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Burger King Company: Strategic Audit Report Essay

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Updated: Jul 22nd, 2021

Introduction

Burger King is a famous American fast food company that, in the past, competed with McDonald’s for the title of the most widespread and popular burger company in the USA and abroad. It distinguished itself from other fast-food companies by encouraging the customers to create their brands and recipes, thus allowing more room for alterations and modifications, which McDonald’s’ conveyer belt method of foodservice and production did not allow (Hunger & Wheelen, 2013). This innovative approach allowed Burger King to stay afloat and retain a loyal customer base even after the food chain fell into disarray after becoming a part of Diageo. Due to Diageo’s poor management practices, the brand lost franchising power. Burger King was later sold to TPG capital in 2002. Some of the company’s investors include Bain Capital and Goldman-Sachs, which currently control up to 25% each (Hunger & Wheelen, 2013). Since 2010, the number of customers served by Burger King has been growing steadily (Burger King, 2018). The company’s current employee count is over 40,000, and the number of individual customers served exceeds 12 million a day (Burger King, 2018). The purpose of this strategic audit report is to analyze the strengths and weaknesses, as well as the internal and external factors influencing the company and provide alternative strategic solutions to solidify its positions in the market.

Vision and Mission

Burger king’s vision statement is as follows: “We proudly serve the best burgers in the business, plus a variety of real, authentic foods all freshly prepared just the way you want it” (Burger King, 2018, para. 1).

Burger King’s mission statement:

“We will prepare and sell quick service food to fulfill our guest’s needs more accurately, quickly, courteously, and in a cleaner environment than our competitors. We will conduct all our business affairs ethically, and with the best employees in the world. We will continue to grow profitably and responsibly, and provide career advancement opportunities for every willing member of our organization.” (Burger King, 2018, para. 2)

As it is possible to see from the company’s vision and mission statements, Burger King is a customer-oriented company that emphasizes the quality and uniqueness of every individual customer, as they seek to allow the customers to “have it their way” when it comes to deciding how their food is going to be served and prepared. The quality of their product plays a very important part in Burger King’s strategy, as the franchise cannot match McDonald’s and their conveyer belt method, meaning it has to offer the customers something in return for increased waiting times.

Strategic Planning

External Factor Analysis Summary

External Factors Weight Rating Weighted Score Commentary
Opportunities:
  • The fast-food industry keeps growing.
0.1 3 0.30 Potential increases in market share.
  • Increased demand for healthy products.
0.1 3 0.30 Opportunity for expanding the existing menu to cater to new customers.
  • Globalization trends.
0.1 2 0.20 More markets become available for expansion.
  • Cost differences between competitors.
0.15 2 0.30 The opportunity to provide similar services and products at lower prices.
  • Mergers and expansion through acquisition.
0.5 3 0.15 Buying local franchises to enter new markets.
Threats:
  • McDonald’s is a strong competitor.
0.15 3 0.45 McDonald’s has a wider chain of food stores and a more recognizable brand name.
  • New potential entrants to the industry.
0.1 2 0.2 Other franchises offering different products can steal market share.
  • Rising obesity rates in the USA and abroad.
0.20 4 0.8 May reduce customer flow.
  • Political issues.
0.025 1 0.025 Pro-health policies may increase the costs of food production.
  • Consumer habits.
0.025 1 0.025 With the introduction of new products and lifestyles, burgers may lose their appeal as fast food.
Total Scores 1.00 2.75

Internal Factor Analysis Summary

Internal Factors Weight Rating Weighted Score Commentary
Strengths:
  • Famous brand
0.12 4 0.48 Burger King is very famous in the USA and several other countries.
  • Solid market position
0.1 3 0.3 Has a solid market share that is likely to grow.
  • Low capital requirements
0.08 3 0.24 The food chain has already been established.
  • Distribution cooperative
0.1 3 0.3 Has its distribution cooperative.
  • Cost-efficient operations
0.2 3 0.6 A very efficient system of food delivery and production.
Weaknesses:
  • Franchising model as a revenue source.
0.15 3 0.45 The current franchising model has many weaknesses.
  • Struggles with shareholders and leadership changes.
0.1 3 0.3 Focus on short-term gains over long-term benefits.
  • Concentrated presence in the US, less so in other countries.
0.1 3 0.3 The brand is not very known outside of the US.
  • High-calorie menu
0.05 3 0.15 Dissuades customers that prefer low-calorie foods.
  • Outdated marketing strategies.
0.1 4 0.4 The ability to choose the contents of one’s burger is no longer novel.
Total: 1.00 3.52

