Situational Analysis for Dunkin Donuts
Founded in 1950 and headquartered in Massachusetts, Dunkin Donut is one of the leading brands in the snack food market. Dunkin Donuts is the world’s leading coffee and baked food chain. It is located in thirty countries worldwide with more than 10,000 stores (www.dunkindonuts.com).
Conducting Situational analysis is important to determine the health of a business. It is used as a tool to determine the company’s internal strength & weaknesses, and the available (Lake. L). opportunities and threats in the market. This helps in recognizing the best strategy for the company growth and sustainability.
The Macro-level Environmental Factors for Dunkin Donuts
Political Legal Factors
Political and legal environment influence the marketing decision to a large extent. This environment is composed of laws and government regulations play a pivotal role for the organization. (Marketing Management, Kotler).Dunkin Donuts has encountered a number of challenges because of governmental restrictions and legal issues since its inception. The company follows the US government imposed trade restrictions. They are 100% fair trade certified and promises quality product. They also abide by the labor laws and other environmental regulations set by the Government. The most alarming concern for Dunkin Donuts is Government is under pressure to impose restriction on meat consumption. Environmentalists are arguing that to raise animals a large amount of deforestation is made which is harmful for the environment. Companies like Dunkin will have to spend more on R&D in case restriction is imposed. (Meat Consumption and the environment: Assignment calls for eating less meat, 2012).
Society shapes our beliefs, values and norms. These days there is increasing concern for health. Coffee may be categorized as bad for health. Dunkin Donuts is offering essential nutritional information on company website. It is also providing a training plan for better health. It is in the news that if people consume snack items along with coffee in between meals it can make them lose weight. This idea is attracting health conscious people and may help companies like Dunkin to tap the new market segment. (Zuckerbrot, 2014).
Technology has opened new prospects for companies in the changing business scenario. Dunkin donuts has brought new machines and also using high tech equipment to compete in the beverages market. Several researches are being carried out to develop fake meat to cut the cost and dependence on meat suppliers. Scientists are combining proteins and minerals to create meat which taste like meat but will not be meat. These innovations are going to help Dunkin Donuts in the long run.
Though Dunkin donuts face a lot of competition in the market from other companies like Starbucks and Mc Donald, the new emerging markets of Asia and South America are giving the company a wider opportunity. There are other factors such as increasing price of coffee beans, higher interest rate and inflation rate which are posing threat on the company.
The Competitive Environment for Dunkin Donuts
There are several countries where Dunkin Donuts has established itself. But due to delay in expansion Dunkin is experiencing competition from local small scale shops. For example, in Midd we find a very popular donut chain called Mad over Donut which is giving Dunkin a tough fight.
Threat of New Entrants
In this industry economies of scale can be achieved by continuing the production. Hence entering this industry is not difficult for the new entrants. New companies set up their small coffee shops and starts business because barrier to entry is low. (Wahlen, Baginski & Bradshaw, 2014). Hence Dunkin Donuts is threatened by the new entrants in the market to a moderate level.
Rivalry among existing firms
In the coffee segment Starbucks is a direct competition whereas Costa coffee is a direct competition in the snack segment. Lots of indirect competitions are there from Pizza Hut, KFC, and MC Donald’s. These companies are well known in the fast food market.
Threat of Substitute Products
Dunkin Donuts is facing the threat of substitute products to a great extent. They have come up with simplified menu for the convenience of the customers. They are focusing more on quality to create satisfaction and loyalty among customers.
Bargaining Power of Buyers
Buyers of Dunkin Donuts have plethora of choices. There is stiff competition given by companies like Starbucks and MacDonald. Along with that there are new entrants in the market. Naturally the company has to keep the price competitive and have to provide high quality to attract customers.
Bargaining Power of Suppliers
Suppliers have comparatively low bargaining power in this industry. They need to supply quality ingredients as per the client’s expectations. Some large companies like Continental Mills, Rich Products Corp and Dean Food are part of the procurement process of Dunkin.
Internal Environment of the Firm
The Dunkin Donuts restaurants are spread across the world as franchises. The owner. The chain of restaurants operate separately in each location but are committed to deliver the same goods and services and the same taste of food as is the hall mark of Dunkin Donuts. It is on franchise basis that the firm operates in almost twelve thousand locations in thirty-six countries.
Dunkin Donuts operates 24x7 and gives high value to the customer satisfaction. It is strict with its franchises in terms of serving quality. It has been alleged that Dunkin Donuts has the most number of legal proceedings against its franchises who failed to adhere to its norms and guidelines. The management expects agile administration and quality food and service served to the customer to keep its good fame intact. The foods are mainly served as take away and are especially favorable as snacks. It is a way to serve nutrition to the fast-paced livelihood of the people, especially in America. Hence the franchises are especially favourable among the working mass.
According to Glassdoor review, there is constant pressure to serve the customer right and on time, the culture of the firm may be stressful for an employee while it is refreshing and assuring for the customer who pays the buck. Serving the people on time and with precision requires high levels of energy; hence at the service levels Dunkin employs young people who need ready money to make their livelihood from.
