38 states and in the District
of Columbia, and another 523 shops in 23 other countries.
7. KKD has plans to grow international stores to 900 by January 2017.
8. KKD experienced 6.5% increase in total revenues in fiscal 2015.
9. Current ratio for KKD is 2.5.
10. KKD is increasing its $80 million stock buyback to $105 million in 2015.
4
Copyright © 2017 Pearson Education Limited
(Global Edition) 16e Fred David, Forest David (Solutions Manual All Chapters,
100% Original Verified, A+ Grade)
Krispy Kreme Doughnuts Inc. – 2015
Forest R. David
A. Case Abstract
Headquartered in Winston-Salem, North Carolina, Krispy Kreme Doughnuts (KKD) serves doughnuts
and coffee as well as other snack items. The company has locations in 23 countries. Many Krispy
Kreme shops are factory shops where customers can watch doughnuts being made and purchase fresh
hot doughnuts as well. The factory stores are responsible for servicing local grocery stores and
convenience stores. The KK Supply Chain provides raw materials for both franchise and company-
owned stores in the doughnut-making process. Krispy Kreme storeowners must purchase all materials
from KK Supply Chain. Krispy Kreme reported total revenues in fiscal year end February 2015 of
$490 million with about 90 percent of revenues derived from the United States.
B. Vision Statement (proposed)
Krispy Kreme strives to be the best doughnut and coffee brand in the world.
C. Mission Statement (actual)
“Consumers (1) are our lifeblood, the center of the doughnut. (2)
There is no substitute for quality in our service to consumers.
Impeccable presentation is critical (7) wherever Krispy Kreme is sold.
We must produce a collaborative team effort that is unexcelled.
We must cast the best possible image in all that we do. (8)
We must never settle for "second best;" we deliver on our commitments.
We must coach our team (9) to ever-better results. (5)”
(Proposed)
Krispy Kreme Doughnuts provides people of all ages (1) the highest quality doughnuts and coffee (2)
in the industry. We actively serve customers across the United States and globally in more than twenty
countries (3). We are proud of our Doughnut Theaters (7), where customers watch fresh hot doughnuts
being made and order them while they are still hot. We work diligently with many nonprofits including
schools and churches to help with fundraising activities (8). We continually upgrade our production
technology (4). We provide our employees with meaningful employment, fair wages, and an ethical
workplace (6, 9), while providing a fair return on investment for our shareholders. (98 words)
1. Customers
2. Products or services
3. Markets
4. Technology
5. Concern for survival, growth, and profitability
6. Philosophy
1
Copyright © 2017 Pearson Education Limited
, 7. Self-concept
8. Concern for public image
9. Concern for employees
D. External Audit
Opportunities
1. The US doughnut market is a $13 billion industry with about 25% of sales coming from bulk
doughnuts in the 1 dozen-size box and up.
2. The outlook for doughnut shops remains positive, especially outside of North America, where the
market is not saturated.
3. A growing middle class in developing countries has created many new customers.
4. In early 2015, Jollibee Foods Corp., based in the Philippines, was considered by many analysts to
be a serious contender to purchase KKD, as Jollibee management looks to add an American-based
food company to its portfolio.
5. Many people around the world prefer eating healthier snacks, with reduced calories.
6. Coffee prices as of 2015 were 75% lower than their all-time highs in 2011.
7. Growing familiarity of US products in Latin America from advertising and immigration.
8. Schools, churches, and other not-for-profits are often looking for fundraising options.
9. Breakfast sandwiches are the new burgers: Breakfast sales at fast-food chains increased by 4.8%
annually from 2007-2012.
10. In 2014, international sales for Dunkin' Donuts decreased 2% and Baskin Robbins decreased
1.2%.
Threats
1. Major rival Dunkin’ Brands reported $260 million more in revenue than KKD.
2. Both in the US and globally, people are becoming more health conscious in their diet and food
choices, in particular, low carb diets are increasingly popular.
3. Competitors of KKD, including Dunkin’ Brands and Starbucks, have already diversified their
menu options to include healthier choices.
4. Like many commodities, the price of coffee is subject to wild price fluctuations. Recent droughts
and fungal infections may reduce the coffee supply by 40% by 2020.
5. Some cities and other governments around the world are imposing laws that restrict portion sizes
of soft drinks and other sugar-laden snack sizes.
6. Also, a global acceptance to “fair trade” providing farmers a fair wage and educational programs
for their farming efforts has also contributed to higher prices.
7. There are over 850 Tim Hortons locations throughout the US that generated over $600 million in
revenue in 2014.
8. Starbucks is the world’s largest specialty coffee retailer with over 18,000 stores in 60 different
countries.
9. Barriers to entry are relatively low for the restaurant industry, but rivalry (competitiveness) among
firms is exceptionally high.
10. In the restaurant industry, the bargaining power of consumers is quite powerful, availability of
restaurant options in most places is abundant, and consequently there is intense price
competitiveness among rival firms.
