Krispy Kreme Strategic Analysis: Industry & Growth Path
This paper presents a strategic analysis of Krispy Kreme (KK), examining the competitive dynamics of the quick-service restaurant (QSR) and packaged goods industries in which it operates. The paper identifies Krispy Kreme's core competencies — notably product differentiation and marketing — alongside key weaknesses such as management talent gaps and the product's unhealthy reputation. It reviews firm performance following a turnaround under James Morgan and evaluates four strategic alternatives: maintaining the current path, expanding the menu, selling to a private firm, or focusing exclusively on the QSR segment. The paper concludes with a recommendation that Krispy Kreme pursue private ownership to enable long-term, sustainable strategic growth.
- Industry Environment: Competitive pressures and market attractiveness for doughnuts
- Core Competencies: Product differentiation and marketing as key strengths
- Weaknesses: Talent gaps and unhealthy product reputation
- Firm Performance: Turnaround results and current strategic posture
- Strategic Alternatives: Four strategic options evaluated with trade-offs
- Implementation and Evaluation: Recommendation for private ownership and long-term growth
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What makes this paper effective
- The paper follows a clear, logical structure that mirrors a standard strategic management framework — moving from environmental analysis to internal assessment, then to alternatives and a concrete recommendation.
- The analysis avoids generic claims by grounding observations in specific details, such as the calorie count of a glazed doughnut, the role of James Morgan's turnaround, and the black-market popularity of Krispy Kreme products.
- The recommendation ties directly back to earlier analysis, making the conclusion feel earned rather than arbitrary.
Key academic technique demonstrated
This paper demonstrates the strategic management technique of evaluating multiple alternatives before committing to a recommendation. Rather than arguing for one path from the outset, the author enumerates four distinct options — each with trade-offs — and selects the most defensible based on prior environmental and internal analysis. This structured decision-making approach reflects standard business case methodology.
Structure breakdown
The paper is organized into six sections: an industry environment overview using competitive forces logic, a core competencies section highlighting product and marketing strengths, a weaknesses section addressing talent and brand perception, a firm performance review noting the limits of available data, a four-option alternatives section, and a final implementation recommendation. Each section builds on the previous one, creating a coherent analytical arc.
Industry Environment
Krispy Kreme (KK) operates in two industries, both of which are highly competitive. The quick-service restaurant (QSR) side of the business has low switching costs, moderate brand loyalty, and — particularly at the local level — few barriers to entry. At the national level, barriers to entry are much higher, but the intensity of rivalry, especially between Krispy Kreme and Dunkin' Donuts, is significant. This affects pricing power, though KK has been able to offset that disadvantage by successfully differentiating its product. This segment of the business was the source of most of the issues that plagued the company after it expanded too rapidly.
The second key element, beyond intense competition within the industry, is where the industry fits in the context of broader consumer choice. Aside from direct competitors, consumers could simply choose not to eat doughnuts. An aging population more concerned with health, the Atkins diet fad, and the declining novelty of Krispy Kreme all challenged the brand. The company needs to find loyal customers today who can serve as the foundation for building a sustainable business over the long run.
Overall, the attractiveness of the industry is minimal — this is a difficult space in which to build a business. Dunkin' is massive. Tim Hortons is the second-largest doughnut chain in the United States but is wildly popular in Canada, which supplies it with a steady cash flow for expansion. Mom-and-pop shops face low barriers to entry and have proven to be formidable competitors for any individual KK store. The margins are small once the novelty factor wears off, and because consumers have low switching costs and many potential substitutes, Krispy Kreme has only limited bargaining power with which to influence consumer decision-making. Doughnuts are not an attractive industry.
Core Competencies
By all accounts, Krispy Kreme does doughnuts well. The flagship product has proven popular among a wide range of audiences, so the product itself clearly serves as a strength. This is a doughnut that offers genuine differentiation. That differentiation allowed the company to expand in the past, provides much of the brand's reputation today, encourages repeat visitors, and allows Krispy Kreme to charge higher margins. There are even black markets for Krispy Kreme doughnuts (Linthicum, 2017).
Another core competency lies in the company's marketing. Krispy Kreme achieved a couple of significant marketing wins early on — particularly with the iconic "Hot Donuts Now" sign — and enjoyed further success during the company's boom years. That boom was derailed more by internal issues than by marketing failures. The marketing of Krispy Kreme during that period was strong and could have sustained momentum had it not been for accounting and governance problems, as well as difficulties with franchisees.
References
Linthicum, K. (2017). The Krispy Kreme familia and the black market doughnuts of Juarez. Los Angeles Times. Retrieved April 4, 2017, from http://www.latimes.com/world/mexico-americas/la-fg-mexico-krispy-kreme-2016-story.html
Tuttle, B. (2017). Krispy Kreme is giving away doughnuts for the next 3 weeks. MSN. Retrieved April 23, 2017, from
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