Krispy Kreme Doughnuts Inc. – 2015 Fores t R. D avid A. Case Abstract
Headquar tered in W inston -Salem, N orth Carolina, Krispy Kreme D oughnuts ( KKD ) serve s doughnu ts
and c offe e as we ll as othe r snack items. The company has location s in 23 coun tries. Many Krisp y
Kreme s hop s are factory shop s where custo mers can w atch doughnu ts being m ade and purchas e fresh
hot d oughnu ts as well. The factory stores are respons ible for servicing l ocal grocer y stores and
conven ie nc e stores. The KK Supp ly Chain provi des raw mater ials for both franch ise and company-
owned sto re s in the doughnu t-making process . Krispy Kreme st oreow ners must purchas e all mat erials
from KK S upp ly Chain. K rispy Kreme r eported total r e venue s in fiscal year end February 2015 of
$490 million with a bout 90 percen t of revenue s derived from the United States .
B. Vision State ment (proposed)
Krispy Kreme stri ves to be the best doughnu t and coffe e brand in the w orld.
C. Mission State ment (actual)
“Consu mers (1) are our lifeblood, the center of the doughnut . (2)
Ther e is no s ubstitute for quality in our service to consu mers.
Imp eccab le presen tation is critical (7) whereve r Kri spy Kreme is sold.
We m u s t produc e a collabora tive t eam effor t that is unexce lled.
We m ust cast the best possible image in all that we do. (8)
We m u s t neve r settle for "secon d best;" we deliver on our commitments.
We m ust c oac h our team (9) to ever-better results. (5)”
(Proposed )
Krispy Kreme D oughnut s provi des peop le of all ages (1) the hi ghes t quality doughnu ts and coffe e (2)
in the i n dus try. We actively serve customers acros s the United States and globa lly in more than twenty
coun t ries (3). We are prou d of our Doughnu t Thea ters (7), where customers watch fresh hot doughnu ts
being m ade and or der them while t hey are still hot. We w ork dili gently with m any nonprof its including
schoo ls and c hurche s to help with fund raising activities (8). We continually upgrad e our produc tion
techno lo g y (4). We provide our empl oyee s with m eaningful emp loyment, fair wages, and an ethica l
wor kplace (6, 9), while prov iding a fair retu rn on i nves tment for our shareho lders. (98 words)
1.Customers
2.Produc ts or services
3.Markets
4.Techno logy
5.Concer n for survival, growth, and profitability
6.Philosophy
1 Copyright © 2017 Pearson E ducation Limited 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) 7.Self-concep t
8.Concer n for public im age
9.Concer n for empl oyee s
D. External Audit
Opportunities
1.The US doughnu t market is a $13 billion i ndus try with abou t 25% of sales coming from bulk
doughnu ts in the 1 d ozen -size box and up.
2.The outlook for doughnu t shop s remains positive, espec ially outside of N orth America, where the
ma rke t is not saturated.
3.A growing mi ddle class in develop ing coun tries has created m any new custo mers.
4.In early 2015, Jollibee Food s Corp., based in the Philippines, was cons idered by m any analysts to
be a s er ious contende r to purchas e KKD , as Jollibee managem ent looks to add an American-based
food compa n y to its portfolio.
5.Many peop le around the w orld prefe r eating healthier snacks , with reduced calories.
6.Coffee prices as of 2015 were 75% lower t han their all-time hi ghs in 2011.
7.Growing familiar ity of US product s in Latin America from adver tising and immi gration.
8.Schoo ls, churches , and other not-for-profits are often looking for fundra ising options.
9.Breakfas t sandwiche s are the new burgers : Breakfas t sales at fast-food chains increased by 4.8%
annua ll y from 2007 -2012.
10.In 2014, int ernati onal sales for Dunkin' D onuts decrease d 2% and Baskin Robbins decrease d
1.2%.
Threat s 1.Major ri val Dunkin’ B rands repor ted $260 million m ore in revenu e than KKD .
2.Both in the US and globally, peop le are beco ming m ore health consc ious in their diet and food
choices, in particular, low carb die ts are increas ingly popu lar.
3.Com petitors of KKD , including D unkin’ B rands and Starbucks , have already diversified t heir
menu o p tions to include healthier choices.
4.Like m any commod ities, the price of coffe e is subject to wild price fl uctuations . Recen t drough ts
and f unga l infections may reduc e the coffe e supp ly by 40% by 2020.
5.Some cities and other govern ments around the w orld are imposing laws t hat restrict portion sizes
of s of t drinks and other sugar -lade n snack sizes .
6.Also , a gl obal acceptance to “fair trade ” providin g farmers a fair wage and educa tiona l progra ms
for their farming ef forts has also contributed to hi gher prices.
7.Ther e are over 850 Tim Hortons locations throughou t the US t hat generated over $600 million in
revenu e in 2 014.
