0
LI Boya
YE Zhirui
WANG Yanyi
CHENG Qiaomei
Providence Klugan
Ogochukwu Chrystle Oguamanam
History
· 2001-2004
rapid growth
· 2000Digital Java
acquisition
· 2001 go public
· 1990s aggressive
expansion
· 1982 bough...
Q1:
What are the chief elements of Krispy Kreme’s
strategy? Was it working?
Strategy in Growth stage
1990's --- 2004
Cost-leadership

Differentiation

Economic scale
Unique product
Grow capability
A...
Strategy in Mature Stage

Form 2004

Keep going expansion
Rely on customer loyalty
Strategy Innovation:

Acquisition Motan...
Q2:
Identify and explain the key elements of their
business model
Business Model

On-premise
Business

Business 1:
companyowned stores

Off-premise
Business

Business 2:
franchised
stores
...
Business Model
Krispy Kreme's business model involved generating revenues and
profits from three sources
1. sales at compa...
Q3:
What does a SWOT analysis reveal about Krispy
Kreme’s overall situation, including an evaluation
of their financial pe...
Financial Performance

Dollar amounts in thousands
Year
Revenues
Growth Rate

Jan.2000 Jan.2001 Jan.2002 Jan.2003 Jan.2004...
Financial Performance

Year 2005
• Stock Price: -88%
• Stores: -30
SWOT&TOWS





Opportunities
 New ways of selling
 New promoting
concept
 Present menu offerings
Threats
 Health ...
Mckinsey 7S Model

1.Hard Elements
1) Strategy (Mixed)
2) Structure (Own stores & Franchises)
3) Systems (Everyone contrib...
Q4:
On the basis of your assessment above,
what do you think of Krispy Kreme’s growth
prospects? Just how good are they?
GROWTH PROSPECTS
•

Historical basic product with variations –
KK is known for its doughnuts, let that be
the basic produc...
GROWTH PROSPECTS
•

Customer experience – make every
doughnut a fun and adventurous
experience for the customers. Let them...
GROWTH PROSPECTS
• Franchise – maintain effective
communications with franchises,
ensure that they uphold the KK
brand and...
GROWTH PROSPECTS REALITY

• For KK, the growth prospects
as at the end of 2005 seem
quite bleak. Though they had
optimisti...
GROWTH PROSPECTS REALITY
80

$ m l l i on
i

70
60

com
pany st or es

50

f r anchi sed st or e
aver age
syst em de
wi
av...
GROWTH PROSPECTS REALITY
30
25
20

com
pany st or es

%

15

syst em de
wi

10
5

i ncr ease i n
syst em de sal es
wi

0
-...
GROWTH PROSPECTS - OTHER
• Porter’s five forces; though not
a traditional model for
assessing growth prospects of
a compan...
GROWTH PROSPECTS - OTHER
•
•
•
•
•

Competition and rivalry
Substitutes (and complements)
Bargaining power of suppliers
Th...
GROWTH PROSPECTS - OTHER
• Ansoff’s growth model
• Market penetration – existing
products, existing market
• Market develo...
Q5:
What major issues do you think that Krispy
Kreme management needs to address?
Major issues
• Low-carbohydrate diets
Adversely impacted several food categories
“this phenomenon has affected us most hea...
Major issues (cont’d)
• Weak senior management team
Inappropriate tone at the top of the organization
Unqualified manageme...
Q6:
What recommendations would you make to
Krispy Kreme management to improve upon the
strategy or otherwise sustain the c...
RECOMMENDATIONS
• Develop stronger control of franchises recruitment in
order to concentrate on succesful actual stores
• ...
THANK YOU !!!!!
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strategic management - krispy kreme, is turnaround possible?

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Transcript of "strategic management - krispy kreme, is turnaround possible?"

