?IFE Matrix and QSPM Matrix for Krispy Kreme?

IFE Matrix and QSPM Matrix for Krispy Kreme, see the paper in attachment.IFE Matrix and QSPM Matrix for Krispy Kreme, see the paper in attachment.
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INTRODUCTION
Intentions:
The purpose of this paper is to provide an analysis on Krispy Kreme Doughnuts, Inc. We
evaluate the current financial condition for Krispy Kreme Doughnuts, Inc. We generate a
SWOT Matrix to provide strategic planning for Krispy Kreme Doughnuts, Inc’s internal and
external factors. We will implement strategies for Krispy Kreme Doughnuts, Inc to become
the top competitor within the industry. With the new strategies, Krispy Kreme Doughnuts,
Inc will revamp the mission statement and objectives to focus on customers and expansion.
We projected financial statements with the new strategies as well as comparing to the
competitors for Krispy Kreme Doughnuts, Inc. The base year is 2016 for Krispy Kreme
Doughnuts, Inc.
History:
Krispy Kreme Doughnuts, Inc. (KKD) is based out of Winston-Salem, North Carolina as an
“American doughnut company and coffeehouse chain.” In 1933, KKD was founded by
Vernon Rudolph. He purchased a yeast raised doughnut recipe from a chef in New Orleans.
Thereafter, he launched to sell doughnuts in Winston-Salem, North Carolina to local stores.
In 1955, KKD enhanced the logo to with green and red coloring. One of the opportunities for
KKD is the fundraising which began in 1955. The fundraising is special ordering process for
churches, schools, and any organizations. KKD contributes through fundraising to the
community which allows additional funds for churches, schools, and any organizations.
Automation is key factor in 1963 which limited the hand production. The founder passed
away in 1973. KKD was sold to Beatrice Foods in 1976. KKD began to decline in growth
which lead franchises to buy the company. Hot Doughnuts Now light was developed in 1992.
This alerted the customers that the fresh donut was ready for purchase. After the 2000s,
KKD enhanced the products through shaped donuts and different colors. In 2000, KKD
become public on the NASDAQ. The stock price was $21. KKD first international store
opened in Canada in 2001. KKD launched their signature coffee in 2011. Europe become
target to KKD in 2003 with stores in England. KKD celebrated the 75th birthday in 2012. In
2015, KKD opened its 1,000 store while the first customer received a dozen free donuts per
week for a year. In 2016, KKD was acquired by JAB Beech, Inc. This acquisition assisted
KKD to become competitive within the coffee industry and become privately owned. KKD
produces approximately 5.5 million doughnuts a day with at least 20 flavors. KKD has stores
in United States, Australia, Canada, Hong Kong, Indonesia, Japan, Kuwait, Mexico, the
Philippines, South Korea, and the United Kingdom with 282 stores owned by franchisees and
113 stores owned by corporation. KKD products are available in grocery stores and
convenience stores such as Walmart, Target, and many more. KKD has two types of stores:
factory and satellite stores. The factory stores are where the doughnuts are made. Satellite
stores sell all products of KKD. Some satellite stores allow the customers to see how the
doughnuts are made.
CASE ANALYSIS
Question 1:
Identify the firm’s apparent current mission. Then briefly review the firm’s
current objectives and strategies. [Please note that you must evaluate the
firm’s mission statement.]
Mission Statement:
The mission statement for KKD is “to touch and enhance lives through the joy that is Krispy
Kreme.”
Mission Statement Evaluation:
Component
Company
1
2
3
Yes
Yes
Yes
4
No
5
No
6
Yes
7
No
8
9
Yes
Yes
KKD’s mission statement consists of customer service. The primary goal to enhance each
customer life with KKD products. The quality of products/service are bringing in more
customers. KKD market presence is established world-wide. There are over 800 stores
world-wide in 28 countries. There is no technology component to KKD. Concern for
Survival, Growth, and Profitability is not present within KKD mission statement. The basic
philosophy is to focus on the lives of individuals. Self-concept is not integrated within the
mission statement of KKD. Concern for Public Image and Employees are centered around
the mission statement of KKD. KKD focuses on helping any individual lives through their
products.
Company Objectives:
KKD’s president and CEO is Tony Thompson. The main objective of KKD is to focus on
activities that will allow the company to grow. KKD plans to continue expanding by using
tiered pricing strategy implemented in 2015. There will be a reduction of cost to open a KKD
store. KKD will enhance the stores by tailoring to each region demands. KKD plans to
become franchise based globally. Currently, KKD is 100% franchise based internationally.
