The market and Krispy Kreme - Essay Example

?THE MARKET AND KRISPY KREME A worldwide doughnut company was born in an old building on July 13, 1937. Krispy Kreme was established in Winston-Salem, North Carolina by Vernon Rudolph. Then just a store, Krispy Kreme used a classified recipe for yeast-raised doughnuts. Because of the very appealing aroma of freshly cooked doughnuts, mere passers-by would inquire to ask if they can have an order of the freshly cooked treat. With such request from customers, Rudolph then put a hole on an outside wall of the store to make the fresh and hot Krispy Kreme doughnut more accessible to its buyers (KrispyKreme.Com, 2009; David & Musa, 2008, p. 26). Most of the time, it is the product’s consistency whether in taste or in quality that appears to be the problem. Krispy Kreme is not an exemption to this inconsistency. For the company to be able to hurdle over this hindrance in quality, Krispy Kreme constructed a mixing plant and a distributing system that will deliver the perfect Krispy Kreme doughnut mix. The company did not just bring an original yeast-raised doughnut to the market but also a technology that will increase product consistency in its stores. The 1940s and 50s were the decades that Rudolph and his equipment engineers created Krispy Kreme’s own doughnut-making machineries (KrispyKreme.Com, 2009; David & Musa, 2008, p. 26). Even if the company was just starting to expand its market across the state, it was pretty obvious that Vernon Rudolph cared about the quality of the products that his company will be giving out to its market. This proves that the company is putting their customers first and not just the amount of money the company can make. As long as the customers are happy, the satisfaction that the doughnuts are bringing to its patrons will equate to the company’s well-earned income. The quality consistency hurdle was surpassed by the company. Although, it was considered as a challenge since Krispy Kreme was just starting its ground on broader market, the problem was properly addressed by Rudolph and a contingency plan was made to ensure that the public and the patrons of the products will get the quality products that they deserve. Delivering the mixture on a daily basis increased the expenses of the company. To cut the expenses being brought by the regular transportation of the mixture, Rudolph together with his equipment engineers developed Krispy Kreme’s own doughnut-making machineries. It was a wise marketing strategy in ensuring the quality of the products that are being produced by the different stores and still be able to achieve the desired profit out of the stores. A decade was dedicated to further develop and systematize the whole doughnut-making process (KrispyKreme.Com, 2009; David & Musa, 2008, p. 26). The first international Krispy Kreme store was opened on December 2001 in Canada near Toronto. The company further expanded its market to Australia and Europe in 2003. Asia, Southern America and the Middle East were the next markets that the doughnut company explored. Krispy Kreme Doughnuts (KKD) was able to expand their markets in 5 continents in less than a decade. KKD has a total of 123 stores in 5 continents by the 28th of January 2007. Two hundred thirty nine KKD factory stores and 33 satellite stores were operating giving a total of 272 stores nationwide (KrispyKreme.Com, 2009; David & Musa, 2008, p. 27). KKD then focused more on the markets in Asia and the Middle East. Demographically, KKD perceives that these 2 locations will be more favorable for its products. Asia and the Middle East have high consumptions of sweet goods which will work pretty well for the company’s signature products. It has also been noted that Western products have high popularity in these Eastern locations. The future success of KKD in these places given the fore mentioned facts appears to be very promising (David & Musa, 2008, p. 27). The Asian and Middle East markets is showing very good potential with regards to KKD’s success. There is one market that the company is looking to penetrate next and this is the European market. Aiming to penetrate this market, KKD partnered up with Harrod’s department stores in London to debut the trademark Krispy Kreme Hot Original Glazed doughnuts. As there are quite a number of differences between Americans and European customs, it will take a lot of convincing for the British population in particular to change their traditional cookie or biscuit with the American doughnut during snacks. Aside from the issue with the cookie, Europeans prefer tea over coffee. This is a risk that KKD will be taking as they are offering their custom brewed coffees (David & Musa, 2008, p. 32-33). KKD is not just the only company offering sweet delicacies in the market. The company has numerous competitors not just in the domestic but also in the international market. In the domestic market, competition is being brought up by Dunkin’ Donuts and Starbucks Corporation. While in the Canadian market, Tim Hortons is the name of competition (David & Musa, 2008, p. 29). Dunkin’ Donuts was founded more than a decade after KKD. In comparison to the 239 KKD stores located in the United States, Dunkin’ Donuts has more than 5,300 stores domestically. The only figure that KKD outnumbered Dunkin’ Donut is by the number of calories a single Krispy Kreme Hot Original Glazed doughnut has compared to its Dunkin’ Donut counterpart. What makes KKD standout is that it also serves beverages and has a wider variety of doughnut flavors to choose from (David & Musa, 2008, p. 29). Even if KKD pioneered the industry, Dunkin’ Donuts are more accessible via the number of its store worldwide. The varieties of doughnuts and drinks that are being offered by KKD are worth almost nothing if people would not be able to have a taste of it due to the lack of accessibility to its stores. Dunkin’ Donuts is starting to broaden the variety of its products by offering doughnuts or beverage that are unique to a certain market as an ingredient that is being used is a local produce of the country or city which a Dunkin’ Donut store is located (David & Musa, 2008, p. 