Krispy Kreme

Q.1. what is Krispy Kreme Doughnuts’ corporate Strategy? Briefly identify the business strategies that Krispy Kreme Doughnuts is using in each of its consumer business segments.

Company strategies: Krispy Kreme Doughnuts, Inc. is a global retailer, distributor, marketer and wholesaler of doughnuts, including operating and franchising a chain of doughnut stores; manufacturing and selling doughnut mixes, supplies, and machinery to franchisees; and selling and distributing its own line of branded coffees. Currently Krispy Kreme implements a differentiation strategy, attempting to distinguish their doughnuts based on taste, quality, and simplicity There are three Business segments from which Krispy Kreme Generating its Revenue 1. Company Stores KKD shifted in focus from a wholesale bakery to a specialty retail bakery to promote and increase sales at the company’s own retail outlets. The company emphasized the “HOT DOUGHNUTS NOW” feature as a response to customer feedback as well as a form of local advertising. The company was able to boost its store sales-volume by combining on-premise sales at its stores to capture customer base and then to secure off-premise sales at supermarket and convenience stores for packaged sales. 2.

Franchises

For rapid Expansion KKD Start Giving Franchise License Domestically to capture the larger part of Market in united State .Grant franchises only to candidates who have experience in operating multi-unit food establishments and who have the capital to adequately finance the opening of new Krispy Kreme stores in their territory. Relying upon franchised stores as opposed to company-owned stores conserves the company’s capital for other expansion efforts. KKD also Want to enter in Global Market where People are somehow aware of doughnuts and welcome Western Food KKD used the International Franchising Strategy to Become a global krispy kreme that can be enjoyed by everyone all over the world 3. KKD Supply Chain Build a vertically-integrated value chain by supplying doughnut mixes to all stores, by making the doughnut equipment used at all Krispy Kreme stores, and by supplying coffee products used in making hot and cold coffee beverages. Selling ready-mixed ingredients and doughnut-making equipment to franchisees.

Q.2. Develop Strategic Position & Action Evaluation Matrix (SPACE)

X A X I S

Y A X I S

Internal Strategic Position Competitive Advantage (CA) ( -1 Best, -6 Worst) Market Share -2 Brand image -1 Product Quality -2 Customer Loyalty -3

Average Total X Axis Score Financial Strength (FS) Revenue increase Cash flows Efficiency Ratios Working Capital Ratio Average

Total Y Axis Score

-2

External Strategic Position Industry Stability (IS) ( +1 Worst, +6 Best) Growth Potential 2 Resource Utilization 1 Financing Access 1 Industry Profits 2

1.5 -0.5

(+1 Worst. +6 Best) 2 1 2 3 2

Environmental Stability ( -1 Best, -6 Worst) Inflation Rates -4 Technological Changes -3 Competitive Pressure -3 Competing Products Price -2 Average -3

-1

KKD's directional vector is positioned in the Defensive vector (Lower-Left quadrant) of the matrix, it shows that a firm financially is so weak not utilizing its Internal Strengths (IS) which its Competitive advantage is. Firm can also work on improving its internal factors, by developing newer products that are health conscious and improving choice which will envariablly result in increased sales.

Question 2: What is your assessment of the long-term attractiveness of the industries represented in Krispy Kreme business portfolio? Industry Attractiveness Measure

weight

Company Store

Franchises

Market size and projected growth rate Intensity of Competition

0.35

4

1.4

3

1.05

4

1.0

0.20

3

.60

2

.40

3

.60

Resource Requirements

0.20

4

.80

1

.20

4

.80

Industry Profitability

0.25

3

.75

2

.50

3

.75

TOTALS

1

3.15

KK

Supply Chain

2.15

2.85

What is your assessment of the competitive strength of Krispy Kreme’s different business units? Competitive Strength Measure

Weight

Relative Market share

0.20

3

.60

1

.20.

