CASE 18 Burger King

CASE 18: BURGER KING (MINI CASE) TABLE OF CONTENTS

1.

Case Summary ................................. ................ .................................. ................................... .................................... ................................... ................................... ................................ .............. 1

2.

SWOT Analysis ................................. ................ .................................. ................................... .................................... ................................... ................................... ................................ .............. 2 A.

Strength: Company Internal .................................. ................. ................................... ................................... ................................... ................................... ....................... ...... 2

B.

Weaknesses: Weaknesse s: Company Internal .................................. ................. ................................... ................................... ................................... ................................... ................. 2

C.

Opportunities: Opportu nities: Environment External .................................. ................ ................................... ................................... .................................... .......................... ........ 3

D.

Threats: Environment Environme nt External ................................... .................. ................................... ................................... ................................... ................................... ................. 4

E.

EFE Matrix ................................... .................. .................................. ................................... .................................... ................................... ................................... ................................ .............. 4

F.

IFE Matrix ................................. ................ ................................... ................................... ................................... ................................... ................................... ................................... ................. 5

G.

CPM Matrix ................................. ................ .................................. ................................... .................................... ................................... ................................... ................................ .............. 6

3.

Problem Statement .................................. ................. .................................. ................................... ................................... ................................... .................................... ....................... ..... 7

4.

Alternative Alternat ive Strategy ................................. ................ .................................. ................................... ................................... ................................... .................................... ....................... ..... 7

5.

Evaluation Evaluat ion of Alternative Alternat ive Strategy .................................. ................. ................................... ................................... ................................... ................................... ................. 8

6.

The Best Strategy and Justification Justifica tion ................................. ................ ................................... ................................... ................................... ................................... ................. 9

7.

Implementation Implement ation ................................. ................ .................................. ................................... .................................... ................................... ................................... ........................... ......... 10

a)

Short Term ................................... .................. ................................... ................................... ................................... ................................... ................................... ................................. ............... 10

b)

Long term .................................. ................. ................................... ................................... ................................... ................................... ................................... ................................... ................... 10

Case 18: Burger King (Mini Case)

1. Case Summary

Burger King previously called as Insta-Burger King, it was the second largest hamburger franchise chain in the world after McDonald. As per June 2010, it is recorded that burger king has 12’  12’ 174 174 outlets in 76 countries, which is 66 percent of them are in the US and 90 percent are privately owned and operated worldwide. This fast food chain was established by Keith Kramer and Matthew burns on 1953. In 1955, after facing financial difficulty this company was sold to Miami based franchised and being renamed Burger King by its new owner called James Mclamore and David Edgerton. In 1989, this company bought by Deigo a British Spirit Company. Under Diego management BK has fall off in the business because of poor performance. To avoid from further loses, Diego has sell it to a partnership private equity firm led by TPG capital in 2002. Burger King is the Second largest chain of hamburger fast food f ood restaurant in terms of global location, behind industry in dustry bellwether McDonald’s. McDonald’s . Based on resources, company income was generate mainly from three sources that is retails sales at company owned restaurant, royalty payment from sales and fee from franchise and also property income from restaurant leases to franchisees. Management has used a business strategy that can help boost sales and production performance and investing on promoting the brand. The company also specifically plan on growing its chain and focus on international expressions. Expansions are done only at selected market for example a country that has potential on positive growth and attractive new market for instants the Middle East or Asia markets. According to industry analysis, burger king share price had fallen by half from 2008 to 2010, this is according to them burger king is having significant management problem.

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Case 18: Burger King (Mini Case)

2. SWOT Analysis  A. Strength: Company Internal 1. Burger King Second largest Fast Food Hamburger is known for its strong brand: brand: Throughout the years it has survive in the industry and has built a strong brand in the US and worldwide since was founded in Florida in 1953. 2. Solid market position: position : Which measured by the total number of restaurant and system wide sales as well as Burger King also being the second largest fast-food hamburger restaurant chain in the world. 3. Lower capital requirement:  requirement:  This is provide burger king with a strategic advantage as the capital required to grow and maintain the burger king system is funded primarily by franchisees. When compared to competitors causing burger king to have high percentage of franchise restaurant (90%). 4. Owned distribution cooperative: which cooperative: which is, restaurant service Inc. that manage and act as the purchasing agent for the Burger king a system in the U.S. this ensure items move smoothly and efficiently from supplier through regional distribution centers and each restaurant across the country. 5. Long term exclusive contracts: Burger contracts:  Burger King have exclusive contract with the other strong brand name which is Coca-Cola and with Dr. Pepper, seven-up, to purchase soft drinks for its outlet. 6. Boost efficiency by reduce cost: cost: Burger King installing point-of-sale cash register system and flexible batch broiler to maximize cooking flexibility and facilitate a broader menu selection while reducing energy cost.

