UNIVERSITAS TRISAKTI

STRATEGIC MANAGEMENT PAPER

KRISPY KREME DOUGHNUTS MANAGEMENT

NAMA : IRVING FEISER PASARIBU

KELAS : KELAS KHUSUS F LANJUTAN MANAJEMEN
NIM : 022154002

CHAPTER 1
INTRODUCTION
1.1 BACKGROUND ISSUES

Currently the food and beverage industry is increasing, the growth is related to the attitude of society are
increasingly critical in choosing food. Eating is a primary need that is endless, every day people always
need to eat but as time goes by changing human behavior. Humans need food that has certain
characteristics. this affects a growing number of companies engaged in this industry. When we observe
the conditions in the market, in almost all segments of the food and beverage market is getting much
demand. Not just the tight competition, the character of the food and beverage market is also likely to
increasingly challenging and if not faced with the right strategy it will be a failure, when viewed from
the characteristics of consumers alone leads to impulse buyers. They are easy to switch brands.
To deal with that company should be able to provide two kinds of benefits to consumers, namely
functional benefits and emotional benefits to its customers. Functional benefit is the value given by the
company to the consumer of the goods or services used, it means consumers are satisfied if the goods or
services can perform its functions desired by the consumer, while the emotional benefits is the value that
companies provide to their customers is measured from the level of customer satisfaction with service
and existing facilities. Consumers generally want to get both of these benefits, if the company is able to
provide both of these benefits, then the consumer will feel a good experience to the company. This is
important because it is the key to success for the company to win the market. Therefore, the role of
experiential marketing is indispensable in contributing to the company's progress. The reason is, the
provision would create a pleasant experience for consumers emotional benefits that impact increases
consumer confidence to choose, use, and ultimately will be loyal to the brand. From the brand image of
the company's products, for example in terms of competitive price, good quality, good image, benefits
and outstanding service will provide functional benefits to consumers that will also encourage consumer
confidence that will have an impact on brand loyalty.
Conditions like these that encourage the greater number of competition donuts and coffee with modern
innovation offers distinct advantages. This is an effort to modern outlets for entrepreneurs to survive in
the business competition intensifies, but offers a view of the outlet and attractive product alone is not
enough. Every company should be Able to create products and services that evoke an unforgettable
experience (experiential marketing). The concept of experiential marketing Began grounded in the world
of marketing has now been-adopted by the company, Instant confirmation items, namely by adding the
element of experience of the product. With experiential marketing, marketers are expected to use a wide
selection of Appropriate strategies in accordance with the expected goals, be it to Achieve brand
awareness, brand perception, brand equity or brand loyalty (Fransisca Andreani, 2007, p5).
Krispy Kreme is one of the companies in the food and beverage industry to implement this concept.
Krispy Kreme comes with products that create experience for consumers by stimulating the five senses
(sense), feeling or emotion (feel), mind (think), action (act), and efforts to connect consumers with the
brand itself (relate). A brand products that provide creative experiences for consumers will be able to
create a brand image, brand trust and increase brand loyalty.
2

Establish customer loyalty requires a strong emotional bond between consumers and companies. The
emotional bond formed through a unique experience that is perceived by consumers to the company's
products. Krispy Kreme offers experience to its customers. Because Krispy Kreme is one of the food &
beverage industry company that prioritize features and benefits Also while prioritizing customer
satisfaction. One of the success factors in Krispy Kreme can be seen from experiential marketing factor.
When connected to the concept of sense-feel-act-think-relate, Krispy Kreme stimulate the senses of
consumers by providing a sense be fragrant aroma of donuts and coffee. Products offered by Krispy
Kreme Also has a very unique name such as Nutty Butter, Mud Pie, Choco Snow Flakes, White
Rainbows, Custard Flower and Blueberry Blossom. All donuts are Also designed with a unique and good
quality. Overall facilities and infrastructure used by Krispy Kreme is in conformity with the lifestyle of
today's modern society. For consumers, can buy Krispy Kreme donuts have a pride in itself (lifestyle).
Krispy Kreme is not just selling Doughnut and coffee were delicious, but also provide a pleasant
atmosphere and a memorable experience. This is a form of experiential marketing implementation which
lately often discussed by marketing experts. Experiential Marketing applied by Krispy Kreme shows how
to create a product that not only offer functional benefits are delicious Doughnut and coffee but also
emotional benefits of both sides. An experience acquired by consumers after buying donuts at Krispy
Kreme provide a memorable experience, raises brand image, brand trust and brand loyaty positive to
product Krispy Kreme. In the end, consumers will be encouraged to spread their positive perceptions
about Krispy Kreme to friends, relatives, and so on. This makes the formation of Word Of Mouth and
Krispy Kreme make much discussion. A great buzz comes from the attributes and advantages inherent
in the brand and product.
With many outlets popping donuts and coffee in the shopping center were heavily shared promotions that
can attract the attention of consumers, of the stiff competition consumers will easily switch loyalties from
one brand to another brand. Of course this is an important consideration for companies how to make
customers loyal to the brand companies, especially for Krispy Kreme.

