Internal Management ReportPrepare an executive level report related to the target acquisition company?s financial and operational strengths and weaknesses that addresses the acquiring company?s internal management team. Key words: synergistic, opportunistic, and financial.Report on what your research into the target company?s current financial and operating status is (this should include a financial statement review and examination of the footnotes in the annual report) and report it your executive team and any key internal personnel. There should also be some consideration into how what is discovered makes the target a good (or bad) acquisition at this time.

External Stakeholders Report

• Prepareanexecutivelevelreportrelatedtothetargetacquisitioncompany?sfinancialandoperationalstrengthsandweaknessesthataddressestheacquiringcompany?sexternalstakeholders.Keywords:synergistic,opportunistic,andfinancial.Thisshouldreflectmuchoftheinformationgatheredinfortheinternalmanagementreport,butitneedstobetailoredtofittheparentcompany?sexternalstakeholders.
• Use the attached attaching Outline

Company is Starbucks aquiring Dunkin' Brands

WEEK 3 TERM PAPER OUTLINE TABLE OF CONTENTS INTRODUCTION ..................................................................................... Purpose.............................................................................................. Proposal ............................................................................................. Scope.................................................................................................. INTERNAL REPORT - STAKEHOLDERS............................................................ Corporate Overview .......................................................... SWOT Analysis . . . ......................................................... Organization and Corporate Issues ........................................ Capital Structure .............................................................. Financial Statement Review.................................................. CONCLUSION............................................................................................... RECOMMENDATIONS ............................................................................... REFERENCES........................................................................ TABLE OF CONTENTS INTRODUCTION............................................................................................... Purpose............... .................................................................................... Proposal............................................................................... Scope......................................................................................................... EXTERNAL REPORT - STAKEHOLDERS ......................................................... Threat of New Entrants ....................................................... Bargaining Power of Buyers................................................... Bargaining Power of Suppliers .......................................... The Threat of Substitutes ......................................................... Rivalry among Existing Competitors ............................................ OTHER AREAS OF CONCERN ............................................................ For Our Customers ................................................................. For Suppliers ........................................................................ For Lenders and Creditors......................................................... Government.......................................................................... For Investors & Shareholders...................................................... For Current and Future Employees............................................... Community........................................................................... CONCLUSION................................................................................................... RECOMMENDATIONS.................................................................................... REFERENCES............................................................................... Internal Report Surname 1 Dunkin Brand Internal Report Student's Name Course Professor's Name Date Internal Report Surname 2 Introduction Purpose The purpose of this report is to evaluate several internal factors that would be important to interested stakeholders such as management and shareholders. The report will most importantly assess the finacial health of the organisation enabling the management make an informed decision on whether its feasable and wise to acquier Dunkin brands. Proposal The goal of this research is to find out the financial health of Dunkin brands and if it would be a good return on investment to the shareholders. Data used in the presentation of this report was collected through methods such as observations, secondary sources, interviews and administering of questionnaires. The target population was mainly Dunkins brands and the data analysis method included use of regration analysis. Data presentation methods included; use bar graphs, pie charts and line graphs. Scope This report will identify the purpose of the study then briefly touch on the information about the organisation. SWOT analysis will be evaluated then corporate issues and capital structure assessed. Finacial review of starbucks