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Table of Contents

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Executive Summary

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Significant strategic business decisions which have facilitated or

inhibited Burger King's growth and success in the US and

worldwide and what is significant in Burger Kings History

Burger King stands as one of the most well known fast food restaurant. This chain of fast

food restaurants quenches the hunger of approximately 11.4 million customers every day. As

we look into the history of Burger King, the sail has never been smooth always as this

organization has used various strategies to tackle complex situations of business. As the

saying goes “business is dynamic". There has always been a tough market environment in

which the business compete aggressively one such environment is the hyper-competition

environment (Management, 8Th Ed By Schermerhorn page 221) where there is a direct

competition from numerous competitors resulting in suffocating and challenging

environment. It becomes essential for these businesses to be creative in getting the right

strategy, however most of them will be copied by its competitors as soon as it is found

effective .Thus no matter how many competitive strategies’ Burger King comes up with it

still remains short lived.

Burger kings was founded by McLamore and Edgerton their first decision of offering its

customers with dining rooms along with franchising helped rapid growth of Burger King. A

decision about franchising was taken as it required a lower investment to expand the

business. However Franchising was done in such a way that the Burger King owned the land

and building (accounting for 34%) Once Burger King was under the administration of Smith

he increased this to 42%. He focused on franchising because not only did it reduce the tax to

the company but also such type of asset had appreciation.

During the administration by Smith he also ensured that a strong contract was drafted

between Burger King and franchisee’s in order to control the franchisees. During the initial

periods where Burger King was under the control of its founders it was observed that there

was a limited control existed by them which resulted in varying quality of services and food

among the franchisees thus affecting the brand image of the company hence smith ensured

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that the contracts were drafted in such a manner that the franchisees could not move out of

the boundaries drawn by the company.

In the initial period there were only few regional offices but later the company expanded it to

ten regional offices in US. There were surprise checks done from the company along with

two compulsory checks in two year this was to understand the functioning of the franchisees

and also to have a strong command over the franchisee which facilitated in a smooth

functioning of operations. A lot of activities were carried out to control the franchisees, as

lack of it could have had devastating effects on the company.

They effectively utilized the resources present within the company when they started with the

breakfast menu without investing much on gathering new equipments to fulfill the

requirements soon they had a successful entry into breakfast market.

Burger king focuses and ensures that it delivers the best tasting burgers and French fries

when compared to any of its competitors along with a top rated quality. This has been a

significant strategy used by Burger king over its major competitor Mc Donald. There has

been a consistent growth in the sales as they frequently introduce a wide variety of products.

Burger King used extensive marketing strategies such as Distribution of Free sample of fries,

establishing fry mobiles to generate awareness etc.

Burger King faced severe problems when the man behind the success of BK to reach the

number two position quit the organization in the year 1980 after which they had a fluctuating

management that was unstable due to frequent change in its executives. Burger King had

failed to design a tailored menu for regional tastes and to niche sector of customers such as

health conscious customers.(Strategic Market Management, 7Th Ed By David A. Aaker, page

225).

They ventured into the foreign markets early that did not resulted in its failure however they

established themselves in thirty different countries.

In decline for years, Burger King's fortunes have begun to change, so that it is now regarded

as a 'cool' and profitable brand. Key to its success has been the fact that Burger King's

marketing now focuses on appealing to the super fan; that is the 18-35 year old male who

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enjoys fast food and values taste above everything else (Successes and Failures in Consumer

Goods Innovation and NPD , Publication date : December 2009, Publisher : Datamonitor)

Burger Kings effective disaster plan has been lauded in the corporate circles for the way it

handled the disastrous effects of Hurricane Andrew which hit the US coast in 1992. The

hurricane had hit Florida where Burger King had its headquarters. Such was the force of the

winds which were recorded at 150 miles an hour that it along with the storm surge that

followed the hurricane caused extensive damage to the headquarters worth 10 million dollars

at that time and also destroyed homes of half of 700 employees who used to work there. Such

was the extensive damage caused by wind and water that it damaged the windows and roofs

and left behind a massive trail of destruction. But the management had foreseen the

impending disaster and hence was more prepared for it. The management had airlifted its

operations to Seattle, Washington where it acted as a temporary base for its operations. Part

of its emergency operations was to mobilize key people and use the field offices to handle

important corporate work. A ‘Command Center’ was setup to handle work until the main

offices at Florida will be back up to full operations. The management also distributed Interest

free loans, food and other essentials and established a housing clinic for its homeless

employees affected by the storm. (Pg. 67, Disaster and Recovery Planning)

The turnaround plans chartered by Mr John Chidsey , CEO of Burger King have garned

world wide attention due to the fact that it helped the second largest fast food outlet to beat

the effects of recession in 2006 and go on to look after its shareholders and the franchises.

(www.ibscdc.org)

It was not only the recession that Burger King had to deal with but it had also deal with

internal problems like the change in management. The new management under the leadership

of Mr John Chidsey had to immediately look into the factors contributing to the downfall of

the fast food industry like obesity concerns, spurt in food prices and the proposed embargo

commodity exports. (www.ibscdc.org)

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The management had look into some specifics in order to affect a successful turnaround in

the fortunes of the company. These points are as follows:

Understand the dynamic of the fast food industry

Factors causing the growth of US fast food industry

Impact of recession on the US economy and the industry and for Burger King in

specific.

