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Strategic Management Audit: Burger King
- 1. Burger King STRATEGIC MANAGEMENT AUDIT
- 2. Overview COMPANY OVERVIEW, CURRENT PERFORMANCE, MISSION, VISION, OBJECTIVE, AND STRATEGIC MANAGERS.
- 3. BK: Company Overview and Current Performance Founded in 1954. 14,000 restaurants worldwide. 50% located outside the United States. 1.14 billion USD revenue in 2018. Merged with Tim Hortons in 2014.
- 4. Company Mission “offer reasonably priced quality food, served quickly, In attractive, Clean surroundings.
- 5. Company Vision “to be the most profitable QSR business, through a strong franchise system and great people, serving the best burgers in the world.” Achieve the leading position in QSR business. (McDonald’s) Use a franchise system to grow. Great people and the best burgers. Establish the nature of the business.
- 6. Company Objectives Increasing market share by increasing brand image. Target larger consumer segments/Generate new customers. To project itself as a high quality and premium brand. Increase brand loyalty. Increase customer satisfaction. Start conversion of company/franchise ownership from 11.75% to 15% (for every 100 BKs, 15 will be company owned).
- 8. External Environment Analysis PESTEL ANALYSIS
- 9. Political Factors Governmental support for globalization. Political stability in major markets. Governmental support for e-commerce. Significant opportunities for growth and international expansion.
- 10. Economical Factors Expanding international trade agreements. Economic stability of the U.S. High economic growth in developing markets. Opportunities for growth and expansion in developing economies.
- 11. Social/Sociocultural Factors Increasing consumer diversity. Higher health consciousness. Increasing support for animal rights. Opportunities to improve despite the threats.
- 12. Technological Factors Higher availability of automation technologies. Higher popularity of mobile technologies. Low R&D activity in the quick service restaurant industry. Major opportunities for performance improvements based on technological external factors
- 13. Ecological/Environmental Factors Climate change. Emphasis on business sustainability. Increasing popularity of low-carbon lifestyles. Realistic opportunities to work on sustainability and efficiency.
- 14. Legal Factors Import and export regulation. Environmental protection laws. GMO regulation. Legal-based opportunities for growth and sustainability.
- 15. Internal Environment Analysis SWOT ANALYSIS
- 16. Strengths Strong brand image. S1 High market penetration. S2 Moderate differentiation of products. S3
- 17. Weaknesses Easily imitable business. W1 Limited product mix. W2 Low control on franchise model. W3
- 18. Opportunities Diversification/product mix widening. O1 Market development. O2 Service quality improvement. O3
- 19. Threats Aggressive competition. T1 Imitation. T2 Healthy lifestyles trend. T3
- 20. Strategy Formulation MISSION REVIEW, OBJECTIVES ILLUSTRATION & REVIEW, AND TWOS ANALYSIS.
- 21. Mission Review Missing elements in the company’s mission. Emotional appeal. Target region. Increasing employee commitment and motivation.
- 22. Objectives Review Not formulated based on SMART goals. Measurement is missing. No time frame stated.
- 23. Objectives Review • "Increasing market share by 15% by the end of 2020." • "Generate new customers by 8% by 2019.“ • "Increasing brand value perception by 10% by the end of 2022.“ • "Increasing brand loyalty by 10% by the end of 2020." "Increasing market share by increasing brand image.“ "Target larger consumer segments/Generate new customers.“ "To project itself as a high quality and premium brand.“ "Increase brand loyalty.“
- 24. TWOS Analysis OS, TS, OW, AND TW STRATEGIES.