2
Copyright © 2017 Pearson Education Limited
,Competitive Profile Matrix
Krispy Kreme Starbucks Dunkin' Brands
Critical Success Factors Weight Rating Score Rating Score Rating Score
Advertising 0.06 1 0.06 4 0.24 2 0.12
Price Competitiveness 0.11 3 0.33 1 0.11 2 0.22
Financial Position 0.08 3 0.24 4 0.32 2 0.16
Customer Loyalty 0.10 2 0.20 3 0.30 4 0.40
Global Expansion 0.09 1 0.09 4 0.36 3 0.27
Market Share 0.12 1 0.12 4 0.48 3 0.36
Product Line 0.09 2 0.18 4 0.36 3 0.27
Store Locations 0.05 1 0.05 4 0.20 3 0.15
Customer Service 0.07 3 0.21 4 0.28 2 0.14
Product Quality 0.08 3 0.24 4 0.32 2 0.16
Debt Ratio 0.11 3 0.33 4 0.44 1 0.11
Employee Dedication 0.04 3 0.12 4 0.16 2 0.08
Totals 1.00 2.17 3.57 2.44
KKD trails both Starbucks and Dunkin’ on the total CPM score. KKD competes well with Dunkin’ in
its home market of the Southeast US but not nearly as well in the Northeast and other markets. Much
of KKD’s lower CPM score can be attributed to lower market share in both the US and international
markets.
EFE Matrix
Opportunities Weight Rating Weighted S core
1. The US doughnut market is a $13 billion industry with about
25% of sales coming from bulk doughnuts in the 1 dozen-size 0.10 4 0.40
box and up.
2. The outlook for doughnut shops remains positive, especially
0.05 2 0.10
outside of North America, where the market is not saturated.
3. A growing middle class in developing countries has created
0.05 2 0.10
many new customers.
4. In early 2015, Jollibee Foods Corp., based in the Philippines, was
considered by many analysts to be a serious contender to
0.05 1 0.05
purchase KKD, as Jollibee management looks to add an
American-based food company to its portfolio.
5. Many people around the world prefer eating healthier snacks,
0.05 1 0.05
with reduced calories.
6. Coffee prices as of 2015 were 75% lower than their all-time highs
0.05 2 0.10
in 2011.
7. Growing familiarity of US product in Latin America from
0.04 1 0.04
advertising and immigration.
8. Schools, churches, and other not for profits are often looking
0.03 4 0.12
for fund raising options.
9. Breakfast sandwiches are the new burgers: Breakfast sales at
0.04 1 0.04
fast-food chains increased by 4.8% annually from 2007-2012.
10. In 2014, international sales for Dunkin' Donuts decreased 2%
0.04 2 0.08
and Baskin Robbins decreased 1.2%.
3
Copyright © 2017 Pearson Education Limited
, Threats Weight Rating Weighted S core
1. Major rival Dunkin‘ Brands reported $260 million more in
0.10 2 0.20
revenue than KKD.
2. Both in the US and globally, people are becoming more health
conscious in their diet and food choices in particular, low carb 0.05 1 0.05
diets are increasingly popular.
3. Competitors of KKD, including Dunkin‘ Brands and Starbucks,
have already diversified their menu options to include healthier 0.06 1 0.06
choices.
4. Like many commodities, the price of coffee is subject to wild
price fluctuations. Recent droughts and fungal infections may 0.04 3 0.12
reduce the coffee supply by 40% by 2020.
5. Some cities and other governments around the world are
imposing laws that restrict portion sizes of soft drinks and other 0.01 1 0.01
sugary-laden snack sizes.
6. Also, a global acceptance to — fair trade“ providing farmers a fair
wage and educational programs for their farming efforts has also 0.02 2 0.04
contributed to higher prices.
7. There are over 850 Tim Hortons locations throughout the US
0.04 3 0.12
that generated over $600 million in revenue in 2014.
8. Starbucks is the world‘s largest specialty coffee retailer with
0.08 2 0.16
over 18,000 stores in 60 different countries.
9. Barriers to entry are relatively low for the restaurant industry,
0.05 2 0.10
but rivalry (competitiveness) among firms is exceptionally high.
10. In the restaurant industry, the bargaining power of consumers is
quite powerful, availability of restaurant options in most places
0.05 3 0.15
is abundant, and consequently there is intense price
competitiveness among rival firms.
TOTALS 1.00 2.09
With a total EFE score of 2.09, Krispy Kreme is performing below average on addressing key external
issues facing the firm. The most opportune area for Krispy Kreme to address is consumer desire for
healthy options (KKD offers none) or breakfast sandwich offerings. Krispy Kreme’s score was also
hurt significantly by larger rivals Starbucks and Dunkin’ Donuts.
E. Internal Audit
Strengths
1. Many KKD shops are factory shops where customers can watch doughnuts being made and purchase
fresh hot doughnuts.
2. KKD has long prided itself on hot fresh doughnuts and a one of a kind taste.
3. KKD are sold in KKD stores, grocery stores, convenience stores, gas stations, Wal-Mart, and Target
stores in the US.
4. The company is transitioning toward smaller factory shops that will focus on retail rather than
wholesale customers. In fiscal 2015, 51% of revenue is generated from wholesale.
5. KKD has long helped the communities with fundraisers, even offering special packaging at times.
6. As of February 2015, there were 278 KKD stores operating domestically in 38 states and in the District
of Columbia, and another 523 shops in 23 other countries.
7. KKD has plans to grow international stores to 900 by January 2017.
8. KKD experienced 6.5% increase in total revenues in fiscal 2015.
9. Current ratio for KKD is 2.5.
10. KKD is increasing its $80 million stock buyback to $105 million in 2015.
4
Copyright © 2017 Pearson Education Limited
