Business Strategies of Burger King

This report is to aim the overall business strategies of Burger King. In 1991, the Canadian fast food industry was in a period of declining sales and Burger King was being outspent by its major competitors which McDonald’s was spending seven times as much on advertising as Burger King, Harvey’s and Wendy’s were both spending 25% more. A counter strategy was developed for English Canada that focused on Burger King’s flagship product, the Whopper, rather than try to match the competition’s multi-product advertising strategies.

The campaign had several key components. Individual promotional programs were developed for the franchisees and a much closer relationship between the company and its local and regional stores was put into place. Another critical component was the media strategy. Burger King decided to concentrate on advertising.

By using advertising on television, internet, backed by strong promotional advertising in local newspapers and radio, Burger King found a way to make its smaller share of voice noticed and heard.

This report demonstrates the value of having a focused, national strategy that localizes promotional to support the business management.

1.1 Authorisation

This report was authorised by Mr James McLamore and David Edgeton who are the founders and current Chief Executive Officers of Burger King Holdings, Florida US, on December 07, 2011.

1.2 Objectives

Analyse the strength and weakness of Burger King

Compare Burger King’s competitiveness to that of its competitors

Present the findings of the Strategic Analysis and proposed several strategic options for Burger King based on the findings.

1.3 Scope

This study shall cover the operations of Burger King Holdings based in United States. It will cover all its outlets around the world. The company will analyze the strategies used in the company, and give recommendations on how it can improve its operations. The swot analysis of the company will also be analyzed.

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1.4 Limitations of Study

As all other researches, this research also had limitations. Firstly, the information available for Burger King was not sufficient enough to get the correct strategies and be able to analyse it. Secondly Burger King had some of its information that could not be given to the public; this prevented us from going into depth with the report.

Background to the organization

Burger King is one of the largest fast food chains in the world, with more than $2 billion in annual revenue. Burger King is the second largest hamburger fast food chain in the world, trailing only behind McDonald’s. Burger King has over 12,000 restaurants covering all 50 States and 73 different countries.

Some of the notable products from Burger King include the Whopper sandwich, chicken sandwiches, chicken tenders, and fries. Burger King also offers other choices such as salads, breakfast items, and desserts.

The first Burger King, called “Insta Burger King” opened in 1954 in a Miami, Florida suburb. About 90% of Burger King restaurants are independent franchises. The company went public with an Initial Public Offering in 2006. In 2009 Burger King introduced the Whopper Bar which is a division of the restaurant that is more like a bar that serves drinks and also offers Whoppers. Burger King has won several awards including being named one of the top 100 Global Brands by Inter-brand.

Burger King’s slogan is “just the way you like them” and the vision is “we proudly serve the best burgers in the business, plus a variety of real, authentic foods..all freshly prepared..just the way you want it.” Their values are to be fairness, diversity, respect, caring, clear accountabilities, teamwork, high standards, commitment to excellence, celebrating their successes.

General environment analysis

Demographic

Mostly located in urban residential area.

Target customer between 18 to 34 years old.

Target to the middle income group.

Customer population growing.

Sociocultural

Nowadays people in the society always prefer healthy lifestyle to avoid any negative disease happen on them.

Working hours too long caused people prefer eat outside food instead of cooking themselves.

Materialistic society

People like to spend since income per capital of Malaysia increasing this few years.

Technology

Technology advancement leads the process of output more effective and also efficiency.

Globalisation

Malaysia government open business length for foreigner investor to running their business in Malaysia. There are so many companies of foreigner we may saw in Malaysia such as Burger King, Mac Donald and so on.

Economy

The rising of petrol price in Malaysia affect the transportation cost of every business become higher.

Prices of certain goods grow up and lead the cost of production increase.

Porter’s 5 Forces

New entrants:

Recently, the current players established are very powerful, so Burger King would not need to pay so much attention in worry about the new entrants. So this kind of risk is very low. Besides, Burger King is a one of the oldest fast food’s brand, it was established in 1953. Their reputation and the quality of food, the material they used were trusted by their customers. So if the new entrants would like to join and compete with Burger King and want to gain the market share and challenge the existed players are very hard. Burger King is a franchised company. If you want to enter the market, you must have huge capital to invest and very advanced patented technology. Due to these specialized assets and the huge cost to exit, there is very difficult for you to go in and exit from the market of the fast food.

