The Impact of Burger King's Arrival in Lausanne - Research Paper Example

 The Impact of Burger King's Arrival in Lausanne Executive Summary:  Businesses do not operate in a vacuum. They operate in an environment peopled with individuals otherwise referred to as the customers, suppliers, the civil authorities, diverse economic and social factors, entrepreneurs and shareholders as well as homogenic institutions otherwise known as competitors. A business has to navigate all these factors so that to remain economically viable (Israelite, 27). In the current research, the Lausanne Franchises of McDonalds are faced with imminent competition from the entry of McDonalds perennial competitor; Burger King. This entry is presumed to be sometime in December of this year. The entry of a competitor always heralds new challenges to be surmounted by any company. The customers being the main source of revenue also become, at such times, an important source of information. In this regard, McDonalds Lausanne commissioned this study to establish whether their current customer base is under threat from this new entrant. The company wants to be pre-warned of any customer migration possibilities and by thus put in place customer retention strategies that will preempt any negative impacts on their business positions from the imminent competition. The research was carried out among existing customers to establish their contention with the variety, price, quality and service offerings of the Franchises. The selected customers were given questionnaires after briefly being familiarized with the need for the study. The questionnaires were designed in an easy to answer manner and were brief and to the point. The answers given were then analyzed using SPSS version 19 and data thus provided interpreted to examine its relevance to the research questions. From the collected data, it became apparent that majority of the clients were not averse to the idea of trying out the new Burger King joint. Though it emerged that most clients rated McDonalds highly on variety and pricing, the score for quality was generally average and it was below average for service. The most important question and the one which returned the most jolting response is the one that sought to know whether the clients were open to shifting their loyalties once the new store opened. Majority of the respondents answered in the affirmative. On further probing, they revealed that if they found the major factors of fast food joints to be more favorable in Burger King than in McDonalds, then they had no qualms about shifting allegiance. These factors include quality, variety, and value for money, ambience and service. It is thus recommend that whilst improving on the characteristics that the firm performed poorly in, it should also exercise diligence in maintaining those that it scored highly in and if possible improve on them. Some menu offerings that the clients seemed to favour most were observed to have substitutes in Burger King. This means that McDonald has to work extra hard to retain the value in these offerings whilst maximizing on the offerings that are unique to them. Introduction:  Business enterprises do not operate in a vacuum. In a perfect competition, many factors conspire to offer an ever challenging environment for businesses. Individuals (customers) civil institutions, suppliers, investors and competitors are among the factors that constitute the environment of a business entity. Competitors imply the other institutions, firms or individuals that are either similar to those offered by the firm, are homogenic in application or are perfect substitutes. The business entity has to marshal its resources in such a way that it maximizes its revenues to the fullest given the presence of these competitors. This interprets into employing resources to study the competitors, do the SWOT analyses on the unique challenges posed by each competitor and eventually devise a way of thriving under the prevailing conditions or the conditions posed by the imminent entry into the market of a competitor. In this regard, McDonald’s fast food chain has commissioned this study to try to establish the risks inherent in the entry of their second largest competitor into their Lausanne market in France. Burger King is set to launch their branch in Lausanne in December 2012. The study is thus aimed at establishing the possible risks posed to the McDonalds chain by this and in particular the threat to its market share and prospects for future growth. Specifically, the research will try to establish the levels of contention with the products and services offered at McDonalds among customers and how willing they are to try the products of our competitors. Secondary Research: Historically, the competition between McDonalds and Burger king has been so stiff to the extent of being termed legendary. In most cases, these two fast food establishments have been located on the same street with McDonalds setting the pace and the competitor being the follower. As such, research on the establishment of one in a location the other already operates in and the effects on the sales volume of the trailblazer abounds. The two giant fast food outlets have been known to fight it out on several diverse fronts and examination of these and how they have played out in history is important to analyse the current threat faced by McDonalds. Branding The two firms have elaborate branding schemes that involve the use of Mascots, signature burger brands (The Big Mac for McDonalds and the Whooper for Burger King), and architectural designs and paintworks for their outlets. Over the years, Burger King has seen several rebranding depending on the current owners and the prevailing market