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
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.
4

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
one-of-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

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-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

$ 8,709

$ 18,433

$ 21,046

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

EXPENSES
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)

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

ASSETS
Current Assets
Cash and Cash equivalents

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

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

Acumulated Amortization

Total Assets
Liabilities
Current Liabilities

Defered Long term Liability

Charges
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 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

BY OWNER

10

BY TYPE
FACTORY
STORES
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

FRANCHISE

298

199

117

62

TOTAL
INTERNATIONAL
STORES

298

204

123

68

TOTAL
SYSTEMWIDE

523

409

246

130

STORE
SATELITES

DOMESTIC
STORE

INTERNATIONAL
STORES
COMPANY

11

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

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

$ 8,709

$ 18,433

$ 21,046

REVENUES BY BUSINESS
SEGMENT

Operating Expenses by Business

Management
Company Store

DEPRECIATIONS AND
AMORTIZATION EXPENSES
Company Stores
Franchise

12

Amortization Expenses
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

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.

13

STORES BY OWNER

COMPANY STORES; 18%

FRANCHISE STORES; 82%

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

15

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

16

BY OWNER

BY TYPE
FACTORY
STORES

SATELITE

COMPANY
STORES

93/18 %

83
10
(In Thousands)

YEAR
ENDED
FRANCHISE
STORES

430/ 82 %

198

REVENUES BY BUSINESS
523/100 %
SEGMENT

281

FEBRUARY
232
1 2009
242

BY LOCATIONS
DOMESTI
C

INTERNATIONAL

93
FEBRUARY
132
3 2008

5
JANUARY
298
28 2007

225

303

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

Operating Expenses by Business

Management
Company Store

17

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
Profit By business segment
dan profit
Karena CS profitnya
Data 2009,
negatif (23,74)/store,
Company Stores
$(2,208)
$ 4,638
$ 18,564
profit CS/store 0
523 $ 20,193.03 $ 24,584.00 $ 44,777.03 Company Store
negatif (23.74)
dirubah semua
Franchise
$ 16,601
$ 14,212
$ 16,473
dan profit
menjadi franchise
FS/store 38.61
Jumlah store sesuai
KK Supply Chain
$ 24,584
$ 30,455
$ 36,779
posisi tahun 2009. Di
sini harus ada$effort
Data
2009,
Total
Profit
$ 38,977
$ 49,305
71,816
perbaikan marketing
mematok profit
CS/store $ 40
93
430 $ 20,322.30 $ 24,584.00 $ 44,906.30 untuk meningkatkan
Total stores
sales dan efisiensi dan
dan profit
efektifitas operasi
FS/store
Company Stores
93
105
113
untuk menurunkan
38.61
beban
Dollar
amounts in thousands
Franchise
430
344
282
Mematok profit
CS dipertahankan
CS/store
$ 40
sebanyak 40 store
Average
profit per store
danYear
profit
53 CSJan.2006
Jan.2000
Jan.2001
Jan.2002
Jan.2003
Jan.2004sedangkan
Jan.2005
FS/store
diubah menjadi$ FS.
Di
Company Stores
$ (23,74)
$ 44,17
164,28
38.61
sini harus ada effort
perbaikan
marketing
40
483300,715
$ 20,248.63
$ 24,584.00
Revenues
394,354
665,592
707,766
Franchise 220,243
$ 491,549
38,61 $ 44,832.63
$ 38,70
$ 543,361
58,41
untuk meningkatkan
sales dan efisiensi dan
efektifitas operasi
untuk
Growth
-23.23%
36.54%
31.14%
24.65%
35.41% menurunkan
6.34% beban
Rate
STOCK
PRICE
STORES

-88%

-30

18

CHAPTER 3
BUSINESS CASE ANALYSIS, STRATEGIC BUSINESS ANALYSIS

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
19

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.
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

20

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

3.1.3 IFE ANALYSIS

21

22

3.1.4 EFE ANALYSIS

23

3.1.5 CPM ANALYSIS

24

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.

25

3.1.7 BCG MATRIKS ANALYSIS

26

STRATEGIC POSITION KRISPY

KREME DOUGHNUTS BASED ON
BCG MATRIKS

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

27

28

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

Kreme Doughnuts

DISADVANTAGE

The operation is more

complex than the franchise
29

COMPANY STORES

management

The potential for big losses

if not be managed properly

Potentially to earn big

profits if managed properly.
FRANCHISE STORE

Relative easy and simple

operations

Less Krispy Kreme

Doughnuts control

Potential losses are in

franchaisee not on the
franchisor

Franchise Fee relatively

fixed.

3.2.1 BUSINESS MODEL KRISPY KREME DOUGHNUTS

30

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.
4.

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

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.

LO
W

DEGREE

HIG
H
4
4
4

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?
31

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
Atmosphere
Grow capability
Experience
Aggressive expansion
Emotional leisure
Franchising
Trend & popularity
Reduce advertising
Brand awareness
Go public
32

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

3.5 ALTERNATIVE STRATEGIES FOR KRISPY KREME DOUGHNUTS

ALTERNATIF 1

Close unprofitable stores,

and focus on other domestic
areas and global market

ADVANTAGE

Increase capital from sold

locations and properties

DISADVANTAGE

Lose domestic locations

Lose foothold in certain

33

Diversify and expand

product mix

Develop culturally oriented

products

Redesign current product

names and descriptions

Redesign packaging (cups,

wrappers, bags, etc.)

Develop new market

Themed doughnuts
Holiday doughnuts

Special order
birthday doughnuts

Special event
catering (wedding,
etc.)

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

Decrease loss

ALTERNATIF 2

Attractive young ages

Increase the holidays' sale

Loyal customers will

increase

ADVANTAGE

Increase the customers'

database

DISADVANTAGE

Remodel the production

line

Increase the website

setup cost

Need to find more

workforce to support
new activities

Krispy Kreme Club w/

emails, games, coupons,
events

34

ALTERNATIF 4

ADVANTAGE

DISADVANTAGE

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
35

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
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

36

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
company
stores
60

40
store average
$ million franchised
20
systemwide average

0
Q3 2004
Q4 2004
Q3 2005
Q2 2005
Q3 2005

37

30
25
20
company stores
systemwide
15
% 10
5
0
Q3
2004 Q4
Q1 2005
Q3 2005
increase
in 2004
systemwide
sales Q2 2005
-5
-10
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
in store sales
Competition andChanges
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

38

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)

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

accessed on November 30 2015.
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