Executive Summary
This report is about the Burger King, a leading quick service chain in the world. This paper is an in-depth analysis of the company, including its internal and external environments and the environmental factors that affect its operation. Burger King is considered as one of the major fast food chains in the world. Among its top competitors are McDonald’s and Wendy’s. Burger King as a multinational company seeks to expand its business worldwide. The aim of the paper is to analyze the current strategies of Burger King. The paper also aims to identify the current market situation and determine its impacts on Burger King’s future strategies. Lastly, the paper aims to determine the possible strategies that Burger King can employ in order to remain competitive and become successful.
Burger King
The Burger King company was founded in 1954, by two marketing and financial entrepreneurs, James McLamore and David Edgerton. The strategy of the Burger King has been successful and by 1959 Burger King expanded and established five stores in Miami. Similar to other fast food pioneers, the Burger King founders sought to attract investors by giving away exclusive rights to large territories through franchise arrangements (Reiter 1996). Burger King like many multinational fast-food companies has a system. Franchise is one of the most important means of achieving volume growth in a largely saturated marketplace and it is increasingly associated with multinational expansion (Felstead 1993). Most large companies in the fast-food sector are operating under the ‘format’ franchise system. The format type of franchise is the most common among the fast-food companies today. In this system, the franchisor (Burger King) not only supplies the product, but also lays down precisely the rules and procedures that have to be followed by the franchisee within a set of detailed pre-determined procedures or format. The franchisee is in effect purchasing a carefully prepared ‘blueprint’, which minimizes the risks involved in setting up a conventional small business.
Operating Industry
Burger King operates in the fast food hamburger restaurant (FFHR) category on the quick service restaurant (QSR) segment of the restaurant industry. The quick service restaurant is the largest segment of the restaurant industry in the United States (Burger King: Annual Report 2006).
Competitive Environment
The fast-food industry in the United States is very competitive. McDonald’s is the industry leader while Wendy’s and Burger King are in constant struggle for the second place. The consumer food-service market is typically broken down into eight categories according to the type of food and restaurant operations. The categories are sandwich, pizza, chicken, grill-buffet, dinner house, contract and hotel. The fierce competition in the fast food industry is evident with the pace in which strategies are changed. Fast food restaurants are always on the look out for new strategies that will enable them to gain customers and market share. The two main domestic competitors of Burger King are McDonald’s and Wendy’s.
SWOT Analysis
Strengths
1. Wide selection of menu items
Burger King offers different varieties of menu items and choices for the consumers. Through the many choices that Burger King provides, consumers can customize their orders.
2. Fast and efficient service
Burger King has a different process in order taking and preparing the orders of the customers. Unlike in McDonald’s where a single dine staff takes a customer’s order and prepare the foods for a single customer. Burger King has two separate stations. One is where the customers order and one is where the customers pick up their foods. This process of order taking and serving is considered very fas and efficient. A customer falls in line to make his or her order and to pay. He or she will be given a number and then will move down the line where he or she picks the order.
3. Innovative Products
Burger King’s distinct assets include the unique Whopper with its one of a kind charbroiled taste. The company also prepares the hamburger any way the customer wants it. In addition to the Whopper, Burger King also offers a few set items on its breakfast menu that differentiates it from its competitors. These include Croissan’wiches and French toast sticks. The rest of the menu also offered the unique Veggie burger and Chicken Ceasar salad.
Weaknesses
1. Weak Marketing Campaigns
One of the weaknesses of Burger King that I think contributed to its decline that started several years ago is its weak marketing campaigns. The company was not able to effectively communicate with the customers. The customers were also confused about the different advertisements of the company that are sometimes considered ‘eccentric’.
2. Inconsistent Quality
The consumer’s perception of the quality of the food items and the overall product offering at Burger King is poor. Many consumers view quality at Burger King as inconsistent. This is perhaps due to the inconsistency in quality standards and the poor maintenances of some Burger King stores.
Opportunities
1. Expansion
In the previous years, particularly in the year 2006 - 2007, Burger King embarked on an expansion strategy. The company started to be more active in its expansion programs. In fiscal year 2007, Burger King opened 441 new restaurants around the globe. Burger King also entered four new countries namely Indonesia, Egypt, Poland and Japan. The opportunity to expand is very promising and the company is experiencing initial benefits from its expansion strategy (Burger King: Annual Report 2007).