perceptions, their signature Mascot ‘King’ has been shelved and re-launched enough times. On the other hand, the image of McDonalds has remained stubbornly uniform over time and the golden arches and Ronald McDonald have become synonymous with fast food, more so in the American market. Innovation Both firms have invested a lot of energy and resources to try to come up with unique offerings and maintain relevance in the market. Burger King has over the time been offering limited time offers; they use these offers to gauge the reception of any single item they intend to add to their menu and are not afraid of asking for public opinion over the same. On the other hand, McDonalds goes beyond the norm to offer unique products. Case in mind is the recent introduction of the McGriddle, this ‘pancake sandwich’ had customers skeptical initially but it became an instant hit. On the same note, McDonalds introduced free WI fi in its stores to lure customers who might want to eat while surfing the internet for various reasons (Israelite, 243). Resilience When Starbucks threatened to dominate the coffee market, the management in McDonalds reacted by introducing the McCafe. Reacting to this, Burger King launched the Turbo Joe coffee brand. Over time both companies have been faced with great strife and more so Burger King but they have always jumped back to their spots in the market. Imitation Whenever a new burger hits the market, McDonalds have been known to jump on the idea and try to better it and most cases, their final products comes out as better than the original (Guber, 45). This has greatly contributed to their continued dominance of the market. The same can be said of Burger King albeit with muted success. Customer service and Hygiene In the fast food industry, there is no sure way of losing customers than to serve them food in unhygienic environments. In the same way, poor service from the counter staff or the waiters is a real turnoff for customers. It is with this knowledge that the two firms have been known to have an over insistence on the best quality of customer care and the highest levels of hygiene (Bernstein, 205). Though this may be true as a collective policy for the groups, the maintenance of the standards falls to individual stores and their Franchises holders and/or managers. Food offerings This being their core business, the outlets have invested heavily in research on the food variety they offer. With the new day customer going the healthy eating way, the fast food outlets have not been left behind and are tasking their quality assurance departments with the duty of ensuring that they incorporate healthy eating into the fast food model. Burger King has had mixed results from this effort while McDonalds has succeeded in reducing the calories in their food albeit with larger portions. These fronts among others have defined the relationship between these two firms over the years. The challenge occurs where one program may be successful in one location but become a big flop in the other. For this, there is need for localized market studies to establish the success any program might have for individual Franchisesss and outlets (Bernstein, 209). Any research that aims at establishing the levels of competition that exists between the two firms and who might benefit can only benefit from incorporating these diverse fronts into research programme. Qualitative Research: Study design The research was formulated as a qualitative survey. This involved the use of questionnaires and person to person interviews in trying to achieve the set objectives. It is seen as desirable to use qualitative methods since it describes the incidence from the participant’s viewpoint (Creswell, 76). This can be contrasted to quantitive techniques which use narrow lineation to assign numeric values to experiences. Being a qualitative survey, the researcher used a positivist attitude to it where he sought to be external to his research world and use deductions from data collected to form an opinion. His hypothesis provided the platform from with to be deductive with the primary data he collected (Krauss, 55). The research was designed as to not invoke relativity and by such doing the occurrence of the subject under study was to be easily established. Recruitment and participants The researcher used random sampling to come up with a sample of fifty (n=50) participants to interview. This took the form of an exit interview whereby the researcher randomly approached clients who had just been served at McDonalds. The researcher presented himself to the clients and introduced himself to them and briefly explained to them the use to which the data he sought to collect would be put to. It was also imperative that the researcher inform the participants of the measures he had placed to protect their identity and the fact that their responses would not be released to parties other than those that were central to the research. During the sampling, the researcher adopted a cross-sectional model. This is where the researcher picks a small section of the whole population under study. The segment thus chosen must be seen to be well representative of the whole population both in composition and proportion (Creswell, 90). This ensured that all demographic aspects of McDonald’s clients were well represented and other aspects as occupation and income levels were also considered. It is thus important to note that the composition of the respondents in terms of sex, age and occupation were not left to chance but were predetermined from existing data about the Franchises’ clients. After coming up with the proportions to be taken by the different demographic and social categories as well as the different occupations, the