This approach allows KKD to expand and increase profits. Brand marketing becomes key
aspect to become 100% franchise based globally. KKD long term goal is to become one of
the key consumer packaged goods sellers. Internationally, KKD continues to grow and
expand to at least five new countries. The Global Partner Summit conference was held for the
first time which allows the operators to come together and learn from each other. The goal of
KKD is “to continue narrowing that gap between the size of the company and the potential of
the brand. We made good process during 2016 and excited about the opportunities that lay
before us.”
Company Strategies:
KKD focuses on four strategies: accelerating global growth, leveraging technology,
enhancing our core menu, and maximizing brand awareness. Accelerating global growth
focuses on geographic expansion and growth within current stores. KKD will continue to
expand with existing franchise and grow out existing company owned. Then, the company
plans to enter new regions with limited or no existing marketing presence. The primary goal
will be to double the growth over the next few years. KKD plans to add additional flavors to
doughnuts and beverages by introducing new mobile application to promote the customer
experience. KKD plans to incorporate technology through the Hot Light smartphone
application. The application includes a reward program. ERP system was introduced to KKD
in 2015. This has allowed KKD to become functional in the accounting, finance, operations,
and management areas. KKD continues to enhance the menu by offering unique products.
Customers continue to grow through enhancing the menu. Brand awareness has become key
strategy for KKD. This allows KKD to become competitive in the beverage industry. The
fundraising program since 1955 has continue to provide growth for KKD.
Question 2:
How would you describe the firm’s current financial condition?
[Use
financial ratios and other pertinent income and balance sheet data to support
your analysis.]
Financial ratios provide a thorough analysis of the company’s financial condition. Currently,
KKD financial condition is stable while being competitive with Dunkin Brands Group, Inc.
and Einstein Noah Restaurant Group, Inc. There are five categories of financial ratios to
determine the financial condition. They are liquidity ratios, asset utilization ratios, leverage
ratios, profitability ratios, and market ratios. The current financial condition (2016) is
compared to the previous historical condition (2014 and 2015).
Historical Financial Analysis:
After comparing KKD historical financial analysis, current ratio was a negative trend while
the quick ratio stayed neutral. The asset utilization ratios had mixture of positive and
negative trends. Inventory turnover, days sales of inventory, accounts receivable turnover,
days sales of outstanding, and total asset turnover are positive trends. Fixed asset turnover is
a negative trend. Debt management ratio consists of debt ratio and times interest earned ratio
which are negative trends. Profitability ratios are gross margin, profit margin, operating
margin, basic earning power, return on assets, and return on equity. Operating margin, gross
margin, and return on equity generated more income which shows a positive trend. The rest
of the profitability ratios remain at no change.
The market ratios consist of price/earnings ratios, price/cash flow ratio, and market book
ratio which are a negative trend. Overall, KKD total current assets have decrease but property
and equipment continue to grow because the company continues to expand domestically and
internationally. Total current liabilities continue to decrease while long term debt continues
to grow with expanding stores. Revenues continues to grow as well as direct operating
expenses through testing products and costs of expansion.
Competitor Financial Analysis:
For the competitor financial analysis, we compared Einstein Noah Restaurant Group, Inc.
and Dunkin Brands Group, Inc. to KKD. Within the liquidity ratio, KKD is strong for current
and quick ratio than the two competitors especially the industry average. The asset utilization
consists a mixture of strengths and weaknesses. The inventory, accounts receivable, and total
asset turnover are strengths for KKD while the others are weakness compared to the
competitors and industry average. Since Dunkin Brands Group, Inc. franchises out their
stores, there is no inventory listed on the balance sheet. Debt management is strong for KKD
compared to the industry average. Profitability contains mixture of strength and weakness.
Operating margin, profit margin, basic earnings power ratio, and return on equity are
weakness while return on asset and gross margin are strength when compared to the industry
average. Dunkin Brands Group, Inc. has a negative equity balance which makes return on
equity irrelevant. Lastly, all three of the market ratio is strong for KKD.
