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.
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
2

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
4

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
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.
5

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

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

6

FINANCIAL REPORT KRISPY KREME DOUGNUTS

EXHIBIT I

KRISPY KREME DOUGHNUTS INCOME STATEMENT

1-FEB2009

3-FEB2009

28-JAN2007

$ 383,984

$ 429,319

$ 461,195

$ 345,007

$ 380,014

$ 389,379

GENERAL AND ADMINISTRATIVE

EXPENSES

$ 23,458

$ 26,303

$ 48,860

DEPRECIATION AND AMORTIZATION

EXPENSES

$ 8,709

$ 18,433

$ 21,046

IMPAIRMENT CHARGES AND LEASE

TERMINATION COSTS

$ 548

$ 62,073

$ 12,519

$ (14,930)

$ 15,972

OTHER OPERATING (INCOME) AND

EXPENSES, NETT

$ 1,501

$ 13

$ 1,916

OPERATING INCOME (LOSS)

$ 4,761

$ (42,587)

$ (28,497)

$ 331

$ 1,422

$ 1,627

$ (10,679)

$ (9,796)

$ (20,334)

$ (9,622)

EQUITY IN LOSES OF EQUITY METHOD

FRANCHISEES

$ (786)

$ (933)

$ (842)

OTHER NON OPERATING INCOME AND

(EXPENSES) NETT

$ 2,815

$ (3,211)

$ 7,021

$ (3,558)

$ (64,727)

$ (41,025)

$ 503

2,324

$ 1,211

$ (4,061)

$ (67,051)

$ (42,236)

REVENUES
OPERATING EXPENSES
DIRECT OPERATING EXPENSES
(EXCLUSIVE OF DEPRECIATION AND
AMORTIZATION SHOWN BELOW)

SETTLEMENT OF LITIGATION

INTEREST INCOME
INTEREST EXPENSES
LOSS ON EXTINGUISHMENT OF DEBT

LOSS BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES
NET LOSS

EXHIBIT II
THOUSANDS)

KRISPY KREMES BALANCE SHEETS ( ALL NUMBERS IN

PERIOD ENDING

FEBRUARY
1 2009

FEBRUARY
3 2008

JANUARY
28 2007

$ 35,538

$ 24,735

$ 36,242

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

ASSETS
Current Assets
Cash and Cash equivalents
Short Term Investments

Acumulated Amortization

Other Assets

$ 6,144

$ 5,855

$ 9,226

Deferred Long term Asset

Charges

$ 2,004

$ 2,396

$ 5,539

$ 195,006

$ 203,378

$ 349,942

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

$ 106

$ 3,488

$ 4,038

Minority Interest

Negative Goodwill

$ 137,171

$ 145,727

$ 270,530

Misc Stock Option warrants

Redeemable Prefered Stock

Prefered Stock

Common Stock

$ 361,801

$ 355,615

$ 310,942

$ (303,133)

$(299,072)

$ (233,246)

Treasury Stock

Capital Surplus

Other Stockholders Equity

$ (913)

