What does a Porter Five Forces analysis reveal about the industry in which Dunki

Question

What does a Porter Five Forces analysis reveal about the industry in which Dunkin’ Donuts and Starbucks compete? Is the industry attractive? Yes? NO? Why? What are the strategic implications for Dunkin’ Donuts?

Discuss the pros and cons of Jamba Juice’s strategy and how it compares to that of Dunkin’ Donuts. What similarities are there between the two companies in term of their growth strategies? Discuss.

EXCERPT:

Dunkin' Donuts—Growth Feeds a Sweet Tooth

Java giant Dunkin' Donuts is opening hundreds of stores and entering new markets appealing to a new generation of customers. But is the rest of the world ready for this upstart from the Northeast? Can Dunkin' stay on course with its rapid growth?

The firm's present global travels are a long step from its first coffee shops opened in the Boston, Massachusetts, area in 1950, a few decades before Starbucks appeared on the coffee scene. Now it's expanding internationally and broadening its food and coffee menus for a new generation of more health-conscious customers and to ride the wave of fresh trends.

Dunkin' Donuts is a nationally known brand with a long reputation for quality that has earned the trust of many loyal customers. With Starbucks rethinking its positioning strategy and McDonald's offering a great-tasting coffee at a reasonable price, Dunkin' Donuts is hoping that with careful strategic planning, consumers worldwide will, as its ad campaign purports, “Run on Dunkin.”

Although Starbucks has driven the trend toward upscale coffee, Dunkin' Donuts is betting that consumers nationwide will embrace its reputation for good-tasting coffee, unpretentious value, simplicity, convenience, and delicious donuts.

Part of Dunkin' Donuts' strategic plan of action includes focusing on the sale of its core products—coffee and donuts. With 500 billion cups consumed every year, coffee is the most popular global beverage, and estimates are that Americans drink 400 million cups a day. Dunkin' Donuts serves close to 3 million of them. That equates to about 30 cups per second—and 65% of the company's annual store revenue.

Global Growth Strategy

Most Americans have had an encounter with the Dunkin' Donuts brand through its almost 7,000 domestic outlets. Over the next two decades, the company has plans to double the number to 14,000 stores. Because Dunkin' Donuts is a franchise system, access to capital from eager operators is easier than funding growth from within. Its parent company, Dunkin' Brands Group, Inc., also owns ice creamery Baskin-Robbins.

The Dunkin's brand has managed to carve out an international niche, not only in expected markets such as Canada and Brazil, but also in some unexpected ones like India, Brazil, Qatar, South Korea, Pakistan, and the Philippines. The company is betting big on emerging economies. “Emerging markets are attractive because they are growing very quickly, they've a fast-growing middle-class [eating out more], and they love American brands,” says CEO, Nigel Travis. The company's growth plans include opening between 80 and 100 outlets in India—with 500 stores there within 15 years. “The company plans to locate in Asia a ‘disproportionate’ number of the 350-450 outlets that it plans to open outside the U.S. this year,” Travis said.

Related Diversification Strategy

For most of its existence, Dunkin' Donuts' main product focus has been expressed by its name: donuts and coffee in which to dunk them. Since Stan Frankenthaler became executive chef and vice president, Dunkin' has launched about 25 new products annually as a new product innovation initiative. It has stepped up to competition by offering a variety of espresso-based drinks complemented with a broad number of sugar-free flavorings, including caramel, vanilla, and mocha swirl.

Its related diversification strategy now includes entry into the crowded fast-growth breakfast market with a new line of products. Its sandwich offerings focus on combinations of eggs, cheese, ham, and sausage on Texas toast, English muffins, croissants, bagel sandwiches, and burritos. Considering that coffee is the most profitable item on the menu, it's a good bet that this gives the company room to experiment with new food offerings.

The update to Dunkin' Donuts' menu items was inevitable due to increased competition in the morning meal market. But, none of its strategic plans make much sense unless consumers buy into the notion that Dunkin' has the culinary skills to sell more than its name implies. If plans prove successful, more customers than ever may flock to the shops. However, it may take a while to convince them that Dunkin' Donuts is the place to go to for breakfast.

Customer Appeal and Strategic Partnerships

Sometimes called the “anti-Starbucks,” Dunkin' Donuts has a rich history of offering simplicity and straightforward morning snacks—earnest and without pretense—to the everyday working class. The company appeals to simple, modest, and quality- and cost-conscious customers.

{Jamba Juice Blends for Fruitful Growt

Jamba Juice's humble beginnings started in 1990 in San Luis Obispo, California, when cycling enthusiast, Kirk Perron, opened his first store. Having now grown to over 760 locations, mostly in the United States, Jamba, Inc. plans to broaden its reach through franchising with a mix of 80-90% franchised stores with 10-20% company owned. The company sees potential for 2,700 domestic and 1,000 international store locations. “We are going for an asset-light business model, with a focus on brand development,” says its CEO, James White.