will follow before a look at the conclusion and recommendations. Internal report-stakeholders Corporate overview Internal Report Surname 3 Having its headquaters in Canton, Massachusetts, Dunkin brands is an American fast food company that runs two chains of fast foods; Dunkins Donuts and Baskin-Robbins.the company was established 1950 and its current CEO is Nigel Travis. As of 2011, it boasted of revenues of over $628.2 million and a net income of $34.44 million. Its other subsidiaries include Mister Donats, Baskins robbinns australia and Dunkins Donuts Swot analysis Strengths It has a strong brand image as a result of its reputation of producing high quality products. Its customer service is also considered as one of the best in the industry. Its product Dunkin donuts is considered a superior grade of coffe in the industry as it uses 100% arabica coffe beans. High customer awarenes of its two brands i.e Dunkins Donats and Baskins Robbins which have a 94% and 92% barand recogniton respectively. According to Brand keys, its Dunkins Donut was considered as the number one brand in terms of customer satisfaction (Amos & Emerson, 2012). It has several distribution facilities including establishment of 243 new distribution sites in 2012 (York, 2008). Dunkin has a superior franchised business model that shield it from comodity flactuations which enables management to only focus on store development and advertising. Weakeness The company has a debt to capital ratio of around 67% that limits its financial flexibilty. However Its debt levels are projected to reduce as the company has a strong free cash flow and good growth prospects (Liebowitz, 2013). It has a limited geographical presence as its Internal Report Surname 4 recognition and loyalty is centralized in the North east of America. Starbuck and McDonalds holds stronger brand recognition both internally and in the external markets. Opportunities The company has potential growth and expansion opportunities domestically and internationally. The western part of United states has great potential where the band has limited presence.the area is considered to have highest population with the least brand penetration. Internationaly, the company experienced over 3500 net new opennings and is planning on continued growth in core markets such as Japan, South korea and Middle east. In 2011 they reached agreement with India to bring the Dunkin Donuts franchise in the market. Its partnership with Nba superstar, Lebron James in 2012 has significant impact on its growth especially in Asian countries such as China and Phillipenes that have a huge following of the sport (Brizek, 2014). Threats The company faces intense rivalty from brands such as Cold stone creamery, McDonalds and starbuks. Food and beverage industry is at a mature stage of growth hence several competitors including Dunkind brands, Mcdonalds and Pete's coffee. Market volatility is also a great concern; the global economy is becoming more intergrated hence any economic crisis would affect its operations (Leigh & Pershing,. 2006). Changing consumer tastes and preferances is another factor especially in the US where some consumers are shifting towards substitutes such as Tea. Its debt burden is also a concern as it may affect its finacial position. Organisation and corporate issues Internal Report Surname 5 Dunkin operates in a highly competitive segment of food & retail industry hence brand recognition, product quality, customer service and competitive pricing are key to maintaining market share. While the company has the highest operating margins, high interest expenses have affected the net nargins. The 2006 leveraged buyout led to the company holding approximately 1.46 billion in long term obligations but only $277 million in cash. The company intends to engage in increased marketing and brand differentiation so as to be able to challenge the more established firms (Transformation, 2012). Capital structure Dunkin filed with securities and exchange commission to raise 4400 million in initial public offerings in 2011. It saw its stock appreaciate by nearly 21.3% relative to the S7P500 and 48.25% growth in starbucks, its most direct competitor. Its 41.46 billion long term debt comprises of about 45.2% of its total assets. Total shareholders equity totals to about $745 million and boasts of debt-equity ratio exceeding 3.32. its interest expenses are expected to decrease in the future as a result of firms decision to use funds from IPO to fully repay high interest senior notes (Liebowitz, 2013). Financial statement review The company has flactuating operating expenses and seen earnings waver. Operating margins have however rebounded by about 27% since recession. Its large debt burden may also handicap its abilty to access cheap financing. Its holds $246 million in cash compared to its $1.47 billion in debt. Dunkins experienced a growth in sales revenue by about 9.1% for fiscal year 2011. Operating income increased by 11.8 million translating to 6.14 for fiscal year 2011. Further, net income increased by $7.6 million (Liebowitz, 2013). Internal Report Surname 6 External report-stakeholders Threat of new entrants There is limited or moderate threat of new entrants due to the barriers of entry experienced. Initial investment for new entrants is not significant and includes, lease of stores or equipment. Small coffee shops can compete relatively well against large companies such as starbucks