Strategic Plan For Krispy Kreme - Essay Example

Strategic Plan: Krispy Kreme Executive Summary Krispy Kreme’s main objective is to have a successful Krispy Kreme branch in every main town, in the United States of America, and to be the global leader in doughnuts and complementary products while creating magic moments worldwide. As a result of its vision to expand rapidly globally, it has suffered financial constraints. On competitor analysis, Dunkins donuts posed the greatest threat, and there would also be more competition arising from other outlets based on convenience. Numerous strengths, weaknesses, opportunities, and threats play a crucial role in the strategic decisions for Krispy Kreme to achieve its set objectives. Its strengths are 1) its vertical integrated value chain whereby its operations are carried out through franchising. 2) Has a high competitive strategy, based on a strong brand name and a loyal customer base that incorporates grassroots operations. 3) Diversification strategy in selling its products in both grocery stores and franchised outlets that escalates its market share. 4) Innovations, as well as experimental ideas, have kept customers interested in the company. 5) Its global outlook that could benefit the company; especially the fact that US markets are becoming increasingly competitive. These strengths can be primal for Krispy Kreme to achieve its objectives. Krispy Kreme has some weakness that could negatively affect their business. 1) Its limited menu offering and slow response to customers changing preferences. 2) Financial and legal constraints and hence struggling in the business. The long term objective of Krispy Kreme Company to appeal demographically large section of the society through its advertisement and expansion is visionalized to be a vital element in achieving its mission are recommendable. Strategic planning is on of the most vital tool to growth and development of any company. Competitive strategies are achieved when Functional departments of any company develop internal strategies for achieving the set objectives and mission of a company. Krispy Kreme has to achieve its objective to be a global leader in doughnuts in the shortest term possible. Krispy Kreme should set a specified objective and factor in other external influences to achieve its mission. Company Background. Krispy & Kreme Doughnuts is an American corporation, originally a partnership, which began its business operations in 1937 as a small regional company. It has a limited liability, the ability to obtain finances for expansion and perpetual life. It developed quite well in the first years, but its tremendous present was felt in the late 1990s whereby it started to experience expansion, customer awareness, and rapid increasing. The company operates in various segments that include; franchise stores, company stores and supply chains. The company stores primary source of income is the production and distribution of doughnuts both in wholesale and retail. Sale channels constitute of on-premise and off-premise sales. To realize the growth of the past KKD in the franchise department, it generates revenue through the collection of franchise royalties and fees from interested entrepreneurs within the whole US. Another profit area is the sales of equipment to the area developer stores which guarantees a constant quality of the products. Krispy Kreme has about 430 stores in the Us, Australia, Canada, Hong Kong, Indonesia, Japan, Kuwait, Mexico, the Philippines, South Korea and the U.K (Plunketts 10). On-premise sales comprise sales to customers visiting factories and satellite stores include drive through windows, along with a reduced price to community organizations. Off premise sales, consists of sales of doughnuts to a variety of retail customers, such as stores, mass merchants and other food stores. Doughnuts are sold to these customers on trays for displays and sale in glass-encloses cases and in packages for display and sale on both stand-alone display units and on customers shelves. (Plunkett 11). Mission Vision Statement. Though not well articulated, I recommend the following mission vision statement: To be the global leader in doughnuts and complementary products, while creation magic moments worldwide. The vision statement for Krispy Kreme focuses on its dominance globally in the supply and distribution of doughnuts and its complementary products while at the same time creating appeal for its products worldwide through advertising and Branding. The Company is not limited to geographical locations. The company’s competence to operate globally eclipses a large section of revenue source and has the capability to build a large customer base. Therefore, this statement though not clear it serves the intended purpose of the set objectives of the company and I recommend that the mission vision statement not to be changed. SWOT Analysis Strengths; analytically, it is reflective to conclude that KKD’s attractive source of strengths still has to be transfigured into distinctive competitiveness. A key strength of KKD is that it possesses a vertical integrated value chain where its operations are carried out through franchising. It is commendable how the company conceptualized a vertically integrated value chain that was involved in supplies to both franchised stores and company owned proprietary doughnut-making equipment. The company sells equipments to new franchises; supplies premixed dough, ingredients and roasted coffee beans for distribution to Krispy Kreme outlets. Secondly; KKD has a competitive strategy that incorporates a high level of grassroots advertising, centered on a strong brand name and loyal customer base. Thirdly, KKDs diversification strategy in selling its products in both grocery stores and franchised outlets has escalated its market share. Fourth, innovations and experimental ideas have kept customers interested in the company. Finally, a global outlook will benefit the company; especially in the US markets are becoming increasingly competitive. The company has succeeded in achieving high store sales-volume by capturing a large customer base. Weaknesses; One major weakness of KKD is its limited menu offering and slow response to customers changing preferences. According to Messing and Sugarman, about management, “Krispy Kreme had neither the management team nor the capital to handle its unrealistic and misguided hyper growth plan.” (Messing and Sugarman, 2006, pg 28). For example, international expansion plans was done without looking at the prerequisites needed. Opportunities; Krispy Kreme diversification of their products and expanding worldwide provide a wide customer base hence creating a good opportunity for large market poll and result in an increase in sales. The company’s branding and advertisement reputation as a competitive strategy will benefit the company than any other company. Finally, Krispy Kreme has a website channel and hence factors in convenience measures for their clients worldwide. The portal has become central to business operations. Threats; 1) increasing capital costs. The need for production and distribution ability has resulted to increased capital intensity. New units’ costs have risen to 1.3 million to 1.5 million from an initial 1 million cost due to increased equipment and building costs (Palepu Healy and Peek 651). This essentially affects the company mainly because of limitation of unit development. 