1.2 COMPANY PROFILE KRISPY KREME

Founder : Vernon Carver Rudolf

Tokoh penting : Vernon Carver Rudolf (Founder), Anthony N Thompson (CEO)
Website : www.krispykreme.com
Type Of Businness : Food And Beverage Retail World Wide
Headquarters : Winston-Salem, Carolina Utara, Amerika
Established : Since 1937 - now
Total Employees: 14.000 World Wide
Promotion : Website, banner, advertising, social media,

CHAPTER 2
INTERNAL & EKSTERNAL FACTOR, FINANCIAL PERFORMANCE

2.1 EXECUTIVE SUMMARY KRISPY KREME

History of Krispy Kreme came from a man named Vernon Carver Rudolf on July 13, 1937, he was
carrying a secret recipe donut of a chef from France, he founded the company donuts first time in Winston
Salem, North Carolina which was formerly called Old Salem with the concept of wholesale bakery. The
delicious scent of cooking doughnuts drifted into the streets, and passers-by stopped to ask if they could
buy hot doughnuts. So, he cut a hole in an outside wall and started selling hot Original Glazed doughnuts
directly to customers on the sidewalk.
In 1944 Birth of The Showcase
After the war, a showcase was designed for this space. The top served as the counter. Since cake
doughnuts and cake sticks were made as well as yeast doughnuts, an attractive display could be made of
the variety. The display case is a feature you cannot miss when entering our stores today. Vernon Carver
Rudolf mission is Quality and Consistent to its customers.
In 1945 Original Glazed
Then and Now, While times had changed a lot the company's signature Original Glazed Doughnut stayed
the same with eight wonderfull varieties Glazed, Jelly Filled peanut cake stick, plain powdered, coconut
chocolate, cinnamon. With the development of his business in 1948 built factory plant mix and in 1949
the Department of operating supplies.
In 1955 bowtie gets trademarked
The Krispy Kreme bowtie logo is trademarked with familiar green and red coloring. In the same year
fundraising has begins named krispy Kreme fundraising - Special business ordering from churches,
schools, clubs and other organizations took an upswing in 1955, and has grown steadily. Using the Fund
Raising Plan to sell doughnuts has enabled many schools to buy uniforms and take school trips. The Plan
has also helped organizations buy air conditioners, pianos, and libraries for schools. It has helped to fund
scholarship programs.
In 1963 change the mode of production
Hand production was a thing of the past when automation took over. The planning and timing of
production became a vital task.
In 1973 Bad News Came To Krispy Kreme
the founder Krispy Kreme Mr. Vernon Carver Rudolf dies and the company was sold to Beatrice Foods
but the development is very slow.
In 1982 Krispy Kreme Doughnuts acquired back by Krispy Kreme and continues to be developed by
opening outlets in several major cities in the US
In 1989 First retail store
4

The first retail-only store is opened which brings the doughnuts out to the customer on the 180 curve.
This first location is on High Point Road in Greensboro, NC. The innovative menu system helped shops
to be able to order products at a much faster pace than the former paper ordering system. A team member
testing the program at the launch said, "I can order in fifteen minutes. It's amazing. I can change orders
when necessary and then print my tickets." Since this time, the Krispy Kreme Information Services
Department has been researching innovative solutions to provide ease to team members and guests.
In 2001 First international shop in Canada
In December 2001, the first International store opened in Canada just outside of Toronto .
In 2011 New Krispy Kreme Coffe
Krispy Kreme proudly announces the launch of its newKrispy Kreme Signature Coffee Blends at
participating U.S. and Canada locations. Three specially crafted coffee blends "WORTHY" of its oneof-a-kind doughnuts. This also opened the door for speciality coffee blends. In the same year Hot Light
App Launched - We invented the Hot Light App in response to customer requests to know exactly when
our doughnuts are the hottest. Becoming wildly popular since it's inception, it continues to evolve as it
alerts Krispy Kreme fans when it's the perfect time for hot, delicious doughnuts.
In 2012 Celebrate The 500 International Locations
We celebrated our 500th international opening in Aguascalientes, Mexico. Since opening our first
international location in 2001, we have expanded into 21 international markets.
In 2013 We Celebrate The 100 In Mexico
We proudly open the doors of our new store in Cancun, making it Mexico's 100th Krispy Kreme
location. Along with Cancun, Krispy Kreme currently has locations in some of the most vibrant and
exciting cities in Mexico, including Mexico City, Puebla, Cuernavaca, Monterrey, Leon, Guadalajara,
and Aguascalientes.
In 2014 Tony Thompson June 1, 2014 - Appointment of new Krispy Kreme President and CEO
Anthony N Thompson.

2.2 KRISPY KREME VISION STATEMENT

Is to be the worldwide leader in sharing delicious tastes and creating joyful memories.
2.3 KRISPY KREME MISSION STATEMENT
Is to touch and enhance lives through the joy that is Krispy Kreme.

