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Krispy Kreme Case Analysis

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2241 words
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TO:

FROM:

DATE: November 12, 2006

SUBJECT: "Krispy Kreme Doughnuts Going Global?"

This memo contains the answers to Questions 1 through 4 from the International Marketing assignment titled, "Krispy Kreme Doughnuts Going Global?" The questions are offset in the shaded area and the answers are provided below each question.

(1) Where should Krispy Kreme go next? List the next ten countries they should enter in order of most viable. Describe the criteria you used to develop your list.

I identified, evaluated and ranked the countries in which I think Krispy Kreme should enter next. The results of the analysis are summarized below. The criteria, presented in order of their importance and followed by a narrative description are:

1. Political / Legal

2. Economic

3. Cultural

Political / Legal

Political and legal considerations were given first priority in this analysis with primary emphasis given to whether a country's legal or political system prohibits or impedes foreign investment. If a country's political or legal system discouraged or prevented foreign investment, that country was disqualified from further consideration. Factors considered when assessing the political and legal environment:

1. Ease of doing business

2. Transparency International's Corruption Ranking

3. Relative political stability

4. Enforcement of ownership rights

5. Degree to which foreign investment is encouraged

Economic Environment

A country's economic environment plays a significant role in the success of businesses operating within that country. Countries with struggling or shrinking economies were not included in the top ten ranking. Economic indicators and trends selected for this analysis:

1. Gross Domestic Product (GDP)

2. Gross National Income (GNI)

3. Market size (population and population density)

Cultural Environment

Assuming a country had a favorable political, legal and economic environment; its cultural environment was evaluated. Culture impacts demand and the marketing mix; therefore, if a country's culture was deemed unfavorable, it was not included in the top ten ranking. Similarly, if a country's culture seemed especially favorable, that aspect is denoted later in the analysis. Cultural factors considered in this analysis:

1. Hofstede's Cultural Typology

2. Structural eating habits and trends

3. Acceptance of prepared and take-out food

4. Dietary considerations (to assess product adaptation requirements)

5. Perceptions of doughnuts as a breakfast food or a snack food

6. Preference for freshly prepared foods

7. Language and how "Krispy Kreme" translates

The aforementioned criteria were used to determine the ten most viable countries/regions for Krispy Kreme's international expansion. The list of countries/regions, presented in descending order, with especially attractive characteristics denoted adjacent to the apposite country, is presented in Table 1 on the following page.

Table 1

Rank Country Attractive Cultural Characteristics

1 Hong Kong Densely populated, open to Western ideas with positive U.

In this essay, the author

  • Explains that political and legal considerations were given first priority in this analysis with primary emphasis given to whether a country's legal or political system prohibits or impedes foreign investment.
  • Opines that countries with struggling or shrinking economies were not included in the top ten ranking.
  • Analyzes how a country's cultural environment was evaluated based on its favorable political, legal, and economic environment.
  • Explains the criteria used to determine the ten most viable countries/regions for krispy kreme's international expansion.
  • Explains that densely populated, open to western ideas with positive u.s. country of origin effects, prefers freshly prepared foods, e.g. sushi, doughnuts are snacks (assumes product adaptation) implying all day consumption, brand and product recognition.
  • Explains that densely populated, prefers freshly prepared foods, e.g. sushi, doughnuts are snacks implying all day consumption, brand and product recognition, speaks japanese and english (6 years of written english is part of formal education system).
  • Explains that densely populated, open to western ideas with positive u.s. country of origin effects, prefers freshly prepared foods, doughnuts are snacks implying all day consumption, brand and product recognition, speaks chinese and english (business people).
  • Explains that densely populated, open to western ideas with positive u.s. country of origin effects, prefers freshly prepared foods, e.g. sushi, doughnuts are snacks (assumes product adaptation) implying all day consumption, brand and product recognition.
  • Explains that collectivist culture promotes sharing (office heroes) and is open to western ideas with positive u.s. country of origin.
  • Explains that densely populated, open to western ideas with positive u.s. country of origin effects, prefers freshly prepared foods, e.g. sushi, doughnuts are snacks (assumes product adaptation) implying all day consumption, brand and product recognition.
  • Explains that doughnuts are snacks that are open to western ideas with positive u.s. country of origin effects, implying all day consumption, brand and product recognition, and speaks chinese and english
  • Explains the psychic proximity, english language, huge country but population concentrated in urban centers, brand and product recognition.
  • Opines that the product will not require adaptation due to preference for sweet taste; brand and product recognition.
  • Explains that japan's consumer income is slightly less than the u.s., but the difference shouldn't affect demand. both economies are considered high income and doughnuts are normal goods.
  • Opines that japan's preference for freshly prepared foods, e.g. sushi, will increase demand for doughnuts relative to the u.s.
  • Explains that demographic changes, such as the increase in single person households, ageing population, and women working outside the home increase demand.
  • Compares salient aspects of the environment and its impact on doughnut demand in southern california and london in table 3.
  • Explains that southern california's population of 24 million is three times larger than that of london. highly concentrated populations imply more foot traffic which would increase doughnut demand.
  • Opines that since doughnuts are normal goods, demand in london will be comparable to that in southern california.
  • Explains that both london and southern california have related goods (complements and substitutes), although there is significantly less direct competition in london compared to the u.s.
  • Explains krispy kreme's growth plans, as stated in the case, are appropriate to the extent that they plan to grow internationally.
  • Describes business people and others who are affluent and familiar with american products.
  • Opines that market less than one dozen or change packaging so that it can be carried more easily.
  • Explains that chinese people drink more tea than coffee, a common complement to doughnuts in the u.s.
  • Explains that most asians do not entertain business acquaintances at home and frequently meet others in restaurants.
  • Describes the "experience" of watching freshly prepared doughnuts come off the conveyor by organizing trips and tours to the new shops; host open houses; give-aways in front of shops.
  • Cites agri-food trade service, market information. food services market in other countries.
  • Analyzes krispy kreme's take on the asian market.
  • Explains japan's take-out food industry possibilities for foreign countries to enter an expanding market.
  • Summarizes the answers to questions 1 through 4 from the international marketing assignment titled, "krispy kreme doughnuts going global?"
  • Recommends the waterfall approach, first developing a stronghold in asia, beginning with more developed countries and migrating to less developed nations on the continent.
  • Opines that japan's take-out and prepared food markets will grow due to changing demographics, including ageing population, more women working outside the home, and increasing number of single person households.
  • Explains that in japan, doughnuts are considered snack instead of breakfast food, thereby increasing demand relative to the u.s.
  • Argues that healthy eating in the u.k. should drive the offering of "savory" versus "sweet" tasting doughnuts.
  • Advises krispy kreme to focus on franchising and licensing internationally instead of domestically, so that they do not have to invest any of their own cash.
  • Explains krispy kreme's marketing plan for hong kong is summarized in table 4.
  • Recommends distribution of free doughnuts to offices and factories to promote brand leverage preference for freshly prepared foods; exclusive shops to support perception of quality and premijm pricing
  • Analyzes how krispy kreme seeks asia sweet spot. mister donut: four million sold and still counting.
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