8.Starbuck s is the w orld’s larges t specialty coffe e retailer w ith over 18,000 store s in 60 differen t
coun t ries .
9.Barriers to entry are relatively low for the restauran t indus try, but rivalry (competitiveness ) among
firms is ex cep tiona lly hi gh.
10.In the restauran t indus try, the barga ining power of consu mers is quite powerful, availability of
restau ran t options in most place s is abunda nt, and consequen tly there is intense price
comp e titivenes s among rival firms.
2 Copyright © 2017 Pearson E ducation 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 Starbuck s 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 interna tional markets. EFE Matrix Opportunities Weight Rating W eighted S core 1. The US doughnu t market is a $13 billion industry with about 0.10 4 0.40 25% of sales coming from bulk doughnu ts in the 1 dozen-size box and up. 2. The outlook for doughnu t shops remains positive, especially outside of North America, where the market is not saturated. 0.05 2 0.10 3. A growing middle class in developing countries has created many new customers. 0.05 2 0.10 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. 0.05 1 0.05 5. Many people around the world prefer eating healthier snacks, with reduced calories. 0.05 1 0.05 6. Coffee prices as of 2015 were 75% lower than their all-time highs in 2011. 0.05 2 0.10 7. Growing familiarity of US product in Latin America from advertising and immigration. 0.04 1 0.04 8. Schools, churches, and other not for profits are often looking for fund raising options. 0.03 4 0.12 9. Breakfast sandwiches are the new burgers: Breakfast sales at fast-food chains increased by 4.8% annually from 2007-2012. 0.04 1 0.04 10. In 2014, international sales for Dunkin' Donuts decreased 2% and Baskin Robbins decreased 1.2%. 0.04 2 0.08 3 Copyright © 2017 Pearson Educati on Limited Threats Weight Rating W eighted S core 1. Major rival Dunkin‘ Brands reported $260 million more in revenue than KKD . 0.10 2 0.20 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 popul ar. 0.05 1 0.05 3. Competitors of KKD , including Dunkin‘ Brands and Starbucks, have already diversified their menu options to include healthier choices. 0.06 1 0.06 4. Like many commodities, the price of coffee is subject to wild price fluctuations. Recent drought s and funga l infections may reduce the coffee supply by 40% by 2020. 0.04 3 0.12 5. Some cities and other governments around the world are imposing laws that restrict portion sizes of soft drinks and other sugary-laden snack sizes. 0.01 1 0.01 6. Also, a global acceptance to —fair trade“ providing farmers a fair wage and educa tional programs for their farming efforts has also contributed to higher prices. 0.02 2 0.04 7. There are over 850 Tim Hortons locations throughou t the US that generated over $600 million in revenue in 2014. 0.04 3 0.12 8. Starbucks is the world‘s largest specialty coffee retailer with over 18,000 stores in 60 different count ries. 0.08 2 0.16 9. Barriers to entry are relatively low for the restaurant industry, but rivalry (competitiveness) among firms is exceptionally high. 0.05 2 0.10 10. In the restaurant industry, the bargaining power of consumers is quite powerful, availability of restaurant options in most places is abunda nt, and consequently there is intense price competitiveness among rival firms. 0.05 3 0.15 TOTALS 1.00 2.09 With a total EFE score of 2.09, Krispy Kreme is perfor ming below averag e on addres sing key external issue s facing the firm. The most oppor tune area for Krispy Kreme to addres s is consu mer desire for healt hy options (KKD offer s none ) or breakfas t sand wich offer ings. Krispy Kreme’s score was also hurt significantly by larger rivals Starbuck s and Dunkin’ Donuts. E. Inter nal Audit Strengths 1. Many KKD shop s are factory shop s where customers can watch doughnu ts being made and purchas e fresh hot doughnu ts. 2. KKD has long pride d itself on hot fresh doughnu ts and a one of a kind taste. 3. KKD are sold in KKD stores , grocer y stores, convenienc e stores, gas stations , Wal-Mart, and Targe t stores in the US. 4. The company is trans ition ing toward smaller factory shop s that will focus on retail rather than wholesale customers. In fisca l 2015 , 51% of revenu e is genera ted from wholesa le. 5. KKD has long helpe d the communities with fundraisers , even offer ing special packag ing at times. 6. As of Februar y 2015 , there were 278 KKD stores opera ting domestically in 38 states and in the District of Columbia, and another 523 shop s in 23 other coun tries. 7. KKD has plans to grow interna tiona l stores to 900 by Januar y 2017 . 8. KKD exper ience d 6.5% increas e in total revenue s in fiscal 2015 . 9. Curren t ratio for KKD is 2.5. 10. KKD is increas ing its $80 million stock buybac k to $105 million in 2015 . 4 Copyright © 2017 Pearson Educati on Limited
