Name: Neelam Lokwani

Madonna Id: 236488

Course: Business Policy
Date: 10/14/2015
First Case Analysis
Case 12: Krispy Kreme Doughnuts
Introduction
Krispy Kreme Doughnuts is a global chain of doughnuts, coffee, sundaes and shakes that was
founded by Vernon Rudolph in Winton-Salem, US in the year 1937. Vernon Rudolph had bought
a yeast-raised doughnut recipe through Ishmael Armstrong, his uncle by a New Orleans French
Chef Ishmael knew and Vernon began selling doughnuts to grocery stores. The first product sold
by Vernon was the hot Original Glazed Doughnuts to customers on the sidewalk.
The first Krispy Kreme logo was designed by Benny Dinkins, a local architect. The first Krispy
Kreme bakery outside the South opened in Akron, Ohio in 1939
(https://en.wikipedia.org/wiki/Krispy_Kreme).
In the 1940s, doughnuts were sold on a display case showing a variety of doughnuts to choose
from, The Original Glazed doughnut was a signature doughnut of Krispy Kreme with no change
in the taste in the past or now.
In the 1950s Krispy Kreme expanded with the opening of new stores in the US and in 1955,
Krispy Kreme had a trademarked logo. The company also began fundraising for churches,

schools and other organizations. The company opened a unit dedicated for manufacturing and
distribution which by the 1960s entered into automation that led to the focus on planning and
timing of the doughnuts production.
In the year 1973, Rudolph died and by then Krispy Kreme had 60 chain stores. Later in 1976,
Krispy Kreme was acquired by Beatrice Foods Company in Chicago. Beatrice Foods was a wellrecognized back then and gained franchisees for Krispy Kreme in 1982 and in 1989 the first
retail store of Krispy Kreme was opened.
In the 1990s, Krispy Kreme rapidly expanded with opening its stores in New York and
California, after which they decided to go global by opening its first store outside the US in
Canada in the year 2001.
Further achievements of Krispy Kreme doughnuts were: the signature Krispy Kreme Coffee in
2011, launch of the hot light application on mobile phones, 500th international store opening in
2012, 75 years of existence of the company and also Tony Thompson was appointed as the
President and CEO of Krispy Kreme in the year 2014.
Today Krispy Kreme not only operates as chain stores but also in mega-chains like Walmart,
Target and major gas stations.
Existing Mission Statement:
Our mission is to touch and enhance lives through the joy that is Krispy Kreme.
Existing Vision Statement:
Our vision is to be the worldwide leader in sharing delicious tastes and creating joyful memories.

Krispy Kremes Strategies & Objectives:

To increase the number of company stores worldwide

To produce and offer healthy doughnuts to Krispy Kreme customers
To increase the company stock price in order to have higher shareholder value
To increase sales specifically in the doughnuts section
To initiate different types of marketing strategies for brand recognition and investment

strategies for on-store and off-store operations

To realize new achievable and original standards for upcoming franchisers
Revised Mission Statement:

To deliver the best quality doughnuts and coffee to its customers by innovating and giving
outstanding service in an exciting store atmosphere.
Revised Vision Statement:
To be the most loved and respected doughnut and coffee company internationally.
External Opportunities of Krispy Kreme Doughnuts:

Innovating its production line in the category of hot doughnuts

Increasing stores at airports and petrol pumps in foreign countries
Diversifying its product line in various categories, i.e., ice-creams, ice-cream cakes and

breakfast meals
Expand domestically
Increase in coffee consumption
Improvement in automated operations
Involvement in social media marketing
External Threats of Krispy Kreme Doughnuts:

Health conscious customers

Many competitors for example, Dunkin Donuts, McDonalds and Tim Hortons
Changing tastes and preferences of customers, more preference towards organic markets

due to long term health issues like obesity and diabetes

Local doughnut brand competitors
Competitive Profile Matrix (CPM):

Critical Success
Factors
Product Quality

Weight

Dunkin Donuts
Ratin
Score

McDonalds
Rating
Score

Tim Hortons
Rating
Score

0.10

g
3

0.30

0.30

0.40

Product Diversity

0.08

0.16

0.24

0.16

Advertising
Price
Customer Loyalty
Financial Status
Global Expansion
Sales
Market Share
Total

