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In the world of globalisation the Business houses have been leading their way to the corporate business methodology bringing about change every second. Globalisation has become the phenomenon for a successful business enterprise. Business need to do things differently from what they have been doing to secure an advantage over their competitors, management need to focus on transforming business to adopt new challenges. Business has become so dynamic that nothing can be predicted forever. When doing business in a global perspective comes it becomes most turbulent. It is vital to implement right strategy in right time to get competitive advantage in global scenario. We are going to stabilise the changes and the theories of strategic management on one of the biggest food retailer Burger King in U.K. with the insight of KOTTER'S model of handling change in organisation. Burger King Corporation is a fast food chain restaurant which has spread over 65 countries. This is a truly global company. But still it has enough opportunity in the global market.
It is really essential to analyse changes of thought in strategic management so as to evaluate Burger King's strategies. There are various approaches to strategic management which have been developed according to the nature of the strategic management task or according to the conditions when making any strategic decisions. The changes of thought are prescriptive, descriptive and configuration..
Mintzberg, Ahlstrand and Lampel in their book Strategic Safari, have explained managers about the innovative strategies and their evaluation and implementation. Each change describes the method through which the complex job of managing the organization could be dealt with. We are going to understand the Kotter's theory of handling change in organisation with respect to Burger King.
ESTABLISH A SENCE OF URGENCY-
Establish a sence of urgency focuses on strength, weakness, opportunity and threat which is a conceptual model. Formulation of strategy is the idea which when implemented may not work in reality. Another drawback of this change model is that before starting operation how an organisation can assess its strength and weakness.
This change model suggests that a few key strategies are formulated for any given industry to safeguard against existing and potential future competitors. Certain strategies are unique to a particular organization. (Joseph R. Matthews, 2005)
This change model is also work on the perception that there are a limited generic set of strategy, which can be implemented after analyzing the position of the industry, helping to identify the best strategy. But establish a sence of urgency has some limitation to deal with changing situation of business environment. This is only suitable for small organisation, which wants market power.(Ehap H, arun P, 2006)
CREATE A GUIDING COALITION-
Create a guiding coalition is the traditional model of change and is similar to establish a sence of urgency but the only difference is that this change model is formalized. It is also very much bureaucratic so the employee needs to follow this process mandatorily. The model was designed to cope with stable situation. For its bureaucratic characteristic, it is not flexible enough to handle unstable situation.
Burger King's follows and formulate its strategies. Since its takeover by Texas Pacific Group along with Bain Capital and Goldman Sachs Capital Partners in 2002 every aspect of its business is carefully undertaken. The business system is highly mechanistic and the working process is very standardised and formalised. Burger King introduces new items constantly and the managers are selected very carefully with a systematic training given to them. Extensive advertising and promotion are based on careful observation of changing consumer taste and behaviour. (Grant,2004)
This also follows centralised format with the chief executive being the head; but unlike the change of urgency and opposite from the guiding coalition, it rooted that the processes in the mysteries of intuition. That shifted strategies from precise designs, plans, or positions to vague visions or broad perspectives, to be seen, in a sense, often through symbol. (Mintzberg, 2002)
DEVELOPE A VISION AND A STRATEGY FOR THE SPECIFIC CHANGE-
Develope a vision and a strategy for the specific change is quite similar to design the change in any organization. The process is focused on CEO. The difference is it offers innovative and creative intuition in a visionary leader. This process is dependent on leader's ideas, ability, experience, vision etc.
This process of change model thought emphasises on the ability to understand people's mental processes and how reality is perceived. The strategy is formulated based on concept, maps, frames ad schemes. This strategy is not very practical as the process is based on people's mental perception and therefore strategy formulation is conceptual.
This also consider strategy as an emerging process. Strategists can be present everywhere in the company, and the formulation and implementation of strategy works together in this process. this says that strategies are adopted with the experience at the workplace.
Burger King implements its strategy following the development of a vision and a strategy for the specific change. With increased competition & market requirements it has different strategy for different regions. (Grant,2004)
Opposite to the vision which focuses upon self-interest and fragmentation, the developement focuses on common interest and integration. This approach instigates involvement of various groups and departments within the company and thus the strategy developed is the reflection of the corporate culture of the organization. (Morrison, 2002)
EMPOWER EMPLOYEES FOR BROAD-BASED ACTION-
The strategy formulation is seen to be a reactive process: a response to the challenges imposed by the external environment. Among its most noticeable theories is the "contingency theory", that considers what responses are expected of organizations that face particular environmental conditions, and "population ecology", writings that claim severe limits to strategic choice. (Mintzberg, Ahlstrand, Lampel, 2002)
Burger King adopts new product innovation strategy so as to compete with the other competitors in the fast food market and offer value for money meals to the customers.
