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ATENEO DE DAVAO UNIVERSITY

SCHOOL OF BUSINESS AND GOVERNANCE


GRADUATE SCHOOL

STRATEGIC MANAGEMENT

DUNKIN BRANDS GROUP, INC., 2015

Submitted to:
PROF. STEPHEN ANTIG

Submitted by:
ALGER, CHRISTINE JOYCE P.
AROBO, ANA ROSE

JULY 20, 2019


I. INTRODUCTION

With more than 20,000 points of distribution in more than 60 countries, Dunkin’
Brands is one of the world’s leading franchisors of quick service restaurants
(QSRs) serving hot and cold coffee and baked goods, as well as hard serve ice
cream. Dunkin’ Brands is the parent company of two of the world’s most
recognized and beloved brands: Dunkin’, America’s favorite all-day, everyday stop
for coffee and baked goods, and Baskin-Robbins, the world’s largest chain of ice
cream specialty shops.

Dunkin’, founded in Quincy, Massachusetts in 1950, is famous for its combination


of high-quality coffees, espresso beverages, baked goods and breakfast
sandwiches served all day with fast, friendly service. Baskin-Robbins, founded in
Glendale, California in 1945, is iconic for its variety of “31 flavors” of ice cream,
along with the brand’s creative ice cream cakes, milkshakes and ice cream
sundaes. Dunkin' Brands' 100 percent franchised business model currently
includes more than 12,500 Dunkin' restaurants and nearly 8,000 Baskin-Robbins
restaurants.

Source: https://www.dunkinbrands.com/company/about/about-dunkin-brands

II. VISION AND MISSION STATEMENT

A. VISION STATEMENT

OLD VISION STATEMENT

We strive to be recognized as a company that responsibly serves our guests,


franchisees, employees, communities, business partners, and the interests of our
planet.

Source: https://www.dunkinbrands.com/community/corporate-social-
responsibility/overview

PROPOSED REVISED VISION STATEMENT

We strive to be the world’s biggest everyday source of high-quality all-day coffee,


baked goods and creative ice cream products whilst responsibly and sustainably
serving our stakeholders.
B. MISSION STATEMENT

OLD MISSION STATEMENT

Dunkin’ Brand’s website does not provide a written mission statement, however,
below are listed as the company’s “priorities” broken down into four parts:

Our Guests
At Dunkin’ Brands, we approach everything we do – from product development to
restaurant operations to communications – through a guest-centric lens.
(Customer; Philosophy)

We strive to offer all of our guests authentic, high-quality menu items. Our goal is
to continuously improve our menu while offering guests the choice and great taste
that they expect from Dunkin’ and Baskin-Robbins. (Product)

Food safety continues to be a key priority for Dunkin’ and Baskin-Robbins


restaurants and our supply chain. (Self-Concept)

Our Planet
When it comes to our impact on the environment, we recognize that what we do
today will matter tomorrow. Guided by our Serving Responsibly commitment, we
actively work to make business decisions that serve the interests of our guests,
franchisees, communities and the planet today and for years to come – by reducing
our packaging, improving the efficiency of our restaurants, and sourcing our
ingredients more sustainably. (Survival, growth and profitability; Philosophy;
Technology)

Our People
We are committed to improving the diversity of our employee, franchisee and
supplier base and to fostering an inclusive environment for all who come in contact
with our Brand. We strive to welcome diverse employees to our teams and to
weave inclusion into the fabric of our culture. Our leaders and employees foster an
environment where everyone is valued and respected; everyone matters here.
(Employees)

Our Neighborhoods
At Dunkin’ Brands, we feel fortunate that our restaurants are part of the fabric of
so many communities and neighborhoods around the globe, and our franchisees
value the role they can play in strengthening their communities. (Public
Image;Philosophy)

Source: https://www.dunkinbrands.com/community/corporate-social-
responsibility/overview
PROPOSED MISSSION STATEMENT

Dunkin’ Brand is a global (3) source of high-quality all-day coffee, baked goods
and creative ice cream products (2). With emphasis on food safety and our
commitment to serve all our stakeholders responsibly (1,5,6,7,8,9) we are in
continuous pursuit of developing sustainable products and overall operations while
taking advantage of technological advancements (4,5,7,8). We foster an inclusive
environment with a diverse team (9) who helps the company pursue its
commitments to all of its stakeholders especially in strengthening every community
where the brand is established worldwide. (1,3,6,7,8). (80 words)

(1) Customer, (2) Product or services, (3) Markets, (4) Technology, (5) Survival,
growth and profitability, (6) Philosophy, (7) Self-Concept, (8) Public image, (9)
Employees

III. INTERNAL ASSESSMENT

A. FINANCIAL ANALYSIS

INCOME STATEMENT OVERVIEW

Dunkin’ Brand’s revenues have increased to USD$ 34.9M in 2014. Although


operating expenses have slightly decreased in 2014, its operating income has
greatly decreased indicating a poor financial health. But overall net income has
increased to USD 29.4M.

