Activities of KKD in the International Market - Essay Example

?International Business Activities of KKD in the International Market: As of January 28, 2007, there are a total of 123 Krispey Kreme stores operating internationally, out of which 66 are satellite units. The stores are located in Australia, Canada, Hong Kong, Indonesia, Japan, Kuwait, Mexico, The Philippines, South Korea and United Kingdom. In fiscal 2007, 60 new international stores were opened, while 5 international stores were closed down. Krispey Kreme concentrates on their development effort, primarily in Asia and Middle East. In 2007, The Krispey Kreme was awarded the development rights in the Middle East, Hong Kong, Tokyo, the Philippines, and Indonesia. The developments and franchise agreements for these territories provide for the development of in these regions 200 stores. The International Franchise division consists of the company’s global store franchise activities. Worldwide franchise stores trade in doughnuts and complementary products, exclusively through the appropriate sales channel as in the case of Krespey Kreme direct outlets, using the same store formats as in the company stores segment. The International Franchise division also uses a kiosk format for the effective operation. The North Carolina-based Krispy Kreme has come to Asia. The KKD opened its first shop in Hong Kong and then in Indonesia. Tokyo, Manila and Macau outlets were opened as they expanded their business in Asia. For the other part of the continent, KKD opened outlets in Kuwait; with an eye on is setting up this fall in Kuwait with additional shops planned for the Saudi Arabia, Egypt and United Arab Emirates. Hong Kong and other Asian countries are relatively easier targets now, than it were it were a few years ago. External Environment of Krispey Kreme: In the US market, Krispy Kreme faces completion in baking industry. Krispey Kreme production includes breads, pies, doughnuts, cakes and coffee. The competition is exceedingly high and so firms must be able to provide cheap, differentiated products to the purchaser who needs them for low switching costs. In America, the people are busy and they always go for the fast food which makes them fatty and diabetic. Now the people are aware of this problem, and they are choosy in food as well as taste. In international market, the Dunkin’s Donuts is the main competitor for the Krispey Kreme donuts because it offers or similar lines products to the customers. The Dunkin’s donuts have a reputation in international market as they only introduced the first zero gram fatty products for the customers. The Asian franchises sell doughnuts only at their outlets aiming at monopoly. KKD’s business in the United States actually concentrates on wholesale business. Krispy Kreme has appended its base in the US by supplementing them with other items, in supermarkets and convenience stores. The Challenges: 1)      Competitive: KrispyKreme functions in the area of expertise eatery business; on the other hand they compete with all outlets that a customer can access with the intention of satisfying usage for snacks, coffee, or treat-based objects. These outlets consist of other area of expertise eateries, fast food outlets, local expediency stores, and other retail atmospheres that store coffee and other beverages. With regard to their core merchandise, Krispy Kreme also has to compete with unbranded doughnut producers that are sold through supermarkets and doughnut vans. 2)      Economic/Financial: The continued financial recession is destined to tighten customer’s expenditure. As Krispy Kreme is a non-necessary food article this may pressure sales. Price rises is not the target of Bank of England as there is upward stress on long-term rates of interest all over UK. An increase in interest rates will enhance the price of capital and denote more luxurious borrowing for Krispy Kreme, which is deeply engaged in competition with its rivals. 3)      Physical Environment: Due to the increase in rivalry, it is vital for Krispy Kreme to pursue the real trends and be a step forward in the rivalry by improving the quality of its products. Although Krispy Kreme is at present facing a rough moment it is still capable of launching lack as a successful company. Thus, it can gain lack its marketplace share. 4)      Social Cultural/labor There are sufficient proofs pointing to a trend that customers of the UK are becoming more alert on the constituents in their food. In 2008 this provoked Krispy Kreme to remove trans fats from their merchandises. Low carb diet tendencies (for example the Atkin’s diet) can also influence purchasing. Culturally citizens in the UK do not have any trendy following for foodstuff brands as in the USA. This involves more expenditure for business organization advertising necessary to convince customers to stay faithful. 