Philippine Christian University

GRADUATE SCHOOL OF BUSINESS AND MANAGEMENT

2nd Floor. Administrative Bldg., 1648 Taft Avenue corner Pedro Gil St., Malate, Manila
Telephone: (63-2) 8521-5045

MASTER IN BUSINESS ADMINISTRATION

STRAMA 1 and 2 FRAMEWORK

1. Case Background

Background

Krispy Kreme Doughnuts (KKD) is a company that offers doughnuts, coffee, and other snack
items, with its headquarters located in Winston-Salem, North Carolina. Back to 1933 when Vernon
Rudolph first bought this yeast-raised doughnut recipe from a French chef. Krispy Kreme began as a
sidewalk store in 1937. He The delicious smell of the doughnuts catches the hearts of the passerby.
Throughout the 1950s, they have made several chains of small stores, and gradually established a mixing
plant to have a consistent way of cooking the doughnuts. The next decade, they started to expand their
business in the southeast part of the US, until the Beatrice Foods Company bought the company.

In 1982, the early franchisees of Krispy Kreme bought it back from the Beatrice Foods Company.
They expanded more outside the southeast US and had their first initial store in New York City. They also
opened their first common stock in 2000. By this decade. They continue their international expansion.

Being in the food industry, their pride is in the taste and quality of their product. They believe
that achieving this is by controlling the quality and freshness of the ingredients. Their competitive
advantages are quality, service, innovation, and continuous creation of these. They strongly say that
they are more than a product or brand, they are a set of capabilities. The factory stores are responsible
for supplying local grocery stores and convenience stores. Raw materials for the doughnut-making
process are provided by the KK Supply Chain, and Krispy Kreme store owners are required to purchase
all materials from the chain. Krispy Kreme reported total revenues of $490 million in fiscal year-end
February 2015, with about 90% of revenues generated from the United States.

2. Environment Analysis
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GRADUATE SCHOOL OF BUSINESS AND MANAGEMENT
2nd Floor. Administrative Bldg., 1648 Taft Avenue corner Pedro Gil St., Malate, Manila
Telephone: (63-2) 8521-5045

A. General Environment
A.1 Opportunities
A.1.1. Socio-Cultural-Demographic Forces
 The doughnut market in the United States is estimated to be valued at $13 billion, wherein
around 25% of total sales are attributed to the purchase of doughnuts in bulk, specifically in
the size of one dozen or more.
 The doughnut shop market outlook is positive, particularly in non-North American regions
where there is less saturation.
 The emergence of a burgeoning middle class in developing nations has resulted in an influx
of new customers.
 Due to evolving food preferences worldwide, menus are expanding.
A.1.2. Technological Forces
 The growing popularity of US products in Latin America can be attributed to several factors,
including increased advertising and immigration.
 Growing digital platforms can increase brand awareness for all demographics.
A.1.3. Economic Forces
 Dunkin' Donuts and Baskin Robbins experienced a decline in their international sales in 2014
with a decrease of 2% and 1.2%, respectively.
 In 2015, the cost of coffee had dropped by 75% from its highest point in 2011.
 In early 2015, Jollibee Foods Corporation, based in the Philippines, was considered by many
analysts to be a severe contender to purchase KKD, as Jollibee management looks to add an
American-based food company to its portfolio.
 The food industry is rapidly expanding with the growing population. In the United States
alone, the doughnut market is a $13 billion industry.
A.1.4. Environmental Forces
 Fast-food breakfast sandwich sales rose by 4.8% annually from 2007-2012, outpacing
burgers.
Philippine Christian University
GRADUATE SCHOOL OF BUSINESS AND MANAGEMENT
2nd Floor. Administrative Bldg., 1648 Taft Avenue corner Pedro Gil St., Malate, Manila
Telephone: (63-2) 8521-5045

