PROJECT OF STRATEGIC MANAGEMENT

KKD Case Analysis

SUBMITTED BY: IRUM AFZAL BILAL KYANI RAMEEEZ WAJHI USMANI SUBMITTED TO: SIR FARRUKH IDREES

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DEDICATION
This report is dedicated To our beloved parents, Who educated us and enabled us To reach at this level.

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ACKNOWLEDGEMENT
All praise to Almighty Allah, Who gave us the opportunity to enhance our vision and ability to complete this project.

We are greatly indebted to our teacher SIR FARRUKH IDREES for providing us most valuable guidance and advice. His encouragement was the main source of strength that stimulated us to complete this project in the extremely limited time available to us.

We are also thankful to our parents for providing us support and encouragement during the completion of this project.

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Table of content
VISION AND VALUES___________________________________________________7
Our Vision___________________________________________________________________7

Our Values_____________________________________________________________7 MISSION STATEMENT__________________________________________________8 CASE ABSTRACT_______________________________________________________8

COMPETITORS OF KRISPY KREME DOUGHNUT____________________________9 MAIN PROBLEM_____________________________________________________________9 SWOT MATRIX_______________________________________________________________9 Four Types of Strategies___________________________________________________9 SWOT ANALYSIS___________________________________________________________11 ENVIRONMENTAL ANALYSIS______________________________________________13

EFE Matrix (External Factor Evaluation)_____________________________________13 IFE Matrix (Internal Factor Evaluation)______________________________________15
How can I create the IFE matrix?_______________________________________________________15

CPM (Competitive Profile Matrix)_________________________________________18

SPACE MATRIX_____________________________________________________________________19 GRAND STRATEGY MATRIX_________________________________________________________21 RECOMMENDED STRATEGIES______________________________________________________25 RECOMMENDATION________________________________________________________________27 CONCLUSION______________________________________________________________________28

CONCLUSION

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HISTOR OF KRISPY KREME DOUGHNUTS

He founder, Vernon Rudolph, worked for his uncle, Ishmael Armstrong, who purchased a secret recipe for yeast-raised doughnuts and a shop on Broad Street in Paducah, Kentucky, from Joseph LeBeouf of Lake Charles, Louisiana. Rudolph began selling the yeast doughnuts in Paducah and delivered them on his bicycle. The operation was moved to Nashville, Tennessee, and other family members joined to meet the customer demand. The first store in the nation with the Krispy-Kreme name opened on Charlotte Pike in 1933. Rudolph sold his interest in the Nashville store and in 1938 opened a doughnut shop in Winston-Salem, and began selling to groceries and then directly to individual customers. The first store in North Carolina was located in a rented building on South Main Street in Winston-Salem in what is now called historic Old Salem. The Krispy Kreme logo was designed by Benny Dinkins, a local architect. By the 1960s, Krispy Kreme was known throughout the southeastern United States, and it began to expand into other areas. In 1976, Krispy Kreme Doughnut Corporation became wholly owned subsidiary of Beatrice Foods of Chicago, Illinois. The headquarters for Krispy Kreme remained in Winston-Salem. In2003, a pilot project in Mountain View, California, to sell doughnuts through car windows and sunroofs at a busy intersection (with wireless payment) failed. On February 19, 2007, Krispy Kreme began selling the Whole Wheat Glazed doughnut in an attempt to appeal to the health conscious. The doughnut has twenty Calories fewer than the original glazed (180 vs. 200) and contains more fiber (2 grams vs.0.5 grams). As of January 2008, the trans-fat content of all Krispy Kreme doughnuts was reduced to 0.5 of a gram or less. The U.S.Food and Drug Administration, in its guidelines, allow companies to round down to 0 g in its nutrition facts label even if the food contains as much as 0.5 of a gram per serving. Krispy Kreme benefited from this regulatory loophole in its subsequent. Advertising campaign, touting its doughnuts as "trans- fat free and having "0 grams transfat!Krispy Kreme began another phase of rapid expansion in the1990s; opening stores outside the southeastern United States where most of their stores were located. Then, in December 2001, Krispy Kreme opened its first store outside the U.S. in Mississauga, Ontario, Canada, just outside Toronto. Since 2004,Krispy Kreme has rapidly expanded its international operations. On April 5, 2000, the corporation went public on the NASDA Qusing the ticker symbol KREM. On May 17, 2001, Krispy Kreme switched to the New York Stock Exchange, with the ticker symbol KKD, which is its current symbol. On January 18, 2005, Krispy Kreme announced Stephen Cooper, chairman of financial consulting group Kroll Zolfo Cooper LLC, as temporary CEO. Cooper replaces Scott Liven good, who the company said has retired as chairman, president, CEO and a director. The company also named Steven Panagos, a managing director of Kroll Zolfo, as president and COO. Although based on informal advertising such as word-of-mouth, in 2006, Krispy Kreme moved into television and radio advertisements, beginning with its Share the Love" campaign with heart-shaped doughnuts.