Owners of the international chain of company-owned and franchised yogurt and smoothie stores, Yogen Fruz, have invested $20 million in the firm. Its CEO Michael Serruya says his company's goal is to provide Jamba, Inc. with insights into global franchise operations. Jamba's accelerated growth plans include worldwide franchising, expanding in-store products beyond smoothies, complimentary acquisitions, and the sale of Jamba-branded consumer packaged goods beyond its stores—things like fruity coconut water, fruit cups, and even a frozen home-smoothie kit for kids.

Jamba's strategy is to diversify from a smoothie-only shop to a line of wraps, sandwiches, salads, and flatbreads. So far, so good. The company's expanded menu includes fruit and vegetable smoothies, Fit and Fruitful smoothies with a weight burner boost to support weight management goals, Whirl'ns Frozen Yogurt, Probiotic Yogurt blends, and coconut water infused smoothies. Nondairy, nongluten vegan items are included on its menu as well.

Viewing it as a natural fit to the breakfast market, Jamba acquired an Oprah Winfrey favorite—Talbott's Tea. The company believes premium, all-natural hot beverages will be a great complement to its existing lines. So far, with all of these growth strategies in place, same-store comparable sales at this cold beverage company are turning out to be very “hot.” Is Jamba ready to take on the fast-developing market for beverage alternatives?}

Dunkin' Donuts is banking on strategic partnerships to help fuel its growth through widespread marketplace prominence. Although Dunkin' Donuts often partners with a select group of grocery retailers, such as Stop & Shop and Wal-Mart, to create a store-within-a-store concept, the company is very selective about where they choose to set up shop.

“We want to be situated in supermarkets that provide a superior overall customer experience,” says a business development executive. “Of course, we also want to ensure that the supermarket is large enough to allow us to provide the full expression of our brand, … which includes hot and iced coffee, our line of high-quality espresso beverages, donuts, bagels, muffins, and even our breakfast sandwiches.” Furthermore, the outlet's location within the supermarket is critical for a successful relationship. “We want to be accessible and visible to customers, because we feel that gives us the best chance to increase incremental traffic and help the supermarket to enhance their overall performance.”

Finding the Sweet Spot

If Dunkin' Donuts can find the “sweet spot” by being within most consumers' reach without the feel of a mass-retail-like omnipresence, the company's growth strategy may prove fruitful. But this strategy is not without its risks.

In the quest to appeal to new customers, offering too many original products in too many locations could potentially dilute the essential brand appeal and alienate longtime customers who respect its history of simplicity. On the other hand, potential new customers and a younger demographic previously unexposed to Dunkin' Donuts might see it as uncool as “yesterday's brand.” Some older franchises seem long overdue for a makeover, especially when compared to the trendy Italian feel of a nearby Starbucks cafe.

For the time being, Dunkin' Donuts seems determined in its quest for domination of the coffee and breakfast market. Will Dunkin' Donuts strike the right balance of products and placement needed to outserve its fierce competition?

Explanation / Answer

Answer :

Dunkin Donuts: Dunkin Donuts is an American based company founded in 1950, and it is global company in the business of donuts and coffeehouse based in Canton, in Greater Boston.

Starbuck is an American coffee company. This company serves the worldwide market and is a well known company in the world. This company starts around 1972 and the age of the company is around 45 years.

Porter Five Forces analysis reveal about the industry in which Dunkin’ Donuts and Starbucks compete is the “threat / competition due to new entrant business” in the market. The threat due to new entrant is one of the five forces of Porter’s five Force analysis.

Yes this industry is attractive, because the demand for these products i.e. coffee and donuts are very high in the global market and people likes to have this product for their refreshments.

Strategic implications for Dunkin’ Donuts are as below:

These strategic initiatives helped the Dunkin Donuts in a successful business model in the global market.

Pros and Cons of Jamba Juice’s strategy :

Pros – Jamba Juice strategy is helping in glowing the business globally, It had opened many stores in the domestic as well as in international market. It had lot of product diversification and it meets the breakfast demand of most of the people in most of the global location. It is expanding in the global market and soon will capture lots of market share in the world market. Higher product diversification is being used by Jamba.

Cons:- The organization did not had good sales at the stores. This low sale is a concern for the profitability of the stores.

Similarities are there between the two companies in term of their growth strategies: The growth strategy for both companies are similar because both have expanded in the global market, with the help of the franchisee concept. The global expansion is in the similar ways for the companies. The product diversification is being utilized by both the companies. Thus these two strategies are similar for both companies.

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