#2 Dunford Bakers Case Study PDF

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 AShortHistory  Inthelate1  920’sH  azelL  oveD  unfordw  asw  idowedw  henh  er husbands uddenlyd  iedfromh  eartfailure,leavingh  erw  iththree boystor aise.T  hen,w  iththeo  nseto  ftheg  reatd  epression,L  DS HighS  choolw  ass hutd  own,w  heres heh  adb  eenteachingh  ome economics.H  azelfoundh  erselfw  idoweda  ndu  nemployed.  Whatw  asa  m  othertod  o?In1  931,w  iththee  ncouragemento  fh  er father,s heinstalledtwoc oalfires tovesinh  erh  omea  ndb  egan bakinga  nds ellingb  read,u  tilizingh  erb  oysa  ndtheirb  icyclesa  sa  deliverys ervice.D  uetoh  ere  xperienceidentifyingr ecipesthat werethem  ostp  opulara  mongh  ers tudents,s hew  asa  bletoz ero ino  na  s uccessfulfavoriter ighta  way:h  er1  00%w  holew  heat bread.H  erc ustomerb  aseg  rewr apidlya  ss heu  niquelym  eta  n effectived  emandforc onvenient,h  omestylew  holew  heatb  read.  Ash  erc lientb  aseg  rew,s heh  ireda  fulltimed  eliverytrucka  ndd  river,a  ndlaterb  orroweds pace froma  notherc ommercialb  akeryintown( theN  aborhoodB  akery).  Asw  ords pread,theD  unfords sawa  nincreasinglylarge portiono  fthee  ffectived  emand forh  omestyleb  reada  ndw  ere abletoo  pena  ndm  aintain severals uccessfullocations.  Eventuallythes tanda  lone storesw  erec onsolidatedintoa  50,000s quarefootp  lantinW  est Jordan( seeb  elow),a  ndthe wholesaleb  usinessw  as

expandedtoincluden  umerousw  holesalec onstituentss ucha  sg  rocerys tores,c onvenience stores,a  ndg  ass tations.

 Inr ecenty ears,D  onutsh  aveb  ecometheirm  ostp  opularp  roduct,thek ingo  fw  hichb  eingthe ChocolateIcedC  hocolateC  akeD  onut.



OpportunitySpace  AnO  pportunityS  paceisa  nindustry,m  arkets egment,o  ra  reaw  herea  ne  ntrepreneurc an createn  ewv alueb  yfillingina  v oidc ausedb  ya  m  arketimperfection.T  heInnovationP  rocessis howthee  ntrepreneurc reatesa  n  ews olutiontothem  arketimperfection.  TodayD  unfordB  akersd  irectlyc ompetesw  ithinternationals pecialtyd  onutm  akerss ucha  s Dunkin’D  onutsa  ndK  rispyK  remew  hoa  lsow  holesaletog  rocerys tores,c onveniences tores, andg  ass tations.T  heya  lsoc ompetew  ithg  rocerys toresthatm  aketheiro  wnd  onutsinhouse, normallya  ta  lowerp  rice.L  ocally,theyc ompetew  ithN  aborhoodB  akerya  ndP  apaP  ita.  MajorC  ompetitors:

  BecauseD  unfordB  akersm  akesh  igherq  ualityd  onutsa  ta  b  etterp  ricethanm  osto  fits competitors,itc ompetesinn  ationalm  arketsr atherthanc ompetings olelyinU  tah.  PapaP  itaB  akeryisa  notherb  igc ompetitor.F  orinstance,w  hileP  apaP  itaa  lsoh  asitso  nly locationintheS  altL  akev alley( ina  m  uchs mallerfacilityjust1  9m  ilestothen  orth),theys upply Costcoa  nds ellb  akedg  oodsthroughindependentr etailersa  sfara  sN  ewY  ork.L  ackingthe impressivec ustomerr eviewsthatD  unfordd  emonstrates,P  apaP  ita’sm  arkets pacec ould becomea  ne  asyfuturetargetforD  unfordB  akerstofill. 

FiveTypesofValue  Ano  rganization’sp  erformanceislargelya  ttributedtoitse  ffectivenessinm  anagingr esources. TheF  iveT  ypeso  fV  alueframeworkp  rovidesa  u  sefulindicationo  fo  rganizationalp  erformance andw  illb  ee  xtensivelyu  sedthroughoutthec ourse: 

ValueinUse  Thee  ffectivenesso  fa  p  roduct,s ervice,o  re  xperienceinfulfillingc ustomern  eeds.T  hisis measuredb  ythec ustomers'o  veralls atisfaction.  DunfordB  akerss etthemselvesa  partb  ytheiru  nique,u  nusuallyg  reattastingd  onuts( especially theirflagshipp  roduct:thec hocolateicedc hocolatec aked  onut).C  onsumersc onsistentlyr ate DunfordB  akersa  sh  igh,o  rh  igherthanc ompetitors. 

