Content Page 2.0 Introduction Pages 3 2.1 About KK 3.0 PEST Pages 5-7 4.

0 SWOT Pages 8-9 5.0 Entry mode Pages 10-11 6.0 Risks in International Business Pages 12 7.0 Reference 14-15 Pages Page 3-4

2.0 Introduction In this report I will discuss the analysis of the business environment in the country, including its competitors and PEST analyses for the country that Krispy Kreme have recently entered. This report will also include a clearly described and justified entry mode with the support of SWOT analyses. This will lead to a discussion on why India was chosen as an entry mode in comparison to other places. 2.1Krispy Kreme History Krispy Kreme founded in 1937 by Vernon Rudolph who purchased a donut shop. The company started from selling donuts to local grocery stress in Winston-Salem, North Carolina. Passing consumers who walked by the bakery started to stop by to ask if they could by the donuts hot. Rudolph decided to be creative and cut a whole out in the wall of his shop so that he could sell his donuts to passing consumers, this concept worked extremely well and so it was the start of the Krispy Kreme retail service. The company as of today manufactures premium-quality sweet treats, including its signature hot Original Glazed doughnut, to suit their consumers demand. They also offer over 25 varieties of donuts and complimentary beverages including iced drinks known as Krispy Kreme chillers to go with it. As well as this you can buy Krispy Kreme merchandise, such as mugs, t-shirts, hats and many more products. This creates brand identity and helps to carry on the establishment of the brand. Krispy Kremes donuts and has allowed them to be distinguished within the market. They have built their brand around their iconic themes colours (green, white and red) and have kept each store with the same layout and style so it is easily established and associated with Kripsy Kremes. With over 730 locations in 22 countries, Krispy Kreme are selling over 6 billion donugnuts a day. However the rapid expansion proved unsustainable. As Krispy Kremes earnings suffered from a 2005 lawsuit that accused former management of hiding evidence of dropping sales and profits. The company had to shell out $4.75 million to settle the case. Kreme are always continuously looking to grow and diverse, with their product development team. They test and trial new recipes to suit the needs of Krispy Kremes fans and they never seem to disappoint. For example they seasonally bring out limited edition donuts, on Valentines day they had a heart shaped donut, which was a great hit especially in the Edinburgh store as they sold out. To touch and enhance lives through the joy that is Krispy Kreme. From this mission statement you can see that Krispy Kreme was all about the experience you felt, from visiting a store to eating a Krispy Kreme. It was a treat. To be the worldwide leader in sharing delicious tastes and creating joyful memories. This vision is slowly but surely getting there, the unique idea of bringing a classic hot doughnut to go international. One theory suggests Dutch settlers invented them in

North America, and so therefore doughnuts is American. Taking this concept internationally has made a huge impact on Kripsy Kreme as they are globally recognized. With a new store just opened in India, a developing country and so therefore was a risky strategy. However we will continue to look into the success of the store opened in India. In order for KK to become the worldwide leader their long-term goals include expanding in more areas in the UK and internationally. Krispy Kremes website has provided solutions for franchising that is open to anyone in the public. This allows Krispsy Kreme to create a system of shops to people who have a passion in investing in Krispy Kremes. This report will examine the strategic method of expanding Krispy Kreme in to India where Citymax Hotels India Pvt. Ltd., the hospitality division of the Dubai based retail giant Landmark Group, has signed a franchise agreement with Krispy Kreme Doughnut Corporation to develop 80 Krispy Kreme stores in South and the West India over the next 5 years. Also the opportunities and risks will have to be assessed in order to become a successful business in India. 3.0 PEST Analyses The pest analysis shows that Krispy Kreme has some difficulties regarding its new store opening in India, however does have promising success. Currency changes and legal restrictions challenge the businesses success overseas. The pest analysis also shows that KK is trying to adapt to new technology trends. To conclude the PEST analysis shows many economical factors to think of. Overall this analysis sums up all the external factors that can influence KK success in India. We believe Bangalore is a strategic fit for entering the country. It is India's 3rd largest city and home to many IT firms, well-known universities and research institutes. This city, because of its extreme contribution to the IT sector of the country, believe the move to India the first in a line of planned missteps which would threaten the long-run growth of Krispy Kreme negatively. (Refer to appendix 1) 4.0 SWOT Analysis The SWOT analysis is an extremely useful tool for understanding and decision-making for all sorts of situations in business and organisations. SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats. (Refer to appendix 2) 5.0 Entry Mode Krispy Kreme Citymax Hotels India Pvt. Ltd. has signed a franchise agreement with Krispy Kreme Doughnut Corporation and so will use franchising when expanding in India. However this report will discuss other forms of entry mode that can be used. There are 5 main strategies: international licensing which KK could use for them to expand to India. Monye. S quotes licensing arrangements allow for the use of a firms