in a localized settings, however in the long run their success rate is very low. Ease of entry is easily countered by established firms through lowering of prices or differentiating of costs. Economies of scale at the disposal of large firms also mean they get first priority in terms of raw material from the suppliers Bargaining power of buyers: moderate to low The industry is characterized by many buyers hence demand for price concessions is virtually impossible by individual buyers. Vertically Differentiated products provides diverse consumer base limiting a single buyer's power. Industry leaders increasingly price their products in relation to rival stores in accordance to price elasticity and competitive premium pricing (Falamarzi, Alfadhel, & George, 2010). Bargaining power of suppliers: low to moderate pressure Main inputs include Arabica coffee and coffee beans grown in select regions. This makes cost of switching between substitute suppliers low. With its substantial size, the company has the power to take advantage of its suppliers. This fact means that suppliers have moderate to low power. Internal Report Surname 7 Threat of new substitutes: high The industry has many potential substitutes including tea, fruit juices, carbonated drinks, mineral water and energy drinks. Coffee can also be prepared by consumers in their homes. Switching costs to substitutes are absent making the threat high (Falamarzi, Alfadhel, & George, 2010) Rivalry among existing firm: high to moderate The industry is characterized with monopolistic competition with Starbuck having a significant share but competitors are not further away. Consumers incur no costs in switching to competitor products hence the increased risk. Despite the above facts, a moderate level of competition is developed through differentiation of products by companies. Other areas of concern For customers Areas of concern for customers mainly include healthy nutrition habits to avoid growing trends of nutrition related diseases such as diabetes, hypertension, cancer and obesity. Substitute products such as carbonated drinks and alcoholic beverages can lead to some of these serious ailments (Liu & Liu, 2009). Another concern is the production of low quality products by smaller firms that come at low prices. Exploitation is also evident especially with monopolistic nature of sector. Established firms may set very high premium prices on their products without the knowledge of ignorant consumers. Internal Report Surname 8 For suppliers A major area of concern here is the volatility of global market which may lead losses resulting from inflation of prices especially in areas the raw materials are sourced from. Larger firms are also adopting horizontal vertical integration that enables them acquire supplier facilities at very low costs. Suppliers are also faced with the challenge of exploitation from established firms such as McDonalds because of their inferior bargaining power (Liu & Liu, 2009). For lenders and creditors A main concern for lenders is mostly losses that they may incur in case any economic shock occurs for instance the 2008 recession. This industry is so susceptible to these economic shocks. Government A concern for the government is that the monopolistic power created by huge organizations may result in unfair competition and exploitation of its citizens. For investor and shareholders Shareholders should be concerned about their return on investment which may be significantly low because of the gradual decline in this sector resulting from the social cultural change in lifestyle of consumers. The change has led to defection or switching to substitute such as mineral water and fresh fruit juice. The continuous increase in price of coffee beans is a concern, for instance between 2009 and 2010, a 200% increase was realized meaning the overall profitability reduced significantly affecting shareholder's dividends (Liu & Liu, 2009). For current and future employees Internal Report Surname 9 Current and future employees should be concerned with their job security. After the 2008 recession, the company laid off many employees to be able to survive. Community The community should be concerned about very limited environmental efforts by companies in the industry, for instance increased use of plastic packaging (Liu & Liu, 2009). Conclusion Based on the report above, the organisation is not in perfect finacial health to be acquired but its superior brands and customer loyalty means that it is a good prospect. It has also a great potential of growth especially in new markets as well as existing markets if its financial woes are resolved. It also boasts of exciting distribution channels and facilities across America. Recommendations Dunkin should explore further penetration in existing markets for instance in the eastern markets where for every 1 dunkin Donats store nearly 99600 people are served. Expansion in the Asian countries can be aided by its strong bases in south Korean and Middle east. Expansion to new markets should also be considered specifically in emerging markets such as Brazil and india as well as established European countries where other rivals have strong bases. It can do this by tailoring its products to the tastes of the locals to avoid rejection (Amos & Emerson, (2012). Renewed marketing and branding should also be on the table to remain competitive. It can capitalise on its strong brand loyalty image in