- 25. OS Strategies (MAXI-MAXI) Utilization of strong brand image and high market penetration to open new restaurants. (S1, S2, O2) Emphasis on diversification through moderate differentiation. (S3, O1)
- 26. TS Strategies (MAXI-MINI) Retaining position in the market with the help of strong brand image.(T1, S1, S2) Utilization of moderate product differentiation to address the healthy lifestyles trend & reduce risk of imitation. (S3, T3)
- 27. OW Strategies (MINI-MAXI) Address current product mix limits by product mix widening. (O1, W2) Investing in service quality improvement for harder imitation. (O3, W1) TW Strategies (MINI-MINI) BKC should focus on widening its product mix and increasing its product differentiation in order to minimize the chances of imitation. (T2, W1)
- 28. TWOS ANALYSIS Opportunities Threats 1. Diversification/product mix widening 2. Market development 3. Service quality improvement 1. Aggressive competition 2. Imitation 3. Healthy lifestyles trend Strengths OS Strategies (MAXI-MAXI) TS Strategies (MAXI-MINI) 1. Strong brand image 2. High market penetration 3. Moderate differentiation of products 1. BKC’s strong brand image and high market penetration make it easier for the company to open new restaurants and introduce new products. (S1, S2, O2) 2. BKC’s moderate differentiation is a strength that allows the company to ensure uniqueness of some of its products and emphasize on diversification. (S3, O1) 1. One of the major threats that BKC could face is aggressive competition. BKC should innovate and diversify its products more often to retain its position in the market with the help of its strong brand image. (T1, S1, S2) 2. BKC can utilize its moderate product differentiation to improve products to address the healthy lifestyles trend. (S3, T3) Weaknesses OW Strategies (MINI-MAXI) TW Strategies (MINI-MINI) 1. Easily imitable business 2. Limited product mix 3. Low control on franchise model 1. BKC should seize the product mix widening opportunity in order to address the current product mix limits. (O1, W2) 2. BKC can overcome its weakness of being an easily imitable business by investing in service quality improvement, which will give them a competitive edge and makes it harder for other businesses to imitate them. (O3, W1) 1. BKC should focus on widening its product mix and increasing its product differentiation in order to minimize the chances of imitation. (T2, W1)
- 29. Company’s Strategies GRAND, GENERIC, AND VALUE DISCIPLINES.
- 30. Generic Competitive Strategies (Porter’s Model) Cost leadership. Primary generic strategy. Minimizing costs to offer low prices, through standardization of processes. Broad differentiation. Creating unique characteristics for differentiation. Flexible options. (“Be Your Way”)
- 31. Grand Strategies (Intensive Growth Strategies) Market penetration Grow revenues from existing customers. Market development Grow through entering new markets. Product development Grow through introduction of new products
- 32. Competitive Edge Unrivaled differentiation of products. Quick service. The franchise strategy.
- 33. Strategy Implementation IMPLEMENTATION PROBLEMS, STRUCTURE COMPATIBILITY TO STRATEGY, STRATEGY COMPATIBILITY TO LIFE CYCLE STAGE, AND ACTION PLANS.
- 34. Strategy Implementation Problems Cost leadership. Broad differentiation. Market penetration in a saturated market. Product development.
- 35. Structure Compatibility to Strategy Global centralization. Functional groups. Geographic divisions.
- 36. Strategy Compatibility to Life Cycle Stage Burger King is in maturity in its product life cycle. Increased competition. Similar product offerings. Strategy is matching the stage. Main objective is to maximize profit while defending market share.
- 37. Sample of Strategy Implementation Action Plans Objective: Increasing market share by 15% by the of 2023 Actions Due date BY Comment 1. Achieving 10% growth in annual sales 1/1/2019 1/1/2020 1/1/2021 1/1/2022 1/1/2023 Abdallah Requires annual evaluation. 2. Increasing promotional budget by 20% 1/1/2020 Ramy Emphasize the use of celebrities, influencers and social media. 3. Raising customer satisfaction by 25% 1/1/2021 Ahmed Tracking social media feedback. 4. Increase awareness by 10% 1/1/2021 Ramy 5. Increase customer retention by 20% 1/1/2023 Abdallah Focusing more on customer retention rather than acquisition.
- 38. Control and Evaluation Objective Actual Corrective Actions 1. Raising customer satisfaction by 25% by the end of 2020 ✓ 1. Achieving 10% growth in annual sales ✓ 1. Increasing market share by 15% by the of 2023 Adjusting the promotion budget 1. Reducing Employee turnover by 30% by 2024 Adjusting the implementation procedure through reviewing the effectiveness of compensation programs and training.
- 39. Conclusion Ever-changing leadership is bad for business. Stability needed. Less focus over goals & objectives. Affected brand image adversely. Lacked consistency in operation. Failed to communicate vision to franchisees. International presence can be further strengthened. Mission statement can be further improved. Objectives can be further improved.