2) limited operating history with small-format units. There is a limited history and public information that is vital on unit economics. 3) Decelerating comp store sale. Large new stores entering the market could negatively affect comp store sales. 4) Fad risk; sustentation of the initial reception of Krispy Kreme in many markets is unlikely. There is a likelihood of much unfair competition as the brand strengthens. Maybe existing brand and customer reliability could lessen the gravity of that risk. Strengths Franchised operations Strong brand and loyal customers Diversification strategies Innovations Opportunities Global outlook Wide customer base Weaknesses Limited menu Slow response to client preferences Financial and legal constrains Threats Unit development limitation Fad risk Decelerating store sale Stiff completion Short and Long Term Objectives; Both long and short term objectives of Krispy Kreme through their strategic planning that would maximize opportunities and alleviate threats and risks are commendable. To realize incremental earnings, there is a strategic plan on the expansion of the current business base. Areas include; 1) increase coffee sales. Planning to put more focus on beverage program coffee sales are likely to increase in proportion to overall sales hence grow from just half of the 10% of beverages total sales. 2) Expand international markets to have a large section of customer base worldwide. 3) Increase unit sales potential for small units in doughnut stores that could range from $750,000 to $1.5 million. 4) Take equity state in franchises ranging from 20% to 70%. The stakes could be of benefit in profit contributing as the franchises become profitable. In its financial outlook, over the next three years, Krispy was expected to grow its earnings by 35%, driven by a top line growth of 25% to 30% and a margin expansion of 75 bp to 100 bp per year. (Palepu, Healy and Peek 650). On achieving the long term objectives are a reflection of utilizes majority if not all its opportunities and eliminates majority if not all its threats and risks. The purposeful achievement of high financial returns avoids losses and opportunities are utilized in maximum production capacity. This would make the company pose dominance to other major companies hence have a superior customer base worldwide. Strategic Analysis and Choice. The swot analysis diagram, grand strategy selection matrix, and model of grand clusters are the tools that would help in identifying Krispy Kreme strategic options. SWOT analysis diagram According to Pearce and Robinson (167), the application of SWOT analysis scrutinizes a firm’s strategies by comparing both the external and internal factors in one of the four quadrants. Krispy Kreme is above the horizontal axis, meaning that opportunities outweigh threats hence a boost to its expansion plans. Horizontal axis indicates both internal strengths and weaknesses. Entirely, the SWOT diagram indicates that Krispy Kreme has opportunities, which when well seized, would lead to a growth oriented company. Krispy Kreme position in cell one suggest that to expand its business worldwide it would employ an aggressive, growth-oriented strategy. (Pearce & Robinson 167). Grand strategy selection matrix It uses SWOTs analysis results to address grand strategy selections as output. The internal strengths of Krispy Kreme Company would be more convenient and beneficial than using external opportunities. Therefore, the best grand strategy lies in quant rant III. Grand strategy options in this quadrant to take an effort to dominate the market in terms of competition. Model of grand strategy clusters This is another tenet when selecting a grand strategy. It defines business in terms of competition weaknesses and strengths. Krispy Kreme having established more that 430 stores it has the capability to sustain its operations worldwide. Selecting a Grand Strategy SWOT analysis diagram supports aggressive and diverse stategy; hence I would recommend the company to employ grand strategy. Market development, innovation and product development were elements in the grand selection matrix. Market development and growth orientation are vital elements in pursuant to market objectives. Pursuing this concentrated growth strategy would achieve both long and short term goals. Tactics In the realization of achieving it’s long-term and long term objectives and implement the intended strategies, Krispy Kreme would employ several tactics. To create and expand unit stores would be a continuous exercise. This is justifiable because it would create a large customer base worldwide. This results to increases the opportunity to create a proximity tendency to many customers worldwide and hence increased sales. In addition, this tactic is justified because proximity is a driving force in preventing threats of other businesses and hence counters low customer counts. Critical Success Factors All elements factored in this strategic plan are vital for Krispy Kreme. The significant factor for development and achievement of this organization is the financial outlook. This would help realize its mission to expand globally. Recommended aggressive growth strategy will put Krispy Kreme into a position of achieving its set objectives in becoming a global company in doughnut production. Just like any profit making corporation, Krispy Kreme would realize the full capability of the recommended strategic plan if the financial objective is fully achieved. References Canak N., Krispy Kreme business case study, scholarly research paper Lussier N. Management fundamentals: concepts, applications, skills development, Boulevard mason, USA. 2008. Print. Messing S. and Sugarman A. the forewarned investor, career press, Inc., 3 Tice Road, USA. ., 2006. Print. Palepu G., Healy M., Peek E. Business Analysis and Valuation: Text and Cases, Bedford Row, London. 2007. Print. Pearce, J. & Robinson, R. Strategic Management: Formulation, Implementation, and Control, 9th edition. New York: The McGraw-Hill Companies. 2004. Print. Plunkett W., 2008, Plunkett’s food industry almanac, plunkett Research, LTD, Houston, Texas, USA. 2008. Web. 2 April 2012, < www.plunkettresearch.com>. Powers, R. J. Note on SWOT Analysis. 2009. Print. Read More