Krispy Kreme Doughnuts

CASE STUDY

Harun KAYA

BU-524 Strategic Management

Prof. Chris NAJERA

8/24/2011

Krispy Kreme Doughnut

1) Identify the firm’s existing vision, mission, objectives, and strategies.

Vision

To be the worldwide leader in sharing delicious tastes and creating joyful memories.

Mission

To touch and enhance lives through the joy that is Krispy Kreme.

Objectives and Strategies

Consumers are our lifeblood, the center of the doughnut

There is no substitute for quality in our service to consumers

Impeccable presentation is critical 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

We must never settle for "second best;" we deliver on our commitments

We must coach our team to ever-better results

2) Develop vision and mission statements for the organization.

Vision

To be a trusted worldwide leader in providing tasty and healthy doughnuts .

Mission

Krispy Kreme Doughnut strives to provide the best doughnuts along with consideration of

safety regulations for our valued customers.

Objectives

The objectives of the organization should be to make people see the healthy side of doughnuts

and thus increase its sales and revenue through customer attraction.

Strategies

The strategy of the organization should be to work on increasing customer based brand equity

in order to enhance competitive advantage in the organization. For this a mixture of advertising

and other marketing tactics needs to be employed and the customers need to start realizing

that the doughnuts served by KKD are not as detrimental to their health as perceived.

External Opportunities:

Development into diversified product

markets

Detection of the problem occurring in

the management of the business and

thus the fall in business and

profitability

Develop the social outreach programs

to promote the doughnuts and to

promote the customer based

objectives and mission of the

organization.

Reaching the market to really know

what the customers want and then to

develop the marketing and strategic

policy in accordance to that.

Moving into healthier alternatives for

example sugar free doughnuts

Capitalization of the holiday seasons

and availability of KKD in recreational

places.

External Threats:

Tough competition and increasing

global recognition of Starbucks and

Dunkin Donuts.

Global presence of the competitors

Fall in the number of company stores

and rise in franchises and thus a fall in

the authority over strategies and

management of the organization as a

whole

More health conscious customer base

Development of organic markets

3) Identify the organization’s external opportunities and threats.

4) Construct a Competitive Profile Matrix (CPM)

KKD Dunkin Starbucks

CRITICAL

SUCCESS

FACTORSWeıght Ratıng Score Ratıng Score Ratıng Score

Customer

Loyalty

0.1 2 0.2 3 0.3 4 0.4

Large Market

Share

0.2 2 0.4 2 0.4 4 0.8

Advertising 0.2 2 0.4 2 0.4 4 0.8

Global

Markets

0.05 2 0.1 3 0.15 3 0.15

Market

Share

0.1 2 0.2 3 0.3 3 0.3

Management

Experience

0.1 2 0.2 3 0.3 4 0.4

Social

Recognition

0.2 2 0.4 3 0.6 4 0.8

Strong

Business

Partners

0.15 2 0.3 3 0.45 4 0.6

Total 1.1 2.2 3 4.25

5) Construct an External Factor Evaluation (EFE) Matrix.

Key External factors Weight Rating Weighted Score

Opportunities

Diversification of

Product

0.20 1 0.2

Detection of Problem

in management

0.1 3 0.3

Social Outreach

Programs

0.1 2 0.2

Market Research 0.15 2 0.3

Development of

healthier doughnuts

0.05 3 0.15

Capitalization of

holiday season and

recreational spots

0.05 2 0.1

Threats

Tough Competition 0.2 3 0.6

Global presence of

competitors

0.05 3 0.15

Health conscious

customers

0.05 4 0.2

Fall in number of

company stores

0.02 1 0.02

Rise in organic foods 0.03 2 0.06

Total 1 4.48

6) Indentify the organization’s internal strengths and weaknesses.

Strengths

- Globally recognized brand name

- Having over 70 years long history as an American icon

- Having quality and well educated workforce

- Increasing market share in the United States

- Recognized as being healthy and tasty doughnuts company in the United States

Weaknesses

- Krispy Kreme does not spend much for marketing its products and on media advertising

while its competitors do.

- The price of different ingredients and raw materials especially high quality coffee beans is

increasing.

- Krispy Kreme needs to introduce low calorie doughnuts and other food items

7) Construct an Internal Factor Evaluation (IFE) Matrix.

Key Internal factors Weight Rating Weighted Score

Strengths

Production Capacity 0.20 3 0.6

Human Resource

Power

0.1 2 0.2

Price Differentiation 0.1 2 0.2

Different Channels of

distribution

0.2 4 0.8

Diversification of

Product

0.1 1 0.1

Supply Chain

Management

0.05 3 0.15

Weaknesses

Reliance on single

product

0.05 1 0.05

Dropping sales 0.05 3 0.15

Apparently

unhealthy product

0.05 3 0.15

Fall in number of

company stores

0.05 1 0.05

Single location

production

0.05 2 0.1

Total 2.55

8) Prepare a Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix, Strategic Position

and Action Evaluation (SPACE) Matrix, Internal-External (IE) Matrix, Grand Strategy Matrix,

and Quantitative Strategic Planning Matrix (QSPM) as appropriate. Give advantages and

disadvantages of alternative strategies.

Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix

Strengths

Brand loyalty

Selling internationally

Special secret recipe for doughnuts

Placing in Middle East market where

sweet products consumption is high

Baking doughnuts freshly in factory

stores

Innovative development through the

franchise stores

Weaknesses

Losing in profit

Non-various product segment

Decreasing in reputation

Decreasing in hold of company stores

Weak advertising

Problems on reaching customers

Opportunities

Development in brand name

Market diversification

Getting into organic markets

Customer oriented marketing and sales

policy

Threats

Competition with Starbucks and

Dunkin Donuts

Risk of increasing sugar prices

Increasing in demand of organic foods

Falling profitability

Strategic Position and Action Evaluation (SPACE) Matrix

FP

+6

-6 6

CP IP

-6

SP

Financial Position Industry Position

ROI 2 1. Growth Potential 3

Liquidity 3 2. Profit Potential 5

Working Capital 2 3. Consumer Trust 4

Cash Flow 3

4. Investment

Reliability 3

Earnings Per Share 2 5. Productivity 4

12 2.2 19 4

Stability Position

Competitive

Position

1. Economic

Changes -2 Market Share -1

2. Government

Control -2 Product Quality -1

6. Competition -2 Product Life Cycle -2

4. Price Elasticity -5 Customer Loyalty -1

5. Entry Barriers -4 Capacity Utilization -1

-15 -2.8 -6 -1.2

y axis -0.6 x axis 2.8

Internal-External (IE) Matrix

IFE 2.55

EFE 2.28

IFE Total Weighted ScoresStrong Average Weak

3.0 to 4.0 2.0 to 2.99 1.0 to 1.99EFE Total

Weighted

Score

High 3.0 to 4.0

Medium 2.0 to .99 xxxxx

Low 1.0 to 1.99

Implications from table: Generic Goal: Hold and Maintain

Implied Market Penetration

Strategies: Product Development

Rapid Market Growth

Quadrant II Quadrant I

K.K.

Doughnuts

Weak

Completive

Strong

Completive

Position Position

Quadrant III Quadrant IV

Slow Market Growth

Grand Strategy Matrix

Quantitative Strategic Planning Matrix (QSPM)

Product

Development

Market

Penetration

Market

Development

Key Factors Weight AS TAS AS TAS AS TAS

EXTERNAL

Strengths

Diversification of

Product

0.20 3 0.6 3 0.6 3 0.6

Detection of Problem

in management

0.1 3 0.3 3 0.3 3 0.3

Social Outreach 0.1 2 0.2 4 0.4 2 0.2

Programs

Market Research 0.15 4 0.6 4 0.6 4 0.6

Development of

healthier doughnuts

0.05 3 0.15 1 0.05 2 0.1

Capitalization of

holiday season and

recreational spots

0.05 2 0.1 3 0.15 3 0.15

Threats

Tough Competition 0.2 3 0.6 2 0.4 3 0.6

Global presence of

competitors

0.05 2 0.1 2 0.1 2 0.1

Health customers 0.05 3 0.15 4 0.2 3 0.1

INTERNAL

Strengths

Production Capacity 0.2 4 0.8 2 0.4 2 0.4

Human Resource

Power

0.1 2 0.2 3 0.3 2 0.2

Price Differentiation 0.1 3 0.3 2 0.3 3 0.3

Channels of

distribution

0.2 4 0.6 2 0.4 3 0.6

Diversification of

markets

0.1 2 0.2 3 0.3 4 0.4

Supply Chain

Management

0.05 3 0.15 2 0.1 2 0.1

Weaknesses

Reliance on single

product

0.05 3 0.15 1 0.05 2 0.1

Dropping sales 0.05 3 0.15 3 0.15 3 0.15

Unhealthy product 0.05 2 0.1 2 0.1 3 0.15

Fall in number of

company

0.05 2 0.1 2 0.1 2 0.1

5.95 5.2 5.1

9) Recommend specific strategies and long-term objectives. Show how much your

recommendations will cost. Clearly itemize these costs for each project year. Compare your

recommendations to the actual strategies planned by the company.

1.) Redirect Employees – Reduce Work Pool if necessary = 3 million $

2.) Implement A new Algorithm = 250 million $

3.) Refocus Advertising Network= 90 million $

10) Specify how your recommendations can be implemented and what results you can

expect. Prepare forecasted ratios and projected financial statements. Present a timetable or

agenda for action.

Strategy Implementation

KK Doughnuts should establish a financial and operational audit committee within the

corporation, both company-owned and franchised to determine causes of negative ratio of

revenues to expenses.

The strategic implementation will follow this rank:

1. Redirect Employees 2012 Q1

2. Implement the new doughnuts 2012 Q3

3. Refocus the Advertising Network 2013 Q1

11) Recommend specific annual objectives and policies.

KK Doughnuts has a major competitor which is Dunkin Donuts, they should try to impose the

market as being number one doughnut store by beating Dunking Donuts. It is possible if KK

Doughnuts implement new marketing strategies against to its competitors. The company

should get rid of inefficient job titles, and the administrators of the company should pay

attention for every recommendations and ideas within the organization.

12) Recommend procedures for strategy review and evaluation

First of all, a ‘new offer’ should be occurred for strategy review and evaluation. This ‘offer’

should be carried by a ‘senior manager’. Strategic management planning team needs to carry

out the information-collecting tasks. A successful strategic plan is executed when employees,

advisors, and freelancers contribute to every phase of the planning procedure. ‘Department

manager’ should also focus on the plan and try to develop strategies with his/her team, and

than, respectively; the plan should be audited by Executive Vice President and CEO.