International Expansion of Burger King into France - Case Study Example

International Expansion of "Burger King" into France The expansion again of Burger King into France has been suggested following analysis of the company's previous operation (now shut down) in that country. This report puts forward information for making a decision on a new structured implantation of Burger King in France. Global Macro Environmental Variables In order to avoid any unwarranted assumptions about the French market, we begin by evaluating the global macro environmental variables as they relate to France using the PESTLE model (Armstrong). This "big picture" model allows us to more rapidly adapt to the realities of this market; even though certain factors are beyond our control, it is imperative that we align our plan positively with them if we are to succeed this time. Among the different factors identified by this model, we have singled out three that have a particular impact on the success of Burger King. Further PESTLE information is available in Appendix 1. 1. The most critical is the socio-cultural factor. France is a country with a long culinary tradition. French people who consume fast food show preferences guided by considerations of health and nutritional variety (Steele). French ex-employees of foreign fast-food chains have identified such preferences and successfully set up their own fast-food restaurants better aligned to French tastes (Rosenberg). Burger King will therefore need to adapt its cultural approach by extending the menu range beyond the basic burger-soda combination to produce meals to appeal both to the customer who is interested in novelty and fashion and to the one who seeks reassurance from tried and trusted classics. In general, culture occupies an important place in French life and extends beyond eating habits. Literature, art, lifestyle, values and traditions are all watched over and influenced by various French institutions as well as the government. As a nation, France seeks to develop and export its culture: "promoting cultural influence has been national policy for centuries" (Morrison). As such, a certain cultural protectionism exists in the French domestic market. For this reason, standardisation of Burger King operations extended to France must also be tempered by intelligent adaptation to the cultural norms that are deeply rooted in the market (Briscoe). 2. The legal environment and a number of governmental components are also specific to France. While to some degree harmonised with European policy, laws are still largely based on the Napoleonic Code, which has certain significant differences to anglo-saxon law. The french government has also recently begun a national awareness campaign for fitness and healthy eating, typified by its promotional web site (www.mangerbouger.fr). While this has no legal weight, it is an indication of the french government's wish to influence eating habits and therefore food market offerings. This represents both a challenge and an opportunity to Burger King. For example, if the company can adapt its promotional material correctly, Burger King meals can be positioned as the "healthy fast-food alternative" (Rosenberg). 3. Economic factors including exchange rates and inflation will also be important considerations. Exchange rates are based on the euro, which is currently strong against the US dollar. Revenue flowing back to the parent company from Burger King in France will therefore be enhanced, but operating expenses will be higher as well. France has one of the highest numbers of public holidays in Europe and almost double the amount of paid vacation for a salaried employee compared to the US. The french working week was redefined some years ago by the government as 37 hours per week. Where possible, the response of companies in France was to become more efficient in their working practices. However for restaurants such as those of Burger King, the repercussion is on higher staffing expenses. Adaptation of restaurant operating procedures may be required. Competitors of Burger King such as McDonald's (Briscoe) and Quick have succeeded in their implantation with adaptation and marketing. Others have shut down or been absorbed by other companies in the sector (LoveBurger for example). Burger King's own adventures in France are a case in point. There is a possibility that Burger King was a victim of its own inability to appreciate the differences in culture, a phenomenon also referred to as Self Reference Criterion or SRC (Lee). SRC is defined as the tendency to judge another culture based on one's own culture. Well-developed perceptual skills will be needed within Burger King management to avoid the pitfalls previously experienced. The application of the theory underlying SRC is to recognise that SRC is likely to exist in any company in this situation and therefore also in Burger King. To escape from the SRC trap, Burger King must consciously compare the situation in France as interpreted through french eyes with how Burger King might see it through US eyes, avoiding all value judgements. The comparison will allow the SRC influence to identified and isolated, so that the expansion in to France can truly be effected according to the business benefit to be gained (Lee). Marketing Information System In order to succeed as such a market-based company in expansion in France or any other international context, Burger King needs a marketing information system. The goal of this system is to organise