To look into challenges facing Burger King to remain profitable

History:

The Burger King was founded as a franchise by James Mclamore and David Edgerton in

1954 in US and the King making its appearance the year after in 1955. Burger King made its

foray outside US by opening its first restaurant in Puerto Rico in 1963. Till date Burger King

operates 12000 restaurants in 76 countries worldwide. The restaurants also include franchises

owned by families and have being in operation for decades. (www.investor.bk.com)

Core Competencies-

According to C K Prahalad and Gary Hamel Core competency is defined as having

knowledge and experience of an area or a product which is different but better than others.

(www.quickmba.com) As per the definition core competencies lead to a better development

of the intended core products which are not directly sold to end users but are used to produce

a large number of end user products. For improving the core product the company should

possess good technology, skills and in depth knowledge of the product. According to

Prahalad and Gary:7

An organisation can access variety types of markets

Significant contribution to the end product

Make it impossible for the competitors to imitate

Core competency is the ability to integrate and co-ordinate the various groups in the

organisation and in doing so bring out a product that markets the results. Through alliances

and licensing agreements the missing pieces can be joined together to give a better overview

of the product. However core competency does not necessarily involve:

Outspending rivals on research and development

Sharing costs among business units

Integrating vertically

In line with the core competencies, Burger king invested in food and service technology to

develop its core product namely ‘the humble hamburger’. The company procured the Insta-

Boiler which had the capacity to produce 400 burgers within an hour with a selling price of

unbelievably 18 cents. Over the following years Burger king installed the flame boiler in its

production units to introduce its new product ‘The Whooper Sandwich’ in the market. This

particular product became so popular that Burger King is still unrivalled in that particular

segment and is called the home of the whopper.

In mid 2006 Burger King introduced the revolutionary yet untried service of pork ribs from

its fast food outlets. Pork ribs are generally found in fine dining restaurant with the customer

enjoying it over a drink. Technically the concept was untested and costly as compared to the

economical hamburger. But Burger King went ahead with its pilot project in USA and it

worked wonders for them so much that they couldn’t meet the demand and had to shelve its

project temporarily. People flocked to the joints to buy these pork ribs and they didn’t mind

the price. (www.time.com)

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Competitive Method of Burger King:

Micheal Porter had devised model to which explains three generic strategies to gain a

competitive edge in the market. The model is illustrated as follows:

(www.marketingteacher.com)

Lost cost leadership strategy:

The low cost leader in any market gains competitive edge for the ability to produce at the

lowest cost. Cost advantage is an important factor right from building factories to recruiting

employees and training them. The product tends to be no frills and in some cases it doesn’t

necessarily mean low prices. (www.marketingteacher.com)

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Burger King which started as a small fast food joint in 1954 in USA and made its foray in to

the international market by opening an outlet in Puerto Rico in 1963. Till date this chain has

opened more than 12000 restaurants spanning over 76 countries with most of this franchises

owned by families due to its low cost nature for running.

Differentiation:

Differentiated goods and services satisfy the needs of the consumer through sustainable

competitive advantage. This directs the company to focus on the product which gives them a

better margin. This helps the organisation in segmenting its products and thus helps in

gaining more than the average price. However this differentiation results in additional costs

which should be offset by the revenue generated by sales. (www.marketingteacher.com)

Burger king is not only in completion with Mcdonalds but also with KFC, Pizza Hut etc. In

order to establish itself it installed machinery which churned out more than 400 burgers in an

hour and also introduced products according to customer’s taste like apple fries for children

and low fat baguette style chicken sandwich.

Focus or Niche Strategy:

This strategy comes into play when neither the organisation can afford a wide scope cost

leadership nor a wide scope differentiation strategy. This strategy is generally used by the

smaller firms. However these strategies are generally not useful in the long run.

(www.marketingteacher.com)

Burger King has strived to achieve the top position in the market but this hadn’t been entirely

possible. This is where the management at Burger King introduced awareness programs like

‘Battle for burger’ and ‘Aren’t you hungry for Burger King?’.

Why is McDonald Better Burger King?10

Mcdonald has upstaged Burger king in terms of marketing, advertising and in terms of

numbers also. Mcdonalds has been in the fast food industry more than Burger King and has

more than 40000 fast food outlets while Burger King has more than 12000 restaurants. In

terms of the total revenue generated outstrips the one generated by Burger King. Revenue

apart Mcdonalds outshines Burger King also in terms of advertising to both the adult as well

as kids segments. Burger king is slowly making foray into advertising segment by targeting

the teen segment. (www.bloggingstocks.com)

Another issue affecting the smooth functioning of the Burger King is the constant change in

the top management. Various decisions are made and remain incomplete the different style of

functioning of the CEOs. Even if any good work is done then unknowingly it gets undone by

the new CEO. If Burger King has had a stable management it would have at least helped in

bridging the gap between it and Mcdonalds.