Threats
1. Intense Competition
One of the biggest threats to Burger King is its competitors. Burger King is considered as the second largest fast food chain next to McDonald’s. Burger King always finds itself in fierce competition with McDonald’s, Wendy’s. Hardee’s and other fast food restaurants. The increased competition among rival companies is characterized by price wars, product innovation and growth strategies.
2. Consumer Health Expectation
There is a change in the consumer attitude and behavior that is considered a threat to most fast food restaurants. Consumers are becoming more conscious when it comes to health issues. Consumers are demanding quality, healthier menu items. Although Burger King has taken the initiative in introducing ‘healthy food items’ the need to be more committed to providing healthy foods to the consumer can pose a serious threat if the company fails to satisfy the demands of the consumers.
The restaurant industry is affected by consumer preferences and perceptions. If prevailing health or dietary preferences and perceptions cause consumers to avoid Burger King’s products in favor of alternative or healthier foods, Burger King’s business could be in danger (Burger King: Annual Report 2006).
Significant Items of Burger King
Burger King is one of the major quick service restaurants in the world. In terms of size and number of stores, Burger King ranks second, next to McDonald's. One of the significant items of the company is the Burger King brand. The company's Burger King and Whopper brands are two of the most widely-recognized brands in the world. Another significant item is the company's Have it Your way brand promise. Have it your way is one of the aspects of the company's business processes that sets it apart from its competitors. The customers are given more food choices. Another significant item is the company's innovative menu. The basic menu pf all Burger King restaurants consists of hamburgers, cheeseburgers, chicken and fish sandwiches, breakfast items, french fries, onion rings, salads, desserts, soft drinks, shakes, milk and coffee. In addition, promotional menu items are introduced periodically for limited periods. Burger King continually seeks to develop new products. Burger King focuses on product development and innovation. The company always aims to introduce innovative products in order to attract customers and to remain competitive. Another significant item is product quality. Product quality is important in attracting and maintaining customers.
Porter’s Generic Strategies
Michael Porter believed that a firm can choose between two options. These are cost advantage and differentiation. There are according to Porter three generic strategies that a company can employ. These are cost leadership, differentiation and focus.
Cost Leadership
Overall, cost leadership requires a firm to develop vigorously an optimally efficient scale of operation and to control tightly the firm’s cost in all activities (Reid et al 1993).
Focus Strategy
A focus strategy requires a firm to concentrate on a particular market segment which may be dictated by factors such as the buyer, the product, or the location rather than the overall market. The strategy is predicted on the notion that a firm that devotes its entire energies to a niche or target can better achieve competitive advantage than those rivals which broadly compete across the market (Reid et al 1993).
Differentiation
Firms that follow the generic differentiation strategy seek to exploit firm-specific assets by producing goods or services, which are almost unique compared to those offered by rivals. Differentiation is not limited to the physical nature of the product. Other significant dimensions of differentiation include distribution channels, marketing efforts, after sales service and so on. Essentially a firm seeks to establish itself as unique within its industry. Effective differentiation is generally resistant to the forces of competition. Potential and existing rivals must overcome the uniqueness of the product and try to erode customer loyalty. Customers are less likely to switch because of a perceived lack of similar alternatives (Reid et al 1993). The recommended strategy for Burger King is Differentiation.
Recommended Strategy – Differentiation
Burger King can use differentiation strategy as its main strategy in competing with its rivals. The Have It Your Way brand promise pervades everything that Burger King does especially in the area of product and service. Burger King also achieves differentiation through its new innovative products. Some of this innovative products are Burger King Chicken Fries, Burger King Stacker and Burger King’s Value Menu with 10 items. Burger King continues to introduce innovative products in the breakfast segment. One prime example is Burger King Joe.