2.4 KRISPY KREME VALUES

We believe :
Consumers are our lifebloods, the center of the doughnut.
There is no substitute for quality in our service to customers.
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
5

2.5 Internal factors

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.
Perishability of product
Limited product line (heavy reliance on doughnut sales)
Overextended (i.e., Montana Mills acquisition)
Lack of locations in some areas
Pricing in some locations
2.6 External factors
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
restaurants

2.7 FINANCIAL PERFORMANCE

FINANCIAL REPORT KRISPY KREME DOUGNUTS
EXHIBIT I

KRISPY KREME DOUGHNUTS INCOME STATEMENT

1-FEB3-FEB2009
2009
REVENUES
$ 383,984
$ 429,319
OPERATING EXPENSES
DIRECT OPERATING EXPENSES
(EXCLUSIVE OF DEPRECIATION AND
$ 345,007
$ 380,014
AMORTIZATION SHOWN BELOW)
GENERAL AND ADMINISTRATIVE
$ 23,458
$ 26,303
EXPENSES
DEPRECIATION AND AMORTIZATION
$ 8,709
$ 18,433
EXPENSES
IMPAIRMENT CHARGES AND LEASE
$ 548
$ 62,073
TERMINATION COSTS
SETTLEMENT OF LITIGATION
$ (14,930)
OTHER OPERATING (INCOME) AND
$ 1,501
$ 13
EXPENSES, NETT
OPERATING INCOME (LOSS)
$ 4,761
$ (42,587)
INTEREST INCOME
$ 331
$ 1,422
INTEREST EXPENSES
$ (10,679)
$ (9,796)
LOSS ON EXTINGUISHMENT OF DEBT
$ (9,622)
EQUITY IN LOSES OF EQUITY METHOD
$ (786)
$ (933)
FRANCHISEES
OTHER NON OPERATING INCOME AND
$ 2,815
$ (3,211)
(EXPENSES) NETT
LOSS BEFORE INCOME TAXES
$ (3,558)
$ (64,727)
PROVISION FOR INCOME TAXES
$ 503
2,324
NET LOSS
$ (4,061)
$ (67,051)

28-JAN2007
$ 461,195
$ 389,379
$ 48,860
$ 21,046
$ 12,519
$ 15,972
$ 1,916
$ (28,497)
$ 1,627
$ (20,334)
$ (842)
$ 7,021
$ (41,025)
$ 1,211
$ (42,236)

EXHIBIT II
KRISPY KREMES BALANCE SHEETS ( ALL NUMBERS IN
THOUSANDS)
PERIOD ENDING
FEBRUARY
FEBRUARY
JANUARY
1 2009
3 2008
28 2007
ASSETS
Current Assets
Cash and Cash equivalents
$ 35,538
$ 24,735
$ 36,242
Short Term Investments
Net Receivables
$ 20,770
$ 26,764
$ 64,227
Inventory
$ 15,587
$ 19,987
$ 26,612
Other current Assets
$ 3,991
$ 4,594
$ 5,187
Total current Assets
$ 75,886
$ 76,080
$ 132,268
Long Term Investments
$ 1,365
$2,024
$ 4,261
Property Plant & Equipment
$ 85,075
$ 90,996
$ 168,654
Goodwill
$ 23,496
$ 23,496
$ 28,094
Intangible Assets
$ 1,036
$ 1,531
$ 1,900
Acumulated Amortization
Other Assets
$ 6,144
$ 5,855
$ 9,226
Deferred Long term Asset
$ 2,004
$ 2,396
$ 5,539
Charges
Total Assets
$ 195,006
$ 203,378
$ 349,942
Liabilities
Current Liabilities
Accounts Payable
$ 27,816
$ 30,630
$ 133,140
Short/current long term Debt
$ 3,761
$3,788
$ 1,730
Other current liabilities
$ 8,039
$ 8,800
Total current liabilities
$ 39,616
$ 43,218
$ 134,870
Long Term Dept
$ 97,449
$ 75,156
$ 105,966
Other Liabilities
$ 23,865
$ 25,656
Defered Long term Liability
$ 106
$ 3,488
$ 4,038
Charges
Minority Interest
Negative Goodwill
$ 137,171
$ 145,727
$ 270,530
Total Liabilities
Stockholders Equity
Misc Stock Option warrants
Redeemable Prefered Stock
Prefered Stock
8

Common Stock
Retained earnings
Treasury Stock
Capital Surplus
Other Stockholders Equity
Total Stockholders Equity
Total Liabilities and SE

