a) Conduct an external strategic management audit on Dunkin’ Donuts basing on the case

study above. (15mks)

According to Kabanoff and Brown, (2008) an external strategic-management audit is sometimes

called environmental scanning or industry analysis and it focuses on identifying and evaluating
trends and events beyond the control of a single firm. An external audit reveals key opportunities
and threats confronting an organization so that managers can formulate strategies to take
advantage of the opportunities and avoid or reduce the impact of threats.

According to the case study, the Key External Forces can be categorised under economic,
social and environmental forces, political and legal factors.

Economic forces
 Propensity to save; according to the case study, there is an indication that the propensity
to spend is low. This can be seen when Dunkin’ Donuts focuses on lower prices like the
99 cent breakfast wrap
 Price competitiveness; Dunkin’ Brands, Inc is basing on lower and attractive price
packages to beat off competition from McDonald’s and Starbucks.
 Breadth of competing products; according to the case study, the breadth of competing
products is not very wide. The main products are coffee, doughnuts and ice-cream

Social and environmental forces

 Consumption trends and lifestyle; according to the study, the consumption trend is that of
working people. This is shown when Dunkin’ Donuts in 2009 launched a $100 million
advertising campaign around the theme “You Kin‟ Do It” that highlights everyday
challenges, such as work and traffic.

Political and legal forces

 The political and legal forces appear to be friendly. This is demonstrated by the fact that
Dunkin’ Brands, Inc has more than 13,000 locations in more than 40 countries with more
than 7,900 shops in 30 countries, 5,800 of them being in North America.
For this case study, Porters model has been adopted to analyse the external environment

Five Forces Analysis (Porters analysis)

The Porter’s Five Forces model attempts to analyse the industry in which Dunkin Brands, Inc,
operates.

These Porter’s five forces are as follows:

 Threat of New Entrants
 Bargaining Power of Suppliers
 Bargaining Power of Buyers
 Threat of Substitute Products or Services
 Rivalry Among Existing Firms

Porter’s Five Force Model

Adopted from Porter, (1980)

Threat of New Entrants

 The economies of scale is difficult to achieve in the Doughnuts and ice cream industry in
which Dunkin Brands, Inc operates. This makes it easier for Dunkin Brands, Inc with large
production capacitates and with more than 13,000 locations in more than 40 countries to have
 a cost advantage. It also makes production costlier for new entrants. Therefore, this makes
the threats of new entrants a weaker force for Dunkin’ Brands, Inc.
 The capital requirements are also high for the Doughnuts and ice cream industry, therefore,
making it difficult for new entrants to set up businesses as high expenditures need to be
incurred. This also makes the threat of new entrants a weaker force for Dunkin’ Brands, Inc
in the Doughnuts and ice cream industry.

According to the case study, Dunkin’ Donuts in 2009 launched a $100 million advertising
campaign and is also expanding its Dunkin’ Deals, which bundles a bagel or sandwich for 99
cents with the purchase of a coffee. Therefore, with these innovative and attractive officers
together with the strong marketing, Dunkin’ Brands, Inc will continue to build a stronger
brand identification that will attract new customers and retain its current customers rather than
losing them to new entrants.

Bargaining Power of Suppliers

 From the case study, information on the number of suppliers in the industry in which
Dunkin’ Brands, Inc operates is not provided, but is fair to assume that there are many
compared to the buyers. This means that the suppliers have less control over prices and
this makes the bargaining power of suppliers a weak force.
 Raw material required to make doughnuts and ice cream are fairly standardised, less
differentiated and have low switching costs. This makes it easier for buyers like Dunkin’
Brands, Inc to switch suppliers. Therefore, the bargaining power of suppliers is a weaker
force for Dunkin’ Brands, Inc.

Bargaining Power of Buyers

 According to the case, the number of suppliers in the industry is very small they include
McDonald’s and Starbucks. This means that the buyers have a few choices to choose from,
and therefore, do not have much control over prices. This makes the bargaining power of
buyers a weaker force within the industry.
 From the case, it can be presumed that the income of the buyers within the industry is low.
For instance, Dunkin’ Donuts president Will Kussell is quoted saying, “We‟re going to help
you get through whatever you have to deal with every day.” This means that there is pressure
 to purchase at low prices, making the buyers more price sensitive. This makes the buying
power of buyers a weaker force within the industry.