technology, patents, trademarks or other firm-specific advantage by another in exchange for valuable consideration. An advantage of licensing is that there is an agreement to use that property for a specific time between KK and another. Therefore KK wont have huge expenses on property and so is a relative cheap way to gain presence in the market. However a disadvantage is that you have littlte or no control over how the second party sells your products, unless the contract specifies restrictions and conditions. Another entry mode is exporting goods and services. Monye. S quotes this is the process of servicing foreign markets from home country facility ; indirect exporting may be treated as domestic sales since it involves selling on an ex-works basis to international trading companies whose responsibility it is to sell the products abroad. This means KK will need to produce goods from one country then transfer them to another country to distribute them. An advantage of this type of entry mode is that they can increase their overall sales volume by minimizing the cost of foreign market entry. Therefore KK wouldnt need to pay as much as any other entry mode fee as they are exporting their good. Another advantage is the increase economies of scale, this will benefit KK as this would lower the average cost per unit through increased production since fixed cost are shared over an increased number of goods.

Last but not least franchising is another type of entry mode. Monye. S quotes franchising us an all-inclusive contractual arrangement which enable the franchisee to use proven and successful business formula in operation and marketing, package of goods and service and permission to trade with franchisors trademark or brand name. Citymax Hotels India Pvt. Ltd. has signed a franchise agreement with Krispy Kreme Doughnut Corporation to develop 80 Krispy Kreme stores in South and the West India over the next 5 years and so will be the entry mode used when entering India. An advantage of using a franchise is that you are able to check how successful other franchises are before expanding to India. Another advantage for KK is that they are a recognized brand name and trademark, therefore will benefit from any advertising or promotion by the owner of the franchise - the 'franchisor'. On the other hand there are disadvantages for KK to franchising their business. One of the disadvantages could be the cost that may be higher than they expected. Although the initial cost of buying the franchise, Krispy Kreme may have to pay a continuing management service fee. Looking at all types of entry mode Krispy Kremes are going to keep to franchising their business. This will be a huge benefit for them as they will be able to communicate with their customers due to the language different, this would help communicate their message across through there franchisor. 6.0 Risks in International Business The four risks are cross-cultural risk, commercial risk, currency risk and country risk. The expansion to India could cause language barriers and so therefore could be seen as an issue as it will be difficult to communicate with their customers. KK will also have to

adapt to the Indian society and the religion differences in order to maximise their profits. A country risk could include if India became more inclined to health issues as of the US and UK have done over the last few years. An article already written regarding taxation on unhealthy foods could cause dramatic profit losses for Krispy Kreme. According to Cavusgil currency risk is a risk of adverse fluctuations in exchange rates. When expanding into a new market currency risk can be an issue. One of the risks this will consist of is asset valuation, meaning the deprecation of assets, which are own leading to a loss when selling their assets. Another huge risk regarding currency is the exchange rate because exchange rates are constantly fluctuating and so therefore KK will have to spend more money changing money across and will affect their profit. Commercial risk is critical when expanding internationally. As KK expand their business into a new country they will need to make sure they analyse their customers at a close, as pricing could be a risk. KK need to make sure they have entered India at the right time so they can maximise their profits.

