Objectives

Case Abstract Introduction Mission Statement Competitive profile matrix EFE Matrix IFE Matrix TOWS Matrix SPACE Matrix Grand Strategy Matrix Matrix Analysis And TOWS Summary QSPM EBIT/EPS Analysis Profitability Ratios

Case Abstract
Main issues faced by KKD is decline in their sales form their franchise and international stores decreased by 10 % in the year 2010 International stores buy the ingredients from local merchants by KKD

Introduction
1937 Founded by Vernon Rudolph, KK opens first store in North Carolina. 1940s-1950s - Build own mixing plant and distribution system. 1960s-1970s - Krispy Kreme begins to expand their stores. 1990s - Continue expansion that include stores in New York and California.

Krispy Kreme Profile

Founded In 1937 Headquartered in Winston-Salem, North Carolina Products Doughnuts (30 kinds), soft drinks (espresso, chillers), hot drinks (coffee) Revenue 510.21 million USD (2006) Net Income - 88.45 million USD (2006) Employees 4,250

We opened our

doors

on July 13, 1937

History
40s & 50s
improving the doughnut making process through innovations

History 60s & 70s

Our stores are

familiar
gathering places for friends
10 5

History

80s & 90s the hot doughnut experience everyone was talking about us!

11

TODAY

Expansion, innovation,

extending the Krispy Kreme experience

12

KKD Products

13

Our Vision

To be the global leader in doughnuts and complementary products while creating magical moments worldwide.

Our Values

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

MISSION STATEMENT
We create the tastes for good times and warm memories for everyone, everywhere. With our Original Glazed doughnut as our signature and standard, we will continually improve our customers experience through: Innovative ideas Highest quality Caring services

SWOT MATRIX
Strengths Weaknesses Opportunities Threats

STRENGTHS
Affordable, high-quality doughnuts with strong visual appeal and one- of-a-king taste Neon Hot Doughnuts Now sign encourages people outside the store to make a impulse purchase market research shows appeal extends to all major demographic groups including age and income Hot shop stores save money while keeping Krispy Kreme Donuts customer experience intact Vertical integration helps ensure high quality product consistent expansion; now in 16 countries Product sold at thousands of supermarkets, convenience stores, and retail outlets through U.S.

WEAKNESSES
Return on equity, assets, and investments all negative in the trailing twelve months; skill of management is questionable Shareholders have not received dividends recently, and are not expected to in near future; stock price in state of flux Closing stores when stores should be open globally at steady rate to keep up with competitor growth Management states in recent 10-K that it is struggling with how to make stores profitable Product line slow to expand with nothing outside sweet treats to draw in health-conscious customers Advertisement not aggressive enough to appeal to areas outside southeast of U.S. where most stores are Revenue down, net losses in each or past three years Per 10-K, continued dispute with Franchisees could hurt future business

OPPORTUNITIES
`Families crave convenience because of busy life style Asian love sweet and are open to trying foreign foods. Starbucks lack of diversified and distinctive pastry line Dunkin Donuts does not have hot doughnuts to sell Many children love sweet treats. Tim Hortons has yet to expand beyond U.S. and Canada and its products line does not appear to be competitive. South America, Africa and south Asia are market to conquer.

THREATS
Dunkin donuts presently dominate the doughnuts market particularly in south eastern U.S People are becoming more health conscious, which does not bode well for high sugar, high fat treats Starbuck has approximately 25 time amount of store worldwide that Krispy Kreme donuts has Restricted cash flow from banks and massive layoff have stirred the world economy and decreasing discretionary income European prier their local brand of doughnuts Britons tend not to have car, which inhabits drive thru customer and their eating habits and office technique differ from Americans Shareholder may sell Krispy Kreme donuts for lack of returns and dividends compared to other similar firm in the industry

SWOT ANALYSIS
The following SWOT analysis is intended to examine KKDs internal strengths and weaknesses and link them to external opportunities and threats with the aim of selecting a strategy to pursue.

EFE matrix
External Factor Evaluation (EFE) matrix method is a strategic-management tool often used for assessment of current business conditions. The EFE matrix is a good tool to visualize and prioritize the opportunities and threats that a business is facing.

Difference b/w
EFE MATRIX & IFE MATRIX The major difference between the EFE matrix and the IFE matrix is the type of factors that are included in the model. While the IFE matrix deals with internal factors, the EFE matrix is concerned solely with external factors.

External factors
Increasing popularity of coffee shops and bakery cafs Popularity of American foods and fashion in overseas markets Growth in two-income households Americans continue to experience time-starvation Entertaining opportunities moving from home to work environment Technological advancements (i.e., paperless ordering, predictive modeling software, hand held computers for delivery drivers)

EXTERNAL FACTORS CONTD.