0.03
0.10
0.08
0.05
0.13
0.11
0.15
1

4
4
3
2
4
3
2

0.12
0.40
0.24
0.10
0.52
0.33
0.30
2.47

4
3
3
4
4
3
3

0.12
0.30
0.24
0.20
0.52
0.33
0.45
2.7

1
2
4
3
4
4
4

0.03
0.20
0.24
0.15
0.52
0.44
0.60
2.74

External Factor Evaluation (EFE) Matrix:

Key External Factors Opportunities
1. Asians have a sweet tooth for Western brands
2. Children like sweet treats
3. Starbucks is more concentrated on coffee than

Weight
0.06
0.09
0.05

Rating
3
4
3

Weighted Score
0.24
0.36
0.15

bakery items
4. Dunkin Donuts dont sell hot glazed

0.04

0.40

doughnuts
5. McDonalds is more concentrated on coffee

0.08

0.24

and shakes than doughnuts

6. Tim Hortons are yet to expand globally

0.11

0.33

Key External Factors Threats

7. Doughnut market dominated by Dunkin

Weight
0.14

Rating
4

Weighted Score
0.56

Donuts
8. Health conscious customers
9. Krispy Kreme has less stores compared to

0.10
0.10

3
2

0.30
0.20

Starbucks and Dunkin Donuts

10. European culture prefer local brands
11. European follow certain etiquettes
12. Due to lack of returns and dividends,

0.09
0.06
0.08

2
2
1

0.18
0.12
0.08

shareholders had to sell KKD stocks

Total

Internal Strengths of Krispy Kreme Doughnuts:

Signature original hot glazed doughnuts

Brand recognition
Produces quality products
Existing worldwide with 395 stores locations
Sold at mega-chains like Walmart and Target and also at gas stations
Sells 20 varieties of doughnuts, other bakery items and coffee
Affordable price
Internal Weaknesses of Krispy Kreme Doughnuts:

Lack of returns and dividends to shareholders due to reduction in stock price

Doughnuts are considered high-calorie and unhealthy
Not much focus on advertising campaigns
Strong competitors are Dunkin Donuts and Starbucks
Limited product line
Poor company management
The company has faced downfall in revenues and loss in the past 3 years
Conflicts with franchisees

3.16

Internal Factor Evaluation (IFE) Matrix:

Key Internal Factors Strengths
1. Affordable price and standard quality

Weight
0.09

Rating
4

Weighted Score
0.36

2. Customers are of all ages and incomes

3. Attracting customers with the Hot

0.08
0.07

4
3

0.24
0.21

Doughnuts Now sign board

4. Globally expanding; recently in 16 foreign

0.10

0.30

countries
5. Product conveniently available at mega-

0.09

0.18

chains and gas stations

6. Vertically integrated products

0.08

0.16

Weight
0.10
0.07

Rating
2
2

Weighted Score
0.20
0.14

9. Lack of advertising

0.07

0.07

10. Closure of franchisees due to conflicts

11. Doughnuts are considered high-calorie and

0.06
0.08

1
1

0.06
0.08

unhealthy
12. Downfall in revenues and loss in the past 3

0.06

0.12

years
13. Poor company management
Total

0.05
1

0.10
2.22

Key Internal Factors Weaknesses

7. Lack of returns to shareholders
8. Lack of dividends to shareholders

Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix:

1.
2.
3.
4.
5.
6.
7.

Strengths
Brand recognition
Produces quality products
Sells 20 varieties of doughnuts, other
bakery items and coffee
Sold at mega-chains like Walmart and
Target and also at gas stations
Existing worldwide with 395 stores
locations
Affordable price
Signature original hot glazed doughnuts

1.
2.
3.

4.
5.
6.
7.
8.

