Rebranding of Burger King - Case Study Example

REBRANDING BURGER KING 1 Introduction Trout (as cited in Powell and Brierley, 2002) says that brands are about perceptions and not the product and if managers do not understand the difference, then their plans for marketing risk failing. Objectivity is not a determinant, neither are facts or quality of products, but the marketing world is ruled by the Haig (as cited in Powell and Brierley,2002) also argues that branding has been transformed into a process of building perceptions in the minds of the consumers, the basis on which they now make their decisions on what to buy. They both concur that brand success in the present high market dynamism requires an understanding of the important marketing role played by brand communication. Managing brands is made complex by the fact that communicating the qualities and identity of the product is not enough and that of the corporation itself is paramount in building a perception among the public. Where symbolic features and public relations originally sufficed as an efficient marketing strategy, national corporations dealing with consumer products have to build and consolidate the perceptions of the public about their products, services and the corporate itself. This can be achieved by exploiting a variety of communication channels such as relations in the community and person-to-person campaigns, lobbying and public relations, advertisements, as well as online marketing. 1.2 Background information on Burger King Burger King, founded in Miami the state of Florida, the U.S.A., is a chain of fast food hamburger restaurants with a global network. It was founded in Florida in 1953 as Insta-Burger King, but it ran into bankruptcy in 1954 and it was bought out by James McLamore and David Edgerton who rebranded it as Burger King. The two previously held its franchise in Miami. It has however changed owners four times since then and publicized in 2002 by its third owners TPG Capital and partners. Its fortunes were declining and a major restructure was initiated by Brazilian 3G Capital, a new major shareholder, in an attempt to reverse the trend. Together with Berkshire Hathaway, a partner, they even initiated a merger with Tim Hortons, a chain of doughnut outlets based in Canada, targeting the coffee and breakfast lovers, as Tim Hortons sought to take advantage of Burger’s international network. The company currently has operations in 79 countries with a chain of 13,000 outlets; the U.S.A commands 66 percent of these and up to 99 percent are owned and operated on a private basis. However, from 2013 the new owners have been initiating a model of entire franchising, with the mode of franchising being varied to suit different markets. An example is the master franchises, a licensing model where franchisees in some regions sell franchise licenses on behalf of the company. 2.1 Competitors Burger King key competitors include McDonald, Wendy’s, Starbucks, SubWay, Dairy Queen, Sonic, Hardees, Jack in the Box among others. McDonald’s, which is the largest fast food hamburger chain worldwide, is the main competitor with 35,000 outlets across 119 countries and a 68 million-customer base. Strong strategic policies including affordable prices have kept it well ahead of Burger King over the years. With this and the other smaller competitors such as Subway and KFC improving their competitiveness by the day with things such as bacon sundae and offers on limited-time competition in the fast food market is intensifying as shown in the market trend below. Fast food trend in the American market by store number The increasing competition threatens Burgers market position and they have to up their marketing strategies, sort out public relations issues and improve online presence to retain customer loyalty. 3.1 The need for change The company has heavily relied on franchising as an entry strategy into new regions and markets. Though this helps it to minimize capital investments and operations, flawed management of the processes has severally affected relations between the company and the licensees, sometimes leading to legal disputes and cases that set precedents. Franchising started in 1959, whereby franchisees opened its stores in given regions after buying the rights. Through this type of agreements, Burger King lost supervisory management rights over the franchises and soon there were complaints about the quality of products, design and image of the stores and the procedure of operations. Such deterioration has sometimes led to some of the large franchises attempt to buy out the stores but which Burger King has contested, leading to lawsuits. An example is the franchise between it and Chart House based in Louisiana in the 1970s. With over 350 stores in the U.S.A, the owners attempt to buy out Burger King soured relationship between the two companies developing into a lawsuit. It has also had stringent franchising policies aimed at curtailing the growth of the stores owners lest they become a threat. It limited the living distance of the owners from their stores, which meant that they were to be small individuals or groups and not large companies. They were also restricted from diversifying investment funds away from the franchise investment. This has affected the size and number of franchisees as well as the brands appeal to potential investors. It has also held the right to own the store locations, which it leases, or rents to the franchisees with the right to evict them and take over in case of any nonconformity. This stunts growth and has hurt the brand image. Disputes over copyright and endless legal suits have occurred such as in Australia where its franchise had to operate under its private name, Hungry Jacks. 