Source : www.krispykreme.com

$ 361,801
$ (303,133)
$ (913)
$ 57,755
$ 194,926

$ 355,615
$(299,072)
$ 81
$ 56,624
$ 202,351

$ 310,942
$ (233,246)
$ 1,266
$ 78,962
$ 349,492

EXHIBIT III NUMBER OF EACH TYPE OF STORE AT THE END OF FYs 2009. 2008, 2007
and 2006
FEBRUARY
FEBRUARY
JANUARY
JANUARY
1 2009
3 2008
28 2007
29 2006
BY OWNER
COMPANY STORE
93
105
113
133
FRANCHISE
430
344
282
269
STORE
TOTAL
523
449
395
402
SYSTEMWIDE
BY TYPE
FACTORY
STORES
COMPANY
83
97
108
128
FRANCHISE
198
198
188
195
TOTAL
281
295
296
323
FACTORY
STORE
SATELITES
COMPANY
10
8
5
5
FRANCHISE
232
146
94
74
TOTAL
242
154
99
79
SATELITES
TOTAL
484
308
198
158
SYSTEMWIDE
DOMESTIC
STORE
COMPANY
93
100
107
127
FRANCHISE
132
145
165
207
TOTAL
225
245
272
334
DOMESTIC
STORES
9

INTERNATIONAL
STORES
COMPANY
FRANCHISE
TOTAL
INTERNATIONAL
STORES
TOTAL
SYSTEMWIDE

5
298
298

6
199
204

6
117
123

62
68

523

409

246

130

Source : Krispy Kremes 2009 Form 10K

EXHIBIT IV KRISPY KREMES DOUGHNUTS SEGMENTED REVENUES AND EXPENSES

(In Thousands)
YEAR ENDED
FEBRUARY
FEBRUARY
JANUARY
1 2009
3 2008
28 2007
REVENUES BY BUSINESS
SEGMENT
Company Stores
$ 265,890
$ 304,444
$ 326,199
Franchise
$ 25,537
$ 22,958
$ 21,075
KK Supply Chain
$ 92,557
$ 101,917
$ 113,921
Total Revenues
$ 383,984
$ 429,319
$ 461,195
Operating Expenses by Business
Management
Company Store
$ 268,098
$ 299,806
$ 307,635
Franchise
$ 8,936
$ 8,746
$ 4,602
KK Supply Chain
$ 67,973
$ 71,462
$ 77,142
Total Operating Expenses
$ 345,007
$ 380,014
$ 389,379
DEPRECIATIONS AND
AMORTIZATION EXPENSES
Company Stores
$ 6,402
$ 11,558
$ 15,979
Franchise
$ 86
$ 92
$ 119
KK Supply Chain
$ 1,019
$ 5,586
$ 3,469
$ 1,202
$ 1,197
$ 1,479
Corporate Administration
Total Depreciation and
$ 8,709
$ 18,433
$ 21,046
Amortization Expenses
Source : Krispy Kremes doughnuts Inc. 2009 Annual Report, p. 34,92

10

2.8 FINANCIAL ANALYSIS

During the period 2007 - 2009 (all figures in Thousands):
Total Asset Krispy Kreme Doughnuts decreased from $ 349.492 be $ 194.926. (EXHIBIT II)
Total Stockholders' Equity decreased from $ 78.962 be $ 57.755. (EXHIBIT II)
Total Revenue Krispy Kreme Doughnuts decreased from $ 461.195 be $ 388.984. (EXHIBIT IV)
Company Stores: revenue fell from $ 326.199 be $ 265.890, down from $ 307.635 expense be $
268.098,
so that in the year 2009 Company Stores no longer profit but a loss of about $ 2.208.
Franchise: revenue rose from $ 21.075 be $ 25.537, expense rose from $ 4.602 into $ 8.936, so that
in years
2009 franchise still generate a profit of about $ 16.601.
KK Supply Chain: revenue fell from $ 113.921 be $ 92.557, down from $ 77.142 expense be $
67.973,
So that in the year 2009 of KK Supply Chain still give a profit of about $ 28.584.

STORES BY OWNER

STORES BY TYPE
COMPAN
Y STORES
18%

500
400
300
200
100

FRANCHISE STORES
82%

SATELITE

FACTORY STORES

COMPANY
STORES
10
83

FACTORY STORES

FRANCHISE
STORES
232
198

SATELITE

STORES BY LOCATION
500
400
300
200
100

INTERNATIONAL
DOMESTIC

DOMESTIC

COMPAN
Y STORES
5

93
INTERNATIONAL

FRANCHI
SE
STORES
298
132

11

BRAND NAME
Kri s py Kreme
Pri vate Label
Entenmanns
Hos tes s
Donettes
Entenmanns
Softees
Li ttl e Debbi e
Entenmanns
Extreme
Hos
tes s
Meri ta
Bl ue Bi rd

USD
130,409,808
88,304,008
85,233,104
83,839,496
33,668,032
30,860,856
17,163,728
17,089,810
13,363,270
11,534,341

BY OWNER
COMPANY
STORES
FRANCHISE
STORES

93 / 18 %
430/ 82
%
523 / 100
%

UNIT SALES
42,774,572
38,358,984
25,656,796
36,445,068
10,643,769
24,837,084
5,244,544
5,745,155
6,303,118
8,092,483

BY TYPE
FACTORY
SATELITE
STORES
83
10

PRICE/UNIT
T
3.05
2.3
3.32
2.3
3.16
1.24
3.27
2.97
2.12
1.43

RANK

4
6
2
7
1
10
3
5
8
9

BY LOCATIONS
DOMESTIC
INTERNATIONAL
93

198

232

132

298

281

242

225

303

12

YEAR ENDED
REVENUES BY BUSINESS
SEGMENT
Company Stores
Franchise
KK Supply Chain
Total Revenues
Operating Expenses by Business
Management
Company Store
Franchise
KK Supply Chain
Total Operating Expenses
Profit By business segment
Company Stores
Franchise
KK Supply Chain
Total Profit
Total stores
Company Stores
Franchise
Average profit per store
Company Stores
Franchise