5)      Technology: Due to certain difficulties (nature) in preparing and purchasing foods, products, some technical trends have influenced the business. Technology can be employed to improve effectiveness, manufacture, allocation, and assessment of the commodity in relation to marketplace alterations. Some critics argued that e-commerce would prevent customers from writing stores, physically. On the other hand, the conditions of specialty eateries are that they are expediency foods and need physically powerful physical presence with the intention of capitalizing on the impulse purchase of food. 6)      Political – Legal: Political features on the expert eaterly business are few, and include mainly minimum salary alterations and employment law alterations. As Krispy Kreme teach their employees, and as employees need some training little prior skill or teaching, they pay workers minimum salary or slightly above. Per se they are influenced by minimum wage enhancement. Other political features have been the action of government to decrease obesity; on the other hand it is improbable to consider that government will hire legislation against to high fat and unhealthy foods. Value Chain Analysis of Krispy Kreme: Value chain analysis is described as the activities within the organization and relates them with the analysis of the competitive strength of the organization. The value chain model is a very useful tool in defining the core competencies and the activities of the firm. This indicates that the firm by itself can create competitive advantages such as cost advantage and differentiation. In Michael Porter’s view primary activities are directly connected with the creation or delivery of services or products. The five main areas in the primary activities are inbound logistics, operations, outbound logistics, marketing and sales and services. All these are connected with support activities to enhance the effectiveness and efficiency. Benefits of vertical integration is to reduce transportcost, improve coordination in supply chain, because of increased control over inputs, provide more opportunity to differentiate gain upstream or downstream profit margins, increase entry barriers towards potential competitors, gain access towards downstream distribution channels, lead to develop core competencies. The vertical integration provides krispy kreme many benefits such as by making and delivering the equipments and ingradients, on stores the company able to keep a tight control over its product and this helps to maintain a high standard of customer expectations. Here the focus is on the primary activities of the Krispy Kreme. These includes, Supplying Fresh Donut Mixes to All Stores: To begin with its own recipe, with unique taste doughnut mix is produced, controlled and distributed to several stores and franchises. The company makes its doughnut mix in its own plant and plans to make other plants. Krispy kreme roast, and bags its own coffee and the entire doughnut making equipments like huge stainless steel fryer conveyor belt contraptions etc found every restaurant are assembled at the plant in Highpoint, north Carolina. Manufacturing Equipment for Doughnut Making: Krispy Kreme has designed equipment for the production donut making. They sell them to stores and earn profit. This activity ensures product consistency. Retail Distribution Channel: Doughnut mixture and doughnut making equipment is distributed to large factory stores and also to factory stores that supply smaller stores. They outsource the retail channels in Wal-Mart and service stations. Fresh Doughnut and Store Experiences: Krispy Kreme dominates the markets and stores all over the world. KK sells freshly baked doughnuts and their products have a high demand in the market. Another plus point in the company’s glazed warm product is that its production is on long scale and that the manufacturing technique is simple. Brand: The targeted local campaign and the store demand of the company has increased by word of mouth publicity, it has become a very recognizable brand among consumers. The brand loyalty has ultimately leaded to more demands on franchise opportunities. The taste factor, binds generations of its loyal customers, and the Doughnut theatre, which is designed to give a multisensory experience to the customer and helps to establish a brand identity. Another attractive feature is the original glazed sign of Krisply Kreme. It is popular in any circle of friends. Integral and Competitive Model Strategy Model: Krispy Kreme’s trade model involved creating profits and revenues from three Sources: Royalties from franchised stores and franchise fees from it latest store openings. Trade at company-owned stores. Sales of doughnut mixtures, coffees to franchised stores and modified doughnut-making tools. KKD was drawn to franchising for the reason that it reduced capital needs, provided an attractive royalty stream, and put reliability for limited store operations in the hands of successful franchisees that recognized the ins and outs of operating multi-unit chains powerfully. KKD had little problem attracting top-quality franchisees as of the attractive finances of its new stores. KKD had developed a vertically included supply chain whereby it contrived the mixes for its doughnuts at business plants in Illinois and North Carolina and also manufactured proprietary doughnut-making tools for using them at franchises and company occurred outlets. The deal of mixes and tools, referred to as “KK distribution and manufacturing” by the company, created a considerable fraction of both earnings and revenues. 