the collection, the processing and the use of marketing data as a sound basis for strategic and operational decisions. Structurally, the Marketing Information System is organised with inputs of data and queries and the output of organised information and answers. The main components are: internal reporting systems with company historical data (may be limited for France); marketing research systems for targeted data monitoring and tracking; marketing intelligence systems ranging from the unfocused scan to the systematic search; and marketing models to interpret the data (Kotler). A marketing information system goes beyond simple data collection or the application of information technology. It is " a continuing and interacting structure of people, equipment and procedures to gather, sort, analyse, evaluate, and distribute pertinent, timely and accurate information for use by marketing decision makers to improve their marketing planning, implementation, and control" (Kotler). The sources of information to feed into the Marketing Information System include both primary and secondary research. Primary research in this instance will include some limited in-restaurant observation dating from the previous Burger King operation in France, but is more likely to be centred on test marketing and surveys. French people know and are typically willing to participate in these activities. For secondary research, considerable information is available as France is a developed nation with advanced consumerism. A particular source of interest is the "Eurotypes" data collected by the RISC research agency of Paris. These data describe six Eurotypes and in particular "Francotypes", using various sociodemographic characteristics and profiles. Initial analysis indicates that Burger King could, by adapting to the culture in France, address aproximately two thirds of the population. This hypothesis should be examined by further primary market research and the marketing information system used to propose a solution for the third of the population not addressed (the so called "traditional" and "homebody" groups). This information will serve in the construction of a model such as the 12C model (Kotler) to understand and plan for a french country operation. Major factors in this model will include the culture (Steele), communication (the french workforce typically only speaks french) and commitment for putting into place the infrastructure necessary to generate profits. The marketing information system will also influence and benefit from the international marketing success factors of a clear competitive focus, an effective relationship strategy and a well-managed organisation (Doole). As an investment on the part of Burger King, the usefulness of a Marketing Information System is in its quality as an evolving tool capable of giving responses to marketing questions and of acting as the support for the implementation of the marketing strategy, which it already helps to define. Identifying Market Potential To identify the potential of the market a number of techniques are available. Overall country attractiveness rankings exist for France, as does the Goodnow Hansz temperature gradient model, which seeks to identify the environmental determining factors, which should then define how a country will plan its market entry strategy. Similarities exist between these methods which examine the environmental factors of a country like France by evaluating political stability, economic development, culture, legal framework and so on. In the case of the Goodnow Hansz model, weighting is then applied to these factors to give a result on a "temperature gradient" where "hot" is positive and "cold" is negative (Goodnow, Hansz). These rankings can offer valuable information for direct foreign investment, even if they remain too aggregated to be useful at an industry level. We have used the Business Environment Risk Index or BERI technique (http://www.beri.com) for this report (see Appendix for a detailed presentation of the data). It gives the company an appreciation of the risks involved in establishing an operation in France and allows Burger King to assess the potential for long-term profits, which is essential information given the relatively high investment that is necessary for restaurants, equipment, staffing and promotional campaigns. Global Marketing Plan The result of this analysis and the Marketing Information System is to generate a marketing plan applicable to France. In fact, Burger King will be able to construct a global marketing plan that will be the basis for any international expansion. It is understood that Burger King can benefit from a standardised method for comparing opportunities in different countries and that France is one opportunity among several (Kotler). At the same time as defining a template that is generally applicable, we emphasise the need previously discussed to take into account local or national variations and to handle them accordingly. It is instructive to learn from the experience of another company in the same market, McDonald's, who found that "the global popularity of the product was increasingly qualified by exceptions" but that "in key respects of quality, cleanliness, speed, and branding, McDonald's [would] remain uniform.'"Decentralization does not mean anarchy"' (Briscoe, 130). In line with the other information presented here, it should be noted that McDonald's steered clear of trying to impose a standardized culture and has for the