Burger King Company is one of the oldest fast-food chain restaurant companies in the United States, which operates globally through the use of different franchises. The company is considered to be the second largest after MacDonald’s in the fast-food industry. The company applies different business and corporate-level strategies in its business operations. Although it is largely concentrated in the United States and Canada, it is opening new outlets in other parts of the world. This paper discusses several important strategic management aspects, related to the company, including a balanced scorecard, corporate and business strategies, competitive advantage, gained by the use of the Porter Five Forces model as well as soundness and scenario analysis. A SWOT analysis has also been prepared to investigate company’s strengths, weaknesses, opportunities, and threats in the new market segments. Recommendations provide the company with suggestions on how it can remain competitive in the current field even after the emergence of new players.
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Burger King was founded in Florida in 1953 by Mathew Burns and Keith Kramer. The company was originally known as Insta-Burge King (Vu, Bo, Brooks, Cheng, & Tsang, 2013). Two founders had some financial problems and opted to sell the company to a Miami-based franchise, under the rule of two owners, David Edgerton, and James McLamore. New owners of the company renamed it to Burger King. The company produced the first Whopper sandwich in 1957, before being sold to a different company, known as Pillsbury Corporation. It happened after the company had opened more than 250 locations across the United States (Vu et al., 2013). Pillsbury Corporation later sold the company to Grand Metropolitan, which eventually merged with Guinness, It led to the establishment of a business unit, entitled Diageo. Management of the new franchise neglected the burger business and focused on the production of alcohol instead, which resulted in poor operating performances. Burger King became damaged to such an extent that most of its units across the United States ceased to exist (Sharon, 2010). Diageo’s management decided to divest the money-losing chain into a partnership of private equity firms that was led by TPG Capital (“Form 10-K,” 2012). After the implementation of a series of promotional campaigns and activities, created by the investing group, the company was listed in the Initial Public Offering (IPO). The investment group still owns 31% of the outstanding common stock (Vu et al., 2013).
Burger King Company is a global chain of hamburger restaurants, established across the United States with its current headquarters in Miami-Dade Florida. The company has more than 15,000 outlets, functioning in 100 countries. 47.5% of the outlets, which are located in the United States, and nearly 99.5 % of the above mentioned franchises are privately owned and operated by different owners (“Burger King Holdings Inc,” 2010). This system of operation was launched in 2013, when the company was listed in the IPO. The number of employees is estimated to be more than 30,000. Most outlets specialise in fast food services. The main products of Burger King Company include Humbuggers, French Fries, Milkshakes, Whopper sandwiches, Chicken, salads, breakfasts, and fire-grilled burgers. All products are sold in their retail outlets. The company is recognised internationally, as it sells most of its products in different parts of the world. However, the major market has remained in the United States, where the company possesses a huge customer base and a developed brand (“Burger King Holdings Inc,” 2010). Burger King offers a variety of services to different consumers. Its outlets function as fast food restaurant across the United States. They also serve to provide numerous seminar services for different groups (Vu et al., 2013). Moreover, Burger King also organises customised events.
Burger King is an example of the company that has a centralised functional organisational structure. The organisational structure has three main characteristics, which are as follows: global centralisation, functional groups, and geographic divisions. Global centralization ensures that the company’s organisational structure maintains the core management team, which is supposed to make decisions for the company. This system was initiated in 2001 after a period of time, when the company used to have a decentralised system, which did not allow it to achieve the desired goal (“Form 10-K,” 2012). The purpose of the new system was to improve the business performance and the effectiveness of certain management features. Functional groups, being a component of the organisational structure of the company, ensure that the company has established different units, which deal with specific segments of the business market (Vu et al., 2013). For example, the company has specific units that deal with matters, related to IT and human resource management as well as all to other legal issues that may arise in the company. The last aspect of the organisational structure is related to the geographic locations. Burger King has divided its major outlets into specific zones. Each of the zones is headed by the executive vice president, who reports directly to the company’s headquarters. The major geographic zones include North America, Asia-Pacific, Latin America and the Caribbean, as well as Europe, Middle East, and Africa.
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1.1 Company Mission Statement
Burger King’s vision statement is aimed at achieving leadership in fast food industry. Four major goals are represented in the Burger King statement. They include the establishment of a franchise system, creation of best burgers in the world, and having the most profitable business that deals with Quick Service Restaurant (Vu et al., 2013). The vision statement of the company states the following: “To be the most profitable QSR business, through a strong franchise system and great people, serving the best burgers in the world.” (“Burger King Holdings, Inc.,” 2010). Burger King’s Mission statement can be read as “Our aim is to prepare and to sell quick food services in order to fulfil our guests’ needs more accurately, courteously, and in a cleaner environment than our competitors do.” (“Burger King Holdings, Inc.,” 2010).
