STRATEGIC MANAGEMENT Individual Assignment (15/20 marks)

Answer all questions.

I am looking for creativity, fluency.

Questions

Case Study: Greggs Doughnuts Inc.

Greggs Doughnuts has offered delectable doughnuts and since July 13, 1937.Vernon Rudolph bought a secret yeast-raised doughnut recipe from a New Orleans French chef and began selling these doughnuts to grocery stores in Winston-Salem, North Carolina. Also, during these early days, Rudolph cut a hole in an outside wall at his rented building and started selling the hot original glazed doughnuts to his customers that were walking by. This hole would eventually be worldwide known as the Hot Now Original Glazed sign outside every Greggs store.

Greggs Doughnuts operates a leading chain of doughnut outlets with about 650 locations throughout the US and in 21 other countries. The shops are famous for their glazed doughnuts that are served fresh and hot out of the fryer when the hot sign is on. In addition to its original glazed variety, Greggs serves cake and filled doughnuts, crullers, and fritters, as well as hot coffee and other beverages. The chain includes about 275 doughnut shops and some 370 kiosks and satellite locations.

Greggs mission

Greggs mission is stated:

To touch and enhance lives through the joy that is Greggs. They also have a vision which is: To be the worldwide leader in sharing delicious tastes and creating joyful memories.

The strategy of Greggs

The strategy of Greggs is defined in its 10-K form. The following are the strategic initiatives that are currently being pursued by the firm:

1. to stimulate an increase in on-premises sales of doughnuts and complementary products by increasing the number of retail distribution points to provide customers more convenient access to our products.

2. to reduce the investment required to produce a given level of sales and reduce operating costs by operating smaller satellite stores supplied by larger, more expensive traditional factory stores.

3. to increase the number of markets which can support a factory store through the continuing development of smaller factory store models.

4. to achieve greater production efficiencies by centralizing doughnut production to minimize the burden of fixed costs.

5. to achieve greater consistency of product quality through a reduction in the number of doughnut-making locations.

6. o enable store employees to focus on achieving excellence in customer satisfaction

and in-shop consumer experience.

7.

Greggs External Audit

Greggs Doughnuts is affected by multiple governmental and environmental factors. Locations in this firm are subject to local regulations that include health, sanitation, safety, fire, building and other agencies in the states or municipalities where these stores are located. Local regulations differ between each state and municipality. Adding new stores or refurbishing old stores in some areas may be affected by licenses, approvals, zoning, land use, and environmental factors. The ingredients used to produce Greggs Doughnuts may be subject to US and state laws if produced off site and transported to another location for sale or consumption. In addition, accuracy of product labels is subject to federal and state regulations. The use of various product ingredients and packaging materials is regulated by the United States Department of Agriculture and the Federal Food and Drug Administration.

Greggs Doughnuts franchise their brand. Their franchises must comply with regulations adopted by the Federal Trade Commission and with several state and foreign laws that regulate the offer and sale of franchises. The FTCs Trade Regulation Rule on Franchising and certain state and foreign laws require that franchisers furnish prospective franchisees with a franchise disclosure document containing information prescribed by the FTC Rule and applicable state and foreign laws and regulations. Greggs must register in domestic and foreign jurisdictions that require registration for the sale of franchise. Some state and foreign laws may regulate substantive aspects of the franchisor-franchisee relationship. These laws may limit a franchisors ability to: terminate or not renew a franchise without good cause; interfere with the right of free association among franchisees; disapprove the transfer of a franchise; discriminate among franchisees with regard to charges, royalties and other fees; and place new stores near existing franchises.

Greggs Doughnuts are subject to state and federal labor laws that govern their relationships with their employees, such as minimum wage requirements, overtime and working conditions and citizenship requirements. Many employees of Greggs are paid at rates related to the federal minimum wage. Accordingly, further increases in the minimum wage could increase labor costs. The work conditions at facilities are regulated by the Occupational Safety and Health Administration and are subject to periodic inspections by this agency. In addition, the enactment

of recent legislation and resulting new government regulation relating to healthcare benefits have resulted in increased costs, and may result in additional cost increases and other effects in the future.

A current threat for Greggs Doughnuts is the change in consumer behavior. The change has pushed the market to becoming relatively unfavorable because of the growing trend for healthier food choices. Demographics in the U.S. show that the number of working Americans are increasing thus, it gives rise to the number of people eating out. Nonetheless, this market is shifting toward healthier choices with the rate of overweight and potential obesity, and the preference for casual dining.