Substitutes:

There is many choices and low switching cost. It is very easy for customers to choose the foods from McDonald’s, KFC and Wendy’s Burger. They also can produce the very similar products, such as Fish Burger, Chicken Burger, Beef Sandwich, French Fries, dessert and so on. Another example is the breakfast. It is possible for the customers to change from Burger King Burger breakfast set to McDonald’s Burger Breakfast set, it can be very subjective, such as, no parking, too many people, the temperature too high or too cold in the restaurant and so on can affect the customers to change their mind and decide to purchase the competitors’ substitutes to satisfied their needs.

Bargain of Suppliers:

Burger King has more than 350 suppliers and distributors. They are recognized as an important and integral supplier to the Burger King System and they will continue to provide the Burger King system with the excellence service and using the high quality marketing communications services. Burger King is managing well in supplier diversity programs and maintaining a diverse portfolio of suppliers. Restaurant Services Inc. (RSI), it is very famous and strong purchasing agent, they help the vast majority of products and services used by Burger King’s owners in United States and is the manager of the system’s supply chain. RSI works and communicate closely with the restaurant owners, Burger King Corporation, food and packaging suppliers, marketing agencies, equipment vendors, distributors, and information system providers in order to streamline and improve their supply-chain and make the system more efficient.

Bargain of Customer:

They added salad bars and some “light” menu for customers, and it can less fatty and healthier image. It will increase their customers’ power and become stronger. It also can attract the olds to come and enjoy the food even the foods are become more healthy but these still delicious.

Managing inter-firm rivalry:

Their biggest competitor is McDonald’s, Wendy’s International Inc. and Yum Brands and Owner of Taco Bell. Burger King’s market shares are lesser than McDonald’s. Burger King has a market share is around 21.9 % and McDonald has approximate 44%, which is double of the Burger King’s market share percentage. Recently, McDonald is rapid of expanding the branches in many third world countries, such as China and India. Burger King just only expanded in handful of international market, not like McDonald. So we know that McDonalds has the most of them market share and branch, means that they are having the market position now. It also means that they are the leader in the market and they have the powerful right to set the food prices and McDonald’s growth very fast also. Due to their product differentiation level quite low, so the rivalry is high intensive.

Summary of environmental scanning

Burger King is the one of the dominator in the fast food industry with high reputation and high market shares. New entrants who would like to join the industry and compete with Burger King and want to gain the market share and challenge the existed players are very hard. However, the main competitors of Burger King are still McDonald’s, KFC and Wendy’s Burger. Because there is many choices and low switching cost between them. So, Burger King still needs to put effort to compete with this few main competitors. Moreover, Burger King is managing well in supplier diversity programs and maintaining a diverse portfolio of suppliers. Restaurant Services Inc. (RSI), it is very famous and strong purchasing agent, It works and communicate closely with the restaurant owners, Burger King Corporation, food and packaging suppliers, marketing agencies, equipment vendors, distributors, and information system providers in order to streamline and improve their supply-chain and make the system more efficient.

SWOT Analysis

Capital Market –

The strength of Burger King on Capital Market is the company able to fully utilize their on hand resources. It makes their operation more efficiency and brings the company growth faster. However, the weakness from this company is their share at market is declining. So that the available capital will become lower and also it will bring them liquidity problem and directly influence the confidence of the investor. The company has the opportunity to acquire some of the restaurants and growing the restaurants industry. It can contribute more profit to company in order to overcome the liquidity problem. There have some threat to the company which is the stringent regulation set by government. Besides it, the economy downturn may cause the company not doing well too.

Product Market –

For the strength, company has the strong brand and product portfolio. Their products are differentiated from other products. Burger king has largest restaurant network over the world. For this reason, the customer, supplier and creditors are reliable on them. Furthermore, they are able to bring forth new ideas in their products constantly. Nevertheless, the weakness of the burger king in product market is less control over franchises. It may cause the company loss their goodwill or loyalty from customer. On the other side, the opportunity of the company is launch of various innovative products through their potential creativity. It can also improve their product and brand well-known. The threat to the company is outbreak of Food-borne Illnesses. It may cause the consumer not reliable on their food. Besides, competitive markets affect their performance on business. The costs of food are rising higher than standard inflation and due to loss of some profit. Since, burger king is fast food restaurants, while health concerns among general public. So the revenue will drop too.