Burger King uses its mission statement to guide its daily business operations across the world. The mission statement can be found in all restaurants in different locations and it is also present on the company’s website. The company has a slogan that further complements the mission statement. The slogan is “HAVE IT YOUR WAY”. It aims to create an impression that the company is committed to providing high-quality customer service that will meet their expectations. Moreover, the mission statement, the slogan, and the vision statement aim to cooperate with different guests, children, and business partners in order to contribute to the development of the society. Burger King plays an important role in corporate responsibility, because it ensures that the company has an impact not only on the business market but also on other sectors of the society. That is why their stakeholder’s approach is normally considered to be linked to food, people, corporate governance, and the environment.
1.2 Corporate-Level Strategy and Strategic Fit
Corporate level strategies refer to strategic decisions that are made within a company and affect the entire structure. It is sometimes considered as the main form of strategy, which the company applies to keep the business in operation for a long period of time. Such strategies assist the company in selecting the right pricing options that will allow it to earn the required profits. It provides companies with an opportunity to decide whether the enterprise should invest in a certain line of business or it should leave this specific line. These forms of corporate level strategies tend to affect the organisation as a whole. Burger King is an outstanding company, due to the fact that it has implemented several different corporate level strategies over the past years (Vu et al., 2013. A couple of years ago, the company has managed to change its management system, which has centralised all operations of the company. The initial system was transformed in order to introduce a completely different one with new management structure and team. The company is re-franchising all of the company-owned restaurants across the world with an aim to retain more cash for investments in different areas. The company is also focused on controlling costs of its different outlets across the United States and in other parts of the world. The main purpose of such an initiative is to ensure that the company remains profitable in certain areas. The pricing on some food products is also decreasing in order to attract new customers (Brady, 2010). Moreover, this strategy is aimed at enhancing loyalty among the existing customers. The company is also involved in several financial mergers and acquisitions. These mergers and acquisitions provide the company with a possibility to exploit new markets as well as to increase their financial muscles and resources. One of the latest acquisitions of the company is the Canadian coffee chain Tim Horton that is expected to have near 600 international locations in different countries across the world. Once the company has been acquired it is expected to boost the financial capability of the company as well as to increase the number of resources that are currently available for the company.
Generic strategies of any firm have three important aspects. They include cost leadership, differentiation, and focus. Cost leadership occurs when a company sells a product at a cost that is lower, comparing to the price of the competitors. Burger King has been seriously reducing the prices on some of its products in the market, making them a preferred option for most customers. Some of these strategies have proved to be too effective for the company, which has achieved better results than other businesses (Vu et al., 2013). The company has not placed much emphasis on the differentiation of its products across the market, even though some forms of differentiation of the products, which are sold in its restaurants, have been increasing. Customization of some fast food products is also available in the market, and it depends on consumer’s preference. The company mainly focuses on the kinds of goods and services, which it offers to the current population, and tries to make them more attractive (“Burger King Holdings Inc,” 2010). This broad focus ensures that the company’s competitive advantage is not limited.
1.3 Major Business Unit and Business Level Strategies
Burger King’s main enterprise units are fast food restaurant chains that are located in all parts of the world. These fast food restaurants are known for providing certain fast foods products, among which the most prominent are Burgers and other forms of sandwiches (“Form 10-K,” 2014). The products, sold in different franchises across the world, are considered to be the main products, provided in numerous units. The product life cycle of a burger would provide a perfect example of how goods pass different stages of production and enter the market (“Form 10-K,” 2014). Burgers and other products in the food industry are considered to have completed the final stage of the life cycle, when the prices of different products are stabilised. The products were introduced in the early 1950s. This period was defined as the birth phase of the product. It successively fulfilled the growth stage, during which it faced competition from different players in the market such as, for example, MacDonald’s. Currently, the price of the product has stabilised in the market, because the product has become established in it. However, the product is still at the growth stage in some markets across the world.
