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Case Report
For




ENJOY THE RIDE.





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Business Policy
Dr. Wu
February 7, 2013
WRITTEN BY:
Thomas J. Boucher
David I. Prejean
Maycio M. Vining
Reginald G. Walker, Jr.

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Tables of Contents
I. History....... 4
II. General Environment Analysis.. 5
III. Industry Environment Analysis. 6
IV. External Factor Evaluation Matrix. 6
V. Internal Competence.. 7
VI. Internal Factor Evaluation Matrix.. 8









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History of Krispy Kreme Doughnuts
Krispy Kreme Doughnuts (KKD) was founded by Vernon Randolph. Randolph started
out working in his uncles shop in Paducah, Kentucky. While working at the shop his uncle
purchased a secret doughnut recipe from someone in Lake Charles, Louisiana and it was this
same recipe that Randolph took to Nashville, Tennessee to be a part of a startup operation.
Shortly after, in 1937 Randolph sold his shares for the startup and moved to Winston-Salem,
North Carolina where he opened the very first Krispy Kreme doughnut shop. Initially they
started out selling strictly to local grocery stores but soon realized there was a market to sell
directly to customers in the Winston-Salem area.
After his initial success in North Carolina, Randolph began expanding throughout the
Southeast and in 1976 KKD became a wholly owned subsidiary of Beatrice Foods. This lasted
until 1982 when a large group of franchisees were unhappy with Beatrice Foods and purchased
the company back. Krispy Kreme then spent the rest of the 1980s expanding in the southeast.
After the stock market started booming in the 1990s, Krispy Kreme decided to go public
in 2000 with the ticker symbol KREM on the NASDAQ. This was found to be too slow for
KKD however and on May 17, 2001 they became listed on the New York Stock Exchange under
the symbol KKD. With this, the stock price quadrupled and investors purchased franchising
rights open stores across the United States and one store in Canada. By 2004, Krispy Kreme
locations expanded out to Australia and South Korea.
It was from this point on that Krispy Kreme hit some rough patches with their stock price
falling from $40/share down to $10/share. This rough patch was thought to be blamed as a result
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of consumers becoming diet-conscious and starting a carb free diet known as the Atkins diet.
Other rough patches included:
2005 - The main franchisee in Arizona and New Mexico had filed for bankruptcy
2008 Sheetz (large convenience store on the East Coast) quit purchasing donuts in favor
of producing their own.
2008 International stores in Hong Kong and Canada shut down.
In 2006, CEO Stephen Cooper left Krispy Kreme leaving Darryl Brewster to take his place.
His time as CEO was short lived however as he stepped down in early 2008. J im Morgan took
over as chairman but has not been successful in turning things around for Krispy Kreme. As of
2009 KKD reported having an operating loss for the years 2007, 2008, and 2009. (Refer to
Exhibits 1 & 2)
General Environment Analysis
The general environment contains the external and internal environment. Culture and
behavior of Krispy Kreme employees is a relaxed, somewhat playful, culture that exists. They
focus a lot on this concept of 'magic. Management strategies focus on maintaining a high level
of quality and exceptional experience for the customers and employees. A few other
internal environmental factors are brand recognition, wide demand, the technology in the
machines, and quality of the product to name a few. Consumers are everyday people and the
range is everyone. Mainly younger people do to the high sugar content of the product. Suppliers
affect Krispy Kreme externally as well as competitors such as Starbucks and Dunkin' Donuts.
Other factors that the company can't control also have an effect on the operation of Krispy
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Kreme externally. Like natural disaster, the increase in supply cost, consumers lost in income,
eating trends and technology advances to name a few.
Industry Environment Analysis
The industry environment analysis for Krispy Kreme Donuts is about of the Quick Service
Restaurant (QSR) Industry also known as the Fast Food Industry. After careful examination of
this industry and the environment the following conclusions can be made. The stock shares in
this industry are currently on the rise. This is evident in the increase of stock prices over the past
year. Majority of the stores in this industry are experiencing stable sales growth and positive
operation conditions. Lastly, many stores in this industry are lowering prices and slowing
expansion in the overstored QSR market to focus on creating healthy menu items.
EFE Matrix
Opportunities
International Expansion 0.20 x 4 =0.80
Greater percentage of Americans working 0.15 x 4 =0.60
Local International Stores willing to buy ingredients 0.05 x 2 =0.10
New beverage program for hot drinks 0.10 x 3 =0.30
Threats
McDonalds 0.10 x 3 =0.30
Dunkin Donuts 0.15 x 4 =0.60
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Demand for Healthier items 0.15 x 3 =0.45
Substitute products 0.20 x 4 =0.80
Total_______________________________________________________3.95
Internal Competence
The internal competence for Krispy Kreme was not as formidable and profitable as it once
was. Their profitability was decreasing and their revenue was not reaching peak maximization to
stay ahead of fierce competitors like Dunkin Donuts or even McDonalds, who were starting to
offer caffeine products within their menu. As we fast-forward, Krispy Kreme is the #1 donut
company in the world and are constantly matriculating and elevating. The reason for this rapid
advancement is their stern belief to sticking to their core competences. This means they hold true
to their brand quality and traditional.
Krispy Kreme doughnuts have special, secret ingredients which sets them aside from our
donut shops. They are very particular in how they create these fascinating donuts which allows
for a sense of perfection for employees and mouth-watering satisfaction for customers. They
proud themselves on operating machinery efficiently so that each and every donut reaching the
consumer the way that it was envisioned in 1937. From the flour recipe to the doughnut machine,
everything must be synchronized and running smoothly.
Appearance is also of the highest prominence. At Krispy Kreme, various doughnuts are
neatly presented to customers upon entrance with a welcoming aroma that is absolutely
breathtaking and delectable. There are gorgeous images of historic features and figures with the
appealing green, red and white trademark color scheme occupying the walls. Also, there is also a
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clear window for customers to see the delicious doughnuts being assembled. Customers are able
to create their own doughnuts made fresh-to-order and reach their sugar limit during any time of
the day since Krispy Kreme, in most locations, is opened 24 hours a day.

IFE Matrix
Key Internal Factors Weight Rating Weighted Score

Strengths_____________________________________________________________________________

1. Brand Quality 0.10 4 0.40
2. Store Appearance 0.10 4 0.40
3. Technological Efficiency 0.10 3 0.30
4. Availability 0.10 3 0.30
5. Customer Value 0.10 4 0.40

Weaknesses___________________________________________________________________________

6. Number of stores 0.10 1 0.10
7. Beverage sales 0.10 2 0.20
8. Offers no dividends 0.10 1 0.10
9. Little advertisement 0.10 1 0.10
10. Weak business in international markets 0.10 1 0.10
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Total 1.00 2.40