EPPM4014

PENGURUSAN STRATEGIK
CHAPTER 5 : STRATEGIES IN ACTION
TYPE OF STRATEGIES
SET 3
NOR AQLELY AQMAL BT MOHD KAMIL

A123521

NOOR FATIHA BT MOHD YUSUF

A122523

NUR AMALINA BINTI KHAIRUDIN

A123420

SHAFURA BT YAAKOB

A122388

NUR IZZATUL AKMA BT MOHD RIDUAN

A122723

NAMA PENSYARAH:
PUAN SITI HAWA BT RADIN EKSAN

Vision statement (actual)

(8) a full services store in every U.S market that exceeds 100,00 households.
(2)Expand the doughnuts market by utilizing profitable horizontal sales channel.

Mission statement (actual)

To be the (1)consumers doughnut of choices by offering and affordable product with

universal appeal.
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)

Customer
Products or service
\markets
Technology
Concern for survival, profitability and growth
Philosophy
Self-concept
Concern for public image
Concern for employees

Objective (actual)
have a successful Krispy Kreme in every town in the United States

mission statement (proposed)

is to become the recognized leader in its targeted market for quality doughnuts and
beverages.

Vision statement (proposed)

to create specialty caf anchored by an authentic, fresh-doughnuts and upscale quick
service menu selections.
Creates a good moments among customers while they are with us
serving the best doughnuts ever.
company strategies

Krispy Kremes ability to align strategy and execution with the brands highest potential
defines their capacity for vision and creativity. They place having both brand value and internal
cultural values as a key priority. Using their brand as a platform, Krispy Kreme has developed
strategies such as linking everything they do by, understanding, protecting, and promoting their
brand, establishing the brand with the Hot Doughnuts Now experience, penetrating
complementary, off-premises channels of sales. They are committed to building an organization
based on common values of integrity, authenticity, passion, learning, sharing, and positive
expectations. Their commitment to value serves as a stage for all policies and programs that
affect internal and external relationships. Developing a successful strategy in standard cycle
market proves to be
relatively simple for Krispy Kreme. However, if looked at too simply, a company
will choose a strategy that is too narrow or too broad based on the other factors of
choosing a strategy. Determining which customer needs to satisfy is an area where choosing the
incorrect strategy can result in a decreased competitive advantage.
Currently Krispy Kreme implements a differentiation strategy, attempting to distinguish
their doughnuts based on taste, quality, and simplicity.This seems to be the norm for the
doughnut industry. Companies in this industry choose to compete based on their unique tastes or
variety of flavors as potential competitive advantages, rather than cost. Krispy Kreme chooses to
emphasize its secret yeast raised doughnut recipe. However, doughnut companies have also
succeeded their cost position through vertical integration, by having an automated system,
designed to create high quality, consistent doughnuts. Krispy Kreme manufactures their own
custom doughnut making equipment for all of their restaurants. Krispy Kreme chooses not to
segment its market, believing that their breadth of appeal extends across all major demographic
groups, including age and income. Concentrating on a large market seems to be the norm among
competitors as well. Where they seem to fall behind the curve is in choosing an appropriate
corporate, cooperative, or international strategy. Perhaps, Krispy Kremes most import asset is
their brand name and taste. Their Hot Doughnuts Now sign, serves as their biggest signal to
the freshest doughnuts offered. Targeting consumer tastes is one area in which they succeed.
They understand that consumers value freshness when it comes to doughnuts.
Their Doughnut Theatre Experience combined with clever marketing, creates a myth for
consumers. Krispy Kreme executives understand that relying on word of mouth is more credible
than paid advertising. Before Krispy Kreme enters a market they will flood that market with
memorabilia including T-shirts and hats, forming an unpaid loyalty base. However, their
strongest marketing focus is their charitable efforts through giveaways, and wholesale charges to
charities. By using this particular approach they continue to emphasize their small town,
southern hospitality, commitment to the community, and brand value. Through a related
diversification strategy, Krispy Kreme should choose to offer a variety of other products that
doughnut eaters tend to enjoy. They currently offer beverages and places to sit, but what they

