Think Different

Report onKRISPY KREME DOUGHNUTS, INC.

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Table of Content
Page no.
About Apple Inc. 03
Current performance of Apple3-4
Mission and Vision statement.05
Growth strategy05
Corporate governance..06
Top Management.06-07

Environmental scanning:
External Environment Analysis ..07 -09
Industry environment.09-11
Summary of external forces 11
Internal Environment12-19
Core Competencies 20-21
Summary Of Internal forces...22

Analysis of strategic factors:

SWOT analysis...22-23
IFAS24-25
EFAS26-27
TOWS Matrix.34-35

Identification of strategic issues36

Strategic alternatives and recommendation36
Evaluation and control..37

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About Krispy Kreme Doughnuts:

In 1937, Vernon Rudolph began selling homemade doughnuts to local groceries for
resale in Winston-Salem, North Carolina. His doughnuts were based on a recipe his
uncle had obtained from Louisiana, and they were unique in their inclusion of yeast. The
yeast allowed the dough to rise, which gave the doughnuts a light, airy composition,
different from the usual cake doughnuts. This secret ingredient proved successful and it
didnt take much time before Rudolph started selling doughnuts straight to customers
from a hole he cut in his wall. The success of his doughnut operation forced Rudolph to
expand, and by the 1950s, it had grown to a small chain of family-owned doughnut
shops. Rudolph was committed to quality and consistency. Each doughnut shop used
the same original recipe, but the doughnuts were still handmade at each location. To
enforce a standard of quality, the company opened a plant dedicated to producing and
distributing dry doughnut mix to each shop. The company also engineered and
manufactured doughnut-making machinery for regulating doughnut production. This
automation allowed the company to enjoy steady growth throughout the 1950s and
1960s in the Southeast. The doughnut machinery, ingredient mix, and corporate image
were refined during this period, and are nearly the same today as they were back then.
Rudolph passed away in 1973, and company growth slowed for a while, until the
Beatrice Foods Company acquired Krispy Kreme in 1976. Although some reorganization
took place, the companys headquarters remained in Winston-Salem. The Beatrice
Foods Company was a major presence in the food market and a household name until
the leveraged buyout raids of the 1980s. The bulk of their brands and assets became
ConAgra Foods, which is still today one of the countrys largest packaged foods
companies. A group of franchisees bought Krispy Kreme back from Beatrice Foods in
1982, and refocused the companys energies on the hot doughnut experience. The
Doughnut Theatre concept, where customers could watch freshly baked doughnuts roll
off the assembly line from behind a glass window, was popularized during this time. The
company began to expand again, and it ventured out of the Southeast. In 1996, a store
was opened in New York City, and in 1999, a store was opened in California. Krispy
Kreme was a national brand at this point, and took the opportunity to go public.

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1. Current Situation: Current situation of Krispy Kreme Doughnuts Inc. is

given below:

A. Current Performance of Krispy Kreme Doughnuts:

Krispy Kreme operates 582 stores (including franchised) in 18 countries worldwide. Stores range
from 4,000 to 8,000 square feet and are generally located in freestanding suburban locations.
They also operate smaller satellite stores, kiosks and sell directly through large retailers such as
Tesco. Krispy Kreme is a vertically integrated business. Starting with their secret recipe, they
make fresh doughnut mix each day, which is distributed to all stores. They manufacture their
own doughnut and coffee machinery. Doughnuts are freshly made; they have a simple product
line focused on doughnut variations and their own branded coffee (developed from the
acquisition of Digital Java in 2001).In the UK Krispy Kreme operates a subsidiary (with a 34%
equity interest) with an exclusive development license to the franchise in the UK

KRISPY KREME DOUGHNUTS, INC.

Mission Statement:
To touch and enhance lives through the joy that is Krispy Kreme

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

Values
They believe...

Consumers are our lifeblood, the center of the doughnut

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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

Growth Strategies and Policies of krispy kreme: WINSTON-SALEM, N.C.

Traffic fell at Krispy Kreme Doughnuts during the companys fourth quarter, as the donut chain
tweaked its promotional and incentive strategies to improve operating margins.
Net income for the fourth quarter ended Feb. 1 tumbled to $6,546,000, or 10c per share,
compared with $14,760,000, or 21c per share, reflecting unusual tax credits in the prior year.
Excluding special items, earnings per share increased to 17c from 12c.
Revenues increased 11% to $125,367,000 from $112,746,000 in the year-ago period.
For the year, net income declined to $30,060,000, equal to 44c per share on the common stock,
which compared with $34,256,000, or 48c per share.
Revenues increased 6.5% to $490,334,000 from $460,331,000.
System-wide domestic same-store sales rose 3.6% for the quarter and 3.1% for the year on
higher prices and average check. System-wide store count rose 19% to 987 company and
franchise shops worldwide for the year.
Looking ahead, management is focused on four key strategies, which include accelerating global
growth, leveraging technology, enhancing the core menu and maximizing brand awareness.
This year, Krispy Kreme executives project shop openings in at least six new countries, mostly in
the Asia-Pacific region, where the chain already has a strong presence, and in Latin America,
where it is establishing a foothold.

