Krispy Kreme Financial Analysis Case Study

Introduction
Krispy Kreme Doughnuts, Inc. is one of the worlds leading retailers and wholesalers of doughnuts and packaged sweets. The company owns and franchises Krispy Kreme doughnut stores which make and retail varieties of doughnuts and a wide range of coffees and other beverages. It operates about 530 stores both locally and in foreign countries like Australia, Canada, Indonesia, and Mexico among other countries. The company is head quartered in Winston-Salem in North Carolina, the US Krispy Kreme Doughnuts, Inc. In this paper financial analysis is done between Krispy Kreme and average industry which is comprised of other companies in the restaurant industry for example the Starbucks and McDonalds. Financial Ratio Analysis Some of the key ratios analyzed in this case study includes the following: Return on Equity (ROE), Return on Assets (ROA), Return on Investments (ROI),profitability, margins and returns, liquidity and leverage, financial position and efficiency ratios. Quick ratio: This is the measuring of liquidity ratio which is done by comparing current assets minus inventories divided by current liabilities. Krispy Kremes quick ratio is 1.73, while the industrys is 0.69. This is a very positive ratio for the firm because it indicates that the firm has a competitive advantage over the industry when it comes to its ability to pay off its debt. i.e. its ability is superior as compared to that of the industry. Inventory turnover ratio: this is cost of the goods sold divided by inventory. The firms turn over ratio is 20.03. This means that the company is able to sell their inventory in 18 days on average as compared to the industrys turn over which is 31.78 hence can sell their inventory in 11 days. From the fact that Krispy Kreme is a very liquid company, as far as speed of inventory is concerned, there are a little behind them. Return on Assets (ROA): this is the key indicator in evaluating how the management is generating profits from operations. ROA is net income divided by total assets. The Krispy Kreme ROA is 12.28, while that of the industry is 9.15 and this considerable difference in the ratios means that the firm has a huge advantage in that for every dollar in total assets, Krispy produces $12.12 in net income as the industry produces $9.15; therefore it means that Krispy Kreme is good in using its assets to produce more income and thus high profit margin.

Price-to sales multiple of the Krispy Kremes is significantly higher (4.64) as compared to that of the industry (1.63) which means that its very positive for medium to large sized firm. The price-earnings multiple of the Krispy Kremes is 16.18 while that of the industry is 21.73. this from investors perspective indicate that Krispy Kreme is extremely overpriced as compared to its competitors and earnings will continue to increase hence the company is more likely to increase their stock which is a generally a good sign for the company. SWOT analysis of Krispy Kreme Strengths Krispy Kreme's has the capability to align its strategy and execution of its brand potential. They have their priorities set on having both brand value and internal cultural values. Using their brand as a platform, it has developed strategies such as promoting, understanding and protecting their brand, penetrating complementary, offering off-premises channels of sells, and linking everything they do. Also, Krispy Kreme are very committed to organization building through adaptation of common values of integrity, learning, sharing, authenticity and having positive expectations. Adopting commitment values affects both internal and external relationships which then serves as a stage for all policies and programs. Krispy Kreme has limited challenges in developing a successful strategy in standard market cycle meaning that they can easily satisfy its customers needs which works to their advantage when it comes to competitive edge. Also their Doughnut theater experience combined with clever marketing creates a myth for consumers. Krispy Kreme relies on word of mouth before which they flood the market with memorabilia including T-shirts and hats forming an unpaid loyalty base. Their strongest marketing focus is their charitable efforts through wholesale charges to charities and giveaways and by doing this they emphasize on their value on commitment to the community. Upgrading their extranet to a more standardized, browser interface where administrators can sign specific resources required by users for their framework while protecting important information from their competitors has proven to be a competitive advantage for the company. Here, information can be delivered to customers and employees anytime anywhere. Also, it allows the firm to operate more efficiently and stay ahead of competition while avoiding high hidden costs of technology ownership. In addition to the use of internet, customers can be emailed regular newsletters about the company and this removes the excessive costs of printing and distribution. Weaknesses