B. Weaknesses: Company Internal 1. Rely on franchisees: franchisees: The revenue sources is two from its three source of revenue. 2. The changes of management:  management:  over the years may undermined its ability to establish and communicate a consistent and motivational vision to its franchisees. For example, when Diageo’s management took over Burger King Business, the performance was poor to the point that major franchises went out of business and the total value of the firm declined.

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Case 18: Burger King (Mini Case)

3. The high percentage of franchise: franchise: cause Burger King to have limited management control. 4. Concentrated in the US: Burger US: Burger King concentrated in the US is 60% and has small or less percent presence internationally as compared to McDonald’s. 5. Unable to adapt suitable marketing strategy:  strategy:   During the fiscal years and marketing to the wrong target market. For example, while McDonald’s strategy is to put more emphasis on woman and older group by offering healthier salads and upgraded its already good coffee, Burger King continued to market to young men offering high calorie burger and advertisement featuring dancing chickens and a  ‘creepy looking’ king. king. This This marketing marketing conc concept not only promotes an unhealthy diet but also targeting the wrong target market, which was the men, that having difficulties and was hit hard on employment and such during the fiscal year. 6. Torn apart its existing sales by too much rely on value meals:  which they sell it in lower price compared to its production cost. Thus, causing them to lose money. 7. High calories food: food: Some food item for example Pizza Burger, contains 2530clories. This served as a concern as Americans opt for a more healthy living.

C. Opportunities: Environment External 1. International Expansion:  Expansion:   The potential growth and new market of other countries led to Burger King to focus on exploring new grounds and international expansion. 2. Developing Health conscious: conscious: Burger King should also take advantage of the growing health conscious community where people are more concern on their health by offering and introducing more healthy items on the menu. 3. The FFHR were projected grow: The grow:  The fast-food hamburger restaurant (FFHR) category in the quick service restaurant (QSR) segment of the restaurant industry were projected to grow 5% annually during 2010-2015. This positive remarks is advantageous to Burger King and a good time to market Burger King Products according to consumer’s consu mer’s needs.  needs. 4. Market Share: Share: Marketing and operating economies of scale made it difficult for new entrant established U.S chains in the FFHR category. With this, burger king 3|Page

Case 18: Burger King (Mini Case)

have the competitive advantage to further increase its market share in the industry.

D. Threats: Environment External 1. The economic recession 2008 to 2010: has 2010: has caused the declining margins in Burger King. 2. Legislation for unhealthy fast food: threatens food:  threatens not only Burger King but the quick service restaurant as a whole. For example, a health reform bill passed by the US congress in 2010 required restaurant chains to list the calorie content of the menu. 3. Competitors: Competitors : Burger King Competitor such as McDonald and indirect competitor such as Taco Bell, KFC, and Pizza Hut etc. Burger King may face other small growing competitors as the barrier for the entry is low.

E. EFE Matrix No 1 2 3 4 No 1 2 3

Opportunities International Expansion. Developing Health conscious. The (FFHR) were projected to grow. Market share. Threat Economic recession 2008 to 2010. Legislation for unhealthy fast food. Competitors. Total

0.20 0.20

3 3

Weighted Score 0.60 0.60

0.10

2

0.20

0.10

2

Weight

Rating

0.20

2

0.20 Weighted Score 0.40

0.10

2

0.20

0.10 1.0

2

0.20 2.4

Weight

Rating

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Case 18: Burger King (Mini Case)

F. IFE Matrix No 1 2 3 4 5 6

Strong brand name. Solid market position. Lower capital requirement. Own distribution cooperative cooperative (RSI) Exclusive contracts. Boost efficient by reduce cost.