The empowerment of employees for broad based action deals with two important aspects, configuration and transformation. Configuration is the state of the organisation and its surrounding contexts and transformation describes the strategy making process. Configuration element in this change tends to depend on the competitive and changing environment. When the organisation for some reason is not able to perform properly in its current configuration, transformation element is implemented. The critics of the configuration change says that the configurations advised makes the organisation prototypes and makes them to stop innovating which is the key to success, but still it helps and serves as a pathway or strategy to achieve the organisations goal.
Burger King has undertaken certain strategies to handle its future business scenario such as:
New Innovative products launch.
Value meal offers.
CONSOLIDATE GAINS AND PRODUCE MORE CHANGE-
To do business more effectively with greater efficiency in the competitive world and make a global existence it has to be complete customer oriented. Burger King needs to focus on its operations, starting from raw food material, franchisees to the selling point. Consumers taste and cultural behaviour should be studied intensively so as to provide better food and service worldwide and become a globally recognised organisation.
In today's corporate business environment where every business has to tackle various political, economical, social, technological challenges as well as competition from rival, a company has to design it strategies in such a way that it helps it to acquire maximum market shares. In case of Burger King, for it to develop a greater presence in the global market we must look at its consolidate gains and production of more changes which will enable it to better understand and develop good strategies.
This shows how the external opportunities and threats of the company's can serve as the company's internal strengths and weakness and how the weakness can become the strength. This is a good way to devise and create unconventional strategies that might not otherwise be considered. (wheelen and hunger, 2004)
Strong brand image.
High quality food
Innovative product launches.
Synchronisation of food service through out the globe
Good customer service
Value for money for customers
High market share
Adjusting local preferences
Comfortable sitting lounge
Free Toys for kids
Equal opportunity for employees
Franchising as a tool of growth
Corporate social responsibility
Dominant and long time player providing with learning and capacity to react to competitors and bargaining from suppliers.
Very bureaucratic organisation
Very mechanistic operation
American style of food
ANCHOR THE NEW CHANGE IN THE CULTURE-
When we make any strategy it is important to match strengths with opportunities, avoid threats and go around weakness unless these can be resolved quickly. It is also necessary that the objectives that we make are "SMART" in which
S = Specific, i.e. the objectives should not be vague, it should be focused.
M = Measurable, i.e. one could measure it, that weather the objective is meeting the purpose or not?
A = Achievable, i.e. the objective set could be attainable, it should not be such which Wouldn't be possible to achieve.
R = Realistic, i.e. the objectives should not be vague but realistic, which is achievable with the resources one have.
T = Time bound, i.e. the objectives should have time limits, there should be certain time framed for the organisation to achieve their goals.
There are opportunities for Burger King in the Asian market especially the subcontinent. In countries like India, Pakistan and Sri Lanka Burger King has not been able to build its existence, as in the rest of the world. Asian subcontinent especially the Indian economy and market is considered to be one of the fastest growing for these types of industry and there is no existence of Burger King there. The major strength that Burger King poses is that it undertakes expansion through franchising which serves as the best way to expand business globally as the cultural & political issues along with the capital expenditure reduces. Burger King has created a huge reputation and brand name for itself in the American subcontinent and has made their reputation count but still they have ample opportunities worldwide and they should focus on building their existence count elsewhere even.
Burger King faces stiff competition from its arch rival McDonalds, which has the maximum market share, so in order it to be more dominant in the market it should focus on improving its menu and at the same time maintain its standard of supplying high quality food healthy food. Burger King is doing enough to build its reputation by maintaining the needs of the society through charities as well as fulfilling the needs of the stakeholders but still in the robust fast food industry they should be more efficient in building its reputation over McDonalds which critics say is better than Burger King.
The best way to capitulate the market share Burger King should diversify its business operation strategy of only franchising to acquiring other fast food stores and develop its own working strength. A good example of a company which has grown through acquisition is Mittal Steel which is growing considerably worldwide through acquisition of small as well as large steel manufacturers. They have become the major steel players through this strategy and its ability to create value through product adjacencies has given it a boost in growing through acquisition with a repeatable pattern of value creation tools.
Managers do need to cope with the unstable business world and the ever changing business environment. To do so the strategy of making Burger King's weakness it strength the managers need to focus on customer relationship management and meet up with the changing customer taste and market requirements. It is not that easy to acquire companies in the same industry as well as to understand local culture and preferences quickly. It also requires an intensive research to acquire which local company to acquire or merge with. The managerial challenge includes creating a public awareness about its food. Therefore they should always focus the communication between the company, products and consumers. Managers need to develop a unique style of customer service which is the mantra in retailing because it's not only about providing high quality food but also to meet customers' requirements especially the Asian market where Burger King's existence is very low.
Burger king operates almost in 65 countries and even its food menu is almost same throughout everywhere but only some additional items include in different geographical area according to local preferences. Managers need to understand the cultural aspect of trading globally; people of different regions prefer different food. The better strategy is to provide people what they eat rather than making them eat what you want them to eat. Hence a better supply chain management system is required which will no doubt cut the cost internally and externally but also increase its market share as well.
