Krispy Kreme

EXECUTIVE SUMMARY Krispy Kreme’s recent success has left many individuals in awe. This study attempts to de-mystify how Krispy Kreme has come to dominate the doughnut world and what problems lie ahead in the future. The tools used in this examination will begin with the history of Krispy Kreme. Then an external and internal analysis will dissect Krispy Kreme’s current market and what steps Krispy Kreme is taking to compete in that market, including a look into competitors. Financial reports will then be used as the benchmark to measure that success. Concluding with a presentation of Krispy Kreme’s strategy and plans to thwart future problems faced by the company. These problems include Krispy Kreme’s slow movement into international markets. Competitors such as Dunking Doughnuts are in the process of establishing markets in countries using a multi-domestic strategy. This could cause problems when Krispy Kreme inevitably moves into its international role. Krispy Kreme also ties up capital in inventory costs. Taking almost double the time of the industry average to turn over inventory wastes capital that could otherwise be used for store improvement or capital investments. The next threat faced by Krispy Kreme is its undiversified product line. While established restaurants use changes in product lines to attract new customers, Krispy Kreme has relied on it’s core product line combined with small seasonal changes to

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maintain revenue. All of the problems found by this examination will be explored in more depth throughout the paper. This analysis will focus on product diversification as a means to securing market position and sustaining a competitive advantage in the future presence of increasing competitive rivalry. The donut industry operates in a slow or standard cycle market, therefore there is increasing competition among firms, and they each have incentives to be first movers in employing innovative ideas to produce competitive advantages....