moment effectively avoided the SRC trap. This follows on from the evolution of a company exporting goods without further involvement (the current situation with Burger King for any franchisees operating in France) to a company that acts on a higher level. This higher level can be defined globally (without differentiation), multi-nationally (each country is a special case) or as a combination of both where certain fundamentals remain standardised and other aspects are localised (Kotler). The model suggested for the global marketing plan is the 7P model (Kotler) that covers product, place, promotion, price, physical evidence, process and people (the 8P model has also been defined to include packaging). The model can be applied in a grid format and compared to certain reference countries to assess the desirability of entering a particular market and France in particular. The global marketing plan should also make provision for a mechanism to check that no cultural blinkers are in operation, for example, by using the suggestions following on from Self Reference Criteria to ensure comparison of viewpoints (Lee). A global marketing plan can therefore be advantageous to the company if it clearly identifies those factors for which one universal value is applicable and those that must be interpreted in the context of the country concerned (Briscoe). In the same way, the disadvantage of a global marketing plan is inherent in its name ("global") and the danger of blindly applying a marketing strategy on a global basis without thought for the cultural differences and the need for adaptation. Conclusion The marketing information system and the global marketing plan are the tools for planning re-entry into France. The watchwords are "cultural awareness" and success will be determined by the extent to which Burger King can extend its perception to embrace the differences of another people and another culture. Appendix 1 - PESTLE report (Source: INSEE unless otherwise stated) Political Factors French business taxation is typically higher than its anglo-saxon counterparts. Employment laws limit the "hire and fire" possibilities prevalent in other cultures. President Nicolas Sarkozy and Prime Minister Franois Fillon head the ruling conservative UMP party. Stated aims include improving lacklustre economic growth and high unemployment (BBC). Economic factors INSEE in France publishes data on the country's economic performance with GDP growth of 2%, inflation at 1.5% and unemployment at 8% (approximate figures). Social-cultural factors France (and other countries) rates french culture as one of the best. Health consciousness and welfare development are high although this contributes to higher taxation. Population (in metropolitan France) is 61.6 million people with a ratio of male to female of 0.985. Total fertility rate is 1.98 infants born per woman. Population growth rate is 0,6% with 65% of the population being in the age range of 15 to 64. 51% of the population follow the Roman Catholic religion. 99% of the population over 15 years old are literate (read and write). The part of the population below the poverty line is estimated at 6.2%. French lifestyle changes particularly in the area of nutrition and health are actively promoted: healthier eating (fresh produce, less fatty or sugary foods), basic fitness and extensive restrictions on smoking are all recent major government sponsored or enforced initiatives. Surveys indicate that more young people in France are drawn to government employment than to the private sector (Morrison). For leisure activities, watching television is the most popular with an average of 3 hours and 24 minutes watched per day. Technological factors France is technologically advanced in many areas, not least in agriculture and food science. Companies along the supply chain for the food industry must maintain records of all sources. Legal In addition to the french legal system based on the Napoleonic code, french authorities readily refer to and solicit intervention from European courts of law if they feel this is required. Environmental Environmentally and ecologically aware, France follows European directives. References Armstrong. M. (2006). A handbook of Human Resource Management Practice, 10th, Kogan Page. BBC (2008). Country profile: France. BBC (Online). http://news.bbc.co.uk/2/hi/europe/country_profiles/998481.stm (retrieved 12th March 2008). Briscoe, D. R. and Schuler, R. S. (2004) International Human Resource Management: Policy and Practice for the Global Enterprise, Routledge Doole, I. & Lowe, R. (2004) International Marketing Strategy, 4th edition, Thomson. Goodnow, J., Hansz, J. (1972) Environmental Determinants of Overseas Market Entry Strategies, Palgrave Macmillan Journals. INSEE (National Institute for Statistics and Economic Studies). INSEE (Online). http://www.insee.fr/en/home/home_page.asp (retrieved 12th March 2008). Kotler, P., (1988) Marketing Management: Analysis Planning and Control, Prentice-Hall. Lee, J.A. "Cultural Analysis in Overseas Operations". Harvard Business Review, Mar-Apr 1966, pp 106-114. Morrison, D. (2007) "The Death of French culture". Time Magazine (Online). http://www.time.com/time/magazine/article/0,9171,1686532-4,00.html (retrieved 12th March 2008). Rosenberg, G. (2007) "Anti-fast food in France". Time Magazine (Online). http://www.time.com/time/health/article/0,8599,1610584,00.html (retrieved 12th March 2008). Steele, R. (2002). When in France, do as the French do, McGraw-Hill. Read More