BURGER KING (Case Analysis Final)

VIEWPOINT

This case was analyzed from the point of view of Burger King’s Marketing

Executive.

TIME CONTEXT

The case happened in September of the 2010.

STATEMENT OF THE PROBLEM

What measures could Burger King do to dethrone McDonald’s as well as hold off

the challenge of a number of other chains that were growing in size and

competitive power?

How to reimage Burger King from creepy to hip?

STATEMENT OF THE OBJECTIVES

To boost the image/brand image of the company.

To provide measure(s) to improve the company’s performance in the market.

AREAS OF CONSIDERATION

STRENGTHS

1. Strong market position.

a. BKC is the world's second-largest Fast Food Hamburger Restaurant (FFHR)

chain as measured by the total number of restaurants and system-wide sales.

The company’s specialty is burgers and fries which it sells through over 12,150

flagship fast-food restaurants. The company leverages its strong market position

to gain economies of scale and increase its bargaining power.

b. BK has more than 12,150 restaurants in all 50 states and in 76 countries and

U.S. territories worldwide.

2. Strong brand equity.

a. Burger King has fantastic brand equity, and it's already a competitive concept in

America due to its long history, its size and its muscle," restaurant industry

consultant Allan Hickok said.

b. Burger King serves one of the world’s favorite and well-known brands including

the Whopper sandwich, the Tendercrisp Chicken Sandwich, Chicken Tenders

and the BK Veggie Burger. In 2005, Brandweek magazine ranked Burger King at

15 among the top 2,000 brands of the US. Overall, the company’s established

brand image has enabled it to penetrate various global markets and compete

with regional player effectively.

c. Burger King’s Whopper is known for its quality and it is the best known brand in

fast food. The Whopper (and by extension, Burger King) presents a well

integrated “package”, where product attributes, benefits, values and personality

are distinctive, positive and mutually reinforcing.

d. The most notable aspect of Burger King is the extent to which its identity is tied to

a magnet menu item, the Whopper.

◦ BK is prominently identified as “The Home of the Whopper”, and the two

are inexorably linked.

◦ BK’s menu is “Whopper-centric”.

◦ The BK marketing model is essentially “brand as ‘star’ vehicle”, with the

Whopper as the anointed star.

◦ The Whopper is a well qualified image leader (a true “signature product”)

for Burger King in several respects:

◦ It has a proprietary name with compelling image-oriented as well as

attributes oriented associations.

◦ It offers a distinctive product experience (flame broiled, big, prepared to

order) versus its main competition.

3. Strong brand financial performance.

3G Capital. Because of the popularity and capability of financing

firms/companies by buying shares, BK should allocate and plan well the profit that they

will get from 3G Capital.

4. High quality products.

a. BK quality assurance starts from the initial stage. BK ensures that products are of

the highest quality during receiving deliveries as well as during restaurant

operations; consistent checks are made to guarantee customers receive the best

quality, wholesome, safe food.

5. Wide variety of food products.

The company’s products and services are categorized under the following

different segments:

o Sandwiches

o Hamburgers

o Cheeseburgers

o Salads

o Hash browns

o Coffee

o Juice

o Cookies

o Pies

o Shakes

o Fries

o Onion rings

o Soft drinks

WEAKNESSES

1. Heavily concentrated in the US.

a. Though the company operates in 65 countries, its operations are heavily

concentrated in the US and Canada. About 65% of its restaurants are located in

the US and Canada. Concentration of operations in one geographic area

increases company's exposure to local factors such as adverse economic

situation, labor strikes and changes in regulations that can affect its operations.

b. Concentration of operations in one geographic area increases company’s

exposure to local factors such as adverse economic situation, labor strikes and

changes in regulations that can affect its operations.

2. Few corporately owned stores.

a. Not enough corporately owned stores mean it relies heavily on franchisees to

execute its brand promise.