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VISION AND VALUES

Our Vision
To be the global leader in doughnuts and complementary products, while creating magic moments worldwide.

Our Values
(With acknowledgement to Founder, Vernon Rudolph)we believe... 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, and Caring services

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CASE ABSTRACT
KRISPY KREME DOUGHNUT was found in 1937 and became publically traded company in April 2000 In 1950 KKD mechanized their doughnut making process. Krispy Kreme doughnut has three segments Company store operation Franchise operation KK supply chain

COMPETITORS OF KRISPY KREME DOUGHNUT Dunkin Donuts

It was found in 1950 Its core business is spirit and wine One glazed doughnuts from dunkin donut has 180 calories and doughnut from Krispy Kreme doughnuts has 200 calories Dunkin donuts provide 25 varieties of donuts and Krispy Kreme doughnut provide 20 varieties.

Starbuck
KKD sells drip coffee espresso, frozen beverages and plain or flavored milk. Starbuck purchase and roast high quality whole beam coffee, sell it with fresh, rich brewed coffee

Tim Horton
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 Stars its operations in 1964 and merged with Wendys in 1995 They are selling coffee, doughnuts, parties and home style lunch They are a strong competitor of KKD

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

SWOT MATRIX
Strengths Weaknesses Opportunities Threats

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

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

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.

STRENGTHS
1. Affordable, high-quality doughnuts with strong visual appeal and one- of-a-king taste 2. Neon Hot Doughnuts Now sign encourages people outside the store to make a impulse purchase 3. market research shows appeal extends to all major demographic groups including age and income 4. Hot shop stores save money while keeping Krispy Kreme Donuts customer experience intact 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.

OPPORTUNITIES
1. Families crave convenience because of busy life style 2. Asian love sweet and are open to trying foreign foods. 3. Starbucks lack of diversified and distinctive pastry line 4. Dinkins donuts does not have hot doughnuts to sell 5. Many children love sweet treats. 6. Tim Hortons has yet to expand beyond U.S. and Canada and its products line does not appear to be competitive. 7. South America, Africa and south Asia are market to conquer.

WEAKNESSES

THREATS

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1. Return on equity, assets, and investments all negative in the trailing twelve months; skill of management is questionable 2. Shareholders have not received dividends recently, and are not expected to in near future; stock price in state of flux 3. Closing stores when stores should be open globally at steady rate to keep up with competitor growth 4. Management states in recent 10-K that it is struggling with how to make stores profitable 5. Product line slow to expand with nothing outside sweet treats to draw in healthconscious customers 6. Advertisement not aggressive enough to appeal to areas outside southeast of U.S. where most stores are 7. Revenue down, net losses in each or past three years 8. Per 10-K, continued dispute with Franchisees could hurt future business