EXTERNAL ENVIORNMENT ANALYSIS ACCORDANCE WITH THE CHANGE WITHIN THE ORGANISATION-
The industry has the following characteristics:-
The fast food restaurants industry includes about 225,000 outlets which produces revenues of approx. $120 billion. The major players are no doubt McDonald's, burger king, subway, taco bell and Panera Bread. There exist hundreds of high street corner shops as well. Thus it is an ever growing industry.
(Market research, 2007)
Capital Investment is even quiet high for the establishment of a retail outlet. Running capital is vital even.
Quality of food decides the future of the business.
The profit margin is low because of high competition.
Geographical Location and local culture should be considered and tackled properly.
Cleanliness is the major factor. Hygiene is always the key element.
Food along with some sort of free service always an added advantage.
The fast food industry consists of the following type of operators:
Big players like McDonald's, Burger king, KFC, Subway etc.
Local food restaurants.
High street corner shops.
Other food providers such as: Chinese food, Indian cuisine food, Italian food, ethnic food providers.
The analysis of the external macro-environment that affects all types of firms is the PEST analysis. P.E.S.T. is an acronym for the political, economic, social and technological factors of the external macro environment. These external factors are usually beyond the firm's control and sometimes interoperated as threats. Therefore 'pest' is an appropriate term for these factors.
Political & Legal:
Health and Safety Law is strict.
International standard of food is high
Nutrition standard will be high in future
Recycling of waste is mandatory
Environmental friendly production process.
Government terms on permission for business is tough
Trading policies are strict
Socio - cultural:
Consumers look for value for money and evaluate their spending.
Different types of food eating culture in different places
Increasing fast food consumers.
Consumer's attitude differs in different geographical area.
Media's views on Burger King's food
Buying access and trends of consumers
Ethnic and religious factors of consumers
Fashion and role model of the company
Corporate social responsibility shown by Burger King
Advertising and publicity by the company
Ethical issues undertaken by Burger King Management.
High Growth Rate in fast food industry.
High competition may reduce the profit margin
Global existence of Burger King may increase the sales.
Increment in operating cost including the Labour cost and employee salaries.
Fluctuation of price in raw food is high
Exchange rate fluctuation in different countries.
Innovation potential for better service
Better supply chain management
Technology development for quick service
High quality cooking equipments.
High technological involvement for market research
Easy access for customers at the customer service.
Global communication & control through technology (internet)
Upgrading capacity of technology change
POLITICAL & LEGAL
Health & Safety
Value for money
High growth rate
New Product Launch
Supply chain management
Figure1. PESTLE Framework
Although PESTLE analysis is a straight forward approach and cover all the major environmental factors that affect an organization but there are certain limitations of this analysis because it assumes that future will be like the past and may not be useful where there are high levels of uncertainty about the future changes in the environment. (Johnson & Scholes, 2000)
FIVE FORCE ANALYSIS-
Porter describes the competitive forces shaping an industry in his five forces model of industrial competition. The model has been one of the most widely used models in strategic management. By analysing the five forces, one can assess the forces driving competition in an industry and evaluates the odds of a firm successfully entering and competing in an industry. (Stahl, Grigsby, 1997)
Figure2. Porter's Five Forces Model
Threat of new entrants is low as the entry barriers are very high because of.
Huge capital requirements to start chain of retail outlets
Economies of scale allow the current players to provide service at lower cost.
Government regulations and access to fast food industry are complicated because of quality standard and hygiene.
Rivalry among existing firms is high because
Number of competitors is few in terms of market share.
Working capital requirement is very high.
Though Industry growth rate is high but the profit margin is low.
Enough opportunity is there to grow for current players
Threat of substitute products or services is high because of
Existence of high street corner fast food shops, which might provide food at cheaper rates due to low operating cost.
The free delivery service and other innovative ideas by the local shops pose a huge threat.
Bargaining power of buyers is high because of
Low switching cost as the consumers can swing to any other restaurants or supermarkets.
Plenty of alternate suppliers of alternative foods.
Buyers very sensitive to cost and quality of food hence look around for deals and packages for value for money.
Bargaining power of suppliers is moderate because of.
The raw material requirements for big outlets is quiet huge therefore self manufacturing is undertaken so as to reduce cost as well as bulk purchases reduces cost.
The limited availability of high street shops helps them to build a brand name as well.
In every country the wage of labour is govern by the local government and no single foreign company can force the local government to change minimum wage rate.
With the help of analysis mentioned above, one can evaluate how Burger King's Motto of "Have it your own way" made it American's leading fast food chain and how well it is delivering its strategies in comparison with its competitors.
Burger King has showed an extra ordinary growth in revenues and profitability due to its innovative ideas and low-cost production capability. Burger King recognized the importance of price sensitivity factor for the customers and laid the foundation of its success. It offers high quality food at lower price which any customer would expect.
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Retrieved on 4th december '09
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Market research, retrieved on 2nd december'09