Krispy Kreme Doughnuts

Strengths KKD produces approx 5.5 million doughnuts a day consisting of over 20 categories. KKD doughnuts are available in super markets, grocery stores convenience stores, gas station, Wal-Mart and Target stores. KKD has 395 stores with the presence in 40 states on USA and in 10 foreign countries. KKD provides best quality doughnuts to the customers. Weaknesses Fall in revenues and profits since year 2008. Major reduction in stock price after year 2005. KKD profits are in negative. Randomly closing and opening of new stores. Weak business in International market. Strong competition for Dunkin doughnuts and Starbucks. Several lawsuits against the company in the past Weak position in UK and Spain in term of revenues. Franchising business is not doing well. KKD does not have an updated register Uniform Franchise opening circular which prevents it from offering franchises to new franchisees. Opportunities Joint ventures in other countries for expansion. Entrance into new markets Increase number of domestic stores

 Improve franchise business Opening of new stores in Japan and Spain and increase number of stores in the countries where they are currently operating. People are becoming health conscious so KKD should find a way to reduce calories in existing products and offer something new to the customers Threats Majority of people in USA and UK are concerned about their weight. People are well aware of the fact that sweet food contains more calories which will result in variety of diseases. Strong competitors domestically and internationally

PEST analysis 3.2.1 Political Political factors affecting the specialist eateries industry are few and consist mainly ofminimum wage and employment law changes. Krispy Kreme train their staff who usually EMBA Sep10 Strategy 1 - John Ellis Group v016.pdf Page 4 have little experience or education; consequently, they pay employees minimum wage orsimilar and are therefore affected by minimum wage increases.Other political factors are government actions to reduce obesity; however it is very unlikelythat government will legislate against high fat and unhealthy foods 2 . 3.2.2 Economic The continued economic downturn has meant tightened consumer spending, as KrispyKreme is a non-essential food item this may pressure sales. Inflation is above the Bank ofEngland target and there is upward pressure on long-term interest rates as shown by theUK treasury yield curve. An increase in interest rates will increase the cost of capital andmean more expensive borrowing at a time that they could need to expand to compete withrivals. 3.2.3

Social UK consumers are becoming more aware about the ingredients in food, e.g. boycottingtrans fats, battery farmed poultry and mass farmed tuna. In 2008 this motivated KrispyKreme to remove trans fats from their products. Low carb diet trends (e.g. Atkin s) can alsohave an effect on purchasing.Going out to eat and drink is a social habit that is unlikely to change in the near future, butconsumers can change their habits from eating doughnuts to other sweet foods such as ice-cream or pastries. 3.2.4 Technological Due to the nature of purchasing and preparing foods, few technological trends influence theindustry. However technology can be used to improve efficiency, production, distribution,and monitor commodity prices in real-time. Some commentators argue that ecommerce willerode visits to physical stores, however the convenience food nature of speciality eateriesrequire strong physical presence to capitalise impulse purchases. 3.2.5 Environmental Fluctuations in commodity prices affect margins, as in 2009 when the price of wheat andsoybean oil (key ingredients of doughnuts) reached record highs