3. Inconsistent management and strategy. Changing Executives.

a. Management lacked focus and direction and has struggled with marketing mix

decisions. Franchises became confused and angered, service was slow and food

preparation wasn't consistent. Burger King lost its core product-flame broiled

burgers, made the way the customer wanted them.

b. Burger King Corp. was founded in Miami in 1954 by James McLamore and David

Edgerton, a year before Ray Kroc opened his first McDonald's in suburban

Chicago. The Whopper was introduced in 1957. In 1967, Burger King was

acquired by the food conglomerate Pillsbury. In 1988, Pillsbury was bought by

Grand Metropolitan PLC, a British conglomerate. In 1997, Grand Metropolitan

merged with Guinness to create Diageo. With each merger, even as Burger King

grew, it became a smaller piece of the overall company. Ultimately, it became an

afterthought. Soon after the merger, Diageo decided that Burger King no longer

belonged. In 2000, Diageo officially placed Burger King on the auction block. The

company was finally sold in 2002 to a consortium of private equity investors—

Texas Pacific Group, Bain Capital, and Goldman Sachs Capital Partners—for

$1.5 billion.

4. Narrow-based target market.

a. Burger King is pinpointing its target market, and is currently trying to hit a bull’s

eye with a new, focused marketing approach—to both consumers and potential

franchisees. BK’s primary target market is age 18 to 34 years old and 4 to 15

years old.

b. While Burger King’s consumer marketing will attempt to focus its efforts towards

more specific audiences—like children and ethnic markets—the company’s

marketing target is a lot narrower when approaching potential franchisees.

5. Confusing ad campaigns.

a. Ineffective ad campaigns were one of the problems facing BK. Burger king lost its

core product-flame broiled burgers, made the way the customer wanted them.

Many in store promotion also failed. They fail to efficiently promote products,

because they are too busy trying to promote “The King” character.

b. The Burger King "I like square butts" commercial. I found that offensive because

it was promoting a Sponge Bob kid's meal. I just didn't think that was appropriate

for little kids, especially when you know the real lyrics to the real song. In the

commercial, the Burger King icon was measuring the square butts of other girls.

A lot of people were offended over this commercial.

c. Ambassador to Spain because of a new ad campaign running in that

country for a product called

the “Texican Whopper”. Ambassador

Jorge Zermeno wrote to Burger King in

Spain to denounce what he

called “denigration” of the Mexican

flag.

“This advertisement denigrates the

image of our country and uses

improperly Mexico’s national flag,”

Jorge Zermeno wrote in a letter to Burger King in Spain, the

Reforma newspaper reported on Monday.

The ambassador contacted the local offices of Burger King after

he saw the posters in Spain, Reforma said. The burger is only

available in Europe, according to the paper.

Mexico has strict laws prohibiting the defamation of the flag,

Zermeno said. He asked Burger King to cancel the ad campaign

that “offends Mexicans and Mexico.”

6. High prices.

a. Another thing that hurt them was the fact they didn't lower prices to keep

competing with their competitors this led to a below average sales growth.

OPPORTUNITIES

1. New product development, particularly around breakfast.

BK value menu featuring six items at less than $1, breakfast sandwiches, and

specialty burgers. To create a consistent brand image, BK needs to extend their menu

which will show the consumer that BK burgers are big, high quality, juicy and satisfying

burgers. BK needs to put the focus back on the food and show that it is well prepared,

satisfying and desirable.

2. Keep building its brand through ad campaign, such as the Whopper virgins.

BK can use the flamed-broiled and whopper in developing their brand image.

Consumers associate BK with food that ignites the senses. Consumer needs the

convenience of food and not a fast food that brand himself as cool but creeps the

people.

3. Expansion into emerging markets.

BK can expand to Asia wherein people are already into fast food restaurants.

High levels of consumer demand, coupled with relatively low levels of competition, offer

a lucrative opportunity for many franchisors to expand into emerging markets.