1. Dunkin donuts presently dominate the doughnuts market particularly in south eastern U.S 2. People are becoming more health conscious, which does not bode well for high sugar, high fat treats 3. Starbuck has approximately 25 time amount of store worldwide that Krispy Kreme donuts has 4. Restricted cash flow from banks and massive layoff have stirred the world economy and decreasing discretionary income 5. European prier their local brand of doughnuts 6. Britons tend not to have car, which inhabits drive thru customer and their eating habits and office technique differ from Americans 7. Shareholder may sell Krispy Kreme donuts for lack of returns and dividends compared to other similar firm in the industry

SO STRATEGIES
1. TV, radio, and print ads demonstrating 27varieties of doughnuts against nondescript pastry offerings by Starbucks (S3, O3) 2. All store signs in supermarkets and conveniences where product is sold have picture of young child eating a Krispy Kreme doughnut (S7, O5) 3. 3. Continued grand openings of stores in highly-populated cities such as Sao Paulo, Brazil & Johannesburg, South Africa (S6, O7)

ST STRATEGIES
1. Compare "hot" doughnut appeal of Krispy Kreme Donut to cold doughnuts of Dunkin'Donuts in TV and Internet ads (S1,T1) 2. 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) 3. 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

WT STRATEGIES

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1. 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) 2. Aggressive Internet ads demonstrating the appeal of Krispy Kreme Donut hot doughnuts (W6, O4) 3. Open small but profitable "hot shops" in South America, Africa, and Southeast Asia in order to expand globally (W3, O7

1. Expand product line with low-calorie foods(W5, T7) 2. Recruit top executive talent from other fast-food firms (W1, T7) 3. Survey franchisees to discover ways to repair business relationships and retain growth of franchise model; study McDonalds model for tips (W8, T1, T3)

ENVIRONMENTAL ANALYSIS
EFE Matrix (External Factor Evaluation)
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. The EFE matrix is very similar to the 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 assessed in the EFE matrix are the ones that are subjected to the will of social, economic, political, legal, and other external forces.

How do I create the EFE matrix?

Developing an EFE matrix is an intuitive process which works conceptually very much the same way like creating the IFE matrix. The EFE matrix process uses the same five steps as the IFE matrix. 1. List factors: The first step is to gather a list of external factors. Divide factors into two groups: opportunities and threats. 2. Assign weights: Assign a weight to each factor. The value of each weight should be between 0 and 1 (or alternatively between 10 and 100 if you use the 10 to 100 scale). Zero means the factor is not important. One or hundred means that the factor is the most influential and critical one. The total value of all weights together should equal 1 or 100.
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3. Rate factors: Assign a rating to each factor. Rating should be between 1 and 4. Rating indicates how effective the firms current strategies respond to the factor. 1 = the response is poor. 2 = the response is below average. 3 = above average. 4 = superior. Weights are industry-specific. Ratings are company-specific. 4. Multiply weights by ratings: Multiply each factor weight with its rating. This will calculate the weighted score for each factor. 5. Total all weighted scores: Add all weighted scores for each factor. This will calculate the total weighted score for the company.

External factors
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 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) Channel expansion possibilities (i.e., Internet pre-ordering) Competitors like Dunkin Donuts and Starbucks Low-carb 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 2. Asian love sweet and are open to trying foreign foods. 3. Starbucks lack of diversified and distinctive pastry line 4. Dunkins donuts does not have hot doughnuts to sell 5. Many children love sweet treats. 6. Tim Hortons has yet to 0.08 0.05 0.10 0.07 0.03 0.04 3 2 3 4 2 2 0.24 0.10 0.30 0.28 0.06 0.08 12 | P a g e

expand beyond U.S. and Canada and its products line does not appear to be competitive. 7. South America, Africa and south Asia are market to conquer. 0.09 1 0.09