may have slightly overlooked in the past is that frequenters of doughnut/coffee shops enjoy the
atmosphere as much as the sweetness of doughnuts.
Perhaps one of their biggest attractions is the doughnut
Making theater, allowing customers to see the actual process of cooking and glazing the
doughnuts. They have recently begun updating the look of their stores to capture the essence of
their unique brand. In 2001, Krispy Kreme acquired Digital Java, Inc to broaden their beverage
offering to customers. With this acquisition came the offering of different drip coffees, ranging
from light and smooth to deeper, more intense blends. It also now offers espresso beverages,
frozen coffee beverages, and other frozen beverages prepared with a variety of proprietary
flavors5. In addition to doughnuts, they sell snack foods, real fruit pies, cinnamon buns, and
mini-doughnuts3. Offering more morning sweets or health conscious breakfast items such as low
fat bagels should be avenues they explore. Doughnuts are generally a morning consumption
item, so means to attract more customers during the day or evening, other than freshness,
sweetness,
and the sign, should also be investigated. They could choose to diversify into fresh baked breads
for the evenings, or deli type sandwiches throughout the day.
Another strategic decision of updating their extranet to a more standardized, browseraccessible interface has proven to be a competitive advantage for the company as well. The
system lets administrators assign only those resources users require for their framework, and
protect important information from competitors. This is one of the problems of their former
extranet. With the upgrade they can now quickly and securely deliver applications and data to
employees anytime, anywhere4. This allows Krispy
Kreme to operate more efficiently and stay one step ahead of the competition. Even their cash
register is an efficient low profile, space saving design, which integrates keyboard and operating
screen into an intelligent compact terminal. By connecting reliable smart terminals to industry
standard open system components, they can avoid many of the high hidden costs of technology
ownership. Through their website, managers can log onto MyKrispyKreme to monitor
inventory levels, and consumers and investors can log on to obtain information about the
company, new and upcoming openings, newsletters, and purchase collectibles.
Their website also features a Friends of Krispy Kreme club where customers can sign
up to be emailed regular newsletters about store openings and new flavors. This alone will
remove the excessive costs of printing and distribution. Krispy Kreme has a thorough
understanding of the actions and focus needed to maintain a competitive advantage as they are in
their early stages of growth.
However as they continue to grow and enter new markets they may want to consider
alternatives in altering or expanding upon their current strategy. A potential problem looming
over Krispy Kreme executives is their low inventory turnover ratio. Krispy Kreme averages

approximately eighteen days, opposed to the industry average of nine days10. Management at
Krispy Kreme hope this problem will be solved by their new internet site, if not this flaw in
Krispy Kremes supply line will continue to cost the company money and reduce future profits.
Although Krispy Kreme has done a successful job in securing their position and
maintaining a competitive strategy, it is critical that they continually take strategic actions to stay
ahead of the competition. Already, other companies in the doughnut industry have begun to
respond to some of the successful actions by Krispy Kreme. One company has even begun to
compete head to head with what Krispy Kreme prides itself on most, taste and quality. LaMars
Doughnuts, perhaps the biggest prospective threat to Krispy Kreme has held taste tests directly
competing with a variety of Krispy Kremes products. In one such contest, held in Springfield,
Missouri, Police and sheriff department officers judged LaMars Doughnuts to be superior to
Krispy Kremes products in four of five categories: original glazed, glazed sour cream, chocolate
iced and Bavarian Crme filled, and cinnamon roll. The doughnuts were judged according to
taste and appearance. LaMars strategy is to go to its customers by operating neighborhood,
bistro-style doughnut stores with gourmet espresso bars in high traffic areas. Currently they
operate 40 franchised and company owned gourmet doughnut stores in seven states, and the goal
is to open 1200 stores nationwide by 2010.
As critics of Krispy Kremes strategy have thought, their success is in large part due to
the fact that they are the new kids on the block. They may want to slow their growth in location
to maintain the authenticity and exclusiveness associated with high quality desired products of
any kind, such as a diamonds from Tiffanys or a doughnut from Krispy Kreme. Everyone in the
bakery/sweets industry attempts to differentiate their product based on quality and taste. It is only
those with an entrepreneurial mindset and vision who can provide an innovative, competitive
advantage building idea or capability. Krispy Kreme has achieved this with their doughnut
theatre by offering customers something they dont see often, a first hand view of the frying and
glazing process. Cinnabon has realized the advantage of this unique featured and copied the idea.
They similarly represent themselves as a modern version of the traditional neighborhood bakery
where people are always welcome to stroll in, sample their unique product and delicious treats,
and linger a while to enjoy the entertaining baking process and warm, friendly atmosphere.
Cinnabon offers an experience, much like the Krispy Kreme experience. Of particular
importance to Cinnabons strategy is their Express Packs they have designed packaging made
to seal in the warmth and freshness of their products until you get them home and are ready to
eat.

