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2A

Dunkin Donuts

I. Company Background
William Rosenberg, the founder of the international coffee and donut chain Dunkin’
Donuts, was born in Massachusetts in 1916 and raised in the Dorchester neighborhood
of Boston. Rosenberg left middle school in eighth grade to help support his family, which
had lost their family business during the great depression. A natural entrepreneur as a
boy, Rosenberg purportedly transported a block of ice to a New Hampshire racetrack
and sold ice chips for 10 cents each, earning himself $171.00 in a single day. After
working a variety of jobs, including working as a telegram delivery boy for Western
Union when he was just 14, Rosenberg landed a job driving an ice cream truck when he
was 17 and worked his way up to management by the time he was 20.

Dunkin’ Mission Statement

To be the leading provider of the wide range delicious beverages & baked product
around the kingdom in a convenient, relaxed, friendly environment, that insures the
highest level of quality product and best value for money.

Dunkin’ Vision Statement

To be always the desired place for great coffee beverages and delicious complementary
donuts & bakery products to enjoy with family and friends

II. Industry Analysis

A. Swot Matrix
Strengths of Dunkin Donuts Weaknesses of Dunkin
Donuts

Global Operations: Tapping Over-Reliance on US Market:

into a large market offers In FY 2019, 46.7% of the
more customers, which company’s total revenues
increases sales and profits. came from the Dunkin’
By 2002, Dunkin’ had 5,000 Donuts US segment. With
food joints in 38 countries, nearly half of its revenue
which has increased over the generated from the US,
past two decades to 13,000 Dunkin’ will be severely
restaurants in 46 countries. It impacted in the case of
has evolved into the largest economic challenges in the
coffee-and-baked-goods market.
chain in the world.
Slower Expansion: As
Perfect Positioning: Dunkin’ competitors like McDonald
is synonymous with breakfast and Burger King expand
nearly everywhere. This is rapidly across the world,
attributed to its perfect Dunkin’ adopted a limited
positioning as the to-go for expansion strategy. This
breakfast. By focusing on a snail-paced expansion is a
small niche, the fast-food weakness since Dunkin will
chain has set itself apart from always enter new and
the competition. emerging markets after its
Superb Franchise Strategy: competitors.
The robustness of business
models is put to the test in Poor Targeting outside the
times of crisis. Dunkin’s US: While Dunkin’s effective
franchise strategy cushioned targeting has enabled a
the impact of the pandemic steady revenue growth in the
and enabled the company to US, the chain is struggling in
emerge on the other side India and other emerging and
better off than competitors. lucrative markets. This is
attributed to poor
Community-Centric understanding of non-
Strategies: Adopting Americans leading to poor
strategies that seek to help strategies.
the community will never go
unrewarded. Dunkin’ Lack of Variety: Dunkin’ relies
recently announced it will be primarily on coffee and
hiring 25,000 new employees bakery products, which limits
as part of its commitment to the fast-food chain to a small
keep America running and segment in the food sector.
working. Reducing or streamlining
offerings to cater to a specific
Strategic Branding: With 70 sector also limits the number
years in the industry, Dunkin’ of customers.
has always stayed relevant to
consumers regardless of the Low Financial Capabilities: To
generation. From marketing compete favorably for
to dropping ‘Donuts’ from its market share, companies
name and menu changes, the require immense financial
company employs strategic resources. Dunkin’s
B. Pestel Analysis
Political Factors
The action of the governments directly impacts businesses all over the globe.
Therefore, every business has to keep closer look at the government policies and
actions to ensure its smooth running.

Similarly, Dunkin’ Donuts also relies on the actions of the government heavily.
This is why several political factors impact Dunkin’ Donuts. The major purpose of
Dunkin’ Donuts is to maximize profits, and one thing that affects the profit of
Dunkin’ Donuts is the tax rate.

Dunkin’ Donuts will retain less profit if a government imposes high tax rates. This
would affect the Donut brand adversely since it would now have less money to
give dividends to its shareholders.

Other than that, low profit will push Dunkin’ Donuts to increase the prices of its
products so that it can maximize its profit. This will make the products of Dunkin’
Donuts expensive for the customers, and as a result, the sales of Dunkin’ Donuts
will fall.

