Burger King is a company that has shown consistent growth and success since it was founded and currently has a market presence in more than one hundred countries. In the US market the chain has operations in all the states and runs over 10,000 restaurants. The company offers a good selection of fast foods in its menu starting with its flagship Whopper sandwich as well as a variety of burgers, beverage servings and others food offerings. The company’s principal office is domiciled in America in the city of Miami, Florida in the US. The biggest market is the home country of the US but has significant activity in markets in all the continents across the globe. The company is placed in the second position in the US market behind market leader which is MacDonald’s. The need to maintain a solid market position calls for an analysis of its present strengths and weaknesses and identify areas for improvement in order to maintain steady growth in the future.
.The background of Burger King is not complete without a brief history of its founding. Burger King can be traced to the year 1954 when it was founded by two businessmen, James McLamore and David Edgerton. The company under their leadership grew nation-wide and was later sold to Pillsbury in 1967. The company by this time was a well recognized brand and was growing exponentially and was well poised to become the market leader in the US (Barnes Report, 2015). McLamore and Edgerton were the first to innovate the idea of offering dining rooms in the US and also leveraged their growth on advertising using the new emerging media.
The two founding businessmen saw the opportunity for growth by franchising as the best way to move the company forward (Professional Services Close-Up, 2012). The franchisee was sold the rights to trade under the Burger King logo and this resulted in a massive growth in markets outside of the US. The leadership under Pillsbury brought sharp differences with franchises that were operating albeit with lower standards than expected by the new owner. The Pillsbury management enforced stricter standards of operation for the franchise holder with new contracts specifying new operational guidelines that had to be followed.
Grand Metropolitan acquired Burger King in 1989 which ran the company until 1997 when it merged with Guinness. The internal restructuring at Diageo which was the holding company forced it to sell Burger King in 2002 to TPG capital which oversaw its transition to a publicly listed company (Morrison, 2012). The company again changed ownership in 2013 to 3G capital of Brazil which still holds the current majority shareholding.
The personnel structure at Burger King is centered on a global model that is centralized. The company has a central structure that at the core has a management that is tasked with making the major strategic decisions that affect the company. The central control emphasis approach is supported by geographic diversified divisions that help the overall objective of having effective personnel management. The company has four main geographic divisions which operate in a semi-autonomous structure but are under the overall control of the North American office. Within the organizational structure is the specialization of operating with functional groups that deal with legal matters, IT infrastructure and human resources management. The advantage of using the centralized system of personnel management is that there is a strong overall control across the company that gives the geographic divisions the latitude of operating and making key decisions that affect their markets. The company is competitive in its salary that is accompanied by other benefits such as regular in-house training.
The financial performance at Burger King has been consistently strong over the years due to its strong positioning in the market. The financial report for the company for the years 2010 to 2013 is reflection of the strength of its selling brands (Anon, 2017) which guarantees strong revenue flows. The strong performance in the company is a result of a robust marketing campaign that results in the company products getting higher visibility in the market. The company also makes use of its internal capital surplus to run its operations with minimum use of financing from financial institutions which tends to be more expensive.
The central aim of the company is to provide food that is nourishing with a wide variety for its consumers to choose. The vision of the company is to promote the culture of excellence that is embraced within the organization and the objective to be the best in the fast food industry. The mission statement forms the platform of the organizational culture of being customer oriented (Global Fast Food Market, 2014) with the right pricing, excellent service and an attractive eating environment to attract loyal clients. The consideration of the customer is the main driver towards corporate excellence. The company works to employ the best people in the industry, provide the best burgers in the world and have the most profitable and flexible franchise system in the world. This will result in a strong business model that is competitive.
The analysis of the external challenges facing Burger King is important so as to arrive at recommendations that would be beneficial to the Company.
PESTLE: The political analysis of Burger King is from the government support that actively encourages growth and expansion into new markets across the world. Political neutrality and running a policy of being apolitical in its foreign operations should be part of the policy statement of the company to give direction to the managers running the operations abroad (Min and Min, 2013). Political goodwill from the leadership of the host nation will ultimately translate to economic goodwill and capital for the company.
The economic consideration is the strength of the local economy in the country in which it is based. A strong economy has to be balanced with the prevailing foreign remittance regulations which may affect its profitability if the profits cannot be remitted back home. Higher economic growth in markets outside the US is an opportunity for the company to utilize. The removal of tariff barriers through trade agreements will also lead to a more robust performance for the company.
The social consideration is to put emphasis on the health consciousness of its consumers which can be an opportunity as well as a threat (PR NewsWire, 2014). A strong CSR is necessary as the company cannot operate within a community which is hostile to the company as a stakeholder and steward of the resources the company will use in running it’s operations. Taking the perspective that the success of the company is attached to the welfare of the community and the workers will help the company achieve greater success. A decision to increase support for animal rights can work to its advantage since most of its key product offerings are made with meat and meat products. The company should train local employees with the view of using them as part of the management. A program of trainee management for the local employees would make the workers feel secure by having locals in the management positions as opposed to seeing the company as a global hegemony. Giving scholarships (Food and Beverage Close-Up, 2016) to bright but needy students is another approach that the company can take to strengthen its CSR.
The technological consideration is to invest in the new technology which would to a more efficient production within its factories (Burgos, 2013). Available automation technology would reduce the amounts of resources that are necessary for Research and Development for automation. Inefficient technology in its production facilities will increase the production cost and make it less competitive which will lead to lower profit margins. Use of technology especially a strong cloud based systems will make the integration of all its operations to be much easier to manage.
Ecological consideration is to try and mitigate environmental degradation with responsible use of natural resources in its operations. The company should promote an organizational culture of low-carbon emission as a lifestyle.