Burger King has applied several forms of business level strategies. The company has heavily applied product differentiation, cost leadership, and cost focus. It has actively differentiated the type of products that are sold in the retail outlets. Although the company retained the name ‘Burger’, the diversification of the food products that are being sold by the company is quite high (“Form 10-K,” 2012). In addition to the above mentioned fact, the company has not remained only in the parent country, where the company was formed. It has opened different outlets across the world, to be more specific, in more than a hundred different countries, making the company be the second-largest fast food chain in the world. Diversification in different environments around the globe creates new opportunities for the company (“Form 10-K,” 2014). The company has also been applying its cost effective strategy in order to overdo its main competitors. Burger King achieves it by reducing the prices on some products in the fast food chain. Moreover, the company offers numerous promotional services, as well as discounts for its products. It has significantly increased the profits of the company. In the countries, where the retail stores did not meet the set targets and did not earn the desired profits, the company joined some outlets and reduced the number of employees working in these areas in order to reduce costs that significantly affected the profit levels of the company (“Form 10-K,” 2014). Burger King has also put more attention on the cost focus, as one of the business level strategies. The product prices have been lowered in specific market segments, which are quite successful, and in which the product is more likely to be accepted. Such products are basic but still acceptable among different consumers in the market (“Burger King Worldwide Reports Fourth Quarter and Full Year,” 2013).
1.4 Industry Analysis and Porters Five Forces Model
Burger Company remains the second largest company in the fast food industry. It means that there are some companies, which are ahead of Burger Company. MacDonald’s remains the largest player in the food and restaurant business. The number of stalls and outlets that the company has opened are numerous, comparing to other competitors in the same market (“Form 10-K,” 2012). The company has formed several mergers and has different acquisitions in the market. Burger King and MacDonald’s remain the two largest companies in the fast food chain business and they both originated in the United States (Vu et al., 2013). However, it is imperative to mention that there are other companies that are making progress in the same field. The examples of such companies include Wendy and Jack in the Box, which are selling the same products as Burger King and MacDonald’s.
The porter model is commonly used to investigate if competitive advantage exists within a given industry. It focuses on five important aspects, which examine whether competitive advantage exists between different companies. These five aspects include new entrants, substitutes, bargain of suppliers, bargain of buyers, and inter-firm rivalry. Recently many players have entered the field that was largely dominated by two main companies. However, it did not affect the position of Burger King since the company has already established a formidable brand in the market. So the risk of the new competitors is significantly low. Besides, Burger King remains one of the oldest fast food chains, established in the United States and in other parts of the world, which means that it would require something special to dethrone Burger from the position that it currently occupies (“Form 10-K,” 2014). In addition to the above information, the company has hugely invested in new technology and has patented most of its product that are available in the market. Therefore, new entrants will have to invest heavily before they achieve the same status as Burger King.
The second aspect of the five forces model is related to the availability of substituting products. It is still relatively easy for most customers to choose products of different fast food chains such as Burger King, Wendy, and MacDonald’s because all of the earlier mentioned stores produce nearly the same kind of services and products (“Burger King Worldwide Reports Fourth Quarter and Full Year,” 2013). Now new goods are produced by these companies in order to ensure that the position of the company is not under a threat.
Burger King remains one of the companies that have a very high number of suppliers in the market. These suppliers are recognised for the important role that they play in the sustainability of the company. Their excellent services have many years benefited the company to a great extent. Burger has ensured that such kind of suppliers never leave its market. It has also introduced supplier diversity programs (“Burger King Worldwide Reports Fourth Quarter and Full Year,” 2013). Moreover, the company has ensured that it develops a portfolio of all individual suppliers that the company currently deals with. One of the suppliers that is currently used by Burger Chain is Restaurant Services Incorporation, which is a famous purchasing agent (“Form 10-K,” 2012). The company helps Burger King to communicate closely with most suppliers in different markets and market segments regarding equipment, food and packaging materials, and information systems (“Form 10-K,” 2014). When it comes to making a bargain with a customer, Burger King develops a strategy, aimed at increasing their products, so that they are more appealing to the customers (Vu et al., 2013). Most of its products are reported to contain less fat and be much healthier. This feature has enabled their products to attract different market segments, which are highly concerned with healthy benefits.
MacDonald’s company, Yum Brands, Wendy International, and Owner of Taco Bell remain to be the biggest competitors of Burger King. MacDonald has more market shares as compared to other players in the business, including Burger King. Its shares approximately constitute 21.9%, while those of MacDonald’s currently reach a 44% point, which is almost a double value, comparing to the one, possessed by Burger King. MacDonald’s has also been involved in establishing more branches across the world, despite the fact that the company is leading in the number of countries, including India and China (“Form 10-K,” 2012). The company continues to grow, even though it has a greater number of outlets, in comparison to other companies in the same industry. Such strategies have placed the company on top for a long period, and it remains difficult for any company to dethrone it from the position that it currently occupies in the market (“Form 10-K,” 2014). MacDonald’s can be said to be a leader in the business market and can determine the prices of different products across this market segments.
