Burger Kings International Strategy and the Struggles to Succeed in the French Market - Case Study Example

Running header: Burger King International strategy Student’s name: Instructor’s name: Subject code: Date of submission Burger King’s International Strategy and the Struggles to Succeed in the French Market Burger King is a multinational company with operations in numerous countries across all the continents of the world. As such, the company has adopted an elaborate international strategy in its bid to succeed in the international market. This is bearing in mind that the decision to venture the international market was informed by the fact that competition was increasing at home from such companies as McDonalds implying a shrinking domestic market which necessitated reduction on reliance on single market. As such, the company aimed at targeting markets with opportunities of high profitability as well as a large customer base in a bid to achieve higher economies of scale. Entering an international market is never easy owing to challenges that include tariffs and trade barriers and variable rates of exchange among other barriers. As such, an organization entering international market has to choose between a uniform marketing mix as its global strategy or adjusting to the characteristics that are unique to the individual markets or localization (Vrontis and Kitchen, 2005). As such, this paper looks at the international strategy that is employed by Burger King in its bid to succeed in the international market. It should also be noted that Burger King had initially entered the French Market in 1980s before exiting in 1997. The company then reentered the market in 2013. As such, the paper will also look at the company’s struggles to succeed in the French market. In so doing, the paper will analyze its past and present position in France as well as the pros and cons of the market. Brief History of Burger King The company was founded in 1954 with its first restaurant being opened in Miami, Florida. Its introductory product that is credited with its growth and hence success is the Whopper sandwich introduced in 1957. The product paved way for the development of the burger king home of the whoppers campaign in 1958.Its first initial public offering was successfully completed in 2006 and thereafter it was acquired by 3G capital in 2010 and hence it was converted back to a private company. It was again relisted in the New York Stock exchange though 3G capital retained 70% of the company’s ownership. Since its inception, the company has grown to become the second largest fast food hamburger restaurant chain globally as far as the numbers of restaurants are concerned. By the end of 2013, the company had 13,367 restaurants in more than 90 countries with over 45% of the restaurants being located outside the US and Canada. It should however, be noted that almost all of its restaurants outside Canada are franchised. The section below analyses the strategy adopted by Burger King that has seen it overwhelmingly succeed globally. Use of Franchising as an entry method Burger King mainly uses franchising as its entry method into international markets in its pursuit to expand globally while increasing profitability. In this regard, the strategy is mainly reliant on the revenues coming from its percentage of sales as well as the franchise fees that it receives from the franchisee. In addition, it also generates income from leasing or subleasing property to franchisee. A good example of its franchises is its operations in France. Its return to France has seen it enter into franchise agreements with French restaurant Groupe Olivier Bertrand as well as a private equity firm Naxicap partners in its bid to expand into the French quick serve market.Theestablishment of three new restaurants inMartinique in 2014 in its bid to expand its presence in French West Indies was a franchise with ADM food services. In the Middle East, BK has used various Franchisee including Olayan Food Service Company in Saudi Arabia and First Food Service Company in UAE. Franchising is seen as an important part of its strategy since it saves the company of the much required capital and hence it is able to expand into even more countries. However, it should be noted that the relationship between the franchises and the company’s management has always significantly influenced its success or failure since the franchises have to play a crucial role in decision making. The company’s marketing mix The company’s success in the international market has also been influenced in a great way by its marketing mix. This is explained below; BK’s products The company produces hamburgers, cheeseburgers, fries, salads, hash browns, onion rings among other products. Its brand is differentiated through burger king have it your way slogan. The products are highly standardized in terms of quality, image and brand name. All the franchisees are required to standardize products in line with BK’s patents and requirements hence giving BK great deal of control over its products while securing a low entry risk and low cost entry mode while generating economy of scale and use of cash full motivated business contact with market experience and knowledge. In addition, its product promotional strategy influences the consumer to feel no need of changing the recipe for its burgers since the company “got it right from the first time”. As such its product strategy has been a source o success in the international market. BK’s Price BK’s pricing is not standardized but prices are adapted in accordance with multiple factors including customer similarity levels, competition and economic differences. As such, a consumer in Africa will not be charged the same price with a customer in US or France (Rodrigo, 2012). On the other hand, different prices are adapted where competitors like McDonalds exist. As such, the company has succeeded in the international market through adoption of competitive pricing while considering local conditions. BK’s Place This involves making the products available to target consumers. The company has its operations spread in over 95 countries. The operations are mainly run through franchises who have heavily invested in equipments necessary to make the customer comfortable. The location of BK’s restaurants varies from country to country though there is standardization in terms of atmosphere, decoration