The legal consideration is related to their ability to meet regulations on import and export across all their markets. The company must also operate within the stipulated environment protection laws of each country where it operates. The company must also ensure that it addresses the issue of use of GMO in its products (Drezner, 2013) and the laws that are attendant to it in each country where it operates.
Porters 5: The Porters 5 theory is used to give an analysis of three criteria to understand how the company can improve its operations. 1. The potential of new companies entering the market (moderate): The threat to the position of Burger King by new companies entering the market is moderate, but instead the focus of the company should be on dislodging the main competitor MacDonald’s from the first position as well as warding off Wendy’s from encroaching on its market share. 2. Industry competition is highest in the burger category both from the old established companies and new entrants. The competition from other brands can be overcome by distinguishing it from its close competitors on the strength of its quality. 3. To reduce the bargaining power of the customers the company can innovate substitutes that are cheaper as well as to moderate the ability of customers switching to other companies offering similar products.
SWOT: The strength of Burger King is that it has a strong financial standing and a healthy financial record sheet. The majority shareholder 3G Capital can also inject resources necessary for acquisitions without resorting to the financial markets to raise capital. The other strength is the strong brand name and image that the company has developed over the years. The company also has strong market penetration in the fast-food industry which is a key strength. The weakness is that the products of the company can easily be imitated and sold by other companies. The company also very levels of control on their franchisee and this may compromise the overall quality of the brand. Opportunities are available to diversify its current product offerings and to domesticate the new product offerings. The North American market has almost reached saturation levels and new markets (Investment Weekly News, 2012) would be the future drivers of growth. The threats that it faces is the new companies that offering food that is imitated from Burger King as well as the changing consumer preference for healthy food.
The core competence of Burger King is in the strong brand name that is easily recognized as well as the large network of distribution that is efficient in delivering the company products across all the markets where it operates. The Burger King brand is synonymous with quality and therefore would be the preference when making the choice of which company to patronize. The investment in research ensures that the company has the ability to deliver turn-key new products that suit the changing customer taste (Keiningham, Gupta, Aksoy and Buoye, 2014). The Company has invested heavily in its research and development department to ensure it maintains consistency in all the products offered.
The marketing approach taken by Burger King is on four key areas (4Ps) which are Product, Place, Promotion, and Price. The product mix approach is to market all the available products as bundles of value meal from which the customer can choose from. The Place perspective is to market the physical locations using the company restaurants (signage), the website and mobile applications that can locate the closest (Frykman and Tolleryd, 2012) Burger King Restaurant in the vicinity. The promotional mix is by using both traditional and new media of advertisement. The company uses billboards, television as well as tie-ins with film producing houses such as Walt Disney (Marketing Weekly News, 2014). The pricing is based on the current prices of its close competitors as well as the industry patterns of supply and demand. A good example was when they offered value meals that were evenly matched with the prices offered at Wendy’s.
The following are suggestions that the company can take and implement in their operations in the future to improve the performance of the company.
The operations of Burger King over the years have shown consistency in performance and helped to build a strong brand that is patronized by loyal customers globally. The influx of new smaller companies that are offering similar food which are at times imitation of Burger King are eating away the profits and market share of Burger King. At the same the company is facing competition from the traditional big players such as Wendy’s. The company has an organizational set-up that is centralized but also gives its divisions a measure of independence. An analysis of its strengths and weaknesses has identified some areas the company can improve on for future action. The company can improve its approach to advertising so that it can posit a positive and strong image for its brand. The Company still maintains strong economic fundamentals in its operations and will continue grow in the years to come.
References
“Burger King McLamore Foundation Commences Enrollment for 2017 Burger King Scholars Program”, 2016, Food and Beverage Close – Up,
“Burger King Worldwide, Inc.; BURGER KING(R) Restaurants Named Title Sponsor of First Ever “State Champions Bowl Series””, 2014, Marketing Weekly News, pp. 76.
“Burger King Worldwide; Burger King Worldwide Continues Its Aggressive Global Expansion Plans with a New Franchise Agreement in Colombia”, 2012, Investment Weekly News, pp. 297.
2016 U.S. Fast Food Restaurants Industry-Industry & Market Report2015, Barnes Reports: Bonita Springs.
Anon, (2017). [online] Available at: https://w.nasdaq.com/markets/ipos/co [Accessed 25 Apr. 2017].
Drezner, D. (2013). America’s fast food for thought. The World Today, 69(3), 28-30. Retrieved from https://www.jstor.org/stable/41963165
Burgos, S. 2013, “Corporations and social responsibility: NGOs in the ascendancy”, The Journal of business strategy, vol. 34, no. 1, pp. 21-29.
Gandhi, H.V. 2014, “FRANCHISING IN THE UNITED STATES”, Law and Business Review of the Americas, vol. 20, no. 1, pp. 3-24.
Global Fast Food Market – Industry Analysis, Size, Share, Growth, Trends, and Forecast, 2013 – 2019 2014. New York.
Global Vending Machines Market Size and Forecast to 2017 2014, New York.
Keiningham, T., Gupta, S., Aksoy, L. & Buoye, A. 2014, “The High Price of Customer Satisfaction”, MIT Sloan Management Review, vol. 55, no. 3, pp. 37-46.
Min, H. & Min, H. 2013, “Cross-cultural competitive benchmarking of fast-food restaurant services“, Benchmarking, vol. 20, no. 2, pp. 212-232.
Morrison, M. 2012, “Is Burger King poised to retake second place from Wendy’s?”, Advertising Age, vol. 83, no. 22, pp. 2-n/a.
Frykman, D., Tolleryd, J.(2012).The Financial Times Guide to corporate valuation. UK: Pearson.
Pomposo, A. (2014). What is the Secret to MacDonald’s Global Branding Success? Blur Blog. https://www.blurgroup.com [Accessed 21 April. 2017]
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