Sample Term Paper On Dunkin Brand
Dunkin Brands is one of the most successful business entities in the United States. The company engages in its operations in the hospitality industry. Specifically, the company operates fast-food entities namely Dunkin Donus and the Baskin Robbins. Although founded in America, the company has grown in service and currently operates in 36 countries. This paper wants to explore Dunkin Brand by assessing its current and long term strategies. The paper will also conduct both an internal and external environmental analysis and ascertain if the company is operating according to their strategic goals.
Dunkin Brands Group operations are centered in the food and beverage sector. Dunkin Brands is popular with coffee and snacks provision in the market (dunkinbrands.com). An analysis of its current market operation indicates that the company utilizes a cost-leadership strategy (Spence & Brady, 2010). This strategy involves a firm seizing a large market share through provision of low cost services and products to the customers. A company uses provides low priced products/services with the expectation of a having positive response from the potential consumers. This is the case with Dunkin-Brands because the company currently focuses on expanding its customer base and market share by supplying affordable products to its consumers.
Although currently Dunkin Brands faces a stiff competition especially from rival firms such as Starbucks the company has managed to provide better quality products and services at a low price. The company has managed to maintain this strategy through adoption of different business techniques. First the company produces a higher output that helps it realizing high asset turnover. Moreover, through expansion of its output the company has managed to spread out its fixed costs over a large pool of customers. Ideally, when a firm enhanced its production it spreads its fixed costs such as infrastructural costs because it is exposed to a higher customer segment. A larger market cover boosts its sales and hence sustaining the applicability of the cost-leadership strategy. Besides that the company provides a large variety of standardized products which enables it to minimize product/service customization costs. Unlike other rival firms, Dunkin Brand does not have to routinely introduce new products that may increase its expenses. Therefore, a reduction in internal costs helps the company provide cheap products that enable it achieve its short-term strategies. Apart from cost-minimization, the company has heavily invested in technology.
The company is aware that technology will help its current cost-leadership strategy to succeed because of enhancing efficiency in services. For instance, the company currently uses technology to monitor customer behavior and hence understand their taste. This ensures that the company produces products that are market relevant and match with the customers’ expectations. Therefore, Dunking Brands current cost-leadership strategy enables it gain completive edge that is essential in boosting sales.
Like any other competitive firm, Dunkin Brands has a long-term strategy. Specifically, the company’s long-term strategy is the growth strategy. The growth strategy focuses on expanding firms activities on a constant mode so that in the long-term the company enjoys the largest market power as well as establish solid customer base. In ensuring the company operates according to the policies of the growth strategy, the company has made several initiatives.
First the company has focused on diversifying its business operations. As earlier noted the company was originally based in America but has grown to serve customers in various parts of the world. The company has managed to realize this expansion through diversifying its operations. The company continues to put effective measures that ensure it provides a variety of services that cater for the evolving needs of the customers.
Secondly, the company uses market penetration business tactics. Ideally, the company has a plan of widening its scope of business by firstly surveying the viability of the market and then launches products and services that respond to the specific market. For instance, when the company ventured into the European market it started gaining popularity and positive response from the consumers because the products were cheap and, them in variety. Consumers had the comfort of selecting their preferred snack or coffee brand and at an affordable price.
Once Dunkin Brand establishes a base in a new market it focuses on developing that market so that its products and services become the mot preferred consumers. The aim of market development is to ensure the company becomes the market leader in the long term. Therefore, it uses various initiatives to realize this goal. For instance, the company uses marketing tools that inform the potential consumers of its existence in the market. The company also gives special focus on customer service because they know when consumers are given quality services they are likely to return.
However, all the above indicatives are reinforced with a strong labor force team. Specifically, the company has invested in competent workers in all its department levels. The company is aware that when personnel are competent the company will realize increased productivity (Price, 2004). The company also has put adequate measures to motivate its workers by ensuring the workers get completive salaries and good working environment. Therefore, a blend of the above ensures the growth strategy delivers its intended long0-term objectives for the company.
Company mission and vision statements
Dunking Brand current mission is to serve the freshest and quality coffee and dons in modern setup. This mission confirms that company is focused on providing essential services and products to its potential consumers. The company wants to ensure derive value for their money by not only having access to good products but also in a serene environment that features a modern setup.
The company’s vision statement is centered on responsibility in serving various stakeholders such as customers, employees, business partners and the public. Dunkin Brand vision statement confirms that the company is wants to improve the welfare of its entire people and also operate in a responsible way that match with the society’s expectations.
