Strategic Mangement(Krispy Kreme)

P r o j e c t o f Strategic prudence Case Study Krispy Kreme glory HAILEY COLLEGE OF COMMERCE UNIVERSITY OF THE PUNJAB We be thankful to ALLAH ( tot every(prenominal)y mighty) for command us and giving us power and courage. Project submitted Sir Ishfaq Ahmed This project is ground on our course of S. M. We have tried to utilize our knowledge closely the subject which was taught by our professor. S. M is a vast field and it was a bit difficult for us to cover it all at our erudition phase. We have applied many concepts of S.M to the case study We are genuinely much thankful to our Sir Ishfaq Ahmedfor teaching us this important subject with all dedication and interest. It was very necessary for us to understand the real concepts of S. M. for our emerging practical actioning life. Project pre equalityed by Bilal Raja 792 Krispy Kreme aureole History and addition The founder, Vernon Rudolph, worked for his uncle, Ishmael Armstrong, who purchased a secret recipe for barm-rais ed glorys and a shop on Broad Street in Paducah, Kentucky, from Joseph LeBeouf of Lake Charles, Louisiana. Rudolph began contending the yeast annuluss in Paducah and delivered them on his bicycle.The operation was moved to capital of Tennessee, Tennessee, and other family members joined to butt against the customer demand. The first store in the nation with the Krispy-Kreme name subject on Charlotte Pike in 1933. Rudolph sold his interest in the Nashville store and in 1938 opened a doughnut shop in Winston- tradem, and began selling to groceries and then directly to individual customers. The first store in North Carolina was located in a rented building on southward Main Street in Winston-Salem in what is now called historic oldish Salem. The Krispy Kreme logo was designed by Benny Dinkins, a local architect.By the 1960s, Krispy Kreme was cognize without the southeastern United States, and it began to expand into other areas. In 1976, Krispy Kreme Doughnut Corporation became a wholly owned subsidiary of Beatrice Foods of Chicago, Illinois. The headquarters for Krispy Kreme remained in Winston-Salem. In 2003, a pilot project in Mountain View, California, to sell doughnuts through car windows and sunroofs at a busy intersection (with piano tuner payment) failed. On February 19, 2007, Krispy Kreme began selling the Whole Wheat Glazed doughnut in an attempt to assemblage to the health conscious.The doughnut has twenty Calories fewer than the maestro 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 do drugs Administration, in its guide delineates, concede 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 publicizing campaign, touting its doughnuts as trans- fa t free and having 0 grams trans-fat Krispy Kreme began a nonher phase of fast expansion in the 1990s, opening stores outside the southeastern United States where approximately 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 inter topic operations. On April 5, 2000, the muckle went public on the NASDAQ using 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, lead of financial consulting group Kroll Zolfo Cooper LLC, as interim CEO. Cooper replaces Scott Livengood, who the companionship 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 announce such as word-of-mouth, in 2006, Krispy Kreme moved into television and radio advertisements, informant with its Share the Love campaign with heart-shaped doughnuts. Vision and determineOur Vision To be the global leader in doughnuts and complementary increases, while cr feeding 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 overcritical wherever Krispy Kreme is sold We must produce a collaborative team up effort that is unexcelled We must cast the best possible construe in all that we do We must never settle for irregular best we deliver on our commitments We must coach our team to ever-better resultsMission controversy We create the tastes for good times and warm memories for everyone, everywhere. With our Original Glazed doughnut as our signature and sta ndard, we will continually improve our customers experience through Innovative ideas Highest quality, and Caring service Financial/ care performance environmental analysis Internal factors Strong brand recognition and recall wide-cut appeal of signature glazed doughnuts Vertical integration Development in international markets Strong channel of distribution Quality of intersection point grow assortment of offerings at KKD stores including beverages Doughnut machine technology.Perishability of product Limited product line (heavy reliance on doughnut sales) Overextended (i. e. , Montana Mills acquisition) inadequacy of locations in some areas Pricing in some locations External factors change magnitude popularity of coffee shops and cookry cafes Popularity of American foods and fashion in overseas markets Growth in two-income ho utilizationholds Americans continue to experience time-starvation Entertaining opportunities moving from home to work environment Technological advan cements (i. e. paperless ordering, predictive modeling software, hand held com typeseters for delivery drivers) agate line expansion possibilities (i. e. , Internet pre-ordering) Competitors like Dunkin Donuts and Starbucks Low-carb trend in eating preferences All-natural, organic, sanitary eating trends Cultural differences in breakfast and snack foods Increase in eating at full-service restaurants combined with a abate in the use of fast-food restaurants S. W. O. T analysis Strengths 1. Affordable, tall-quality doughnuts with strong visual appeal and one-of-a-kind taste 2.Neon heatable Doughnuts Now sign encourages people outside the store to make an impulse purchase 3. Market research shows appeal extends to all study demographic groups including age and income 4. Hot shop stores save money while property KKD customer experience intact 5. Vertical integration helps ensure high quality product 6. Consistent expansion now in 16 countries 7. Product sold at thousands of supe rmarkets, convenience stores, and retail outlets through U. S. Weaknesses 1. paying back on equity, assets, and investments all negative in the trailing twelve months skill of mgmt. s