(in thousands of USD)


Income Statement 12/28/2013 12/17/2014 Percent Change
Revenues 713,840 748,709 4.88%
Operating Expenses 436,631 432,535 -0.94%
Operating Income 27,527 22,684 -17.59%
EBIT 304,736 338,858 11.20%
Interest 86,648 83,125 -4.07%
EBT 218,088 255,733 17.26%
Tax 71,784 80,170 11.68%
Other Items 599 794 32.55%
Net Income 146,903 176,357 20.05%

BALANCE SHEET OVERVIEW

Total assets of Dunkin’ Brands have decreased to USD 57.3M and their liabilities
have decreased by USD 9.9M. Total equity also decreased by USD 37.3M.
2014’s overall financial position is really not looking good.
(in thousands of USD)
Income Statement 12/28/2013 12/17/2014 Percent Change
Cash 256,933 208,080 -19.01%
Accounts Receivable 79,765 105,060 31.71%
Inventories - - - -
Other Current Assets 125,062 129,478 3.53%
Total Current Assets 461,760 442,618 -4.15%
PPE 182,858 182,061 -0.44%
Equity Investments 170,644 164,493 -3.60%
Goodwill & Intangibles 2,343,803 2,317,167 -1.14%
Other Assets 75,625 71,044 -6.06%
Total Assets 3,234,690 3,177,383 -1.77%

Short-term Debt 5,000 3,852 -22.96%


Accounts Payable 12,445 13,814 11.00%
Other Current Liabilities 326,853 337,853 3.37%
Total Current Liabilities 344,298 355,519 3.26%
Long-term Debt 1,818,609 1,807,081 -0.63%
Deferred Income Taxes 561,714 540,339 -3.81%
Other Liabilities 97,781 99,494 1.75%
Total Liabilities 2,822,402 2,802,433 -0.71%

Noncontrolling Interest 4,930 6,991 41.81%


Common Stock 107 104 -2.80%
Retained earnings - 779,741 - 711,531 -8.75%
Treasury Stock - 10,773 - -100.00%
Paid in Capital and other 1,197,765 1,079,386 -9.88%
Total Equity 412,288 374,950 -9.06%
Total Liabilities,
noncontrolling Interest, &
Equity 3,234,690 3,177,383 -1.77%

HISTORICAL RATIOS

Historical Ratios Overview

Based on their financial ratios – in terms of liquidity, their ratios dropped in 2014
but nevertheless they are still capable of paying their short-term obligations
however this must be addressed accordingly to avoid liquidity problems in the
future. In terms of operating performance – their efficiency dropped in 2014, but in
terms of profitability their performance has increased. As to the financial health of
the company, the company has a weak equity position. Their operation primarily
capitalizes on debt thus financial risk is very high. In terms of overall growth, they
are in a good position because it is higher than the previous year.
2013 2014
Internal Liquidity
Current Ratio 1.34 1.24
Quick Ratio 1.34 1.24
Operating Performance
Total Asset Turnover 0.23 0.22
Operating Profit Margin 42.69 45.26
Net Profit Margin 20.58 23.55
Risk Analysis
Debt-Equity Ratio 4.61 5.04
Long Term Debt/Capital 0.81 0.83

Growth Analysis
Return on Equity 35.91 47.71
Net Profit Margin 20.58 23.55
Return on Investments 6.55 8.08

Du Pont Analysis Overview

There’s an increase in Operational Efficiency (ROS), Marketing Excellence and


overall Corporate Performance (ROE). However, financial risk is high because it is
more than the industry tolerance of 3.3.