(In Thousands)
FEBRUARY
1 2009

FEBRUARY
3 2008

JANUARY
28 2007

$ 265,890
$ 25,537
$ 92,557
$ 383,984

$ 304,444
$ 22,958
$ 101,917
$ 429,319

$ 326,199
$ 21,075
$ 113,921
$ 461,195

$ 268,098
$ 8,936
$ 67,973
$ 345,007

$ 299,806
$ 8,746
$ 71,462
$ 380,014

$ 307,635
$ 4,602
$ 77,142
$ 389,379

$(2,208)
$ 16,601
$ 24,584
$ 38,977

$ 4,638
$ 14,212
$ 30,455
$ 49,305

$ 18,564
$ 16,473
$ 36,779
$ 71,816

93
430

105
344

113
282

$ (23,74)
$ 38,61

$ 44,17
$ 38,70

$ 164,28
$ 58,41

13

Data 2009,
profit CS/store
negatif (23.74)
dan profit
Data 2009,
profit CS/store
negatif (23.74)
dan profit
FS/store 38.61
Data 2009,
mematok profit
CS/store $ 40
dan profit
FS/store
38.61
Mematok profit
CS/store $ 40
dan profit
FS/store
38.61

CS

FS

Profit CS

Profit

Penjelasan

Total

93

430

$ 14,393.00 $ 24,584.00 $ 38,977.00

523

$ 20,193.03 $ 24,584.00 $ 44,777.03

93

430

$ 20,322.30 $ 24,584.00 $ 44,906.30

40

483

Current business
Karena CS profitnya
negatif (23,74)/store,
Company Store
dirubah semua
menjadi franchise
Jumlah store sesuai
posisi tahun 2009. Di
sini harus ada effort
perbaikan marketing
untuk meningkatkan
sales dan efisiensi dan
efektifitas operasi
untuk menurunkan
beban

CS dipertahankan
sebanyak 40 store
sedangkan 53 CS diubah
menjadi FS. Di sini
harus ada effort
$ 20,248.63 $ 24,584.00 $ 44,832.63 perbaikan marketing
untuk meningkatkan
sales dan efisiensi dan
efektifitas operasi untuk
menurunkan beban

Dollar amounts in thousands

Jan.2000
Jan.2001
Year
220,243
300,715
Revenues
36.54%
Growth Rate
STOCK
PRICE
STORES

Jan.2002
394,354
31.14%

Jan.2003
491,549
24.65%

Jan.2004
665,592
35.41%

Jan.2005
707,766
6.34%
-88%
-

Jan.2006
543,361
-23.23%

30

14

1.
2.
3.
4.
5.

CHAPTER 3
BUSINESS CASE ANALYSIS, STRATEGIC BUSINESS ANALYSIS

SWOT, TOWS, IFE, EFE, CPM, BCG MATRIKS, M-KISNEY ANALYSIS

BUSINESS ANALYSIS
ANALYSIS STRATEGY
CRITICAL ISSUES
ALTERNATIVE STRATEGIES

3.1 SWOT ANALYSIS

Strengths
Affordable, high-quality doughnuts with strong visual appeal and "one-of-a-kind" taste
Neon "Hot Doughnuts Now" sign encourages people outside the store to make an impulse
purchase
Market research shows appeal extends to all major demographic groups including age and income
Hot shop" stores save money while keeping KKD customer experience intact
Vertical integration helps ensure high quality product
Consistent expansion; now in 16 countries
Product sold at thousands of supermarkets, convenience stores, and retail outlets through U.S.
Weaknesses
Return on equity, assets, and investments all negative in the trailing twelve months; skill of
mgmt. is questionable
Shareholders have not received dividends recently, and are not expected to in near future; stock
price in state of flux
Closing stores when stores should be opening globally at steady rate to keep up with competitors'
growth
Management states in recent 10-K that it is struggling with how to make stores profitable
Product line slow to expand with nothing outside "sweet treats" to draw in health-conscious
customers
Advertising not aggressive enough to appeal to areas outside southeast of U.S. where most stores
are
Revenues down, net losses in each of past three years
Opportunities
Development into diversified product markets
Detection of the problem occurring in the management of the business and thus the fall in business
and profitability
Develop the social outreach programs to promote the doughnuts and to promote the customer
based objectives and mission of the organization.
Reaching the market to really know what the customers want and then to develop the marketing
and strategic policy in accordance to that.
Asians love sweets and are open to trying foreign foods
15

