Strategic Analysis of Burger King

Introduction

The following report is an analysis of case study of Burger King fast food chain till date 2006. It primarily takes into considerations, significant changes over the years. And , also the strategic business decisions that led to, or formed a basis, of these changes. Moreover it helps us to identify the company’s core competencies and the competitive advantage it gained. It also highlights the issues faced by the company. A small comparison with McDonald’s helps to benchmark Burger King’s performance.

Following the critical analysis of case study, it follows necessary recommendations for the Burger King Company in UK market and lastly comparioson with ‘Schools of Strategy’ which are prominent in its history. A personal conclusion that evaluates the case – study and various comparisons throughout the report.

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Background

The company of Burger King Corporation was formed by Miami entrepreneurs James McLamore and David Edgerton in 1954. The Burger King Holdings is the parent company of Burger king, however in U.S. it operates as Burger Kings Brands title; whereas internationally as Burger King Corporation. Today (as of year 2006, referring to case study), it is world’s 2nd largest fast food chain based on locations (behind Mcdonalds). The company has presence in more than 70 countries and runs more than 12000 restaurants. Thus, we can see that the brand rules one whopper of whole fast food chain empire.

The company is presently run by Mr. John Chidsey who acts as a CEO and chairman of the parent company. The brand has a $2.54 billion and boasts of handling more than 38000 employees successfully catering to 11.4 million customers.

Burger King – History

Burger king is a predecessor to a company called Insta-Burger King. The Insta –Burger King was founded in 1953 in Jacksonville, Florida by owners named Keith.J .Cramer and Matthew Burns. The found the company after inspired by McDonald’s efficiency, in food preparation, delivery and architectural layout. The company Insta-Burger King was launched on the basis on an equipment known as the Insta – Broiler. The device proved as a very successful oven for cooking burgers.

Changes in Leadership – Burger King History

The Burger King Company saw changes in management from the first year over more than 50 years since its establishment. The names (CEO) and significant decisions of them over the years are as follows:

• Year
• Name
• Former position
• Significant change in Burger King

1954-1970James W. McLamore, David EdgertonPresident and chairman – Burger KingFounders, bought Insta-Burger King from Keith G.Cramer (owner of Keith’s Drive-In restaurant)
Introduced an improved version of ‘Insta-Broiler’(which had a capacity of 400 burgers an hour) called ‘flame broiler’
Launched ‘Whopper’ sandwich – the company’s signature product
By 1961, had 45 restaurants in Florida and South-east US; which they increased to 274 restaurants all over the world mainly through franchising.

Consider the above p of Burger king’s history of more than 50 years some of the prominent features can be well justified by ‘three sigma’ Competitive strategy model. The model is explained, considering Burger King’s strategies as follows:

1) Offensive strategy

The strategy formulates overcoming the barriers to goal achievement by changing the systemic relationships creating them. This strategy often requires significant capital investment and includes the following options –

Changing or altering the competitive structure or environment in your industry (forward or backward integration, acquiring competitors, etc.).

Example – In the p of 1954 to 1967, Burger King History marks a significant approach of increasing its number of branches from 45 outlets in US to 274 outlets across the world. This was achieved through maximum approach towards franchising and expansion with limited investment, thus creating a forward integration.

Anticipating industry competitive structural change and positioning your organization to exploit this change before others recognizes it (developing substitute products, changing the mode of sale or distribution, etc.).

Example– The p of years from 1977-1980 and since 2000, Burger King company adapted new structure with new corporate aptitude in order to control the franchises and improve products.

Diversifying into more attractive markets

Example– Launch of Burger King Kids Club program marked its focus into an attractive children market. The results produced were significant in boosting sales and creating a loyalty and brand image in the new market segment.

2) Defensive strategy

The strategy is about accepting the industry competitive forces as a given and positioning your organization to best defend against them.

This could include harvesting and selling the business before competitive conditions cause its value to drop.

Example – The history also identifies two major deals of the company respectively –

• Sold to ‘Pillsbury – prepared food giants’ in late 60’s
• Takeover by Grand Metropolitan PLC in early 1990’s

The main reasons accounted were increase in credit burden on the franchises and unhealthy as well as inconsistent relation with franchises.