DU PONT ANALYSIS
DUNKIN' BRAND
RATIO 2014 2013

NET INCOME 176,357 146,903

SALES 748,709 713,840

TOTAL ASSETS 3,177,383 3,234,690

EQUITY 367,959 407,358

RETURN ON SALES 24% 21%


ASSET TURNOVER 0.24 0.22
EQUITY MULTIPLIER 8.64 7.94
RETURN ON EQUITY 48% 36%
INTERNAL FACTOR EVALUATION MATRIX (IFE MATRIX, IFEM)

Weighted
Strengths Weight Rating
Score

Dunkin’ Brands is one of the largest franchisors of QSR and


has a global reach and accessibility considering the
1 0.09 4 0.36
presence of 11, 300 (Dunkin) and 7,000 (BR) restaurants
across the world and considered as a speed leader in QSR

Dunkin' Donuts has Centralized Manufacturing Locations


2 0.07 4 0.28
(CML) were products are delivered fresh daily
Dunkin' Franchisees in the United States pay 5% of gross
3 0.07 3 0.21
sales for advertising fees
No 1 in customer loyalty - Dunkin’ Donuts recognized as the
4 #1 in coffee category for 8 consecutive years by the Brand 0.07 4 0.28
Keys Customer Loyalty Engagement Index
5 Price of products are highly competitive 0.05 3 0.15
Has shown impressive growth in revenues (8.1%) and
6 0.05 3 0.15
overall corporate performance

7 Was named top US ice cream and frozen dessert franchise 0.04 3 0.12

Can negotiate better pricing on food, packaging and othe


8 0.04 3 0.12
supplies due to size compared to small scale entrepreneurs

Superb performance in new Markets - Dunkin Brands Group


9 Inc. has built expertise at entering new markets and making 0.03 3 0.09
a succes out of them
10 Already engaged in various CSR activities 0.02 3 0.06

Primary Implication from IFEM (Strengths)

Dunkin’ Brands greatest strength is that they are the market speed leader in QSR.
Dunkin’ has established. They have continuously received rewards for Customer
Loyalty which is a good indicator that they have strong position in the market.
They have established Central Manufacturing Locations making their operation
more efficient which reflects their overall corporate performance.
Weighted
Weaknesses Weight Rating
Score
Does not offer healthy options for health conscious
1 0.07 1 0.07
customers
2 Store cannibalization is becoming a problem 0.06 1 0.06
A few products have a high market share, while most of the
products have a low market share. This reliance on a few
3 0.06 1 0.06
products makes Dunkin Brands Group Inc vulnerable to
external threats if these few products suffer for any reason
There is a lack of proper financial planning at Dunkin Brands
Group Inc regarding cash flows, leading to certain
4 0.05 1 0.05
circumstances where there isn’t enough cash flow as
required leading to unnecessary unplanned borrowing
Total number of stores outside US territories have decreased
5 0.05 2 0.1
in number
The company’s financial risk is high due to high debt to
6 0.04 1 0.04
equity ratio
The company's ability to meet its short term financial
7 0.04 1 0.04
obligations is low
8 Dunkin Brands has no COO 0.04 2 0.08
Even though the product is a success in terms of sale but its
positioning and unique selling proposition is not clearly
9 0.03 2 0.06
defined which can lead to the attacks in this segment from
the competitors
Dunkin Brands has limited control over employees at
10 restaurants because they are employed and paid by 0.03 2 0.06
franchisee
Total IFE Score 1 2.44

Primary Implication from IFEM (Weaknesses)

Primary weakness is their lack of healthy options for health-conscious customers.


This is the current consumer trend and if left unsolved can lead to reduction of
revenues. They also have limited product offerings because they are primarily
known as a breakfast restaurant. The company also have a high financial risk at
the moment because of poor long-term debt management.
CURRENT ORGANIZATION CHART

PROPOSED ORGANIZATIONAL CHART

Reason:

We added the COO because we noticed that they don’t have any second-in-
command. As we all know the function of CEO is more concentrated on
investments thus someone must be commissioned to oversee the business
operations.
MARKET MAP

Overview:

In terms of quality and price – Dunkin is in positioned lower than the competitors.

EXISTING STRATEGY TO INCREASE REVENUE

1) Drive-Thru Facility – to cater consumers in a hurry


2) Loyalty and rewards program – enable company to collect data
3) Dunkin’ K-Cup – helped Dunkin penetrate the market
4) Use of Arabica Coffee – cheaper than other types of coffee
5) Will open 65 Dunkin Donut Stores in Brasilia and additional stores 80
additional stores outside brazil
6) Rehauling stores to have “sip and sit” atmosphere
7) Offer dinner – friendly food
IV. EXTERNAL ASSESSMENT

EXTERNAL FACTOR EVALUATION MATRIX (EFE MATRIX, EFEM)

Weighted
Opportunities Weight Rating
Score

New trends in the consumer behavior can open up new market


for the Dunkin' Brands Group, Inc. It provides a great
1 0.09 4 0.36
opportunity for the organization to build new revenue streams
and diversify into new product categories

