MOS 4410 - krispy kreme.docx

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Department
Management and Organizational Studies
Course Code
Management and Organizational Studies 4410A/B
Professor
Raymond Leduc

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Description
MOS 4410 – KRISPY KREME – CASE STUDY  Follow case guide analysis  MISSION – sell doughnuts and beverages at our own stores; sell the doughnut mix and equipment, sell franchises – have 3 different income statements for each part of the business – provide a “HOT DOUGHNUT” experience  VISION – no clear vision statement – make recommendation  Objectives – want to be in several cities (geographic expansion) o Broaden distribution – not only have their product available in stores but also other places o 20% annual revenue growth o Mid-single digit comparable store-sales growth o 25% annual growth in earnings per share o National expansion (grow the business) – 25 more stores in England, Ireland etc. o Grow revenues in 2 ways – open more stores or sell more in your existing stores o Increase beverage sales to 20% of store revenue o Remodel old stores and clear debt o Open different stores in smaller towns o Open 77 stores next year  THESE OBJECTIVES ARE SMART  Good exam case  a lot of information given  DOUGHNUT INDUSTRY – five forces  Substitutes – lots of substitutes – bagels, muffins, baked goods  Degree of rivalry – competition versus rivalry – there is a lot of competition but the rivalry is moderate – and two companies hold a dominant % of the market share  Barriers to entry – low; costs a lot to get a franchise; not hard to get into this business – can be a big franchisee or a small local doughnut shop – but kind of high because quite a few companies (groceries) are getting into the market as well  Power or buyers  lots of places to buy doughnuts, low switching costs, lots of substitutes  Power of suppliers  Low – a lot of companies manuf the doughnuts on their own and there are a lot of suppliers and the raw materials are easy to find  Is this an attractive industry??  Moderately attractive – a lot of control over suppliers but not buyers and they can easily switch over to other substitutes – how hard is it to make money? – the stronger you are in this industry, the more $ you can grab  Sociocultural – trend towards becoming healthier which does not fit with the doughnut company  Some concern in the industry that some players will have a tough time – only have one product (small product portfolio) will not last long  However, this is a convenient product – easy to eat, people like to treat themselves  ONLY doughnut shops are feeling constraints because people can go to grocery stores or bakeries and find doughnuts anyways so they do not need to make a special stop to the doughnut store  Better to sell coffee with doughnuts because coffee sales are usually higher – and they go hand in hand – people want to come and get both things at one time  Companies specializing in doughnuts are not growing as fast  If you want to succeed in this business you need more breadth – MORE Than just doughnuts – can’t just have one item – long term opportunities are limited  Market growth rate is 15% which is GOOD!  Brand loyalty – up to 80% are regulars  Is this an attractive future? 
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