researcher studied the existing data on the disposition of the various groups so as to be able to restrict the respondents to approach. Data Collection The survey investigated the behaviours and customs of the subset to identify loyalty trends and satisfaction levels. The questionnaire was the chosen mode of data collection. This was ideal due to time limitations and the researchers over insistence on the need not to inconvenience the respondents more than necessary. The other reason for the questionnaire being the most ideal mode of data collection is the need to rate the answers on different levels and this method has been proven to be simple, quick in administration and easy to analyse (Creswell 103). The questions took both the open and closed format. The data thus collected was analysed using SPSS version 19 and the results presented in graphical, tabular and arithmetic formats. The questions were designed to draw as much feedback as possible on the satisfaction levels of clients in terms of product quality, affordability and service. There was one question which was inferential and it was aimed at establishing the respondents’ loyalty. The multiple choice format and Likert based scales which is a preferred method for determining ranking of answers (Huck 76; Creswell 98) were used. The questions were set with the assistance of findings from previous studies and the questionnaire was self administered. The questionnaire was constructed with the eventual purpose of analysis in mind. The setting of the research questions was done with reference to previous research done in competing firms and the multiple choices were double checked to ensure that they captured all necessary aspects of the research. Care was taken to use only positive statements and the questionnaire was in easy to understand language and was checked for grammatical errors, spelling and punctuation to ensure all respondents understood it in the same manner (De vaus, 62). The return rate for the Questionnaire was 100% since it was self administered. Results and Findings 1.0 Descriptive results for demographic variables TABLE 1 Demographic variable characteristics Frequency Valid Percent The age of the participant Under 20years 20 41.4 20-35 Years 14 27.6 35-50years 14 27.6 >50 years 2 3.4 Sex of the participant Male 32 63.3 Female 18 36.7 Occupation Student 15 30.4 White collar 26 52.2 Blue collar 9 17.4 The overall sample comprised of 50 customers who took part in the study. The participants comprised a convenience sample for the study due to the ease of accessibility (Nachmias-Frankfort and Nachmias, 208). A structured questionnaire was used to collect data from the participants. Table 1 presents a summary of the demographic characteristics of the sample participants. A major proportion of the participants (41.4%) comprised of persons less than 20 years while the least proportion (3.4%) comprised of persons over 50 years. In regard to gender, males comprised a higher proportion (63.3%) of the sample as compared to females (36.7%). Further, the sample mainly consisted of white collar workers (52.2% blue collar workers formed the least proportion amongst the undergraduates (17.4%). 2.0 Preliminary results of main outcome measures The main aim of the study was to establish the level of loyalty and contentment among McDonald’s clients, In this regard, major selling points of McDonalds were identified and respondents questioned on how they rated them. Table 2 presents a summary of the qualitative variables. TABLE 2 Summary of descriptive for staff efficiency, food quality, price and ambience Frequency Valid Percent Staff efficiency Strongly agree 10 20 Agree 19 36.7 Disagree 7 16.7 Strongly Disagree 12 23.3 No comment 2 3.3 Frequency Valid Percent Hygiene Strongly agree 18 36 Agree 13 26 Disagree 6 12 Strongly Disagree 13 26 No comment 0 0 Frequency Valid Percent Price Strongly agree 7 14 Agree 8 16 Disagree 19 38 Strongly Disagree 16 32 No comment 0 0 Frequency Valid Percent Food Quality Strongly agree 17 34 Agree 21 42 Disagree 8 16 Strongly Disagree 3 6 No comment 1 2 Frequency Valid Percent Ambience Strongly agree 26 32 Agree 15 30 Disagree 7 14 Strongly Disagree 2 4 No comment 0 0 TABLE 3 Food ratings by category Mean Std. Deviation Skewness Kurtosis Breakfast 2.24 1.272 -0.041 -0.355 Burgers 2.07 1.387 0.731 0.841 French fries 3.02 1.263 -0.261 -0.052 Hypothesis Tests In the investigation of the degree of contentment with the McDonalds outlet, it emerged that there is no statistically significant relationship between quality of service, food, pricing, hygiene and degree of loyalty (rho = 0.078, P = 0.688). The results for non-parametric correlation (Spearman’s Rho) indicate that there is no significant relationship between high ratings of food offerings and willingness to commit to future visits or make recommendations to friends, rho = 0.213, P = 0.268. Additionally, a significant relationship between those who were willing to try another outlet and those who were willing to make another outlet their choice outlet was established, rho = -0.022, P = 0.091. Discussions and Recommendations The study established that the risk posed to McDonalds by the entry of Burger King into the Lausanne market was real. The statistical analysis of the responses painted a picture that points to a substantial number of McDonald’s customers shifting their loyalty to any other outlet that may be within their reach. Though not a favorable observation with regard to business, this was not wholly unexpected. Further analysis showed that the willingness to shift to Burger King could be associated to expectations of better services, higher degrees of hygiene, lower prices, wider food variety and improved food quality. This