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1.5 Current and Future External Market Opportunities and Threats
The company currently faces a number of threats. The major threat that the company currently encounters is competition from major players, which are already existing or developing in the industry. The food business is considered as dynamic and has a large number of followers. Any major change in strategy normally affects other businesses. Other threats that are faced by the company include expiry of franchise agreements, use of newer technologies and better services, as well as the level of maturity within the industry. The franchise factor is important because, it constitutes the majority of the revenue of the company and, therefore, its expiry is a challenge for the company. These factors affect all companies in the same field.
Intense competition has increased as major key players are investing into the market that has been heavily dominating. The use of newer technologies and better services, as well as increased activities in marketing and promotional campaigns may signal about the change in the market situation in later years. Moreover, most of the franchise agreements that were signed by the company in 2006 are also expiring, which places the company at a worse position (Brady, 2010). If the agreements are not renewed, fellow competitors may take advantage of this opportunity to gain a competitive advantage over the company. Apart from the above factors, the industry has also become more mature, comparing to its original state, when it was established (Vu et al., 2013). The industry does not pay attention to the year of establishment of different products in the market segment, but rather analyses whether the services that are being offered by the company are appropriate or not and improves them so that they correspond to the required standard (“Burger King Holdings Inc,” 2010). It means that issues, related to customer loyalty, have been significantly reduced. Lastly, acrylamide, found in French fries, threatens the quality of products in the market and affects the number of customers, who visit the restaurants.
Opportunities can be classified as major or minor. Major opportunities have higher levels of significance, since they have an impact on the company’s profits. The major opportunity for the company is to produce products at lower prices in order to attract a huge number of customers and to win the competition. The company can opt to develop one dollar breakfast sandwiches, which will attract many people due to its lower price in the market. However, the establishment of it will take more time and will not generate instant profits for the company. That is why it is a long time project. Additionally, the company could choose to open new outlets in unexploited areas such as India, China, Malaysia, and Singapore. Burger King could also expand its current market in Asia, which has largely remained unexploited for long periods of time. The company could also decide to reduce the number of underperforming outlets and to focus solely on the outlets that make more profits in different market segments (Vu et al., 2013). These issues are rather important, since the company will have to consider several factors before closing their outlets. Therefore, it is not a major opportunity. The cost of the entry into the Burger King franchise could also be reduced in order to incorporate other entities. It will increase the number of resources as well as the customer base of the company. The company could also choose to continue some of its practices and strategies that have been bringing fruitful results for many years. Its position in the market is quite noticeable. It means that the current strategies have been effective, taking into consideration the fact that the company’s profits have been increasing on a yearly basis. Reduction of the franchise cost, as well as the usage of existing strategies, is still viewed as major opportunities.
1.6 Current Internal Strengths and Weaknesses
Burger King is a company with various strengths and weaknesses. It has a strong market position. Burger King is considered to be the second largest franchise in the United States and across the world. These two factors are considered to be the major company’s strengths. Their number of stores is only equated to that of its fearsome competitor, MacDonald’s. The company has a high franchise mix. It means that the company can be able to grow quite fast with minimum expenditure. The company is also assured of income throughout the years due to the benefits, provided by the above market position (“Form 10-K,” 2014). The company has exhibited a successful financial performance in the previous years, and continues to increase its profits. Burger King has established a global brand that most customers across different market segments would be able to associate with. Financial performance is a major factor for the company. Most of the internal strengths are important factors, because they form the foundation of the company.
Burger King has some fundamental weaknesses. The company is largely concentrated in two countries, the United States and Canada. It is the company’s major weakness. The number of outlets in these two countries constitutes 65% of the total number of the outlets that are present in the company (“Form 10-K,” 2014). The concentration of outlets in some areas increases the company’s exposure to certain local factors that may significantly affect the business opportunities of the company. Some of these local factors include labour strikes, changes in regulations, and adverse economic situation. Another weakness that the company has shown is related to the scattered marketing campaign (Sharon, 2010). As a result, the company has failed in promoting certain products, because it has placed more emphasis on products, which were not popular among customers. It is also another major weakness, since the company is losing some of its customers to other players. The market share has been declining over a couple of years (Sharon, 2010). Their revenues have reduced, and their income growth has also decreased. Market share and revenues are minor weaknesses since they are fluctuating and are based on several variables.