Typeo  fC  onsumerR  eview Urbanspoon

DunfordB  akers KrispyK  reme

Dunkin Donuts

Banbury CrossD  onuts

96%

82%

53%

93%

Yelp

4.5

4.0

2.0

4.0

GoogleR  eviews

4.6

4.0

2.5

4.3

Facebook

4.8

4.7*

4.4

4.8

*ThisratingcamefromKrispyKreme’sUKFBsite.TheirgeneralFBsitehadnoratings.

 Hereisw  hata  fewc onsumersh  avetos aya  bouttheire  xperiencee  atingD  unford’sflagship product( donuts,e  speciallyc hocolatec aked  onuts):

 Additionally,theird  onutsa  reb  aked,n  otfried,s uggestingthattheya  rem  oreh  ealthythan traditionald  onuts.Indeed,e  atinga  D  unfordd  onutisa  totallyd  ifferents ensation,w  hichh  as createda  u  niquev aluethatm  ostd  onutslack.

 Clearly,D  unfordd  onutsh  avea  s uperiortastea  ndq  uality.

 DunfordB  akersh  ase  xcelleda  tV  alueinU  se,a  ndthey’llb  ev eryw  iseto“ stickw  ithw  hatthey’re besta  t.”F  ocusingo  nc orec ompetenciesthatd  eliverm  aximumv alueisa  nu  nderlyingp  rinciple ofg  reate  ntrepreneurship. 

ValueinExchange  Thee  fficiencyo  fa  p  roduct,s ervice,o  re  xperienceinfulfillingc ustomers’n  eeds.T  hise  quatesto theb  enefitsr eceivedfromthep  urchase( andtheo  veralls atisfaction)m  inusthec ostso  fm  oney, time,a  nde  nergys pent.  Asw  ed  iscussed,D  unfordd  onutsh  avea  ne  xtremelyh  ighv alueinu  sec omparedtoo  ther donuts.T  herefore,y oum  ighte  xpectthatr etailp  ricesw  ouldb  es ignificantlyh  igherfortheir donuts.H  owever,w  efindjusttheo  pposite.T  hetableb  elows howsa  r etailp  ricec omparison witho  thers pecialtyd  onuts hopsinthea  rea.  DonutS  hop

12C  hocolateC  akeD  onuts

DunfordB  akers

$7.99

KrispyK  reme

$8.99

Dunkin’D  onuts

$9.07

BanburyC  rossD  onuts

$9.60

 Becausec ustomersp  aym  uchlessthantheV  alueinU  seo  ftheirc ustomere  xperience,the ValueinE  xchangeisv eryh  igh.T  hisp  rovidesa  p  owerfuls ourceo  fc ompetitivea  dvantage*o  ver competitors.  CompetitiveA  dvantage:W  hena  c ompanyisa  bletoc reatem  oree  conomicv aluethanr ivals. 

ValueinDistribution  Measuredb  ythea  vailability,a  ccessibility,a  ndc onvenienceo  fa  p  roduct,s ervice,o  re  xperience. ValueinD  istributionp  avesther oadforg  rowtha  sita  llowsm  orec ustomerstou  sethep  roduct moree  asily.  Whod  oesn’te  atd  onuts?N  earlythee  ntirec ountryfallsw  ithinthes copeo  fD  unfordB  akers targetm  arket.B  utw  hatisthatm  arket,g  eographically?  Afterm  orethan7  0y earso  fs uccessfulo  peration,thec ompanyh  asc onsolidatedtojusto  ne