Recommendations:

The Burger King is well positioned in the fast food industry and is trying to consolidate its

position in the existing market by introducing new products which tilt towards the healthy

food segment. Burger King is also working towards modernizing its restaurant as well as

expanding its restaurant to handle 24 hour operations like its competitors. Burger king also

has to add a little variety to its breakfast menu so as to appeal to the early morning segment

of customers.

Burger King has to provide stable working environment to its top management as these are

the people who make the decisions that shape the functioning of the organisation. Burger

King had 17 CEOs since it started and this really doesn’t bode well for an organisation trying

to gain an upper hand over its competitors. The company even has to improve the marketing

strategies like upgrading the distribution channel and ensuring that the same quality standards

are maintained through all its outlets. The company should try to introduce new products and

develop an effective advertising campaign in order to lure potential new customers to its

outlets. The company should also try to collaborate with other outlets in order to maximise

revenue and have a much wider appeal to the customers.

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In UK there are people of diverse culture and religions and thus Burger King has to ensure

that it appeals to all. Thus it has introduced Halal food for its Muslim customers and also

started healthy food to appeal to the people who believe in fitness.

School of Strategy:

There are 10 schools of strategy which are as follows:

The Design School- There should be a clear and knowledgeable approach to the

policies put forward by the management for the pursual by its employees.

The Planning School- There should be a rigorous approach to the policies which can

affect a positive outcome.

The Entrepreneurial School- this is all about having an visionary approach to the

decisions.

The Cognitive School- This style is of having a mental approach to the problems at

hand.

The Learning school- In this process the management studies the functioning of the

organization and then suggests ways to overcome the deficiencies.

The Power School- This process involves the art of negotiating between the power

brokers.

The Cultural School- This involves involvement of various groups within an

organisation.

The Environmental School- Under this process the external environment in the

organisation shapes the decision making process.

The Configuration School- This involves structuring the decision making process.

(www.12manage.com)

The Positioning School:

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The planning school doesn’t put any limits on the strategies that are possible in any given

situation while the positioning school in contrast suggests that a few strategies can be used in

the current scenario which can be used against the existing and the future competitors. In this

case Burger King has an existing competitor in Mcdonald while future competitors consist of

Taco bell and Wendy’s.

The Positioning School of Burger King:

The Burger King holds a commanding No. 2 position in the fast food industry and holds a

competitive as well as financial share in the market in relation to its competitors. At the time

when USA was in the grips of recession the management at the Burger King have

implemented a different strategy to strengthen the business. The management took out

slogans like ‘Battle for burger’ and ‘Aren’t you hungry for Burger King?’ which were

strategically directed towards money saving clientle and thus ensured the competitive edge is

maintained.

Critique of positioning school:

The burger king has always maintained a different approach to the way it approaches the

competitive market which is illustrated by the fact of they providing healthy alternative to its

fat food. The decision of the management at Burger King usually depends on the business

dynamics and the nature of the business. The management try to use different cooking

methods but they still cling on to the traditional food like ‘Whooper’.

(www.facilitatingimpact.blogspot.com)

Competative Analysis:

The Management has also to ensure that it does a regular analysis of its competitors to

understand its position in relation to them. Apart from Mcdonald which is Burger Kings main

competitor, it has other competitors as Wendys, Pizza Hut, Dominos who are also vying

against each other to gain a share in the market. However they may not entirely eat in to the

share of Burger King but they can surely affect the total revenue generated at the end of fiscal

year.

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Another factor where the management at Burger King has to take a note of is the emergence

and prominence of healthy foods especially in Fast Food joints. With lawmakers closely

monitoring the fat content in the products sold by fast food joints it has become essential for

Burger King to provide a healthier alternative to its customers. At present Mcdonald is the

pioneer in providing healthier food alternatives in its outlets and is really consolidating its

position in the competitive market for a long term.

Conclusion

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Bibliography:

Websites:

http://www.ibscdc.org/Case_Studies/Strategy/Restructuring%20Turnaround

%20Strategies/RTS0184.htm

http://investor.bk.com/phoenix.zhtml?c=87140&p=irol-irhome

http://www.quickmba.com/strategy/core-competencies/

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http://www.time.com/time/nation/article/0,8599,2001661,00.html

http://marketingteacher.com/lesson-store/lesson-generic-strategies.html

http://www.bloggingstocks.com/2007/04/09/mcdonalds-vs-burger-king-battle-of-the-

brands/

http://facilitatingimpact.blogspot.com/2008/07/strategy-school-3-positioning-

school.html

http://www.12manage.com/methods_mintzberg_ten_schools_of_thought.html

Books:

Management, 8Th Edition By Schermerhorn, Published by Wiley, John & Sons

Strategic Market Management, 7Th Edition By David A. Aaker Published by Wiley

India Pvt. Ltd.

Disaster and Recovery Planning, a Guide for facility managers, Gustin Joseph 3 rd

Edition, Published by Fairmount Press

Journal

Successes and Failures in Consumer Goods Innovation and NPD , Publication date :

December 2009, Publisher : Datamonitor

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