Krispy Kreme - 2008 Case Analysis

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University of the Philippines Cebu College
Management Division
Lahug, Cebu City

Mgt 190 Case Analysis #1
Krispy Kreme Doughnuts

Date Due: December 16, 2010
Date Submitted: ___________________

Submitted to:
Professor Jesus C. Cinco, Jr.

Submitted by:

Group 3

Vien Carmelo Garcia – Team Leader
Eugene Lov Llagono
Annaliza Lisondra
Ryzza Lynn Mancio
Jocelyn Medico
Ma. La Arnie Mesa

EXECUTIVE SUMMARY

KKD is one of the largest doughnut brands in the world. Recently, the company has suffered major problems as it incurred losses over the past years. Its stock price plunged yet rebounded. Competitors in the US Quick Service Restaurant industry has become stiffer paired with the changing consumer demands and preferences. However, several opportunities are showing in the foreign markets especially the Asian market as well as in the domestic market. The generic business strategy for KKD is product differentiation.

Weighing on the company’s strengths, weaknesses, opportunities and threats, intensive strategies were considered. Further analysis showed that market development is the most suitable strategy for the firm to pursue based on several factors such as feasibility, profitability and changes in the environment. With Krispy Kreme Doughnuts being a strong brand (with its trademark doughnuts), the chosen strategy will facilitate the rebound of the company in terms of its financial performance, company growth and market share. It is also consistent with the vision of becoming of the world’s first choice for doughnuts and the objective of increasing their international presence, increase revenue and net income.

Table of Contents

PROBLEM STATEMENT1
VISION1
MISSION1
OBJECTIVES2
Financial (refer to Balanced Scorecard)2
Strategic (refer to Balanced Scorecard)2
SITUATION ANALYSIS2
Internal Environment Analysis2
Financial Analysis2
Value Chain Analysis4
External Environment Analysis5
General Environment5
Industry Environment5
Competitive Environment6
STRATEGY FORMULATION7
STRATEGY EVALUATION8
STRATEGY IMPLEMENTATION9

List of Appendices
Appendix 1: Vertical Analysis of Income Statements11
Appendix 2: Horizontal Analysis of Income Statements11
Appendix 3: Horizontal Analysis of Balance Sheets12
Appendix 4: Key Financial Ratios and Their Trends13
Appendix 5: HA/VA of Production data and Relevant Productivity Measures/Ratios13
Appendix 6: IFE Matrix15
Appendix 7: Tabulation of Key Trends/Changes in the Macroenvironment15
Appendix 8A: Industry Analysis (Current)16

PROBLEM STATEMENT
Players in the Quick Service Restaurant (QSR) industry, in which Krispy Kreme Doughnuts is also a part of, are beginning to regain share prices after being challenged aggressively by stock price discounts from industry giants McDonalds and Burger King. Notably, these companies have reported normal growth in same-store sales and operating conditions have become favorable, encouraging them to increase production efforts.

With industry competition heightened in these conditions, firms are fighting aggressively to gain market share and increase growth through broadening their product lines and expanding rapidly in domestic and international markets. Broader product lines provide customers with more value through high product variety. Most companies offering doughnuts and related products are also offering healthier food options and lowering calorie content in their products to adapt to the trend towards healthy food. Meanwhile, similar firms as KKD are trying to capitalize on the rising trend for eating outside of homes and the growing number of two-income households in the US market while expanding in attractive markets such as Asia and the Middle East which provide companies with better growth opportunities since these markets have growing demand for sweet snacks and patronize Western brands. Yet, in the case of KKD, it still has not...
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