In realisation of consumer price sensitivity, Dunkin’ has expanded its Dunkin’ Deals, which
bundles a bagel or sandwich for 99 cents with the purchase of a coffee. This will further
attract a large number of customers to Dunkin’ Brands, Inc. products. Furthermore, the $100
million advertising campaign around the theme “You Kin’ Do It” will also build a larger
loyal customer base.

Threat of Substitute Products or Services

 From the case, it is fair to conclude that there are very few substitutes available in
Doughnut and ice cream industry, evidence of this fact can found in the quote by Dunkin’
Donuts’ brand marketing officer Frances Allen saying: “Starbucks can’t do food and
McDonald’s can’t do coffee. This therefore, implies that there is no ceiling on the
maximum profit that Dunkin’ Brands, Inc can earn. All of these factors make the threat of
substitute products a weaker force within the industry. It also means that buyers are less
likely to switch to substitute products. This means that the threat of substitute products is
weak within the industry.

Rivalry among Existing Firms

 The number of competitors in industry are very few, with only ‘McDonald’s and
Starbucks’ mentioned as notable competitors according to the case study. This makes the
rivalry among existing firms a weaker force within the industry.
 The case also shows that the very few competitors have a large market share which has
forced Dunkin’ Brands, Inc to launched fierce, frontal attacks on both McDonald’s and
Starbucks to gain a stronger position and become a market leader. This makes the rivalry
among existing firms a stronger force within the industry.
 According to Dunkin’ Donuts’ brand marketing officer Frances Allen quote: “Starbucks
can’t do food and McDonald’s can’t do coffee’’, this is indicative of big weakness among
the competitors which implies that the rivalry among existing firms a weaker force within
the industry.
Conclusion;
Menon & Tomkins, (2004) stress that firms should be able to respond either offensively or
defensively to the factors by formulating strategies that take advantage of external
opportunities or that minimize the impact of potential threats. According to the case study,
Dunkin’ Brands, Inc has chosen to launch fierce frontal attacks on both McDonald’s and
Starbucks.
b) Describe the trend towards cooperation among competitors and discuss the market
commonality and resource similarity in relation to competitive analysis (10mks)

Definitions
Market Commonality
Market commonality was defined by Stephenson & Pandit, (2008) as the number and significance of
markets that a firm competes in with rivals. This generally describes competing firms that offer
similar products in the same market. These markets can be geographic, product areas, or segments.

Resource Similarity
Fleisher & Bensoussan, (2003) define resource similarity as the extent to which the type and amount
of a firm’s internal resources are comparable to a rival

According to Miles and Snow, competing firms within a single industry can be categorized into
one of four basic types (defenders, prospectors, analysers and reactors) on the basis of their
general strategic orientation

For this case study, the market commonality and resource similarity in relation to competitive
analysis of Dunkin’ Brand Inc, McDonald’s and Starbucks can be best analysed by categorising
the competition into Defenders and prospectors

Defenders
McDonald’s and Starbucks are companies with a limited product lines of doughnuts and coffee
respectively and are focusing on improving the efficiency of their existing operations. This is
evident in the case when Frances Allen is quoted saying: “Starbucks can’t do food and
McDonald’s can’t do coffee’’. This cost orientation makes them unlikely to innovate in new
areas.

Prospectors
Dunkin’ Brand Inc, are a company with fairly broad product lines of doughnuts, ice-cream and
coffee and focus on product innovation and market opportunities. This sales orientation makes
them somewhat inefficient. They are emphasising creativity over efficiency. According to the
case, Dunkin’ Brand Inc. can be seen putting emphasis on new product development. On top of
the Doughnut and ice products, they can be seen entering breakfast and coffee markets as well.
Trend towards cooperation among competitors

From the case, Dunkin’ Brand Inc, has adopted a frontal assault market location tactic which
is quite offensive aimed at attacking the current market position of McDonald’s and Starbucks.