Technology is becoming more advanced in term of food


2 preparation, marketing, packaging innovations and so much 0.08 4 0.32
more
3 Intense price competitiveness among rival firms 0.07 4 0.28
4 Consumers are becoming more health conscious 0.06 4 0.24
There is still room for international expansion considering UK
5 re-opening was a success; other Asian countries still has room 0.06 3 0.18
for expansion
The new technology provides an opportunity to Dunkin' Brands
6 0.05 4 0.2
Group, Inc.
The local players have local expertise while Dunkin Brands
7 0.05 3 0.15
can bring global processes and execution expertise on table.
The price of Arabica coffee bean is lower compared to other
8 0.04 3 0.12
variety of coffee bean (Robusta)
Dunkin' Brands can develop an agreement to Colombia, the
9 0.04 3 0.12
2nd world's Arabica grower
10 Customer crave convenience because of busy lifestyle 0.03 3 0.09

Opportunities Implications:

Consumer behavior has changed and is now leaning towards consuming healthy options.
Technology is more accessible now to companies who wanted to develop their products,
packaging, and services.
Weighted
Threats Weight Rating
Score
As the company is operating in numerous countries it is
1 exposed to currency fluctuations especially given the volatile 0.06 2 0.12
political climate in number of markets across the world.
2 More competition in the breakfast category 0.05 2 0.1
Incidents involving food-borne illnesses, food tampering, or
3 food contamination could create negative publicity and 0.05 2 0.1
significantly harm in Dunkin’s operating results
New technologies developed by the competitor or market
4 disruptor could be a serious threat to the industry in medium to 0.05 2 0.1
long-term future.
Changing consumer buying behavior from online channel
5 could be a threat to the existing physical infrastructure driven 0.05 2 0.1
supply chain model.
Intense competition – Stable profitability has increased the
number of players in the industry over last two years which has
6 0.04 1 0.04
put downward pressure on not only profitability but also on
overall sales
There’s a looming supply crisis in the coffee industry as well as
7 0.04 1 0.04
the increase of prices to 50%
In 2014 KKD, Starbucks and Dunkin’ Brand Group increased to
6.5, 10.1 and 4.9 percent respectively. The quick service
8 0.04 2 0.08
restaurant segment is highly competitive, and competition
could lower revenues.
Trade Relation between US and China can affect Dunkin
Brands growth plans - This can lead to full scale trade war
9 0.03 1 0.03
which can hamper the potential of Dunkin Brands to expand
operations in China.
Many mom-and-pop stores can open anytime promising
10 cheaper product offerings because they don’t have to pay 0.02 1 0.02
franchise fees and royalties
Total EFE Score 1 2.79

Threats Implications:

Currently, competition in the breakfast industry is very tight. Due to intense


competition, competitors have upgraded their services with the help of technology
and are currently ahead in the game in terms of taste and quality.

THE COMPETITORS

a. “MOM-AND-POP” DOUGHNUT SHOPS


Not really a dominant rival, however there are thousands of “mom-and-
pop” doughnut and specialty shops worldwide eating a portion of the
market.
b. STARBUCKS CORPORATION (SBUX)

Starbucks is the world’s largest specialty coffee retailer with more than
18,000 coffee shops in 60 countries. It offers coffee drinks and pastries,
roasted beans, coffee accessories, and teas. The company owns about
9,400 of its own shops (mostly in the United States), while licensees and
franchisees operate roughly 8,650 units worldwide (primarily in shopping
centers and airports). In 2014, Starbucks began offering beer and wine, as
well as fancy snacks, chicken skewers, chocolate fondue, and other items.
By year-end 2014, only 40 Starbucks offered these new items. The
company also owns the Seattle’s Best Coffee and Torrefazione Italia coffee
brands. Starbucks markets its coffee through grocery stores and licenses
its brand for other food and beverage products. The company is determined
to get the afternoon and evening customer, whereas historically it has
mainly been a breakfast place. That is why the beer, wine, and more food
is being rolled out at more and more Starbucks outlets.

The company sees afternoon and dinner also as a way to differentiate itself
from Dunkin’ Donuts and Krispy Kreme Doughnuts that historically have
been more about quick service than sit down and stay, which is the venue
Starbucks plans to enter aggressively globally. Starbucks now offers 10
standard small dinner plates as part of its evening menu, such as truffle
macaroni and cheese. There are also five choices of red wine, three white
wines, a sparkling rose, and prosecco.

c. KRIPY KREME DOUGHNUTS (KKD)

Krispy Kreme Doughnuts is chain of doughnut outlets with about 695


locations throughout the United States and in about 20 other countries. The
shops are popular for their glazed doughnuts that are served fresh and hot
out of the fryer, as well as cake and filled doughnuts, crullers, and fritters.
Hot coffee and other beverages also are sold. KKD outlets are almost all
owned and operated by franchisees; the company owns and operates 90
locations. Aside from doughnuts and coffee, no other food items of
substance are offered. The company markets its doughnuts through
grocery stores and supermarkets.