Channel expansion possibilities (i.e., Internet preordering) Competitors like Dunkin Donuts and Starbucks Low-crab trend in eating preferences All-natural, organic, healthy eating trends Cultural differences in breakfast and snack foods Increase in eating at full-service restaurants combined with a decrease in the use of fast-food

KEY EXTERNAL FACTORS

WEIGHT

RATING

WEIGHTED SCORE

OPPORTUNITIES
1. Families crave convenience because of busy life style 0.08 3 0.24

1.

Asian love sweet and are open to trying foreign foods.

0.05

0.10

1.

Starbucks lack of diversified and distinctive pastry line

0.10

0.30

1.

Dunkin donuts does not have hot doughnuts to sell

0.07

0.28

1. 1.

Many children love sweet treats. Tim Hortons has yet to expand beyond U.S. and Canada and its products line does not appear to be competitive.

0.03 0.04

2 2

0.06 0.08

1.

South America, Africa and south Asia are market to conquer.

0.09

0.09

THREATS
1. Dunkin donuts presently dominate the doughnuts market particularly in south eastern U.S People are becoming more health conscious, which does not bode well for high sugar, high fat treats 0.12 1 0.12

1.

0.08

0.16

1.

Starbuck has approximately 25 time amount of store worldwide that Krispy Kreme donuts has

0.08

0.08

1.

Restricted cash flow from banks and massive layoff have stirred the world economy and decreasing discretionary income

0.06

0.12

1.

European prier their local brand of doughnuts

0.05

0.10

1.

Britons tend not to have car, which inhabits drive thru customer and their eating habits and office technique differ from Americans

0.06

0.12

1.

Shareholder may sell Krispy Kreme donuts for lack of returns and dividends compared to other similar firm in the industry

0.09

0.09

TOTAL

1.00

1.94

Internal factors
Strong brand recognition and recall Wide appeal of signature glazed doughnuts Vertical integration Development in international markets Strong channel of distribution Quality of product Expanded assortment of offerings at KKD stores including beverages Doughnut machine technology. Perish ability of product Limited product line (heavy reliance on doughnut sales) Overextended (i.e., Montana Mills acquisition) Lack of locations in some areas Pricing in some locations

Key internal factors

weight

Rating

Weighted score

STRENGTHS
1.affordable, high-quality doughnuts with strong visual appeal and one- of-a-king taste 0.09 4 0.36

2. Neon Hot Doughnuts Now sign encourages people outside the store to make a impulse purchase

0.06

0.18

3. market research shows appeal extends to all major demographic groups including age and income

0.08

0.32

4. Hot shop stores save money while keeping Krispy Kreme Donuts customer experience intact

0.07

0.21

5. Vertical integration helps ensure high quality product 6. consistent expansion; now in 16 countries 7. Product sold at thousands of supermarkets, convenience stores, and retail outlets through U.S.

0.07 0.08 0.06

3 3 3

0.21 0.24 0.18

WEAKNESSES 1. Return on equity, assets, and investments all negative in the trailing twelve months; skill of management is questionable 0.10 1 0.10

2. Shareholders have not received dividends recently, and are not expected to in near future; stock price in state of flux

0.07

0.07

3. Closing stores when stores should be open globally at steady rate to keep up with competitor growth

0.06

0.12

4. Management states in recent 10-K that it is struggling with how to make stores profitable

0.07

0.07

5. Product line slow to expand with nothing outside sweet treats to draw in health-conscious customers

0.04

0.08

6. Advertisement not aggressive enough to appeal to areas outside southeast of U.S. where most stores are

0.03

0.06

7. Revenue down, net losses in each or past three years 8. Per 10-K, continued dispute with Franchisees could hurt future business

0.08 0.04

1 2

0.08 0.08

Total

1.00

2.36

CPM (Competitive Profile Matrix)

DUNKIN DONUTS

STARBUCKS

TIM HORTONS

Critical success factor

weight

rating

score

rating

score

rating

score

Advertising

0.11

0.44

0.33

0.22

Product quality

0.15

0.45

0.45

0.30

Product diversity

0.08

0.16

0.08

0.16

Price competitiveness

0.08

0.24

0.16

0.24

Management Financial position

0.10 0.10

3 3

0.30 0.30

3 2

0.30 0.20

2 3

0.20 0.30

Customer loyalty

0.10

0.40

0.30

0.30

Global expansion

0.13

0.39

0.52

0.13

Market share

0.10

0.30

0.30

0.10

Sales distribution

0.05

0.10

0.15

0.10

total

1.00

3.08

2.79

2.05

SPACE MATRIX

SPACE MATRIX
It is a management tool used to analyze a company. It is used to determine what type of a strategy a company should undertake The SPACE matrix can be used as a basis for other analyses, such as the SWOT analysis BCG matrix model industry analysis assessing strategic alternatives (IE matrix).

