(McDonald’s and Burger King)
Introduction and Background Information
This task concentrates on the competitive strategies of McDonald’s and the Burger King both operating in the food industry. The McDonald’s Restaurant operates internationally with over 36,250 branches in 119 countries (Ooi & Yazdanifard, 2014). The company is headquartered in Illinois in the US, and it has over 420,000 employees globally. The company's total revenue as at 2014 was $27.4 billion with profits of over $4.8 billion (Ooi & Yazdanifard, 2014). The MacDonald's chief competitor is the Burger King which was established in the year 1953 commonly known as the King of Burger. The Burger King operates in more than 70 countries of which 90.0% are privately owned as franchises (Ooi & Yazdanifard, 2014). The Burger King is headquartered in Miami in the US whose major products are the hamburgers, chicken, soft drinks among others. The company employees over 34,000 people and its operating income as per the end of the year 2010 was US$2 billion with a net income of US$118 million (Jargon, 2010). The essay discusses the environmental scans of both companies with various strategies put in place to ensure market competitiveness.
External Environment Scan (PESTEL Analysis)
Political Factors
Every organization operates under the state policies. For instance, the McDonald’s and the Burger King operate in different states whose state policies differ. The operations of the McDonald’s and BK in the US and the European Union countries have faced some protests concerning the side effects of the fast foods. The protests have forced the governments to review the impact of fast foods and its contribution to diseases such as the obesity (Jargon, 2010). The other political factors affecting the operations of the McDonald’s and the Burger King are tax laws and employment laws. For instance, in the developed economies the companies must pay a minimum wage and a specified tax. These implications have increased the operational costs of the McDonald’s and the Burger King (Jargon, 2010).
Economic Factors
The changing economic trends forces organizations to rethink their operational strategies. For instance, during high inflation, Burger King puts more emphasis on meals packaging to maintain its customer loyalty (You & Lee, 2011). Similarly, the McDonald’s Company has a global presence and the economic forces such as high-interest rates and the high standards of living influence its operations.
Social Cultural Factors
Social-cultural factors may influence the way a multinational company operates. For instance, different countries have different cultures. The Muslim culture forbids the consumption of pork, and it is vital for the company to be aware of such situations to avoid cultural conflicts. The social, cultural factors also encompass age groups of which the company must have a clear strategy on which to focus. The global policy of McDonald’s defines consumers based on their features (Ooi & Yazdanifard, 2014). The approach offers a lucrative return to the company since it focuses on the age of between 5-35 years. On the other hand, the Burger King has specialized in the production of hall food in the Muslim nations to avoid the cultural conflict with the residents (Ooi & Yazdanifard, 2014). The halaal food helps the company to refrain from offering the pork meat. The Burger King also takes into consideration the religious resting days and offers its employees the off days to attend to churches.
Technological Factors
As noted earlier, technology in the food industry is dynamic and keeps on changing as the innovations are discovered. The Burger King has gone global due to the introduction of Mobile Payment (MP) in all its global stores. The Mobile Applications do not only enable easy payment processing but also offers clients an opportunity to view the available menu via their mobile applications (Ooi & Yazdanifard, 2014). Besides the mobile applications, the Burger King has embraced the concept of green technology in its productions process. The increased demand for green production technology has made McDonald’s face many accusations from the environmental activists in various areas of operations. To respond to this claims, MacDonald's management have invented to the usage of biodegradable plastics to get rid of glasses when it is offering meals (Ooi & Yazdanifard, 2014). The company as well is focused in online marketing using various social media tools to increase its market share.
Legal Factors
Both McDonald’s and the Burger King takes into consideration the various tax regulations in their areas of operation. The other legal requirements involve standardization of the food standards as per the state of operation. The MacDonald's global strategy in food production and distribution focuses not only on the country's food standards but also considers the international food requirements.