Organization –

For the strength, company has a clear organizational goal of profitability. So company’s employees have the ability to reorganizations achieve their goals. Moreover, company also will give the achievement awards and some incentives to the stakeholders who are employees or managers who have made significant contributions. This is a good way by giving rewards due to increase employees confident that their personal needs will be met and motivate them. For the weakness, company management lacked focus and direction and has struggled with marketing mix decisions. Service was slow and food preparation was inconsistent and many stores needed remodeling. This is another problem of the services provided by the employees. For the opportunity, company has to support, encourage and invest in their career growth by providing numerous training and development programs designed to help employees build useful skills and competencies. Hence, this is an opportunity for them to upgrade their skills and it enables them to perform to the best of their ability. Another opportunity is at every each year, global managers attend their annual convention to engage with their franchisees and to hear about their strategic vision, operations, development and marketing plans for the upcoming year. For the threat, the outside competitive will affect company performance, so the mangers need to solve the competitive problems and control the management in organization. Besides, another threat is the unemployment rate is getting higher nowadays so it will lead employees are hard to find the jobs.

Summary of situation analysis

Burger King Holdings, INC is focuses on its company strategies analysis and their performance within the fast food service restaurant industry. Therefore, company faces countless internal and external issues in environmental analysis, and these will influencing their business operations which is prominent in the industry analysis. Thus, Burger King Holdings identify its company strengths, weaknesses, opportunities and threats in three stakeholders group. Consequently, each aspect affecting Burger King is then applied into a SWOT analysis to recognize the company’s strongest characteristics and areas in need of improvement to establish the firm’s success of gradually increase the shareholder value. Besides, in applying the swot analysis is a essential that help company to minimize and avoid weaknesses and threats. The weaknesses in company must be scrutinized in order to changed them into strengths part. Similarity, in the other way round the threats should be changed into opportunities. Therefore, both strengths and opportunities will be matched to optimize company potential for accomplishes goals in the fast food industry.

Strategic Options

Strategic options are creative alternative action-oriented responses to the external situation that an organization (or group of organizations) faces. Strategic options would help Burger King to take advantage of facts and actors, trends, opportunities and threat of the outside world. Burger King can use this tool ‘Strategic options’ to identify and make a preliminary screening of alternative strategic options or perspectives.

Burger King opened more branches in superior retail locations which would give them powerful capabilities over their competitors. They can have stores that are exposed to areas with much higher foot traffic and better local demographic compositions. Also, given the high visibility associated with premium retail locations the cost of their marketing budget would be significantly reduced due to the incidental advertisements the storefronts naturally offer.

When Burger King enters into mature state, it should shift its focus away from differentiation based superiority to cost-based superiority. Thus, low cost often becomes the overall driving force of corporate profit. Low cost advantage can be achieved through increased economies of scale. They should improve their capabilities in their distribution network and maintain their industry lead in low transportation costs.

Segment and customer selection becomes crucially important to maintaining a high profit margin. While the trend in the specialty burger industry is to target the general population, Burger King should focus on a customer segment that offers the greatest amount of price elasticity. This segment should compose of those customers most loyal to the Burger Kings’ brand who are also in the highest income bracket.

Furthermore, Burger King is implementing new and different marketing connections which extend the corporate strategy of strengthening their brand image. The efforts for the strategic option include long term branding campaigns through radio and television commercials which have a time caption of 30 seconds and 60 seconds respectively. This campaign strategy can better spread the product and service offerings visually and on audio to reach the mass customers. In addition, the strategic option of Burger King towards expanding their market share involves an advertising approach focusing on new product offerings as well as the existing popular products such as the Whooper.

The higher demand and popularity of dining among young and middle age groups has provided a potential for Burger King to increase its profits and with greater market potential, the company has utilized the improvements in technology and technology equipment to provide better services that may attract these potential customers. In addition, the company focuses on training its staff for better service offering and better preparation of food.

KEY SELECTION CRITERIA

BURGER KING’S key selection criteria is the criteria which burger king uses as a basic framework of evaluation and selection when creating and deciding strategic options. Here is but a few Key selection criteria that BURGER KING uses.

• Alignment with core competencies
• Alignment with strategic goals
• Internal rate of return in excess of (a certain number say 15%)
• Improve customer service
• Urgency

ALIGNMENT WITH CORE COMPETENICES-

Core competencies are those capabilities that are critical to a business achieving competitive advantage, these include technical/subject matter know-how, a reliable process and/or close relationships with customers and suppliers. It may also include product development or culture. Therefore when BURGER KING develops a strategic option it makes sure that it has considered and factored in its core competencies to make sure it has the capability to facilitate this strategic option.

