Case: Dora’s Doughnuts

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Case: Dora’s Doughnuts
(Note: This case is fictional. Your answer should be based on the facts presented in this case)
Dora’s Doughnuts (DD) is an owner-operated quick-service restaurant located in Commuterville, N.J., that sells breakfast and lunch items as well as hot and cold beverages. It is located at the Commuterville train station and open from 6AM to 3PM. Customers order and pay at a central counter and either take their items “to-go” or eat them at one of the tables in the restaurant. Mornings are the busiest times as train commuters stop by on their way to work to get a quick bite for breakfast. Most morning commuters frequent DD every day. Most commuters arrive at the train station by car and live west of Commuterville. Lunchtime is much less busy. Lunch customers are mostly local moms and their children, and people, who work in businesses surrounding the train station, who walk to DD. DD is owned by Dora Dinkins. Dora and her employees, who have been with DD for many years, are very popular with customers and know most of their regular customers by name. DD’s menu is limited. It includes 15 types of doughnuts, 3 breakfast sandwiches, 3 lunch sandwiches, coffee, tea, water, and soft drinks. DD also offers 2 rotating daily special sandwiches for breakfast and lunch. Customers especially love DD’s doughnuts, which are their most popular items. DD’ doughnuts are made using Dora’s grandmother’s secret recipes. Food and labor cost account for about one-third of sales and rent for the restaurant accounts for almost half of sales.
Quick service restaurants offer items that are fast to prepare, and easy to consume. The quick service restaurant industry is dominated by large chains such as McDonalds, and Dunkin Donuts that offer vastly different types of food. Many customers, who frequent quick service restaurants, have a favorite restaurant or chain that they visit at least once per week. Customers look for good value for their money, convenient locations, favorite types of food and good service. Recent consumer trends include preferences for healthier menu items, locally sourced and natural ingredients, and a focus on catering to children. It is predicted that overall industry growth will be flat. Morning snacks, afternoon snacks and evening snacks are the fasted growing segments. Snacks are small items that are consumed between meals. Inputs are commodity items such as eggs, flour, vegetables, and meat. Large chains usually make long-term contracts with suppliers and are able to negotiate lower prices for their inputs. Food and labor costs are generally the largest cost categories for quick-service restaurants, and occupancy costs (e.g., rent) also account for a significant portion of costs.
Recently, Tim Horton’s (TH), the largest quick service chain in Canada and fourth-largest quick service chain in North America announced that it will open a location on the main transit road west of Commuterville that is used by most train commuters. Rents for businesses in this location are significantly lower than rents near the Commuterville train station. TH restaurants, which are open 24 hours, offer an expansive menu that includes doughnuts and various other baked goods, breakfast items such as breakfast sandwiches on biscuits, bagels and English muffins, and oatmeal, as well as lunch items such as cold and hot lunch sandwiches, including wraps and paninis, as well as salads, soups, and chili. TH offers a wide selection of beverages. TH is well known in Canada for the quality of its coffee that is made only from 100% Arabica beans and is always freshly brewed. TH also offers various specialty coffees beverages such as lattes, espressos and cappuccinos. TH recently started to offer a children menu that includes meal options with no artificial colors or flavors, a full serving of fruit and no added sugar.
Please, answer the following questions in the order provided.
a) Analyze buyer power and rivalry in the quick service restaurant industry. Make sure that you reach a conclusion about each of these forces and an overall conclusion based on your analysis. (12 points total: 4 points for each force; 2 points for overall conclusion)
b) Does Dora’s Doughnuts have a competitive advantage? In answering this question you should identify at least 3 of Dora’s Doughnut’s resources and capabilities and assess whether they meet the four criteria that determine whether resources and capabilities are core competencies. (12 points)
c) Is Tim Horton’s entry a threat to Dora’s Doughnuts? In answering this question you should consider your analyses in parts a) and b) above. Consider whether being part of a large Canadian chain makes Tim Horton’s a bigger threat. (10 points)
d) Alternatives and Recommendation: Dora’s Doughnuts is considering the following 3 strategic options in anticipation of Tim Horton’s entry.
Expand menu to include soups, salads and kids menu.
Stay open until 9PM.
Change nothing.
Identify the pros and cons for each option. Which strategy would you recommend? Why? (16 points total: 4 points for discussion of each option, 4 points for recommendation and reasoning)

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