Overall Financial Health or Evaluation:
Financial Evaluation
Historical
Competitors
Liquidity
Negative
Strength
Asset Utilization
Positive/Negative
Strength/Weakness
Debt Management
Negative
Strength
Profitability
Positive
Strength/Weakness
Market Ratio
Negative
Strength
Recommendation:
We can conclude that KKD has positive and negative aspects. The chart above shows a
comparison of KKD from historical and competitors financial analysis. KKD financial
analysis determines that it needs improvement in the performance as well as outperforming
the competitors. KKD should improve in asset utilization and liquidity which means
controlling inventory, property and equipment, direct operating expenses, long term debt but
continue to increase revenues. The company should be able to increase the value which
contributes to better market ratios by maintaining their financial conditions.
Question 3:
Outline and discuss the firm’s external opportunities and threats, using any
analytical model(s) you believe are relevant.
Krispy Kreme Doughnut, Inc. (KKD) external opportunities and threats are analyzed through
general environment, industry environment, and strategic groups. There are five external
opportunities and threats for KKD to consider.
Opportunities:
1) Reduce investment costs: KKD can reduce costs of opening new stores in new locations.
Since KKD is focusing on franchising 100% globally, they have the opportunity to revamp
the stores as shop or kiosks. This will enable KKD to decrease the expenses but take full
advantage of profits and growth.
2) Menu Expansion: KKD products are focused on doughnuts and beverages. It can also add
foods items like their competitors. Dunkin Brands Group, Inc. provides breakfast items such
as sandwiches, croissants, and hash browns.
3) Consumer Packaged Goods: KKD is focused on becoming one of the top company for
consumer-packaged goods (CPG). CPG allows KKD to continue to grow and build
relationships with the suppliers. There are over 10,000 grocery and convenient store locations
that sell KKD products. Keurig Green Mountain and KKD have a licensed contract. Keurig
Green Mountain sell KKD grounded coffee and K-cups. KKD also has an agreement for nonyeast products which allow for a longer shelf-life.
4) Social Media: KKD has introduced the Hot Light smartphone to enhance interactive
experience for customers. This allows KKD to target the youth generation with social media
continuing to grow. Hot Light app consists of loyalty and reward programs. It also allows the
customers to be up to date on the latest products of KKD.
5) Franchising: KKD continues to expand operations. Franchising is the best opportunity to
KKD to use. This will allow KKD to become one of the top leading franchising companies
which allow for growth. Since KKD has expand 100% franchising internationally, they are
working on closing in the domestic markets.
Threats:
1) Competitors: Dunkin Brands Group, Inc. provides range of products whereas KKD does
not. Baskin-Robbins is a chain for Dunkin Brands Group, Inc. This allows Dunkin Brands
Group, Inc to provide products to attract customers such as breakfast items, bagels, muffins,
and ice cream. Einstein Noah Restaurant Group, Inc. provides products such as bagels,
salads, sandwiches, and beverages. KKD produces doughnuts and beverages while the
competitors provides variety of products.
2) Healthy Products: Dunkin Brands Group, Inc. promotes healthy products called
DDSMART. DDSMART are reduction in calories, fat, saturated fat, sugar or sodium. The
products are English muffin, turkey sausage flatbread, oatmeal, wheat bagel, and any other
healthy alternatives. Einstein Noah Restaurant Group, Inc. provides products with bacon,
egg, avocado, and healthy vegetables.
3) Fuel Costs: KKD continues to expand globally which increases transportation costs. Fuel
costs for the products to ship began to add up. Any items shipping overseas become
expensive because of the fuel costs for airplanes, trains, and cargo boats.
4) Economy: KKD continues to expand domestically and internationally which is affected by
economy. Expansion causes KKD to grow and add more employment opportunities. As KKD
continues to expand, the long-term debt increases which means loans are being taken out.
The interest rates fluctuate which affect the amount of loan repayment. The foreign exchange
rate plans huge role for KKD. KKD is targeting the international market which impacts the
goods and services transported overseas. Inflation plays factor in the consumer’s purchases.
Consumers tend to purchase when inflation is low.
5) Government Regulation: There are many regulations that affect KKD. Food product
regulation controls the ingredient list, product weight, and product labels. The product
ingredients and packaging materials are regulated through the United States Department of
Agriculture and the Federal Food and Drug Administration. Franchise regulation impacts
KKD as the ultimate goal is to become 100% franchised. Federal Trade Commission and
state and foreign laws control the sale of franchises. KKD may have change laws that impact
each store. International trade has huge impact on KKD with operations internationally. KKD
must comply with domestic laws and international business and trade. KKD exports the
doughnut mixes to the franchises. If any ingredient becomes banned, then KKD will pick an
alternative ingredient.