29; DunkinDonuts.Com, 2011). International markets are hard to penetrate since it has distinct tastes that a foreign country may or may not be able to please. Circumstances will be harder when a competition has already been established at the location that is yet to be penetrated. Such instances, it can go either way for the company. The market can either try something new and then decide what it prefers more, or the market will stick to what it has been used to. This is the dilemma that KKD is and will be facing against Dunkin’ Donut (David & Musa, 2008, p. 29-31; DunkinDonuts.Com, 2011). Another competitor for KKD is the Starbucks Corporation. For KKD, the doughnuts came first before the coffee. It is the other way around for Starbucks. Just like Dunkin’ Donuts, Starbucks is also conquering the world with an estimated 12,000 retail stores. The number of KKD store is just a mere percent of the number of Starbucks stores worldwide. A factor that the Starbucks Corporation has explored is marketing its original coffee blends and coffee-making equipment. This is an area that KKD would not be able to compete with as it cannot and will not be able to make their doughnut-making equipment suitable for the homes (David & Musa, 2008, p. 29-31). Tim Hortons is named as the largest restaurant chain in Canada. Just like KKD, it was originally a store that offered coffee and doughnuts in 1964. Compare to KKD and Dunkin’ Donuts, Tim Hortons is the youngest among the competing companies. Tim Hortons offers almost the same just like its competitors however it was founded outside the United States which makes it a foreign company competing with all-American companies like KKD and Dunkin’ Donuts. Its stores in the United States alone outnumbered all the KKD stores located worldwide (David & Musa, 2008, p. 28). Compared to KKD, Dunkin’ Donuts made a very good marketing strategy when it made doughnut flavors and beverages which include ingredients that are locally produced. This will get the curiosity of the locals on whether the infusion of an international product and the local ingredient appeal in the palate. KKD has been pretty conservative towards keeping its recipe’s quality that the company forgot to revise its menu every now and then. Such process is a risk however once proven all the hardships will be worth taking as income and popularity will sure be gained in the market (David & Musa, 2008, p. 28-31; DunkinDonuts.Com, 2011). Whether it is a company store or a franchise, a particular KKD store is required to purchase all its supplies from the KKD Supply Chain. This is being done to insure the quality of the products of each store. This is continuing the goal of Rudolph in achieving uniformity of the quality of the products being produced in every KKD store whether it will be domestically or internationally (David & Musa, 2008, p. 30). During the mid-2000s, there is on the negative side with regards to net income. Year by year the company is making marketing strategies in gaining a positive income by end of its fiscal year. As reports have shown, from a negative US$ 198,339.00 net income on 30th January 2005, KKD’s net income on 27th January 2007 increased to a negative US$ 42,236.00. The company was able to overcome more than US$ 150,000.00 in net income in just a span of 2 years (David & Musa, 2008, p. 31). It was not just KKD who experienced a slide in the economic sector in the past decade. During the years that the revenue was falling, there were no changes as to the number of stores and employees were made. KKD reduced its manpower from almost 7,000 employees to just 4,759 employees by January 28, 2007. The money that used to be allocated for additional manpower was used to open other international stores. This has boosted the income of the company and further spread its reputation in more foreign markets (David & Musa, 2008, p. 25). Though it was not an easy task in giving up employees who have made working at every KKD a part of their daily lives, it was a step needed to be taken to save a 70-year old company. The negative net income of the company was the result of continuous reorganization of the company since the death of founder Vernon Rudolph in 1973. His death was the mark of the slow growth that the company experienced in succeeding years which eventually resulted to the negative net incomes that the companies achieved in several years (David & Musa, 2008, p. 31; KrispyKreme.Com, 2009). The mission statement of KKD as stated on their website KrispyKreme.Com (2009) “to touch and enhance lives through the joy that is Krispy Kreme.” KKD also included in the site their vision as “to be the worldwide leader in sharing delicious tastes and creating joyful memories.” So far, the company has not fulfilled its vision in conquering the leadership in bringing its product to the worldwide market. With the figures that have been previously stated, the company is falling behind companies that were founded on later years. KKD supply chain is evidence that the company is fulfilling its mission statement. By ensuring that each KKD store is equipped with the same machineries and ingredients, the quality of the products that each store is producing is the same just like the other stores. Though the international KKD store has the same equipment that domestic stores have, international stores does not have the same ingredients as they are purchasing it from local distributors. This may cause a difference towards the taste or the quality of KKD products being produced at the on-shore stores (David & Musa, 2008, p. 30; KrispyKreme.Com, 2009). As these international stores are not importing ingredients and other supplies anymore, the expense in transportation decreased and the expense was converted to income. This transformation though comes with a consequence. The international stores may not be able to sustain the quality of the products that it will produce as the variety of the ingredients being use will surely differ to the ingredients being used by domestic stores. This step may not fulfill the company’s mission statement as there will be inconsistencies in the products that the on-shore