CASE SUMMARY

Burger King previously known as insta-burger king, currently was the

second largest hamburger franchise chain in the world after Mc Donald. 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 diego 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.

As per June 2010, it is recorded that Burger king has 12 174 outlets in 76

countries, which is 66 percent of them are in the US and 90 percent are privately

owned and operated worldwide. Burger King is the second largest chain of

hamburger fast food restaurants in terms of global locations, behind industry

bellwether McDonald’s. Based on resourced, company income was generated

mainly from three sources that is retail sales at company owned restaurant,

royalty payment from sales and fee from franchises 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 expansions. Expansions are done only at selected

market for example countries that has potential on positive growth and

attractive new market for instants the middle east or Asia markets.

According to industry analysis, burger king’s share price had fallen by half

from 2008 to 2010, this is according to them burger king is having significant

management problem. In this study case we will recommend several strategic

management in other to solve its problem.

SWOT ANALYSIS

STRENGTHS: COMPANY INTERNAL

a. Burger King is known for its strong brand. Burger King, formerly known as

Insta-Burger King was founded in 1953. Throughout the years it has

survived in the industry and has built a strong brand in the US and

worldwide.

b. Burger king has a strong market position, being the second largest fast-

food hamburger restaurant chain in the world as measured by the total

number of restaurant and systemwide sales.

c. Has lower capital requirements compared to competitors causing Burger

King to have a high percentage of franchise restaurants (90%). This

provides Burger King with a strategic advantage as the capital required to

grow and maintain the Burger King system is funded primarily by

franchisees.

d. Has its own distribution cooperative which is, Restaurant Services Inc.

(RSI), that manage and act as the purchasing agent for the Burger King

system in the U.S.. This ensures items move smoothly and efficiently from

suppliers through regional distribution centers and each restaurant across

the country.

e. Has a long term exclusive contracts with other strong brand names which

was Coco Cola and with Dr. Pepper/Seven-Up, to purchase soft drinks for

its restaurant.

f. Reduce its costs and boost efficiency by 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.

WEAKNESSES: COMPANY INTERNAL

a. Too dependent and heavily relying on franchisees as revenue sources,

which accounted for two from its three sources of revenue.

b. The continuous leadership changes 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.

c. Its high percentage of franchisees also cause Burger King to have limited

management control.

d. Its restaurant mostly concentrated in the United States (60%). And has a

small or less presence internationally as compared to McDonald’s.

e. Failure to adapt to more suitable marketing strategy during the fiscal

years and marketing to the wrong target market. For example, While

McDonald’s strategy is to put more emphasis on women and older group

by offering healthier salads and upgraded its already good coffee, Burger

King continued to market to young men offering high calorie burgers and

advertisement featuring dancing chickens and a “creepy looking” king.

This marketing 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.

f. Cannibalized its existing sales by putting too much emphasis on value

meals, which they sell it in lower price compared to its production cost.

Thus, causing them to lose money.

g. Some food items, for example Pizza Burger, contains 2530-calorie. This

served as a concern as Americans opt for a more healthy living.

OPPORTUNITIES: EXTERNAL ENVIROMENT

a. The potential growth and new market of other countries led to Burger King

to focus on exploring new grounds and international expansion.

b. 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.

c. 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 needs.

d. Marketing and operating economies of scale made it difficult for new

entrant to challenge established U.S. chains in the FFHR category. With

this, Burger King have the competitive advantage to further increase its

market share in the industry.

THREATS: EXTERNAL ENVIRONMENT

a. The economic recession (2008-2010) has caused the declining margins in

Burger King.

b. Legislation for unhealthy fast food threatens not only Burger King but the

quick service restaurant as a whole. For example, a health reform bill

passed by the U.S. Congress in 2010 required restaurant chains to list the

calorie content of the menu.

c. Aside from its main competitor, which is McDonald, and indirect

competitors such as Taco Bell, KFC, and Pizza Hut etc. Burger King may

face other small growing competitors as the barrier for entry is low.

EFE MATRIX

Rating indicates how effective the firm’s current strategies respond to the factor.