THREATS
8. Dunkin donuts presently dominate the doughnuts market particularly in south eastern U.S 9. People are becoming more health conscious, which does not bode well for high sugar, high fat treats 10.Starbuck has approximately 25 time amount of store worldwide that Krispy Kreme donuts has 11.Restricted cash flow from banks and massive layoff have stirred the world economy and decreasing discretionary income 12. European prier their local brand of doughnuts 13. Britons tend not to have car, which inhabits drive thru customer and their eating habits and office technique differ from Americans 14.Shareholder may sell Krispy Kreme donuts for lack of returns and dividends compared to other similar firm in the industry 0.12 1 0.12

0.08

0.16

0.08

0.08

0.06

0.12

0.05 0.06

2 2

0.10 0.12

0.09

0.09

TOTAL

1.00

1.94

ANALYSIS OF RESULTS:
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In above table the most important factor to be successful in the industry Dunkin donuts presently dominate the doughnuts market particularly in south eastern U.S and rating of this factor is 1 which shows that the company is capitalizing the opportunities to avoid threats .Second important factor to be successful in the industry Starbucks lack of diversified and distinctive pastry line with rating of 3 which shows that Krispy Kreme doughnut Is taking advantage of this opportunity. Finally the total weighted score is 1.94 which is below average of 2.5, so KKD is not operating well. They are not taking advantage of the external opportunities to avoiding the threats facing the firm

IFE Matrix (Internal Factor Evaluation)

Internal Factor Evaluation (IFE) matrix is a strategic management tool for auditing or evaluating major strengths and weaknesses in functional areas of a business.. The IFE Matrix together with the EFE matrix is a strategy-formulation tool that can be utilized to evaluate how a company is performing in regards to identified internal strengths and weaknesses of a company.

How can I create the IFE matrix?

The IFE matrix can be created using the following five steps:

Key internal factors

Conduct internal audit and identify both strengths and weaknesses in all your business areas. It is suggested you identify 10 to 20 internal factors, but the more you can provide for the IFE matrix, the better. First, list strengths and then weaknesses. It is wise to be as specific and objective as possible.

Weights
Having identified strengths and weaknesses, the core of the IFE matrix, assigns a weight that ranges from 0.00 to 1.00 to each factor. The weight assigned to a given factor indicates the relative importance of the factor. Zero means not important. One indicates very important. If you work with more than 10 factors in your IFE matrix, it can be easier to assign weights using the 0 to 100 scale instead of 0.00 to 1.00. Regardless of whether a key factor is an internal strength or weakness, factors with the greatest importance in your organizational performance should be assigned the highest weights. After you assign weight to individual factors, make sure the sum of all weights equals 1.00 (or 100 if using the 0 to 100 scale weights). The weight assigned to a given factor indicates the relative importance of the factor to being successful in the firm's industry. Weights are industry based.

Rating
Assign a 1 to X rating to each factor. Your rating scale can be per your preference. Practitioners usually use rating on the scale from 1 to 4. Rating captures whether the factor represents a major weakness (rating = 1), a minor weakness (rating = 2), a minor strength (rating = 3), or a major strength (rating = 4). If you use the rating scale 1 to 4, then strengths must receive a 4 or 3 rating and weaknesses must receive a 1 or 2 rating.

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Note, the weights determined in the previous step are industry based. Ratings are company based.

Multiply
Now we can get to the IFE matrix math. Multiply each factor's weight by its rating. This will give you a weighted score for each factor.

Sum
The last step in constructing the IFE matrix is to sum the weighted scores for each factor. This provides the total weighted score for your business.