Industry Total Revenue:
Industry CAGR:
Product Categories:
KKD product categories consist of doughnuts and beverages. KKD signature donut is the
original glazed. The day to day flavors are chocolate doughnut with sprinkles, maple iced,
glazed filled, cinnamon apple, cruller, powdered filled, doughnut holes, cake batter, and
cinnamon bun. Currently, KKD has introduced new flavors which are chocolate chip cookie
doughnut made with chips ahoy cookie, nutter butter cookie twist doughnut, Oreo cookies
and kreme doughnut. The beverages consist four types: hot, iced, frozen, and chocolate. They
are hot chocolate, frozen lemonade, coffee, latte, iced coffee, iced latte, skinny latte, and
mocha. Lastly, KKD produces ground coffee and Keurig coffee cups. The Keurig coffee cups
are smooth and decaf. The ground coffee consists of smooth, rich, and decaf.
Key Competitors #1:
Key Competitors #2:
Question 4:
Outline and discuss the firm’s internal strengths and weaknesses using any
analytical model(s) you believe are relevant.
Krispy Kreme Doughnut, Inc. (KKD) internal strengths and weaknesses are analyzed.
Strengths
1) Strong Brand Awareness: As an international company, KKD is a consumer brand with a
consistent number of customer in the US and abroad. KKD goal is become 100% franchised
globally. The company has grocery and stores hence making the doughnuts readily available.
The company sells over twenty different varieties of doughnuts.
2) Vertical Integration: The company is vertically integrated and consists of three business
units: franchise operations, company store operations, and KK supply chain operations. The
company`s supply chain operations use an accelerated approach hence enhancing a high
volume of production. Even the output is cost effective. The company has specialized
equipment for making the doughnuts and specific doughnut mixes that each store is required
to purchase hence enabling each store to produce more than 4000 doughnuts daily.
3) Signature Products: The company offers the best products which are tasty, fresh, and with
the finest ingredients. KKD signature product is the original glazed doughnut. KKD remains
one of the top sellers and has loyal customers domestically. Furthermore, the company
continues with its pursuit of introducing its products to Europe, Australia, and Asia.
4) Strong Leadership: The organization also has strong leadership. In early 2000 the
company made sales but experienced losses as time went by, but after the new leadership of
Jim Morgan, the stocks have gone up. The company also offers to fundraise to groups with a
profit margin of approximately 50-60%.
5) Hot Light: KKD has an application called Hot Light. The customers have the ability to be
notified when fresh products are out of the oven. The customers have to be nearby KKD to
be able notified. The employee at KKD presses a button to turn on the light. The button is
linked to Hot Light application.
Weaknesses
The company`s weaknesses should be considered from the corporate and the customer`s
perspective. KKD has the following shortcomings.
1) Lack of Locations: KKD lack of locations globally is still weakness. Domestically, KKD
has 181 franchise stores. KKD are in 36 out of 50 states in the United States of America.
Internationally, KKD has 824 locations within 34 countries. For KKD to become ranked top
in their industry, KKD should continue to expand globally. In the near future, KKD should
continue to expand.
2) Weak mission statement: KKD has simply mission statement. The mission statement lacks
depth and preciseness. The purpose of the mission statement is to define the purpose. It does
not include technology, concern for survival, and self-concept.
3) Limited Product Line: KKD produces two types of products: doughnuts and beverages.
KKD is limited to not competing with breakfast items. This affects the number of sales made.
There are no healthy products. All KKD products have high carb, sugar, and fat. If KKD is
limiting to certain products, then KKD does not have competitive advantage. KKD sales
have increased by 5% from 2014-2016. Since 2014, net income continues to decrease.
4) Internal costs: KKD costs continue to increase which reflects when new stores and shops
are created. The assets continue to increase as well. KKD should be able to manage the
expenses and assets as they continue to expand globally. KKD should monitor the overall
financial statements. There should be increase in sales over time as the stores and shops
continue to grow.
5) Ordering: KKD lacks the ability to have online orders. Many of sales for KKD consists of
fundraising. Since no customers can order online, then they are required to call or visit the
store. Many customers may work job therefore cannot afford to visit. Online orders attract
many of the generations with cell phones. M …
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