Rating of 1 indicates the response is poor, 2 indicates the response is below

average, 3 meanwhile indicates its above average and rating of 4 means

company is superior in responding to the factors. Weights are industry-specific

while ratings are company-specific. Total weighted scores well below 2.5 point

to internally weak business. Scores significantly above 2.5 indicate a strong

internal position. The total weighted score of 2.40 indicates that the business has

slightly less than average ability to respond to external factors.

No Opportunities Weight Rating Weighted

Score

1 International expansion 0.20 3 0.60

2

3

Growing health conscious population

FFHR potential growth in QSR segment

0.20

0.10

3

2

0.60

0.20

4 Increase market share 0.10 2 0.20

No Threats Weight Rating Weighted

Score

1

2

3

Economic recession (2008-2010)

Legislation for unhealthy fast food

Competition from well-established fast

food companies

0.20

0.10

0.10

2

2

2

0.40

0.20

0.20

Total 1.0 2.40

IFE MATRIX

Rating captures whether the factor represents something major or minor. A

rating of 1 represent a major weakness while a rating of 2 represents a minor

weakness. A minor strength will represent a rating of 3 while a major strength

will be rated as 4. Since we are using the rating scale 1 to 4, then strengths must

receive a 4 or 3 rating and weaknesses must receive a 1 or 2 rating. Total

weighted scores well below 2.5 indicate to internally weak business. Scores

significantly above 2.5 indicate a strong internal position. Burger King company

score of 2.60 shows that the company has an internally strong business.

No Strengths Weight Rating Weighted

Score

1

2

3

4

5

6

Strong brand name

Strong market position

Lower Capital requirements

Has its own distribution cooperative (RSI)

Exclusive partnership

Cost efficient kitchen and registry

operation

0.13

0.10

0.08

0.07

0.06

0.03

4

3

3

3

3

3

0.52

0.30

0.24

0.21

0.18

0.09

No Weaknesses Weight Rating Weighted

Score

1 Reliance of franchisee as source of

revenue

0.13 2 0.26

2 Continuous leadership changes 0.09 2 0.18

3 Limited management control 0.07 2 0.14

4 Concentrated in US only, less presence in

certain country

0.08 2 0.16

5 Wrong marketing strategy 0.10 2 0.20

6 Too much emphasis on value meals 0.03 2 0.06

7 High calorie food items/menu 0.03 2 0.06

Total 1.0 2.60

CPM MATRIX

The overall competitiveness of a firm can be evaluated on the basis of its overall

strength rating. If the difference between a firm’s overall rating and the scores of

lower-rated rivals is higher then the firm has greater net competitive advantage.

Whereas, if the difference between a firms’s overall rating and the scores of

higher-rated rivals is bigger then the firm has greater net competitive

disadvantage. The competitive profile matrix shows that the total weighted score

of McDonald’s is higher than Yum Brands and Burger King which means that it

has the strongest competitive position. While Burger King has the net

competitive disadvantage compared to the other two brands.

McDonald’s Yum! Brands Burger King

Critical

Success

Factors

Weight Ratin

g

Weighted

Score

Rating Weighted

Score

Ratin

g

Weighte

d Score

Brand Name 0.15 4 0.60 3 0.45 2 0.30

Product

Quality

0.09 2 0.18 3 0.21 3 0.21

Public Image 0.07 2 0.14 3 0.24 2 0.14

Market Share 0.10 4 0.40 3 0.30 3 0.30

Price

Competitive

0.05 3 0.15 2 0.10 3 0.15

Innovation 0.04 3 0.12 2 0.08 2 0.08

Advertising 0.06 4 0.24 3 0.18 2 0.12

Market

Expansion

0.08 4 0.32 4 0.32 4 0.32

Financial

Position

0.06 4 0.24 3 0.18 2 0.12

Sales

Distribution

0.08 3 0.24 3 0.24 3 0.24

Strategic 0.04 3 0.12 3 0.12 2 0.08

Partnership

and Aliances

Number of

Locations

0.10 3 0.30 4 0.40 3 0.30

Geographic

coverage

0.08 3 0.24 4 0.32 2 0.16

1.0 3.29 3.14 2.52

PROBLEM STATEMENT

LIST OF PROBLEMS

1. Poor management by its previous predecessor

Burger King has gone through different management style and companies

since it was founded in 1953 by Keith Kramer and Matthew Burns. Even

though Burger King has established itself as a well known brand over the

years, its history of poor management has put a toll on its brand name.

