June 2, 2010

Business Strategy

For our company, Dunkin’ Donuts, the generic business strategy that is used is Low Cost. This strategy involves the firm gaining more market share by appealing to cost-conscious or price-sensitive customers. Low Cost companies have the lowest prices in the target market segment. To be able to offer the lowest price while still achieving profitability and a high return on investment, the firm must be able to operate at a lower cost than its competitors. Dunkin’ Donuts’ main competitor is Starbucks. There are three ways Dunkin’ Donuts separates itself from Starbucks:
1. Dunkin’ Donuts produces more than Starbucks, resulting in high asset turnover. Dunkin Donuts uses the fixed price but produces more which allows Dunkin Donuts to sell at a lower cost because fixed costs are spread over a larger number of units.
2. Dunkin’ Donuts also offers high volumes of standardized products. It limits customization and personalization of service. Mostly every Dunkin Donuts has the same service, it assures its customers it will remain the same no matter which location they go to. All Dunkin Donuts are also located in low rent areas.
3. Dunkin’ Donuts has control over the supply chain to guarantee low costs. This could be achieved by bulk buying to enjoy quantity discounts, squeezing suppliers on price, instituting competitive bidding for contracts, working with vendors to keep inventories low, and these are all ways Dunkin Donuts keeps its prices as low as possible and is the leading franchise over Starbucks and Krispy Kreme.

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