Strategic Management

MBA Course Code: Winter 16111

Burger King

MBA Student Name: Sherif Ibrahim

Sidhom

Dr. Mahmoud A. Moursi

1

Burger King Case

This company was undiversified - (Fast-Food
Hamburger restaurant/FFHR which operated within
the quick service restaurant/ QSR)
:Company Overview Burger King was originally known as Insta-Burge King. It was founded in Florida in
1953 by Keith Kramer and Matthew Burns before they had financial difficulties and sold
the company to its Miami based franchisee, James McLamore and David Edgerton in
1955. The new owner renamed the company to Burger King. The first Whopper sandwich
was introduced in 1957. The company again was sold to the other party, Pillsbury
.Corporation during their expansion exercise to 250 locations in United States
In 1989, Pillsbury Corporation was sold to Grand Metropolitan, which in turn merged
with Guinness to form Diageo, a British spirits company. Diageos management
neglected the Burger King business, leading to poor operating performance. The business
was damaged to the point that major franchises went out of business and the total value of
the firm declined. Diageos management decided to divest the money-losing chain by
selling it to a partnership private equity firm led by TPG Capital in 2002. The company
became re-energized by a series of promotional campaign and activities created by the
investment group. In May 2006, the investment group took Burger King Public by
issuing an Initial Public Offering (IPO). The investment group continued to own 31% of
.the outstanding common stock
As of June 2010, the company owned or franchised 12,174 restaurants in 76 countries
and U.S territories, of which 1,387 were company-owned by franchisees. Of Burger
.Kings restaurant total, 60% were located in the United States

:Industry overview The fast-food hamburger category operated within the quick service restaurant (QSR)
segment of the restaurant industry. QSR sales had grown at an annual rate of 3% over the
past 10 years and were projected to continue increasing at 3% from 2010 to 2015. The
fast food hamburger restaurant (FFHR) category represented 27% of total QSR sales.
FFHR sales were projected to grow 5% annually during this same period. Burger King
.accounted for around 14% of total FFHR sales in the United States
Burger King competed against McDonalds, Wendys, and Hardees's restaurants in this
category and against regional competitors, such as Carls Jr., Jack in the Box, and Sonic.
Indirectly, they also competed against the QSR restaurant segment, including Taco Bell,
Arbys, and KFC. Although the restaurant industry as a whole had few barriers to entry,
marketing and operating economies of scale made it difficult for a new entrant to
challenge established U.S. chains in the FFHR category. The QSR segment appeared to
be less vulnerable to a recession than other business as proven during the quarter ended
May 2010, both QSR and FFHR sales decreased 0.5%, compared to a 3% decline at both
casual dining chains and family dining chains. The U.S. restaurant category as a whole
.declined 1% during the same time period
Apart of all the above, Americas increasing concern with health and fitness was also
putting pressure on restaurants to offer healthier menu items. For example, one county in
California had attempted to ban McDonalds from including toys in its high-calorie
.Happy Meal because legislators believed that toys attracted children to unhealthy food

:The major strategic issues that facing Burger King

This case happened in September of the 2010
Limited control over franchisee Poor sales pricing strategy High expenses cost of Burger Kings company-owned restaurants Low entry barrier - market become saturated Growing health consciousness Slow industry growth rate -

:Company objectives
.To boost the brand image of the company
.To provide measures to improve the companys performance in the market

:Burger King Analysis using The SWOT Analysis

:Strengths
.Strong market position
.Strong brand equity

.Strong brand financial performance

.High quality products

.Wide variety of food products

:Weaknesses
.Heavily concentrated in the U.S
.Few corporately owned stores

.Inconsistent management and strategy- changing executives

.Narrow-based target market
.Confusing ads campaigns
High prices

:Opportunities
.New product development (breakfast)

.Keep building its brand through ads campaign (whopper virgins)

.Expansion into emerging markets
Wide-based target market

:Threats
.Changing consumer habits towards healthier food choices

.Intense competition from McDonald's, other restaurants and even retailers

.Increasing labor costs putting pressure on bottom line margins
.The major competitor McDonald's is way ahead in market share

Industry analysis: analyzing the task environment

A strategic group: is a set of business units or firms that "pursue similar strategies
with similar resources". Categorizing firms in any one industry into a set of
strategic groups is very useful as a way of better understanding the competitive
.environment
Business units belonging to a particular strategic group within the same industry
.tend to be strong rivals and tend to be more similar to each other
Burger King has a great deal in common with McDonald's in terms of their similar
.strategy
In analyzing the level of competitive intensity within a particular industry or
strategic group it is useful to characterize the various competitors for predictive
purposes. A strategic type is a category of firms based on a common strategic
orientation and a combination of structure, culture, and processes consistent with
.that strategy
This distinction helps explain why companies facing similar situations behave
.differently and why they continue to do so over long periods of time

