Nicole Kent

11429054
Due: 07/01/08
International Marketing 2MKT659
Individual Assessment and
Reflective Statement
IA Word Count: 2,405
RS Word Count: 494
 Marketing Plan for Krispy Kreme Doughnuts

Introduction

Krispy Kreme Doughnuts has been a successful company for many years. The

company was able to start expanding internationally in 2001. It opened its first store in

the United Kingdom in 2003 at Harrod’s Department Store in Knightsbridge. Krispy

Kreme has been a success in the United Kingdom and should continue expanding into

other countries as well as other parts of the world. The best candidate for a new overseas

market at this time would be Brazil. This report will thoroughly examine the reasons

why it would be a good business decision for Krispy Kreme to enter into the Brazilian

market.

Why Brazil?

There were many qualified markets that would have been great for Krispy Kreme

to enter, but the best option would be Brazil. Brazil is the fifth-most populated country

and Latin America’s largest market. The country has the world's tenth-largest economy in

terms of Gross Domestic Product. Much of the reason for this is because of the

governmental development and liberalization of the economy over the last two decades.

Military rule ended in 1985 which had been going on for over half a century. In 1988 a

new constitution for Brazil was approved for the country. Since then, the country has

seen much improvement and continues to mold and restructure Brazil’s economy to make

it the best as possible. The variety of cultures throughout Brazil has been a positive

attribute in helping the economy throughout the years.

 A unique aspect that made Brazil the best candidate for a new market was because

of the diversity throughout the country. Most of the population descends from early

European settlers who were chiefly Portuguese. There were also some Italian, French,

Dutch, African slaves, and assimilated indigenous peoples. Starting in the late 19th

century many people from several different countries immigrated to Brazil. Some of

these countries are: Italy, Germany, Spain, Poland, Lebanon, Syria, Ukraine, Russia,

Lithuania, Hungary, Armenia, Japan, China and Korea.

Another unique characteristic Brazil has is that it is the only Portuguese-speaking

nation in the Americas, giving it a distinct national culture separate from its Spanish-

speaking neighbors Portuguese is the only language with full official status in Brazil; it

is virtually the only language used in schools, newspapers, radio and TV, and for all

business and administrative purposes. Even though Portuguese is the main language

among the Brazilian culture there are other languages such as English, French, German,

Italian, etc. which are spoken by some people.

Alternative Markets

New Zealand

One of the other possible candidates that were considered was New Zealand. The

reason for this would be because the country is starting to become more internationalized

and Krispy Kreme has been well established already in Australia. Although Australia

and New Zealand are different countries they would be classified in similar markets. The

one reason why New Zealand wasn’t the best candidate was because of the population of

the country. The population of New Zealand is only a little over four million people, so

even if Krispy Kreme was going to be a success in New Zealand it probably wouldn’t
create as much business and profits as Brazil has the potential to do. Brazil has a

population of over 190 million people.

Western Europe

Western Europe was another candidate for a market that Krispy Kreme could

enter into. Krispy Kreme has already expanded into the United Kingdom, but they

haven’t opened any stores in other European countries which could have a lot of

potential. The reason why Europe wasn’t the best candidate for the new market choice

was because of limitations dealing with the cultures in different countries. For example,

in France and Italy they have many pastry shops and local bakeries which people are

already loyal to and it might be too difficult to bring in a commercial company that would

end up being successful.

Market Entry Strategy

The best strategy to enter into the Brazilian market would be to do franchising.

Franchising is a marketing-oriented method of selling a business service, often to small

independent investors who have working capital but little or no prior business experience.

Krispy Kreme has franchised Korea, Japan, China, the Philippines, Indonesia, Kuwait,

Dubai, Mexico, Australia, Canada, the United Kingdom, and the United States where the

company originated. They have seemed to be successful with opening franchises in all

of these countries and plan to keep expanding in the future. Krispy Kreme has the same

franchising requirements for anyone who wants to buy into the Krispy Kreme franchise.

Krispy Kreme has three franchising requirements. These requirements are:

 1. Applicants must have current ownership and operating experience or previous

ownership and operating experience of multi-unit food service operations in

the market that you desire to develop.

2. Our franchisees must possess the capital sufficient to fund the development of

the market. We currently grant franchises on an area development basis.

Specifically, our area developers are required to build multiple stores (10 or

more) in a market. The minimum net worth requirement is $30 million or

$1,000,000 per store to be developed, whichever is greater. For instance, a 15-

store market requires a minimum net worth of $30,000,000.

3. Area developers must have substantial familiarity with the market proposed

for development and be willing to develop multiple units over a period of

time. In addition, they must be willing to diligently exert full-time best efforts

in performing their obligations under the area development agreement.

Along with these requirements the company will also have to follow the

franchising laws of the country. This could be problematic because there might be

difficult barriers involved with the franchising process that could be time-consuming.