2 3 4 5 6 7

4 3 3 3

0.06 0.03

3 3

0.18 0.09

Weight

Rating

Rely on franchise as source of revenue. The changes of management. Limited management control. Concentrated in US only. Wrong marketing strategy. Too much emphasis on value meals. High calorie food.

0.13

2

Weighted Score 0.26

0.09

2

0.18

0.07

2

0.14

0.08 0.10 0.03

2 2 2

0.16 0.20 0.06

0.03

2

0.06

Total

1.0

No 1

0.13 01.0 0.08 0.07

Weighted Score 0.52 0.30 0.24 0.21

Strength

Weaknesses

Weight

Rating

2.6

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Case 18: Burger King (Mini Case)

G. CPM Matrix McDonald’s

Critical Success Factor Brand Name Product Quality Public Image Market Share Price Competitive

Weighted

Wendy Hemberger Weighted

Rating

0.15

4

0.6

2

0.30

3

0.45

0.09

2

0.18

3

0.21

3

0.21

0.07

2

0.14

2

0.14

3

0.24

0.10

4

0.40

3

0.30

3

0.30

0.05

3

0.15

3

0.15

2

0.10

Innovation

0.04

3

0.12

2

0.08

2

0.08

 Advertising

0.06

4

0.24

2

0.12

3

0.18

Market Expansion Financial Position Sales Distribution Strategic Partnership and  Alliances Number of Logistic Geographic coverage

0.08

4

0.32

4

0.32

4

0.32

0.06

4

0.24

2

0.12

3

0.18

0.08

3

0.24

3

0.24

3

0.24

0.04

3

0.12

2

0.08

3

0.12

0.10

3

0.30

3

0.30

4

0.40

0.08

3

0.24

2

0.16

4

0.32

1.0

3.29

Score

2.52

Rating

Weighted

Weight

Score

Rating

Burger King

Score

3.14

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Case 18: Burger King (Mini Case)

3. Problem Statement  “Poor  “Poor leadership and management, and loss of brand vision that leads to weak marketing strategies, wrong target market and lack of innovations.”  

Poor Management by its previous predecessor.



Weak marketing strategies and wrong target market.



Lack of product innovations.



Limited management control.



Reliance of franchisees as revenue source.

4.  Alternative Strategy 1. Rebranding Brand is important asset to the company, when company has confident, well-positioned brand, opportunity grows you are perceived as more credible, get more unsolicited leads, close higher percentage of business and can charge more for your services. Rebranding is marketing strategy in which a new name, term, symbol, design, or combination thereof is created for an established brand with the intention of developing a new, differentiated identity in the minds of consumers, investors, and competitors. Often, this involve radical changes to a brand logo, name, and image, marketing strategy, and advertising themes. Such changes typically aim to reposition the brand/company, occasionally occasi onally to distance itself from negative connotations of the previous branding, or to move the brand upmarket, furthermore they may also communicate a new massage a new broad of director wishes to communicate.

2. Setting new product and marketing strategies. Burger King has successfully differentiated dif ferentiated from its competitors when it launched the Have It Your Way advertising in 1974. But the constant take-over of the company has caused it to loose direction of its market segment and target. The inflexibility of its marketing strategies has led to unnecessary menu development and targeting the wrong market. The product development should take into account the current demand of the market. At times like this where the community re more concerns on their health, health , they will think more of their family and protection against aga inst having high calories food. In short, burger king must 7|Page

Case 18: Burger King (Mini Case)

be able create a product that caters the community concerns and needs. Which include more healthy food items on the menu as well as targeting a wider market segments and consumers. The marketing campaign campai gn that will be used must be able to reach certain target group for certain products.

3. Market expansion For the organic growth (slow and steady growth) of the company, Burger King must expand its market to potential countries like l ike to Kuwait, Bahrain. Qatar and united emirates emira tes and South Africa while the existing market should be concentrated more to compete with the rivals. Modernization and the vast cultural impact of western culture to the other parts of the world can be an advantage for BK to expand its market in other market outside Europe. Guerrilla style tactic can be used to open outlets in international major airports. This is easier for BK to reach worldwide market. BK must have an outlet at every airport in every capital around the world for the worldwide expansion.

5. Evaluation of Alternative Strategy

No

Evaluation of  Alternative  Alternative Strategy

Pro 



1

Rebranding 

2

Setting New product and marketing strategies.