Internal factors
1. 2. 3. 4. 5. 6. 7. 8. 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) 9. Lack of locations in some areas 10. Pricing in some locations

Key internal factors STRENGTHS

1.affordable, high-quality doughnuts with strong visual appeal and one- of-a-king taste 2. Neon Hot Doughnuts Now sign encourages people outside the store to make a impulse purchase 3. market research shows appeal extends to all major demographic groups including age and income 4. Hot shop stores save money while keeping Krispy Kreme Donuts customer experience intact 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.

weigh t

Rating Weighted score

0.09 0.06 0.08 0.07 0.07 0.08 0.06

4 3 4 3 3 3 3

0.36 0.18 0.32 0.21 0.21 0.24 0.18

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WEAKNESSES 1. Return on equity, assets, and investments all negative in the trailing twelve months; skill of management is questionable 2. Shareholders have not received dividends recently, and are not expected to in near future; stock price in state of flux 3. Closing stores when stores should be open globally at steady rate to keep up with competitor growth 4. Management states in recent 10-K that it is struggling with how to make stores profitable 5. Product line slow to expand with nothing outside sweet treats to draw in health-conscious customers 6. Advertisement not aggressive enough to appeal to areas outside southeast of U.S. where most stores are 7. Revenue down, net losses in each or past three years 8. Per 10-K, continued dispute with Franchisees could hurt future business 0.10 0.07 0.06 0.07 0.04 0.03 0.08 0.04 1 1 2 1 2 2 1 2 0.10 0.07 0.12 0.07 0.08 0.06 0.08 0.08

Total

1.00

2.36

ANALYSIS OF RESULTS:
In above table the most important factor to be successful in the industry Return on equity, assets, and investments all negative in the trailing twelve months; skill of management is questionable and rating of this factor is 1 which shows that the company is using its strengths to avoid this weakness. Second important factor to be successful in the industry affordable, high-quality doughnuts with strong visual appeal and one- of-a-king taste with rating of 4 which indicate that this important is major strength of Krispy Kreme doughnut. Finally the total weighted score is 2.36 which is below average of 2.5, so KKD is not operating well. They are not utilizing their strengths to minimize their weaknesses.

CPM (Competitive Profile Matrix)

Competitive profile matrix is essential tool used in strategic management process, it contain all the important critical success factors of industry. Success factor can vary from industry to industry, every industry consider different success factor, and all the companies in CPM are measured on same scale by considering the same success factor. In IFE we only consider
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internal strengths and weakness and EFE constraint is to consider only internal factor from PLEST (Political,legal,environmental, social and technological) but Competitive profile matrix is not bound by any constraint, all the success depends upon the importance it can be external or internal doesnt matter

Critical success factor Advertising Product quality Product diversity Price competitivenes s Management Financial position Customer loyalty Global expansion Market share Sales distribution total

weight 0.11 0.15 0.08 0.08

DUNKIN DONUTS rating score 4 3 2 3 0.44 0.45 0.16 0.24

rating 3 3 1 2

STARBUCKS score 0.33 0.45 0.08 0.16

TIM HORTONS rating score 2 2 2 3 0.22 0.30 0.16 0.24

0.10 0.10 0.10 0.13 0.10 0.05 1.00

3 3 4 3 3 2

0.30 0.30 0.40 0.39 0.30 0.10 3.08

3 2 3 4 3 3

0.30 0.20 0.30 0.52 0.30 0.15 2.79

2 3 3 1 1 2

0.20 0.30 0.30 0.13 0.10 0.10 2.05

NOTET: the rating values are as fallows 1= major weakness, 2=minor weakness, 3=minor strength,
4= major strength

ANALYSIS OF RESULTS:
According to above analysis the most important factor to being successful in the industry is product quality. Dunkin donut is strong on advertising and customer loyalty as indicating by rating 4, starbuck is strong on global expansion.tim Hortons does not have any strong factor. Overall dunkin donuts is strongest as indicating by total weighted score 3.08

SPACE MATRIX
Strategic Position & Action Evaluation Matrix Aggressive Conservative Defensive Competitive

Two Internal Dimensions

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Financial Strength (FS) Competitive Advantage (CA) Environmental Stability (ES)

Two External Dimensions

Industry Strength (IS)

