BURGER KING (Case Analysis Final)

VIEWPOINT This case was analyzed from the point of view of Burger King’s Marketing Executive. TIME CONTEXT The case happened in September of the 2010.

STATEMENT OF THE PROBLEM •

What measures could Burger King do to dethrone McDonald’s as well as hold off the challenge of a number of other chains that were growing in size and competitive power?

•

How to reimage Burger King from creepy to hip?

STATEMENT OF THE OBJECTIVES •

To boost the image/brand image of the company.

•

To provide measure(s) to improve the company’s performance in the market.

AREAS OF CONSIDERATION

STRENGTHS 1. Strong market position. a. BKC is the world's second-largest Fast Food Hamburger Restaurant (FFHR)

chain as measured by the total number of restaurants and system-wide sales. The company’s specialty is burgers and fries which it sells through over 12,150 flagship fast-food restaurants. The company leverages its strong market position to gain economies of scale and increase its bargaining power. b. BK has more than 12,150 restaurants in all 50 states and in 76 countries and U.S. territories worldwide.

2. Strong brand equity.

a. Burger King has fantastic brand equity, and it's already a competitive concept in America due to its long history, its size and its muscle," restaurant industry consultant Allan Hickok said. b. Burger King serves one of the world’s favorite and well-known brands including

the Whopper sandwich, the Tendercrisp Chicken Sandwich, Chicken Tenders and the BK Veggie Burger. In 2005, Brandweek magazine ranked Burger King at 15 among the top 2,000 brands of the US. Overall, the company’s established brand image has enabled it to penetrate various global markets and compete with regional player effectively. c. Burger King’s Whopper is known for its quality and it is the best known brand in fast food. The Whopper (and by extension, Burger King) presents a well integrated “package”, where product attributes, benefits, values and personality are distinctive, positive and mutually reinforcing.

d. The most notable aspect of Burger King is the extent to which its identity is tied to a magnet menu item, the Whopper. ◦

BK is prominently identified as “The Home of the Whopper”, and the two are inexorably linked.

◦

BK’s menu is “Whopper-centric”.

◦

The BK marketing model is essentially “brand as ‘star’ vehicle”, with the Whopper as the anointed star.

◦

The Whopper is a well qualified image leader (a true “signature product”) for Burger King in several respects:

◦

It has a proprietary name with compelling image-oriented as well as attributes oriented associations.

◦

It offers a distinctive product experience (flame broiled, big, prepared to order) versus its main competition.

3. Strong brand financial performance.

3G

Capital.

Because

of

the

popularity

and

capability

of

financing

firms/companies by buying shares, BK should allocate and plan well the profit that they will get from 3G Capital. 4. High quality products. a. BK quality assurance starts from the initial stage. BK ensures that products are of

the highest quality during receiving deliveries as well as during restaurant

operations; consistent checks are made to guarantee customers receive the best quality, wholesome, safe food. 5. Wide variety of food products.

The company’s products and services are categorized under the following different segments: o Sandwiches

o Cookies

o Hamburgers

o Pies

o Cheeseburgers

o Shakes

o Salads

o Fries

o Hash browns

o Onion rings

o Coffee

o Soft drinks

o Juice WEAKNESSES 1. Heavily concentrated in the US.

a. Though the company operates in 65 countries, its operations are heavily concentrated in the US and Canada. About 65% of its restaurants are located in the US and Canada. Concentration of operations in one geographic area increases company's exposure to local factors such as adverse economic situation, labor strikes and changes in regulations that can affect its operations.

b. Concentration of operations in one geographic area increases company’s

exposure to local factors such as adverse economic situation, labor strikes and changes in regulations that can affect its operations. 2. Few corporately owned stores. a. Not enough corporately owned stores mean it relies heavily on franchisees to

execute its brand promise. 3. Inconsistent management and strategy. Changing Executives. a. Management lacked focus and direction and has struggled with marketing mix

decisions. Franchises became confused and angered, service was slow and food preparation wasn't consistent. Burger King lost its core product-flame broiled burgers, made the way the customer wanted them. b. Burger King Corp. was founded in Miami in 1954 by James McLamore and David