The Competitive Profile Matrix (CPM)

critical success factors

Employees
Revenue
net income
product line
consumer loyalty
P/E ratio
product quality
market expansion
customer service
Advertising
Total

weight
0.1
0.2
0.1
0.1
0.05
0.05
0.15
0.05
0.05
0.15
1

krispy kreme
rating
score
2
0.2
2
0.4
2
0.2
2
0.2
2
0.1
1
0.05
2
0.3
2
0.3
1
0.05
2
0.3
2.1

weight
0.1
0.2
0.1
0.1
0.05
0.05
0.15
0.05
0.05
0.15
1

starbuck
s
rating
4
4
4
3
3
3
2
3
2
2

score
0.4
0.8
0.4
0.3
0.15
0.15
0.3
0.15
0.1
0.3
3.05

tim hortons
Weight rating
score
0.1
3
0.3
0.2
4
0.8
0.1
3
0.3
0.1
4
0.4
0.05
3
0.15
0.05
2
0.1
0.15
2
0.3
0.05
2
0.1
0.05
3
0.15
0.15
2
0.3
1
2.9

Note: the ratings values are as follows;

(1)
(2)
(3)
(4)

= Major weakness
=Minor weakness
=Minor strength
=Major strength

We have classified for 4 class of rating which is major weakness, minor weakness, minor
strength and major strength.From these three organization starbucks have conquer the higher
rating in each critical success factors.it gets for 4 rate in employees, revenue and net income. The
other critical success factors starbucks gets for 3 and 2 rating. It show starbucks has a good
reputation. Besides that Tim Hortons has get best rating in revenue and product lines. Other than
that it only gets for 2 and 3 rating. The minor weakness for Tim Hortons are advertising, market
expansion, product qualityand P/E ratio. Krispy Kreme is the weakest among all three
organization.it only get 2 for the best rating which is advertising,market expansion, net income,
product quality, consumer loyalty, product line, revenue and employees. The total score for
Krispy Kreme is 2.1. Starbuck get the highest score that is 3.05 and Tim Hortons gets 2.9.

Annual objective (recommendation)

Become a global krispy kreme that can be enjoyed by everyone all over the world
Policies (recommendation)

Serving only a hot doughnuts for our customers

Customers will be entertain as soon as they get into our restaurant
Full, fair, accurate, timely, understandable disclosure
Accountability.

CPM

Critical Success
Weight
Factors

Dunkin
Donuts
Rating
Weighted
Score

Market Share
0.2
Price
0.1
Financial Position
0.2
Product Quality
0.1
Product Lines
0.2
Consumer Loyalty
0.1
Employees
0.1
Total
1.0

4
0.60
1
0.20
4
0.40
1
0.20
4
0.80
1
0.20
1
0.20

Starbucks
Corporation
Rating
Weighted
Score
4
0.80
1
0.20
4
0.60
1
0.20
2
0.30
1
0.20
1
0.20
2.60

Tim Hortons
Rating
Weighted
Score
4
0.80
1
4
0.80
2
3
4
0.60
1
0.20

0.20

0.40
0.80

2.50

3.80

EXTERNAL FACTOR EVALUATION (EFE) MATRIX

Opportunities
1.New stores open systemwide is 19 store
2.Down employees to 4,759 employees
3.Share increase 400 percentage in two years
4.Total revenue increase from 2007 to 2008

Weight
0.10
0.15
0.15
0.025

Rating
3
4
4
3

Weighted Scores
0.30
0.60
0.80
0.15

5. Average weekly sales increase per store is 11

percentage
6. 60 new international stores opened
7.Asia and Middle East offer favorable
population

0.10

0.20

0.25
0.05

4
3

0.50
0.40

Threats
1.Net decrease of 6 domestic stores
2.Franchisees closed 13 stores
3.Closing 71 domestic stores