A looming problem for Krispy Kreme firm is the low inventory turnover ratio which currently averages approximately eighteen days as compared to the industry average of nine days. If not attended to quickly the firms supply line will continue to cost more money and reduce future profits. The financial condition of Krispy Kreme is superior to that of its competitors but does have some areas that need improvement. Krispy Kremes young management is showing that they want to be cautious and have employed an almost zero tolerance policy regarding debt. Opportunities Diversification strategy should be considered. Given the fact that its customers enjoy their sweetness of their doughnuts suggest that they also enjoy the prevailing environment. Perhaps by allowing customers to see the actually process of cooking and glazing the doughnuts will go along way to attracting more customers while keeping them loyal. Since doughnuts are generally morning consumption, other freshness for the rest of the day should be explored for instance diversifying into fresh baked breads for evenings or deli-type sandwiches throughout the day. Despite the fact that Krispy Kreme strategy of upgraded extranet services works well for the company now, there is an opportunity to consider alternatives in altering or expanding the same to suit the continuous growth of the company as they enter new markets. Threats Other trends such as the recurrence of health food manias and other consumer preference issues are also threats to Krispy Kremes potential especially in terms of customer numbers. Krispy Kreme needs to continuously reinvent their strategies to stay ahead in terms of competition as other companys in the same industry are posing serious competition in regard to doughnut tastes e.g. LaMars Doughnuts is the biggest prospective threat to Krispy Kreme since they go to its customers by operating neighborhood bars and in high traffic areas. One of the most troubling financial indicators for Krispy Kreme are their market value ratios (p/cf,p/b etc) which indicates that in the current market they are valued higher than their counterparts Conclusion Considering the financial analysis of Krispy Kreme, the firm is performing well in the industry and still has a great potential of even doing better. Analysis shows that the firm is still new in the market and has been able to differentiate itself and its products from its competitors. This therefore indicates that Krispy Kreme has bright future.

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Case study about Krispy Kreme Doughnut

admin Contents Chapter 2.1 Vision Mission Objectives Strategiesddfdfdf 2.2 Developing Vision Mission Objectives Strategies 2.3 External 2.4 External 2.5 Competition 2.6 SWOT 2.7 Internal Factor Evaluation Factors Factor Profile and Evaluation Evaluation Matrix Matrix Matrix Analysis matrix Vision, Mission, Objectives and Strategies Identification Two: Krispy of Vision, Mission, Kreme Objectives and Doughnut Strategies

2.8 Quantitative Strategic Planning Matrix Chapter 3.1 Identification Vision Mission Objectives Strategies 2.2 Developing Vision Vision, Mission, Objectives and Strategies of Vision, Mission, Objectives and Three: Hershey Strategies

Mission Objectives Strategies 2.3 External 2.4 External 2.5 Competition 2.6 SWOT 3.7 Internal Factor Evaluation Matrix Factors Factor Profile and Evaluation Evaluation Matrix Matrix Matrix Analysis

Chapter

One: Introduction

This paper is going to present strategic analyses on two well known international organizations in order to study how well they are doing in the market and how well, their management of the business and its operations actually is. The number of external and international factors contributing to these will be focused upon through the use of various strategic management tools and finally, recommendations and conclusion will be presented for each organization if it seeks to improve its business or at least stabilize it in the longer run. In order to do this, the paper is going to do the following:

i) Identify the vision, mission, objectives and strategies of the organizations and develop them if any is missing or lacking

ii) Identify external opportunities and threats for the organization and construct an external evaluative matrix iii) Develop a competitive Profile matrix in order to study the competitive positioning of the organization in the market

iv) Study the internal situation of the organization by constructing a Internal Factor Evaluation matrix and a SWOT matrix

v) Develop recommendation for the organization in case they are needed and they also elaborate upon their ways for implementation by the management of the organization.

All these tools will be used for the two organizations i.e. Krispy Kreme Donuts and Hershey Company side by side. The aim of doing so is to be able to provide the comparative conclusion and say how management of the organization, even with the given external threats and opportunities can direct the future and profitability of the organization.