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We are evaluating a list of additional countries to build on our strong, global brand, said Tony
Thompson, president and chief executive officer, during a March 11 earnings call with analysts.
We believe that we can continue global system-wide unit growth at a double-digit rate for years
to come.
On the technology front, Krispy Kreme began testing a mobile platform late last year, which
included the introduction of a loyalty and rewards program. A national roll-out is planned for
later this year.
The mobile app engages our guests through its Hot Light feature that notifies them when the
Hot Light is on at their favorite Krispy Kreme shop, and it allows us to reward our guests with
points that can be redeemed on future visits, Mr. Thompson said. The app also offers stored
value, which can be securely loaded, and allows our guests to easily pay and go.
Krispy Kremes third strategic focus is enhancing the core menu, particularly in beverages and
limited-time donut varieties. Within the coming months, the chain plans to promote frozen lattes.
Donuts will always be center of plate for us, and an important complement to our donuts is the
significant opportunity to increase our in-store beverage attachment rate, Mr. Thompson said.
We have devoted additional leadership resources to beverage, and currently are revamping our
long-term beverage strategy, as well as working on short-term opportunities, both inside and
outside of our shops.
The final piece of the companys plan is maximizing brand awareness through multiple channel
opportunities, including wholesale donuts and snacks, licensing and a fundraising program.
Wholesale, or consumer packaged goods, represent about half of the companys shop revenues,
and we believe the channel has significant growth opportunities over the long term, Mr.
Thompson said. We have been adding new, longer shelf life products such as marble cake and
fruit danishes, which have received positive feedback from consumers.
The company announced a coffee licensing program last year that now includes packaged ground
coffee, ready-to-drink coffee and K-Cup packs. Recently, Krispy Kreme announced a multi-year
licensing agreement with Massimo Zanetti Beverage USA to roast and distribute 12-oz bags of
Krispy Kreme ground coffee for grocery stores, mass merchants, club stores and on-line.
Fundraising is a unique element in our effort to maximize brand awareness, Mr. Thompson
said. Krispy Kremes fundraising program has assisted local charities for over 60 years, and we
believe we can grow distribution through this channel. We are working on adding fundraising
capability to our mobile guest engagement platform.
The company has reaffirmed its outlook for adjusted net income for fiscal 2016 of $55,000,000
and $59,000,000, up 14% to 22% from adjusted net income of $48,300,000 in fiscal 2015.
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After the earnings were reported, Krispy Kremes shares were trading mid-morning March 12 on
Nasdaq at $19.07, down $1.28, or 6%, from the previous close of $20.35.

B. Corporate Governance:
The Board oversees the Companys Chief Executive Officer (the CEO) and other senior
management in the competent and ethical operation of the Company on a day-to-day basis and
assures that the long-term interests of the shareholders are being served. To satisfy its duties,
directors are expected to take a proactive, focused approach to their position, and set standards to
ensure that the Company is committed to business success through the maintenance of high
standards of responsibility and ethics. The key practices and procedures of the Board are outlined
in the Corporate Governance Guidelines available on the Companys website.
The Board met a total of four times during 2009. The Board has determined that all Board
members are independent under the applicable NASDAQ and SEC rules.

C. Top Management:
Name

Title

Tony Thompson

President and Chief Executive

Officer

James H. Morgan

Chairman of the Board of Krispy

Kreme

Robert S. MCCOY,JR

Lead independent
Director

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Board Role

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2. External Environmental Analysis

A. General Environment
The U.S Market for Doughnut was $10 billion. The Major portion of 45% market share was held
by Dunkin donuts. Dunkin Donut was the world`s largest coffee and baked-good chain. In contrast to
Krispy Kreme it emphasize more on coffee and convenience. Dunkin Donut had threat from Starbuck
which the countered by adding a wider variety of hot-and cold-coffee beverages, and beating Starbuck in
time management. Quick and consistence service was the Dunkin donut focus.

Winchell`s Donut house was also proposing itself as a fresh glazed donut maker. It initiated
program like WARM N FRESH and replacing donut after every 15-20 minutes between certain times. It
initiated several promotional schemes to combat Krispy Kreme. It brought some innovation by adding
low-fat doughnuts, muffins and bagels.

Tim Hortons was another name in the market and it specialized in coffee and baked doughnut.
Eventhough half of its sales include coffee without donut. Another point of difference was the 24 hour
drive through at Tim Hortons. Similarly LAMAR`s Donut was famous for its customized product and its
doughnut were of artisan quality. The biggest surprise with respect to other companies was that a day
old donut were never sold at the shops but were donated at day`s end to the needy.

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All these companies had some portion of market since the size of market was so huge that every
company was doing good in its area of expertise. Moreover, some small vendors were also happy since
giants like
Krispy Kreme and others used to invest heavily on marketing and promotion which was simply increasing
awareness and size of the market

PESTL Analysis for KRISPY KREME DOUGHNUTS, INC.

i. Political Factors
Political factors affecting the specialist eateries industry are few and consist mainly of minimum wage
and employment law changes. Krispy Kreme train their staff who usually have little experience or
education; consequently, they pay employees minimum wage or similar and are therefore affected by
minimum wage increases.
Other political factors are government actions to reduce obesity; however it is very unlikely
that government will legislate against high fat and unhealthy foods2.

ii. Economic Factors

The continued economic downturn has meant tightened consumer spending, as Krispy Kreme is
a non-essential food item this may pressure sales. Inflation is above the Bank of England target
and there is upward pressure on long-term interest rates as shown by the UK treasury yield
curve. An increase in interest rates will increase the cost of capital and mean more expensive
borrowing at a time that they could need to expand to compete with rivals.
iii. Social Factors
UK consumers are becoming more aware about the ingredients in food, e.g. boycotting trans
fats, battery farmed poultry and mass farmed tuna. In 2008 this motivated Krispy Kreme to
remove trans fats from their products. Low carb diet trends (e.g. Atkins) can also have an effect
on purchasing.
Going out to eat and drink is a social habit that is unlikely to change in the near future, but
consumers can change their habits from eating doughnuts to other sweet foods such as icecream
or pastries.
iv. Technological Factors
Due to the nature of purchasing and preparing foods, few technological trends influence the
industry. However technology can be used to improve efficiency, production, distribution, and

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monitor commodity prices in real-time. Some commentators argue that ecommerce will erode
visits to physical stores, however the convenience food nature of speciality eateries require
strong physical presence to capitalise impulse purchases.
v. Legal Factors
Fluctuations in commodity prices affect margins, as in 2009 when the price of wheat and
soybean oil (key ingredients of doughnuts) reached record highs.