3.2 Burger King SWOT analysis Strengths With a chain of 13,000 spread over 79 countries, its diversification over a wide geographic coverage gives it a reach to large customer base thus realizing higher sales volume. Aggressive marketing and advertisements especially in America has built it a popular brand name and achieved considerable customer loyalty in some regions. The years have seen an expansion of its product offering from the simple basic French fries, sodas, burgers and milkshakes offered in 1954 to a diversification that has led to unique products such as the Whoopers. Its growth model is largely based on franchising. This minimizes the capital and management investment required to launch new branches. Weaknesses A high concentration of the branch network in a single geographical location exposes the company to local regulatory and labor problems. According to (MBASkool.com, 2014), the fact that 66 percent of its branch network is in the United States makes the company vulnerable to local problems of one area such as strikes and the effects of changes in legislation. It has over-relied on the long-term consumers who prefer the larger and fatty sandwich portions and this has notably slowed its transition to healthier and leaner offers in response to emerging consumption habits especially in the developed markets, affecting its appeal among this class of consumers. Poor management of franchising and trademark disputes has also affected its reputation internationally. Opportunities Opportunities exist for online retailing especially in the growing markets and introducing the home delivery model to some customers convenience. Self-service will also reduce customer-waiting time. Product differentiation to suit different geographical regions, deferent cultures and different demographic sections of the population will tremendously boost sales volume. Aggressive advertisements in fashion magazines and online are great opportunity as well as professional management of franchising to grow the branch network. Threats The slow recovery of the economy especially the U.S its main market hampers it growth potential. According to (Friesner, 2014), it has continually missed financial targets driven adverse conditions in the economy such as unprecedented unemployment levels that erode consumers purchasing power. The eating habits are changing against the favor of fast foods. According to (Friesner, 2014), research shows that the age bracket of 18 to 34 years considerably cut their fast food consumption from 2006 partly due to the unfavorable economy and increasing health awareness. The rising influence of other upcoming fast food such as Wendy’s, which at some time surpassed its market share, is a factor of concern. 3.3 Controversies Since it was founded in 1954, endless legal cases and disputes have marked its history, both as defender and plaintiff. Several aspects of its operation have variously been affected by these disputes. The company has changed hands quite a number of times in its history and its response to the disputes have ranged from diplomacy with the disputants and critics to hostile denial and blame shifting tactics. Such a show has been met with praise and suspicions of political correctness among different interest groups over the years. A dispute over trademark with a company that had a name identical to Burger Kings’ in Illinois resulted in a federal case whose outcome defined U.S.As trademark and Lanham Act. A similar trademark dispute with a shop in Australia led to the shop retaining its name. It has also had disputes with interest groups such as animal rights groups, social and governmental agencies, trade unions over a myriad of issues touching social justice, rights of animals, ethics and its responsibility as a corporate. The outcome of these disputes has always negatively affected the companys interaction with business partners as well as its image in the public. 3.4 Changing demography Though the years have seen an expansion in its menu from the basic French fries, sodas, burgers and milkshakes offered in 1954 to an offering set that is more diversified, many of the products introduced have failed to gain foot in the market especially in the United States partly due to a failure to tailor the products and tastes to the demography and regional cultural trends. In the U.S.A where 66 percent of its business lies, trends in demography show that in the not so long future the population will be composed of the rapidly growing Hispanics at 16.3 percent, 17.3 percent Asians as well as an influential portion of Millennials. The increasing potential customers of Asian and Hispanic native demands provision of more culturally diverse bites flavored more than what has been the case previously (Vu et al., 2013). Unless Burger increases its product range, it risks losing business to alternatives. The branding and marketing need modification as this group especially the Millennials prefers diversified and customized products. The company has also in the recent years been targeting the male youth neglecting potential female customers and other groups, effectively hurting its earning potential. 