Strategic Factors Analysis

SWOT Analysis

Strengths:
  • Strong position in the domestic market.
  • Greater franchise mix.
  • Exemplary financial performance between 2014-2018.
Weaknesses:
  • Poor market concentration.
  • Haphazard marketing campaign.
  • Putting stakeholder interest and short-term gains over the good of the company.
Opportunities:
  • Expanding the existing product chain to appeal to new customers.
  • Maintaining steady positions in the US.
  • Expanding to new emerging markets.
Threats:
  • Strong competitors.
  • Franchise expiration dates.
  • The backlash against acrylamides may require new recipes.

SWOT analysis is an efficient framework used to analyze companies and business plans by defining their four key parameters in terms of strengths, weaknesses, opportunities, and threats (Kolbina, 2015). The analysis presented above highlights all the major factors that influence Burger King at the moment. As it is possible to see, it maintains a solid position in the US market but faces various difficulties when trying to expand abroad. The company should capitalize on its strengths to pursue the available opportunities, while at the same time taking steps to mitigate their risks and threats, particularly in regards to its poorly planned marketing campaign.

Porter’s Five Forces Analysis

Force Name Force Strength Commentary
Competitive rivalry Strong
  • Many competitors.
  • The high variety of companies and products.
  • Easy to adapt.
Bargaining power of buyers Strong
  • No switching costs.
  • Many companies to choose from.
  • Moderate presence of consumer protection organizations.
Bargaining power of suppliers Weak
  • Does not require specific and rare supplies to function.
  • High availability of alternatives in terms of food and equipment supply.
Threats of substitutes Strong
  • Many competitors offer adequate performance.
  • Goods and practices can be replicated.
  • Low capital requirements.
Threats of New entrances Moderate
  • The relative ease of entry.
  • Moderate risks in business.
  • Moderate costs of doing business.

Based on Porter’s Five Forces analysis presented above, Burger King should focus on acquiring more market share and implementing a more aggressive approach towards potential competitors and new entrants, with the possibility of acquiring promising enterprises that have the potential of becoming competitors in the future (Dobbs, 2014).

CAPM Analysis

Due to being a franchise and the youngest publically-traded company, Burger King’s asset performances are sensitive to repetitive risk. Its R-squared values are relatively low, standing at 0.062, which suggests a 6.2% risk of Burger King from market sources, while the balance of corporate risk is between 73-74% (Capps & Cassidy, 2016). Based on these values, the company is unlikely to attract any returns higher than already expected using historical data. Burger King has a positive alpha value, which means that the funds are likely to yield returns higher than the expected beta. Both alpha and beta values for Burger King are high, which makes the company attractive to investors, as their funds have a high potential rate and high capability of return (Capps & Cassidy, 2016).

Alternative Strategies

Market Expansion

Instead of trying to expand in an already enriched US market, Burger King should expand into new regions and markets where the presence of strong competitors is equally low. The company should use its vast experience and resource base to establish itself in these markets by purchasing several local brands and expand from there, basing the expansion strategy on various national food traditions and preferences.

Rebranding and New Products

Burger King made a name for itself by being one of the few franchises that allowed the customers to offer their recipes and ways of making a burger. However, this approach was since copied by many other food chains, the most prominent example being Subway, which offers plenty of choices in regards to their sandwiches and fillings. Inventing something new and groundbreaking would help rebrand the company and breathe life into its marketing campaign.

References

Burger King. (2018). Web.

Capps, C. J., & Cassidy, C. M. (2016). Expanding the competitive profile matrix (CPM): Introducing the financial competitive profile matrix (FCPM). Academy of Strategic Management Journal, 15(2), 9-14.

Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: A set of industry analysis templates. Competitiveness Review, 24(1), 32-45.

Hunger, D. J., & Wheelen, T. L. (2013). Cases in strategic management. New York, NY: Pearson.

Kolbina, O. (2015). SWOT analysis as a strategic planning tool for companies in the food industry. Problems of Economic Transition, 57(9), 74-83.

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