brands like Dunkin Donuts by popularising other brands like Baskin Robbins. Internal Report Surname 10 References Brizek, M. G. (2014). Coffee wars: The Big Three: Starbucks, McDonald's and Dunkin'Donuts. Journal of Case Research in Business and Economics, 5, 1. Amos, J., & Emerson, B. J. (2012). The Tasti D-Lite Way: Social Media Marketing Lessons for Building Loyalty and a Brand Customers Crave. McGraw Hill Professional. Transformation, B. (2012). Dunkin'Donuts. Retrieved on April, 16. Liebowitz, J. (Ed.). (2013). Big data and business analytics. CRC Press. Leigh, D., & Pershing, A. J. (2006). SWOT analysis. The Handbook of Human Performance Technology, 1089-1108. York, E. B. (2008). Brand vs. brand: Attack ads on the rise. Advertising Age, 79(40), 1. Internal Report Surname 1 Dunkin Brand Internal Report Student's Name Course Professor's Name Date Internal Report Surname 2 Introduction Purpose The purpose of this report is to evaluate several internal factors that would be important to interested stakeholders such as management and shareholders. The report will most importantly assess the finacial health of the organisation enabling the management make an informed decision on whether its feasable and wise to acquier Dunkin brands. Proposal The goal of this research is to find out the financial health of Dunkin brands and if it would be a good return on investment to the shareholders. Data used in the presentation of this report was collected through methods such as observations, secondary sources, interviews and administering of questionnaires. The target population was mainly Dunkins brands and the data analysis method included use of regration analysis. Data presentation methods included; use bar graphs, pie charts and line graphs. Scope This report will identify the purpose of the study then briefly touch on the information about the organisation. SWOT analysis will be evaluated then corporate issues and capital structure assessed. Finacial review of starbucks will follow before a look at the conclusion and recommendations. Internal Report Surname 3 Internal report-stakeholders Corporate overview Having its headquaters in Canton, Massachusetts, Dunkin brands is an American fast food company that runs two chains of fast foods; Dunkins Donuts and Baskin-Robbins.the company was established 1950 and its current CEO is Nigel Travis. As of 2011, it boasted of revenues of over $628.2 million and a net income of $34.44 million. Its other subsidiaries include Mister Donats, Baskins robbinns australia and Dunkins Donuts Swot analysis Strengths It has a strong brand image as a result of its reputation of producing high quality products. Its customer service is also considered as one of the best in the industry. Its product Dunkin donuts is considered a superior grade of coffe in the industry as it uses 100% arabica coffe beans. High customer awarenes of its two brands i.e Dunkins Donats and Baskins Robbins which have a 94% and 92% barand recogniton respectively. According to Brand keys, its Dunkins Donut was considered as the number one brand in terms of customer satisfaction (Amos & Emerson, 2012). It has several distribution facilities including establishment of 243 new distribution sites in 2012 (York, 2008). Dunkin has a superior franchised business model that shield it from comodity flactuations which enables management to only focus on store development and advertising. Internal Report Surname 4 Weakeness The company has a debt to capital ratio of around 67% that limits its financial flexibilty. However Its debt levels are projected to reduce as the company has a strong free cash flow and good growth prospects (Liebowitz, 2013). It has a limited geographical presence as its recognition and loyalty is centralized in the North east of America. Starbuck and McDonalds holds stronger brand recognition both internally and in the external markets. Opportunities The company has potential growth and expansion opportunities domestically and internationally. The western part of United states has great potential where the band has limited presence.the area is considered to have highest population with the least brand penetration. Internationaly, the company experienced over 3500 net new opennings and is planning on continued growth in core markets such as Japan, South korea and Middle east. In 2011 they reached agreement with India to bring the Dunkin Donuts franchise in the market. Its partnership with Nba superstar, Lebron James in 2012 has significant impact on its growth especially in Asian countries such as China and Phillipenes that have a huge following of the sport (Brizek, 2014). Threats The company faces intense rivalty from brands such as Cold stone creamery, McDonalds and starbuks. Food and beverage industry is at a mature stage of growth hence several competitors including Dunkind brands, Mcdonalds and Pete's coffee. Market volatility is also a great concern; the global economy is becoming more intergrated hence any economic crisis would affect its operations (Leigh & Pershing,. 