After reading over the franchise disclosure laws for Brazil it seems that Krispy Kreme

shouldn’t have too many major issues with opening a franchise in Brazil. However, if it

becomes too difficult to open a franchise, it might be a good business decision to do a

joint venture with a well established business in Brazil such as a department store,

supermarket, etc.
 Even if the company doesn’t have any problems with franchising in Brazil, they

should definitely consider doing a joint venture with another established company. When

Krispy Kreme started in the United Kingdom, they did a joint venture with Harrod’s for

their first store. It was a great success and helped Krispy Kreme establish their brand in

the United Kingdom. Doing a joint venture could be a great way for Krispy Kreme to

establish their brand image a lot quicker than they might just opening a new business

themselves. Opening up a franchise or doing a joint venture could both be successful for

the company.

Marketing Mix

Product

Krispy Kreme has a key universal product which is doughnuts. All of the Krispy

Kreme stores have the original-glazed doughnut which is the same in every store because

they use the same original recipe that was created in 1937 to make each doughnut. Each

store can produce anywhere from 2,400 to over 6,000 dozen per day, which are sold both

on premises and off-premises. With other variety doughnuts, new ones could be

considered that would fit the demands of customers in Brazil. The country as a whole

has a sweet tooth so many of the variety doughnuts as well as the original glazed will be

perfect to fulfill those cravings.

Price

The biggest issue with price is that the exchange rate has to be taken in account to

accommodate the potential market and make profits for the company. The customers
have to be charged enough for the product so that the company will be able to make a

profit, but they also have to figure out how much the people will be willing to spend on a

doughnut and what they can afford to spend. It also might be worth considering whether

or not customers would be willing to buy doughnuts by dozen, individually, or

somewhere in between. Accommodations could be made it in order to meet the demands

of customers in Brazil.

Place

Although there are many major well populated cities in Brazil, the South-East

region of the country would be the best location for a Krispy Kreme store to be opened.

One of the reasons is because the South-East region has the largest population, totaling

69,174,339 people. It is also the region with the highest demographic density and

urbanization. Some of the major cities in the South-East region are: São Paulo, Rio de

Janeiro, Belo Horizonte, Santos, Vitoria, and Tubarao. Its economy is the most

developed and industrialized of the economies of the five regions, accounting for more

than half of Brazil's production. To start out with, it would be best just to open up shops

and see how successful they become. If they are successful, then it could be smart to sell

doughnuts in supermarkets and convenience stores like Krispy Kreme does in the United

Kingdom with Tesco.

Promotion

Portuguese is the official language spoken in Brazil so promoting things in

Portuguese would be the most sensible idea. You could also consider promoting in
different languages in areas where there is a specific language spoken by the majority of

people. Many businesses promote their products or services through public

advertisements such as billboards and advertisements in public transportation areas in

major cities. This would be the best way for Krispy Kreme to promote their new product

in Brazil. Also, in the South-East region most people are internet friendly so internet

advertisements would be sensible to reach their market. Many people in Brazil haven’t

heard of or had Krispy Kreme before so for new store openings it could be a strategy to

have taste-testing available to promote their product to new customers.

Barriers to Enter Into the Brazilian Market

When entering into any market there can be many barriers that would limit entry

into the new market. There are some limitations that could be problematic for entering

the Brazilian market but they shouldn’t be a huge issue to worry about. However, they

still need to be taken into consideration and examined in order to find ways the resolve

the limitations so they no longer continue to be an issue.

One problem that needs to be recognized is the taxation system in Brazil. Brazil

has a poorly structured revenue system characterized by heavy tax burdens, a narrow

taxable base, complicated levies and widespread tax evasion. Companies, both foreign

and domestic, employ tax professionals and devote considerable resources to managing

their tax affairs. The corporate and indirect taxation systems are particularly complex,

porous and unwieldy; the income tax system is considered to be relatively efficient, with

a top rate of 27.5%.

 Another problem that might be of concern is Brazil’s franchise laws. Brazil, like

any other country, has there own franchise laws that need to be taken into account

because Krispy Kreme is a franchise business. As talked about previously, Krispy Kreme

has their own franchise standards that they have in order to find franchisees that will be

successful with the company and carry on a positive brand image. These regulations

need to be taken into account along with the franchise laws that the Brazilian government

has created.

The location of where your stores are at could make or break your business. As

stated before the best location for a Krispy Kreme would be in a major city in the South-

East region. The only problem is that it may be hard to expand and open many other

stores in other cities because many aren’t as well developed as the South-East region.

How Krispy Kreme can adapt to Brazil’s culture

One of the biggest barriers that almost any business has to face is the cultural

differences among different countries and being able to adapt to these cultures to make a

successful business. However, the Brazilian culture doesn’t seem like it will be difficult

for Krispy Kreme to adapt to.

If you compare the psychic distance between the United Kingdom and Brazil they

almost couldn’t be anymore different. The United Kingdom mainly speaks English while

Brazil mainly speaks Portuguese. English people generally prefer more savory tasting

foods when it comes to their breakfast, but Brazilians have more of a sweet tooth,

consuming many fruits, sugar, and spices to make sweet treats. The psychic distance
between the two countries is so different but it seems to work out in the advantage of

Krispy Kreme.