3) Guerilla/ niche strategy

The strategy involves minimizing or neutralizing barriers by reducing the size of the playing field and taking an offensive or defensive position in a smaller, more attractive market segment.

Example – The Company decided to trade-off as an individual business entity as it failed and showed a remarkable downfall re-building the brand image in 1983 to 1993.

The key factor that consistently affected strategy formulation is the continuous changes in leadership/management affecting relationship with franchises and loyal customer.

Burger King core competencies

Core competencies are points of leverage for gaining competitive advantage. They are organizational competencies that are unique to your organization or are performed better than your competitors and make a significant contribution to customer perceived value or create a significant cost advantage.

Core competency is best explained as the competitiveness of a range of products or services. It can also be explained as the co-ordination of diverse production skills and integration of multiple streams of technologies. Considering Burger King, a global renowned brand and chain of fast food, the core competencies can be generalised as follows:

Operational Difference – Major company stake is owned by franchises

As I went through the historical p of Burger King History, the franchises of Burger King played a major part in expansion of the parent company from the early 1960’s till date. The relation of franchises and management has always been influential and significant in success and failures of Burger King History. Primarily, the company operated with major investment from franchises and minimal from the company, so the decisions and relationship with franchises was crucial.

Flame broiler a unique device that improved with decades in Burger King history

The company was set-up on the basis of the oven called ‘Insta-broiler’ for cooking burgers. The purpose had been inspired from McDonald’s speedy service. It was further mechanised into a gas grill without changing patties and self functional by means of a conveyor belt. Further, the device was also customised and technologically advanced to produce Chicken sandwich, Chicken Whopper, Veggie burger, etc.

Drive –thru service

The company though was working hard on franchises and unique device to meet operational needs; it was mainly oriented to meet demand of production at ‘Drive-thru’ restaurants. This was because the company had major part of its sales revenue i.e. 70 % from ‘Drive-thru’ operations.

Later this competence was adapted by McDonald and other competitors as well. However the effectiveness and efficiency of Burger King’s ‘Drive-thru’ was easily highlighted.

Competitive methods of Burger King

The purpose of its competitive strategy is to build a sustainable competitive advantage over the organization’s rivals. It defines the fundamental decisions that guide the organization’s marketing, financial management and operating strategies.

As there were many significant changes in the history of Burger King, eventually there were different competitive methods used in different p in history. Some of the significant competitive methods are listed as follows:

• Initial decade in Burger king’s history, ‘Insta-broiler’ a device competitive in making burgers and technological advancements in the same gave it a competitive advantage.
• High amount of franchises worldwide executed major ownership stake and customised operations in the outlets. This was tightened and a new company structure was formed, followed by a new competitive aptitude.
• Push sale approach led increase in competitive breakfast market and thus improve in position in market. Burger King moved to second position in US fast food market after McDonald. [Year 1982-1985]
• Launched a Burger King Kids Club program that help the company to increase sales and successful entry into a new market segment. [Year 1990-1995]
• Introduction of a turnaround plan named ‘Go Forward Plan’, which was significant to attain objectives like increasing profit, create a customer image, teamwork, etc.[Year 2000]. One more advantage Burger King introduced was ‘Revamped Chicken Whopper’, helpful to compete with other competitors.

Burger King<McDonald’s (BK is simply not as big as McD)

Some of the basic company facts and objectives of both the companies, help us understand how Burger King is not as big as McDonald’s in global terms.

SuppliersThe suppliers vary with various franchise in different locations worldwide.McDonald chooses best suppliers and type and quality of meat varies with country culture.
AdvertisingThe BK adverts were quite confusing and sending wrong messages in potential market which affected cultural values and also brand image at times.McDonalds often had appropriate ways of advertising and were supportive to increase sales and popularity of the brand.

