Burger King in India: Marketing Analysis

Introduction

Burger King is a global chain of fast food serving millions of customers every day with a product line consisting of delicious hamburgers and sandwiches. The company is considered to be a successful venture which has its rooting in high-quality food and exclusive marketing communication techniques implemented from time to time enforcing its presence and brand as customers continue to experience the taste of a mouth-watering menu. The current paper covers different aspects of the company detailing its history, description of its business, the trail of its high growth over the years and most importantly evaluates a potential market using PESTEL analysis and making recommendations for the company of various marketing strategies which the company could implement for better market approach and results.

Background

Burger King, often abbreviated as BK, is the name of one of the most successful international fast food companies. Burger King was established in Miami, Florida on Dec 4, 1954, by two famous businesses men James McLamore and David Edgerton. Its current key people are Brian Thomas Swette (Chairman), John Chidsey (CEO), and Ben K. Wells (CFO). At that time the restaurant was not called “Burger King” as its name was “Insta Burger King” at the time of inception because its owners wanted to emphasize the fact that the food served was prepared instantly and customers could eat on the go. Since 1954, Burger King Company has built up a network of its restaurants in 74 countries all over the world.

Its sixty-six percent of franchises are in the United States while others are owned and operated privately internationally. Burger King is the second world largest food company is based in the US whose main competitors in the food fast market are McDonald’s’ and Wendy’s. Although it’s not popular as McDonald’s, yet, they have still been able to serve great food and customer service. Currently, it has more than eleven thousand restaurants which provides this company an international presence.

Although the main market of Burger King Restaurant in the U.S., it is the employer of more than three hundred and forty thousand people serving around 11.4 million customers each day through its global network. It has been experiencing some scale of slouch in its company operations because of the present economic situation however Burger King Revenues still come up to some $2.4 billion in the year 2008. It has been almost 52 years since its first outlet was opened and the corporation is still running very strong with absolutely no sign of BK slowing down (BKC 2008).

Global Competitive Analysis

Burger King Corporation belongs to the Quick Service Restaurant (QSR) and Fast Food Hamburger Restaurant (FFHR) markets which are characterized by immense completion between different brands due to similarities in the product menu and pricing structure which they all implement. The major competitors of Burger King are McDonald’s Corporation, Wendy’s International Inc., and YUM! Brand Inc. Mcdonald’s is the largest and the most popular brand amongst all fast food vendors.

The sales of the QSR market are US$228billion worldwide with McDonald’s in the leading position having a market share of 45% whereas Burger King only has a share of 14%. FFH is the largest segment of QSR which generated US$69billion in sales in the U.S. representing 27% of QSR. The major companies McDonald’s, Wendy’s, and Burger King share between them 73% of these sales. The FFHR market is considered to comprise companies that have a similar organizational structure and they all operate through a worldwide chain of restaurants serving each market differentiated majorly based on the country and culture they operate in.

The pricing strategy of such restaurants is quite similar where the customer does not have a choice to distinguish major price differences (Options Express 2009). The major companies constitute the majority of this segment however in addition to these major brands the market also includes small fast-food chains and also other fast-food chains in countries where these major brands are not present. Targeting such markets is not an easy task where local brands are quite strong however the franchise policy adopted by major companies allows local vendors to be part of a much bigger and wider setup. The key financial information relating to Burger King and its major competitors including McDonald’s Corporation, Wendy International Inc, Yum Brands Inc., and industry averages are provided in the following table:

Burger King McDonald Wendy YUM Industry
Market Cap 2.48B 61.16B N/A 15.64B 154.56M
Employ­ees 41,000 400,000 440,001 50,400 5.70K
Quarterly Rev Growth 1.00% -9.60% N/A -7.90% 8.00%
Revenue 2.55B 22.99B 2.45B1 11.08B 413.45M
Gross Margin 33.13% 37.09% N/A 24.53% 21.51%
EBITDA 451.00M 7.45B N/A 1.98B 35.43M
Operating Margins 13.94% 27.15% N/A 12.89% 5.02%
Net Income 192.00M 4.35B 87.90M 928.00M N/A
EPS 1.402 3.827 N/A 1.914 0.09
P/E 13.12 14.35 N/A 17.72 16.8
PEG (5 yr expected): 0.93 1.6 N/A 1.36 1.14
P/S 0.93 2.59 N/A 1.41 0.41

(Source: Yahoo! Finance 2009).