3.5 New marketing strategies Burger King needs to rebuild a foundation on an efficient strategy that will become a basis for expansion. A restructuring of the franchise management units is required to create a more favorable environment for the franchisees. This involves terms that do not curtail their growth in terms of the size of franchise network ownership, operating terms, allowing competition, and recognizing trademark rights. This will improve its reputation among these important business partners and tremendously grow the branch network. Sales volume will consequently rise and the gains will enable the company to compete more strongly with upcoming rivals. It also needs to standardize it franchise operations. The product appeal needs to be extended to a wider demography. The company has been focusing unevenly on the young male what’s with the King mascot and humor. This is despite the fact that their proportion in the market of fast foods is only 17 percent. The menu needs offerings such as wraps, salads and smoothies to capture more female consumers (Bhasin, 2012). It also needs to develop online retailing especially in the developing markets. This will create awareness to all potential customers across the world enabling them access their products from any location. This is cheaper to the company as it does not require a physical outlet and electronic payment systems such as PayPal do exist to facilitate it. This measure combined with aggressive advertising in local newspapers and magazines will boost its revenue tremendously (Thanh, n.d.). To mark a shift in its marketing strategy and corporate perception, a reimaging of its chain stores is due, through changes in décor, and more modern and urbanized architectural designs of the restaurants. 4.1 Challenges and opportunities Obesity is now a major problem the U.S.A. According to (Vu et al., 2013), a figure above a third of the adults in the U.S.A or 37.5 percent has obesity. Consequently, everyone is in search of healthier foods, the perception generally being that fattening and unhealthiness is associated with consumption of fast foods. It is even a fact that Burger Kings burgers targeting the young male had unhealthy amounts of trans-fats and other fats, which has affected its earnings in the recent years. Many fast-food joints have started including healthier offers in their menu, and adopting a similar strategy will help Burger King increase sales by creating an opportunity to reach out to new consumers and a larger market. Standardizing operations will reap low product costs and a quality that is consistent throughout its stores. This will establish a strategy of cost leadership allowing it to expand rapidly. The developing markets offer the greatest opportunity for growth. They have the highest youthful and young working population who are leading busier lives by the day and this has made the popularity of fast foods to surge. As long as the price is affordable, it is a market with great potential. Investing in technology in functions such as the service kiosks touch screens for self-service and mechanized preparation of food across its various stores will greatly reduce production cost; give the customers a memorable experience through speed and convenience of service and accuracy of ordering. It will also improve efficiency in the management of inventory. The downside of this is that technology will cut down on labor-intensive jobs. 5.1 Conclusion The fact that competition is intensifying in the fast-food market is intensifying is undisputable and as both large and smaller players sharpen their strategies to carry the day, Burger King cannot afford to continue wasting time in a series of missteps and corporate misbehavior. Customers often buy the seller and the perception they have about the company prevails over the quality or quantity. Changing demographics and health consciousness especially in the developed market offer more than enough reason to rebrand. Besides this, new potential markets are growing and the availability of technology offers are high potential opportunities to exploit. References Bhasin, K 2012, This Is Burger Kings New Plan To Take On McDonalds; Business Insider viewed April 30, 2015, http://www.businessinsider.com/burger-kings-rebranding-plan-2012-4 Friesner, T 2014, Burger King Marketing Mix, Market Teacher, viewed April 30, 2015, http://www.marketingteacher.com/burger-king-marketing-mix/ MBASkool.com, 2014, Burger King, viewed April 30, 2015, http://www.mbaskool.com/brandguide/food-and-beverages/590-burger-king.html Powell, H & Brierley, S 2002. The advertising handbook, London: Routledge. Thanh, N, et al n.d., Research on factors affecting customer satisfaction towards Burger King in Vietnam, viewed April 30, 2015, Vu, A, Bo, D, Brooks, J, Cheng, V & Tsang, M 2013, Burger King: Changing or Imitating?: Analysis of Burger King’s Re-strategy, Munich: GRIN Verlag GmbH. Read More