B. Task Environment (Industry Analysis):

Krispy Kreme strategies are partly based on the need to address forces in the external business

environment. These forces can limit or reduce the firms market share and revenues. Five Forces
analysis, based on Porters model, shows the following strengths or intensities of external factors
in the industry environment:

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1. Threats of new entrants (Medium):

Large capital requirements required to build chain of stores
Favourable locations are already occupied
Economies of scale in distribution and raw ingredients (lower per unit costs due to
the experience curve)
Product and brand differentiation
Capital requirements for individual stores are low, however new entrants wishing to
compete on a like basis with national store networks, distribution channels, brand equity
development and advertising, face large capital requirements to gain market share. This is
reflected in the large number of individual outlets compared with the small number of large,
proven top specialty eateries.
The UK commercial property market is landlord-driven and controlled; premium locations in
the UK are scarce and command high prices with most of the favourable locations within
town centres, airports and train stations already being occupied by existing competitors.

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2. Bargaining Power of Supplier (Low):

Vertically integrated businesses with only commoditized raw ingredients
Large number of suppliers to choose from and low switching costs

3. Bargaining Power of Buyer (Low):

Buyers are fragmented and numerous
Although there are no switching costs for the buyer the food and drink market is part of the
fabric of society

4. Rivalry among existing firms (High):

High concentration of rivals e.g. Starbucks and local chains
Static market growth
High fixed costs
Perishable products (food and drink)
A large number of competitors in the industry are all competing for the same customers. Coffee
chains (e.g. Costa, Starbucks) are all competing to be number one in the market and have similar
corporate goals. While product differentiation is limited, there is fierce differentiation by product
range, brand and store ambience (e.g. seating). There are zero switching costs for customers,
which promotes price wars. Market growth is static, which promotes fierce fighting for market
share, and there is saturation of competition due to the limited number of prime locations
available for outlets. Smaller chains have to pay a premium for prime sites or settle for less
desirable locations.

5. Threat of substitute product (Medium):

Large choice of alternatives with similar products e.g. energy drinks, cakes, biscuits, ice-cream,
chocolate
No switching costs
Although a consumer can choose from multiple substitutes (e.g. desserts, pastries or drinks),
speciality eateries compete based on convenience and opportunity. Most people buy from
speciality eateries when travelling, shopping or meeting people. This is evidenced by the location
of the eateries, which is concentrated around high footfall locations such as train stations,

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business districts and shopping centres. For a consumer this becomes a competitive choice rather
than a substitute choice (e.g. do I buy a coffee from Starbucks or Costa).
Other substitutes come from full menu eateries such as restaurants and fast-food outlets
with a smaller threat from supermarkets.

C. Summary of external forces:

At present time in general environment the economic forces and socio-culture force are
important. The purchasing power of consumer, Inventory cost, Distribution cost, selling price
etc. all are related with economic forces. If countrys economic condition is stable then all factors
will work positively. In industry environment threats of substitute product and threats of new
entrance is important for present as well as for future. New entrance in industry keep krispy
kreme always improving their product quality feature etc. and for substitute products they will
always try to make their product unique.

3. Internal Environment:
Corporate structure of Krispy Kreme Doughnuts:
The organizational structure is mainly a traditional hierarchy, with some key elements from
other types of organizational structure. The success of the company is linked to innovation and
the leadership of Steve Jobs, but its organizational structure is partly responsible for ensuring
support for such leadership. Now, under Tim Cooks leadership, Krispy Kreme Doughnuts
has made some small changes in its organizational structure to suit market and industry demands.
Krispy Kreme Doughnuts organizational structure is effective in supporting business

performance to ensure leadership in the industry. However, further changes in this organizational
structure can help improve Krispy Kreme Doughnuts capabilities, especially in the area of
rapid and creative innovation and design

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A. Corporate culture:
Krispy Kreme Doughnuts, Inc. (hereinafter, Krispy Kreme) seemed poised to become an
industry leader and Wall Street chart topper in 2000, however, by 2004 the companys stock price
had plummeted. Krispy Kremes stock price one day after the initial public offering in April of
2000, was $40.63, giving the company a market capitalization of nearly $500 million. Investors
believed Krispy Kreme was the next big money maker to enter the market.

B. Organizational Activities:
Organizational activities are such type of work these are done for achieving organizational goals
and objectives. That activities include how the firm will work, in what position will be better for
the company, who will do the work, and what type of improvement is needed etc. These works
are done by several departments this are-

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Marketing
Finance
Research and Development
Human Resource Management.
Information System.

Marketing Analysis:
It is difficult to determine where the marketing department resides within the organization, as
very little evidence of market research exists. Krispy Kremes marketing plan seems simple on
the surface; they dont appear to have put much effort into marketing their product. The company
spent very little on advertising, depending largely on word of mouth, and local publicity. Store
openings were popular events in the communities, so often newspapers and other media provided
free publicity for the events. This strategy seems to still work well for new store openings, but
would not be sufficient to generate continuing business. This is evidenced by the fact that even
while new stores are opening, older stores within the same market are having to close. In short,
the companys marketing strategy appeared to consist merely of allowing its product to sell itself.
The products superior reputation, the firms operational techniques, i.e., their training, facilities
management and franchise management, appears to be appear to be the Krispy Kremes major
strengths. When adding the coffee product to the organization, they also included it within the
vertical integration supply chain to control costs. They felt that this would ensure quality and
consistency in the product. When Krispy Kreme purchased the Montana Mills Bread Company,
there seemed to be a sense that this was just a logical next step. In fact, the CEO considered this
acquisition as the natural outgrowth in the continuing process of vertically integrating an entire
range of products and services for flour-based, short-shelf life products. Again, failure to do
appropriate and effective market research, Krispy Kreme missed the identifying the new trends
toward reduced carbohydrate consumption patterns in the general public. As a result, Krispy
Kreme acquired a company in 2003 that by the end of fiscal year 2004, had lost $2million
dollars.