Outside Stakeholder groups
Public- Like any other company, Dunkin Brand recognizes the public as an external stakeholder and hence focuses on establishing cordial relations with the public. The company is aware that the public are essential in building the company’s reputation and hence brand. If the public gives negative criticisms then the company will face a negative image and this may affect the prospect of the company. Therefore, the company manages this group by participating cooperate social responsibility initiatives that improve the social welfare of the people. The company recognizes that improving the relations with the public will not only help in boosting the company’s brand, but will also help the company achieve its corporate strategy objectives.
Governments- As earlier noted, Dunkin Brand operates in various nations of the world and in each these countries there are laws that guide the conduct of business. Dunkin knows that to succeed in these markets it has to adhere to all laws and regulations. Therefore, before venturing in any market, the company has established a policy of conducting an assessment of all legal requirements or conditions. The government as an external stakeholder ensures the company operates securely and protects it from illegal business entities in the market.
Economic factors: The economic environment is also essential in determining if a company can realize its goals. Economic factors help a company understand the purchasing power of consumers as well as market potential. For Dunkin, there are various economic factors that are crucial for its success. First, inflation rate is an essential determinant of market potentials. Dunkin would like to operate in a market where interest rates are optimal. High interest rates level is not good for the business because they will increase operational costs as well as affect customer’s purchasing power. Secondly, exchange rates are an important element in the success of Dunkin Brand. Since dunkin brand operates in foreign nations it would want the exchange rates to remain stable and favor its parent country (U.S.A) because that will ensure they earn high revenues from foreign markets. Apart from interest rates, the economic growth levels of all its areas it conducts business is important. Consistent economic growth determines the potentials of succeeding in the market since a high economic growth means customers have a high spending power and hence they can sustain the operation of Dunkin through increasing purchases.
Political factors- Any business entity would like to operate in a market that enjoys a stable political environment. A stable political environment is influenced by many factors. For instance, the level of bureaucracies in obtaining licenses or permits can determine the success of a business entity. Moreover, environmental regulations and trade conditions determine if Dunkin can venture into the markets. Another essential political factor is tax policies. If a potential market operates under strict tax policies it becomes difficult for the business to realize growth because the company will incur more operational costs (Abrams,2003). Moreover, when a company decides to transfer the high taxes to consumers through increasing product prices then they will realize a reduction in sales because customers will reduce their purchasing expenditure. Therefore, political factors are important in influencing Dunkin to venture into various potential markets.
Social factors: In any business environment there exist customers and other people who come from diverse cultural backgrounds and they hold different beliefs and values. Therefore, as a business entity, Dunkin Brand should recognize the needs of its customers by ensuring it adheres to their cultural and social needs. Besides that the company should focus other demographical features that fall under social factors. For instance, the company should study the population growth rate and age distribution of its potential customers. The demographical data is important for Dunkin because it helps in planning for production of good that fit specific age group. Besides that, understanding the lifestyle pattern of consumers is essential for Dunkin. Lifestyles are ever changing and hence understanding the pattern of change helps Dunkin plan for any changes in customer behaviors.
Technological factors-In the current business environment; technology plays an essential part in the success of business. Successful companies have focused on incorporating technological aspects in most of their business operations. Technology helps firms in improving quality in service provision and hence attracting more customers. Moreover, it helps increase efficiency in operations hence a firm becomes more competitive. However, the realizing the benefits of technology requires a market to provide the necessary infrastructural features such as internet, and electricity. Therefore, Dunkin should always conduct a background check of the potential market to ensure it features the basic technological conditions.
Factors driving change
The current food and beverage industry in the United States is driven by many factors. These factors force firms to align their business practices to ensure they match with market expectation. Below are some of the factors driving change in the food and beverage industry?
Innovation- Most firms have realized how innovation helps in boosting their sales growth and hence market share. Currently, firms that are focusing on innovation by providing products that provide more features to consumers. Firms that are more innovative enjoy good sales and customers.
Prices- In the recent years, firms have engaged in price wars where each entity wants to become price leaders. Firms, competition in prices has led to a massive reduction in the prices of consumers and hence consumers
Environmental conservation policies- The growing need for adoption for environmentally friendly policies have forced firms to change their business practices to ensure they comply with expected environmental conditions. For instance, firms have started using clean energy in their production activities. Firms that seem to comply with the environmental regulations seem to enjoy good reputation in the industries.
Lifestyles- The changing lifestyle practices have revolutionized the food industry by forcing firms to study the lifestyles of consumers. Firms that accurately predict the changing lifestyles of consumers are gaining increased sales since consumers believe they are sensitive to their needs.