Target Market Competitive Analysis

The target market selected for this paper is India. The reason for providing a global perspective to competitive analysis is that major companies are present in this market and the above analysis will help the user of this research to have a better understanding of the market position of Burger King and the expectations which the company can have for a particular market entry. Burger King announced its big plans in 2007 to enter the Indian market and carried out discussions with DLF, a major property company, to open a network of franchise outlets in major cities of India.

However, till now it has not been able to succeed in its plans. The major participants of the Indian fast food industry are both local companies and multinationals which are in a close tussle with each other targeting the youth of the country.

These companies include Nirula Group which is a local Indian group and owns hotels, restaurants, pastry shops, etc. Wendy’s International Inc. is another major player in the market. McDonald’s Inc. made a relatively late entry to the market through a joint venture with two local companies and since then has dominated the market with more than 100 outlets throughout India. In addition to these companies, KFC also made its entry into the market in 1995, also through a joint venture with a local company. Furthermore, companies like Pizza Hut and in particular Dominos which expanded their network within a short period are strong players in the market however their target market is different from those belonging to the FFHR market segment (Goyal and Singh, 2007).

Country Profile

India poses itself as one of the most vibrant and fastest-growing economies in the world. Since its independence from British Rule in 1947, the country had problems of corruption, poor infrastructure, weak foreign and trade policy, and overall poverty and social issues which inflict a rather poor image of the country to the external world and foreign businesses. However, in the late 1990s and starting of the new millennium, the conditions began to improve as the government implemented a relaxed trade policy allowing competition from foreign companies into their local markets. The country has a population exceeding one billion people and with levels of income increasing the booming economy is one not to be ignored. The market analysis of India is carried out using PESTLE Analysis:

Political

  1. India is the world’s largest democracy with more than a billion people from different casts, cultures, and religions.
  2. Until the early 1990s economic reforms the trade policy was strict which implied a closed economy.
  3. The political outlook of the country is stable with the new election are being held in the country (IANS 2009). The transitions of previous governments have been peaceful and appreciated around the world. The current ruling party in Congress and the Prime Minister previously the Finance Minister are considered responsible for the economic reforms which brought the country to a new economic development front.

Economical

  1. Since economic reforms in 1990 India has shown a high GDP growth rate between 6-10% (Thomas 2008) which is considered to be exceptional and comparable to that of China. However, it started to show a decline after continuous three years of great success (Thomas 2008).
  2. Industrial and IT revolution in the country has allowed the country to attract foreign investors and businesses to set up their offices in India.
  3. The working conditions suggest easier company set up with abundant cheap labor available.
  4. With the recent upsurge in the economy a large section of the Middle Class has emerged which constitutes mainly of young and enthusiastic people who are very much influenced by Western culture.
  5. The Middle-Class income level has increased which has, in turn, increased consumer spending on both necessities and luxuries.
  6. Food industry is a huge market in India with thousands of restaurants, hotels, bakeries, pastry shops, and other forms of business.
  7. Multinational companies like McDonald’s, Pizza Hut, Dominos, Wendy and KFC, etc already operating in India and expanding their operations.

Social

  1. Majority of Indians are vegetarian with a small proportion of the population accepting chicken as part of their meal but still, beef is considered sacred and not used for cooking except Muslims living in the country.
  2. The Indian food requirements have forced multinational companies to adapt to them to be acceptable to the public. Few companies faced major criticisms from the Indian public in their early years of operations as they were only selling chicken burgers however now the menus include more vegetarian choices.
  3. Traditional Indian foods are still quite popular amongst the masses however with the increased awareness through media and tendency towards acceptance of Western cultures the market for fast food has exceeded all expectations.
  4. There is still a large population of India living in poverty making less than $1 per day and struggling for food. Companies have faced criticisms from local bodies for promoting highly processed junk food at higher prices in a country where malnutrition problems are widely spread (ICMR 2009).
  5. The middle-class masses concentrated in the major cities including Delhi, Mumbai, Bangalore, etc could be considered as the main target.