 Many people worldwide prefer eco-friendly food options, like low-carbon footprint
doughnuts.
 A lot of individuals globally opt for consuming snacks that are healthier and have fewer
calories.
A.1.5. Politico-Legal Forces
 KKD is active in Corporate Social Responsibility (CSR) initiatives through partnerships with
various community organizations for fund raising and charity events.
 Many schools, churches, and other non-profit organizations are frequently in search of
fundraising opportunities.
A.2. Threats
A.2.1. Socio-Cultural-Demographic Forces
 People globally are becoming more health conscious. Low-carb diets are increasingly
popular.
 Competitors such as Dunkin’ Brands and Starbucks have already incorporated healthier
options on their menus, something KKD has yet to do.
 Keeping up with new market trends, such as health and environmental consciousness
among customers, presents a complex challenge.
A.2.2. Technological Forces
 Increasing the budget for research and development to keep up with technological
advancements.
A.2.3. Economic Forces
 Starbucks operates 18,000 stores in 60 countries, making it the world's largest coffee
retailer.
 There are more than 850 Tim Hortons locations in the US, which generated over $600
million in revenue in 2014.
 Dunkin’ Brands, one of Krispy Kreme Doughnuts' major competitors, reported $260 million
more in revenue than KKD.
A.2.4. Environmental Forces
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GRADUATE SCHOOL OF BUSINESS AND MANAGEMENT
2nd Floor. Administrative Bldg., 1648 Taft Avenue corner Pedro Gil St., Malate, Manila
Telephone: (63-2) 8521-5045

 There is a controversial issue surrounding doughnut companies' contribution to

deforestation of rainforests through the use of non-certified palm oil.
 The price of coffee is highly volatile due to factors such as droughts and fungal infections,
which could lead to a 40% reduction in supply by 2020.
 Global acceptance of fair trade ensures farmers receive fair wages and educational
programs, leading to higher prices for their crops.
A.2.5. Politico-Legal Forces
 Several governments worldwide are implementing laws to limit the serving sizes of sugary
drinks and snacks.
 Competition among firms is high despite low barriers to entry in the restaurant industry.

B. Operating Environment
B.1 Opportunities
B.1.1. Rivalry Among Competing Firms
 The KKD product exhibits distinct characteristics that set it apart from others in the market.
 The competitive advantage of a firm refers to the unique set of attributes, resources, and
capabilities that enable it to outperform its competitors in the marketplace. The quality of
their product surpasses that of their competitors.
B.1.2. Potential Entrants
 Krispy Kreme Doughnuts (KKD) exhibits commendable attributes in terms of product
excellence, customer retention, and brand reputation.
 The likelihood of new competitors entering the market is very low.
B.1.3. Substitute Products
 Krispy Kreme has the potential to enhance their innovation capabilities by exploring
alternative product offerings. The company has the capacity to generate additional
strategies for enhancing their products and introducing novel features.
B.1.4. Bargaining Power of Suppliers
 Both franchise stores and company stores are obligated to procure all supplies only from the
Krispy Kreme Supply Chain.
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GRADUATE SCHOOL OF BUSINESS AND MANAGEMENT
2nd Floor. Administrative Bldg., 1648 Taft Avenue corner Pedro Gil St., Malate, Manila
Telephone: (63-2) 8521-5045

B.1.5. Bargaining Power of Buyers

 The establishment of a doughnut factory retail outlet, offering the opportunity to purchase
freshly baked and warm doughnuts directly from the premises, so enabling direct sales to
the public. Krispy Kreme operates a specialized section that offers customized doughnut
options, ensuring that the preferences of each individual consumer are accommodated.
B.1.6. Industry Growth
 Aiming to increase their market share and expand into new markets, they are hoping to
develop innovative marketing strategies. One idea is to create Doughnut Theater-style
factory stores where customers can watch the doughnuts being made. This will help them
improve their products and services, attracting more customers to their business.
B.1.7. Shareholders' Actions
 Collaborating with another enterprise.
B.1.8. Creditors' Actions
 The CEO stated in 2014 that the company had strong overseas markets, with many stores
seeing up to 3 months of long lines after opening.
B.1.9. Community Perceptions
 Healthy menu choices.
 Appealing image to attract people of all ages and backgrounds.
B.2 Threats
B.2.1. Rivalry Among Competing Firms
 A large number of competitors in the industry are all competing for the same customers.
 KKD competitors are Dunkin’ Donuts, Tim Hortons and Starbucks which are very known
worldwide.
B.2.2. Potential Entrants
 When a new firm enters a market easily, the intensity of competitiveness among firms
increases.
 Customers are eager to try something different all the time.
B.2.3. Substitute Products
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GRADUATE SCHOOL OF BUSINESS AND MANAGEMENT
2nd Floor. Administrative Bldg., 1648 Taft Avenue corner Pedro Gil St., Malate, Manila
Telephone: (63-2) 8521-5045