The resources of Dunkin Donuts mainly come from America. Fresh coffee-beans, milk, cheese, butter, vegetables, meat, chicken and ham all comprises the raw materials for the preparation of food at Dunkin Donuts. The franchises need monetary investment and to serve the customer, great labour force is required. The young millennia generation mainly forms the human resource of the company. The business also requires logistics, both local and international to make the business commodities available to the franchises. It also requires good storage system.
As we summarize our findings, SWOT Analysis of Dunkin Donuts is outlined.
Dunkin which has a strong geographical presence is a well-known and highly recognizable brand all over the world. Dunkin’s customers are loyal to the products it offer. The company tagline “America runs on Dunkin” aptly describes it.
Dunkin is convenient to have due to its strategically located stores which are mainly situated near to the railway stations, airports etc.
Dunkin is known for its excellent supply chain. Dunkin has the model of centralized manufacturing. Dunkin Donuts have broad market coverage and are known for their manufacturing competence. The franchise structure is well developed to reach out to the customers.
There is a poor relationship between the company and its franchises. In 2010, the company had legal battle with fifteen of its franchisees .Dunkin is also facing difficulty to expand the business domestically in US (Pratap,2018) . The rising cost of manufacturing of the products is also one of its weakness which it needs to sail through.
There are number of emerging economies where Dunkin has the plan to expand its business. If Dunkin continues with its expansion policies the company is certainly going to have material benefit. Dunkin is targeting the health segment. It is coming up with low calories products. Soon they will be reaping the benefits of providing healthy snacks to the customers.
The lifestyle trends of global customer snacking more between shifts of work and depending on takeaways are the opportunities for Dunkin donuts to grow on its business. The new USP of shifting its focus on coffee has helped the company to gain on the millennial customer base.
Companies like Starbucks and Krispy Kreme are giving stiff competition to Dunkin. Competitions from local brands are also affecting the business. The shelf life of bakery products is quite less. The bottom line of the business is affected. The cost of raw materials and logistics are high and thus require attention. Added to all these are the costs of rising labour while on the other hand the stiff competition compels to keep the products at a range of competitive pricing giving the best qualities that can be served.
Poor Franchisee Relationship
Limited expansion domestically.
Rising manufacturing cost
Tapping the health segment
Lifestyle change of global customer
Shift to coffee as the brand
Rising Cost of Raw Materials and Logistics
Short Shelf life
Rising labour cost
Concluding from the situational analysis, we can apprehend that the business prospects of Dunkin Donuts are huge. Though already it is doing steady business in 12000 franchises over 36 countries, it has room for further improvement (Dunkin Brands: 2017, Annual Reports). It can impart training and mentoring for the franchises instead of being too stern with legal suits. Reward and recognition of the franchise staffs can go a long way in inculcating the sense of responsibilities further. Since competition is high in both internal and external markets, it is imperative that the company finds out innovative ways of snacking with quality products at low cost.
Answer to the Questions of Case Assignment
Answer of Question 1
When a company like Dunkin Donuts change its product or rather the brand product to other products, there is problem of losing the old customer base. The Donuts focus has been shifted to coffee. So there needs to be acquired new customer through the branding of coffee who may be different from those who bought the Donuts. It is however wise that Dunkin has not given up on Donuts totally. This way it will be easier for the company to retain new customer while keeping back the old loyal customers who liked the Donuts (Bhasin and Singh, 2018).
In the marketing strategy, Dunkin should canvass for coffee along with the Donuts. This will bring it success in terms of retaining both old customer base and gaining the new customer. Creating the strategy of Marketing Mix where coffee goes with Donuts perhaps with some concessions or with other specialities will be highly appreciated by the customer, more so because coffee and donuts are but complementary products that one may like to have together.
Dunkin Donuts sells mainly donuts with coffee and also serve other light foods. On the other hand Starbucks concentrate on beverage. Dunkin Donuts is more competitive in pricing and gives value to the food offered while Starbucks catches the youth segment and provides them with refreshing ambience of the coffee house where they can chill themselves.
As a marketing personnel I would brand Dunkin Donuts more for the value it offers for food and target the segment of middle class people who would like to have good snacks along with their coffee at a reasonable price. Surely this segment is huge and if targeted properly will be a source of good revenue for the company.
Both Dunkin Donuts and Starbuck engage in customer loyalty programmes and have method of rewarding their loyal customers. But customers tend to switch between companies whatever loyalty bonus they may accrue. The best innovative way to hold customers, other than the loyalty program is to increase the branding (Deventhal, 2019). By providing the coffee and Donuts to sports star at play-fields or promoting the product through some brand ambassador, the company can increase the face-value of the product. Another innovative way is to provide health conscious foods with the coffee cup and promote it for its health value. In fact competing with the competitor for enhancing customer loyalty is really a tough game and the company has to be very vigilant and active to maintain the customer loyalty (VRIO Analysis - Starbucks and Dunkin Donuts, 2016). Small programmes like wishing the customer on his or her birthday with some free gifts are the kind of spending and innovation that the company may think of doing.
Company history and background, retrieved from www.dunkindonuts.com
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Zuckerbrot, T. 2014, Fast Food can be waist friendly, Fox News.
Dunkin Brands (2017); Annual Report.
Wahlen, J.Baginski, S. & Bradshaw, M 2014.Financialn reporting, financial analysis and
valuation, USA; Nelson Education
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