$ 81

$ 1,266

Total Stockholders Equity

$ 57,755

$ 56,624

$ 78,962

Total Liabilities and SE

$ 194,926

$ 202,351

$ 349,492

Total Assets
Liabilities
Current Liabilities

Defered Long term Liability

Charges

Total Liabilities
Stockholders Equity

Retained earnings

Source : www.krispykreme.com

EXHIBIT III NUMBER OF EACH TYPE OF STORE AT THE END OF FYs 2009. 2008, 2007
and 2006
FEBRUARY
1 2009

FEBRUARY
3 2008

JANUARY
28 2007

JANUARY
29 2006

COMPANY STORE

93

105

113

133

FRANCHISE
STORE

430

344

282

269

TOTAL
SYSTEMWIDE

523

449

395

402

COMPANY

83

97

108

128

FRANCHISE

198

198

188

195

TOTAL FACTORY

281

295

296

323

COMPANY

10

FRANCHISE

232

146

94

74

TOTAL SATELITES

242

154

99

79

TOTAL
SYSTEMWIDE

484

308

198

158

COMPANY

93

100

107

127

FRANCHISE

132

145

165

207

TOTAL
DOMESTIC
STORES

225

245

272

334

BY OWNER

BY TYPE
FACTORY
STORES

STORE
SATELITES

DOMESTIC
STORE

INTERNATIONAL
STORES
10

COMPANY

FRANCHISE

298

199

117

62

TOTAL
INTERNATIONAL
STORES

298

204

123

68

TOTAL
SYSTEMWIDE

523

409

246

130

Source : Krispy Kremes 2009 Form 10K

EXHIBIT IV KRISPY KREMES DOUGHNUTS SEGMENTED REVENUES AND EXPENSES

(In Thousands)
YEAR ENDED

FEBRUARY
1 2009

FEBRUARY
3 2008

JANUARY
28 2007

REVENUES BY BUSINESS
SEGMENT

11

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

$ 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

$ 6,402

$ 11,558

$ 15,979

$ 86

$ 92

$ 119

KK Supply Chain

$ 1,019

$ 5,586

$ 3,469

Corporate Administration

$ 1,202

$ 1,197

$ 1,479

Total Depreciation and

Amortization Expenses

$ 8,709

$ 18,433

$ 21,046

Operating Expenses by Business

Management
Company Store

DEPRECIATIONS AND
AMORTIZATION EXPENSES
Company Stores
Franchise

Source : Krispy Kremes doughnuts Inc. 2009 Annual Report, p. 34,92

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
12

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

COMPANY STORES; 18%

FRANCHISE STORES; 82%

13

500
400
300
200
100
0

COMPANY STORES

FRANCHISE STORES

STORES BY TYPE
FACTORY STORES

SATELITE

14

450
400
350
300
250
200

INTERNATIONAL

DOMESTIC

150
100
50
0

COMPANY STORES

FRANCHISE STORES

STORES BY LOCATION

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

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

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

15

BY OWNER

COMPANY
STORES
FRANCHISE
STORES

BY TYPE

BY LOCATIONS

FACTORY
STORES

SATELITE

DOMESTIC

INTERNATION

93 / 18 %

83

10

93

430/ 82
%

198

232

132

298

523 / 100
%

281

242

225

303

(In Thousands)
YEAR ENDED

FEBRUARY
1 2009

FEBRUARY
3 2008

$ 265,890

$ 304,444

JANUARY
28 2007

REVENUES BY BUSINESS
SEGMENT
Company Stores

$ 326,199
16

CS

FS

Profit CS

Profit

Total

Penjelasa

Data 2009,
profit CS/store
430 $ 14,393.00 $ 24,584.00 $ 38,977.00 Current business
negatif (23.74) 93
Franchise
$ 25,537
$ 22,958Karena CS$profitnya
21,075
dan profit
Data 2009,
negatif (23,74)/store,
KK
Supply
Chain 0
92,557
$ 101,917Company$Store
113,921
profit
CS/store
523 $ 20,193.03 $$24,584.00
$ 44,777.03
negatif (23.74)
dirubah semua
Total
Revenues
$
383,984
$
429,319
$ 461,195
dan profit
menjadi franchise
FS/store 38.61
Jumlah store sesuai
Operating Expenses by Business
posisi tahun 2009. Di
Management
sini harus ada effort
Data 2009,
mematok profit
Company
CS/store Store
$ 40
93
dan profit
Franchise
FS/store
38.61
KK Supply Chain

430

Mematok
profit Expenses
Total
Operating
CS/store $ 40
dan profit
Profit By business segment
FS/store
38.61
Company Stores
40
483
Franchise
KK Supply Chain

perbaikan marketing
$
268,098
$
299,806
$ 307,635
$ 20,322.30 $ 24,584.00 $ 44,906.30 untuk meningkatkan
sales dan efisiensi dan
$ 8,936
$ 8,746 efektifitas $operasi
4,602
untuk menurunkan
$ 67,973
$ 71,462beban
$ 77,142
CS dipertahankan
$ 380,014
$ 389,379
sebanyak 40 store
sedangkan 53 CS
diubah menjadi FS. Di
sini harus ada effort
$(2,208)
$ 4,638
$ 18,564
$ 20,248.63 $ 24,584.00 $ 44,832.63 perbaikan marketing
untuk meningkatkan
$ 16,601
$ 14,212sales dan efisiensi
$ 16,473dan
efektifitas operasi untuk
$ 24,584
$ 30,455menurunkan
$ 36,779
beban
$ 345,007

Total Profit

$ 38,977

$ 49,305

$ 71,816

Company Stores

93

105

113

Franchise

430

344

282

$ (23,74)

$ 44,17

$ 164,28

$ 38,61

$ 38,70

$ 58,41

Total stores

Average profit per store

Company Stores
Franchise

Dollar amounts in thousands

Year

Jan.2000

Jan.2001

Jan.2002

Jan.2003

Jan.2004

Jan.2005

Jan.2006

Revenues

220,243

300,715

394,354

491,549

665,592

707,766

543,361

36.54%

31.14%

24.65%

35.41%

6.34%

-23.23%

Growth Rate
STOCK
PRICE

-88%

17

STORES

-30

CHAPTER 3
BUSINESS CASE ANALYSIS, STRATEGIC BUSINESS ANALYSIS
18

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

2. BUSINESS ANALYSIS
3. ANALYSIS STRATEGY
4. CRITICAL ISSUES
5. 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
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.

