Burger King's Global Expansion Strategy and Operations

Introduction

Having perfected the relatively complex process of make-to-order, precisely cooked hamburgers tailored to customers' specific requirements, Burger King established itself as a leader in the Quick Serve Restaurant (QSR) industry in the North American market. The company's commitment to letting consumers "have it their way" placed Burger King ahead of the mass customization trends now prevalent throughout many industries operating profitably today (Daniels, Radebaugh, & Sullivan, 2011). This strategy of mass customization is known for its exceptionally high percentage of variable costs and unpredictability of quality levels, due to the wide variation of processes involved in food preparation and service delivery (Taylor & Lyon, 1995).

Despite these significant obstacles to making mass customization work in the fast food industry, Burger King has achieved a high level of process optimization that continues to keep operating costs low and performance levels above the industry average (Terry & Forrest, 2008). The mastery of this core set of processes has also given Burger King a defensible competitive advantage in one of the most competitive industries globally (Daniels, Radebaugh, & Sullivan, 2011).

A closer analysis of this core strength reveals that deep integration several layers back in the supply chain is what makes flexibility in customizing customer responses possible. Burger King maintains one of the most diverse and well-integrated supply chains in the industry, incorporating quality management and periodic audits of delivery schedules and profitability performance (Terry & Forrest, 2008). This level of insight into supply chain performance has also given the company exceptional control over how it expands regionally and globally.

Unlike other QSR competitors, Burger King has concentrated on a holistic approach to managing its value chain at the supplier level. By relying on supplier qualification standards and processes to ensure consistent product performance on the one hand, and maintaining agility in responding to market needs on the other, Burger King has secured a significant competitive advantage. Control over product quality to the supplier level, combined with greater agility in managing growth, has made Burger King more adept at managing global expansion efforts, as evidenced by its success in Latin America (Daniels, Radebaugh, & Sullivan, 2011).

Burger King is concentrating its global expansion efforts in nations with cultures comparable to those where it has already succeeded in the United States. With its headquarters in Miami, Florida serving as a model, Burger King seeks out Latin American nations with demographic and psychographic profiles similar to those of its home city. Analysis of the case makes clear that Burger King has extensive expertise fulfilling the expectations of consumers in Latin American nations for fast food. Following this framework for global expansion, it is not surprising that Burger King initially chose to expand into a series of smaller Caribbean nations already familiar to the company (Daniels, Radebaugh, & Sullivan, 2011).

Burger King's Competitive Strengths and Supply Chain

Based in Miami, Burger King executives, planners, and managers possess a depth of insight into these smaller yet highly lucrative markets that larger, more diverse competitors — including McDonald's — cannot easily match. From this standpoint, Burger King holds a potent competitive differentiator in the depth of its local market intelligence, an advantage over larger and less focused competitors that tend to pursue only the biggest markets that are easiest to quantify and research (Daniels, Radebaugh, & Sullivan, 2011). While these smaller nations do not offer the exponentially higher sales growth potential of the high-profile BRIC markets — Brazil, Russia, India, and China — Burger King has the potential to establish highly profitable and stable operations within them.

Burger King has been able to learn a great deal about these smaller Caribbean nations by operating locations in the neighborhoods and suburbs of Miami where immigrants from those countries have settled. In addition, a high percentage of Caribbean visitors travel to Miami on vacation, and over time Burger King has learned what their specific preferences, wants, and needs are. As the case indicates, a low-price menu initially attracts tourists from Caribbean nations visiting Miami, and the flexibility to have burgers cooked exactly as desired — alongside ingredient quality — builds loyalty. Any QSR business could achieve a comparable level of success by concentrating on supply chain management and cost control through mass customization strategies (Taylor & Lyon, 1995).

What distinguishes Burger King in this regard is its deliberate effort to adopt many of the cultural perceptions, values, and needs of these consumers. This commitment to meeting and exceeding expectations pervades how, where, and what Burger King sources for supplies; how it produces meals; and how it manages customer service decisions. All of these attributes and elements of the customer experience contribute to Burger King's sustained success over the long term.

The decisions Burger King has made regarding regional and global expansion can also be analyzed using the Hofstede Model of Cultural Dimensions to gain greater insight into how the company successfully selects specific markets (Hofstede & McCrae, 2004). The model was developed by Dr. Hofstede while working at IBM, where he was tasked with providing senior management greater insight into cultural variation in order to reduce culture shock as the company expanded rapidly on a global scale. After extensive cultural, empirically derived, and ethnographic research, Dr. Hofstede created the Cultural Dimensions Model, which is today used by well over eight hundred organizations that rely on global operations as part of their business model (Hofstede & McCrae, 2004). Dr. Hofstede completed the initial analysis across fifty nations and has continued to refine the framework across Asian nations that have rapidly become economic powers in the global economy.

Cultural Intelligence and Latin American Expansion

Analyzing the cultural congruence between Caribbean and Latin American nations and their influence on Miami, it is clear that it is inherently easier — and less risky — for Burger King to expand into these smaller nations than to face the high levels of uncertainty involved in entering BRIC markets. As the case supports analytically, it is a far more efficient strategy to expand into the smaller Caribbean nations than to compete in unfamiliar BRIC markets. Paradoxically, choosing to expand into smaller nations is both more potentially profitable and less risky than competing against globally entrenched rivals who focus on BRIC nations to the exclusion of all others. Basing expansion decisions on cultural congruence rather than the "big bang" numbers represented by BRIC market figures also makes brand awareness and market share growth far more achievable than attempting to penetrate an entirely new segment.

The high level of cultural congruency also leads to greater trust among new customers in these nations. Combining trust with consistency in planning and executing expansion strategies, Burger King can establish a leadership position relatively quickly, as consumers recognize both the cultural congruency and the trustworthy character of the company (Pizanti & Lerner, 2003).

In contrast to its larger competitors, which invest heavily in high-potential markets and pursue aggressive expansion strategies like those of McDonald's, Burger King chooses smaller markets where it can establish a leadership position quickly. Burger King aims to dominate a given nation's quick service restaurant, convenience, and fast food markets far faster than its larger and slower-moving competitors (Daniels, Radebaugh, & Sullivan, 2011). While this speed and agility in entering new markets represents a clear advantage in time-to-market and in capturing market share ahead of larger rivals, it places an exceptionally heavy responsibility on supply chain operations to identify and source from local suppliers.

Although Burger King demonstrates remarkable agility in executing quickly in foreign nations, a shortcoming of this rapid expansion strategy is the difficulty of securing high-traffic locations in popular areas of major cities. As the case indicates, Burger King uses a strategy of locating in regional, suburban, and urban shopping malls, where pre-teen and teenage consumers — one of the company's most valuable customer segments — tend to congregate. Burger King has found that eating out together is a major social event for children and teenagers, and has worked to create a memorable experience around its QSR locations in each country it operates in (Daniels, Radebaugh, & Sullivan, 2011).

Conclusion and Strategic Recommendations

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