Currently, Dunkin’ Brand Inc matches McDonald’s and Starbucks in every category from price
to promotion to distribution channel. However, for Dunkin’ Brand Inc to be successful, it must
have not only superior resources, but also the willingness to persevere. Generally, the frontal
attack will be very expensive for Dunkin’ Brand Inc to maintain in the long run.

Competitor’s possible defensive reaction

McDonald’s and Starbucks being both well-established competitors with a wide presence in the
USA and internationally, their likely reaction will be defensive to deter the frontal attacks from
Dunkin’ Brand Inc. This will therefore serve to depress profits for the whole industry because of
the fierce competition that will arise among the three firms.

Cooperation among Competitors

Due to fierce competition that arise among firms in the same industry, profits tend to drop. As a result,
strategies that stress cooperation among competitors will naturally develop. Therefore, for the
greater good of survival for all the competitors (Dunkin’ Brand Inc McDonald’s and Starbucks),
will be forced to come to a round table to discuss a mutually beneficial cooperation among
themselves
Question Two
In light of the COVID-19 pandemic in Uganda, choose a company of your choice and analyse
critically the nine critical tasks of strategic management.

How successful has the company been in each of the nine tasks?

What are the key challenges being faced in that particular company? (25mks)

The company of my choice is Centenary Bank

Centenary Bank, which is headquartered at Mapeera House in Kampala City, is the country’s leading
commercial microfinance bank, serving more than 1.8 million consumers, employing over 2754 staff
and has an asset base of UShs. 3.567 trillion as of December 31, 2019.

Fehringer, Hohhof & Johnson (2016) define strategic management as a stream of decisions and
actions which lead to the development of an effective strategy or strategies to help achieve
corporate objectives.

Centenary Bank has been successful in the application of the nine critical tasks of strategic
management in light of the COVID-19 pandemic in Uganda in the following ways.

Exerting Strategic Leadership

Management of Centenary Bank envisioned the impacts of COVID-19 pandemic and empowered all
staff to create strategic change in all the branches across the country. On 16 th March, 2020,
management of Centenary Bank headed by Mr. Fabian Kasi, the Managing Director held a meeting
on the way forward to conduct business amid the looming virus. Management resolved to procure
adequate supplies of face masks, sanitizers and testing kits for its staff. It also resolved to change the
working shifts of its employees across all branches. This was to ensure that the staff remained safe
during the COVID-19 pandemic.

Management further, appointed a COVID-19 team to ensure all parameters agreed upon were put in
place in all its branches. The team was also tasked with ensuring that all its staff had face masks and
kept social distancing.
Linking Budget to Strategy

The General Manager Finance, Mr. Joseph Kimbowa and the general Manager Risk Management Mr.
Francis Ekemu of Centenary bank announced a budget that was forwarded to the procurement
department to ensure all necessary requirements to ensure safety of staff and employees were in place
in all the branches of Centenary Bank. Management further communicated transport provision for all
working staff especially in Kampala branches. The COVID 19 team hired costa vans to pick and drop
every staff to their places of residence to ensure safety during the COVID 19 crisis.

Supportive Policies and Procedures

To ensure safety of its staff and also social distancing guidelines, the management of Centenary bank
communicated through staff mail from Mr. Benoni Okwenje the General Manager Compliance that
only half of the staff were to work on each particular day and this would be done on a rotational basis
that was compiled by the branch managers. The security guards were also instructed to ensure that
every client entering the bank should be wearing a mask and they should also register their names as
well as have their temperatures taken at the entrance. Furthermore, the policy of hand washing was
also instituted at every branch.

Instituting Best Practices

To reduce overcrowding in the Centenary bank banking halls, the clients were sent notifications
through SMS to encourage them to utilize online banking services, mobile banking services and
agency banking services. The loan clients were also notified to make their payments through mobile
money to account services. Furthermore, the General Manager Credit, Mrs. Florence Mawejje also
made a communication to all credit officers to reschedule the loan payments periods for all loan
clients amidst the COVID 19 pandemic to ensure that the credit ratings of clients were not affected
because of loss of incomes.