Green Mountain Coffee Roasters Inc. (GMCR) and KKD have agreed to
widen the home- made single-serve coffee options for Keurig users,
whereby KKD’s upcoming coffees—Smooth and Decaf—will be available in
K-Cup packs for Keurig brewers. Krispy Kreme’s K-Cup packs will be
available at the online shopping sites of Keurig and KKD, along with the
participating KKD shops, grocery, and many other retail outlets. The
convenience of Keurig brewers will enhance the popularity of KKD coffee
among Keurig fans.
The fiscal fourth-quarter results for KKD on March 12, 2014, saw revenue
rise 3.3 percent to $112.7 million. Company-owned same-store sales rose
1.6 percent, and franchise same-store sales soared 6.7 percent. Adjusted
net income grew 37 percent to $8.3 million. It was the fifth full year and 21st
quarter in a row of same-store KKD sales gains.

d. TIM HORTONS, INC.

Tim Hortons is Canada’s leading quick-service restaurant brand, having


more than 4,250 cof- fee and donut shops across the country, and in several
U.S. states. Tim Hortons was acquired by Burger King Worldwide in late
2014 in an $11 billion deal, and BKW immediately created Restaurant
Brands International (RBI). RBI is now the second largest global quick-
service restaurant in the world. Today, BKW is headquartered in Oakville,
outside of Toronto, Canada.

The Tim Horton menu features a variety of coffees and cappuccino, along
with donuts, Dutchies, bagels, and other baked goods. In addition, Tim
Hortons serves a lunch menu of soup, sandwiches, and chili. The chain
includes freestanding as well as kiosk and mall-based outlets; all but about
20 of the locations are operated by franchisees. The company owns the
Cold Stone Creamery ice cream shop chain. Tim Hortons’ revenues in a
recent quarter increased 10.7 percent, and adjusted earnings-per-share
grew 6 percent.

DUNKIN BRANDS VERSUS RIVAL FIRMS

No of Employees
1% 1%

Dunkin
Krispy Kreme

98% Starbucks
2500
2000
1500
1000
500
0
Dunkin Krispy Kreme Starbucks

Net Income

Market Capital
7%

2%

Dunkin
Krispy Kreme

91% Starbucks
COMPETITIVE PROFILE MATRIX (CPM)

DNKN SBUX KKD

Critical Success
Factors Weight Rating Score Rating Score Rating Score

Price
competitiveness 0.15 4 0.6 2 0.3 3 0.45
Product quality 0.13 2 0.26 4 0.52 3 0.39
Advertising 0.12 4 0.48 2 0.24 3 0.36
Market share 0.11 3 0.33 4 0.44 2 0.22
Financial position 0.1 2 0.2 4 0.4 3 0.3
Customer loyalty 0.08 4 0.32 2 0.16 3 0.24
Global expansion 0.07 4 0.28 3 0.21 2 0.14
Top management 0.06 2 0.12 3 0.18 4 0.24
Customer service 0.05 3 0.15 4 0.2 2 0.1
Union relations 0.04 2 0.08 3 0.12 4 0.16
Technological
advantages 0.04 3 0.12 4 0.16 2 0.08
Location of facilities 0.03 3 0.09 4 0.12 2 0.06
Social responsibility 0.02 4 0.08 2 0.04 3 0.06
Totals 1.00 40.00 3.11 41.00 3.09 36.00 2.80

Note: We only considered the two major competitors of Dunkin’ Brands for this analysis.

Primary implications from CPM


From viewing the competitive profile matrix, Dunkin Brands ranks the second out of its
two main competitors Starbucks and Krispy Kreme in its total critical success factors. The
company’s low-ranking stems are from their weaker financial profit, top management,
union relations, and lower product quality. However, Dunkin’ Brands still dominates its
two competitors over price competitiveness, advertising, customer loyalty, social
responsibility, and in global expansion.
V. STRATEGY FORMULATION
a. SWOT MATRIX

This matrix shows possible strategies for the company. Condition was a
comprehensive analysis of internal and external factors and their influence
on the company.