Expansion via franchising is an attractive option for companies looking to expand

abroad without incurring high costs. Additionally, international franchisees already

possess many inherent qualities needed to succeed abroad, like the ability to speak the

native language.

4. Wide-based target market.

BK can change their target market. Can extend their target market to families

which are the target market of McDonalds. If BK wants to close the gap with

McDonalds, they can use the “copy cat strategy”.

THREATS

1. Changing consumer habits towards healthier food choices.

Changing consumer habits towards healthier food choices is a large external

factor for a company that specializes in hamburger. A shift away from hamburgers could

hurt earnings and revenue.

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

The company's competition in the broadest perspective includes restaurants,

quick service eating establishments, pizza parlors, coffee shops, street vendors,

convenience food stores, delicatessens and supermarkets.

3. Increasing labor costs putting pressure on bottom line margins.

4. The major competitor McDonald is way ahead in market share.

ASSUMPTIONS

Company

The company generates revenues from three sources: sales at company

restaurants, royalties and franchise fees and property income from certain franchise

restaurants that lease or sub lease property from the company.

The chain offers a range of burgers, sandwiches, salads and breakfast items. The

Whopper sandwich is its largest-selling product. Burger King was the first fast-food

chain to introduce drive-thru service which now accounts for a majority of the

company’s business.

Under the franchise arrangement, the franchisees invest in the equipment, signage,

seating and decor, while the company owns or leases the land and building.

Franchisees pay the company service fees and rent for premises. The company and

its franchisees as well as affiliates purchase food, packaging, equipment and other

goods from approved suppliers.

Operations

Burger King has more than 12,150 restaurants in all 50 states and in 76 countries

and U.S. territories worldwide. They support every franchisee by offering world class

support services, including training, operations, and marketing.

Approximately 90 percent of BURGER KING(R) restaurants are owned and

operated by independent franchisees, many of them family-owned operations that

have been in business for decades.

The Industry

The fast-food industry is a segment of the food service industry.

Sales for just the hamburger part of this segment are growing rapidly.

The phenomenal increase is facilitated by an annual 10% growth in the amount that

Americans spent on meals away from home.

The fast-food industry is composed of numerous national and regional chains.

Competition

McDonald's – Largest competitor in fast food hamburger restaurants in terms of

number of locations. Second largest competitor in fast food restaurants.

o “I’m loving it”

o Target: adults, children, and families

o Strengths:

Consistency

Familiarity

Happy Meals

McCafe

o Weaknesses:

Losing Hispanic market

Lacks product innovation

Subway – Largest single brand competitor in fast food restaurants in terms of

number of locations.

o “Eat Fresh”

o Target: mothers with children and health-conscious adults

o Strengths:

Healthy alternative to fast food

$5 foot long

o Weaknesses:

Lacks variety vegetarian options

Lacks specialty drinks

Wendy's – Third largest competitor in fast food hamburger restaurants in terms of

number of locations.

Yum! Brands – largest Company in fast food restaurants in terms of number of

locations.

Sales

Burger King’s sales have been falling steadily over recent quarters and were

down 2.3% in the year to the end of June, while profits were flat compared to the same

period a year earlier.

Marketing

Advertising Campaign

Marketing strategyResult & Flaws(if any)

Have it your way

Focused on sending message that burgers are made according to customer requests not standardized

Battle of Burgers & Broiling Vs Frying

Focused on its USP (flame broiled burgers) & advantages over McDonalds

Market share increased from 4% to 8.7%

Search for Herb Disguised strategy

Campaign failed as the customers focused on “herb” rather than the product

Distraction from the intended messageUncomfortable brand association with a nerd personality

We do it like you’d do it & Break the rules

Again focused on its USP

Confusing situations, bad humor and acting resulted in failure of campaign

BK Tee VeeTarget audience: teenage males

Failed campaign as existing customer segment (parents & commuters) didn’t like it

In 1982 'Battle of the burgers' and 'Aren't you hungry for a Burger king now?'

were the slogans used. In 1983 'Broiling vs. frying' and 1985 'The big switch'. All these

ads throughout the years helped increase market shares from 7.6% to 8.3% from 1983

to 1985. 'Search for herb' was a slogan used by BK about a person that has never

tasted a whopper burger, this campaign was supposed to increase market share by

10% but in reality only increased it by 1% it was a disaster. In 1986-1987 'this is a

burger king town' and 'best food for fast times' brought a lot of attention to the company.