Edgerton, a year before Ray Kroc opened his first McDonald's in suburban Chicago. The Whopper was introduced in 1957. In 1967, Burger King was acquired by the food conglomerate Pillsbury. In 1988, Pillsbury was bought by Grand Metropolitan PLC, a British conglomerate. In 1997, Grand Metropolitan merged with Guinness to create Diageo. With each merger, even as Burger King grew, it became a smaller piece of the overall company. Ultimately, it became an afterthought. Soon after the merger, Diageo decided that Burger King no longer belonged. In 2000, Diageo officially placed Burger King on the auction block. The company was finally sold in 2002 to a consortium of private equity investors—

Texas Pacific Group, Bain Capital, and Goldman Sachs Capital Partners—for $1.5 billion. 4. Narrow-based target market. a. Burger King is pinpointing its target market, and is currently trying to hit a bull’s

eye with a new, focused marketing approach—to both consumers and potential franchisees. BK’s primary target market is age 18 to 34 years old and 4 to 15 years old. b. While Burger King’s consumer marketing will attempt to focus its efforts towards more specific audiences—like children and ethnic markets—the company’s marketing target is a lot narrower when approaching potential franchisees. 5. Confusing ad campaigns. a. Ineffective ad campaigns were one of the problems facing BK. Burger king lost its core product-flame broiled burgers, made the way the customer wanted them. Many in store promotion also failed. They fail to efficiently promote products, because they are too busy trying to promote “The King” character. b. The Burger King "I like square butts" commercial. I found that offensive because it was promoting a Sponge Bob kid's meal. I just didn't think that was appropriate for little kids, especially when you know the real lyrics to the real song. In the commercial, the Burger King icon was measuring the square butts of other girls. A lot of people were offended over this commercial.

c. Ambassador to Spain because of a new ad campaign running in that country

for

the “Texican

a

product

Whopper”.

called

Ambassador

Jorge Zermeno wrote to Burger King in Spain

to

denounce

what

he

called “denigration” of the Mexican flag.

“This

advertisement

image

of

improperly

our

denigrates

country

Mexico’s

and

national

the uses flag,”

Jorge Zermeno wrote in a letter to Burger King in Spain, the Reforma newspaper reported on Monday. The ambassador contacted the local offices of Burger King after he saw the posters in Spain, Reforma said. The burger is only available in Europe, according to the paper. Mexico has strict laws prohibiting the defamation of the flag, Zermeno said. He asked Burger King to cancel the ad campaign that “offends Mexicans and Mexico.” 6. High prices. a. Another thing that hurt them was the fact they didn't lower prices to keep competing with their competitors this led to a below average sales growth.

OPPORTUNITIES 1. New product development, particularly around breakfast. BK value menu featuring six items at less than $1, breakfast sandwiches, and specialty burgers. To create a consistent brand image, BK needs to extend their menu which will show the consumer that BK burgers are big, high quality, juicy and satisfying burgers. BK needs to put the focus back on the food and show that it is well prepared, satisfying and desirable. 2. Keep building its brand through ad campaign, such as the Whopper virgins. BK can use the flamed-broiled and whopper in developing their brand image. Consumers associate BK with food that ignites the senses. Consumer needs the convenience of food and not a fast food that brand himself as cool but creeps the people. 3. Expansion into emerging markets. BK can expand to Asia wherein people are already into fast food restaurants. High levels of consumer demand, coupled with relatively low levels of competition, offer a lucrative opportunity for many franchisors to expand into emerging markets. Expansion via franchising is an attractive option for companies looking to expand abroad without incurring high costs. Additionally, international franchisees already possess many inherent qualities needed to succeed abroad, like the ability to speak the native language. 4. Wide-based target market.