Starbucks lacks a diversified and distinctive pastry line

Dunkin' Donuts does not have hot doughnuts to sell
Many children love sweet treats
Threats
Tough competition and increasing global recognition of Starbucks and Dunkin Donuts.
Global presence of the competitors
More health conscious customer base
Development of organic markets
Starbucks has approximately 25 times the amount of stores worldwide that Krispy Kreme Donut
has
Restricted cash flow from banks and massive layoffs have stifled the world economy, decreasing
discretionary income
Europeans prefer their local brands of doughnuts
Britons tend not to have cars, which inhibits drive-thru customers, and their eating habits and
office etiquette differ from Americans
Shareholders may sell KKD stock for lack of returns and dividends compared to other similar
firms in the industry

3.1.2 TOWS ANALYSIS

Strengths
Quality
Brand Awareness
Market share
Various products
Vertically integrated

Opportunities
New ways of selling
New promoting concept
Present menu offerings

Threats
Health campaign
Competition
Increasing cost of ingredients
Consumers habits change

Weaknesses
Communication
Management &Control
Cannibalization (erode)
Financial practice

SO
Marketing &
Social network
ST
Promoting healthy products &
Economic scale & CSR

WO
New markets &
Improving
management

WT
Avoid developing
existing markets by
existing products

16

3.1.3 IFE ANALYSIS

17

3.1.4 EFE ANALYSIS

18

3.1.5 CPM ANALYSIS

3.1.6 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: Company Stores ($266M), Franchise ($26M) and
Krispy Kreme Supply Chain ($93M), with approximately $384M in total revenues for the year ending
February 1, 2009. This means that each business segment represented the following percentage in
revenues: Company Stores (69.2%), Franchise (6.7%), and Krispy Kreme Supply Chain (24.1%).
Profits for each business segment are as follows: Company Stores ($-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.

19

3.1.7 BCG MATRIKS ANALYSIS

Based on the data, Krispy Kreme

STRATEGIC POSITION KRISPY

KREME DOUGHNUTS BASED ON BCG
MATRIKS
20

Doughnuts is the highest market share position compared to its competitors.

For a company store and satellite store negative market growth.
To franchise positive market growth.
Position the entire Krispy Kreme Doughnuts is in CASH COWS, namely High market share and
low market growth.
Krispy Kreme Doughnuts run the operation well, but the results have not been up even tend to
decrease in business.
Krispy Kreme Doughnuts need new strategy to be able to maintain revenue KKD
3.1.8 STREGHT & WEAKNESS KRISPY KREME DOUGHNUTS BASED ON M-KISNEY 7S
MODEL
1.Hard Elements
1) Strategy (Mixed)
2) Structure (Own stores & Franchises)
3) Systems (Everyone contributes to the
value)
2. Soft Elements
1) Shared values (Hot fresh magic
products)
2) Skills (Baking skill, recipe)
3) Style (Ineffective relationship)
4) Staff (Inexperienced, lack of
knowledge)

21

3.2 BUSINESS ANALYSIS KRISPY KREME DOUGHNUTS

SEGMENTING

Based on the table Top 10 Brands of

Doughnuts, Ex.5 seen that the price per
piece Krispy Kreme donut to number 4 to
determine which segments of the market is
for Middle End.

TARGETING

Target markets have not been optimally

performed by Krispy Kreme. KKD should
conduct market surveys which the market
with the most potential.

POSITIONING

With the significant decline in revenue

indicates that Krispy Kreme has not had a
good positioning in the eyes of consumers,
making it easy to be abandoned by the
presence of substitution.

COMPANY STORES

ADVANTAGE
Full control by Krispy
Kreme Doughnuts
management

FRANCHISE STORE

Potentially to earn big

profits if managed properly.
Relative easy and
simple operations
Potential losses are in
franchaisee not on the
franchisor

DISADVANTAGE
The operation is more
complex than the franchise
The potential for big
losses if not be managed
properly
Less Krispy Kreme
Doughnuts control
Franchise Fee
relatively fixed.

22

3.2.1 BUSINESS MODEL KRISPY KREME DOUGHNUTS

Krispy Kreme's business model involved generating revenues and profits from three sources
1. sales at company-owned storees
2. royalties from franchised stores and franchise fees from new store
3. openings store in the 2,400 to 4,200-square-foot
4. franchise fee: $20,000 to $40,000 for each store
5. pay 4.5% royalty fee and 1.0% of revenues
6. sales of doughnut mixes, customized doughnut-making equipment, and coffees to franchised stores.

23

ORGANIZATION CULTURE FOR KRISPY KREME DOUGHTNUTS

NO
DIMENSION
1.
2.
3.
4.
5.
6.

7.
8.
9.
10.
11.
12.
13.
14.
15.