  1. 1. LI Boya YE Zhirui WANG Yanyi CHENG Qiaomei Providence Klugan Ogochukwu Chrystle Oguamanam
  2. 2. History · 2001-2004 rapid growth · 2000Digital Java acquisition · 2001 go public · 1990s aggressive expansion · 1982 bought by Joseph Mcaleer · 1960 standardization of making process · 1950s 29shops · 1933 creation by Vernon Redolph · 2005 decline
  3. 3. Q1: What are the chief elements of Krispy Kreme’s strategy? Was it working?
  4. 4. Strategy in Growth stage 1990's --- 2004 Cost-leadership Differentiation Economic scale Unique product Grow capability Atmosphere Aggressive expansion Experience Franchising Emotional leisure Reduce advertising Trend & popularity Go public Brand awareness Go international Combine with coffee Mix strategy Our Mission To touch and enhance lives through the joy that is Krispy Kreme. Our Vision To be the worldwide leader in sharing delicious tastes and creating joyful memories.
  5. 5. Strategy in Mature Stage Form 2004 Keep going expansion Rely on customer loyalty Strategy Innovation: Acquisition Motana Mils(2003) – failed Low-carbohydrate diet(2004) – failed Questionable acquisition seven-unit franchise
  6. 6. Q2: Identify and explain the key elements of their business model
  7. 7. Business Model On-premise Business Business 1: companyowned stores Off-premise Business Business 2: franchised stores Business 3: doughnut mixed Business 4: supermarket and convenience store
  8. 8. Business Model Krispy Kreme's business model involved generating revenues and profits from three sources 1. sales at company-owned storees 2. 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 3. sales of doughnut mixes, customized doughnut-making equipment, and coffees to franchised stores.
  9. 9. Q3: What does a SWOT analysis reveal about Krispy Kreme’s overall situation, including an evaluation of their financial performance? Do a comparative strengths and weaknesses assessment using McKinsey.
  10. 10. Financial Performance Dollar amounts in thousands Year Revenues Growth Rate Jan.2000 Jan.2001 Jan.2002 Jan.2003 Jan.2004 Jan.2005 Jan.2006 220,243 300,715 394,354 491,549 665,592 707,766 543,361 36.54% 31.14% 24.65% 35.41% 6.34% -23.23%
  11. 11. Financial Performance Year 2005 • Stock Price: -88% • Stores: -30
  12. 12. SWOT&TOWS      Opportunities  New ways of selling  New promoting concept  Present menu offerings Threats  Health campaign  Competition  Increasing cost of ingredients  Consumer’s habits change Strengths Quality Brand Awareness Market share Various products Vertically integrated Weaknesses Communication  Management & Control  Cannibalization (erode)  Financial practice SO Marketing & Social network WO New markets & Improving management ST Promoting healthy products & Economic scale & CSR WT Avoid developing existing markets by existing products
  13. 13. Mckinsey 7S Model 1.Hard Elements 1) Strategy (Mixed) 2) Structure (Own stores & Franchises) 3) Systems (Everyone contributes to the value) 2. Soft Elements 1) Shared values (Hot fresh magic products) 2) Skills (Baking skill, recipe) 3) Style (Ineffective relationship) 4) Staff (Inexperienced, lack of knowledge)
  14. 14. Q4: On the basis of your assessment above, what do you think of Krispy Kreme’s growth prospects? Just how good are they?
  15. 15. GROWTH PROSPECTS • 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
  16. 16. GROWTH PROSPECTS • 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
  17. 17. GROWTH PROSPECTS • Franchise – maintain effective communications with franchises, ensure that they uphold the KK brand and quality and monitor them effectively
  18. 18. GROWTH PROSPECTS REALITY • 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
  19. 19. GROWTH PROSPECTS REALITY 80 $ m l l i on i 70 60 com pany st or es 50 f r anchi sed st or e aver age syst em de wi aver age 40 30 20 10 0 Q 3 2004 Q 4 2004 Q 3 2005 Average weekly sales Q 2 2005 Q 3 2005
  20. 20. GROWTH PROSPECTS REALITY 30 25 20 com pany st or es % 15 syst em de wi 10 5 i ncr ease i n syst em de sal es wi 0 -5 - 10 Q 3 2004 Q 4 2004 Q 1 2005 Q 2 2005 f i scal year Changes in store sales Q 3 2005
  21. 21. GROWTH PROSPECTS - OTHER • Porter’s 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
  22. 22. GROWTH PROSPECTS - OTHER • • • • • Competition and rivalry Substitutes (and complements) Bargaining power of suppliers Threat of new entrants Bargaining power of buyers
  23. 23. GROWTH PROSPECTS - OTHER • Ansoff’s growth model • Market penetration – existing products, existing market • Market development – existing products, new markets • Product development – new product, existing market • diversification
  24. 24. Q5: What major issues do you think that Krispy Kreme management needs to address?
  25. 25. Major issues • Low-carbohydrate diets Adversely impacted several food categories “this phenomenon has affected us most heavily in our offpremises sales channels. "(Livengood, former CEO) • Accounting and financial reporting obligations In late July 2004, SEC launched an inquiry into the company’s accounting practices regarding certain franchise buybacks. In December 2004, KKD identified accounting errors related to its acquisition of two franchises
  26. 26. Major issues (cont’d) • Weak senior management team Inappropriate tone at the top of the organization Unqualified management ( GAAP) • Too many stores in too little time 450 410 400 357 350 300 250 200 150 TO TAL 144 100 50 0 2000 2004 2006
  27. 27. Q6: What recommendations would you make to Krispy Kreme management to improve upon the strategy or otherwise sustain the company’s growth and profitability?
  28. 28. RECOMMENDATIONS • 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)
  29. 29. THANK YOU !!!!!
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