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

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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. Any organization should be placed in any one of four quadrants. Appropriate strategies for an organization to consider are listed in sequential order of attractiveness in each quadrant of the matrix. It is based two major dimensions 1. Market growth 2. Competitive position All quadrant contain all possible strategies Qurdant-1 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 Quardrant-1 Market development Market penetration
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Product development Forward integration Backward integration Horizontal integration Concentric diversification

QURDANT-2
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. Because Quadrant II firms are in a rapid-market-growth industry, an intensive strategy (as opposed to integrative or diversification) is usually the first option that should be considered. STRATEGIES IN QUARDRANT-2 Market development Market penetration Product development Horizontal integration Divestiture Liquidation

QURDANT-3
It contains that companys weak competitive situation and slow market growth. The firms fall in this quadrant compete in slow-growth 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. If all else fails, the final options for Quadrant III businesses are divestiture or liquidation.

STRATEGIES IN QUARDRANT-3
Retrenchment Concentric diversification Horizontal diversification Conglomerate diversification Liquidation

QURDANT-4
It contains that companys strong competitive situation and slow market growth. Finally,
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Quadrant IV businesses have a strong competitive position but are in a slow-growth industry. 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 As above figure there are four quadrants in grand matrix that further contain various set strategies.

STRATEGIES IN QUARDRANT-4
Concentric diversification Horizontal diversification Conglomerate diversification Joint ventures

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RECOMMENDED STRATEGIES Retrenchment:

Retrenchment occurs when an organization regroups through cost and asset reduction to reverse declining sales and profits. Retrenchment can entail selling off land and buildings to raise needed cash, pruning product lines, closing marginal businesses, closing obsolete factories, automating Krispy Kreme processes, reducing the number of employees, and instituting expense control doughnuts systems Krispy Kreme
doughnut

Concentric diversification
Adding new but related products or services. E.g. Amazon has moved to selling the personal computers through online store; Dell has opened an online music downloading store

When to go for concentric diversification?

Organization competes in a non growth or slow growth industry. Adding new, but related, products would significantly enhance the sales of current products New, but related products could be offered at highly competitive price Organization has a strong management team. Organizations products are currently in the declining stage of the products life cycle.

Horizontal diversification
Adding new, unrelated product or service for present customers. E.g Bank, bookstores, coffee shop services in hospital buildings

When to go for Horizontal Diversification?

Revenues derived from an organizations current products or services would increase significantly by adding the new, unrelated products. When the present distribution channel can be used to market the new product

Conglomerate diversification
Adding new, unrelated products or services
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E.g. Energizer acquired Pfizer Existing markets are saturated Organization has the capital and managerial talent needed to compete in new industry Basic industry is experiencing declining sales There exists financial synergy between acquiring and acquired firms

When to go for Conglomerate Diversification

On the basis of these strategies we are giving following recommendations

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. I. Change entire manufacturing and distribution strategy Implement par baked manufacturing operation to allow individual stores to decrease in size, thus lowering per store operating costs to a more appropriate level for sales volume

Increased efficiency smaller workforce per store, par-bake allows for minimal Waste inventory as needed (important b/c fresh goods low shelf life

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 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 be fried and glazed on site. I. Sale of Plant and Equipment -sell Effingham plant II. Remove Doughnut Theater from 95% of locations, Doughnut Theater can be part of a select few Flagship locations only. (3 5Stores) 2-Develop stronger relations and control of franchisees

I. II. III. IV. V.

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 I. Advertising national t television and radio advertising campaign based on hot doughnuts now II. Marketing research periodic research to stay abreast of trends. III. R&D product development 4- Strengthen Competitive Advantage Strengthen Competitive Advantage through differentiation in products and services. I. Continue to utilize hot doughnuts now II. Expand product line

CONCLUSION
After going through this case study and applying different tools of strategic management like swot space matrix, grand matrix we learn a lot. We gain knowledge how we can do internal and external assessment of different organization, and how conclusion can be drawn on the basis of given information.

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