Opportunities
1. Innovating its
production line in the
category of hot
doughnuts
2. Increasing stores at
airports and petrol
pumps in foreign
countries
3. Diversifying its
product line in various
categories, i.e., icecreams, ice-cream
cakes and breakfast
meals
4. Expand domestically
5. Increase in coffee
consumption
6. Improvement in
automated operations
7. Involvement in social
media marketing

Weaknesses
Doughnuts are considered high-calorie
and unhealthy
The company has faced downfall in
revenues and loss in the past 3 years
Lack of returns and dividends to
shareholders due to reduction in stock
price
Not much focus on advertising
campaigns
Strong competitors are Dunkin Donuts
and Starbucks
Conflicts with franchisees
Limited product line
Poor company management

SO Strategies
WO Strategies
1. Do marketing on social
1. Producing and
media about their 20

innovating healthy

different varieties of

doughnuts made of

doughnuts. (S3, O7)

2. Expand further
domestically apart
from the 395 stores
world wide. (S5, O4)
3. Innovate its doughnut
and coffee range by
continuing to offer on
affordable prices (S6,
O1)
4. Get more customers

fruits, nuts, proteins

and fruit smoothies.
(W1, O1)
2. Gain profits by
expanding
domestically and
globally (W2, O4)
3. Increasing product line
by diversifying. (W7,
O3)
4. Resolve disputes with

for coffee consumption

franchisees by

by offering at

improving its

convenience stores and

operations. (W6, O6)

5. Do aggressive

mega-chains. (S4, O5)

5. Due to recognition in
the market, they can
diversify their product

advertising in order to
compete with Dunkin
Donuts and Starbucks.
(W5, O7)

line. (S1, O3)

Threats
1. Health conscious
customers
2. Many competitors for
example, Dunkin
Donuts, McDonalds
and Tim Hortons
3. Changing tastes and
preferences of
customers, more
preference towards
organic markets due to
long term health issues
like obesity and
diabetes
4. Local doughnut brand
competitors

ST Strategies
1. Comparing with

WT Strategies
1. Introduce healthier and

competitors with the

low-calorie product

signature hot glazed

line in order to keep up

doughnuts and their

with changing

cold doughnuts. (S7,

preferences of

T2)
2. Providing better
quality products
compared to local
brands in the country.
(S2, T4)

customers. (W1, T3)

Strategic Position and Action Evaluation (SPACE) Matrix:

Financial Position (FP)
Return on investment
Profit
Net Income
Leverage
Cash flow
Average

Rating
2
1
3
3
2
2.2

Competitive Position (CP)

Market share

Rating
-6

Product quality
Technological know-how
Consumer loyalty
Average

-1
-3
-4
-3.5

Stability Position (SP)

Product quality
Demand variability
Competitive pressure
Risk involved in business
Barriers to entry into market
Average
Y-axis
Industry Position (IP)
Growth potential
Profit potential
Financial stability
Ease of entry into market
Average
X-axis

Directional Vector Coordinates: y-axis= -1, x-axis= -1.5

Rating
-1
-2
-3
-5
-5
-3.2
-1
Rating
3
1
2
2
2
-1.5

7
6
5
4
3
2
1
0
-1.20

-1
-2
-3
-4
-5
-6
-7

Krispy Kreme Doughnuts should follow a Defensive strategy as a result of the SPACE Matrix.
The strategies they should follow are:

To introduce healthier and low-calorie options to their menu

Innovate and diversify product line
Gain back the confidence of shareholders by showcasing the companys true potential

and strength to grow in such a competitive market

Start using updated technology for production
Boston Consulting Group (BCG) Matrix:

BCG Matrix - KKD

15%
10%
5%

0.16

0.15

0.14

0.13

0.12

0.11

0%
0.1
-5%
-10%
-15%
-20%

Strategies and long-term objectives:

1. KKD should indulge in marketing and advertising campaigns in order to attract
customers towards their signature product line of hot glazed doughnuts which they
are well known for.
2. The company should focus on expansion in the US because of recognition and
resolve disputes among franchisees and they can begin their franchising again.
3. Social media is a strong way to achieve customers mainly the teens and young crowd.
The brand should provide discounts and promotions through the internet.
4. As KKD is a well recognized brand worldwide, the company can involve in related
product diversification by introducing ice-creams, cakes, healthy options like fruit
smoothies, etc.
5. Further the company can also opt market development and product development
strategies in order to achieve market growth and innovate a variety of products to
offer to its customers.