In this kind of firms are defenders with a limited product line that focus on
improving the efficiency of their existing operation. This cost orientation makes
.them unlikely to innovate in new areas. With its emphasis on efficiency

:Strategies
A strategy of a corporation forms a comprehensive master plan that states how the
corporation will achieve its mission and objectives. It maximizes competitive
.advantage and minimize competitive disadvantage
:The typical business firm usually considers three types of strategy
Corporate strategy : Stability , growth and retrenchment

-1

.Business strategy: competitive and cooperative strategies

-2

.Functional strategy: Resource productivity

-3

.Business firms use all three types of strategy simultaneously

A hierarchy of strategy is a grouping of strategy types by level in the organization.
Hierarchy of strategy is a nesting of one strategy within another so that they
.complement and support one another

:Customer perceived value

The difference between the prospective customer's evaluation of all the benefits
.and all the costs of an offering and the perceived alternatives
:Alternatives functional strategic options
Firms that occupy second, third and lower ranks in an industry are often called
.runner-up or trailing firms
These firms can attack the leader and other competitors in an aggressive bid for
further market share as market challengers or they can play ball and not "rock the
.boat" as market followers
:Market-challenger strategies
:General attack strategy
Frontal attack
Flank attack

-1
-2

Encirclement attack
Bypass attack

-3

-4

:Specific attack strategy

Price-discount

-1

Product proliferation

-2

Product innovation

-3

Improved services

-4

Intensive advertising promotion

-5

.Good marketing is no accident, but a result of careful planning and execution

A company can win only by fine-tuning the value delivery process and choosing,
.providing and communicating superior value
:Pricing strategy in marketing
Is the pursuit of identifying the optimum price for a product. This strategy is
combined with the other marketing principles known as the four P's (product,
.place, price, and promotion)

Pricing is one of the most important elements of the marketing mix, which
.generates a turnover for the organization
The success in pricing strategies for businesses is heightened with clarity on
market conditions, an understanding of the consumer's unmet desire, and the
.amount they are willing to pay to fulfill it

Burger King Price sends a strong message to its market- it needs to be

.consistent with the value you're delivering
:Selecting the pricing objective
Survival

-1

Maximum current profit

Maximum market share

-2
-3

Maximum market skimming

Product-quality leadership

-4
-5

:Using Price-Adaptation strategies

:Price discounts and allowances
:Promotional pricing tactics

-1

-2

:Actions should be taken to deal with these issues

Play it safe strategy. Make some appealing advertisement that makes fans -1
.feel important
:Advantages
B u rg e r K i n g f a n s w i l l b e fl a t t e re d b e c a u s e B K m a n a g e m e n t
g i v e t h e m 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
profi t/sales will increase.
Disadvantages:
I t w i l l b e c o s t l y a n d i t w i l l t a ke s e v e r a l t i m e o f
b r a i n s t o rm i n g i f t h e product that they will introduce will be a big
boom to the customers/public.
3 -Tr y t o l o w e r t h e i r p r i c e .
Advantages:
Number of customers will increase at their sales/profi t 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.

Specific recommendation:
Focus on its two basic strengths fl ame 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.
I n t ro d u c e a n d e n f o rc e c e n t r a l l y p re p a re d d e t a i l e d f o o d
p re p a r a t i o n g u i d e l i n e s t o bring in uniformity and
consistency in the
taste, ingredient proportion and overall quality of the food.
Remodel the less aesthetically appealing stores

10

 Re - e v a l u a t e p ro m o t i o n a l o ff e r s . I n t ro d u c e v a l u e m e a l s
with
d i s c o u n t o n b i g g e r orders
Introduce home delivery facility wherever possible.
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 n e t w o r k o f s t o re s l i ke B u rg e r K i n g .
Hence it is
p o s s i b l e t o g a i n a h u g e c h u n k o f 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 -Vis its competitors and based on it design the communication
strategy.
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
Advertisements should be relevant and succinct. Creativity and
humor are
Welcome but no beating around the bush.
11

 Brand images tend to be sticky. Try to stick to a consistent

brand image
instead of changing continuously which confuses the customers.
C o n t i n u e h a n d s - o n a p p ro a c h w i t h f r a n c h i s e e s . E s t a b l i s h
a
c o n t i n u o u s f e e d b a c k mechanism from customers and
franchisees and react
on the feedback.
.New marketing campaign for healthier products

.Expansion into high potential countries

12

.May 22, 2011 by Jennydhel Sacramento Burger King co

13