 Due to their limited menu, Krispy Kreme does not provide meals such as breakfast. Because
of this, customers will choose to buy at other establishments that offer catering services for
breakfast menus and the like.
 In order to satisfy their needs, customers may opt for alternative products offered by other
companies.
 Customers are likely to purchase products from nearby shops that offer comparable quality
to what they are searching for.
B.2.4. Bargaining Power of Suppliers
 Due to the Krispy Kreme Supply Chain being the sole provider of raw materials for both
franchise and company-owned stores in the doughnut-making process, some stores may be
at a disadvantage during times of tight supply.
B.2.5. Bargaining Power of Buyers
 There is an intense competition with other well-known brands such as Dunkin’ Donut.
 Buyers can choose from a variety of flavored doughnuts at other shops since this product
lacks differentiation.
B.2.6. Industry Growth
 Krispy Kreme faces stiff competition due to offering common products. Aggressive
marketing and R&D by competitors may affect sales.
B.2.7. Shareholders' Actions
 KKD does not have a geographic structure, instead, it appears to be functionally structured.
B.2.8. Creditor’s Actions
 As KKD has expanded globally, rival firms eye acquisition.
B.2.9. Community Perceptions
 People around the world are becoming increasingly health conscious, leading to widespread
adoption of low-carb diets as a lifestyle choice.

C. Internal Environment
C.1 Strengths
C.1.1. Marketing
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GRADUATE SCHOOL OF BUSINESS AND MANAGEMENT
2nd Floor. Administrative Bldg., 1648 Taft Avenue corner Pedro Gil St., Malate, Manila
Telephone: (63-2) 8521-5045

 The Krispy Kreme name and trademark are associated with a distinctive flavor that has been
cherished by numerous generations of customers.
 Many KKD shops are factory shops where customers can watch doughnuts being made and
purchase fresh hot doughnuts.
C.1.2. Production/Operations
 Access to suppliers that offer raw materials at a lower cost can improve the overall business
efficiency.
 The company utilizes a vertically integrated and automated system to efficiently
manufacture doughnuts. This system consists of three domestic production factories that
generate exclusive Krispy Kreme mixes and customized doughnut-making equipment for all
retail shops.
 As of February 2015, there were a total of 278 domestic KKD stores in operation across 38
states and the District of Columbia. Additionally, there were 523 KKD shops located in 23
foreign countries.
C.1.3. Finance
 The wide product portfolio can allow the organization to expand the customer base and
offset the losses from one product category with benefits obtained from the other.
 The expansion of additional global locations has a positive impact on the company's stock
price and revenue generation. Additionally, the business disclosed a 6.7 percent rise in
comparable store sales. The robust financial position and balance sheet of Kreme Krispy
enable the company to allocate resources towards novel and varied initiatives, hence
enhancing revenue diversification and augmenting key performance indicators such as
Return on Sales and other relevant measures.
C.1.4. Organization & Management
 In contrast to other large corporations, this particular organization lacks the presence of a
Chief Operating Officer (COO), Chief Administrative Officer (CAO), or Chief Strategy Officer
(CSO).
 Krispy Kreme Doughnut discloses its income figures according to geographic regions,
although its organizational structure does not align with these geographical divisions.
Philippine Christian University
GRADUATE SCHOOL OF BUSINESS AND MANAGEMENT
2nd Floor. Administrative Bldg., 1648 Taft Avenue corner Pedro Gil St., Malate, Manila
Telephone: (63-2) 8521-5045

Indeed, the company has a structural configuration that is characterized by functional