Financial Analysis:
The majority of Krispy Kremes financial struggles stem from its overexpansion in the
early 2000s. Capital expenditures on opening new company and franchise stores far
outweighed the decreasing revenues on increasingly unproductive stores. The company
began to close stores and taper domestic expansion in 2005, and its financials have seen

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mixed results. The company reported revenues of $461 million in 2006, down 15% from
$543 million in 2005. Net income, however, was a loss of $41 million, which is much
smaller than the $135 million loss in 2005, signifying an actual increase in net income.
These odd statistics reflect the companys drive to cut costs. Indeed, operating costs in
2006 were $502 million, down 26% from $679 million in 20005.

Research and Development:

Research and development (R&D) refers to the investigative activities a business conducts to
improve existing products and procedures or to lead to the development of new products and
procedures. Krispy Kremes research and development department always try to utilize their
programs and their product quality to compete in the market and by R&D Krispy Kremes try to
find the unique procedures that will make their product different than competitors products.

Objectives of R&D:
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Maintaining the consistency of product quality.

R&D keeps timely flow to compete with competitors.

Updating the features, software, hardware etc. of product.

R&D helps to generate new innovative idea and also work on them.

In any uncertain situation of products R&D finds out the reason and take critical step to
solve.

Strategies of R&D:
This is the way by which corporation and R&D department intend to win. The overall work
process, design ,portfolio are the element of strategy. Krispy Kremes has its strategy to work in
R&D. In what way the procedure will proceed and the overall planning system of R&D are
strategies of R&D.
R&D provide the Krispy Kremes with competitive advantage by maintaining the consistency of
quality and also developing new ideas, uniqueness, immediate solving the arising issues and by
the executive functions of product.

Operation and Logistics: Our drivers are the people that keep everything moving.
Every morning at 4am you'll ensure that each Krispy Kreme truck is on the road and our
shops and in-store cabinets receive a fresh supply of great-tasting doughnuts in time for the
morning rush. You'll also merchandise our
doughnuts in selected Tesco, Moto and Welcome Break outlets throughout the UK, so play a big
part in growing the brand. It's a bit of a
logistical mission, but with your delivery experience in a similar setting, you'll be able to rise to
the challenge.

Value chain for Krispy

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Human Resource Management:

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HRM strategy:
Some elements of their strategy It isnt about whats inside the doughnut but whats inside a
customers head Opinions are: The Michelangelo of doughnut makers It is an art
Heavenly inspired Loyalists are wait in line for hours on the opening day of a new unit they
camp out 24 hrs in advance! Created a cultural icon and built customer pride Exhibit at the
Smithsonian National Museum of American History The Doughnut Theatre watch them
being made Doughnut of the month Website: Friend of Krispy Kreme make customers feel
they are part of the company Collectibles (shirts, boxers, shorts, mugs, hats etc.)

HRM policies:

Employees should not under any debt to get the job.

Employees should be hard working and work for companys success
Training program for the employees to get best outcome and utilize
their efficiency.
Boss and employees will work together and no dominate activities.
Employees should not take excessive work load.

Unfairness of giving promotion.

Rewarding and compensating problem.
Turn over problem.

HRM Issues:

The trends emerge from the activities is that every company has issues and benefit as well and
with them Apples HRM quality is very good cause employees are committed towards the
company to work efficiently. They attend training program to utilize their knowledge and they
give best outcome of them. The competitive advantage of this the Apple Inc. get best outcome
from their employees. Employees are very talented and hardworking than other companies and
their training program utilize their capabilities and their outcome is better than others.

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Information system:

1. Understanding business and information system requirements.

2. Analyzing financial performance.
3. Achieve operational excellence: analyzing competitive strategy.
4. Improving decision making: developing a Website privacy policy.
5. Improving decision marking: Designing the customer database
6. Improving operational excellence: Identifying supply chain management solutions
7. Achieving operational excellence: Developing an E-Commerce strategy
8. Achieving operational excellence: Identifying opportunities for knowledge management

The trends emerge from this is that information is very critical for any organization and Krispy
Kreme has very effective information system that helps to do operation in strategic way. So for

achieving operational success and improving the strategic functions the information system is
very important for present and future as well.

C. Capabilities/core competencies: Krispy Kreme Doughnuts began in 1937, after

Vernon Rudolph began using a secret doughnut recipe he had bought. Its success spread to other
areas and it opened small chains of stores. The stores made their own doughnuts from scratch
using the recipe. To better the quality, the company bought a mix plant, which enabled it to
deliver the doughnut mix in all its stores. Rudolph, assisted by other engineers developed a
doughnut making equipment, which they used to make the doughnuts. As the company
expanded, it maintained the same design in all its stores. The company has expanded and it has
stores in Canada, Australia, London, Mexico, Puerto Rico, Asia, and the Middle East. The stores
maintain a consistency when making their doughnuts. In addition to the doughnuts, it makes
beverages and packaged sweets.

