Write a report on Dunkin Donuts International Growth Strategy.
The rapid growth of the modern corporate world concerning competitiveness has forced most companies to invest in building their capacity for creating economies of scale. To achieve these most companies have therefore focused on developing expansion strategies to new markets. However, there is the need for strategic planning through the suitable use of corporate resources to facilitate successful market penetration (Cavusgil et al., 2014). Development of an international expansion growth strategy involves critical analysis and development of market entry strategies and is a component of essential choices concerning the company primary market focus, target customer groups, channel distribution strategy, brand positioning, product, and service value creations as well as resource allocation. Expanding a business globally or seeking to achieve increased economies of scale requires the development of different international growth plans (Hitt & Xu, 2016). In most case, some business chooses to develop a new strategy while other may use the existing global business strategies. Whichever case, according to strategic management specialists, Michael Porter, there are three strategies which if successfully implemented as a way of developing an international growth strategy contributes to a substantial competitive advantage for the company. These generic strategies include the differentiation strategy, cost leadership strategy, and the focus strategy. Therefore this study aims at providing a detailed report on the business international growth strategy for Dunkins Donuts Company.
Dunkin Donuts is an American multinational or global doughnut company that was founded in the year 1950 by Willian Rosenberg. Since its establishment, the company has grown to become one of the leading coffee and baked goods chains or company in the world. The company has been serving customers internationally for over 40 years and currently operates more than 12000 restaurants or stores in 36 countries. Despite its concentration in US stores, the company has one of their largest international markets in South Korea which represents approximately 4% of the company international sales (Hoffmann, 2014). It operates under the coffee and snack global market or industry and has been able to achieve an increased growth success as a result of their store consistency and ability to establish a strong franchise. Its growth strategy is focused on cost leadership not only on the US snack and coffee industry but also globally. Currently, the company has been able to develop 23% of market share in the coffee and snack market with over 7000 stores in the US and estimated sales revenue of $ 658 million. The company leading competitor is the Starbucks which controls 32.6% of the public market share in the US and operates over 11000 stores with sale revenue of $ 13.2 billion per year.
Figure 1: Revenue Growth for the Organization
Source; Dunkin website, https://www.dunkindonuts.com/
Review of Dunkins Donuts Company international competitive strategy
The company global competitive strategy is becoming a cost leader in the coffee and snack shop industry or market. To achieve a competitive advantage in the market through cost leadership strategy, the company aims at producing more. This strategy contributes to a higher asset turnover as well as ability to spread out the company fixed costs over a large number of values. The company also seeks to achieve cost leadership by offering a variety of standardized goods or products helping the company to limit the amount of product or service customization the company has to make (Samson & Sheela, 2016). As part of the company international competitive strategy, the company has also focused on buying on bulk, bidding competitively over contracts as well as working with the company vendors to keep the inventories low (Buzza, 2016). By doing so, the company has been able to control over their international supply chain. Lastly, the company has been able to build a healthy relationship with its suppliers as an essential strategy to keep their operational costs.
Figure 2: Competitive Differentiation Strategy
The company has also developed their growth strategy around three main pillars which focus on developing more shops. These shops are owned by the company as well as franchised which has helped the company build strong franchise relationships over time ((Musso & Francioni, 2014). For instance, approximately 7000 stores out of 10000 stores operated by the company are franchise stores. Therefore the company growth success is attributed to its store consistency and ability to build a strong franchise.
The development of effective organizational design and structure is significant in the event of a company growth strategy. Poor corporate design and construction contributed to increased contradiction, confusion within roles, slow decision making and lack of proper coordinating as well as failure to share ideas. Organizational design defines the process through which the corporate managers make appropriate regulatory choices that contribute to the development of a particular organizational structure ((Castellani et al., 2018). Dunkin Donuts has developed a standard structure through a chain of many franchise businesses through which control is organic and decentralized. Its structure is built on the development of coffee and donuts brands across the various markets. The structure of the structure of the company influences the operational activities and control. The company has therefore developed its formation under the divisional structure which is further divided into privately owned franchise available to the public for purchase.