If the Brazilians prefer more sweet treats then Krispy Kreme is going to be the

perfect place for them to fulfill their cravings for sweets. The best way for Krispy Kreme

to adapt to the Brazilian culture is to keep their original glazed doughnut, but also

incorporate many of the popular fruits in the areas into the variety doughnuts. If you

think about it, when the Brazilians are making themselves treats they will use the fruits

that they like and are available to them. If Krispy Kreme takes that into account and can

adapt to the culture, then people wouldn’t have to take the time to make their sweet treats

because there would be something offered to them already.

The uniqueness of Krispy Kreme as a whole will make it easy for the Brazilian

culture to adapt to. Having the Hot Doughnuts Now sign will help with getting

customers to come into the store and try this new product. Once they are in the store, the

doughnut theater will be a unique selling point that will keep customers coming back

because they are able to see the doughnut-making process every time they visit the store.

Also the doughnut’s one-of-a-kind taste will get customers to keep coming back for

more.

Conclusion

Krispy Kreme is a strong powerful brand which has been successful for many

years. They have succeeded in expanding internationally and will continue to succeed as

they go into new markets like Brazil. Brazil is an ideal candidate for Krispy Kreme to

consider as a new market for their company. They are becoming more of an international
country in terms of their economy and would be perfect for the Krispy Kreme franchise.

Although there may be some issues that will faced with when going into this new

overseas market, they don’t seem to be of enough concern to not concern Brazil as a new

market candidate. As long as the culture and laws of Brazil are recognized and adapted

to accordingly, there shouldn’t be any issues or problems with entering into this country.
 References

Central Intelligence Agency (2007). CIA World Factbook Brazil. Available from:
<https://www.cia.gov/library/publications/the-world-factbook/index.html> [Accessed 26
December 2007]

Economic Intelligence Unit. Economic Data of Brazil. [online] Available from:

<http://www.economist.com/countries/Brazil/profile.cfm?folder=Profile-Economic
%20Data> [Accessed 26 December 2007]

Food in Brazil. [online] Available from: <http://www.foodbycountry.com/Algeria-to-

France/Brazil.html> [Accessed 26 December 2007]

History Mania Demographics of Brazil. [online] Available from:

<http://www.historymania.com/american_history/Demographics_of_Brazil> [Accessed
20 December 2007]

Hollenson, S. (2007). Global Marketing. 4th ed. London: Pearson Education Limited.

Krispy Kreme Doughnuts Company website (2007) Available from:

<http://www.krispykreme.com> [Accessed 20 December 2007]

Paris, M. Political Division. [online] Available from:

<http://www.mre.gov.br/cdbrasil/itamaraty/web/ingles/divpol/sudeste/regiao/apresent/ind
ex.htm> [Accessed 20 December 2007]

Woolweaver, C. (2001). Compliance with Foreign Country Disclosure Requirements

Governing the Offer and Sales of Franchises. [online] Available from:
<http://www.franchiseconsulting.net/foreign.pdf> [Accessed 26 December 2007]
Reflective Statement
I feel that working in a group for our international marketing class was a different

experience than what I would have normally been used to. At home I go to a private

Lutheran college so there really isn’t a whole lot of diversity among the student body.

Before this class, I don’t think that I had ever been in a group with anyone who was from

another country and that was really intimidating to me. On the first day of class when we

were doing introductions it was really scary to find out that I was one of the only students

whose native language was English. It made me feel like an outcast at first because I

wasn’t used to being different from everyone else.

After coming to class it made me feel more comfortable about the diversity and

the group project was a great experience for me. I really liked that everyone in my group

seemed to be very culturally different than everyone else. I felt like I was able to learn a

lot more than I would have if I was working in a group project back home for the same

class. My group members were able to help me learn more about marketing in the United

Kingdom and broadened my perspectives on how marketing works in other cultures. I

feel like I had the same impact on my group members as they had on me. It was great to

be able to give them knowledge about our marketing culture in the United States because

that is a familiar subject to me.

I think that overall we had a good group project, and because of that it seemed

easier to write my report because I had a good basis for what I was going to be writing

about. The only thing that I would have done differently next time is probably allowed

more time for group meetings and preparation. I thought that our group project went

really well, but it would have been even better if we would have spent just a little more
time on it. It isn’t always easy to have as much time as you would like when you have to

get together and meet with other people.

Overall I feel that this was a great class and I had good people to work with on my

group project. From taking this international marketing class I feel like I have gained

invaluable knowledge that will be very helpful if I ever decide to work for an

international company. Also, I think that from living in the United Kingdom and taking

this marketing class with UK students it has increased my knowledge not only on how

the market in the UK works but internationally as well. I feel that this was the best way I

could have taken an international marketing class and that I have learned the most that I

could from having peers from different cultures and backgrounds.