0.025
0.05
0.10

2
2
4

0.15
0.20
0.30

Total

1.0

3.60

INTERNAL FACTOR EVALUATION (IFE) MATRIX

Strenghts
1.Franchise fees and royalties increase over 14
percent
2.The sales mixes and othr supplies increase 26
percent in equipment,furniture,fixtures,and
similar items
3. Capacity can reduce from 4000 to 10,000
dozen doughnut daily
4. Compromised to four executive officers
5. Plans to convince the British to replace the
biscuit menu to doughnut
6. Offer the tea drinking its own custom brews of
coffee
7. Can develop new doughnut that can be low
calory doughnut selection
8. Should continue to expand globally and
domestic compare with competitor
Weaknesses

Weight
0.05

Rating
3

Weighted Scores
0.15

0.05

0.20

0.07

0.25

0.02
0.15

3
4

0.10
0.30

0.15

0.30

0.20

0.45

0.05

0.15

1.Sales to franchise store decrease 10 percent

2. Ingredients and coffee in doughnut decrease 13
percent
3. Allow constumer to watch the actual doughnut
making process

0.02
0.04

2
2

0.10
0.15

0.20

0.30

Total

1.0

2.45

SWOT Analysis Matrix:

Strengths (S)
1.
2.
3.

Opportunities (O)
1.

Global Expansion.

2.

Mass Customization

3.

Upscale boutique
Stores

Commoditization

2.

Consumer concerns
about nutritional
content

1.

Global Market Penetration.

2.

Menu Diversification.

3. Domestic Market Penetration

SO Strategies
1.
2.
3.

Threats (T)
1.

Brand Name, Trademark, &

Goodwill.
Cost Efficiency &
Operations.
New Product Development

Weaknesses (W)

S1-O1- Target Americans abroad

(MKT DEV)
S2-O2- Build-a-Burger Aisle (PRD
DEV)
S3-O3- Caf Wendy- featuring
upscale/varied fare (CONSEN
DIV)

WO Strategies
1.
2.
3.

ST Strategies
1.
2.
3.

S1-T1- Heavily market quality,

seek premium (MKT PEN)
S2-T1- Build-a-Burger Aisle (PRO
DEV)
S3-T2- Develop Healthy Fare
menu (PRO DEV)

W1-01- Form partnership w/ local

eateries/firms to establish brand
(JOINT VEN/MKT DEV)
W2-O1- Offer local fare in
international stores (PRO DEV)
W2-O3- Caf Wendyfeaturing upscale/varied fare
(CONSEN DIV)

WT Strategies
1.
2.

W1-T1- Position overseas stores

to seek premium market (MKT
PEN)
W2-T2- Develop Healthy Fare
menu (PRO DEV)

3.

3.

Government Action

W2-T2- Purchase competitor

known for healthy menu
(Quiznos e.g.) (HOR INT)

IFF Score
(2.70)

4.0

CFF
Score
(1.85)

4.0

Strong
4.0 - 3.0

Average
3.0 - 2.0

Strong

Average

Weak

4.0 - 3.0

3.0 - 2.0

2.0 - 1.0

3.0

2.0

1.0

3.0

Weak
2.0 - 1.0

Diversification,
retrenchment,
divestment

2.0

1.0

The above framework is a reference to specific SWOT strategies that make prudent sense in our
overall analysis. Specifically, concentric diversification is an appropriate strategy for Krispys .

SPACE Matrix Analysis

Internal Strategic Position

External Strategic Position

Financial (FS)

Environmental (ES)

+6 best, +1 worst

-1 best, -6 worst

+_1_ Return on investment

-3_ Stage of technological life cycle

+_1_ Leverage

-3_ Rate of inflation

+_3_ Liquidity

-2__ Demand variability

+__1 Working capital

-2__ Price range of competing offerings

+_1_ Cash flow

-1__ Barriers to entry into market

+_1_ Ease of exit from market

-4__ Competitive pressure

+__4 Risk level of business

-3__ Price elasticity of demand

+ __1.7_ average

-2.57___ average

Competitive (CA)

Industry (IS)