storefront( attachedtoits5  0,000s quarefootp  lants pace),tofocuso  np  roductionforw  holesale, throughindependentd  istributors.T  heb  randisw  ellk nowninU  tah,m  oste  speciallyintheS  alt Lakev alleya  ndS  tG  eorge,a  ndiss oldinm  assq  uantitiestog  ass tationss ucha  s7  Eleven, HolidayO  il,T  exaco,M  averick,a  ndtog  rocerys toress ucha  sS  am’sC  lub,S  miths,a  ndW  alMart, ton  amea  few.D  unfords eemstod  ominatethelocalm  arket,b  utitsa  mbitiono  utsideo  fU  tahis questionable.  SampleD  unfordB  akersR  etailers:                Whileitsd  igitalp  resenced  oesinvolven  umerousa  ndo  verwhelminglyp  ositivec onsumer reviewsthroughv ariousp  latforms,theo  fficialw  ebsiteislacking.Itd  oesn  otp  rovidelinkstoa  ny pressr eleases( apparentlytherea  ren  ota  ny),r etaillocations,a  nda  lsolacksa  no  nlineo  rdering system.  Further,a  lthoughtheb  ricka  nd mortars torefrontp  rovideso  nly as mallp  ercentageo  fD  unford’s totalincome,thereisn  otc urrently anyp  laceforv isitorstos ita  nd mingle,c uttingo  ffp  ossibilitiesa  sa  socialg  atheringd  estination.  Asm  ucha  sp  eoplee  njoythe donuts,w  hyy outhinkD  unford Donutsa  voidsa  s itd  ownlocation toe  attheird  onutso  ns ite? 

ValueinFinance



Thefinancialp  erformanceo  ftheo  rganization.T  hisism  easuredb  ye  xaminingthen  umbers,for example:r evenue,c osts tructure,g  rowth,c ashb  alance,s tockp  rice,a  ssete  fficiency.V  aluein Financed  emonstratesp  astg  rowth.  Witho  ver8  0y earsino  peration,a  ndb  ign  amer etailerss ucha  s7  Eleven,T  exaco,a  ndW  almart, itiso  bviousthatD  unfordB  akersisp  erformingw  ellfinancially.T  he5  0,000s quarefootp  lantis churningo  utthefamousd  onutsfasterthanfounderH  azelD  unfordc ouldh  aveimagined possible.T  hish  asb  ecomep  ossiblen  otjustb  ecausetheyh  avethes ecretr ecipe( whichindeed laysthefoundationfortheirs uccess),b  uta  lsob  ecauseo  flargec ommerciale  quipmentinfull operation,r elativelyinexpensivelabor,m  aturer elationshipsw  iths uppliers,a  ndthea  bilityto providep  roductsa  ta  h  uges calea  ndthusa  ta  lowp  rice.B  ecauseo  ftheser efinedp  rocesses ande  stablishedr elationshipsw  ithb  ign  amer etailers,thec ompany’sg  rossm  arginsh  aveb  een solidthroughoutthed  ecades. 

 Takea  g  oodlooka  tthisformulaforg  rossm  argin,b  ecausey ou’lln  eeditlater. 

ValueinFitness  Measureso  rganization’sa  bilitytog  row,a  dapt,e  volvea  ndc ontinuetog  enerater esourcesfrom itse  nvironment.V  alueinF  itnessp  romisesfutureg  rowth.  Forg  enerations,D  unfordB  akersh  asg  raduallyo  btaineda  ndm  aintaineda  nincreasingly impressivep  ercentageo  fther egionalm  arketplace.H  owever,thisisa  c riticalm  omentintheir history.  Fore  xample,fory ears,D  unfordB  akersh  ass oldtoC  ostco.H  owever,P  apaP  itaB  akeryr ecently pulledther ugo  utfromu  ndertheirfeetb  yc losinga  h  ugec ontractw  ithC  ostcotop  rovideP  apa Pitad  onutsa  llo  verthew  esterns tates( includingC  alifornia).D  unfordB  akersh  asa  h  ighly diversifiedlisto  fv endors.T  herefore,losingC  ostco’sU  tahc ontracttoP  apaP  itaw  illm  ostlikely notp  rovea  fatalb  lowtoD  unfordB  akers( thoughC  ostcod  oess ella  tono  fd  onuts),b  utitd  oes indicatea  p  resentd  anger.  PapaP  itaisa  m  uchs mallerfacilityinthes amem  etroa  reaa  ndd  oesn’th  avether aving consumerr eviews( ValueinU  se)thatD  unfordB  akersh  ave.Itisa  lsom  uchn  ewera  ndits consumerb  randa  warenessisn  ota  ss trong.T  heya  lsoh  avea  tarnishedr eputationfor employeer elations.H  owc oulds ucha  feeblec ompanyw  ina  c ontracto  verD  unfordB  akers? 

IsD  unfordB  akersc apableo  fc ontinuingtheirw  innings treak?D  otheys tillh  avethea  bilityto grow,a  dapt,e  volve,a  ndc ontinuetog  enerater esourcesfromtheire  nvironment?W  illa  companythatb  eganliterally“ froms cratch”inthek itcheno  fo  neb  ravew  omann  oww  ither,a  fter morethan8  0y earso  fc onstantimprovementa  ndd  ominanceinthem  arketplace?  Whatd  oy outhink?W  hatisthefateo  fD  unfordB  akers? 