Issues relating to Burger King

The case study is very critical in understanding the issues related with Burger King’s history. Some of the prominent issues from past to present can be listed as follows:

Franchise management – The company found it difficult to manage more than 90% franchise in the business of Burger King products and services. Crucial reason was also the percentage of stake ownership , which was initially 38% and was improved to 42% by Donald Smith, former McDonald executive.
Changes in leadership – The history of Burger King marked approximately 20 changes in management. The changes in short term p affected oragnisation focus over goals and objectives, affected brand image adversely and lacked consistency in operation.
Unhealthy food – The Company came prominently in highlight during the era from 2003 as potential customers had responded to be health conscious. The period marked spread of mad-cow disease and obesity levels among children was a rising concern.
Market recession – The US economy faced economic recession from 2006 and needs brand to take effective measures to sustain and avoid losing loyal customers to competitors.
Recommendations for future development in UK

The Burger King opened its first branch/outlet in UK in 1977 on Coventry Street in London. Since then till date Burger King has 654 restaurants in UK ( out of which 73 are owned) whereas it has 139 ‘drive-through’ restaurants. Considering the present fast food environment in UK, following recommendations come in lime-light:

healthy food– Burger King UK has currently many problems within the environment in company and surrounding, however one of the prime concern is healthy food. The company needs to produce fast food with less saturated fats and salt content. The problem of obesity in UK is high as well and addressing to this concern is the need of demand to survive over the competitors.

prime location and events– Burger King needs to increase its influence and market share in UK, by serving at prime hot spots as well as at travel destinations. The presence of Burger King on high streets and at various national rail stations and airport is reasonable, however it needs to be accessible at hot tourist spots and business oriented commercial areas.

speed – Burger King needs to increase its speed of delivering products and services to customers, as it has been competing with McDonalds over more than 50 years and still lacks speed during peak periods. Speed in operations helps to generate revenue in coping zone.

Schools of strategy – Burger King’s evolution (analyse critically)

Strategy formation is judgmental designing, intuitive visioning, and emergent learning; it is about transformation as well as perpetuation; it has to include analyzing before and programming after as well as negotiating during …” – Henry Mintzberg

However there is a difference in perspective leading to strategy arguments. Mintzberg identified this and tried to debate and answer different perspectives through his 10 Schools of Strategy/Thinking. The burger King History prominently highlights two of them, explained as follows:

1] The Power School – Strategy Systems as Processes of Negotiation

According to the power school, strategy systems are described to be mainly shaped by power and politics, whether as a process inside the enterprise itself or as the behaviour of the enterprise as a whole within its external environment. Strategies that may result from such processes tend to be emergent in nature, and take the forms of positions and actions more than perspectives. On the one hand parts of the power school (‘micro power’) see strategy making as the interplay, through persuasion, bargaining, and sometimes through direct confrontation, among narrow scope interests and shifting coalitions, with none dominant for any significant period. On the other hand other parts of power school (‘macro power’) see the enterprise as promoting its own welfare by controlling or cooperating with other enterprise (such as Franchises), through the use of strategic manipulation as well as collective strategies in various kinds of networks and alliances.

example – Burger King at different period in history, tried to take control over franchises by executing greater control over their operations and direct confrontation with various industry giants/ suppliers. These various processes implemented to achieve power through strategy highlights ‘THE POWER SCHOOL’.

2] The Configuration School – Strategy Systems as Process of Transformation

The school follows a formation approach wherein the organisation is transforming into one type of decision making structure into another. The school interrupts the period of stability by some process of transformation. It has configuration of strategy formation from other nine schools which are –

• Design school – Strategy formation as an architecture process
• Planning school – Strategy formation as a formal process
• Positioning school – Strategy formation as an analytical process
• Entrepreneurial school – Strategy formation as a visionary process
• Cognitive school – Strategy formation as a mental process
• er school – Strategy formation as a process of negotiation
• Cultural school – Strategy formation as a collective process
• Environmental school – Strategy formation as a reactive process
• The school recognises a appropriate combination of any one or more of them taking into context a particular type.
• Learning (or Emergent) school – Strategy formation as an emergent process

Example– Burger King history marks use of Positioning school in year 1980 -1983 to create a brand image and achieve second position in US fast food market.

Conclusion

Considering the massive history of Burger King and number of changes in leadership, the main highlight of the case study is instability in management. The factor was highly influential in changes and differences in relation of parent company with franchises and staff.

Also a prominent feature that needs a remarkable control is franchises management. The company has highest percentage of franchises ( more than 90 %) but less control by only 42% ownership in most of the outlets.

The company has a signature product as ‘WHOPPER’ which needs to be promoted all the time and offered with variations, to keep attracting new as well as loyal customers.

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