- 40. Thanks for your time. ANY QUESTIONS?
Editor's Notes
- Founded in 1954, Burger King is a U.S.-based quick service burger restaurant chain that is also known by the abbreviation ‘BK’. Since the 1950’s Burger King has evolved into an international brand with more than 14,000 Burger King restaurants worldwide. Today around 50 percent of these restaurants are located outside the United States. The revenue of Burger King has seen growth over the last three years reaching 1.14 billion U.S. dollars in 2018. In 2014, Burger King and the Canadian QSR-chain Tim Hortons merged under the parent company Restaurant Brands International.
- Burger King’s mission statement is to “offer reasonably priced quality food, served quickly, in attractive, clean surroundings.” This mission statement indicates the kind of outputs expectable from the organization.
- Burger King’s vision statement shows that the company aims to achieve the leading position in the quick service (fast food) restaurant industry. At present, McDonald’s holds this top position. The vision statement also indicates that Burger King uses a franchise system to grow. Great people and the best burgers are offered to attract one of the biggest market shares in the industry. Thus, Burger King’s vision statement establishes the nature of the business and its direction toward global market leadership.
- Increasing market share by increasing brand image. Target larger consumer segments/Generate new customers. To project itself as a high quality and premium brand. Increase brand loyalty. Increase customer satisfaction. Start conversion of company/franchise ownership from 11.75% to 15% (for every 100 BKs, 15 will be company owned).
- Political conditions are determinants of business performance. Governments continually support globalization. Burger King can take advantage of this condition through global expansion. Also, the external factor of political stability helps reduce challenges to the company’s growth and expansion. In addition, Burger King can improve its e-commerce capabilities. In this part of the PESTEL/PESTLE analysis, the external factors present significant opportunities for Burger King to grow and expand internationally.
- Economic conditions directly affect Burger King’s remote or macro-environment. As countries implement more and expanded international trade agreements, Burger King can grow through global supply chain enhancements. Also, U.S. economic stability enables the company to gradually grow in the country. In relation, Burger King has the opportunity to rapidly expand in developing economies. These conditions show that, in the political dimension of the PESTEL/PESTLE analysis model, Burger King must focus on external factors that present opportunities for growth and expansion, especially in developing economies.
- Burger King must always account for sociocultural influences in its remote/macro-environment. The increasing population diversity presents the opportunity for Burger King to innovate its products to attract consumers of various backgrounds. Higher health consciousness threatens demand for Burger King’s products, which are sometimes criticized as unhealthy. However, the company has the opportunity to improve the healthfulness of its products. Animal rights advocacy continues to attract attention, threatening the main products of Burger King. Still, the firm can implement new supply chain policies to address concerns on animal rights and welfare. This part of the PESTEL/PESTLE analysis points to Burger King’s opportunities to improve despite the threats linked to sociocultural external factors.
- Burger King’s business partly relies on technologies. More automation technologies are now available for businesses. Burger King can apply these technologies to improve operational efficiency. Also, the company can tap mobile users to gain a bigger market share. Relative to the low R&D activity in the fast food restaurant industry, Burger King has the opportunity to boost its R&D investments to improve performance. In this part of the PESTEL/PESTLE analysis, Burger King has major opportunities for performance improvements based on technological external factors.
- The environment can impose limits to Burger King’s business. Climate change threatens to reduce the stability of Burger King’s supply chain. However, the company has the opportunity to improve its sustainability status. Also, Burger King has the opportunity to improve efficiency to attract consumers who advocate low-carbon lifestyles. The ecological external factors in this dimension of the PESTEL/PESTLE analysis indicate that Burger King can realistically work on sustainability and efficiency.
- Burger King must comply with legal requirements. Burger King has the opportunity to grow based on import and export regulations that support new international trade agreements. Also, the company can enhance its sustainability performance to exceed expectations and requirements based on environmental protection laws. However, GMO regulations, especially in Europe, limit the performance of Burger King, considering the widespread availability of GMO ingredients used in the industry. This dimension of the PESTEL/PESTLE analysis emphasizes growth and sustainability based on legal external factors.
- Burger King has one of the strongest brands in the industry. This condition makes it easier for the company to open new restaurants and introduce new products. Higher market penetration is a strength based on the large number of Burger King restaurants across the globe. Also, Burger King’s moderate differentiation (e.g., grilled burgers) is a strength that allows the company to ensure uniqueness of some of its products. Burger King’s strengths are mainly based on branding and market penetration.