Burger King’s Have It Your Way strategy is among the top things that differentiates it from its competitors. At Burger King, consumers are given more food and serving choices. Personalization coupled with fast and efficient service makes dining experience at Burger King unique. Burger King boasts its veggie burger, said to be one of its kind in the fast food industry. Parents are also given more control when it comes to their children’s foods. For example Burger King’s kid’s menu lets parents choose applesauce and juice instead of fries and a soft drink. Burger King takes pride in its ability to provide personalized products. Guests can gave the sandwiches at Burger King the way they want them.
Ansoff Matrix
Ansoff (1965) strategy is composed of four components. These are product/market scope, growth vector, competitive advantage, and synergy. Ansoff identified four generic growth strategies:
- Market Penetration
- Market Development
- Product Development
- Diversification
Market Penetration
The market penetration strategy amounts to increasing sales of existing products while at the same time trying to maintain current margins of profitability on sales. When the market is expanding this may be accomplished through active marketing in order to get more first-time users to buy the product or to increase product usage of existing buyers or to increase product usage of existing buyers or to increase the frequency of use (Proctor 2000).
Product Development
A new product can be defined in several different ways. A product can refer to a physical entity or a cluster of expected customer benefits. From the point of view of a business, a product innovation may represent a change in, or addition to, the physical entities that make up its product line. From a market perspective, the term refers to a new or revised set of customer perceptions about a particular cluster of benefits (Proctor 2000).
Market Development
Finding new markets may not guarantee success for the firm. A firm can also achieve growth in developing market. Market development strategy involves developing new markets by duplicating the business operation, with minor adaptive changes. The firm can undertake a market expansion strategy. In market expansion, the same expertise and technology and sometimes even the same plant and operations facility can be used. There is therefore potential synergy and resulting reductions in investments and operating costs. Geographic expansion may involve changing from regional operation to a national operation, moving into another region, or expanding to another country (Proctor 2000).
Diversification
Diversification involves moving simultaneously into new products and new markets. It is a risky strategy but with careful selection of the right kind of businesses, considerable improvements in profitability can be experienced. Diversification can take place into related or unrelated products. A related diversification is one in which the new business has meaningful commonalities with the core business. These provide potential to generate economies of scale or synergies based on exchange of skills and resources. A diversification strategy can be implemented by an acquisition (or merger), new business venture or strategic alliance (Proctor 2000).
Two of the recommended strategies for Burger King is market development and diversification of products.
Recommended Strategy – Market Development
Burger King can employ a market expansion strategy that utilizes its franchise system. Burger King is second to McDonald’s when it comes to market expansion with operations extending up to 69 countries and US territories. In order to gain competitive advantage and to maintain its top position, Burger King must continue its expansion in foreign economies. In order to attract new customers and to remain competitive, Burger King must continue its market expansion strategy. Burger King must also focus on emerging economies such as China, where greater opportunity for growth and success is available.
Recommended Strategy - Diversification of Products
There is no doubt that among its competitors, Burger King offers the most diverse and perhaps the most innovative products. Burger King must continue to invest and remain committed to research and development in order to come up with more diverse and innovative products. One specific consumer product demand that Burger King must focus on is the demand for healthier, higher quality food items. The consumers are starting to get more health conscious and Burger King must be among the first companies to satisfy this demand. Burger King must incorporate healthy foods in its menu.
Evaluation of Strategies
Differentiation
Suitability
The competitive environment in which Burger King operates is highly intense. Product and service differentiation is a suitable strategy for Burger King as it will be a source of sustainable competitive advantage.
Feasibility
Burger King possesses the necessary resources and facilities to be able to introduce products that will differentiate it from its competitors. Burger King's expertise in service and its commitment to Have it Your Way brand promise is also a source of differentiation that will be a competitive advantage in the future.
Acceptability
There is a growing demand among the consumers for healthier foods. Being able to satisfy the changing demands of the consumers will be a source of competitive advantage.
Market Development
Suitability
The competition among restaurants are becoming more intense. Burger King's major competitors are expanding their operations. They are constantly searching for new markets to explore. In order for a multinational business to succeed, it must take advantage of globalization. Market expansion is a suitable strategy for Burger King as it will harness growth and success in competition.
Feasibility
Market expansion is a feasible strategy for Burger King. Burger King possess the necessary resources and expertise to expand its operation. Burger King, with its more than 50 years of experience will be able to successfully expand its business in different locations around the world.