Even suffering declining in revenues along the way.

2. Weak marketing strategies and wrong target market

Certainly the changes of its strategies do led to a profitable quarters and

re-energized Burger King after the take-over of TPG Capital in 2002, but

when the advertisements and campaigns stopped, the sales of its items

also declines. Furthermore, Burger King led by TPG Capital invested too

much on acquiring male consumers as their target market. During the

2008-2010 recession in the U.S., Burger King showed the lack of flexibility

in changes of its market strategies. Male consumers was not a really

suitable target market at that time as they were the ones having

difficulties and was hit hard on employment and such during the fiscal

year.

3. Lack of product Innovations

The “barbell” menu strategies that was introduced at both the premium

and low-priced ends of the product continuum did not really help much in

the growth of Burger King. Since fast food often associated with low price.

Furthermore, the premium items need to be constantly advertised.

Moreover, its menu development was deemed as horrible and too much

emphasis was given on value meals which causes dissatisfaction among

the franchisees.

The growing concern of health and fitness in the U.S. as well as the

passing of the health reformed bill in 2010 by the U.S. Congress is one of

the most important issues to be taken into consideration for the quick

service restaurant (QSR) including Burger King. Burger King should be

flexible in its approach of product offerings but failed to do so by

promoting and creating high calorie and unhealthy food items on the

menu.

4. Limited management control

Approximately 90% of Burger King restaurants were franchised. This

means a lower capital requirements but it also meant Burger King had

limited control over franchisees. The limited control by Burger King

management can cause distortion in relaying the right management style

as well as adhering its vision and mission of the company to the

franchisees. For example, mismanagement by franchisees was they

disregard their aging restaurant. And this will led to the downgrade of its

brand name.

5. Reliance of franchisees as revenue source

According to management, the company generated revenues from three

sources. Two of them are from the franchisees. This posed as a threat to

the company as revenue will be lost if there are declines in franchisees.

Based on the listed problems above, we can conclude that the main problem is

poor leadership and management and loss of brand vision that leads to

weak marketing strategies, wrong target market and lack of

innovations.

ALTERNATIVE STRATEGIES

1. Rebranding

A firm's brand is its most valuable asset. When your firm has a confident,

well-positioned brand, opportunity grows: you are perceived as more

credible, get more unsolicited leads, close a higher percentage of business

and can charge more for your services. Rebranding is a 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 involves radical changes to a

brand's logo, name, image, marketing strategy, and advertising themes.

Such changes typically aim to reposition the brand/company, occasionally

to distance itself from negative connotations of the previous branding, or

to move the brand upmarket, furthermore they may also communicate a

new message a new board of directors’ wishes to communicate.

2. Setting new product and marketing strategies

Burger King has successfully differentiated from its competitors when it

launced the Have It Your Way advertising campaign in 1974. But the

constant take-over of the company has caused it to loose direction of its

market segments and targets. 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 are more

concerns on their health, they will think more of their family and

protection against having high calories food. In short, Burger King must be

able to 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 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 to Kuwait, Bahrain,

Qatar and United Arab Emirates 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 market expansion.

EVALUATION OF ALTERNATIVE STRATEGIES

1. Rebranding

Burger King has lost direction with the constant changes of management

and leadership style. With rebranding, a new and fresh image of Burger

King will be introduced with the new takeover. With rebranding it can help

in understanding more of the brand itself. A more defined purpose and

value of the brand which will be of help in hiring more suitable staff and

target the right sort of clients. Furthermore, with rebranding, the

franchisees will also be involved in the process. This is a great way to

boost morale and make them ambitious to take on a new level. The cons

for this are to rebrand, we must took into account the resources and the

high costs for rebranding.