Chapter Two: Krispy Kreme Doughnut

2.1 Identification of Vision, Mission, Objectives and Strategies Vision Krispy Kreme Donuts: To be the global leader in donuts and complementary products while creating magic moments Mission Krispy Objectives Krispy Strategies Krispy Kreme Donuts: Not Stated Kreme Donuts: Noted Stated Kreme Donuts: Not stated world wide

2.2 Developing Vision, Mission, Objectives and Strategies Vision Krispy Kreme Donuts: The vision of the organization should be more people and consumer oriented and not self centered so that the strategies can be different towards achieving customer based brand equity. Mission Krispy Kreme Donuts: The mission of the organization through its actions is definitely the growth in revenue however this should be strategically altered to the mission of providing consumers with an excellent taste and quality and to spread this happiness throughout the world.

Objectives Krispy Kreme Donuts: The objectives of the organization should be to make people see the healthy side of donuts and thus increase its sales and revenue through customer attraction.

Strategies Krispy Kreme Donuts: The strategy of the organization should be to work on increasing customer based brand equity in order to enhance competitive advantage in the organization. For this a mixture of advertising and other marketing tactics needs to be employed and the customers need to start realizing that the Donuts served by KKD are not as detrimental to their health as perceived. 2.3 External Factors and Evaluation Matrix External Development into diversified product Opportunities: 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 donuts 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 Moving into policy healthier in alternatives accordance for example to sugar free that. donuts

Capitalization of the holiday seasons and availability of KKD in recreational places. External Threats: Tough competition Global and increasing global recognition of of Starbucks the and Dunkin Donuts.

presence

competitors

Fall in the number of company stores and rise in franchises and thus a fall in the authority over strategies and management More of health the organization conscious as customer a whole base

Development of organic markets Chapter Three: Hershey 3.1 Identification Vision Hershey Mission Hershey Company: The mission of the Hershey Company is Bringing sweet moments of Hershey happiness to the world every day. To the consumers of Hershey this means delivering quality consumer driven confectionery experiences for all occasions. To the employees this means winning with an aligned and empowered organization while having fun. To the business partners this means building collaborative relationships for profitable growth with their customers, suppliers, and partners. To the shareholders this means creating sustainable value and to the communities this means honoring the heritage through continued Objectives Hershey Strategies Hershey 2.2 Developing Vision Hershey Company: The vision of the organization through its strategies is apparent and is to be able to provide a more sustainable and consumer oriented growth of chocolate industry. Vision, Company: Mission, Not Objectives and Stated Strategies Company: Not Stated commitment to making a positive difference. Company: Not Stated of Vision, Mission, Objectives and Strategies

Mission Hershey Company: The mission of the company is well suited and finely structured to include all stakeholders. Objectives Hershey Company: The objective of the organization should be to make customers and other stakeholders regard Strategies Hershey Company: The strategies of the organization are to provide sustainability and value to not only the business but to all those who are linked to the organization and the larger chocolate industry internationally. In that, the focus on the profitability of the organization is driven by the need to provide value to the Milton Trust and the shareholders. Hersheys as the chocolate industry leader internationally.

2.3 External Factors and Evaluation Matrix External Opportunities:

Penetration of the organization into the Asian and the Middle Eastern markets since the customer base there is less health conscious as of today.

Analysis of the strengths of the competitors and thus promoting and developing the good in accordance to that. Crafting ways to increase customer interaction to know what they want in the shape of chocolate and also to know what the customers expect from the organization in terms of their social responsibility. Developing Further production lines in the Areas organic holiday from where and cocoa more season beans are imported. products Threats:

development of

into the

healthy External

Capitalization

Competition from very strong international organizations and thus the struggle for market leadership as far Maturing Global as customer climatic chocolate base about and the and health confectionery and to thus the the is reduction of in concerned. calorie and intake cocoa

change

thus

the

threat

production

sugar

Increase in political differences internationally and thus the threat to the trade and capital mobility of the economies especially in regards to the Asian and Middle Eastern countries as far as United States is concerned.