Moreover, Dunkin’ Donuts is significantly impacted by the competition

regulations made by the government. However, like any other business, Dunkin’
Donuts also desires fair competition in the market.

Strict government policies that ensure competition and fair business practices
will help Dunkin’ Donuts to function smoothly in the market. Other than that, the
brand requires political stability to expand. In case of political instability, the
sales of Dunkin’ Donuts will fall, and the brand’s revenue will also fall.

Economic Factors
Businesses are directly linked to the economy of the country. When businesses
do well, the economy of country does well. However, the performance of a
business is significantly impacted by economic factors.

Dunkin’ Donuts is a widely spread brand greatly impacted by economic factors.

One economic factor that highly affects Dunkin’ Donuts’ operations is inflation.
Inflation increases the price of every commodity. Due to this, the inputs required
by Dunkin’ Donuts become expensive.
The cost of expensive inputs is transferred to the customers, which makes the
products of Dunkin’ Donuts expensive. This affects the sales of Dunkin’ Donuts
adversely since people are reluctant to buy the expensive products of Dunkin’
Donuts.

Besides inflation, unemployment is another economic problem that impacts the

brand overall. High unemployment lowers the standard of living of the people.
Due to this, people will have less money to spend on extravagant commodities
such as donuts. As a result, the sales of Dunkin’ Donuts will fall, and the brand
will generate low revenue.

Moreover, other economic factors also impact Dunkin Donuts, such as interest
rates. Higher interest rates affect the Donut brand negatively since it encourages
people to save money instead of spending it. This leads to a fall in demand for
the products of Dunkin’ Donuts, and the brand struggles financially as a result.

Moreover, businesses often take loans from banks to expand their operations.
High-interest rates will discourage Dunkin’ Donuts from taking the loans. As a
result, the growth and expansion of Dunkin’ Donuts will hinder.

Technological Factors
Businesses are highly impacted by technological factors. The role of technology
has been observed and acknowledged by businesses all over the globe. Dunkin’
Donuts is one of the brands that has made the most out of technology.

The technological developments in terms of social media have really benefited

Dunkin’ Donuts. The brand has used various social media platforms to market its
products. This marketing strategy has helped Dunkin’ Donuts significantly to
grow in recent times.

Besides that, other technological developments in the food and beverages

industry impact the brand significantly. Adopting the latest techniques
developed can help Dunkin’ Donuts be more productive. This will help the brand
in generating higher revenue and maximize more profit.

Besides that, the increasing technology has previously helped Dunkin’ Donuts
produce sugar-free products. This has increased the revenue of Dunkin’ Donuts
significantly since offering sugar-free donuts has made those people buy donuts
who once used to avoid them.
In addition to that, online deliveries have really helped the brand increase its
sales. This has increased the reach of Dunkin’ Donuts and helped the brand
increase its revenue.

Legal Factors
Businesses have to abide by the laws present in the society where it is operating.
Similarly, Dunkin’ Donuts also has to keep close eye on the laws since legal
factors play a significant role in determining the operations of Dunkin’ Donuts.

Dunkin’ Donuts has to abide by several laws present in society. For example, it
has to be careful while dealing with its employees since violating workers’ rights
can result in lawsuits and heavy fines.

Dunkin’ Donuts must remember that in some societies, labor unions and labor
rights are very strict, and the brand can even face bans if it violates these laws.

Moreover, other legal factors, such as customer laws, impact Dunkin’ Donuts.
The brand has to abide by customer laws to ensure the smoothness of its
operations. Dunkin’ Donuts has to take care of its customers, or it can face
lawsuits similar to a recent lawsuit filed by customer against Dunkin’ Donuts
recently.

The brand must be cautious and abide by the laws strictly, or it can end up
paying heavy fines due to the lawsuits.

Environmental Factors
Environmental factors significantly affect the operations of any business. For
example, Dunkin’ Donuts is one of the brands that is significantly impacted by
environmental factors such as climate change, recycling, waste management,
etc.

Climate change has increased the frequency of natural disasters in recent years
significantly. In case of natural disasters, traffic disruption can occur. This can
lead to disruption in the supply chain of Dunkin’ Donuts and result in operational
problems.