-1 best, -6 worst

+6 best, +1 worst

__-0.87__
y-coordinate
(FS + ES)

-3__ Market share

+3__ Stage of industry/alliance evolution

-2__ Price/quality ratio

+3__ Growth potential

-3__ Product life cycle

+4__ Profit potential

-2__ Customer loyalty

+4__ Financial stability

-2__ Competition's capacity utilization

+4__ Technological know-how

-2__ Technological know-how

+4__ Resource utilization

-3__ Bargaining power

+3__ Capital intensity

-2.43____ average

+3.57___ average

Vector magnitude: square root of (y2 + x2) =

_1.44____ versus maximum 7.07 =

SPACE Matrix Analysis

__1.14__
x-coordinate
(CA + IS)

___weak______(strong,
medium, weak)

FS
Aggressive

Conservative

Intensive Integration

+6

Intensive,

Diversification

+5

concentric

+4

diversification

+3
+2
+1

+6

+5

+4

+3

v = 1.44

+2 +1

-1

--2

-3

-4

-1

IS

-5

-6

CA

-2

Retrenchment,

-3

divestiture,

-4

liquidation,

-5

concentric

-6

diversification

Integration,
Intensive

Defensive

Competitive
ES

The above framework recommends that Krispys pursue an integration as well as an intensive
strategy albeit we have more confidence in the intensive strategies. The strategy that seems to make the
most sense is the product development as it will create the most economic value added, i.e. the build a
burger aisle or a healthy fare menu.

Long terms objectives Krispy Kream Doughnuts

The Krispy Kream long-term objectives include positioning itself as the leading highquality donut maker and retailer in its established market, and to expand its market
around the world, with emphasis on domestic expansion. Doubles company
revenues in two years through market development and market penetration.
(Current revenues are $42,236,000). Based on the long term objective, Krispy
Kream Doughnuts needs to increase divisional revenues by 40% this year and 40%
next year.
Specific strategies Krispy Kream Doughnuts
1) Develop new product this year that are successfully marketed
Struggling Krispy Kreme plans unit growth, new menu items. Sales of donuts
started to increase as consumers turn to comfort food. Some of the reasons
consumers are seeking their comfort in doughnuts is new products have been
developed without Trans fats, in smaller portion sizes and new flavors. No
Sugar-Coating the Situation, Impulsive, Ingenious, Enticing. The unparalleled
appeal of sweet goods, donuts in particular, seems to be able to keep them in
consumers hands no matter what diet they are working on in their heads.
Even with this long-standing affair between consumers and sweet goods,
producers still need to continually find new ways to promote their products
and offer new options to keep consumers interested. Krispy Kreme's
promotion with the Kansas City Royals is offered as a successful example.
Tradition and comfort play well for donuts despite consumer tendency to not
view sweet goods in this way. Expanding donuts and sweet goods into ethnic
flavors is what Flower Foods and Awrey Bakeries believe could be a winning
startegy.
2) The operations are carried out through three segments
The operations are carried out through three segments, company stores
operations, franchise operations and Krispy Kreme Manufacturing and
Distribution. The stores are both retail outlets and highly automated
producers of over twenty varieties of doughnuts. The company is a branded
specialty retailer, and produces more than three million doughnuts a day. In
addition to its Krispy Kreme stores, the company sells its doughnuts in
supermarkets, convenience stores and other retail outlets throughout the
country. The Krispy Kreme Manufacturing and Distribution segment sells
doughnut-making equipment, mix, other ingredients and supplies and also
operates three distribution centers.
3) Competitive advantage
Krispy Kreme has a competitive advantage over other bakeries because the
self-rising yeast doughnut has an excellent reputation representing freshness
at its finest and because of the innovative doughnut making process. This
process appeals to its customers through anticipation and the sensory
response. The first indication is the large red "hot Krispy Kreme now" neon

sign that's displayed while the doughnuts are being made. When the
customer enters the Krispy Kreme doughnut shop, the aroma of the fresh
doughnut hits their nose, and the anticipation from watching the fresh
doughnuts roll off the line four feet away overtakes them. When the customer
gets to the cashier, their mouth is watering and they always order too many.
This highly refined presentation through the senses has made Krispy Kreme a
cult favorite.
4) Krispy Kreme introduces healthy donut
This is a whole wheat donut with a sweet caramel flavoring covered in the
original Krispy Kreme glaze. This donut is hitting headlines because it is only
180 calories -- a great reduction from the company's "original recipe" donuts.
This product could potentially begin bringing back consumers the company
has lost during the original health and low-carb scares and accelerate the
company's coffee and drink businesses.