BK can change their target market. Can extend their target market to families which are the target market of McDonalds. If BK wants to close the gap with McDonalds, they can use the “copy cat strategy”. THREATS 1. Changing consumer habits towards healthier food choices. Changing consumer habits towards healthier food choices is a large external factor for a company that specializes in hamburger. A shift away from hamburgers could hurt earnings and revenue. 2. Intense competition from McDonald’s, other restaurants and even retailers. The company's competition in the broadest perspective includes restaurants, quick service eating establishments, pizza parlors, coffee shops, street vendors, convenience food stores, delicatessens and supermarkets. 3. Increasing labor costs putting pressure on bottom line margins. 4. The major competitor McDonald is way ahead in market share. ASSUMPTIONS Company •

The company generates revenues from three sources: sales at company restaurants, royalties and franchise fees and property income from certain franchise restaurants that lease or sub lease property from the company.

•

The chain offers a range of burgers, sandwiches, salads and breakfast items. The

•

Whopper sandwich is its largest-selling product. Burger King was the first fast-food chain to introduce drive-thru service which now accounts for a majority of the company’s business.

•

Under the franchise arrangement, the franchisees invest in the equipment, signage, seating and decor, while the company owns or leases the land and building.

•

Franchisees pay the company service fees and rent for premises. The company and its franchisees as well as affiliates purchase food, packaging, equipment and other goods from approved suppliers.

Operations •

Burger King has more than 12,150 restaurants in all 50 states and in 76 countries and U.S. territories worldwide. They support every franchisee by offering world class support services, including training, operations, and marketing.

•

Approximately 90 percent of BURGER KING(R) restaurants are owned and operated by independent franchisees, many of them family-owned operations that have been in business for decades.

The Industry •

The fast-food industry is a segment of the food service industry.

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Sales for just the hamburger part of this segment are growing rapidly.

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The phenomenal increase is facilitated by an annual 10% growth in the amount that Americans spent on meals away from home.

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The fast-food industry is composed of numerous national and regional chains.

Competition •

McDonald's – Largest competitor in fast food hamburger restaurants in terms of number of locations. Second largest competitor in fast food restaurants. o “I’m loving it” o Target: adults, children, and families o Strengths: 

Consistency



Familiarity



Happy Meals



McCafe

o Weaknesses: 

Losing Hispanic market



Lacks product innovation

•

Subway – Largest single brand competitor in fast food restaurants in terms of number of locations. o “Eat Fresh” o Target: mothers with children and health-conscious adults o Strengths: 

Healthy alternative to fast food



$5 foot long

o Weaknesses:

•



Lacks variety vegetarian options



Lacks specialty drinks

Wendy's – Third largest competitor in fast food hamburger restaurants in terms of number of locations.

•

Yum! Brands – largest Company in fast food restaurants in terms of number of locations.

Sales Burger King’s sales have been falling steadily over recent quarters and were down 2.3% in the year to the end of June, while profits were flat compared to the same period a year earlier.

Marketing

Advertising Campaign

Have it your way

Battle of Burgers & Broiling Vs Frying

Marketing strategy Focused on sending message that burgers are made according to customer requests not standardized Focused on its USP (flame broiled burgers) & advantages over McDonalds

Search for Herb

Disguised strategy

We do it like you’d do it & Break the rules

Again focused on its USP

BK Tee Vee

Target audience: teenage males

Result & Flaws(if any)

Market share increased from 4% to 8.7% Campaign failed as the customers focused on “herb” rather than the product Distraction from the intended message Uncomfortable brand association with a nerd personality Confusing situations, bad humor and acting resulted in failure of campaign Failed campaign as existing customer segment (parents & commuters) didn’t like it

In 1982 'Battle of the burgers' and 'Aren't you hungry for a Burger king now?' were the slogans used. In 1983 'Broiling vs. frying' and 1985 'The big switch'. All these ads throughout the years helped increase market shares from 7.6% to 8.3% from 1983 to 1985. 'Search for herb' was a slogan used by BK about a person that has never

tasted a whopper burger, this campaign was supposed to increase market share by 10% but in reality only increased it by 1% it was a disaster. In 1986-1987 'this is a burger king town' and 'best food for fast times' brought a lot of attention to the company. In 1988 'We do it like you do it' was used often but a year later they came out with two new slogans which confused the customer. In 1989 'Sometimes you gotta break the rules' and 'BK tee vee' with MTV and Dan Cortese with 'I love this place'. This was another huge setback for BK because people on the go and parents found this ad loud and irritating. BK at this time has failed to establish a solid image that would differentiate it from its competitors. Ads if anything only confused consumers as to what advantages BK offered. In 1993 it had a market share of 6.1% were McDonalds had 15.6% and BK's sales were growing slower than its rivals.