19

Global presence of the competitors

Strengths

Weaknesses

Quality

Communication

Brand Awareness

Management &Control

Market share

Cannibalization (erode)

Various products

Financial practice

Vertically integrated

Opportunities

SO

WO

New ways of selling

Marketing &

New markets &

New promoting concept

Social network

Improving
management

Threats

ST

WT

Health campaign

Promoting healthy
products & Economic
scale & CSR

Avoid developing
existing markets
by existing
products

Present menu offerings

Competition

Increasing cost of ingredients

Consumers habits change

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

20

3.1.3 IFE ANALYSIS

21

22

3.1.4 EFE ANALYSIS

3.1.5 CPM ANALYSIS

23

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.

24

3.1.7 BCG MATRIKS ANALYSIS

STRATEGIC POSITION KRISPY KREME

DOUGHNUTS BASED ON BCG MATRIKS

25

 Based on the data, Krispy Kreme

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

26

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.

ADVANTAGE

Full control by Krispy

DISADVANTAGE

The operation is more

complex than the franchise

The potential for big losses

if not be managed properly

Less Krispy Kreme

Doughnuts control

Kreme Doughnuts
management

COMPANY STORES

Potentially to earn big

profits if managed properly.
FRANCHISE STORE

Relative easy and simple

operations

27

Potential losses are in

franchaisee not on the
franchisor

Franchise Fee relatively

fixed.

3.2.1 BUSINESS MODEL KRISPY KREME DOUGHNUTS

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

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

ORGANIZATION CULTURE FOR KRISPY KREME DOUGHTNUTS

NO
DIMENSION
1.
2.
3.

STONG WOK ETHIC : ARRIVE EARLY AND LEAVE LATE

HIGH ETHICAL BELIEFS : CLEAR CODE OF BUSINESS
ETHIC FOLLOWED
FORMAL DRESS : SHIRT AND TIE EXPECTED

LO
W

DEGREE

HIG
H
4
4
4
28

4.

INFORMAL DRESS : MANY CASUAL DRESS DAYS

5.
6.

SOCIALIZE TOGETHER OUTSIDE THE WORK

DO NOT QUESTIONS SUPERVISOR DECISION

7.
8.
9.
10.

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

11.
12.
13.
14.
15.

1
3
2
3
3
1
1
3
2
2
1
3

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

DIFERENTIATION
Unique product

Economic scale

29

Atmosphere
Grow capability
Experience
Aggressive expansion
Emotional leisure
Franchising
Trend & popularity
Reduce advertising
Brand awareness
Go public
Combine with coffee
Go international
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

3.4CRITICAL 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

30

3.5 ALTERNATIVE STRATEGIES FOR KRISPY KREME DOUGHNUTS

Close unprofitable stores,

and focus on other domestic
areas and global market

Diversify and expand

product mix
Develop culturally oriented
products
Redesign current product
names and descriptions

Redesign packaging (cups,

wrappers, bags, etc.)

Decrease loss

Develop new market

Themed doughnuts

o
o

Holiday doughnuts
Special order
birthday doughnuts
Special event
catering (wedding,
etc.)

DISADVANTAGE

Lose domestic locations

Lose foothold in certain

regions

Risk for international

locations

Increase cost for new

locations

ADVANTAGE

DISADVANTAGE

Attracts new customers

New development and

packaging costs

Attractive to the
international market

More Competitive with

the market

New ideas may

discomfort old
customers

Risk of not selling

May keep existing

customers

May increase items sold

per purchase

More efficient

More cost effective in the

long run

ALTERNATIF 3

Increase capital from sold

locations and properties

ADVANTAGE

ALTERNATIF 2

ALTERNATIF 1

Attractive young ages

Increase the holidays' sale

Loyal customers will

increase

ADVANTAGE

DISADVANTAGE

Remodel the production

line

Increase the website

setup cost

Need to find more

workforce to support
new activities

Increase the customers'

database

Krispy Kreme Club w/

emails, games, coupons,
events

ALTERNATIF 4

ADVANTAGE

DISADVANTAGE

31

Develop Krispy Kreme

Mascot

Increase the visibility on

market

A huge cost of
advertising expense

Formulate marketing
strategy for mascot and
2008 Beijing Olympics

Increase sales

KK visibility is too low,

it may not have big help

Increase celebrity/icon
marketing possibilities

May be too late to plan

for Olympics

More helpful on
increasing the
international market

Olympic sponsors and

partners were chosen
years ago

Begin advertisements on TV
and Radio

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.
32

 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
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

33

80
60

company stores

$ million

franchised store averag

40

systemwide20average

0
Q3 2004 Q4 2004 Q3 2005 Q2 2005 Q3 200
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

30
25
20
15company stores
% 10
5
0
Q3
2004
Q4
Q1 2005
in 2004
systemwide
sales
-5increase
-10

systemwide

Q2 2005

Q3 2005

fiscal year

Changes in store sales

34

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)

35

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