Another threat for Greggs is our economic downfall within the past couple of years. With this economic downfall, consumers disposable income has decreased. This decrease causes consumers to have to cut down on non-necessity items. Therefore, this is making the consumer more hesitant to spend their money on something that is not a necessity in their everyday life. Greggs also faces the threat of reduced access to financing by franchisees on reasonable terms. This would reduce the number of stores being opened. Opening new stores is a critical part of Greggss growth strategy. The commodities market has been very volatile recently. A significant increase in prices could affect the pricing strategy of the firm. In addition, price increases will lead to a decrease in sales. Because of consumers bargaining power and presence of substitutes, this will negatively affect the firm. Perhaps the biggest threat is from competition. Greggs competes with many well- established food service companies. At the retail level, Greggs competes with other doughnut retailers and bakeries, specialty coffee retailers, bagel shops, fast-food restaurants, delicatessens, take-out food service companies, convenience stores and supermarkets. At the wholesale level, Greggs competes primarily with grocery store bakeries, packaged snack foods and vending machine dispensers of snack foods. Aggressive pricing by competitors or the entrance of new competitors into our markets could reduce our sales and profit margins. Moreover, many of our competitors offer consumers a wider range of products. Many of our competitors or potential competitors have substantially greater financial and other resources than we do which may allow them to react to changes in pricing, marketing and the quick service restaurant industry better than we can. As competitors expand their operations, competition will intensify. In addition, the start-up costs associated with retail doughnut and similar food service establishments are not a significant impediment to entry into the retail doughnut business. This makes threat of new entrants high.

A current opportunity for Greggs is their sentimental value imbedded on their customers. Sentimental value is the worth of the brand, being recognized for that. This sentimental meaning is a great opportunity for Greggs. Greggs Doughnuts takes pride in their popular, world-wide brand. However, their poor execution has struck their share price. Greggss management should use their powerful brand to allow the company to be a better competitor with Panera Bread Company.

Greggss Internal Audit

According to Greggss website, the Board of Directors contains 9 members. This is significantly less than the national average of 14. Out of the 9 members of the Board, Greggss CEO, James H. Morgan, is the only member of management represented on the board. The other members of the Board are a variety of CEOs, senior managers, and directors from other companies. Greggss Board is also divided into 3 committees each with its own chair. The committees are Audit, Nomination and Governance, and Compensation. Greggs has a very diverse Board of Directors.7 Many of the members have held significant posts at government and corporate levels. The composition of the board is a strength for this firm; however, there should be more than one member of management from the company.

In comparison, Panera only has 8 members of the Board of Directors. The advantage of Paneras Board is that it has the founder of the company still on the board. In addition, it has the CEO and a member who worked with competition company Brueggers Bagels. This gives Panera a slight advantage over Greggs regarding board structure and experience. Greggss board members have impressive credentials, however, only a few members have experience in the industry.

The Board of Directors of Greggs covers many functional areas. The Chairman of the Board, James H. Morgan, has experience in public companies and financial services industry, financial functions, and risk-management. In addition, Mr. Morgan has valuable experience in successfully turning around companies. Director Charles A. Blixt has analytical experience in executive decision making, strategic change and risk assessment. Director Lynn Crump-Caine has extensive quick service restaurant experience. In addition, Mrs. Crump-Caine, has experience in global supply chain, global operations departments, standards and consistency, restaurant training, and operations and franchising. Director C. Stephen Lynn has strong leadership, strategic planning, distribution, business development and franchising skills. Director Robert S. McCoy Jr. has experience in risk-management, finance, accounting and financial statement preparation. Director Andrew J. Schindler has experience in risk- management, marketing, operations, strategic-change and personnel development. Director Michael H. Sutton has experience in financial accounting and reporting by public companies. In addition, Director Sutton served as the Chief Accountant to the SEC. Director Lizanne Thomas has experience in securities, corporate governance, and risk-management. Director Togo D. West Jr. has experience in leadership, risk-management, oversight, governance, and international business. There seem to be many finance types on this board. This may lead the board to take a mostly finance view of the organization. The Board of Directors of Greggs covers the four functional business areas. This is good for the firm.

The organization structure of Greggs is divided into three parts. Company store operations is responsible for company stores and joint ventures that make and sell doughnuts and complementary products through on and off-premises sales channels. Franchise operations is responsible for all franchise related issues, in addition, it is responsible for the associate program and area developer program. The Greggs Manufacturing and Development is responsible for the buying and processing of ingredients to make product mixes. Manufacturing and Development is also responsible for manufacturing all the doughnut making equipment that go into Greggs stores. It also supplies and makes all to the necessary food ingredients, juices, coffee signage, display cases, uniforms, and other items. The structure seems appropriate.

Greggs has some corporate values. According to the Greggs website the following are their values:

Consumers are our lifeblood, the center of the doughnut

There is no substitute for quality in our service to consumers

Impeccable presentation is critical wherever Greggs is sold

We must produce a collaborative team effort that is unexcelled

We must cast the best possible image in all that we do

We must never settle for "second best;" we deliver on our commitments

We must coach our team to ever-better results

Greggs Doughnuts does not rely on advertising to promote their specialty treats. They rely on peoples personal experience and to hopefully satisfy to spread the word through their customers. Nowadays, pricing strategy has become essential in the industry of specialty eateries because their customers do compare prices for a sweet treat before indulging in something that is not necessary. Since Panera Bread has increasing market shares and Greggs has decreasing market shares, it is obvious that Greggs is not doing something right within the industry.

REQUIRED:

i. Identify the strengths, weaknesses, opportunities, and threats to Greggs?

ii. What long term goals/objectives would you recommend to Greggs?

iii. Based on your analysis of Greggs situation, what would be your recommended strategy to them and why?

**Please note that, I reserve the right to use all academically acceptable means to determine the originality or otherwise of the work; and enforce the right application of sanctions thereof. **