Appendix 1 Political Factors There are many political factors, which will affect Krispy Kreme when entering into India. A political issue is minimum wage which is Rs.549.80 (5.00) compared to the UK minimum wage which is 6.80, this will benefit KK as it will cut their expenses however a reason why parts of India are extremely poor are due to the lack of income and so causes issues economical. Another political factor could be taxation on unhealthy foods; there is an article on whether or not India should follow Israels example and tax junk food items. This could be bad for Krispy Kreme in the future, as it will mean they will have to pay more tax, and could result in a future loss. Economical Factors Krispy Kremes also need consider the economic factor, which would affect them when expanding into India. According to a report by the U.S. Commercial Service, the middleincome population in India is burgeoning and will grow 10 times by 2025. The caf market in India is growing at a annual rate of 25% over the last five years with Caf Coffee Day leading the segment: According to an October 2011 report by Technopak Advisors Pvt. Ltd, a Delhi-based retail and consumer goods consultancy firm. This along with the growing income of the larger populace makes India a lucrative investment proposition for Krispy Kreme. However one of its biggest competitors, Dunkin Donuts had a net income of $25.9 million, more thank four times that of Krispy Kreme. In May 2012 Dunkin Dounuts opened its first store and now have 5 stores operating, this could be an issue for KK. Krispy Kreme will also recruit employees from India, which again will help their economic growth "Initially we will have most of the ingredients and recipes shipped from the US. Then we plan to source them locally to suit the Indian palate," Krispy vice-president for international development Peter King pointed said. By sourcing the ingredients locally it will be cheaper for Krispsy Kreme to do this and so therefore will not have to worry about importing cots that arise. Even after years of finical losses and store closures Krispy Kreme is expanding. Bangalore is boasted as one of the largest multicultural hubs in India, supporting a large foreign cuisine market due to the variability in tastes. The store set up on the 19th also is in a good location, by several hotels, a school, main thoroughfare, and upscale housing complex. All in the center of the city which, is an economically successful part of the city. The main problem is pricing as there is no price point, being implemented due to city possessing a mean income of about 850 USD and when the average meal is around 1 USD, I would be hard pressed if a coffee and a donut were any more than that. Social Factors With over 1200 million people in Mumbai by opening a KK it is creating job opportunities.

KK will also need to consider the social risks, which can affect their business. Firstly they need to identify whether there is customer demands in India for their product. However Indian definitely has a sweet tooth will. KK will also need to consider the social risks that can affect their business. Firstly they will need to identify whether there is customer demands in India for their product. One of KK big competitors is Starbucks and Dunkin donuts both who have already familiar within India. In order for KK to exploit their customer base they will need to offer cheaper products to obtain maximum profit. Technology factors Another social factor that will affect them would be the use of Facebook in order to communicate with their customer. This is a huge opportunity in technology as there is a population of 1200 million in India and 60% use Facebook. KK need to take advantage of this so they can promote their products and services, to reach a wider market because they are expanding into a new country they will need to make sure they are well established and so therefore will need to spend extra money in their advertising budget.

Appendix 2 SWOT Strengths USP Variety of freshly made donuts and uses a unique secret recipe, which has been wiyh the company since its inception. Krispy Kreme's breadth of appeal extends across all major demographic groups, including age and income. In addition to their taste, quality and simplicity, Krispy Kreme doughnuts are an affordable and indulgent sweet treat. Customer service KK make sure it is all about their customers; making their trip to a KK an experience they will endure. Staff Training (Stake holders) Customer reviews Looking at reviews from the new store opening, there has been some positive feedback. Very good taste KKD is expanding into Dunkin Donuts territory. Weaknesses Financial Constraints No online ordering capability, this is a set back as most of the world base their lives around online. KKD snacks are not healthy, obesity is becoming hugely popular. Competition such as starbuck and Dunkin donuts already dominate the India market.

Opportunities Innovation Expansion of new locations Being one of the greatest cookies and treat stores in the UK the reputation will help them expand into Egypt. There is a huge customer demands in this sector as they havent got many outlets which provide what KK provides. Customer receiving "Hot-Donut" now instead of waiting.

Threats Social Changes Economical factors People are well aware of the fact that sweet food contains more calories, which will result in variety of diseases. Could tax food.

Reference IANS. (19/03/2013). US doughnut major Krispy Kreme forays into India. Available: http://www.hindustantimes.com/business-news/CorporateNews/US-doughnut-majorKrispy-Kreme-forays-into-India/Article1-990591.aspx. Last accessed 18/03/2013. http://www.facebook.com/krispykremeUK?v=box_3&filter=2 http://health.india.com/news/should-india-follow-israels-example-and-tax-junk-fooditems/ http://www.charlotteobserver.com/2012/06/05/3336066/krispy-kreme-is-hot-stuffonce.html

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