- Even though Burger King has moderate differentiation, one of its weaknesses is that its business model and products are easily imitated. For example, other firms could offer similar grilled burgers. Also, Burger King’s limited product mix is a weakness because it prevents the company from attracting customers looking for more options. In addition, even though Burger King grew internationally through franchising, the franchising model is a weakness because it limits corporate control on franchisees’ approaches to management.
- Some elements are missing in the mission statement and its effect can be further improved Emotional Appeal: If a company's mission statement is boring, nobody will notice or remember it. It should be infused with a little edge and personality. It should be energizing, inspirational and memorable. Rather than taking a bland, objective, and scientific approach, companies should strive to build an emotional connection with their prospects. Target Region: The business must determine what region it serves best and relay that information by way of the mission statement. Increasing employee commitment and motivation: Mission statements should be motivating. It shouldn't be based only on making more sales or profits but on employee's significant work and how the mission contributes to people's lives.
- To ensure those objectives are achievable, the SMART strategy is highly recommendable to able to define each goal clearly. Also, goals should be arranged in order of priority from the most important to the least important. "Increasing market share by increasing brand image." This objective is not formulated based on SMART goals. Measurement is missing. No time frame stated. It is specific, attainable, and relevant to the mission of the company. The SMART objective would be: "Increasing market share by 15% by the end of 2020." "Target larger consumer segments/Generate new customers." This objective is not formulated based on SMART goals. Measurement is missing. No time frame stated. It is specific, attainable, and relevant to the mission of the company. The SMART objective would be: "Generate new customers by 8% by 2019.“ "To project itself as a high quality and premium brand." This objective is not formulated based on SMART goals. Measurement is missing. No time frame stated. It is specific, attainable, and relevant to the mission of the company. The SMART objective would be: "Increasing brand value perception by 10% by the end of 2022.“ "Increase brand loyalty." This objective is not formulated based on SMART goals. Measurement is missing. No time frame stated. It is specific, attainable, and relevant to the mission of the company. The SMART objective would be: "Increasing brand loyalty by 10% by the end of 2020." "Increase customer satisfaction." This objective is not formulated based on SMART goals. Measurement is missing. No time frame stated. It is specific, attainable, and relevant to the mission of the company. The SMART objective would be: "Increasing customer satisfaction by 25% by the end of 2021." "Start conversion of company/franchise ownership from 11.75% to 15%." This objective is not fully formulated based on SMART goals. Measurement is stated. No time frame stated. It is specific, attainable, and relevant to the mission of the company. The SMART objective would be: "Start conversion of company/franchise ownership from 11.75% to 15%.by the end of 2021."
- BKC’s strong brand image and high market penetration make it easier for the company to open new restaurants and introduce new products. BKC’s moderate differentiation is a strength that allows the company to ensure uniqueness of some of its products and emphasize on diversification.
- One of the major threats that BKC could face is aggressive competition. BKC should innovate and diversify its products more often to retain its position in the market with the help of its strong brand image. BKC can utilize its moderate product differentiation to improve products to address the healthy lifestyles trend.
- BKC should seize the product mix widening opportunity in order to address the current product mix limits. BKC can overcome its weakness of being an easily imitable business by investing in service quality improvement, which will give them a competitive edge and makes it harder for other businesses to imitate them.
- Burger King uses two generic strategies for competitive advantage: cost leadership and broad differentiation. The company’s primary generic competitive strategy is cost leadership. According to Michael Porter’s model, this generic strategy involves minimizing costs, which leads to low prices. Burger King applies cost leadership through standardization of processes to minimize costs based on economies of scale and error prevention. Burger King also uses broad differentiation as its secondary generic strategy for competitive advantage. Based on Porter’s model, this generic strategy requires creating unique characteristics to differentiate the business from other firms. Burger King applies this generic competitive strategy through grilling of burger patties. Also, the former slogan “Have It Your Way” and current slogan “Be Your Way” represent Burger King’s broad differentiation in terms of offering flexible options to its customers. Free drink refills are also offered in many of Burger King’s restaurants.