Conservative

FS
+6 +5 +4 +3 +2 +1

Aggressive

CA
-6 -5 -4 -3 -2 -1 -1 -2 -3 -4 +1 +2 +3 +4 +5 +6

IS

Defensive

-5 -6

Competitive ES

Strategic Position & Action Evaluation Matrix

Aggressive Conservative Defensive Competitive

Two Internal Dimensions

Financial Strength (FS) Competitive Advantage (CA)

Two External Dimensions

Environmental Stability (ES) Industry Strength (IS)

Internal Strategic Position

External Strategic Position

Financial Strength (FS)

Return on investment Leverage Liquidity Working capital Cash flow

Environmental Stability (ES)

Technological changes Rate of inflation Demand variability Price range of competing products Barriers to entry Competitive pressure Price elasticity of demand
Ease of exit from market Risk involved in business

Internal Strategic Position

External Strategic Position

Competitive Advantage CA
Market share Product quality Product life cycle Customer loyalty Competitions capacity utilization Technological know-how Control over suppliers & distributors

Industry Strength (IS)

Growth potential Profit potential Financial stability Technological know-how Resource utilization Ease of entry into market Productivity, capacity utilization

 Financial strength factor include: profit(+1), sales growth(+2), cash flow(+2) 1+2+2; 5; 5/3=1.67 Competitive advantage factor include; customer loyalty(-2) product quality(-1), market share(-5) -2+-1+-5; -8/3= -2.67 From the above KKDs Financial were compared against competitor Dunkin Doughnuts, Star Bucks and Tim Hortons Environment Stability factors: Barriers to entry into Market (-4); risk involved into business (-3); and ease of exit from market (4) -4+-3+-4= -11/3= -3.67 Industry strength factors include: profit potential (+2); financial stability (+1); technological knowhow (+4) +2+1+4= 7/3= 2.33

Four Types of Strategies

Strengths-Opportunities (SO) Weaknesses-Opportunities (WO) Strengths-Threats (ST) Weaknesses-Threats (WT)

SO STRATEGIES
SO Strategies use a firms internal strengths to take advantage of external opportunities

Strengths Weaknesses Opportunities Threats SWOT SO Strategies

Use a firms internal strengths to take advantage of external opportunities

WO STRATEGIES
WO strategies aim at improving internal weaknesses by taking advantage of external opportunities

Strengths Weaknesses Opportunities Threats SWOT

WO Strategies

Improving internal weaknesses by taking advantage of external opportunities

ST STRATEGIES
ST Strategies use a firms strengths to avoid or reduce the impact of external threats.

Strengths Weaknesses Opportunities Threats SWOT

ST Strategies

Use a firms strengths to avoid or reduce the impact of external threats

WT STRATEGIES
WT Strategies are defensive tactics directed at reducing internal weakness and avoiding external threats.

Strengths Weaknesses Opportunities Threats SWOT

WT Strategies

Defensive tactics aimed at reducing internal weaknesses & avoiding environmental threats

 SO STRATEGIES TV, radio, and print ads demonstrating 27varieties of doughnuts against nondescript pastry offerings by Starbucks (S3, O3) All store signs in supermarkets and conveniences where product is sold have picture of young child eating a Krispy Kreme doughnut (S7, O5) 3. Continued grand openings of stores in highlypopulated cities such as Sao Paulo, Brazil & Johannesburg, South Africa (S6, O7)

ST STRATEGIES Compare "hot" doughnut appeal of Krispy Kreme Donut to cold doughnuts of Dunkin Donuts in TV and Internet ads (S1,T1) Do "road show" across Europe as means of advertising, driving truck and mobile "hot shop" to major European cities and filming their reactions for European ads (S2, S4, T5, T6) Express strengths and outline concrete strategies in clear format within 10-K in order to restore shareholder confidence in future of Krispy Kreme Donut (S1-S7, T7)

 WO STRATEGIES Make doughnuts filled with fruit, put fruit cups on menu, and develop wide variety of fresh fruit smoothies; offer ways to incorporate nuts and protein into foods (W5, 03) Aggressive Internet ads demonstrating the appeal of Krispy Kreme Donut hot doughnuts (W6, O4) Open small but profitable "hot shops" in South America, Africa, and Southeast Asia in order to expand globally (W3, O7