was understood to arise from the expectations that have been built through the marketing drives that the incoming store has been having in other locations and that the customers could access online. The study found uneasiness among the customers arising from the fact that McDonalds was the only major international fast food outlet that had an outlet in Lausanne. Owing to this, they felt that the outlet had monopolized the fast food market in the area and competition would only help in making McDonalds improve on its quality and thus granting them better services. In the comments section of the questionnaire, the respondents left very attention-grabbing responses. One client noted that the entry of Burger King will help him catch up with the whooper which he used to enjoy when he lived in United States and another welcomed the idea since she felt it would help in creating more jobs for the residents. Others responded by welcoming it as a move that can only help them get better services and value for money and stressed the fact that more choice was always a good thing for customers. These pointers helped to identify key challenges that face the outlet. Increasing food prices Globally, increased food, commodity and energy costs have been pushing up the wholesale and retail prices of food items. This interprets to a challenge to any fast food store since getting a balance between maintaining the bottom line and cushioning the customers from adverse effects of the inflationary pressures is not a straight forward engagement. It is advisable to engage the services of a financial analyst to look in to the future prospects and advise accordingly. Beverages over burgers limitation The diversification of the McDonalds menu has been its best selling point over time. That consumers have diverse options in food and drink is a basic fact. The firm has thus over time strived to ensure that these options are well catered for in their outlets under one roof. The growth of the beverage sector should be checked so that it does not threaten the growth prospects of the food sector. Most of the respondents showed more keenness in maintaining their regular beverage intakes at the outlet but were willing to experiment with foods from other outlets. This was challenging to the core business of McDonalds which is the burger market with the ‘Big Mac’ ranking equally with ‘the whooper’ in prevalence levels. It is thus advised that any marketing mix that is to be used incorporates this concern into the formulation. In view of these sentiments and the results from the statistical analysis of the data, several suggestions were conceptualized which would help McDonalds retain its current base of customers and continue attracting more customers in the future. Start a concerted marketing campaign. This will ensure that the outlet will have a head start on the rival in the marketing aspect. The success of previous McDonalds’ marketing campaigns should be used to advise on the necessary marketing mix to use. The four P’s marketing strategy that incorporates product, price promotions and place is the most advisable marketing mix to be used in that it will be able to handle all the fronts of the business’ challenges. Consistency; this has been a major selling point of McDonalds over time. The consistency has ensured that it maintains its position as the number one fast food Franchise in the world in terms of market share and outlets. That the Franchises in Lausanne is facing a competitor’s entry is not a unique position. The need for consistency for the Lausanne Franchises is so as to capitalize on the best practices that other Franchisess have put in place in the face of similar threats. It will such be easier for the outlet to mitigate this threat and improve on its general outlook. The original motto of ‘Quality, service, cleanliness and value’ is still relevant today as it was in the 1960’s and should be upheld at all times. 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Sex: ----------- Male ----------------- Female 3. Occupation: Student--------------- Blue collar-------------- White collar ------------- 4. Residence: Lausanne--------------- Other (Specify) --------------- Part B: Service In the questions below, please tick the most appropriate answer according to your feelings. Totally Agree Agree Disagree Totally Disagree 1. Our service staff is efficient 2. Our orders are processed in time. 3. Our Hygiene is of high standards 4. Our food is of high quality. 5. Our prices are customer friendly. 6. The ambience is homely and welcoming . Part C: Rating On a scale of 1 – 10, with one being the weakest, please rate the following items relating to our meals and service i) Breakfast -------------- ii) Burgers --------------- iii) French Fries --------------- iv) Variety ---------------- v) Originality ---------------- Part D: Competitor analysis Have you ever had chance to eat at Burger King? ------ Yes ------ No (If YES continue with section If NO proceed to Part E) Rate the following statements on a scale of 1 to 10 with 1 being the weakest a) McDonalds food is more delicious than Burger King’s --------------- b) McDonald’s service staff are more efficient, ----------------- c) McDonald’s stores have better ambience. -------------------- d) McDonalds is the more superior outlet. ----------------------- Part E i) Next time you think a burger, will you think McDonalds?------ Yes --------No ii) Would you recommend McDonalds to a friend? ------ Yes --------No iii) Would you be willing to try another Burger outlet other than McDonalds?-----Yes -----No iv) Are you willing to make another outlet your choice outlet? ------ Yes --------No Part F: Comments. 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