differentiation, as opposed to divisional differentiation.
C.1.5. Human Resources
 The presence of workplace diversity can serve as a significant advantage for businesses,
especially those with aspirations to operate in the global market.
C.1.6. Research & Development
 The organization has implemented a range of technological advancements to enhance its
operational procedures and technological infrastructure.
C.1.7. Information Systems
 An optimally designed and effectively integrated information technology infrastructure has
the potential to enhance operational efficiency and facilitate the acquisition of up-to-date
market insights.
C.2 Weaknesses
C.2.1. Marketing
 The company's limited financial resources allocated to marketing and promotional
endeavors hinder its capacity to enhance its consumer base and foster repeat purchases.
 The apparent justification for the prices charged by the business may be called into question
when considering the features of the product or service. This suggests the necessity of
reevaluating the price strategy.
 The failure to understand the demands and expectations of customers contributes to an
inefficient process of strategic decision-making.
C.2.2. Production/Operations
 KKD's unique glazing is exclusively supplied by a single provider.
 The franchise industry is currently seeing a reduction in revenues, with a notable decrease
of 1.7%. Additionally, the foreign sector of the firm is exhibiting signs of weakness.
C.2.3. Finance
 Krispy Kreme's limited expansion is a notable aspect, particularly within the context of a
worldwide environment. In relation to other brands of doughnuts, it has already fallen
behind in terms of global expansion and shop coverage.
Philippine Christian University
GRADUATE SCHOOL OF BUSINESS AND MANAGEMENT
2nd Floor. Administrative Bldg., 1648 Taft Avenue corner Pedro Gil St., Malate, Manila
Telephone: (63-2) 8521-5045

 The company has faced downfall in revenues and loss in the past 3 years.
C.2.4. Organization & Management
 The mission statement of KKD lacks a mention of Corporate Social Responsibility, specifically
omitting any reference to the company's commitment to contributing to the betterment of
the community.
 Poor company management.
C.2.5. Human Resource
 Lack of organizational commitment.
C.2.6. Research & Development
 KKD doesn’t have product development.
 KKD lacks a comprehensive and efficient market research strategy.
 Insufficient research into emerging food trends for potential incorporation into their menu.
C.2.7. Information Systems
 KKD doesn’t have product development.
 KKD allocates little resources and attention towards their advertising efforts, leading to a
reduced number of potential customers.

D. External Factor Evaluation Matrix

EXTERNAL FACTOR EVALUATION

Key External Factors Weight Rating Weighted Score
Opportunities
1. Asians are receptive to Western food. 0.11 3 0.33
2. Main ingredients are basic commodities, 0.08 2 0.16
giving low switching costs from one supplier
to the other.
3. Many children love sweet treats. 0.10 2 0.20
4. Starbucks lacks a diversified and distinctive 0.06 2 0.12
pastry line.
5. Dunkin’ Donuts does not serve hot doughnuts. 0.09 4 0.36

Threats
1. Change in consumer demand towards healthy 0.15 3 0.45
products.
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GRADUATE SCHOOL OF BUSINESS AND MANAGEMENT
2nd Floor. Administrative Bldg., 1648 Taft Avenue corner Pedro Gil St., Malate, Manila
Telephone: (63-2) 8521-5045

2. Increase in cost of raw materials. 0.11 3 0.33

3. Starbucks has approximately 25 times the 0.09 2 0.18
amount of stores worldwide that Krispy
Kreme Donut has.
4. Shareholders may sell Krispy Kreme Donut 0.09 1 0.09
stock for lack of returns and dividends
compared to other similar firms in the
industry.
5. There are over 850 Tim Hortons locations 0.12 2 0.24
throughout the US that generated over $600
million in revenue in 2014.
TOTAL 1.00 2.46

ANALYSIS: Krispy Kreme demonstrates a high level of responsiveness in resolving significant external
challenges, as seen by its total EFE score of 2.46. One area that Krispy Kreme may strategically focus on
is catering to the evolving preferences of health-conscious customers, who are increasingly mindful of
their dietary choices. This is particularly relevant considering the growing popularity of low-
carbohydrate diets in contemporary society. Krispy Kreme's performance was adversely impacted to a
substantial extent by prominent competitors such as Starbucks and Dunkin' Donuts.

E. Internal Factor Evaluation Matrix

INTERNAL FACTOR EVALUATION

Key External Factors Weight Rating Weighted Score
Strengths
1. Consistent expansion; now in 23 countries 0.20 3 0.40
2. Many shops are factory shops where 0.22 4 0.88
customers can watch doughnuts being made and
purchase fresh hot doughnuts.
3. Asians are receptive to Western food 0.05 2 0.10
4. One of a kind taste 0.10 4 0.40