4

0.80

Costs relative to competitors' costs Brand image and reputation Profitability relative to competitors Total

0.20

3

.60

2

.40

3

0.60

0.40

4

1.60

2

.80

3

1.20

0.20

3

.60

2

.60

3

0.60

1

Company Stores

3.4

Franchises

KK Supply Chain

2

3.2

Company Stores and KK Supply Chain are for growth and built base on their big size and high level of industry attractive. Besides, Franchisees segment for maintain, harvesting base on their average industry attractive and relative market size comparing to other industry

G.E Matrix Buiness Units

Revenue

Revenue%

Profit

Company Store

265890

69.2%

-26610

Franchises

25537

6.7%

KK Chain

92557

24.1%

Supply

Profit %

IAS

CS

0

3.15

3.4

16515

41.2%

2.15

2

23565

58.8%

2.85

3.2

Q.5. what are the cash flow characteristics of each Krispy Kreme Doughnuts’ segments? Which businesses are the strongest contributors Krispy Kreme Doughnuts’ free cash flows? By developing a BCG matrix of its relative market share and growth rate?

Buiness Units

Revenue

Revenue%

Profit

Company Store

265890

69.2%

-26610

Franchises

25537

6.7%

KK Chain

92557

383984

Total

Supply

Profit %

RMS

Growth Rate

0

.80

-13

16515

41.2%

.20

10

24.1%

23565

58.8%

.60

-7

100

40080

100

Franchises is located in the Question Marks position on the BCG Matrix. It has a low Relative Market Share Position but a high industry Growth Rate. So KKD , need to focus on market penetration, market development and product development . Company stores and KK supply chain fall in cash cow portion .Company store Business segment presence in cash cow portion of BCG is due to its negative growth. Its attractiveness is high in industry so if company start focusing on product development for those who are health conscious then company store can come in Star.

Q.6. Develop strategic group map for the industry. Justify your reasons

Starbucks is World known Coffee Company having a huge variety of products, like soft drinks, beverages, ice cream, coffee, hot snacks .and the market share of Starbucks ins restaurant industry is more than other two Company. Dunkin donut comes 2nd in restaurant industry having operating globally and its market share much more than kkd company .KKD has less product range than these 2 and still it’s not penetrated in whole market domically and internationally.

Q.7. Identify the Key Success Factors and develop a Competitive Profile Matrix (CPM)? The Competitive Profile Matrix (CPM)

Critical Success Factors Brand Reputation Market Share Financial Position Product Quality Product Lines Consumer Loyalty Total

Weight

0.2 0.1 0.2 0.2 0.2 0.1

1.0

Krispy Kreme Rating (1-4) Weighted Score 4 0.80 1 0.10 2 0.40 2 0.40 3 0.60 2 0.20 2.5

Dunkin’ Donuts Rating Weighted Score 4 2 3 3 3 3

0.80 0.20 0.60 0.60 0.60 0.30 3.1

Starbucks Rating Weighted Score 4 4 4 3 4 3

0.80 0.40 0.80 0.60 0.80 0.30 3.7

As The Total Weighted score of Starbucks is 3.7 which is more than 3.15 that mean Starbucks Is the Market Leader in this Industry. Dunkin’ Donuts come 2nd with 3.1 score. Krispy Kreme position is 3rd in this Industry with score of 2.5

Q.8. what is your assessment of Krispy Kreme Doughnuts’ financial performance during fiscal years 2007-2009? Analyze the following ratios? a. Profitability Ratios:

Profitability

2007

2008

2009

Gross profit Margin

15.6%

11.5%

10.2%

Net Profit Margin

-42236/461195*100= -9.2%

-67051/429319*100= -15.6%

-4061/383984*100 -1.1

Interpretation:

The Gross profit margin showing a decreasing trend .Company decreasing sales effected Gross profit margin. Net profit margin of KKD is negative for the three years. Its mean company not producing any profit. Company not utilizing its resources properly .operating expense increasing continuously.

b.

Liquidity Ratios:

Liquiadity

2007

2008

2009

Current Ratio

131818/13487 = 00.98

760680/43218= 1.76

75806/39616= 1.91

Working Capital

131818-134870= -3052

760680-43218= 707462

75806-39616= 36190

Interpretation:

Current ratios and working capital ratios showing that company can pay its current liability easily. But due to continue loss in 3 years company will not be able to pay its long term debt. That is an alarming situation for the KKD, so no one will invest in KKD