Governance  Organizationsc reatev aluethroughs trategicallye  stablishinga  c ohesives eto  fg  overnance mechanisms,c onsistingo  fr ulesb  yw  hichtheo  rganizationo  perates,s tructures,a  ndd  irectsits resources.  DunfordB  akersfollowsw  hatisc alledg  oodm  anufacturingp  olicies( GMPs)inthem  anufacturing world.D  ennis,theO  perationsM  anager,c onstantlytrainsh  ise  mployeesinr egularteamm  eetings andh  oldsthema  ccountableforthefollowingtypeso  fc riteria( amongo  thers):  ●

Hygiene:F  acilitym  ustm  aintaina  c leana  ndh  ygienicm  anufacturinga  rea.

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Controllede  nvironmentalc onditionsino  rdertop  reventc rossc ontaminationo  ffood productfromo  therfoodo  re  xtraneousp  articulatem  atterw  hichm  ayr enderthefood productu  nsafeforh  umanc onsumption.

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Manufacturingp  rocessesa  rec learlyd  efineda  ndc ontrolled.A  llc riticalp  rocessesa  re validatedtoe  nsurec onsistencya  ndc ompliancew  iths pecifications.

 With( veryp  roprietary)s pecificss urroundinge  acho  fthesep  oints,D  unfordB  akersm  aintains compliancew  iththeF  ooda  ndD  rugA  dministration’s( FDA)m  anyr equirements.T  heses tandards andp  oliciesa  reimportantb  ecauseiftheF  DAe  xecutesa  no  nsitev isita  ndfindsito  uto  f compliance,itc animmediatelyfreezea  llo  perations. 

Resources  Them  eanso  fp  roductionthata  reg  overnedtog  eneratep  erformancea  ndv aluec reation.  Dufordb  akersg  eneratesv aluefromitsr esourcesintwoimportantw  ays.F  irst,theyp  urchaseb  ulk supplies.T  hisa  llowsthemtoleveragee  conomieso  fs caleb  yo  btainings uppliesa  tlowerc osts. Smallerb  akeriesw  ouldh  avea  d  ifficulttimeo  btainingthes ameb  ulkd  iscounto  ns upplies. Becausetheya  lreadyo  wntheintellectualp  roperty( theirs ecretr ecipes),thereisv irtuallyz ero costp  erb  atcho  fd  onutstom  aketheme  xtraordinarilytasty.T  herefore,thisb  ulkp  urchasingtactic multipliestheV  alueinU  sew  ithe  xtremee  fficiency. 

Second,theyfocuso  no  nep  lantw  herea  llm  anufacturingiss ynergized.W  itho  nlyo  nelocation, there’sn  on  eedtos hipo  rh  aultheg  oodsinb  etweenlocationsforv ariousp  haseso  f manufacturing.Instead,e  veryp  rocessisc entralizeda  ndw  hentheg  oodsleavethefactorythey arer eadyforc onsumption. 

ApplyingtheGRVFramework  Now,w  iths omeb  ackgroundo  fthec ompany’sF  iveT  ypeso  fV  alue,a  nde  xampleso  ftheir Governancea  ndR  esources,w  ec ana  pplytheG  RVframeworkm  athematically*.  *Althoughthecalculationsaresound,thedataforthisexerciseisfictionalizedinordertomaintainconfidentiality. 

Thefollowinga  pplicatione  xercisew  illb  ringtolifetheformulab  elow.Ino  rdertoa  pplyit,w  e’ll needtoa  ssignv aluestoe  acho  fthev ariablesintheformula.

 Recallthata  to  nep  ointthec ompanyw  aso  peratings everallocations.A  to  nep  ointtheyh  ad5  locationso  peratings imultaneously.L  et’sa  nalyzeh  owtheV  alueinF  inancec hangedw  hentheir5  locationsw  erec onsolidatedintoo  nelocation,inr elationtob  othg  overnancea  ndr esources.W  e cans tartb  yr eviewingthed  atab  elow.  Representatived  ataforthefiscaly earo  fo  perationb  eforethec onsolidationo  fs tores,c ompared withthed  ataforthefiscaly earo  fo  perationtwoy earsa  fterthec onsolidation( afterthelarge, modernp  lantb  ecamefullyo  perational).

*Notethedifferencebetweenthelasttwocolumnsonthefarright.Botharemeasuresofthegrossmargin(A.K.A.gross profitmargin,orgrossprofits),justindifferentforms.Oneisadollarvalue(perdonut)whiletheotherisap  ercentageof

thetotalrevenue. 

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