WT STRATEGIES

Expand product line with low-calorie foods(W5, T7) Recruit top executive talent from other fastfood firms (W1, T7) Survey franchisees to discover ways to repair business relationships and retain growth of franchise model; study McDonalds model for tips (W8, T1, T3)

GRAND STRATEGY MATRIX

 This is also an important matrix of strategy formulation frame work. Grand strategy matrix it is popular tool for formulating alternative strategies. In this matrix all organization divides into four quadrants and two dimensions which are 1. Market growth 2. Competitive position All quadrant contain all possible strategies

Quadrant-I
It contains that companys strong having competitive situation and rapid market growth. Firms located in Quadrant I of the Grand Strategy Matrix are in an excellent strategic position. These firms must focus on current market and appropriate to follow market penetration, market development and products development are appropriate strategies.

Strategies in Quadrant-I
Market development Market penetration Product development Forward integration Backward integration Horizontal integration Concentric diversification

Quadrant-II
It contains that companys having weak competitive situation and rapid market growth. Firms positioned in Quadrant II need to evaluate their present approach to the marketplace seriously. Although their industry is growing, they are unable to compete effectively, and they need to determine why the firm's current approach is ineffectual and how the company can best change to improve its competitiveness.

Strategies in Quadrant-II
Market development Market penetration Product development Horizontal integration Divestiture Liquidation

Quadrant- III
It contains that companys weak competitive situation and slow market growth. The firms fall in this quadrant compete in slowgrowth industries and have weak competitive positions. These firms must make some drastic changes quickly to avoid further demise and possible liquidation. Extensive cost and asset reduction (retrenchment) should be pursued first. An alternative strategy is to shift away from the current business into different areas.

Final options in quadrant-III

The final options for Quadrant III businesses Divestiture Liquidation.

Strategies in quadrant-III
Retrenchment Concentric diversification Horizontal diversification Conglomerate diversification Liquidation

Quadrant - IV
These firms have the strength to launch diversified programs into more promising growth areas. Quadrant IV firms have characteristically high cash flow levels and limited internal growth needs and often can pursue concentric, horizontal, or conglomerate diversification successfully. Quadrant IV firms also may pursue joint ventures

Quadrant IV (CONTD)
It contains that companys strong competitive situation and slow market growth. Finally, Quadrant IV businesses have a strong competitive position but are in a slow-growth industry.

Strategies in QUADRANT- IV
Concentric diversification Horizontal diversification Conglomerate diversification Joint ventures

Recommended Strategies & Others

Recommended strategies
Retrenchment Concentric diversification Horizontal diversification Conglomerate diversification

RECOMMENDATION
Reduce operating expenses (Down-size individual stores)Lower Costs of Doing Business reduce operating costs per individual store by changing average size of stores from 2500-4500 sq. ft. range to 1500-2000 sq ft. Potential for 30 50 % decrease in operating cost on a cost per square foot basis.

(contd)
i- Change entire manufacturing and distribution strategy Implement prebaked manufacturing operation to allow individual stores to decrease in size, thus lowering per store operating costs to a more appropriate level for sales volume

(contd.)
Increased efficiency smaller workforce per store, parbake allows for minimal Waste inventory as needed (important b/c fresh goods low shelf life Par bake will allow for hot doughnuts now all of the time. Implications of transition to par bake operation New Plant Equipment freezers, production equipment, freezer trucks for distribution/delivery. Store Equipment freezers, oven for various par baked goods, fryers for doughnuts. R&D for unique par bake operation, doughnuts still to befried and glazed on site.

2-Develop stronger relations and control of franchisees

Short-term period of one year postpone new franchise agreements/new store openings Implement Franchise Support Systems Communication between corporate and franchisees Support training, advertising Utilize recommendation #1 in order to lower operating expenses for franchisees.

3- Implement Marketing Strategies

Advertising national t television and radio advertising campaign based on hot doughnuts now Marketing research periodic research to stay abreast of trends. R&D product development

Advertisement / Marketing
Free doughnut strategy Hot Now; free doughnut while waiting in line. TV ad campaign Gifts/Accessories shirts, sweatshirts, hats, boxers, coffee, mugs, toys. Fundraising helped schools raise over $30 million last year (selling doughnuts, coffee, certificates, and partnership cards).

4- Strengthen Competitive
Advantage Strengthen Competitive Advantage through differentiation in products and services. Continue to utilize hot doughnuts now Expand product line Account with A&S New York Bagels (parbaked). Par baked will allow for Hot Bagels Now