1.) Environment Analysis: Krispy Kreme Doughnuts was established in 1937 and is headquartered in Winston-Salem, North Carolina. KKD produces about 5.5 million doughnuts a day consisting of over 20 varieties. When KKD’s trademark doughnut, the unique glazed, is hot off the glazing methods and still warm, they proudly revolve on their neon light to encourage consumers into the store. Krispy Kreme is a main competitor in the restaurant business, known mainly for its donuts. Near the last part of 2004and the opening of 2005, the financial system began to slow. Customer interest in decreased carbohydrate consumption, containing, other than not limited to, the interest in and popularity of low carbohydrate diets, for instance the “South Beach” and “Atkins” diet policies have been blamed for declining trades in pre-packaged donuts. Following are the internal and external factors of environment analysis: Internal Factors: Strong brand appreciation and recall Wide appeal of signature glazed doughnuts Growth in international markets Vertical integration Power full channel of distribution Quality of manufactured goods Expanded collection of contributions at KKD stores containing beverages Doughnut machine tool. Lack of places in some areas Pricing in some places External Factors: Rising reputation of bakery cafes and coffee shops Popularity of American fashion and foods in abroad markets Development in two-income households Americans persist to experience time-starvation entertaining chances moving from home to work surroundings Technological advancements including paperless ordering, handy computers for delivery drivers and predictive modeling software. Channel expansion possibilities containing Internet pre-ordering. Competitors like Starbucks and Dunkin Donuts Low-carb tendency in eating preferences All-natural, healthy, organic eating tendencies Cultural dissimilarities in snack foods and breakfast Enhancement in eating at full-service restaurants, combined with a decline in eating at of fast-food restaurants 2.) Value Chain Analysis: As a vertically included business Krispy Kreme manages downstream and upstream in the value chain. Following are the Krispy Kremes key value-creating activities: Unique taste utilizing secret recipe Doughnut theatre experience Cult brand Sharing ethos Cult brand with strong awareness Global network of franchises and stores Analysis of resources and capacity 3.) Competitive Advantage: Krispy Kreme segregates its supplies into three group of ownership, like the Company store operation, franchisee store operation and the supply chain operations. It follows a vertical integration. February 2002 was a good year for the company to come out with a variety of associated outlets. Krispy Kreme had a total of 75 outlets in February 2002. The company outlets are opened in states like Northern California, and Philadelphia, where they are run by region developer combined ventures. In such places, Krispy Kreme has best ownership significance. The Company posses 23 associates which functioned in 52 stores in same year. The company also had developed around 25 area developers working for 91 stores with eye opening commitment to commence over 250 stores in their territory throughout their preliminary expansion agenda. The main competitors of krispy Krems consist of Dunkin, The Hostess and finally the Dolly Madison. Krispy Kreme has an excellent expansion prospects. They position elevated in competitive strengths. A very significant plus of Krispy Kreme is the reputed brand name. They make available a massive foundation of competitive advantage on competitors. Even though Krispy Kreme has completed a successful task in protecting the position and preserving a competitive strategy, they frequently have to acquire strategic measures to stay forward of their competitors. If Krispy Kreme is to understand its objective of 25% increase in income, there need to be an increase in product demand. Krispy Kreme's approach on strategy and the demand for products stands static. Krispy Kreme's development velocity stands unpredicted on the thumb rule, ie the P/E ratio of a business is approximately corresponding to its development rate. A P/E between 15-20 a share makes sagacity for the similar stock. The Krispy Kreme's P/E ratio was 16 contrasted to the commerce average of 28. 4.) Mission and Vision: The mission of the krispy Krems include, “To touch and enhance lives through the joy that is Krispy Kreme”. The vision statement is “To be the worldwide leader in sharing delicious tastes and creating joyful memories” (Mission and Vision 2011). 5.) International Competitive Strategy: In short, Krispy Krem Company has turned out to be a leading supplier of donnuts and associated products. With chosen goods and has obtained almost worldwide conjugal brand name identification .presently, Krispy Krem is engaged in a numerous activities intended to enlarge its presence in the latest universal market. Krispy krem' expansion strategy of Krispy Kreme has so far been inclined to accentuate locating its stores in elevated traffic areas, together with mini-stores situated in hotels, expensive outlets, shopping malls, and other business enterprise which aren’t self-supporting . The company has as well implemented an extremely insistent international strategy to take advantage on the European flavor and significance in American products. Similarly important, is the company's prominence on Krispy krem' in-store understanding of customer service. Company executives consider that this direction has been the main input to the firm's achievement, affecting sales from a 2002 level of $295 million to over $1.8 billion in 2009 While Krispy krem had also penetrate into mutual venture or association to infiltrate the market with its variety of the products, it also make use of a new website assistance to give customers with online chances to procure the products as well as a increasing choice of other accessories in demand. Reference List Mission and Vision 2011. Krispy Kreme Doughnuts Corporation. [Online] Available at < http://krispykreme.com/about-us/mission-and-vision> [Accessed on 18 Feb. 2012]. Read More