2.0 Environmental analysis
Environmental analysis of Dunkin Donut as the study on internal and external environment of the company has carry out. Michael Porter’s Five Forces which include bargaining power of suppliers, bargaining power of customers, rivalry among competitors, threat of substitutes and threat of new entrants. The VRIO analysis is then done to assess the resources and capabilities of a company to determine their competitive potential; VRIO stands for Valuable, Rare, Inimitable, and Organized to Exploit. After that, SWOT analysis also done to make an understanding on the strengths and weakness of the company and to identify the opportunities and threats for the company.
2.1 Michael Porter’s Five Forces 2.1.1 Bargaining Power of Suppliers
Main suppliers in Dunkin’ Donuts are going to be food ingredients and more important is coffee. Bargaining power of supplier is low for Dunkin’ Donuts because there are not only one suppliers who supply breakfast items and coffee beans; and the supplier does not have much bargaining power as they typically will be in a contract. In 2012, Dunkin’ Donuts has sign long term supply chain agreement with National DCP (NDCP) which has bring benefits on providing long term agreement with company for the procurement and distribution of products; develop more streamlined system, consolidated cooperative board structure and greater consistency in supply and distribution service levels to all U.S restaurants (Leach, 2012). 2.1.2 Bargaining Power of Buyer
Dunkin’ Donut customers retain low bargaining power because there is low switching cost for customer to choose another supplier of coffee, donuts and other breakfast items. This is because DD has a higher reputation for higher grade of coffee at reasonable price and introduce a set menu by combine food with coffee at a reasonable price. The low price good quality pricing strategy that establish by DD has separates them from other competitors like Starbucks as Starbucks implement high quality and high price pricing strategy (PRABHAVA UPADRASHTA, 2012). The everyday American on their commute, who stops for a cup of coffee and a breakfast donuts, pays the menu price and continue on their way.
2.1.3 Threat of New Entrants
The threat of entrant in the competition with Dunkin’ Donut is low except Starbucks because its need a large amount of capital associate with the real estate. Although it can be still operate in small scale but it still need competition to incumbent firms with franchise. Therefore, there will still don’t have another Starbucks or DD in the market because the market in U.S is too hard (prezi.com, 2014). If new competitors would want to enter market, they will need to provide good quality coffee and also with reasonable price because the demand of market has changed since DD has provide variety product with cheaper coffee. 2.1.4 Threats of Substitutes
In this industry, there are higher level of threat of substitutes because there are many alternatives to this product include Starbucks Coffee, McDonald’s Coffee, tea and those is store-bought coffee or snacks. Therefore, DD has offer store-bought alternatives in order for customer to seen as a substitutes that poses a threat of profit even though the profit margin on these product are low. 2.1.5 Rivalry among Industry
There are few most prominent rivals of Dunkin’ Donuts such as Starbucks, McDonald. DD will not only option for consumer to get a cup of coffee because all of these competitors have use same kind of strategy like offers coffee, breakfast and even added various flavors of coffee such as latte, cappuccino, frapp’s which is competitive with these market. Continuously, DD also has combine the food with coffee with lower price to provide good quality of coffee and food like sandwich, tuna fish on a toasted balgel with cheaper price. Overall we could determine that the quick service coffee industry is an attractive industry to the incumbent firm because of the lower power of both suppliers and buyers and low threat of entrants.

2.2 VRIO Analysis 2.2.1 Brand Image “Coffee for the Average American”
Dunkin’ Donuts focuses on their product and prices that are preferred by and appeal to the working middle class American. By selling common coffee and breakfast items at lower priced and quick service (drive-thru) able to attract a large market share and improve efficiency and convenience to customer. As many other competitors are focusing on top-quality products which result on higher prices. Dunkin’ Donut niche in the market is rare because they are only the one provide quick service coffee that portrays their brand as quality coffee at low prices (Anon., 2014). While most of other coffee company are only able to portray either one or two of these quality. With 120 years of franchising experience, Dunkin Donut brand is one of the world most recognized and beloved coffee brand in America (dunkinfranchising.com, 2014). They have a 94% brand awareness level, which difficult for any other company to imitate. Dunkin’ Donut has state their brand vision consistently over the place making it extremely well-known which make them become market leader in sales of hot, decaffeinated and flavored coffee, iced coffee, bagels, donut and muffins with affordable price. 2.2.2 Franchises Business Model
Dunkin’ Donut have a very strong presence in the Eastern U.S with their products and price its offer and have many franchises located around, therefore, it is very valuable as its help company to gain market share. According to annual report 2013, the revenue has been increased from 2.29m (2012) to 2.49m (2013). Dunkin’ Donut strong presence in eastern of U.S is also rare because most of the coffee chain only have fewer location and not compare to the share size and abundance of Dunkin’ Donuts in the eastern U.S (Anon., 2014). However, franchises business model is susceptible to imitation by other companies as there are many other quick service restaurant like Starbucks, McDonald who have become experts in franchising their own business model. Dunkin’ Donuts could be said organized to exploit with 7,015 franchise restaurant in the United State and over 18,000 location nearly 60 countries is one of the world’s most recognized and desired franchises (dunkinfranchising.com, 2014). This success has proved that DD franchised business model include their extensive branding and marketing efforts have leads DD to further expand their franchises business model more efficient in the future.