Acceptability
The success of a multinational company lies in its ability to explore and take advantage of foreign markets. Burger King must be able to expand its operation in new countries. Market expansion is an acceptable strategy for a company such as Burger King that seeks global success.
Diversification of Products
Suitability
In a competitive industry, such as restaurant industry, differentiation in products and services is the key. Diversification of products is one of the suitable strategies for Burger King. Burger King is considered as a quick service restaurant that is able to offer a diverse menu. In order to remain competitive, Burger King must be able to offer more innovative products that will cater to different market segments.
Feasibility
Diversification of products is a feasible strategy, since Burger King has the resources and capability to employ such strategy. Burger King's research and development facilities are among the best in the industry. Burger King's tradition of offering quality products that are hard to copy must be maintained.
Acceptability
The preferences and attitudes of the customers have changed. Customers are becoming more varied and their needs and requirements are changing. In order to attract more customers with different tastes and preferences, Burger King must offer a diverse menu that will attract a wider population.
Courses of Actions
Recommendations
In order to attract more consumers and to expand the operation of Burger King, it is recommended that Burger King explore new markets in Asia and in Europe. By exploring new markets Burger King will be able to compete with McDonald's and Wendy's. The company also needs to invest in research and development (R&D). One major source of differentiation is the company's innovative products. In order to remain competitive and to attract new customer’s, Burger King must focus on developing new products.
Critical Success Factors
The success of Burger King depends on its ability to compete with its major competitors. The restaurant industry is intensely competitive and Burger King competes in the domestic and international markets. The competition is based on price, service, location and food quality. One critical success factor for Burger King is its ability to remain competitive. In order to remain competitive, the company should use its resources and be able to use this resources in order to gain competitive advantage. Differentiation is an important strategy in the restaurant industry, since products and services can be copied easily.
Another critical success factor is the ability of Burger King to successfully implement its international growth strategy. Like many quick service restaurants, the success of Burger King lies in its ability to expand its operation and to explore new markets. Burger King plans to expand its international operations in markets where it currently operates and in selected new markets. Operations in foreign markets may be affected by consumer preferences and local market conditions.
Still another success factor is Burger King's marketing and advertising. If the marketing and advertising programs of Burger King fail, it may lead to failure in attracting new customers and retaining existing customers. If the marketing and advertising programs of Burger King are unsuccessful, the results of operation could be materially adversely affected.
Conclusion
Burger King operates in a highly competitive environment. The treath of competitors to Burger King is very high and there are other factors that affect the business. While its competitors are employing almost the same strategies that Burger King is employing it is important to build a point of difference that will set Burger King apart from them. Burger King is known for its innovative and quality products, high standard service, and operational excellence. In order to remain competitive Burger King must differentiate itself from its competitors. This can be done through differentiatiation of products. Burger King must also explore new markets and take advanatge of new opportunities. Burger King must maintain ots global perspective and continue with its market expansion strategies. The changing consumer preferences and demands also needs to be satisfied. In order to do that, Burger King must develop a diverse product line.
References
All Hail the King, Burger King Annual Report 2006, Burger King, viewed 05 May, 2008,
<http://media.corporate-ir.net/media_files/irol/87/87140/BKCAR2006.pdf>.
A World of Growth, Burger King Holdings, Inc. Annual Report 2007, Burger King, viewed 05 May, 2008,
<http://media.corporate-ir.net/media_files/irol/87/87140/2007_AR.pdf>.
Ansoff, I 1965, Corporate Strategy: An Analytic Approach to Business Policy for Growth and Expansion, McGraw-Hill, New York.
Felsted, A 1993, The Corporate Paradox: Power and Control in the Business Franchise, Routledge, London.
Proctor, T 2000, Strategic Marketing: An Introduction, Routledge, London.
Reid, G C, Jacobsen, L R, and Anderson, M E 1993, Profiles in Small Business: A Competitive Strategy Approach, Routledge, New York.
Reiter, E 1996, Making Fast Food: From the Frying Pan into the Fryer, Mc Gill – Queen’s University Press.
0 comments:
Post a Comment