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The company has approximately 4300 employees. The company owns and franchises several
stores around the world. By February 2013, the company had 97 company stores and 651
franchises. It owns the land and building of 42 stores, owns the building and leased the land of
23 stores, leases the land and building of nine stores, and leases space for 23 in-line and end cap
locations. It has leased the facility of its corporate headquarters, which is 86, 000 feet. The
company owns 150, 000 square foot facility where its doughnut mix plants are located, and
another 105, 000 square foot facility, which contains research, and development training
facilities as well as the manufacturing plant. The Original Glazed doughnut is the companys
signature doughnut. The company brews its coffee, beginning with fresh coffee beans. The
company has developed a sign, which when illuminated indicates that it is making its original
doughnuts. It has a manufacturing plant, which produces the doughnut mixes. The company has
developed a unique theater experience, which enables customers to see as their doughnuts are
made.
Since it began, the company has maintained a reputation of providing high quality and original
products. It makes fresh doughnuts daily. The products and services offered by the company
enables it to have a loyal customer following. Despite the increasing competition, the
competitors have not been able to replicate the reputation and success of the company. The
companys reputation spreads everywhere. People wait in anticipation whenever the company
announces the opening of a new store. Krispy Kreme original doughnuts are valuable and
unique. The company has many trademarks in addition to its trade secret. The use of a secret
recipe makes it impossible for competitors to imitate. The company uses an automated system to
create high quality and consistent dough. They use the machines invented and developed by the
companys founder and other engineers. Many companies have customers that are devoted to its
brands. However, not many companies can influence their customers to have such a devoted
following. The company has been able to retain their customers through the years. Many of the
people who have not heard the choice of enjoying any of the companys products are lured by the
mystery surrounding the companys doughnuts and the positive comments from the companys
customers.
The company has taken a slow pace in its worldwide expansion efforts. It does not have a
presence in some states in the country, and in some regions around the world. This has enabled
its main competitor to make great strides in its expansion efforts, denying Krispy Kreme the
chance of becoming a market leader. Increasing the number of stores in the country, while at the
same time maintaining great service, will enable the company to gain a competitive advantage.
More people will learn about the company, and as word spreads, the company will increase its
revenues and profits. Emphasizing on other products, while not neglecting core product, will
ensure that the company gets more customers. The company sells both doughnuts and coffee, but
its doughnut sales are more than its sales of coffee. The two items are complimentary, and the
company can take advantage of loyal following to make more people aware of its coffee. The

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company has not segmented its markets, because it believes that its products suit every market.
While, this can be advantageous, it also creates some disadvantages for the company. Many
people have become more conscious about their health. They are avoiding fast foods, especially
those loaded with fats and sugar. Because of this, they may not want to visit any of the stores.
The company needs to find ways of attracting people to the stores. They could offer different
products for the markets. Some of the customers find the products too sweet for their taste. The
company can revamp their menu and address the growing consumer concerns. The company can
increase its competitive advantage by diversifying the products, to suit different tastes.
The company has manufacturing capabilities, as it manufactures all its products. The company
manufactures doughnut-making equipment for all its stores and franchises. The recipe for the
doughnut mix has not changed over the years, and the company uses the same mixing machines.
It has a fleet of trucks, which deliver the goods to the retailers. It conducts supervision of
franchises, and the franchises have to follow the companys rules regarding customer service and
employee behavior, product packaging, design of the stores and the furniture, sanitation, training,
use of the companys logos and trademarks, and advertising and marketing. The companys
supply chain has ensured that the doughnuts are the same in all the stores. Because of the use of
the doughnut making machines, the doughnuts have the same quality irrespective of the location
of the store. The company has an R&D team, which comes up with different doughnut varieties,
shapes, fillings, and flavors.
The company has come up with different marketing strategies over the years. The companys
decision to use the neon sign to signal that it has finished making the signature doughnut is a
marketing technique. Customers look out for the sign to know when they can visit the store and
get their original glazed doughnut. They are compelled to buy the doughnuts even if they had not
planned to do so, because they know that the doughnuts are fresh and hot. Those who do not
know about the company seek to find out more about it when they see the sign. The company has
utilized grassroots marketing, choosing to rely on word of mouth for its advertising. It has taken
advantage of social media and it has a Facebook account. The company has managed to attract
more than four million fans on its Facebook account. This is impressive considering that the
company does not have as many stores as its competitors do. The company does not use the
traditional marketing approaches. The company realizes the effectiveness of using employees as
a marketing tool. During training, the company teaches the employees about good customer
service and marketing skills. Wherever the company opens a store, it makes sure that the
community feels like they are a part of it. The company does this by supporting different causes.
For instance, it helps the community to raise funds for different events by donating doughnuts.
The companys manufacturing capability is a core competency in that it is unique and difficult
for competitors in the industry to imitate. The company uses its own inventions and all franchises
use the same equipment. Competitors have not been able to use this technology. Another core
competency is the companys decision to use the red-hot sign to announce its signature
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doughnut. The company realizes that it has a strong loyal following, and customers rush to the
nearest store whenever they see the sign. This sign is unique because the companys competitors
have not managed to imitate it. The companys decision to train its employees and equip them
with marketing skills is a core competency. Some companies train their employees but others
assume that their employees already know how to do the job. Those companies that conduct
training sessions for their employees do so as a way of ensuring good customer service, but they
do not consider the importance of having good marketing skills. By offering this training, the
company ensures that all employees are involved in marketing, instead of leaving all the
marketing efforts to a single department.
I do not think that the companys core competencies are enough to create a competitive
advantage. The industry has changed and the company is in a very competitive industry. The
companys decision to use one manufacturing plant can hinder its abilities to deliver in case
something goes wrong in the plant. The company has to increase its marketing and advertising
efforts. It cannot just rely on word of mouth, especially since it has decided to expand globally.
Some people do not use Facebook or any other social media. This hinders them from learning
about the companys products. However, the use of employees to conduct marketing is a core
competency. If the employees are dedicated to the company and to the brand, then they will use
the skills they have gained to market the company in their own way. Moreover, the company will
always have employees operating under different capacities, and they will continue with the
marketing efforts.