SWOT Analysis
Strengths
Both McDonald’s and the Burger King have adopted a geographical strategy with popular brands, brand loyalty, diversification, and strong brand equity. The Burger King have gone a step ahead to provide sweet tasting burgers and the company is currently nicknamed as the ‘King of Burger'. On the other hand, the McDonald’s has put more emphasis on innovating and diversifying its product lines, extensive demographic presence in more than 119 countries and uncertainty acceptance (Ooi & Yazdanifard, 2014).
Weakness
The major setback facing the McDonald’s is the dynamic changes in the consumer behaviors and expectations in different countries. However, through its global strategy, the company has shifted its focus on the customers whose ages are below 35. The youths are living in the modern technological world with limited geographical and cultural boundaries. The major setback of the Burger King is the campaign against its food products in the global market which are viewed as unhealthy. Therefore, Burger King’s global appeal has reduced significantly in the past decade. However, the company is trying to concentrate more on healthy foods and the introduction of halaal foods in the Muslim countries to regain its market share. The other weakness of the Burger King is that it has a franchised management that is weak. However, the company through its international strategy is restructuring its operations to strengthen its management.
Opportunities
The Burger King has two major strengths. Firstly, the Burger King has an opportunity of quicker market expansion, and it is currently operating in 70 countries. Secondly, the Burger King has engaged in more research and development to cater for the new healthy foods to counter the campaign against its unhealthy foods. On the other side, the McDonald’s is focusing on increasing its franchise applications since it enjoys long-term goodwill. Secondly, McDonald’s is focusing on increasing its demand because of the increase in populations where it operates. The other opportunity of McDonald’s is its continued delivery of healthy diets as opposed to its competitors. Lastly, the McDonald’s is innovating new product ranges to accumulate more customer base.
Threats
Both the Burger King and the McDonald’s faces threats from the legal requirements. The legal suits against the two companies include advertising, unhealthy meals, obesity and employment laws. For instance, various countries provide minimum wage rates that sometimes increase the production costs (Ooi & Yazdanifard, 2014). The declining net operating incomes at McDonald’s reduces investor confidence. McDonald’s also faces opposition from parents who argue that the company is introducing their children to fast-food culture at an early age. Both the McDonald’s and the Burger King faces stiff completion from other fast-growing companies such as the KFC, Hardees, Starbucks, Domino's Inc. and Wendy.
Growth Strategy
The Burger King has a strategy of merging with Tim Hortons to expand the burger brand. Despite the oppositions to this move as tax evasion, the merging is a growth strategy that the Burger King is using to acquire a larger market share (Ooi & Yazdanifard, 2014). The MacDonald's growth strategy is the application of franchisees to expand its global brand.
Marketing Strategy
The Burger King has moved into the digital platform as a market expansion strategy through the introduction of mobile applications. The company is also continuously innovating new communication channels to ease the burden of communication between the customers and the company to maintain customer loyalty (Ooi & Yazdanifard, 2014). The McDonald’s is focusing on the process innovation to introduce more healthy products to reduce the lawsuits against obesity to enlarge its market share through increased acceptance.
Measurement Guidelines and Effectiveness
The Burger King is concentrating on the production of halaal foods in the Muslim countries to refrain from the pork meat. The McDonald’s is focusing on intensive campaigns to educate the customers that it is offering a healthy conscious food diet. This move by McDonald’s is aimed at countering the protests from the parents that it is introducing their children to the culture of fast foods at an early age (Ooi & Yazdanifard, 2014). In conclusion, the food industry is competitive, and the companies in the industry must focus on formulating strategies aimed at competitiveness.
References
Ooi, J., & Yazdanifard, R. (2014). How do Fast-Food Chain Restaurants can still sustain their Businesses Despite Controversial Health-Related Issues. Journal of Research in Marketing, 3(2), 269-273.
Jargon, J. (2010). The Burger King Draws Critics for Courting ‘Super-Fans. Wall Street Journals. Yahoo. com. http://finance. yahoo. com/career-work/article/108728/burger-king-draws-critics. Retrieved, 1.
You, J. S., & Lee, H. C. (2011, September). The Analysis of Toy Design Factor for Customer Loyalty. In Advanced Materials Research (Vol. 284, pp. 2350-2357).