INTERNAL

STRENGTHS WEAKNESSES
1. Dunkin’ Brands is one of the largest franchisors of 1. Does not offer healthy options for health-conscious
QSR and has a global reach and accessibility customers
considering the presence of 11, 300 (Dunkin) and 2. Store cannibalization is becoming a problem
7,000 (BR) restaurants across the world and 3. A few products have a high market share, while most of the
considered as a speed leader in QSR products have a low market share. This reliance on a few
2. Dunkin' Donuts has Centralized Manufacturing products makes Dunkin Brands Group Inc vulnerable to
Locations (CML) were products are delivered external threats if these few products suffer for any reason
fresh daily 4. There is a lack of proper financial planning at Dunkin
3. Dunkin’ Franchisees in the United States pay 5% Brands Group Inc regarding cash flows, leading to certain
of gross sales for advertising fees circumstances where there isn’t enough cash flow as

SWOT MATRIX 4. No 1 in customer loyalty - Dunkin’ Donuts


recognized as the #1 in coffee category for 8
consecutive years by the Brand Keys Customer
5.
required leading to unnecessary unplanned borrowing
Total number of stores outside US territories have
decreased in number
Loyalty Engagement Index 6. The company’s financial risk is high due to high debt to
5. Price of products are highly competitive equity ratio
6. Has shown impressive growth in revenues (8.1%) 7. The company's ability to meet its short-term financial
and overall corporate performance obligations is low
7. Dunkin’ Franchisees in the United States pay 5% 8. Dunkin Brands has no COO
of gross sales for advertising fees 9. Even though the product is a success in terms of sale, but
8. Can negotiate better pricing on food, packaging its positioning and unique selling proposition is not clearly
and other supplies due to size compared to small defined which can lead to the attacks in this segment from
scale entrepreneurs the competitors
9. Superb performance in new Markets - Dunkin 10. Dunkin Brands has limited control over employees at
Brands Group Inc. has built expertise at entering restaurants because they are employed and paid by
new markets and making a success out of them franchisee
10. Already engaged in various CSR activities

OPPORTUNITIES SO WO
1. New trends in the consumer behavior can open up
new market for the Dunkin' Brands Group, Inc. It
provides a great opportunity for the organization to
build new revenue streams and diversify into new 1. OPTIMIZE CMLS BY 1. USE TECHNOLOGICAL
product categories DIVERSIFYING PRODUCT ADVANCMENTS TO DEVELOP
2. Technology is becoming more advanced in term of
food preparation, marketing, packaging innovations PORTFOLIO BY ADDING HEALTHY PRODUCT OPTIONS AND
and so much more HEALTHY OPTIONS USING PACKAGING (W1, W2)
3. Intense price competitiveness among rival firms
4. Consumers are becoming more health conscious ADVANCE TECHNOLOGY (S2, 2. INTENSIFY PROMOTIONAL
5. There is still room for international expansion O2, O4) ACTIVITIES USING MEDIA BUY AND
considering UK re-opening was a success; other
Asian countries still has room for expansion 2. DEVELOP COLOMBIA AS A ONLINE PLATFORMS TO
6. The new technology provides an opportunity to SUPPLY PARTNER TO PENETRATE MARKET (W9, O2,06)
Dunkin' Brands Group, Inc.
7. The local players have local expertise while Dunkin INCREASE COFFEE
Brands can bring global processes and execution PRODUCTION AS PART OF
expertise on table.
8. The price of Arabica coffee bean is lower compared DUNKIN’S CSR ACTIVITES
to other variety of coffee bean (Robusta) (S10, O10)
9. Dunkin' Brands can develop an agreement to
Colombia, the 2nd world's Arabica grower 3. DEVELOP PRODUCTS
10. Customer crave convenience because of busy HEALTHY PRODUCTS TO
lifestyle
INCREASE REVENUES AND
(S6, O4)
ST WT
EXTERNAL

THREATS
1. As the company is operating in numerous countries
it is exposed to currency fluctuations especially
given the volatile political climate in number of 1. INSTALL A COO TO OVERSEE AND
markets across the world. 1. OPTIMIZE THE 5%
STREAMLINE THE WHOLE GLOBAL
2. More competition in the breakfast category FRANCHISEE ADVERTISING
3. Incidents involving food-borne illnesses, food BUSINESS OPERATIONS
tampering, or food contamination could create FEES TO INTENSIFY
negative publicity and significantly harm in Dunkin’s (WS1,T1,T3,T6,T3, T9)
PROMOTIONAL ACTIVITIES
operating results
4. New technologies developed by the competitor or (S5, T5)
market disruptor could be a serious threat to the 2. PROMOTE DUNKIN FOOD
industry in medium to long-term future.
5. Changing consumer buying behavior from online SAFETY POLICY USING
channel could be a threat to the existing physical ADVERTISING FUND TO GAIN
infrastructure driven supply chain model.
6. Intense competition – Stable profitability has CONSUMER TRUST (S3, T3)
increased the number of players in the industry over
last two years which has put downward pressure on
not only profitability but also on overall sales
7. There’s a looming supply crisis in the coffee industry
as well as the increase of prices to 50%
8. In 2014 KKD, Starbucks and Dunkin’ Brand Group
increased to 6.5, 10.1 and 4.9 percent respectively.
The quick service restaurant segment is highly
competitive, and competition could lower revenues.
9. Trade Relation between US and China can affect
Dunkin Brands growth plans - This can lead to full
scale trade war which can hamper the potential of
Dunkin Brands to expand operations in China.
10. Many mom-and-pop stores can open anytime
promising cheaper product offerings because they
don’t have to pay franchise fees and royalties
b. IE MATRIX