5) KKDs strategy provides the company three sources of revenue

Sales at company owned stores, royalties from franchised stores and
franchise fees from new stores; and sales of doughnut mixes, customized
doughnut-making equipment, and coffees to franchised stores. KKD shifted
in focus from a wholesale bakery to a specialty retail bakery to promote
and increase sales at the companys 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.
6) KKD gave reliance on franchising associate stores and opened a few new
company-owned stores as a means of expanding nationally and
internationally. However, franchise licenses were granted only to
candidates who have experience in multi-unit food establishments and who
possess adequate capital to finance the opening of new stores in their
assigned territory. It is remarkable how the company built a verticallyintegrated value chain that supplies both company-owned and franchised
stores proprietary doughnut making equipment as well as doughnut mixes.

Krispy Kream Dougnuts

Comparism Income Statement
For January 2005 until January 2009
2009

2008

2007

2006

2005

Revenue
Total Revenue

383.98
383.98

429.32
429.32

461.2
461.2

543.36
543.36

707.77
707.77

Cost of Revenue, Total

Gross Profit

345.01
38.98

380.01
49.31

389.38
71.82

474.59
68.77

598.28
109.49

23.46

26.3

48.86

67.73

55.3

0.0
8.71

0.0
18.43

0.0
21.05

0.0
28.92

0.0
31.93

0.0

0.0

0.0

0.0

0.0

0.55

57.34

28.49

90.9

163.39

1.5

0.01

1.92

-1.74

0.0

4.76

-52.78

-28.5

-117.03

-141.14

Selling/General/Administrativ
e Expenses, Total
Research & Development
Depreciation/Amortization
Interest Expense (Income), Net
Operating
Unusual Expense (Income)
Other Operating Expenses,
Total
Operating Income
Interest Income (Expense), Net
Non-Operating
Gain (Loss) on Sale of Assets
Other, Net
Income Before Tax

0.0

0.0

0.0

0.0

0.0

0.0
2.82
-3.56

0.0
-2.97
-64.73

0.0
-0.45
-41.03

0.0
0.0
-136.54

0.0
-0.4
-147.38

Income Tax - Total

Income After Tax

0.5
-4.06

2.32
-67.05

1.21
-42.24

-0.78
-135.76

9.67
-157.05

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

-4.06

-67.05

-42.24

-135.76

-157.05

0.0

0.0

0.0

0.0

-41.29

-4.06

-67.05

-42.24

-135.76

-198.34

Minority Interest
Equity In Affiliates
U.S. GAAP Adjustment
Net Income Before Extra.
Items
Total Extraordinary Items
Accounting Change
Discontinued Operations
Net Income

Total Adjustments to Net

Income
Preferred Dividends
General Partners' Distributions

0.0

0.0

0.0

0.0

0.0

65.94

63.81

61.87

61.81

61.63

-0.06

-1.05

-0.68

-2.2

-2.55

-0.06

-1.05

-0.68

-2.2

-3.22

65.94

63.81

61.87

61.81

61.63

-0.06

-1.05

-0.68

-2.2

-2.55

-0.06

-1.05

-0.68

-2.2

-3.22

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

10.68

9.8

20.33

20.21

6.88

8.1

17.8

20.3

27.9

30.91

Normalized EBITDA
Normalized EBIT
Normalized Income Before
Tax
Normalized Income After
Taxes
Normalized Income Available
to Common

14.02
5.31

22.99
4.56

21.04
-0.01

2.78
-26.14

54.18
22.25

-3.01

-7.39

-12.53

-45.64

16.01

-3.7

-29.78

-23.72

-76.68

-50.85

-3.7

-29.78

-23.72

-76.68

-50.85

Basic Normalized EPS

Diluted Normalized EPS
Amortization of Intangibles

-0.06
-0.06
0.61

-0.47
-0.47
0.63

-0.38
-0.38
0.75

-1.24
-1.24
1.02

-0.83
-0.83
1.03

Basic Weighted Average

Shares
Basic EPS Excluding
Extraordinary Items
Basic EPS Including
Extraordinary Items
Diluted Weighted Average
Shares
Diluted EPS Excluding
Extrordinary Items
Diluted EPS Including
Extraordinary Items
Dividends per Share Common Stock Primary Issue
Gross Dividends - Common
Stock
Interest Expense,
Supplemental
Depreciation, Supplemental