1.7 Balanced Scorecard Analysis
A balanced scorecard provides a strategic approach, by which the company applies strategic management and planning in order to meet its goals in society. The approach commonly investigates if the company’ strategic management practices are in line with the vision of the company. It investigates an important aspect of strategic management, and there are four areas, which include customer perspective and experiences, internal businesses and environments, innovation and learning, as well as financial management aspects (Sharon, 2010). Burger King has established in the market with the ability to grow quite fast in the industry. Some of its international markets are located in new areas across the world in such countries as Brazil, Spain, and Turkey. The company is engrossed in entering the markets in underdeveloped towns and regions. Financially, the earning of the company per share differs significantly, when compared to all other players in the same industry. 10.9% earnings per share show that the company’s value is decreasing. The same happens to other players (“Form 10-K,” 2014). Customer’s perspective of different people is supposed to differ. The number of customers can only be increased if the company decides to focus on intense competition. The customer mania theory is used to keep the remaining customers within the company (Sharon, 2010). Burger King has utilised the same method in handling their customers over the years. The company’s internal process has not invested in research and development of their relationship with the customers. Instead, it has focused on enhancing the profits of different units and increasing the number of fast food restaurants across the world. Comparing to other companies, Burger King is not in a bad condition, but the analysis of the balanced scorecard reveals that it is behind Yum Brands and MacDonald’s.
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1.8 Soundness Analysis
Some components of the Burger King’s corporate strategy have to change for the company to compete more effectively in the modern market. The current corporate level strategy, used by the company, is not sound. The marketing plan that is currently applied by the company as well as the prices for some products needs to be changed in order to meet the ongoing changes in the contemporary industry. Moreover, the company’s ownership and management should be stable for a long period of time. In the early 2000s the company was affected due to a change in ownership and a decreasing number of franchises that were supposed to operate under the company (Sharon, 2010). There are some aspects that will have to be changed for the company to grow competitively. The company should seek more endorsements from known celebrities across the world in order to make its products appealing to different populations. However, it should not exclusively focus on the use of famous people as the main elements of its marketing plan . This new marketing strategy will attract many people, who are interested in understanding the dynamics of the company. New items could also be created from the existing menu that is used by the company. It will ensure that the company has a bigger diversity of products, which are sold in the market. Furthermore, the company needs to focus on creating more outlets in other areas of the world, apart from the United States and Canada, as these two countries have become overloaded with the company’s activities (“Burger King Worldwide Reports Fourth Quarter and Full Year,” 2013). A continued investment in two areas limits investment in other parts of the world, which have better opportunities for the company.
1.9 Scenario Analysis
MacDonald’s, being one of the main competitors of Burger King, has heavily invested in product differentiation in the market, by focusing on the aspects, related to the innovation of new products, through research and section development in the market. Some of their new products have achieved success in the market and are accepted across different market segments. The company has once again proved that product differentiation is an effective business level strategy in the fast food business (Sharon, 2010). MacDonald’s has also applied a cost leadership approach for reducing the price of its products. Lower prices for some of the products have made it quite easy for the company to attract more customers from the huge base that currently exists (Sharon, 2010). Their economic pricing strategy has been enthusiastically accepted by customers in the market, which means that it was quite successful, since it depends on the way the strategy is perceived by the consumers. Burger King applies a different form of pricing strategy, which can be classified as the cost leadership strategy. The price of the product is normally low, comparing to the price of the goods that are commonly sold by such entities as MacDonald’s. Low price is a reason, why customer base of the company has remained significantly the same over many years of its operations. Burger King applies a narrowly based cost focus strategy in dealing with such competitors as MacDonald’s. In this case, the company is selling certain products at lower prices in certain outlets, while other competitors are applying a broad-based strategy that makes prices of products remain the same in the different market segments. The competitor’s prices are based on the consumers’ perception of the products. If the price of certain products is considered too high for consumers, it is lowered in order to meet their needs.
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Due to the increased level of competition in the fast-food industry, Burger King is more likely to develop new outlets in different areas around the world and particularly in Asia. The company is also likely to introduce new products and services. Some new products may include nuggets, while its new services may be a spa or a taco bell lounge. Moreover, the company might acquire or merge with one of the other players in the market in order to compete with MacDonald’s effectively.