Each franchise or restaurant established is headed or controlled by a restaurant or unit manager who is responsible for overseeing the operational activities of that unit. Each franchise is governed by its own rules and regulations and is comprised of unit managers, shift leads as well as shift supervisors. The staff of the franchise works under non-supervisory basis ((Hitt & Xu, 2016). The company can attract skilled and qualified employees through external and internal recruiting strategies. However, based on the organizational growth strategy, the employees are required to possess the customer service attitude. Therefore such an organizational structure has been vital in helping the company run the operations of its chain of stores in different regions and countries. With a decentralized structure, the company has been able to reduce the control issues resulting from the many franchise business which required the company to establish strong relationships with the owners (Zhu, 2016). The organizational structure will, therefore, be significant in enhancing the expansion growth strategy of the company despite increased concerns to continue building strong relationships with the franchise owners.
One of the critical elements of successful entry into new markets or regions is choosing the best marketing strategy. It is a great mistake for the company marketing department or the management team to assume that what worked in other areas or markets will as well work in the new target market (Yoder et al., 2016). It is therefore essential for the marketing team to conduct market research by assessing the current market situation, the market size as well as the trends in the market. It is also essential to determine the levels or how intense competition is in the new market as well as the laws and regulations governing business activities in the region.
Figure 3: Summary of Effective Entry Strategy
The company has therefore been able to develop an effective marketing strategy that has enabled it to penetrate its operations in 36 countries internationally. However, its successful entry into the new markets has been through the business efforts to acquire or adopt a franchising strategy. Franchising refers to a business strategy that allows one party to operate a business under your brand name (Vujovi? et al., 2017). The franchise grants the franchisee the right to use the company brand name as well as its operating systems. It is an effective strategy regarding cost since it demands slightly fewer investments compared to licensing. The approach is also less demanding regarding capital than setting up a new business entity. The franchising strategy has contributed to the success of Dunkins international expansion growth strategy. The company has been able to build strong franchise relationship with approximately 70 percent of their operations been franchise owned (Silva et al., 2017). For example in the United States, nearly out of 10000 stores, 7000 of them are franchise businesses operated under different management structures but using the company brand name and operating systems as well as the company marketing campaigns.
The company has been able to work diligently to maintain an adequate supply chain management. This has enabled the company to achieve overall success and become one of the best coffee chains in the world. The company supply chain and production activities have been controlled and developed towards meeting their consumer demands and needs (Singh & Delios, 2017). One of the companies operational control strategy has been the development of the limited time offer deals which has contributed to the significant success of the company as a brand in different markets and the restaurant industry. The company operational control has been enhanced by the adoption of worksoft software that has enabled the company to increase the speed of their business process testing.
Its successful supply chain management ensures that every item produced by the company from the coffee beans to the sugar as well as the Styrofoam cups go through the chain. The company does not own the coffee during its transition through the supply chain until it reaches the hub. Even at that particular point, the coffee is not still under the hands or control of the franchise and therefore has to be monitored, managed and improved if need be (Rugman & Verbeke, 2017). The supply chain effectiveness has also been enhanced by the use of voice logistics technology as well as the use of advanced software’s to help the supply chain managers in ensuring proper flow of the goods. The company on time delivery on time strategy has hugely done well in providing reliable services to the consumers.
It is not an essay task to manage the human resources of a business that has extensive international experience. However, Dunkin Donuts Company has been able to develop effective strategies to reduce the organizational risks brought about by poor human resource management as it can significantly impact the performance of the brand in the international markets (Olson et al., 2018). The rational resource management strategy is focused on achieving operational excellence, improving their focus on employee and franchise staff development as well as stimulates growth through training and equipping the employees and other staff with customer awareness skills.
To manage the human resource across borders, the company has been able to develop effective partnerships with the franchisees which have enabled them to achieve the business as well as the employees working in a particular store. The unit managers, therefore, have the responsibility of managing the staff under their care which makes it easier for the company (Rees & Smith, 2017). The company has levels of engagement, and their readiness in solving any issues concerning the company employees has enabled the company to have minimal human resource issues to handle. The company has also been able to attract the right talent with a focus on excellent customer attitudes. However, there is a need to develop more training programs aimed at providing the franchise staff with excellent customer experience skills.