questionable 2. Shareholders have non received dividends recently, and are not expected to in near future ancestry price in state of flux 3. Closing stores when stores should be opening globally at steady rate to keep up with competitors produce 4. Management states in recent 10-K that it is struggling with how to make stores profitable 5. Product line subdued to expand with nothing Threats 1. Dunkin Donuts presently dominates the doughnut market, equationticularly in north U. S. 2. People are becoming more healthconscious, which does not bode easily for highsugar, high-fat treats 3.Starbucks has approximately 25 times the amount of stores worldwide that Krispy Kreme Donut has 4. restrict cash flow from banks and massive layoffs have stifled the world economy, lessen discretionary income 5. E uropeans prefer their local brands of Opportunities 1. Families crave convenience because of busy lifestyles 2. Asians warmth sweets and are open to trying foreign foods 3. Starbucks lacks a diversified and characteristic pastry line 4. Dunkin Donuts does not have heated doughnuts to sell 5. galore(postnominal) children love sweet treats 6. Tim Horton has yet to expand beyond the U. S. nd Canada, and its product line does not appear to be competitive 7. South America, Africa, and southerly Asia are markets to conquer outside sweet treats to draw in healthconscious customers 6. announce not aggressive enough to appeal to areas outside southeast of U. S. where some stores are 7. Revenues down, net losses in each of past tercet years 8. Per 10-K, continued disputes with certificationes could hurt future business doughnuts 6. Britons tend not to have cars, which inhibits drive-thru customers, and their eating habits and office etiquette differ from Americans 7.Shareholders may sell KKD stock for lack of returns and dividends compared to other similar firms in the industry SO Strategies 1. TV, radio, and sign ads demonstrating 27 varieties of doughnuts against non-descript pastry offerings by Starbucks (S3, O3) 2. All store signs in supermarkets and comforts where product is sold have picture of young child eating a Krispy Kreme doughnut (S7, O5) 3. shroudd grand openings of stores in highly-populated cities such as Sao Paulo, Brazil & Johannesburg, South Africa (S6, O7) ST Strategies 1.Compare hottish doughnut appeal of Krispy Kreme Donut to rimed doughnuts of Dunkin Donuts in TV and Internet ads (S1,T1) 2. Do roadshow 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 shareowner confidence in future of Krispy Kreme Donut (S1-S7, T7) WT Strate gies 1. Expand product line with low-calorie foods (W5, T7) 2. Recruit top executive talent from other WO Strategies 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, O3) 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) 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) I. F. E E. F. E C. P. M Space matrix Boston Consulting Group Matrix (BCG)Krispy Kreme Donuts has three business segments, and they are presented here along with their annual revenues per Form 10-K filed on April 17, 2009 go with terminals ($266M), Franchise ($26M) and Krispy Kreme yield Chain ($93M), with ap proximately $384M in score revenues for the year ending February 1, 2009. This means that each business segment represented the hobby percentage in revenues Company Stores (69. 2%), Franchise (6. 7%), and Krispy Kreme egress Chain (24. 1%). Profits for each business segment are as follows Company Stores ($-2M) Franchise ($18M) and KK Supply Chain ($25M), for a total of $41M in profits.Therefore, Company Stores has 0% of the profits Franchise has about 41% and Krispy Kreme Supply Chain has about 59%. Well assume that Company Stores has 3% of the market share and a -13% growth rate Franchise has 3% of the market share and a 10% growth rate and Krispy Kreme Supply Chain has 3% of the market share and -7% growth rate. Grand scheme (GS) Matrix Recommendations 1- Reduce operating expenses (down-size individual stores) Lower Costs of Doing blood reduce operating costs per individual store by changing average size of stores from 2500-4500 sq. t. range to 15002000 sq ft. Potential for 30 50 % decrease in operating cost on a cost per determine foot basis. I. Change entire manufacturing and distribution strategy Implement par baked manufacturing operation to allow individual stores to decrease in size, then lowering per store operating costs to a more becharm level for sales volume Increased efficiency smaller custody per store, par-bake allows for minimal waste inventory as needed (important b/c fresh goods low shelf life Par bake will allow for hot doughnuts now all of the time. Implications of transition to par bake operation New Plant Equipment freezers, production equipment, freezer trucks for distribution/delivery. Store Equipment freezers, oven for various par baked goods, fryers for doughnuts. R&D for unique par bake operation, doughnuts still to be fried and glazed on site. II. Sale of Plant and Equipment -sell Effingham plant Potential buyers are large scale baked-goods manufacturers Sara lee(prenominal) Corporation Entenmanns (Georg e Weston Bakeries Distribution) Harlan Bakeries, Inc. Estimated value of 10. 5 12 million. III. Remove doughnut theater from 95% of locations, doughnut theater can be reveal of a select few Flagship locations only. (3 5 Stores) 2- Develop stronger relations and command of franchisees I. Short-term period of one year postpone new franchise agreements/new store openings II. Implement Franchise Support Systems Communication amongst corporate and franchisees Support training, advertising Utilize recommendation 1 in order to lower operating expenses for franchisees. Implement Marketing Strategies I. Advertising national television and radio advertising campaign based on hot doughnuts now. II. Marketing research periodic research to stay abreast(predicate) of trends. III. R&D product development 4- Strengthen Competitive prefer Strengthen Competitive Advantage through differentiation in products and services. I. Continue to utilize hot doughnuts now II. Expand product li ne paper with A&S New York Bagels (par-baked). Par baked will allow for Hot Bagels Now.