2.3 SWOT Analysis 2.3.1 Strengths Dunkin’ Donuts has 120 year franchise experience serving in the industry and a worldwide chains of totaling 18,000 location across 60 countries. It has a reputation for high quality of product like coffee for more than five decades which uses 100% Arabica coffee beans; and approximately 2,000 beans go into making just one pound of Dunkin’ Coffee and has use its own coffee specifications, which recognized by the industry as a superior grade of coffee (dunkindonuts.com, 2014). DD able to sells more than 30 cups of freshly brewed coffee each second and serving nearly 1 billion coffee by the cup each year or approximately 2.7 million cups a day (dunkindonuts.com, 2014). DD also has offers discount cards and special deals coupon to customer. DD can be said that are selling high quality product at the lower price in the market compare to other competitor like Starbucks. 2.3.2 Weakness According to annual report 2013 has shown that the Dunkin’ Donuts had heavy indebtedness of approximately $1.8billion which lead to relative liquidity limit the company’s financial flexibility. However, Dunkin’ Brand has a strong cash flow with phenomenal growth prospect which allow the management anticipates the lowering of its debt for greater profitability. Dunkin’ also has a limited geographical presence primarily in the Eastern half of the United States. Recent incidents have surfaced, however, with undisclosed allergens in its coffee which could cost the company lost revenues. The lacked of the marketing effort and appearance of packaging is not appealing is the weakness of the DD which DD does not have spent much on advertising and the appearance is not attractive compare to other competitors. Since the DD has a lot of franchise around the world there will be constants rift with the franchises owner. DD has sued other franchises owner 154times between 2006 and 2008; and involved in over 149 more lawsuits than other companies. (PRABHAVA UPADRASHTA, 2012).
2.3.3 Opportunities U.S represent a significant opportunity growth which there have highest population than other countries. Since, it has the least brand penetration with only 129 stores compare to 3,768 in the ‘core market’. Next, International expansion also represent strong opportunities which the Dunkin’ Brand plans to continue growth in its existing core market such as Japan, South Korea, Middle East, while simultaneously developing new markets. In 2011, DD brand has emerging to Indian market with an agreement of ‘an experience QSR franchisee’ to develop at least 500 DD stores throughout Indian (PRABHAVA UPADRASHTA, 2012). Moreover, DD announced its partnership with NBA superstar LeBron James in March 2012, who begin promote the DD brands in Asia through advertisements, online media, and in-store marketing (PRABHAVA UPADRASHTA, 2012). Furthermore, if the consumption of coffee is continuously increase in Asia as in these countries the disposable incomes of the people are increasing and they would want to spend more on hot and baked items (freeswotanalysis.com, 2014). 2.3.4 Threats The company has identify main competitors as Starbucks, McDonald and Krispy Kreme that provide same kind of product service that giving chance for customer choose other product and cause large reduction in market share of DD. The franchising model develop by DD recommend that the financial result, brand value and perception is fully depend on the operating result of restaurant by franchises (PRABHAVA UPADRASHTA, 2012). Therefore, if franchises do not operate restaurant successfully based on the required standard, the franchises fee paid and royalty income will be unfavorably affected and company reputation and brand image will also be harmed. This strategy recommend are not efficiency as the operation is individually but the brand image will affected if operation not success, therefore, there should be a head office to maintain all franchises to fulfill the require standard. Moreover, the growing trend of a healthier lifestyle being adopted by the people is a threat as they try to avoid high calories food like coffee, donuts and other baked goods which will affect the revenues of DD.
References
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Appendix 1: VRIO Analysis of Dunkin’ Donut Resources or Capability | Valuable | Rare | Inimitable | Organized to Exploit | Brand Image “Coffee for the Average American” | Yes | Yes | Yes | Yes | Franchises Business Model | Yes | Yes | No | Yes |
Table 1: VRIO Analysis of Dunkin’ Donuts

Appendix 2: Internal and External Environment of Dunkin’ Donuts Internal Analysis | External Analysis | Strength: 1. One of the most experience franchise industry. 2. Superior innovative and consumer attraction. 3. Higher reputation for product quality and Grab & Go concept that brings fast and convenience service. 4. Competitive Pricing 5. Worldwide Chain of franchise totalling to 18,000 locations across 60 countries. | Opportunities: 1. Westward expansion of Dunkin’ Donuts brand in the U.S. 2. Emerging market and expansion aboard. 3. Increase in disposable income of people in developing countries. 4. Increase its reach through effective marketing. 5. Increase its presence in newer countries and regions of the world. | Weaknesses: 1. Limited financial flexibility and market share growth. 2. Limited geographical presence 3. Constant rift with the franchisee owners. 4. Appearance of Packaging is not appealing. 5. Lack of Marketing Effort. | Threats: 1. Increasing health consciousness may shift consumer preferences away from coffee, doughnuts, ice cream 2. Quality control, recent litigation with franchises. 3. Competition with McDonald, Starbucks and even from local cafes and bakeries which offer similar kind of food products. 4. Difficult to change the snacking habits of people in certain countries like India and China. 5. Competitors have aggressive differentiation Strategies. | Table 2: Internal and External Environment of Dunkin’ Donuts Appendix 3: Appearance of Packaging Dunkin’ Donuts | Krispy Kreme | | | Big Apple Donuts Coffee | J.C.O Donuts & Coffee | | |