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D. Summary of Internal factors:

At present time in the industry as an internal factor marketing and operation and logistics are
important. Product prices, quality, how Krispy Kremes will promote their product in the market,
where should be their market position these are important for present as well as future. Krispy
Kremes cost efficiency and logistics that is how their distribution system are working and the
inventory to reach of finished products to the consumers are important. The capabilities of

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manufacturing very innovative and unique products for the consumer attract the market and this
will be for future also.

4. Analysis of strategic factors (SWOT Analysis):

IV. Analysis of Strategic Factors

SWOT ANALYSIS
SWOT Analysis, which is based on thorough review of the business (corporation, product category
competition, customers and products), identities and evaluates the internal strengths and weakness of the
companies well as its external threats and opportunities. The marketing mix is driven by the results of the
SWOT analysis.

STRENGHTS:

OPPORTUNITIES:

1. Strong Brand Recognition and Recall

2. Krispy Kreme makes it possible for different
organizations throughout the community to use
their product as a fundraiser. Fundraising
program has helped non-profit organizations
raise millions of dollars in needed funds.
3. Krispy Kreme has Strong Channel of
Distribution.Krispy Kreme is most popular in
grocery and convenience stores which gives
customers easy access to the product.
4. Employees are better trained.
5. Expanded assortment of offerings at KKD stores
including beverages
6. It has a unique brand and variety of freshly made
donuts.Wide appeal of signature hot original
glazed doughnuts
7. KKD can offer to have customers watch product
being made at the donut theater.
8. It has a high capacity to make 4,000 to 10,000
donuts daily.

1. Growth in two-income households will

increase snack-food consumption
2. Untouched domestic locations
3. Increasing popularity of coffee shops
and bakery cafes
4. Customer receiving "Hot-Donut" now
instead of waiting
5. All equipment and Uniforms are
supplied
6. Penetration into foreign/intl. Markets
and popularity of American foods and
fashion in overseas markets
7. Americans continue to experience
time-starvation
8. Acquisition of Atlanta Bread
9. Expansion of new locations (Maine,
Mass)
10. Entertaining opportunities moving
from home to work environment
11. Channel expansion possibilities (i.e.,

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9. Krispy Kreme Doughnuts prides themselves on

high customer satisfaction with fresh quality
donuts.
10. It offers additional products through businesses
acquisitions.
11. Krispy Kreme offers a product that is second to
none, with regards to taste, freshness and the
finest ingredients. It has a great desire for growth
and success of people and company.
12. KKD has great service and innovation.
13. Krispy Kreme has Doughnut machine
Technology. It also has e-commerce which gives
owners access to real-time information.
14. KKD has a drive through window for sales.
15. It also has a new fall product line of donut
called Spice.
16. It is expanding into Dunkin Donuts territory.

Internet pre-ordering)
12. Technological advancements (i.e.,
paperless ordering, predictive
modeling software, hand held
computers for delivery drivers)
13. On-Premise sales royalties (3%).The
higher the sales, the more money
received

WEAKNESSES:

THREATS:

1. Lack of more International locations in the

United Kingdom, Japan and Spain
2. Manufactures all equipment internally in its
Manufacturing and Distribution Department
3. Non-interactive website
4. No online ordering capability
5. Uncertainty of International markets
6. KKD snacks are not healthy (need to consider
low-calorie donut)
7. Perishability of product
8. Limited product line (heavy reliance on
doughnut sales)
9. Overextended (i.e., Montana Mills acquisition)
10. Pricing in some locations
11. Bad Relations with Franchisees (cost of
equipment, packaging, ingredients etc)
12. No other Standout Products (Weak Menu)

1. Competitors like Dunkin Donuts, Tim

Hortons,Starbucks and other National
Chains/Specialty Eateries.
2. Low-carb trend in eating preferences
3. Increasing cost of Ingredients
4. Increasing utility and fuel costs
5. All-natural, organic, healthy eating
trends
6. Krispy Kreme stores went up too fast
7. Cultural differences in breakfast and
snack foods
8. Increase in eating at full-service
restaurants combined with a decrease
in the use of fast-food restaurants
9. Store locations too scattered

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C) Internal / External Factor Evaluation:

a) EFAS
EXTERNAL FACTOR EVALUATION (EFE) MATRIX OF Krispy Kreme Doughnuts

Key External Factors

Weight

Rating

Weighted
Score

Opportunities
1

Growth in two-income households will increase

snack-food consumption

0.14

0.56

Untouched domestic locations

0.09

0.27

Increasing popularity of coffee shops and bakery

cafes

0.06

0.18

Channel expansion possibilities (i.e., Internet preordering)

0.07

0.28

Penetration into foreign/intl. Markets

0.08

0.24

Technological advancements

0.05

0.15

Acquisition of Atlanta Bread

0.04

0.08

On-Premise sales royalties

0.04

0.08

Threats
1

Competitors like Dunkin Donuts, Tim Hortons,

Starbucks and other National Chains/Specialty
Eateries.

0.10

0.2

Increasing cost of Ingredients

0.08

0.08

Store locations too scattered

0.07

0.14

Increase in eating at full-service restaurants

combined with a decrease in the use of fast-food
restaurants

0.08

0.24

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Cultural differences in breakfast and snack foods

0.04

0.08

All-natural, organic, healthy eating trends

0.06

0.06

TOTAL

1.00

2.64

Total weighted score for the Krispy Kreme external Factors is 2.64 whichindicates that the
business has above average ability to respond to external factors.