In 1988 'We do it like you do it' was used often but a year later they came out with two

new slogans which confused the customer. In 1989 'Sometimes you gotta break the

rules' and 'BK tee vee' with MTV and Dan Cortese with 'I love this place'. This was

another huge setback for BK because people on the go and parents found this ad loud

and irritating. BK at this time has failed to establish a solid image that would differentiate

it from its competitors. Ads if anything only confused consumers as to what advantages

BK offered. In 1993 it had a market share of 6.1% were McDonalds had 15.6% and BK's

sales were growing slower than its rivals.

Burger King = High Quality, High Price

McDonalds = Low Quality, High Price

Target Market

18-34, Value-Concius, skew Male:

Looking for genuine burger

Desires to be full

Hate cheap tasting food

Kids 5_14

Enjoy being engaged in the dining experience.

Enjoy specialized kids meal.

Enjoy familiar foods.

A key part of the dining experience for families.

TRENDS

Spending Trends

As of the end of 2008 the economic downturn, leads to lower consumer spending.

Fast food restaurants become alternatives to full service restaurants because they

are cheaper

Lifestyle Trends

Home cooked meals are becoming less prevalent

Changes in lifestyle such as homes with two working parents, an aging population,

increased hours spent working, and an increase in commuting time are driving more

consumers into the restaurants.

Demographic Trends

Demographic changes have been pushing consumers towards fewer meals, a

preference for less meal preparation time, and more frequent snacking in lieu of sit-

down meals.

Low income neighborhoods have a higher density of fast-food restaurants.

Market Volume Forecast

In 2011, the global fast food market is forecast to have a volume of 86.4 billion

transactions, an increase of 7.6% since 2006. (Datamonitor)

Market Value Forecast

In 2011, the global fast food market is forecast to have a value of $125.4 billion,

an increase of 22.2% since 2006. (Datamonitor)

ALTERNATIVE COURSES OF ACTION

1. Play it safe strategy. Make some appealing advertisement that makes

fans feel important.

A market follower is a firm in a strong, but not dominant position that is content to

stay at that position. The rationale is that by developing strategies that are parallel to

those of the market leader, they will gain much of the market from the leader while

being exposed to very little risk.

The advantages of this strategy are:

no expensive R&D failures

no risk of bad business model

“best practices” are already established

able to capitalize on the promotional activities of the market leader

no risk of government anti-combines actions

minimal risk of competitive attacks

don’t waste money in a head-on battle with the market leader

Advantages: Burger King fans will be flattered because BK management give them

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 profit/sales

will increase.

Disadvantages: It will be costly and it will take several time of brainstorming if the

product that they will introduce will be a big boom to the customers/public.

3. Try to lower their price.

Advantages: Number of customers will increase at their sales/profit 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.

DECISION CRITERIA

TIME COST RESOURCES RISK

ACA 1 2 (LONG) 2 (MODERATE) YES 1 (LOW)

ACA 2 2 (LONG) 2 (MODERATE) YES 2 (MODERATE)

ACA 3 1 (LONGER) 1 (LOW) YES 1 (LOW)

We recommend ACA 1: Play it safe strategy. Make some appealing

advertisement that makes fans feel important. It may take long but BK has lower risk

with this strategy. BK doesn’t have to be number one, they need to build first a constant

brand image and differentiation. They need to make their ads less confusing. They

should avoid creepy and offensive ads. If they want to earn more revenue, we suggest

that BK should copy the advertising scheme of McDonalds.