Procedure for strategies review and evaluation

1) Company strategy
Acquire a chain of retail stores to meet KDD sales growth and profitability
objective.
2) Supporting policies
All stores will open from 10.00 A.M to 10.00 P.M. Monday trough
Saturday. This policy could increase retails sales if stores currently
open only 40 hours a week.
All stores must submit a Monthly Control Data Report. This policy could
reduce expense-to-sales ratios.
All stores must support company advertising by contributing five
percent of their total monthly revenues for this purpose. This policy
could allow the company to establish a national reputation.
All stores must adhere to the uniform pricing guidelines set forth in the
Company Krispy Kream Doughnuts. This policy could help assure
customers that the company offers a consistent product in terms of
price and quality in all its stores.
3) Division Objective
Increase the divisions revenues from $40 million to $50 million in 2008 and
increase the divisions revenues from $50 million to $60 million in 2009.
4) Production Department Objective
Increase production 40% 2008 and 40% 2009.
5) Supporting policies
Beginning January 2008, employee will have the option of working up
to 20 hours of overtime per week. This policy could minimize the need
to hired additional employees.
Beginning January 2008, perfect attendance awards in the amount of
$100 will be given to all employees who do not miss a work day in a
given year. This policy could decrease absenteeism and increase
productivity.
Beginning January 2008, new equipment must be leased rather than
purchased. This policy could reduce tax liabilities and thus allow more
funds to be invested in the modernizing production processes.

Krispy Kremes Financial Ratio Analysis (February

2009)

Key Ratios

Growth Rate %

Krispy Kreme

Industry

Sales (qtr vs year ago qtr)

-11.40

5.00

Net Income (YTD vs YTD)

NA

34.70

Net Income (qtr vs year ago qtr)

59.40

30.20

Sales (5 years annual average)

-9.97

6.20

Net Income (5 years annual

NA

14.37

average)
Dividens (5 years annual average)

NA

24.05

Current P/E Ratio

NA

17.3

P/E Ratio 5 Years High

NA

6.7

P/E Ratio 5 years Low

NA

3.8

Price/Sales Ratio

0.74

2.35

Price/ Book Value

4.26

6.29

Price/Cash Flow Ratio

35.60

11.60

Gross Margin

13.9

35.3

Pre-tax Margin

0.3

5.1

Net Profit Margin

-0.3

13.6

5 Years Gross Margin (Average)

13.4

36.3

5 Years Pre-Tax Margin (Average)

-15.6

15.1

5 Years Net Profit Margin (Average)

-16.1

10.6

Debt/Equity Ratio

0.81

2.16

Current Ratio

1.5

1.0

Quick Ratio

1.2

1.0

Interest Coverage

0.9

25.6

Leverage Ratio

2.8

4.2

Book Value/Share

0.90

11.94

Return on Equity

-1.6

54.2

Return on Assets

-0.5

12.5

Price ratio

Profit Margin %

Financial Condition

Investment Return %

Return on Capital

-0.7

14.9

Return on Equity (5 Years Average)

-55.5

27.8

Return on Assets (5 Years Average)

-21.7

9.8

Return on Capital (5 Years

-29.7

12.2

Income/Employee

-254

10,444

Revenue /Employee

91,067

98,255

Receivable Turnover

17.1

49.5

Inventory Turnover

18.7

97.5

Assets Turnover

1.9

1.1

Average)
Management Efficiency

5 Years Summary

Date

Average P/E

Price/Sales

Price/Book

Net Profit Margin

02/09

-51.30

0.24

1.62

(%)
-1.1

02/08

-6.20

0.43

3.34

-15.6

01/07

-13.10

1.73

10.22

-9.2

01/06

-3.00

0.61

3.03

-25.0

01/05

-7.60

0.75

2.22

-22.2

Date

Book Value/Share

Debt/Equit

ROE (%)

ROA (%)

Interest

02/0

$0.86

y
1.30

-7.0

-2.1

Coverage
0.4

9
02/0

$0.87

1.35

-118.5

-33.1

-5.4

8
01/0

$1.26

1.36

-53.5

-12.1

-1.4

7
01/0

$1.76

1.13

-124.9

-33.0

-5.8

6
01/0

$3.90

0.61

-65.2

-32.7

-20.5

Net Worth Analysis (February 2009 in millions)

1. Stockholders Equity + Goodwill

81.62

2. Net Income

-4.06

3. Share Price = EPS x Net Income

0.24

4. Number of Shares Outstanding x Share Price

16.20

Method Average

94