0.09

6. When franchising, the company can evaluate its to be franchisees by knowing

whether they have been an experience under food establishments or franchised food
chains.
7. Increase the companys strengths in order to present the companys potential to be a
part of the stock market and gain back the confidence of its shareholders.
8. To use the vertical integration arrangement of supply chains in order to help cater to
the needs of the health conscious people as well leading to an increase in profits and
sales.
9. To develop culture oriented products in order to attract customers of all ages and
incomes, for example, McDonalds The brand has customized its products
depending on the culture from country to country.
10. Several other recommendations would be re-designed of packaging materials,
innovation in existing products, including doughnuts for the festive or a particular
theme based.

Strategies planned by Krispy Kreme:

All stores are required to have a specific point of sale (POS) system. In addition to providing the
ability to manage on-premises sales, the POS system provides headquarters and permits stores to
communicate with each other.
Krispy Kreme also has an enterprise resource planning (ERP) system that supports both the
financial and operating needs of the organization. Embedded within the ERP system is a data
warehouse that also supports the Company Stores and KK Supply Chain.
To ensure high quality, the following has been instituted:

1.

To ensure freshness, truckloads of the main ingredients are received on a regular basis

2.

Each incoming shipment of ingredients is tested

3.

Each batch of mix is tested.

4.

Krispy Kreme also produces the primary doughnut-making equipment. Franchisees are required
to use such equipment. (Fred David, Strategic Management Concepts and Cases, 13th Edition).
Implementation of recommended strategies:
1. Stores can be rapidly expanded by opening them in convenient areas where most of the
crowd is found i.e., malls, airports, petrol pumps, etc.
2. Choosing a well experienced candidate for franchising.
3. Because of the brand recognition, KKD can initiate advertising campaigns on the social
media, TV, radio and newspapers.
4. Producing theme based or festive season doughnuts and changing the packaging after
every few months.
5. Selling their doughnuts at the mega-chains worldwide would be a good opportunity to
expand, for example, Walmart, Carrefour, Waitrose, etc.
FORECASTED BALANCE SHEET FOR THE YEAR 2016, 2017
February 1,

February 2,

2017

2016
(In thousands)

ASSETS
CURRENT ASSETS:

Cash and cash equivalents

65,900

53,900

Receivables

29,499

26,450

Receivables from equity method franchisees

989

840

Inventories

20,264

18,550

Deferred income taxes

24,545

24,500

Other current assets

7,210

6,330

_______________
Total current assets

________________

148,407

130,570

Property and equipment

124,800

103,200

Investments in equity method franchisees

Goodwill and other intangible assets

33,000

28,156

Deferred income taxes

68,000

79,600

Other assets

12,800

12,425

________________
Total assets

$ 238,600
________________
LIABILITIES AND SHAREHOLDERS EQUITY

__________________
$ 223,381
__________________

CURRENT LIABILITIES:
Current portion of lease obligations

$ 401

$ 388

Accounts payable

16,000

16,450

Accrued liabilities

30,300

28,423

__________________

__________________

Total current liabilities

46,701

45,261

Lease obligations, less current portion

9,945

3,900

Other long-term obligations and deferred credits

22,600

22,500

Commitments and contingencies

SHAREHOLDERS EQUITY:
Preferred stock, no par value; 10,000 shares authorized; none issued and outstanding -

Common stock, no par value;

340,900

339,400

Accumulated other comprehensive income

Accumulated deficit

(39,800)

(69,000)

_________________________________
Total shareholders equity

380,346

342,061

___________________________________

Total liabilities and shareholders equity

$ 363,500

$ 342,061

References:
Textbook reference:
Strategic Management Concepts and Cases, 13th Edition by Fred R. David
Website reference:
http://d1lge852tjjqow.cloudfront.net/CIK-0001100270/7182db60-a56d-439d-957a8ded83120cb5.pdf
http://www.nasdaq.com/symbol/kkd/financials?query=income-statement
http://www.wikiwealth.com/swot-analysis:kkd
https://prezi.com/y_8bizxu7lct/copy-of-krispy-kreme-case-analysis/
https://www.krispykreme.com/
https://en.wikipedia.org/wiki/Krispy_Kreme