2. Setting new product and marketing strategies

Burger King put all its energy into targeting 18-35 year old males, but they

only represent only 17% of the fast food market. Wider range of

consumers can be achieved with new marketing strategies that target the

whole gender and age group. With the new product development aiming

to promote more healthy food items, it does not only fit to the current

trend of health and fitness but also in line with the passing of the health

reform bill in U.S.

Customers who are frequent to Burger King will always have newer needs,

they often wish that new product or services could be more than what is

has today. Therefore, the introduction of the new product development

that focuses on the need of the customers and change in the company’s

image and services could establish the company as industry leader. The

company could rely on the existing customers to provide input to

determine the effective way to enhance loyalty and to attract new

customers and ultimately, increase profitability. However, this strategy

requires the company to have a well define road map and commitments to

raise their service standard to customers. In terms of new marketing

campaign, it will involve a lot of capital and spending too much into

marketing is quite a gamble, as it is never literally proven that high

marketing cost helps to increase sales.

3. Market expansion

Market expansion would raise customers’ awareness to the existence of

the company. Market expansion strategy at new geographical locations

such as Eastern European countries, some parts of the African countries

and Middle Eastern countries would enable the company to bring in

previously untapped customers markets and allow the company to spread

the costs of doing business across more markets and customers. This

makes the cost of doing business less on per-customer basis, which

improves the potential to profit by adding new customers. However, the

company needs to assess the limitations of entering into the new

geographical locations particularly on the government regulations and the

social climate or trend of the people in those countries.

THE BEST STRATEGY AND JUSTIFICATION

The best strategy for Burger King is to combine the two alternatives which

are re-branding and setting new product and marketing strategies. The poor

management and constant leadership change in Burger King has hurt the brand

name. Furthermore, it also provide a thin 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 and promotion strategies in order to survive in the fast food industry.

Focusing on its marketing strategies, Burger King need to develop new

marketing plan such as creating more family oriented menu for the restaurant,

deliver new marketing campaign through different medium such as loyalty

customer programs, limited-time offers menu strategy, kids’ menu package and

slightly change the concept from a high calorie menu to healthier or low calorie

menu. Apart from that, changes on the Burger King infrastructure will gain

positive respond from customer 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 increases their market share. Targeting on the

children and working parents helps 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 terms of increase in market share, customer loyalty, brand popularity

and competitive advantage.

IMPLEMENTATION

SHORT TERM

1. Rebranding

Burger King need to rebrand its image, to have a more focus and specific and

goal directed kind of image, currently consumer may confused on what

Burger King May offers. With rebranding, a new and fresh image of Burger

King will be introduced with the new takeover. Burger king also may merge

with another fast food operator for example DOMINO Pizza, service skills or

fast operation knowledge able to transfer between both operators, as Domino

Pizza is one of the top major quick service restaurants in US. Furthermore,

with this move Burger King can gain more market share in the quick service

restaurant industry. Last but not least, HRM department will 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/ marketing campaign

Burger king may establish new marketing strategy. Burger king may opt to

invest in its commercial advertising by getting a healthy celebrity who enjoys

burger king new healthier food. Burger king need to showcase its various new

menu items, which include smoothies, salads, and specialty coffee drinks.

The commercials video must strike a humorous tone and should be more fun

than the old one. To attract more children consumer burger king may

introduce a 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.

LONG TERM

1. Introducing healthier food & drink

People nowadays are more concern on health, thus Burger king can take a

chance to promote and introducing a healthier food and drinks. For example

include a fresh fruit or fresh vegetable salad to its menu. Not only that, to

promote healthier foods which also include the current food ingredient for

example reduce or remove all usage of msg in food, or reject on preparing

burger that have pickles. For its drink, they can introduce organic fresh drink

and cut off the use of sugar in its drink.

2. A Firmed and consistence company leadership/ ownership

Based on history of this company, the ownership is changed on regular basis,

this may bring to a negative consumer perception on its company. Its only

show how weak Burger king in its management and its unstable 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 clear

vision of the company and compelling picture of a 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 its self.