Burger King = High Quality, High Price

McDonalds = Low Quality, High Price Target Market

18-34, Value-Concius, skew Male: •

Looking for genuine burger

•

Desires to be full

•

Hate cheap tasting food Kids 5_14

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Enjoy being engaged in the dining experience.

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Enjoy specialized kids meal.

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Enjoy familiar foods.

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A key part of the dining experience for families.

TRENDS Spending Trends •

As of the end of 2008 the economic downturn, leads to lower consumer spending.

•

Fast food restaurants become alternatives to full service restaurants because they are cheaper

Lifestyle Trends •

Home cooked meals are becoming less prevalent

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Changes in lifestyle such as homes with two working parents, an aging population, increased hours spent working, and an increase in commuting time are driving more consumers into the restaurants.

Demographic Trends •

Demographic changes have been pushing consumers towards fewer meals, a preference for less meal preparation time, and more frequent snacking in lieu of sitdown meals.

•

Low income neighborhoods have a higher density of fast-food restaurants.

Market Volume Forecast In 2011, the global fast food market is forecast to have a volume of 86.4 billion transactions, an increase of 7.6% since 2006. (Datamonitor) Market Value Forecast In 2011, the global fast food market is forecast to have a value of $125.4 billion, an increase of 22.2% since 2006. (Datamonitor)

ALTERNATIVE COURSES OF ACTION 1. Play it safe strategy. Make some appealing advertisement that makes

fans feel important. A market follower is a firm in a strong, but not dominant position that is content to stay at that position. The rationale is that by developing strategies that are parallel to those of the market leader, they will gain much of the market from the leader while being exposed to very little risk.

The advantages of this strategy are: • no expensive R&D failures • no risk of bad business model • “best practices” are already established •

able to capitalize on the promotional activities of the market leader

• no risk of government anti-combines actions • minimal risk of competitive attacks •

don’t waste money in a head-on battle with the market leader

Advantages: Burger King fans will be flattered because BK management give them importance and because of that, the loyalty of the fans will be lastly. At the same time, they will attract more customers and the BK fans will be happy and feel important. Disadvantages: Costly at the same time, it will need some time to be perfect before it will appear to the media. 2. Continue making innovative products. Advantages: More customers will get into them and because of that, their profit/sales will increase. Disadvantages: It will be costly and it will take several time of brainstorming if the product that they will introduce will be a big boom to the customers/public. 3. Try to lower their price. Advantages: Number of customers will increase at their sales/profit may be increase due to the volume wise buying. Disadvantages: This is partly hard to the management because this is new to them. And it will have a fear attach.

DECISION CRITERIA

ACA 1 ACA 2 ACA 3

TIME 2 (LONG) 2 (LONG) 1 (LONGER)

COST 2 (MODERATE) 2 (MODERATE) 1 (LOW)

RESOURCES YES YES YES

RISK 1 (LOW) 2 (MODERATE) 1 (LOW)

RECOMMENDATION We recommend ACA 1: Play it safe strategy. Make some appealing advertisement that makes fans feel important. It may take long but BK has lower risk with this strategy. BK doesn’t have to be number one, they need to build first a constant brand image and differentiation. They need to make their ads less confusing. They should avoid creepy and offensive ads. If they want to earn more revenue, we suggest that BK should copy the advertising scheme of McDonalds. Specific recommendation: •

Focus on its two basic strengths – ‘flame boiled burgers’ and ‘food made the way customers want’

•

Do operation analysis of the in-store work and speed up the system e.g. introduction of multiple counters for taking orders.

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Introduce and enforce centrally prepared detailed food preparation guidelines to bring in uniformity and consistency in the taste, ingredient proportion and overall quality of the food.

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Remodel the less aesthetically appealing stores

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Re-evaluate promotional offers. Introduce value meals with discount on bigger orders

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Introduce home delivery facility wherever possible.