Weaknesses
1. Weak advertising schemes 0.05 2 0.10
2. Disputes with franchisees 0.08 2 0.16
3. Revenues down, net losses in each of past 0.10 2 0.20
three years
4. Krispy Kreme lies in its less expansion, in such 0.20 1 0.20
Philippine Christian University
GRADUATE SCHOOL OF BUSINESS AND MANAGEMENT
2nd Floor. Administrative Bldg., 1648 Taft Avenue corner Pedro Gil St., Malate, Manila
Telephone: (63-2) 8521-5045

a global environment.
TOTAL 1.00 2.44

ANALYSIS: Krispy Kreme's IFE Matrix score of 2.44 suggests a suboptimal internal posture, highlighting
the need for the company to effectively address its primary internal concerns. There are several notable
areas that might be enhanced. Firstly, it is recommended to introduce breakfast sandwiches to the
menu. Additionally, it would be advantageous to provide customers with a healthier alternative, such as
whole wheat muffins. Furthermore, it is advised to bolster the expansion of the franchise business and
increase the coverage of stores on an international scale.

F. 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

ANALYSIS: Krispy Kreme Doughnuts (KKD) exhibits lower total CPM ratings compared to both Starbucks
and Dunkin' Brands. Krispy Kreme Doughnuts (KKD) exhibits strong competitive performance in its own
market, specifically the Southeast region of the United States. However, its competitive standing in
other markets, particularly the Northeast, is comparatively worse when compared to its rival, Dunkin'.
Both Krispy Kreme Doughnuts (KKD) and Dunkin' Donuts were outperformed by Starbucks due to the
better evaluations of their success characteristics, which can be attributed to both their local and
Philippine Christian University
GRADUATE SCHOOL OF BUSINESS AND MANAGEMENT
2nd Floor. Administrative Bldg., 1648 Taft Avenue corner Pedro Gil St., Malate, Manila
Telephone: (63-2) 8521-5045

international performance. The lower CPM score of KKD may largely be ascribed to its comparatively
lower market share in both domestic and global markets.

G. Assumptions
G.1. General Environment Stability

Krispy Kreme Doughnuts operates in various countries, each with its unique political tensions.
The instability and growing tensions in the global political environment can have a negative impact on
the growth of the industry and limit the opportunities available to Krispy Kreme Doughnuts. Frequent
changes in government policies can harm business performance by increasing environmental
uncertainty. Conducting an analysis of the prevailing trends in the nation's political landscape is of
utmost significance for Krispy Kreme Doughnuts, as shifts in governmental leadership have the potential
to impact the prioritization of various industries' growth and development.

G.2. Industry Growth Prospects

The company aims to expand their business globally, seizing the opportunity to grow in markets
where they are already represented. They plan to work with existing franchise partners and develop
their Company-owned markets. By doing so, they can use supply chain efficiencies and benefit from
their strong brand awareness. They will also explore new markets and regions where they have limited
or no presence. Their objective is to achieve a double-digit annual growth rate in their systemwide unit
count over the next few years.

G.3. Company's Competitive Position

Over the past years, the financial position of the company hasn't been great due to its previous
overexpansion and mismanagement of franchisees. However, Krispy Kreme has set up multiple
strategies to make a comeback on the market, which is likely to help them overcome the challenges they
faced.
Philippine Christian University
GRADUATE SCHOOL OF BUSINESS AND MANAGEMENT
2nd Floor. Administrative Bldg., 1648 Taft Avenue corner Pedro Gil St., Malate, Manila
Telephone: (63-2) 8521-5045

3. Problem Statement supported with evidence

 Consumers have a preference for health-conscious alternatives, a category in which KKD

fails to provide any options except for breakfast sandwiches. In contrast to its industry
counterparts, Dunkin' Brands and Starbucks, the company has undertaken a strategy of
menu diversification.
 Krispy Kreme does not have the national brand recognition as Dunkin’ Brands.
 Krispy Kreme does not have viable strategies that would include increasing advertising and
should obtain new franchise agreements.
 Starbucks have 18,000 stores in 60 foreign countries, Dunkin Donuts have 11,000 stores in
32 foreign countries while Krispy Kreme have 523 shops in 23 foreign countries. Compared
to its major competitors, it is already left behind in terms of global expansion and coverage
of stores.

4. Alternative Courses of Action

A. Tows Matrix
B. Internal-External Matrix
C. Grand Strategy Matrix
D. Summary of Strategies
5. Recommended Alternative and Action Plan
A. Quantitative Strategic Planning Matrix
B. Action Plan
C. Financial Projections
C.1. Sales Forecast
C.2. Income Statement Forecast
C.3. Balance Sheet forecast
C.4. Cash Flow forecast

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