New and fresh image of Burger King will be introduced with the new takeover. Can help understanding more of the brand, due to help in hiring more suitable staff and target the right sort of client. The franchisees will be involved in this process, this will boost morale and make them ambitious to take on new level.  Aim to promote promote more more healthy food items, due to passing of the health reform bill in US.

Cons 



Required took into account the resources and the high cost for rebranding.

Requires the company to have a well define rod map and commitments to rise

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Case 18: Burger King (Mini Case)





3

Marketing expansion.

Will makes the cost of doing business less on pre-customers basis, which improve the potential to profit by adding new customers.



their service standard to customers. Will involve lots of spending toward a new marketing campaign. Requires to access the limitation of entering into new geographical location particularly on the government regulation and the social climate or trend of the people in those countries.

6. The Best Strategy and Justification The best strategy for burger king kin g is to combine the two alternative which are rebranding and setting new product and marketing strategies. strategies . The poor management and constant leadership change in burger king has hurt the brand name. Furthermore, it also provide this line and limited control over the franchisees and their uptake on their restaurant. With rebranding, it can strengthen its management policy along the way as rebranding takes time and effort from all parties in Burger King including the franchisees. This can further strengthen the connection to its franchisees and expand its control. Rebranding can also reintroduce burger king to the masses and shows a conviction to the consumer that they are ready for change and further position and strengthen its place in the market. For the second strategy. Burger King has to change their marketing strategies in order to be survival in the fast-food industry. Changes on the burger king infrastructure will gain positive respond from customers because basically new trend attract more new customer. Burger king need to change the target market from younger people to family segmentation in order to increase their market share. Targeting on the children and working parents help burger king to define its target market not only for younger people but also for the family-oriented population. Thus, every new marketing trends evolve by burger king will promise the company a good return in term of increase in market share, customer loyalty, brand popularity and competitive advantage. In order to survive, Burger King need focusing on its marketing strategies, Burger King Need to develop new 9|Page

Case 18: Burger King (Mini Case)

marketing plan as creating more family-oriented menu for the restaurant, deliver new marketing campaign through different medium such as loyalty customer programs, limited-time limited- time offers menu strategy, kid’s menu package, package , festival offer and slightly change the concept from a high calorie menu to healthier or low calorie menu.

7. Implementation a) Short Term 1. Rebranding With rebranding, a new and fresh image of burger king will be introduced with the new takeover. Burger king need to rebrand its outlet which is more focus and specific and goal direct kind of image due to consumer may confused on what burger king may offers. Burger king also may merge with another fast food operator to learn Service skills or fast operation knowledge able to transfer between both operators, choose operator which is one of the top major quick service restaurant is US. Furthermore, with this move Burger King can gain more market share in the quick restaurant industry. Apart from that, HRM department also need to restructure its staff and employee into a more organize group and this will involve extra cost through the upgrading of certain system.

2.  Advertising  Advertising Burger king may establish new marketing strategy. Burger king may opt to invest in its commercial advertising by getting healthy celebrity who enjoys burger king new healthier food. Burger king need to showcase its various new menu item, which include smoothies, salad and specialty coffee drinks. The commercial video must strike a humorous tone and should be more fun than the old one. To attract more children consumer burger king may introduce mascot. To attract the busy and always on the move consumer they may promote a video that showcase the food is ready to eat and prepared in just a minute. b) Long term 1. Introduce healthier Menu People nowadays are more concern on health, thus burger king can take a chance to promote and introduce a healthier food and drink. For example include a fresh fruit or fresh vegetable salad sala d to its menu. Not only that, to promote healthier foods which also 10 | P a g e

Case 18: Burger King (Mini Case)

include the current food ingredient for example reduce or remove all usage of mgs in food, or reject on preparing burger burge r that have pickles. For its drinks, they can introduce organic fresh drink and cut off the use of sugar in its drink.

2.  A consistent consistent company company ownership ownership Based on history of this company, the ownership is changed on regular basis. This may bring to a negative consumer consume r perception on its company. Its only show how weak burger king in its management and its unstable unstab le top management position. Burger king needs a leader who can specifically direct its company to a clearer direction or vision.  A leader that can articulate articulate clear vision of the company and compelling compelling picture of future condition that the staff and franchisees feel committed to achieve. A strong formation in top management is very important so that can bring a positive aura to the franchises or the worker itself.

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