Dunkin Donuts E 1988 Distribution Strategies Case Solution

1. Problem statement

When the business had started, the company focused on making profits, and reminded the same to its employees about its profit making strategies by placing signs and buttons in the corporate headquarters. Also, this strategy was linked with their advertising slogan “Time to make donuts”. Dunkin donuts was first to initiate business format franchising, and was able to maintain corresponding relationship with its franchises. The company performed exceptionally well as it grew, not only in terms of sales and earnings growth but the expansion of franchise operations also contributed to the success. However, the scenario started to change by early 1988, company sales deteriorated, competition became fierce, and relationship with their franchises became weak. Company had to come up with appropriate distribution strategies, and the strategies needed immense attention before implementation with regards to its implications. The upcoming potential competition was carefully examined by the company, competitors were identified and relevant strategies were devised.

2. Key factors to evaluate

Distribution

The Company considered formulating distribution strategies to tackle the anticipated problems because they believed that the major issue was the uneven distribution expansion. Three strategies were identified, 1) to develop previously underdeveloped market, 2) sell their branded product in the convenience stores, and 3) satellite retail outlets.

Entering into a new market or previously underdeveloped market could be done through two ways either sub franchising, giving exclusive rights to individual owner in the territory, or exclusive development franchising, where the franchise purchases exclusive rights for a certain time period to open shops in the territory.

Secondly, selling branded product option was also considered by the managers. Putting the branded products of Dunkin Donuts on the shelves of convenience store could increase sales. On the other hand, the managers identified some problems as well, for instance, additional investment, friction among the company and franchise, and monitoring the convenience store would require additional effort.

Marketing

Marketing strategy for Dunkin Donuts is primarily on regional level through radio and television, and not on national level. Reason being the uneven expansion of the franchises nation-wide. The marketing representatives updated the franchises about the Dunkin Donuts promotions, and the franchises decided whether to put the promotions on the shop or not. For this reason, the promotion could not be advertised nationally, there were different promotions for different region and sometimes no promotion for certain franchises.

Regional differences

By 1988, the uneven expansion of franchises in Region I increased drastically, although it supported the overall company sales, however, it hurt some of the individual franchise’s sales, and they had start losing their trust in the company. In Region II there was no such uncontrollable expansion. The company had deviated from its original consumer base, and start to expand into the new market.

3. Analysis of potential options

Company has considered a number of marketing, distribution, and shop operation strategies. All of the strategies need to be carefully examined and evaluated before its implementation. The consequences of choosing an inappropriate strategy would be unfavourable and the company is not in the position to face any further issues.

One of the proposed marketing strategy of the company is to attract its consumer to other products as well, such as sandwiches, merely selling donuts and coffee was becoming less profitable. Since, people are becoming more conscious about their health and food choices, so they categorize donuts as less healthy option. Putting promotion on sandwiches and other food items is a considerable option to increase the sales. So that the franchise does not only depend upon the sale of donuts only, there can be many options available to consumers throughout the day. It would also spread the sales and diversify the revenue stream.

However, the promotion process is very complex and whether to participate in promotion or not is in the hands of franchise. Due to such promotion process of the company, a smooth marketing plan is difficult to devise, and every region has its own promotions. There couldn’t be a unified strategy for every franchise.

Another strategy was to improve the distribution process; three strategies are taken into account, penetrating into a new market, brand sales and satellite retail outlets. Although these strategies seem to be effective, managers have identified some potential problems as well. First strategy had two options, either sub franchise or exclusive development franchising. The problem with sub franchising was that it made the distribution channel even more complex. Sub franchise had to report the franchise in the region and then the franchise had to report the franchisor.