Result of our IE matrix indicated that our tactical strategies should focus
on market penetration and product development.
c. QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)
Product development Online channel Promotional event

Strengths Weight AS TAS AS TAS AS TAS


Dunkin' Brands is one the largest franchisors of QSR and has a
global reach and accessibility considering the presence of 11,300
(Dunkin) and 7,000 (BR) restaurants across the world and
1 considered as a speed leader in QSR 0.09 4 0.36 3 0.27 1 0.09
Dunkin' Donuts has Centralized Manufacturing Locations (CMLs)
2 were products are delivered fresh daily 0.07 4 0.28 2 0.14 1 0.07
Dunkin' Franchisees in the US pay 5% of gross sales for
3 advertising fees 0.07 2 0.14 3 0.21 4 0.28
No. 1 in customer loyalty - Dunkin' Donuts recognized as the # in
coffee category for 8 consecutive years by the Brand Keys
4 Customer Loyalty Engagement Index 0.07 2 0.14 1 0.07 0 0
5 Price of products are highly competitive 0.05 3 0.15 2 0.1 0 0
Has shown impressive growth in revenues (8.1%) and overall
6 corporate performance 0.05 4 0.2 3 0.15 1 0.05
7 Was named top US ice cream and frozen dessert franchise 0.04 3 0.12 4 0.16 1 0.04
Can negotiate better pricing on food, packaging and other
8 supplies due to size compared to small scale entrepreneurs 0.04 4 0.16 2 0.08 3 0.12
Superb performance innew markets - Dunkin' Brand Groups Inc.
has built expertise at entering new markets and making a success
9 out of them 0.03 4 0.12 3 0.09 2 0.06
10 Already engaged in various CSR activities 0.02 2 0.04 1 0.02 3 0.06
Product development Online channel Promotional event

Weaknesses Weight AS TAS AS TAS AS TAS


1 Does not offer healthy options for health conscious customers 0.07 4 0.28 2 0.14 3 0.21
2 Store cannibalization is becoming a problem 0.06 4 0.24 2 0.12 3 0.18
A few products have a high market share, while most of the
products makes Dunkin' Brands Group Inc. vulnerable to external
3 threats if these few products suffer for any reason 0.06 4 0.24 0 0 1 0.06
4 There is a lack of proper financial planning at Dunkin' Brands 0.05 2 0.1 3 0.15 0 0
Group Inc. regarding cash flows, leading to certain circumstances
where there isn't enough cash flow as rrquired leading to
unnecessary unplanned borrowing
Total number of stores outside US territorieshave decreased in
5 number 0.05 2 0.1 4 0.2 0 0
6 The company's financial risk is high due to high debt to equity ratio 0.04 1 0.04 3 0.12 0 0
The company's ability to meet its short term financial obligations is
7 low 0.04 2 0.08 4 0.16 0 0
8 Dunkin' Brands Group Inc. has no COO 0.04 0 0 2 0.08 0 0
Even though the product is a success in terms of sales but its
positioning and unique selling proposition is not clearly defined
9 which can lead to the attacks in the segment from the competitors 0.03 2 0.06 3 0.09 4 0.12
Dunkin' Brands has limited control over employees at restaurants
10 because they are employed and paid by the franchisee 0.03 0 0 3 0.09 0 0
Product development Online channel Promotional event