Moreover, recently governments have started to take action to ensure that

businesses recycle their waste and use materials that can be recycled. However,
this will increase the operational cost of Dunkin’ Donuts since shifting to
materials other than plastic will be more costly.
 Moreover, installing machinery that recycles the waste can be very costly for
Dunkin’ Donuts and result in low profits.

Besides that, many groups are pressuring businesses to focus on waste

management. This has made Dunkin’ Donuts focus on waste management
because the brand knows it will lose customers if it doesn’t.

C. Poster Five (5) Forces

Threat of New Entrants:
Dunkin Donuts is a global brand serving donuts, snacks & beverages to
customers worldwide. With the increasing middle-class population, the coffee
and snacks industry has the potential to grow, and a lot of new ventures are
entering the market. The capital requirements of starting a business similar to
Dunkin Donuts in this industry are low, which makes it a more accessible
business to start. Due to low barriers the entry, the threat of new entrants is also
high. The products of one restaurant to another are also not that well
differentiated. The permission required to start a business is not that hectic in
this industry. The switching cost for the customers in this industry is low as the
products are not that well differentiated from one another so more entrants
would be willing to enter into this market. The challenge that new entrants
would face is the presence of large restaurant’s chains in the market, which
might stop them from entering into the business. Hence, we can conclude that
there is a moderate threat of new entrants.

Threat of Substitutes:
The threat of substitute products is high in this industry.There are a lot of local
and international restaurant chains in the market. The coffee and snack sectors
are considered as being threatened by substitute items. Dunkin Donuts is one of
the various retail outlets that sell coffee, doughnuts, and other treats, all of
which are accessible at Dunkin Donuts. In a market where substitutes are
plentiful, a company might gain a competitive edge by focusing its strategy on
customer satisfaction and brand loyalty. Dunkin Donuts has focused on offering a
high-quality customer experience as a result of the higher risk of replacement
items. In addition, the company has invested in creating a simplified version of
the menu for the benefit of its customers.
Bargaining Power of Customers
The bargaining power of customers is high as a number of restaurant’s are there
in the market selling the same product. But the customers coming to Dunkin
Donuts are getting the quality and ambience of the restaurant. The
concentration of buyers is high, but the buying volumes are low, so the
customers cannot bargain a lot. The switching cost of customers is low in the
restaurant’s industry which leads to competitive pricing between the
restaurants. The buyers have a lot of information available on the online
channels so they can easily compare the prices and move to a suitable product.
The customers of Dunkin Donuts are quality-focused, and therefore, Dunkin
Donuts can charge them a premium price. The brand is not just selling food, but
a whole experience and customers are willing to pay more for it.Hence, we can
conclude that the bargaining power for customers is low.

Bargaining Power of Suppliers:

The firms that are part of the procurement process of Dunkin Donuts are
Continental Mills, Rice Products Crop and Dean Foods. All these are large firms
with well-established supply chain networks. There are a lot of suppliers of raw
materials, but the success of the coffee and snacks business is dependent on the
quality ingredients, and hence the company must find suppliers who can meet
these high expectations. The suppliers who are able to form contracts with large
business-like Dunkin Donuts in this industry, have to compromise on the price
structure and adjust according to the demand of the large firms. The suppliers'
products are also not that differentiated or customized; hence the switching cost
for the buyer is not high in this industry. The threat of forward integration is low.
Creating a brand similar to Dunkin Donuts would require huge capital. Hence, we
can conclude that the bargaining power of suppliers is low.

Competitive Rivalry:
Some of the key competitors for Dunkin Donuts are brands like Starbucks,
McDonald’s, Baskin Robbins, Subway, Pizza Hut etc. The sector is facing severe
competition from the local and national companies in the beverage and snacks
section. There are also numerous equally balanced competitors of Dunkin
Donuts like star bucks in the hot beverage's section. The initial capital
requirement required to create a restaurant business similar to Dunkin Donuts
would require huge capital. The switching cost for the customers in this industry
is low as the products are not that well differentiated from one another.Hence,
we can conclude that the competitive rivalry for the industry is high.
To conclude, the above Dunkin Donuts Porter Five Forces Analysis highlights the
various elements which impact its competitive environment. This understanding
helps to evaluate the various external business factors for any company.