Burger King's International Expansion Strategy Analyzed

Overview of Burger King's Business Model

Burger King went public in 2003 after years of private ownership and currently operates 12,000 stores in 74 countries (Daniels, Radebaugh & Sullivan, 2009). Burger King's core competency is making flame-broiled hamburgers to order, which is reflected by its slogan "Have it Your Way" (Daniels et al., 2009). The company uses innovative advertising strategies to differentiate itself from the competition by emphasizing its flame-broiled method of cooking hamburgers (Daniels et al., 2009).

Even though hamburgers are the main menu item, Burger King has successfully experimented with other foods, including most recently pork ribs, which were a significant success (Ozersky, 2010). This demonstrates that the company is capable of expanding on its core competency, which is important for sustained international growth.

The Case for International Expansion

The bulk of Burger King's restaurants are located in the U.S. and Canada, which account for 69% of its revenue (Daniels et al., 2009). Burger King has not pursued international growth to the same degree as its competitors — a strategy that should change, given that the U.S. is experiencing slower growth, a saturated fast food market, and an economic recession.

Countries such as Brazil and China are high-growth markets with an expanding middle class, making them desirable targets for international expansion. Diversified companies are better positioned to handle domestic recessions by taking advantage of growth opportunities in international markets.

Burger King's Brazil Value Chain Model

International expansion had not been a major priority for Burger King until recently. The company has since perfected its strategy for entering new markets using the model it created in Brazil (Daniels et al., 2009). Burger King's successful value chain in Brazil includes building infrastructure prior to opening restaurants, developing a local office and management team, focusing on major cities with established shopping mall locations, and supporting the continuous development of local suppliers (Daniels et al., 2009).

The development of the local supply chain is Burger King's most important value chain activity, because the ability to source local supplies greatly reduces costs for local franchisees, making investment in the business more attractive. The strategy Burger King created for the Brazilian market is also the same one it has applied to its entry into Russia (Daniels et al., 2009).

Entry into Russia and Eastern Europe

On January 21, 2010, Burger King opened its first restaurant in Russia as part of its push to increase global market share (Burger King, 2010). In the five years prior, Burger King had expanded its presence throughout Central and Eastern Europe, entering markets in Poland, the Czech Republic, Hungary, Bulgaria, and Romania (Burger King, 2010).

Burger King has had the advantage of learning from the failures and difficulties experienced by other franchises in their international ventures by waiting before entering foreign markets. However, this patience has also meant missing the opportunity to be first into those markets (Daniels et al., 2009). McDonald's entered Russia in 1990 and now operates over 900 restaurants in the country, making it formidable competition in the Russian market (Murphy, 2010). The risks of being the first mover in a new market are considerable; however, the benefit of becoming the established name for a given product is often worth that risk.

Competing with McDonald's and Local Businesses Abroad

One of the biggest challenges for franchises entering a new market is learning the customs and tastes of local consumers and adapting the standard menu accordingly (Murphy, 2010). Another major challenge for Burger King is competing with McDonald's in foreign markets, where McDonald's benefits from established brand recognition, developed supply chains, and economies of scale that allow it to attract customers with lower prices.

Burger King may have its work cut out for it when competing with McDonald's abroad, but it will likely hold certain advantages when competing against local food establishments. Burger King's franchisees benefit from an established business plan and standardized procedures, national advertising, brand recognition, financial backing, and developed supply chains. The disadvantages of competing with local businesses are that local operators typically know their customers better, have an established customer base, and may be more adaptable in catering to local tastes through menu adjustments.

References

Burger King. (2010, January 21). First Burger King restaurant opens in Russia. Retrieved from http://investor.bk.com/phoenix.zhtml?c=87140&p=irol-newsArticle&ID=1377824&highlight=

Daniels, J. D., Radebaugh, L. H., & Sullivan, D. P. (2009). International business: Environments and operations (12th ed.). Pearson Prentice Hall.

Murphy, K. (2010). International franchising strategy. Retrieved from

Ozersky, J. (2010, July 6). Burger King on the bone: A rib success story. Time. Retrieved from http://www.time.com/time/nation/article/0,8599,2001661,00.html