U.S and Global Market
As stated earlier, Dunkin Brand is one of the leading franchise firms in the United States. The company currently commands a market share of 16%. This a substantial figure considering there are many players in the industry. The company’s also operates 10,858 stores in the United States forming the largest number of stores of the market in any market. The company is also the second largest coffee house shop in the United States.
Existing rivals strategy to gain market share
Dunkin Brands rival firms such as MacDonald’s and Starbucks use various strategies to enhance their market share in both United States and global market. However, the most common strategy includes product differentiation and cost-reduction. The rival companies lure customers to purchase their companies by lowering their products and services and also produce variety of products to meet the varying tastes of consumers.
The changing customer behavior patterns and technology form future factors that firms in the food industry should focus, Firm should realize that the customer needs are changing and hence they should be flexible to adapt to the changes. Moreover, firms should consider integrating technology in their business operation because it will help them remain completive in the business environment.
U.S and Global Markets
As mentioned earlier, Dunkin Brand ranks the second largest coffee and snacks companies. It also enjoys a substantial support in foreign markets especially Europe. However, its main market is centered in United States. Other markets that show a great potential for Dunkin Brand products include Europe, and North America.
Dunkin Brand main generic strategy in the United States is cost-leadership. The company recognizes the presence of huge competition from rival firms and hence the only viable way to seize market share is through providing low-cost but quality services. The cost leadership strategy guides the firm in providing low-cost services through restructuring its business processes to ensure they minimize operational costs.
With regards to strategic orientation, Dunkin Brand operates a polycentric orientation. This is where a company allows the values or culture of the country in which the company is operating to control the decision making process. This strategic orientation has helped Dunkin Brand formulate specific plans for its various operating markets. The company uses this orientation to make the consumers feel they are using their local services and not importing foreign values.
On a global perspective, the company blends product differentiation and low-price policies to gain global competitive advantage. Ideally the company provides affordable products to potential international consumers with the goal of forming a solid international customer base. Secondly, the company uses differentiation tactics of providing a variety of products with different specification with the goal of meeting the varying needs of its potential consumers.
Although the above global market strategies help the company to enhance its global market share they do not deliver results on a faster pace(Baum, & McGahan,2004). The company should specifically focus on collaborating with local enterprises to gain entry to the market.
Strength- The low-pricing strategy acts as strength for the company since it helps it gain more customers and hence increased revenues. Secondly, the company’s strong reputation of providing quality posts helps its increase its local and international market share. The company also enjoys good customer support owing to its policy of providing special bonuses and discounts to consumers.
Weaknesses- Recently, the company experienced financial problems and this lead it face a relative liquidity. The financial challenges affected the company’s prospects of expanding its operations. Moreover, the liquidity had an adverse effect on its reputation. The company also does not have a strong presence especially in the Eastern side of U.S and this makes the company not enjoy market power.
Opportunities- Despite the challenges above the company can greatly gain if its start expanding its international operation especially in unexplored markets such as Africa and Asia. Moreover, the company can gain if it partners with other firms especially in foreign markets. This move will help the company reduce operational costs and hence boost sale growth.
Threats- Increased competition especially from rival firms such as Starbucks and McDonalds forms one of the greatest threats to the company. Uncertainties s in the market especially due to changes in inflation rates poses a threat to the viability of Dunkin Brand.
Dunkin Brand product differentiation and low-price policy forms one of the company’s main core competencies (Baum, & McGahan,2004). The firm uses these competencies to gain competitive edge and increase customer’s numbers. However, based on the analysis of the company’s tangible and intangible assets, the company should make some changes in these areas. The company should specifically focus on improving the values of both assets because that will translate to increased productivity. Moreover, the company should increase the values of its assets to enjoy financial stability.
Profit margin comparison
The above chart provides the profit (net-profit) flow for Dunkin Brand between 2011 and 2014. As seen from the table the company realized a growth of more than 10% in profits between 2013 and 2014. The company has also maintained a consistent growth in revenues from 2011 to 2014.
In 2012 the Dunkin was commanding a less market share comparing with 2013 . Dunkin was ranked the second largest coffee/snack firms in the United States. Its main rival is Starbucks who enjoyed the first position with 19767 stores and Tim Horton’s with 10858.
The current status of the company and performance of its product shows that it’s operating in the expansion stage of the life cycle. This is a stage where theca company products are getting much attention from the market. This stage helps the company achieve high revenues.
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