and settings. It should be noted however, that its outlets are located where they are likely to attract high demand and hence the company’s strategy on place has also greatly contributed to its success in the global market. BK’s promotional strategy BK undertakes an aggressive promotional strategy that differs from one country to the other depending on the conditions of the market as well as customer attitudes, culture among other factors. In fact, BK has been touted as the best when it comes to social media marketing. The use of a successful promotional strategy is indeed one of the key factors behind BK’s success in the international market. People, physical evidence and process management at BK BK’s staff, environment and the customer service is of high quality and almost standardized in most of its restaurants. As a result, it is possible to see people cueing for Bugger king’s burgers up to 45 minutes especially in France. The right customers’ service, the environment and satisfied staff members has indeed been a key reason behind BK’s success in the international market. The Struggles to Succeed in the French Market The initial entry In 1981, Burger King entered the French market but unfortunately it had to close all its 39 stores in France in 1997 citing lack of sales. However, its closure could also have been attributed to the conditions in the market owing to social and political activism led by such activists as Jose Bove’ who were against globalization. For instance, the unionists are known to have attacked the main BK’s competitor in France McDonalds blaming the Americans for stuffing them with junk foods while restricting French daily products. Another reason why BK could have failed is the French culture then that was not accustomed to fast food. In fact, France was regarded as the land of haute cuisine, fine wine and cheese implying that succeeding as a fast food company was going to be an uphill task for BK. But BK’s first failure in France has also been blamed on its failure at local responsiveness. BK is said to have had a strategy of directly transplanting American restaurants with no local adaptation hence resulting in low sales. No wonder it failed even as its major competitor-McDonald continued to wither the storm. In fact, the French food market expanded by nearly 1,450 restaurants between 1983 and 1996 with the total market value increasing fivefold. As such, it can be concluded that Burger King’s failure then was largely as a result of strategy failure. As a result, it had to exit the French market in 1997 citing low sales. The come back Burger King seems to have learnt its lesson and fifteen years later in 2013, it reentered the market. However, it should be noted that it reentered the market with a French taste in a bid to avoid past failures. Another strategy with which it entered the market was through use of Franchising as stated above. This has the advantage of using people who already had the market experience and hence understood its needs. Furthermore, the use of the franchisee’s machinery meant that BK would only use minimum capital while assuring it of success. In addition, BK has greatly made use of adaptation hence responding to the local needs as stated above. It should be noted that despite its first exit of the French market, people still wanted its high quality products and hence its return was readily welcomed by customers wanting greater burger diversity and were hence nostalgic for the return of a brand they considered to have been forcefully taken away from them 15 years ago. When it reentered the market, BK had a target of gaining over 20% of the entire French fast food market share with rumors that it was going to take over the Belgian fast food chain quick and hence it was hoped that it would have over 400 outlets within a few years (Lichfield, 2013). Today, BK looks set to succeed in the French market this time round. Although it only has just over fifteen stores so far in France, it is the only fast food company that is forced to install barriers to control the lunchtime crowds and where people have to wait for up to thirty minutes for their orders implying high demand for its products. This is also attributed to its getting its launching marketing strategy perfectly right. In particular, the company has succeeded in its social media marketing strategy as well as in its engagement with the French consumer which has been exceptional hence creating a buzz around the brand that competitor have envied. Thus if all goes well, BK is certainly going to succeed in the market this time since it seems to have adopted the right strategy. Conclusion: Burger King has been successful in the international market owing to its adaptation of its marketing mix to the needs of the local market. However, when they had chosen standardization as was the case with its initial entrance to France, the strategy largely failed leading to exit. As such, BK has mainly entered international markets through franchising with companies that understand the local culture so that it offers products that are in line with the local customers’ needs and tastes. As has been seen above, BK’s success in the international market is mainly attributed to its use of franchising as a market entry strategy where 99% of its restaurants are franchised. This is in addition to its marketing mix that has been largely tailored to meet local market needs. While its initial failure in the French market is largely attributed to non-responsiveness to local needs hence leading to low sales, its second entry into the market is seen as highly likely to succeed since its new strategy is now more responsive to the needs o the French market. This coupled with its aggressive marketing strategy is bound to see it largely succeed in the French market. References: Vrontis, D& Kitchen, P2005, Entry methods and international Marketing decision making: An empirical investigation, International Journal of Business Studies, Vol. 19, No. 3-4, pp. 87-110. Rodrigo, R2012, Strategic Analysis of Burger King, Retrieved on 9th May 2015, from; http://writepass.com/journal/2012/12/strategic-analysis-of-burger-king/ Lichfield, J2013, The return of the Whopper: Burger King Makes comeback in France, Retrieved on 9th May 2015, from; http://www.independent.co.uk/news/world/europe/the-return-of-the-whopper-burger- king-makes-comeback-in-france-9013377.html Read More