STONG WOK ETHIC : ARRIVE EARLY AND LEAVE LATE

HIGH ETHICAL BELIEFS : CLEAR CODE OF BUSINESS
ETHIC FOLLOWED
FORMAL DRESS : SHIRT AND TIE EXPECTED
INFORMAL DRESS : MANY CASUAL DRESS DAYS
SOCIALIZE TOGETHER OUTSIDE THE WORK
DO NOT QUESTIONS SUPERVISOR DECISION

ENCOURAGE WHISTLE BLOWING

BE HEALTH CONSCIOUS : HAVE WELLNESS PROGRAM
ALLOW SUBTANTIAL WORKING FROM HOME
ENCOURAGE
CREATIVITY/INNOVATION/OPENMINDNESS
SUPPORT WOMEN AND MINORITIES : NO GLASS
CEILING
BE HIGHLY SOCIALLY RESPONSINBLE : BE
PHILANTHROPIC
HAVE NUMEROUS MEETINGS
HAVE A PARTICIVATIVE MANAGEMENT STYLE
PRESERVE THE NATURAL ENVIRONMENT : HAVE A
SUSTAINBILITY PROGRAM

LOW

1
2
1
1

DEGREE

HIGH
4
4
4

3
3
3

3
2
1

2
3

24

Management audit checklist of questions :

1. Does the firm use the strategic management concepts?
Answer : Yes, The Firm use thes strategic management but cant use effectively
2. Are company objectives and goals measurable and well communicated?
Answer : Yes, the manager have communicated with staff about the company's goals and objectives and
how to achieve it
3. Do managers at all hierarchical levels plan effectively?
Answer : No. The company's goal set by one division together with Top management, shareholder, and
outlet manager, and implementation is done all over the managers at each outlet world wide, but not all
managers running the planning that has been made so well, resulting in less achievement of company
goals and objectives at several outlets
4. Do managers delegate authority well?
Answer : No, not all managers delegate tasks, objectives and goals the company well
5. Is the organizations structure appropriate?
Answers : Yes. The organizational structure is appropriate, but the communication between managers
and employee at each outlet is still not good
6. Are job descriptions and job spesifications clear?
Answer : Yes, thee job descriptions and job specifications are clear
7. Is employee morale high?
Answer : Yes, every employee has a high moral and maintained until today
8. Are employee turn over and absenteeism low?
Answer : No. The turnover employess is high
9. Are organizational reward and control mechanisms effective?
Answer : No. because in some outlets have enough employee resigned because at some outlet employee is
not satified, this is due to the loyalty of the employees are not appreciated by management

3.3 ANALYSIS STRATEGY

STRATEGIC IN GROWTH STAGE

COST LEADERSHIP
Economic scale
Grow capability
Aggressive expansion
Franchising
Reduce advertising
Go public
Go international

DIFERENTIATION
Unique product
Atmosphere
Experience
Emotional leisure
Trend & popularity
Brand awareness
Combine with coffee

25

STRATEGIC IN MATURE STAGE

KEEP GOING EXPANSION

RELY ON CUSTOMER LOYALTY
STRATEGY INOVATIONS
AQUISITION MONTANA MILS (2003) - FAILED
LOW-CARBOHYDRATE DIET (2004) FAILED
QUESTIONABLE AQUICITIONS SEVEN UNIT FRANCHISE

1990's --- 2004 GROWTH

FROM 2004 MATURE STAGE

3.4 CRITICAL ISSUES

Banks saved KK in 4/08 extending life of loan agreement (interest rate higher)
New CEO in fiscal 2008
Highly competitive w/ Dunkin Donuts, Tim Hortons and Starbucks
Focus on marketing
Closing of Franchises
Globalizing Krispy Kreme

26

3.5 ALTERNATIVE STRATEGIES FOR KRISPY KREME DOUGHNUTS

ALTERNATIF 1
Close unprofitable stores,
and focus on other domestic
areas and global market

ALTERNATIF 2
Diversify and expand
product mix
Develop culturally oriented
products
Redesign current product
names and descriptions
Redesign packaging (cups,
wrappers, bags, etc.)

ALTERNATIF 3
Themed doughnuts
o Holiday doughnuts
o Special order
birthday doughnuts
o Special event
catering (wedding,
etc.)
Krispy Kreme Club w/
emails, games, coupons,
events
ALTERNATIF 4
Develop Krispy Kreme
Mascot
Formulate marketing
strategy for mascot and
2008 Beijing Olympics
Begin advertisements on
TV and Radio

ADVANTAGE
Increase capital from sold
locations and properties
Decrease loss
Develop new market
ADVANTAGE
Attracts new customers
Attractive to the
international market
More Competitive with
the market
May keep existing
customers
May increase items sold
per purchase
More efficient
More cost effective in the
long run
ADVANTAGE
Attractive young ages
Increase the holidays' sale
Loyal customers will
increase
Increase the customers'
database

ADVANTAGE
Increase the visibility on
market
Increase sales
Increase celebrity/icon
marketing possibilities
More helpful on
increasing the
international market

DISADVANTAGE
Lose domestic locations
Lose foothold in certain
regions
Risk for international
locations
Increase cost for new
locations
DISADVANTAGE
New development and
packaging costs
New ideas may
discomfort old
customers
Risk of not selling