and off-shores stores will offer (David & Musa, 2008, p. 30). Since the mission of the company is in jeopardy because its stores cannot guarantee having the same quality of products due to the reason stated previously, its executives should boost the company’s vision to bring back profit to the company and bring back the consistency in the products in its stores worldwide. The number of KKD stores worldwide is just a fraction compared to the number of Dunkin’ Donuts’ stores or Starbucks stores worldwide. It is not even near in numbers with the Canadian-based company Tim Hortons that has stores in Canada and in the United States only. The marketing strategies being done by KKD’s management are going against its mission and vision statements. These statements have been the principles being followed by past managements when strategic administrative decisions were made. Marketing decisions that were made against its mission statement seemed to be working for the company. Should KKD revise its mission statement since it is not applicable anymore in recent years? It is the same case with regards to the company’s vision. Obviously, it is not achieving its vision. It still has not penetrated international markets that have been penetrated by its competitors. For KKD to fulfill its mission statement, the company should work double time in fulfilling its vision. The only time that the company’s mission statement will be accomplished is when the vision of being the worldwide leader in sharing delicious flavor and create joyful memory in every bite of the company’s signature doughnut. Once the vision is fulfilled therefore the mission of touching and enhancing lives will be reached Dunkin’ Donuts have already adapted a marketing strategy that will appeal in international markets. KKD can adapt the same by using locally produced ingredients that will be uniquely available in their stores at that particular location. It was a tried and tested step for Dunkin’ Donuts. The sales department should create an innovative way to further promote the products. It would not hurt to be a little bit adventurous with flavors that will cater to the palate of locales (David & Musa, 2008, p. 31; KrispyKreme.Com, 2009). KKD can modify its traditional doughnuts to cater to the European culture. This is a step that should be taken by the company to succeed in a foreign market. The company should not be too conservative towards exploring new flavors that will cater to the new markets it would like to penetrate. This marketing strategy does not just apply to international market. It can also be applied to local market strategies to attract the present generation. The taste of the children and young adults in the 1930s may not be the same with regards to the choices of the children and young adults of the 21st century. There are also emerging groups that are more health conscious and the number of calories in a single Krispy Kreme doughnut is not acceptable. Innovations are made not to put the tradition in the past. These are made to cater to other market groups and are more feasible rather than maintaining the traditional and not be able to convert it to a sale. Proposals for improvements can be tested first in a couple of domestic stores. An example would be introducing a more health conscious version of the traditional glazed doughnuts and placing it at stores maybe in Florida, New York or Los Angeles. The company can also do surveys within their stores to check what customers would want them to offer at particular stores. It would not hurt to do go beyond the tradition. It will not be violating any law and will also be applicable in fulfilling the company’s mission and vision statements. It has been noted in recent studies that 1 for every 3 Americans are overweight. When a healthier snack-food alternatives which would not have much calories or carbohydrates in it, the health conscious group or the weight watchers will still be patronizing KKD’s products as it is giving concern to the health of its market. This will be a good promotional tool for the company. It will be a step closer in fulfilling its mission statement in bringing joy to those people who have been enjoying the sweet products of a company who are not just concerned about earning but also to the health of the people who have been avid fans of their sweet confections (David & Musa, 2008, p. 33) Living organisms adapt to its environment to survive. This also applies to marketing. If a company will be conservative to think of changing anything or offering something more, there is a tendency that it will not survive in a very competitive economic world. There is always a price needed to be paid for everything but a little risk would not be harmful once an innovation has been discovered. It is not just the company who will be benefiting from it but also the market that has brought KKD to its stature. KKD has been founded more than 7 decades ago. Most of the people who enjoyed its products have been long gone but that neon sign at every Krispy Kreme store is still lighting up. There are still a lot of people who enjoy the traditional offerings however once in a while a change will be good. Customers will be intrigued every once in a while by the variety KKD will have to offer to them. This will make each store inviting to the regular customers and even to new people who are potential buyers. It is not an impossible task that KKD will eventually be available in every country worldwide. There are risks that should be taken and when success comes, all the hardships are worth taking. Events may come that will make marketing strategies to go against the tradition. This is not breaking the rules. It is just a step to preserve something so that the future generations will enjoy the sweetness and the goodness that generations before them have loved for decades. References David, F. R. & Musa, M. (2008) Case 3: Krispy Kreme Doughnuts. DD IP Holder LLC. (2011) Dunkin’ Donuts [Internet]. Available from [accessed 13 February 2012]. Krispy Kreme Doughnut Corporation. (2011) Krispy Kreme History [Internet]. Available from [accessed 13 February 2012]. Read More