- Market penetration is Burger King’s primary intensive growth strategy. The goal of this intensive strategy is to grow revenues from existing customers or markets where the firm already has operations. Example: Opening new restaurants in its current markets to get a bigger market share. Generic strategy supports this intensive strategy by highlighting unique product features to penetrate markets and grow the business. Market development is Burger King’s secondary intensive growth strategy. To support business growth, this intensive strategy involves entering new markets or targeting new market segments. Example: Opening new stores in overseas locations where it does not have operations. This strategic objective emphasizes low prices in Burger King’s pricing strategy, which is supported through the cost leadership generic strategy. Product development is the least significant of Burger King’s intensive growth strategies. This intensive strategy enables the company to grow through the introduction of new products. Minimally implemented. Example: Most of Burger King’s products remain on the menu for years. This intensive growth strategy supports Burger King’s generic strategy of broad differentiation by highlighting new products that are unique compared to those of competing firms.
- Burger King has employed the differentiation strategies to enhance its profit. The 'Have It Your Way' slogan has encouraged the company to differentiate their products and services, and provide a competitive advantage where consumers are given more choices. Burger King also competing on response. The drive-through and delivery services promote the quick and flexible response to the customers. The advantage of their franchise strategy is maximizing a competitive response for the local market. Burger King provides different menus and foods in different countries. All these strategies can have a quick response to the local demand and expectation in order to enhance the profitability. Moreover, this is also the key success factor for Burger King because of the ability to explore the new market and survive for longer time.
- Cost Leadership Overall cost leadership is not without potential problems. Two or more firms competing for cost leadership may engage in price wars that drive profits to very low levels. Ideally, a firm using a cost leader strategy will develop an advantage that is not easily copied by others. Broad Differentiation Firms pursuing a differentiation strategy are vulnerable to different competitive threats than firms pursuing a cost leader strategy. Customers may sacrifice features, service, or image for cost savings. Customers who are price sensitive may be willing to forgo desirable features in favor of a less costly alternative. Market Penetration in a saturated market. Market saturation is one of the primary limitations to market penetration. There is always a measurable, and predictable point at which all the customers with potential interest in a given category of products and/or services have been reached by either a newcomer or an existing business. Product Development. A product development strategy can fail to deliver its benefits at different stages in the process. When the team is generating ideas, it may not carry out sufficient research into market requirements, leading to developments that do not meet customer needs.
- Burger King has a centralized functional organizational structure. Burger King merged with Tim Hortons to form Restaurant Brands International (RBI) in 2014. The company changed its structure in the process. At present, Burger King’s organizational structure has the following main characteristics: Global centralization: This characteristic of Burger King’s organizational structure maintains a core management team that makes most of the major decisions for the global organization. Functional groups: Burger King’s organizational structure has function-based groups that span the global organization. This feature of the organizational structure refers to basic business functions like human resource management, legal, and IT. Geographic divisions: Despite the reorganization efforts in 2001 and 2014, Burger King’s organizational structure has geographic divisions as a tertiary characteristic. This feature of the organizational structure divides operations according to their geographic locations.
- Burger King is in maturity in its product life cycle, which is characterized with increased competition and similar product offerings. The firm strategy is matching the stage as the strategy can enable the firm compete in price wars. The company’s main objective should be to maximize profit while defending the market share.
- The history of Burger King marked approximately 20 changes in management. The changes in short term span affected organization focus over goals and objectives, affected brand image adversely and lacked consistency in operation. Burger King’s ever-changing leadership undermined its ability to establish and communicate a consistent and motivational vision to its franchisees. What Burger King needs is a stability in leadership, who can articulate clear vision of the company and compelling picture of a future condition that the staff and franchisees feel committed to achieve. In order to strengthen its presence internationally, Burger King must be ready to venture into the other part of the world that has high potential such as Asia, Middle East and Eastern Europe. US market is almost saturated, and the competition is quite stiff. Although the company mission statement emphasizes on the company goals, long term view, and their core values, it has to clarify BK core competition in regard to its products, and it has to go through the challenge to make it as short as to be memorable. As has been mentioned in the company objectives, its focus points are only on the best burger, healthy food and the alignment with their values and vision, while other aims (like Social responsibility, environmental friendly, etc.) would have enhanced their objective.