DISADVANTAGE
Remodel the production
line
Increase the website
setup cost
Need to find more
workforce to support
new activities

DISADVANTAGE
A huge cost of
advertising expense
KK visibility is too low,
it may not have big help
May be too late to plan
for Olympics
Olympic sponsors and
partners were chosen
years ago

27

CHAPTER 4
PROBLEMS AND SOLUTIONS, RECOMMENDATIONS

1. What strategies should implemented by Krispy Kreme Doughnuts Management?

2. How will Krispy Kreme return to profitability?
3. On the basis of your assessment above, what do you think of Krispy Kremes growth
prospects? Just how good are they?
4. RECOMMENDATIONS
4.1

Strategy should implemented by Krispy Kreme Doughnuts

Short term
I.

Repair cost structure by reducing operating expenses :

Evaluation of operating expenses which the expenditure items that are not rational to be
trimmed.
Looking for a replacement base material donut cheaper but do not detract from the quality.
Evaluation of the number of employees, whether it efficient? If you need to do to be more
efficient equipment modernization.
II. Repair cost structure with innovations to raise revenue :
Adding a selection of drinks at the satellite stores, since the margin beverage products
generally> 50%.
Creating new products that conform with changes in lifestyle and healthy food trend, not limited
to just donuts alone.
Open service delivery order with a minimum order.
improve the way services more friendly and fresh.
Fixing advertising becomes more effective.
B. Medium Term / Long
Modernization of equipment.
Changing business models.
Multiply Franchise Store inside and outside the country, such as Asia and the Middle East
markets.
Adjustment of the organizational structure to adopt changes in business models.
Changing business models :
By looking at the trend Company Store continues to decline and rising revenue trend in franchising
the business model must be changed to focus on the establishment of Franchise Store expansion in
many locations. Sales ex Company Stores can boost capital.
Maintaining Company Store who still profit or have a high profit potential, while potentially
making losses converted into franchise.
Proportion of Company Store: Store Franchise original 20%: 80% is converted into a 10%: 90% or
5%: 95%.
Owner nevertheless still have to develop the Company Store, which becomes experience for
28

development of products and services for consumers. Besides, the management Company Store
who both have the potential
profit greater than the revenue from the franchise fee.
The proportion of international business improved by increasing franchise business opportunities.
The proportion Satellite Store propagated, because the profit from the sale of liquor is much larger
than the sales profit donut.
Redesign franchise pattern for easy, attractive, and profitable international standards, so that the
business expansion easier.
Strengthen positioning to intensify promotional and advertising program that Krispy Kreme brand
stronger and form a loyal customer.
Perform product innovation and service to the taste or appearance of products that adapt to the
culture in which the store is located

4.2 How will Krispy Kreme return to profitability?

Competitiveness
Efficiency
Franchisee relations
4.3 GROWTH PROSPECTS
Historical basic product with variations KK is known for its doughnuts, let that be the basic product.
Other products should be added to the menu based on customer demand.
Vertical integration principle at this stage, in order to reduce cost, increase revenues and subsequent
profitability
Franchise maintain effective communications with franchises, ensure that they uphold the KK brand
and quality and monitor them effectively
Customer experience make every doughnut a fun and adventurous experience for the customers. Let
them feel and be involved
Diversify the sales locations open stores in strategic locations, with dense population
For KK, the growth prospects as at the end of 2005 seem quite bleak. Though they had optimistic
projections for sales, revenues and store growth, the actual results were well below what was expected

80
$ million

60
company stores

40
franchised store
average
systemwide
average

20
0
Q3
Q4
Q3
Q2
Q3
2004 2004 2005 2005 2005

29

30
25
20
15
10
5
0
-5
-10

company stores
systemwide
increase in
systemwide sales

Q3
Q4
Q1
Q2
Q3
2004 2004 2005 2005 2005

Changes in store sales

fiscal year

GROWTH PROSPECT OTHER

Porters five forces; though not a traditional model for assessing growth prospects of a company,
the five forces can be used to determine the possibility for future growth for KK in this industry
Competition and rivalry
Substitutes (and complements)
Bargaining power of suppliers
Threat of new entrants
Bargaining power of buyers
Ansoffs growth model
Market penetration existing products, existing market
Market development existing products, new markets
Product development new product, existing market
Diversification

4.4 RECOMMENDATIONS

ALTERNATIVE 1 & 2
Unprofitability must be realized
Back to the basics
Avoid being greedy again
Grow slowly
Other alternatives may be implemented in the future
Develop stronger control of franchises recruitment in order to concentrate on succesful actual
stores
Adapt to consumers desires
Enforce marketing strategies
Establish regular control of the accounting records and hire qualified personel
Be more precise in their mission and vision to reposition themselves (better long-term vision)

30

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Andronczyk, Anthony, 2012, Case Study Krispy/ https://prezi.com/82laigjigiju/case-study-krispy-kreme/

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