Instituting Mechanisms for Continuous Improvement

Amidst the COVID 19 pandemic, management of Centenary Bank encourage its customers to mainly
rely on Agency banking and online banking to ensure that the Standard Operating Procedures (SOPs)
were adhered to. Cente Mobile Loans products were also encourage for loan clients who needed
financial assistance amidst the crisis. Furthermore, to ensure efficiency in payment collections, the
bank streamline its electronic platforms for E-NSSF Collections, E-UNEB Registration, E-Water
Payment, E-UMEME payment and E-Tax

Installing Support Systems

Centenary bank management increased the number of Automated Customer Query machines in its
branches and increased the number of online customer care staff. A toll free bank telephone line was
also sent to all clients via SMS to ensure that customer were served without coming to the banking
halls. This also served to reduce the congestion problem in the banking halls.

Supportive Reward Systems

Management of Centenary bank put up a weekly financial reward for the most compliant branch in
the network which was to be nominated by the COVID19 team. This motivated the staff of each
branch to strickly observe the Standard Operating Procedures put in place by management. It further
motivated the branches to keep their staff members safe and this resulted into not infection of staff
members.

Strategy-Supportive Corporate Culture

Centenary bank is driven by a value system of superior customer service, teamwork, integrity,
exceptional professionalism, excellence, competence and leadership and environmental
stewardship. This is driven direct from the top management to the branch level. For instance,
during the COVID19 pandemic, the Managing Director, Mr. Fabian Kasi was always seen
wearing a mask which encourage all staff and managers to do likewise.

Designing Strategic Control Systems

Centenary bank management set up control systems through electing an overseeing team for the
COVID19 which was called COVID19 task force to ensure that all the set policies and guidelines
were being adhered to throughout the branches. Furthermore, the General Manager Business
Technology. Mr. Arnold Byansi also ensured the electronic platforms were running smoothly and that
customers were being served online.

What are the key challenges being faced in that particular company? (25mks)
The key challenges being faced at Centenary bank amidst the COVID-19 pandemic in Uganda
include the following

Increased cost of doing business

During COVID19, the cost of doing business has become very high for Centenary bank due to
the high rates of lending. The new tight standard operating procedures instituted by Centenary
bank, is discouraging clients to hold their money on mobile money accounts instead of bank
accounts.

Stability risk
According to a report by the General Manager Financial Markets of Centenary bank, he states
that the bank is facing a challenge of stability risk mainly caused by the enlarged flows of short-
term capital as a result of the monetary stimulus of major economies in Europe, South America
and North America. This is feeding into excessive and volatile movements in the currency and
financial markets, as well as cause inflationary pressures in both general and asset prices.

Slow network issues

The COVID 19 crisis has encouraged many clients to migrate to online banking and mobile
banking which has been over loaded and the network has drastically slowed down. The mobile
banking and online banking bandwidth was not designed to accommodate many users and the
current capacity and infrastructure needs to be upgraded.

Very high rates of loan defaulting

The COVID 19 crisis led to the collapse of very many businesses which were servicing loans
with Centenary bank, this has therefore left them unable to pay. It has therefore, affected the
banks profitability and revenue generation. Unlike other developed economies where the
governments have provided relief funds, banks and businesses in Uganda have not been
supported by the government.

Slowing economy

Due to the COVID19 Crisis, the Ugandan economy has slowed drastically. The sluggish
economy and slow real estate market has led to weak loan demand at Centenary bank and low
interest rates, both factors are leading to further compressing of the Net Interest Margin (NIM) of
Centenary bank.

Insecurity of Centenary Agency banking

During this COVID19 period, many of the Centenary agency banking agents have reported
robbery from thieves than ever before. These desperate times have led to the increase in the
number of robberies because many people were affected finally by the lock down period.

A high rate of loan restructuring request

Since March, in the beginning of the COVID 19 Pandemic, Centenary bank has been
overwhelmed by the high number of loan restructuring applications filed by borrowers. The
restructured loans have led to a reduction in the liquidity standing of centenary bank during the
lock down period.

High Transaction Costs on online banking and mobile banking

Centenary bank has reported high number of complaints from clients about the higher charges on
the online and mobile banking platform. The standard operating procedures which require social
distancing has limited the number of clients on cues to make deposits at the counter and yet the
alternative of online banking attracts higher charges.

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