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b) IFAS

INTERNAL FACTOR EVALUATION (IFE) MATRIX of Krispy Kreme Doughnuts

Key Internal Factors

Weight

Rating

Weighted
Score

Strengths
1

Strong Brand Recognition and Recall

0.14

0.56

Wide appeal of signature Hot Original Glazed Doughnuts

0.08

0.32

Strong Channel of Distribution

0.06

0.18

Customers watch product being made at the Donut Theater

0.05

0.15

High customer satisfaction with Fresh Quality Donuts.

0.08

0.32

Doughnut machine Technology

0.09

0.27

Gained Reputation through various fundraising programs

0.05

0.15

New fall product line of donut called Spice

0.04

0.12

Weaknesses
1

Lack of more International locations in the United Kingdom,

Japan and Spain

0.10

0.1

Limited product line (heavy reliance on doughnut sales)

0.09

0.09

KKD snacks are not healthy (need to consider low-calorie

donut)

0.06

0.12

No online ordering capability

0.05

0.05

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5

Bad Relations with Franchisees (cost of equipment,

packaging, ingredients etc)

0.06

0.12

Pricing in some locations

0.05

0.05

TOTAL

1.00

2.6

Total weighted score for the Krispy Kreme internal factor is 2.6 which is above average.So it is
internally strong and aggressive approach.

STRENGTHS

WEAKNESSES
Perishability of product

1. Strong brand recognition and recall

2. Wide appeal of signature glazed doughnuts

Limited product line (heavy reliance

on doughnut sales)

3. Vertical integration

Overextended (i.e., Montana Mills

acquisition)
Lack of locations in some areas

4. Development in international markets

Pricing in some locations

5. Strong channel of distribution

TOWS MATRIX

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OPPORTUNITIES

SO STRATEGIES

WO STRATEGIES

1. Increasing popularity of coffee

shops and bakery cafs

1. Development of bakery cafs

1. Increase products offered in

locations (i.e., coffee, sandwiches)

2. Popularity of American foods

and fashion in overseas markets

2. Development of store locations in overseas

markets

2. Develop Montana Mills in a way

that fits the mission of KKD

3. Growth in two-income
households

3. Increase locations to be convenient for busy

traffic areas in several markets

3. Increase locations

4. Americans continue to
experience time-starvation

4. Provide special offerings geared towards

encouraging people to bring doughnuts to
work

4. Offer standardized, but value pricing

compared to Starbucks

5. Entertaining opportunities
moving from home to work
environment

5. Continue to be innovative in technological

applications that can improve efficiency

THREATS

ST STRATEGIES

WT STRATEGIES

1. Competitors like Dunkin Donuts

and Starbucks

1. Focus on signature glazed doughnuts as a

differentiating advantage over competitors

1. Develop new product offerings

2. Increase in eating at full-service

restaurants combined with a
decrease in the use of fast-food
restaurants

2. Offer nutritional information with an

emphasis on new low-carb, low-calorie, or
organic offerings

2. Offer value-based and consistent

pricing

3. Low-carb trend in eating

preferences

3. Develop low-carb doughnuts

4. All-natural, organic, healthy

eating trends

4. Develop doughnut made with organic

ingredients

Tows Matrix Analysis

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After doing the analysis of Krispy Kreme in terms of its strengths, weaknesses, opportunity and
threats we were able to figure out that Krispy Kreme's major strength is its strong brand recognition.
Customers are well-aware of signature glazed doughnuts which makes it a trademark for Krispy Kreme. It
also has a strong channel of distribution which makes it easily available to its customers. However, the
problem area for Krispy Kreme is basically its limited product line; it relies too much on the sales of its
doughnuts. It needs to come up with innovative products as its competitors can always have a fair chance
of stealing away Krispy Kreme's customers. In order to retain its customer base, it is really important that
Krispy Kreme should try to diverse its product lines. Another major problem lies with the absence of its
stores in some areas, while the pricing of its products in the other areas. The management needs to
analyze the products demand and the potential in various areas, and based on the analysis it must open the
branches wherever suitable. it also needs to take care of the pricing of the products and it should see the
products should not be over-priced in some areas where the customer cannot afford to spend much on the
food items.

Krispy Kreme can see its major opportunities lying in the fact that there is an increase in the
popularity of coffee shops and bakery cafes and its has become a hotspot for youngsters as well agedpopulation where people can come to relax and have an informal meeting with their colleagues. So it
should make use of this opportunity and should come with better ideas to cater the market.

Some of the recommendations we can come up with after analyzing Krispy Kreme's strengths,
weaknesses, opportunity and threats would be that it must development of bakery cafs, it must
development of store locations in overseas markets, it should also Increase locations to be convenient for
busy traffic areas in several markets and it should provide special offerings geared towards encouraging
people to bring doughnuts to work
Krispy Kreme in order to overcome its weakness and avail the opportunities needs to increase
products offered in locations (i.e., coffee, sandwiches) and offer standardized, but value pricing compared
to Starbucks.

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Kripy Kreme needs to focus on signature glazed doughnuts as a differentiating advantage over
competitors, it must Offer nutritional information with an emphasis on new low-carb, low-calorie, or
organic offerings besides it must also develop low-carb doughnuts. Doing all this can significantly help it
develop a competitive edge over its rivals.

V.