Opportunities Weight AS TAS AS TAS AS TAS


New trends in the consumer behavior can open up new market for
the Dunkin' Brands Group, Inc. It provides a great opportunity for
the organization to build new revenue streams and diversify into
1 new product categories 0.09 4 0.36 2 0.18 3 0.27
Technology is becoming more advanced in term of food
preparation, marketing, packaging innovations and so much more
2 0.05 4 0.2 3 0.15 1 0.05
3 Intense price competitiveness among rival firms 0.05 4 0.2 3 0.15 2 0.1
4 Consumers are becoming more health conscious 0.06 4 0.24 2 0.12 3 0.18
There is still room for international expansion considering UK re-
opening was a success; other Asian countries still has room for
5 expansion 0.08 4 0.32 2 0.16 3 0.24
The new technology provides an opportunity to Dunkin' Brands
6 Group, Inc. 0.06 3 0.18 0 0 0 0
The local players have local expertise while Dunkin Brands can
7 bring global processes and execution expertise on table. 0.04 4 0.16 0 0 2 0.08
The price of Arabica coffee bean is lower compared to other
8 variety of coffee bean (Robusta) 0.04 4 0.16 0 0 3 0.12
Dunkin' Brands can develop an agreement to Colombia, the 2nd
9 world's Arabica grower 0.03 3 0.09 4 0.12 0 0
10 Customer crave convenience because of busy lifestyle 0.07 4 0.28 1 0.07 1 0.07

Product development Online channel Promotional event

Threats Weight AS TAS AS TAS AS TAS


As the company is operating in numerous countries it is exposed
to currency fluctuations especially given the volatile political
1 climate in number of markets across the world. 0.06 1 0.06 3 0.18 1 0.06
2 More competition in the breakfast category 0.05 2 0.1 3 0.15 1 0.05
Incidents involving food-borne illnesses, food tampering, or food
contamination could create negative publicity and significantly
3 harm in Dunkin’s operating results 0.04 4 0.16 2 0.08 3 0.12
New technologies developed by the competitor or market
disruptor could be a serious threat to the industry in medium to
4 long-term future. 0.05 3 0.15 4 0.2 1 0.05
Changing consumer buying behavior from online channel could be
a threat to the existing physical infrastructure driven supply chain
5 model. 0.03 0 0 2 0.06 0 0
Intense competition – Stable profitability has increased the
number of players in the industry over last two years which has put
downward pressure on not only profitability but also on overall
6 sales 0.04 2 0.08 0 0 0 0
There’s a looming supply crisis in the coffee industry as well as the
7 increase of prices to 50% 0.04 4 0.16 3 0.12 2 0.08
In 2014 KKD, Starbucks and Dunkin’ Brand Group increased to
6.5, 10.1 and 4.9 percent respectively. The quick service
restaurant segment is highly competitive, and competition could
lower revenues.
8 0.05 4 0.2 2 0.1 3 0.15
Trade Relation between US and China can affect Dunkin Brands
growth plans - This can lead to full scale trade war which can
hamper the potential of Dunkin Brands to expand operations in
9 China. 0.05 4 0.2 0 0 3 0.15
Many mom-and-pop stores can open anytime promising cheaper
product offerings because they don’t have to pay franchise fees
10 and royalties 0.02 4 0.08 3 0.06 2 0.04
STAS 6.23 4.34 3.15
d. STRATEGY CONCLUSION

Based on the results of the models used, tactical strategies should focus on
product development and market penetration.

VI. STRATEGY IMPLEMENTATION

Dunkin Brands should maintain current strategies and focus on product


development and market penetration– especially in creating healthy menu for
health-conscious people.

A healthy hearty selection must be added on the menu like, but not limited to the
ff:

1. Dunkin Low-calorie beverages line


2. Dunkin exclusive Mixed juices line
3. Low-calorie bagels line
4. Vitamin enriched breads
5. Low-calorie ice cream and cakes

The new products will be advertised extensively using media buys and other online
platforms for better market penetration.

To better streamline the operations, a COO should be installed to oversee the


business and make sure that all strategies are implemented. Thus, the
organizational structure will be changed to:

ORGANIZATIONAL STRUCTURE
THE PROJECTED VALUES

Increase in revenue:

Assumptions:

We still expect a growth of 4.88% targeting a total of 8.8% by the end of the third
year.

With the new product line, we are targeting a gradual increase on the 40% of the
revenues from 5% on the first year, upto 10% on the 3rd year.

December 28, 2013 December 27, 2014

Revenues 713,840 748,709

Computation:

1st year 2nd year Remarks


rd
3 year
4.88%
increase
across the
36,537.00 39,050.74 42,518.45 board
5% increase
in growth 1st
year
10% increase
14974.18 32,008.81 34,851.19 2nd-3rd year
51,511.18 71,059.55 77,369.64

Total revenue
800,220.18 871,279.73 948,649.37 per year

Total increase
in revenues
for the next 3
8.88% year
VII. STRATEGY EVALUATION

Prepare a balance scorecard to measure both qualitative and quantitative factors


affecting the success of the implemented strategy.