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Retain ice-creams even if the erstwhile menu is pruned. This is because the major ice-cream brands in US such as Baskin Robbins do not have the kind of extensive network of stores like Burger King. Hence it is possible to gain a huge chunk of shares of ice cream market in the strategically favorable locations OR Enter into a tie-up with ice-cream brands like Dunkin Donuts has done with Baskin Robbins at some stores.

•

Conduct an extensive audience analysis to assess the image of the company vis-àvis its competitors and based on it design the communication strategy.

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If its proved that many customers viewed it as a low quality product maintain low profile temporarily to identify the root cause of bad image and address it. The causes may be anything from bad service to constant image change, but it is necessary to address it before launching another campaign

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Advertisements should be relevant and succinct. Creativity and humor are welcome but no beating around the bush.

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Brand images tend to be sticky. Try to stick to a consistent brand image instead of changing continuously which confuses the customers.

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Continue hands-on approach with franchisees. Establish a continuous feedback mechanism from customers and franchisees and react on the feedback

ACTION PLAN

OBJECTIVE SETTING Strategy

Marketing

Play it safe strategy

BUDGET DECISION

Differentiation Strategy

MESSAGE DECISION OR MEDIA DECISION

Global strategy

Campaign

Global strategy

Campaign Evaluation

OVERALL EVALUATION Along with these steps BK should also remember to inform, persuade, and to remind. Strategy Increase Market Share by: •

Re-positioning BK as a “progressively responsible” Fast-Food Hamburger Restaurant.

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Increase corporate influence and initiatives over franchise operations.

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Streamlining business model to achieve a more product-centric focus.

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Expanding Globally through promotion of brand name.

Differentiation Strategy •

Green Team Campaign •

Recyclable paper products

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Quality, Sustainability, Responsibility.

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Contemporary counter-front and open view into kitchen from anywhere in restaurant.

•

Restaurant Interior/Exteriors gives “Organic Feel”

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Focus on Freshness and Quality of Beef, Produce, Beverage.

Global Strategy •

Focus advertising efforts on new target market.

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Promote healthy BK Kids meals.

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Implement US Standards for emerging global franchises.

Marketing Strategy •

Change consumer attitudes 

Change company’s perception of “unhealthy” and “creepy” to “healthy” and “hip”

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Position Burger King as a destination 

A place where you can be yourself with your friends and escape from everyday stressors

Budget Decision •

BK has strong financial capabilities.

•

You don’t have to make use of a lot of money just for the ads. Make it simple and relevant to what you want people to remember when they here the words “Burger King”.

Message Decision or Media decision •

Who is the target market? o 18 – 34 years oll skew males. o Don’t alienate women.

•

Make use of frame boiled and whopper in order to develop a constant brand differentiation.

Campaign Evaluation •

Was it a Success or Failure?

Final Statements We figured Burger King to advertise the Whopper, but throughout the past years they didn't do this. We figure the whopper or the flame broiled ads would have been more productive and probably would have resulted in greater sales margin. I also feel that the ads should have distinguished themselves from what other ads by letting the people know that burger king wasn't just another standardized burger. Throughout the years, BK tried to establish the market by becoming someone they weren't. I feel the ads used by BK should have been simple and to the point. This would have caused less confusion and more honesty with the customer; this is because you don't want to advertise a pizza or a taco if you’re selling burgers. Other objectives BK wanted were to target teens with the MTV approach. This also failed because people found it loud and annoying. Then they tried a sit in type of restaurant, which also failed because people

want a fast food low price meal not a high priced, sit down meal. Advertising is any paid form of non personal presentation and promotion of ideas, goods or services by an identified sponsor. Advertising is a good way to inform and persuade the customer. Advertising objectives are based on past decisions about the target market, positioning and target mix. They tried to be someone they weren't with slogans like 'search for herb' in 85 and many others like 'BK Tee Vee' trying to persuade the younger generation and 'Sometimes you gotta break the rules'. These slogans and more tried to persuade the consumer. In reminding their customers BK has done a good job. They've at least expanded nationally and internationally and always have commercials everywhere with a juicy whopper on the screen, reminding the viewer that BK is the only place a whopper is made.