ALIGNMENT WITH STRATEGIC GOALS-

When BURGER KING develops a strategic option it makes sure that this option is in line with its primary strategic goals and that the core aims and goals of BURGER KING are factored into this option, so that while the strategic option gives them an edge it doesn’t deviate from what BURGER KING is primarily trying to achieve.

INTERNAL RATE OF RETURN (IN EXCESS OF A SET NUMBER) –

Is a rate of return used in capital budgeting to measure and compare the profitability of investments it is an indicator of the efficiency, quality, or yield of an investment. BURGER KING uses IRR to evaluate if a specific strategic option is profitable, efficient or of a significant yield in comparison to their basic required rate of return which is determined before evaluation and decision on strategic option can be made therefore not just establishing a bench mark of return but a basis of comparison between strategic options and alternatives.

IMPROVE CUSTOMER SERVICE-

BURGER KING is in the fast food industry, which is one of the most product discriminate industries, because consumers have so many choices between other chains such as MCDONALDS, KFC, WENDY’S etc. BURGER KING has differentiated itself by delivering what they call the ‘CUSTOMER EXPERIENCE’, which means providing superior customer service and they do this by making the CUSTOMER EXPERIENCE a key and core element of all their strategic options. They use customer service as key selection criteria to make sure that all their strategic options improve the customer experience and hence give them a competitive edge in their extremely competitive industry.

URGENCY-

another key selection criterion is URGENCY this criteria analyses how urgent is the requirement for the strategic option and how urgently the strategic option can be implemented. This is done to make sure BURGER KING strategic options are both responsive and effective thus achieving strategic target.

Recommendations

Bases on the strategic options, to open more branches is considered inefficient strategy ,because it need a lot of money to open the new branches ,but can implementing more other strategy to reach same goal which is increase the market share like franchisee system and also the delivery system. By using the low cost delivery system, more customers can enjoy the Burger King product everywhere and every time .It is considered more efficiently than open more branches . In the franchisee system, Burger King can earn more profit from the transaction and increase the market share, but to focus on the product quality, Burger King should put more attention on it to keep the reputation maintain and increase in the same time. The franchisee training is very important on it .For the franchisee system, Burger King should also control the location of the branch to avoid too many branches in the same certain place, which can reduce the competition of all franchisee and market inefficient.

Low cost strategic is a good strategic to reach the higher profit, with a good distribution network will hit the corporate low cost strategic. Maintain the quality and lower the production cost is a good way to increase the profit but both element should be move in the same direction .

For the “highest income brackets” of the Burger King market segmentation, will reduce the Burger King’s customer population, because the cheaper should be more attracted. By increase the customer population, Burger King should do more promotion and also the advertising for the short-term. On the other hand, to increase the customers population in the long-term, Burger King should make the product differentiation by develop more product types and favorites which can attract more new customer. This development will increase the market shares and also the competitive advantages for the Burger King to survive in this competition market.

Advertising is important element to reach the profit margin increase, Burger King should use the low cost advertising which can effective and also save a huge of money .The population lifestyle is changed and the technology improvement Burger King cannot using the traditional media to promote their product, teenagers and adults are prefer internet more than the newspaper nowadays. Like using the website advertisement is consider as cheaper advertising which also can filter the population to reach the market segmentation more effective than without filter it. You will never advertising the Burger King to a 80 years old ,so we need to filter the population first to the target customer .

Conclusion

The last half of the twentieth century witnessed the development of many fast food chains, though Burger King is the second largest hamburger fast food restaurant in the world, but it still maximize the profit and minimize cost.

With a general environment analysis, the company can see a longer horizon of time, and be able to clarify strategic opportunities and threats that the organization faces. By looking to the outside environment to see the potential forces of change looming on the horizon, Burger King can take the strategic planning process out of the arena of today and into the horizon of tomorrow.

By the strength of the company to fully utilize their on hand resources, it bring the company growth faster. They are differentiate their products, it make the customers, suppliers can reliable on them. By saturating nearly every market it has entered, Burger King now envisions itself as a stabilized company, with entering new markets as they are in exploiting those markets in every way available to them. The company is also more able to respond to consumer demands that, earlier in its existence, would have been impossible. The best strategic options and key selection criteria that Burger King has been using to strengthen their company business management. They are maintaining the high profit with the low-cost products provide to the market, which can get the higher demand and popularity from the different stages of customer.

So by overall, Burger King has the persistent business management to maintain their business no matter on their products, promotional or business strategic, it bring the company to growth rapidly and globalize.