From the report above, Dunkins Donuts Company has been able to apply their growth strategies very well which has given them a competitive advantage in the market as well as helped the company increase their productivity. Developing a cost leadership strategy has been essential to their success as it provides them with a competitive advantage in the restaurant industry (Castellani et al., 2018). The implementation of franchising strategy has also been very successful in helping the company gain easy penetration into different new markets and regions and therefore contributing positively to the achievement of the company expansion and growth strategy globally.
Figure 4: Summary of a competitive strategy
However, due to their economies of scale or their international presence, issues relating to franchise relationships have come up which poses a significant challenge to the company to seek to establish more strong relationships with their franchisees (Musso & Francioni, 2014). The company management team has a responsibility to develop training programs for increased efficiency in service delivery to their customers. The company current plan to increase the number of the number of restaurants in the US by 1500 stores is a great move however it is important to also focus on expanding their international presence to other nations or regions.
The management of Dunkin Donuts has done a commendable job in driving the company into excellence. The development of business growth strategies and their implementation can be said to be very successful. With an increased commitment to the company strategic goals and improvement on few issues of concern, I believe the current management will steer the company into future success and rival their industry competitors the Starbucks Company by becoming the market leader in the coffee and snack industry or market globally. However, few issues need to be corrected by the management of the company. It is therefore recommended that the company should develop training programs for the franchise staff on offering excellent customer experience as this will contribute to increased customer loyalty. The management should also design and roll out training specifically for the front line colleagues. There is also a need for the administration to develop more strong relationships with the franchise by understanding the various concerns raised and responding through appropriate support as this will play a vital role in enhancing the brand image. There is also a need to develop more strategies aimed at product cost related initiatives to support the company main growth strategy of cost leadership in the industry
References
Buzza, J. (2016, January). Franchising is Entrepreneurship. In United States Association for Small Business and Entrepreneurship. Conference Proceedings (p. CV1). United States Association for Small Business and Entrepreneurship.
Castellani, D., Narula, R., Nguyen, Q. T., Surdu, I., & Walker, J. T. (Eds.). (2018). Contemporary Issues in International Business: Institutions, Strategy and Performance. Springer.
Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2014). International business. Pearson Australia.
Hitt, M. A., Li, D., & Xu, K. (2016). International strategy: From local to global and beyond. Journal of World Business, 51(1), 58-73.
Hoffmann, A. (2014). Dunkin’Donuts: Global Expansion Through Franchising.
Musso, F., & Francioni, B. (2014). International strategy for SMEs: criteria for foreign markets and entry modes selection. Journal of Small Business and Enterprise Development, 21(2), 301-312.
Olson, E. M., Slater, S. F., Hult, G. T. M., & Olson, K. M. (2018). The application of human resource management policies within the marketing organization: The impact on business and marketing strategy implementation. Industrial Marketing Management, 69, 62-73.
Rees, G., & Smith, P. (Eds.). (2017). Strategic human resource management: An international perspective. Sage.
Rugman, A., & Verbeke, A. (2017). Global corporate strategy and trade policy. Routledge.
Samson, M. S., & Sheela, M. V. P. (2016). GLOBAL MARKETS AND THE EVOLVING MARKETING 4P’S. RESPONSIBLE MARKETING FOR SUSTAINABLE BUSINESS, 100.
Silva, G. M., Styles, C., & Lages, L. F. (2017). Breakthrough innovation in international business: The impact of tech-innovation and market-innovation on performance. International Business Review, 26(2), 391-404.
Singh, D., & Delios, A. (2017). Corporate governance, board networks and growth in domestic and international markets: Evidence from India. Journal of World Business, 52(5), 615-627.
Vujovi?, S. M., Vujovi?, T. M., & Pavlovi?, M. L. (2017). Franchising: Way of employment and growth strategy even in time of crisis. Poslovna ekonomija, 11(2), 188-206.
Yoder, Samantha, John K. Visich, and Elzotbek Rustambekov (2016). “Lessons learned from international expansion failures and successes.” Business Horizons 59, no. 2: 233-243.
Zhu, H. (2016). Factors Influencing Customer Doughnut Brand Choice Decision in Thailand, Focusing on Mister Donut, Dunkin’Donuts and Krispy Kreme Doughnut
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