Identification of Strategic Issues:

Question 1.
The chief element of Krispy Kreme's strategy is to deliver a better doughnut and to appeal to
customers in new ways. They have taken great steps to insure customer satisfaction from the use
of their proprietary flour recipe to their automated doughnut making machines. They have
chosen to target mainly markets with 100,000 households. They also were exploring smallersized stores for secondary markets.
Krispy Kremes's strong brand name, highly differentiated products, high-volume production
capability and multi-channel market penetration strategy has worked well. With each new store
opening there are lines waiting at the door all night to experience the Krispy Kreme quality. In
Denver, more than 3000 people stood in a line extending for more than three city blocks on
opening day. They have production areas in full view and a neon light that lights up when "Hot
Donuts" are actually coming off the line. Krispy Kreme makes customers feel good about
indulging. Even Krispy Kreme's name brings a smile to people's faces.
Question 2.
I think Krispy Kreme's financial performance has been good. Since its initial public offering in
April 2000 it has grown from 140 stores to one with 218 locations in 33 states and Canada.
Preliminary results for fiscal year 2002 showed sales topping $621 million, up 39% from the
previous year. Revenues climbed 30% to $392 million.
Krispy Kreme is a product company and the most profitable part of the business is doughnut
sales due to the high volume of loyal customers.
Many Wall Street analysts considered Krispy Kreme to be overvalued. Analysts said in April
2000 the stock was destined for the $15 to $20 share range at best, which is where most known
food related stocks are located. Instead it had been hovering at a value of $40 a share for most of
the year. The stock rose to a high of $54 and many analysts doubted Krispy Kreme's strategy and
potential growth merited a stock price nearly 70 times projected 2002 earnings per share. I agree
with the statement "the numbers just don't work."

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VI. Strategic Alternatives And Recommendations

Gotham Global believes that Krispy Kreme should focus its strategy into three elements:
Stores, Menu, and Brand. These three elements are crucial factors of the companys
business plan.
STORES
Over two thirds of Krispy Kremes product sales come from company and franchise
stores. In the early 2000s, the company rapidly expanded and opened a number of these
stores, only to close some of them years later. Currently, the company has 235 stores
open in the United States, with no immediate plans to expand domestically. Gotham
Global agrees with this plan of action, and supports the companys plan to open 200
foreign stores over the next five years. Foreign stores are already open in Australia,
Canada, Hong Kong, Japan, Mexico, and United Kingdom. A recent store opening in
Tokyo drew 10,000 customers in just three days9. Food analysts note that Japans
attention to health issues has suffered a backlash recently, and fatty, super-sized
American brands are benefiting from it. Krispy Kreme should look into additional
locations in Japan, particularly in higher population-dense areas. China, too, is an
excellent target for expansion. Its growing middle class is an untapped source of
disposable income. The Krispy Kreme brand exudes quality and would succeed in
metropolitan China. The same applies to India, where the middle class is expected to
represent half of its billion-plus population by 204010. Their purchasing power is not to be
overlooked.

MENU

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Health concerns are a relevant issue for any firm in the restaurant industry. Krispy
Kremes stock slide was a result of overexpansion at a time when health concerns were
widespread. The Atkins diet, which advocated low-carbohydrate foods, became wildly
popular just as Krispy Kreme was expanding and promoting its carbohydrate-heavy
doughnuts. Customers concerned with diet restrictions and health issues avoided
restaurants like Krispy Kreme, with so many of its products laden with sugar. Being
healthy may appear to follow a trend of popularityas when fad diets become
mainstream for a whilebut overall it remains a constant issue. However, this is not to
say that all customers come to Krispy Kreme expecting healthy products. Hardees saw
burger sales increase 20% after the introduction of their Thickburger product line11. The
sandwiches contain over 1,000 calories, 2,500 milligrams of sodium, and 100 grams of
fat each, placing them as some of the least healthy fast food products available. Their
success, however, is undeniable, and it proves that a market remains for unhealthy
foods. For Krispy Kreme, moving too much of the menu to low-sugar, low-fat products
would compromise the world-famous taste and quality linked to the company name, and
alienate existing customers rather than bring in new ones.
BRAND
Krispy Kreme has been in business for 70 years. This has allowed the company to build
up its image: a brand that exudes high quality and a one-of-a-kind experience. There are
three crucial components of the companys image: the logo and color scheme, the Hot
Doughnuts Now sign, and the Original Hot Glazed doughnut. The companys
current marketing strategy is mostly based on grassroots campaigns: fundraising
programs for schools, sponsorship of local events and organizations, and free doughnut
giveaways on special occasions. The opening of a new Krispy Kreme store is usually a
large media event: customers line up outside the doors, eager to receive a free doughnut.
These events reflect positively on the company and attract media and public attention.
Gotham Global encourages Krispy Kreme to maintain community ties. School
fundraising programs are an excellent way to build a good reputation and a strong

VII. Evaluation and Control

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In conclusion, Starbucks is in a stable position. However, in order to continue success and

remain a market leader, there are some actions that need to take place. When expanding product
lines and expanding into new markets, evaluation and control needs to be done.
Overall, the goal with each recommendation for Starbucks is to create a stronger brand identity
that realizes who the target market is and how to appropriately meet their wants and needs.
Additionally, Starbucks would like to create brand loyal customers through these
recommendations. In order to assess how brand loyal customers are would be to analyze the
increase in customer loyalty program involvement. Once people engage and realize the value
with the customer loyalty program, they will spread positive word of mouth in person and
through social media platforms and profits will increase for the company worldwide.

BIBLIOGRAPHY

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1. Bennett J, Cohen B, Bubb J (2009). Krispy Kreme: The Franchisor That Went Stale
2. http://hbr.org/product/krispy-kreme-the-franchisor-that-went-stale/an/KEL454-PDF-ENG
3. Bird P (2003). Dunkin' Donuts Inc
4. http://www.kzwp.com/lyons/dunkin.htm
5. Bloomberg Krispy Kream Doughnuts Revenues
6. Carioti R. (2002). Selling Like Hot Cakes
7. http://www.time.com/time/magazine/article/0,9171,901020812-333841,00.html
8. Craver R. (2010). Krispy Kreme ponders pastry delivery
9. http://www.thesunnews.com/2010/11/28/1835387/krispy-kreme-ponders-pastrydelivery.
10. Farley-Jones J. (2010). Krispy Kreme to run first above-the-line work

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