Technological

India has emerged as one of the IT powerhouses which have changed the face of how companies operate around the world especially with the increasing use of outsourcing and call centers.

Legislative

  1. The Indian Government were carried out economic reforms to attract investors has also laid out certain conditions regarding foreign companies’ operations. Most of the multinational food companies have to enter into a joint venture with local Indian companies e.g. McDonald’s have contracted with two investors Amit Jatia and Vikram Bakshi in 1995. Also, Dominos offered a franchise agreement with Bhartia Brothers in 1996.
  2. Few of the multinational companies operating in India have faced strong legislative and social resistance in regards to the way they were doing business in India e.g. KFC had difficulties in its early years due to the opposition claiming that it can create social unrest because masses live under inhumane conditions and also due to its concentration of serving chicken meals.
  3. The food companies need to seek permission from the government for opening branches in designated areas.

Environmental

India has weak environmental regulations. However, the Ministry of Food Processing Industries has reinstated tougher rules and regulations for Food Safety and Environment to deal with the menace of unsafe food (Toxics Link 2008).

Identification of Problem Areas

A research report by AC Nielsen (2004) suggests that 37% of the population has fast food at least once a week. This may be a pulling factor for a company deciding to enter the Indian market however certain problem areas could be identified as in the case of Burger King.

The major problems are the Indian food requirements. Burger King’s most popular Whooper is a beef burger which has been the main source of success however it is not possible to sell the same in India because of the factors above.

The second problem is to find the right partner for a franchise agreement which Burger King has not been able to do so. Trusting another company for developing and strengthening BK’s brand will be an issue which company needs to look closely at.

The pricing of Burger King is higher than its competitor McDonald which may create problems for the company.

The process of starting up a business in India is comparatively difficult. The country’s legislative system requires a lengthy period for registering companies and other issues including paying taxes, obtaining construction permits, and dissolving the company (Doing Business 2009). Also, the cultural difficulties can cause problems for the company as Indians are nationalist in nature and foreign companies have faced problems in the past affecting their operations in India.

Recommendations

Burger King should consider adapting to the Indian food requirements. This could involve using other competitors which are already operating in India and have successfully transformed their menus to meet Indian customers’ needs and beliefs as benchmarks. This will allow the company to approach the market better than those companies as this will not only reduce the time required for changes at a later stage but also more directed marketing can be adopted from the initial phase.

Franchising is an issue as the Indian government requires foreign companies to enter into joint ventures with local companies. The company can seek big names in India and allow itself to control the operations via a centralized approach by developing policies, standards, marketing campaigns, and product improvements in its headquarters. This will increase the company’s control over its brand and its reputation can be well protected and expanded in the Indian market.

The pricing problem cannot be overcome by reducing the price but by focusing more on the strategic location of Burger King’s outlets as it has successfully done in other countries. The locations should be in concentrated areas where people have easy access to its outlets (Burger King Franchise 2009).

Finally, the problems with establishing a company in India could be resolved mostly by entering into a franchise agreement with a local company and focusing more on the core competencies of the company to develop and implement a strategic plan which can achieve a competitive advantage in a tough market place.

List of references

AC Nielsen. (2004). Urban Indian consumers amongst the top 10 most frequent eaters of fast food globally. India: AC Nielsen.

Burger King Franchise. (2009). Mcdonalds Vs Burger King Who’s Better. Web.

Doing Business. (2009). Explore Economies – India. Web.

Goyal, A., & Singh, N. (2007). Consumer Perception about Fast Food in India: an Exploratory Study. British Food Journal , 182-195.

IANS. (2009). India to Vote April 16-May 13 for a New Government . Web.

ICMR. (2009). Case: KFC in India – Ethical. Web.

Options Express. (2009). Burger King Holdings. Web.

Thomas, C. (2008). India’s GDP Growth May Slow for First Time in 3 Years. Web.

Toxics Link. (2008). Food for Thought: Issues of Food Safety. Web.

Yahoo! Finance. (2009). Burger King Holdings Inc. (BKC). Web.