Specific recommendation:

Focus on its two basic strengths – ‘flame 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.

Introduce and enforce centrally prepared detailed food preparation guidelines to

bring in uniformity and consistency in the taste, ingredient proportion and overall

quality of the food.

Remodel the less aesthetically appealing stores

Re-evaluate promotional offers. Introduce value meals with discount on bigger

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

network of stores like Burger King. Hence it is possible to gain a huge chunk of

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-à-

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.

Brand images tend to be sticky. Try to stick to a consistent brand image instead of

changing continuously which confuses the customers.

Continue hands-on approach with franchisees. Establish a continuous feedback

mechanism from customers and franchisees and react on the feedback

ACTION PLAN

Strategy Marketing

OBJECTIVE SETTING

OVERALL EVALUATION

Along with these steps BK should also remember to inform, persuade, and to remind.

Strategy

Increase Market Share by:

• Re-positioning BK as a “progressively responsible” Fast-Food Hamburger

Restaurant.

• Increase corporate influence and initiatives over franchise operations.

Play it safe strategy

BUDGET DECISION

Differentiation Strategy

MESSAGE DECISION OR MEDIA DECISION

Global strategy Campaign Evaluation

• Streamlining business model to achieve a more product-centric focus.

• Expanding Globally through promotion of brand name.

Differentiation Strategy

• Green Team Campaign

• Recyclable paper products

• Quality, Sustainability, Responsibility.

• Contemporary counter-front and open view into kitchen from anywhere in

restaurant.

• Restaurant Interior/Exteriors gives “Organic Feel”

• Focus on Freshness and Quality of Beef, Produce, Beverage.

Global Strategy

• Focus advertising efforts on new target market.

• Promote healthy BK Kids meals.

• Implement US Standards for emerging global franchises.

Marketing Strategy

• Change consumer attitudes

Change company’s perception of “unhealthy” and “creepy” to “healthy”

and “hip”

• Position Burger King as a destination

A place where you can be yourself with your friends and escape from

everyday stressors

Budget Decision

BK has strong financial capabilities.

You don’t have to make use of a lot of money just for the ads. Make it

simple and relevant to what you want people to remember when they here

the words “Burger King”.

Message Decision or Media decision

Who is the target market?

o 18 – 34 years oll skew males.

o Don’t alienate women.

Make use of frame boiled and whopper in order to develop a constant

brand differentiation.

Campaign Evaluation

Was it a Success or Failure?

Final Statements

We figured Burger King to advertise the Whopper, but throughout the past years they

didn't do this. We figure the whopper or the flame broiled ads would have been more

productive and probably would have resulted in greater sales margin. I also feel that the

ads should have distinguished themselves from what other ads by letting the people

know that burger king wasn't just another standardized burger. Throughout the years,

BK tried to establish the market by becoming someone they weren't. I feel the ads used

by BK should have been simple and to the point. This would have caused less

confusion and more honesty with the customer; this is because you don't want to

advertise a pizza or a taco if you’re selling burgers. Other objectives BK wanted were to

target teens with the MTV approach. This also failed because people found it loud and

annoying. Then they tried a sit in type of restaurant, which also failed because people

want a fast food low price meal not a high priced, sit down meal. Advertising is any paid

form of non personal presentation and promotion of ideas, goods or services by an

identified sponsor. Advertising is a good way to inform and persuade the customer.

Advertising objectives are based on past decisions about the target market, positioning

and target mix. They tried to be someone they weren't with slogans like 'search for herb'

in 85 and many others like 'BK Tee Vee' trying to persuade the younger generation and

'Sometimes you gotta break the rules'. These slogans and more tried to persuade the

consumer. In reminding their customers BK has done a good job. They've at least

expanded nationally and internationally and always have commercials everywhere with

a juicy whopper on the screen, reminding the viewer that BK is the only place a

whopper is made.