2006). Changing consumer tastes and Internal Report Surname 5 preferances is another factor especially in the US where some consumers are shifting towards substitutes such as Tea. Its debt burden is also a concern as it may affect its finacial position. Organisation and corporate issues Dunkin operates in a highly competitive segment of food & retail industry hence brand recognition, product quality, customer service and competitive pricing are key to maintaining market share. While the company has the highest operating margins, high interest expenses have affected the net nargins. The 2006 leveraged buyout led to the company holding approximately 1.46 billion in long term obligations but only $277 million in cash. The company intends to engage in increased marketing and brand differentiation so as to be able to challenge the more established firms (Transformation, 2012). Capital structure Dunkin filed with securities and exchange commission to raise 4400 million in initial public offerings in 2011. It saw its stock appreaciate by nearly 21.3% relative to the S7P500 and 48.25% growth in starbucks, its most direct competitor. Its 41.46 billion long term debt comprises of about 45.2% of its total assets. Total shareholders equity totals to about $745 million and boasts of debt-equity ratio exceeding 3.32. its interest expenses are expected to decrease in the future as a result of firms decision to use funds from IPO to fully repay high interest senior notes (Liebowitz, 2013). Financial statement review The company has flactuating operating expenses and seen earnings waver. Operating margins have however rebounded by about 27% since recession. Its large debt burden may also Internal Report Surname 6 handicap its abilty to access cheap financing. Its holds $246 million in cash compared to its $1.47 billion in debt. Dunkins experienced a growth in sales revenue by about 9.1% for fiscal year 2011. Operating income increased by 11.8 million translating to 6.14 for fiscal year 2011. Further, net income increased by $7.6 million (Liebowitz, 2013). Conclusion Based on the report above, the organisation is not in perfect finacial health to be acquired but its superior brands and customer loyalty means that it is a good prospect. It has also a great potential of growth especially in new markets as well as existing markets if its financial woes are resolved. It also boasts of exciting distribution channels and facilities across America. Recommendations Dunkin should explore further penetration in existing markets for instance in the eastern markets where for every 1 dunkin Donats store nearly 99600 people are served. Expansion in the Asian countries can be aided by its strong bases in south Korean and Middle east. Expansion to new markets should also be considered specifically in emerging markets such as Brazil and india as well as established European countries where other rivals have strong bases. It can do this by tailoring its products to the tastes of the locals to avoid rejection (Amos & Emerson, (2012). Renewed marketing and branding should also be on the table to remain competitive. It can capitalise on its strong brand loyalty image in brands like Dunkin Donuts by popularising other brands like Baskin Robbins. Internal Report Surname 7 External report Introduction Purpose The purpose of this report is to evaluate the external environment which is very important to the eventual success of the company. The analysis will touch on important external stakeholders such as competitors and suppliers and prescribe favorable recommendations to any pressing issue that may arise. This will enable the management and interested stakeholders make the ideal decision regarding its plans to acquire Dunkin Brands. Proposal The goal of this research is to find out whether the company is surrounded by the right external environment to undertake an acquistion. Data used in the presentation of this report was collected through methods such as observations, secondary sources, interviews and administering of questionnaires. The target population was mainly important external stakeholders and data analysis method included use of regration analysis. Data presentation methods included; use bar graphs, pie charts and line graphs. Scope This report will look at the purpose conducting the study then identify tools used in the collection of data and the research as a whole. It will touch on the five force porter factors including threat of new entrants, bargaining power of buyers and suppliers as well as threat of new substitutes and rivalry. Other areas of concern touching on stakeholders such as consumers, Internal Report Surname 8 suppliers, government etc will be identified. Conclusion and recommendations will also be made based on the entire report. External report-stakeholders Threat of new entrants There is limited or moderate threat of new entrants due to the barriers of entry experienced. Initial investment for new entrants is not significant and includes, lease of stores or equipment. Small coffee shops can compete relatively well against large companies such as starbucks in a localized settings, however in the long run their success rate is very low. Ease of entry is easily countered by established firms through lowering of prices or differentiating of costs. Economies of scale at the disposal of large firms also mean they get first priority in terms of raw material from the suppliers Bargaining power of buyers: moderate to low The industry is characterized by many buyers hence demand for price concessions is virtually impossible by individual buyers. Vertically Differentiated products provides diverse consumer base limiting a single buyer's power. Industry leaders increasingly price their products in relation to rival stores in accordance to price elasticity and competitive premium pricing (Falamarzi, Alfadhel, & George, 2010) Bargaining power of suppliers: low to moderate pressure Main inputs include Arabica coffee and coffee beans grown in select regions. This makes cost of switching between substitute suppliers low. With its substantial size, the company has the Internal Report Surname 9 power to take advantage of its suppliers. This fact means that suppliers have moderate to low power. Threat of new substitutes: high The industry has many potential substitutes including tea, fruit juices, carbonated drinks, mineral water and energy drinks. Coffee can also be prepared by consumers in their homes. Switching costs to substitutes are absent making the threat high (Falamarzi, Alfadhel, & George, 2010) Rivalry among existing firm: high to moderate The industry is characterized with monopolistic competition with Starbuck having a significant share but competitors are not further away. Consumers incur no costs in switching to competitor products hence the increased risk. Despite the above facts, a moderate level of competition is developed through differentiation of products by companies. Other areas of concern For customers Areas of concern for customers mainly include healthy nutrition habits to avoid growing trends of nutrition related diseases such as diabetes, hypertension, cancer and obesity. Substitute products such as carbonated drinks and alcoholic beverages can lead to some of these serious ailments (Liu & Liu, 2009). Another concern is the production of low quality products by smaller firms that come at low prices. Exploitation is also evident especially with monopolistic nature of sector. Established firms may set very high premium prices on their products without the knowledge of ignorant consumers. Internal Report Surname 10 For suppliers A major area of concern here is the volatility of global market which may lead losses resulting from inflation of prices especially in areas the raw materials are sourced from. Larger firms are also adopting horizontal vertical integration that enables them acquire supplier facilities at very low costs. Suppliers are also faced with the challenge of exploitation from established firms such as McDonalds because of their inferior bargaining power (Liu & Liu, 2009). For lenders and creditors A main concern for lenders is mostly losses that they may incur in case any economic shock occurs for instance the 2008 recession. This industry is so susceptible to these economic shocks. Government A concern for the government is that the monopolistic power created by huge organizations may result in unfair competition and exploitation of its citizens. For investor and shareholders Shareholders should be concerned about their return on investment which may be significantly low because of the gradual decline in this sector resulting from the social cultural change in lifestyle of consumers. The change has led to defection or switching to substitute such as mineral water and fresh fruit juice. The continuous increase in price of coffee beans is a concern, for instance between 2009 and 2010, a 200% increase was realized meaning the overall profitability reduced significantly affecting shareholder's dividends (Liu & Liu, 2009). Internal Report Surname 11 For current and future employees Current and future employees should be concerned with their job security. After the 2008 recession, the company laid off many employees to be able to survive. Community The community should be concerned about very limited environmental efforts by companies in the industry, for instance increased use of plastic packaging (Liu & Liu, 2009). Conclusion After a thorough analysis, it is clear that threat of new substitutes and increased rivalry are the two most critical issues to be addressed. Starbuks has already developed a great strategy in trying to acquire Dunkin; doing this is a right step towards countering increased rivalry. Incorporating tea into their list of products is also an important step towards countering new substitutes; however the company should explore avenues or adding more products to its line. Recommendations Exploring international market segment should be on the table specifically emerging markets such as Brazil and India. It should also transfer its core competencies and capabilities county by country to enhance its growth. It should focus on exploring untapped rural market to ease saturation in urban setting and prevent cannibalization. Internal Report Surname 12 References Amos, J., & Emerson, B. J. (2012). The Tasti D-Lite Way: Social Media Marketing Lessons for Building Loyalty and a Brand Customers Crave. McGraw Hill Professional. Brizek, M. G. (2014). Coffee wars: The Big Three: Starbucks, McDonald's and Dunkin'Donuts. Journal of Case Research in Business and Economics, 5, 1. Falamarzi, S., Alfadhel, A., & George, S, 2010. A Comparative Analysis of Strategies and Business Models of Starbucks Corporation and Dunkin Donuts Company. Liebowitz, J. (Ed.). (2013). Big data and business analytics. CRC Press. Leigh, D., & Pershing, A. J. (2006). SWOT analysis. The Handbook of Human Performance Technology, 1089-1108. Transformation, B. (2012). Dunkin'Donuts. Retrieved on April, 16. Liu, S., & Liu, L. (2009). Implementing Corporate External Social Responsibility Strategies through Organizational Design and Operation. Journal of International Business Ethics, 2(1), 79. York, E. B. (2008). Brand vs. brand: Attack ads on the rise. Advertising Age, 79(40), 1