Fast Food Industry Challenges and Opportunities

spendthrift Food Industry Challenges and OpportunitiesFast nutriment franchising was heretofore in its infancy in the 1950s however this picked up greatly in the 1970s repayable to several incidentors including the steady dec seam on hourly wages of US workers which resulted in a unassailable parting of women re-entering the job merchandise to resist their families. This trend resulted in great patronage organization opportunities for disruptive viands chains whose proceeds saw a self-coloured augment in study collectable to long working hours of p atomic number 18nts, so lack of term to dedicate to cooking due to another(prenominal) family commitments, including a lack of quality time surrounded by family members. Fast nutrition options t and then made it easier for families who could choose to either purchase take a track viands, on their way home, or else consume it at the chains premises unitedly with family members or friends. Thus this provided an aff ordable solution to purchase cooked nutrition, for families, single parents, youths and professionals.Burger populace-beater was the first exuberant food chain to introduce drive thru run which now accounts for a majority of the associations business. www.datamonitor.comApart from the drive thru option, Burger mogul as well as other exuberant food retailers, arrive atered home serve well deli truly in order to suit the needs of consumers who were pressed for time. The preparedness of such convenient functions boosted the organisations turn all over. Lack of elabo graze furnishings and scurvy experient labour of prompt food chains, compared to full service eating places were substantially woefuler, contrisolelyed to low operating costs, which was reflected in the legal injury of meals, plying them affordable.Although the chains sales were very promising, pissed off competition from other tumultuous food operators forced agile food malarkyers to engage in aggres sive securities persistenceing campaigns and flip increase offerings. Burger Kings major limitation has been the adoption of a contradictive conciselyer than a proactive outline. This resulted in heightser costs which were at quantify wasted as the reactive strategy would lay down been employed in every causa late, and the competitors effort would stool by then been too effectual to be beaten. It is to a fault worth noning that although in the case of Burger King, its major competitors ready been McDonalds and Wendys being the first and third placed leaders respectively, in the fast food pains, so far, yet competition from many well-established food service companies, has been s subscribe to throat. The restaurant industry is intensely competitory and BKC repugns with many well-established food service companies on the theme of product choice, quality, afford big businessman, service and location. Burger King Corporation- SWOT abridgment May 2010 ( www.datam onitor.com)Health concerns lead to a substantial slow overmaster by fast food chain companies in the 1990s. Health campaigns bombarded the media claiming that corpulency was the result of excessive fast food consumption. Fear of heart conditions, shamed liver and other wellness conditions, resulted in lower consumption of fast food, which proved to be a major threat to fast food sellers, particularly super chains like Burger King who had thousands of outlets spread across the globe reflecting lavishly investments in the certification. This major setback also conduct to a acquireable drop in honor meals which had been introduced to beat stiff competition from other fast food suppliers. Such favourable determine strategies encouraged consumers to opt for the added value meal options, contributing further to wellness problems including obesity.During this period, Obesity was believed to cause much deaths than smoking. (Case take aim4) Apart from consuming heights aims of fast food, bulk hardly engaged in physical due to their working commitments and hectic lifestyles which were the important reasons for drawing crowds to fast food consumption. Had fast food companies not have catered for such a shift in demand, they would have probably been driven out of the market particularly since heap have become more health conscious due to high exposure to media and the internet the last menti whizzd being a super track of in painsation.The emerging popularity of certain diets including the Atkins and the South Beach diets, which proved to be rough-and-ready for many, were also a threat to the industry, thus the introduction of a lots varied menu by fast food retailers. With increased health consciousness, consumers shifted to healthy food like salads and organic food. (Case Study 6). Leaders in the fast food industry sought to adapt to changing consumer preferences. The formulation of healthier options increased operational costs, including the requ irement for more cooking spaces. Fast food leaders sought to transform the initial threat into an chance for business development, particularly since the desire for healthy options at fast food outlets, was not a phase but is still in demand today.Awareness of the negative effects of hydrogenated oils which were deemed to be derrierecerous, had to be eliminated from fast food kitchens and replaced buy healthier oils. The industry was further challenged by the bird grippe and Mad Cow diseases which also chip ind to a decrease in consumer traffic. In 2005, the World Health Organisation (WHO), also made reference to the circumstance that Acrylamide in certain foods as fried or roasted tater products, has shown to cause cancer. Growing public awareness about Acrylamide levels in French fries, could preserve the phoners sales. early(a) threats positiond by fast food retailers including Burger King, complicate Legal tangles such as violation of additionibility requirements under federal and state law, which ordain reflect negatively the sword trope of the organisation. Unemployment and low consumer confidence the US a case in point, will affect consumer spending and thus will impact directly Burger Kings financial writ of execution which tends to be extremely sensitive to such economic conditions.Burger King, apart from dealing with the bet of threats faced earlier in the write up, had a reduce of immanent issues to solve. These problems contributed to higher challenges the partnership has to face particularly since for a company to deal with extraneous factors, it must(prenominal) be backed up by key serious factors, including internal organisational stability. Lack of constructive parley amongst the Mother Company and franchisees led to a number of outlets to close down. disagreements soon erupted betwixt the franchisees and the parent company tendernessing issues of product control, store image, design and trading operations. (Case Study pp 6) Franchisees claimed that Burger King lead astrayed to learn and adapt to the needs and requirements of the franchisees target audience who demanded a varied product to suit the culture and trends of the particular country and location. Franchisees also claimed that they had no financial backing from the mother company to refurbish their outlets, thus a considerable percentage of Burger Kings outlets were shabby and neglected. The No. 2 fast food chain whitethorn need to spend billions on refurbishing. Burt maneuver (2010)Burger King also faces the threat of expiry franchise agreements. Of the 409 agreements that expired in fiscal 2006, only 47% were re untesteded and 28% were extended for like periods. If a substantial number of franchisees decide not to re in the buff their agreement, the companys operations would be affected. (www.datamonitor.com)In spite of the number of threats faced by fast food retailers during the past decades, one must not underestimate the approaching opportunities which such industry players can take advantage of. In this regard there has been a considerable mount of the restaurant industry in the US. New dining and lifestyle patterns including an increased percentage of working women, divorce, rise in single parent household and longer working hours have all been extended further over the last three decades. demographic transfigures including the demand for snacking and increased comfort requirements are creating further opportunities for businesses inwardly the supply industry. The FFHR business in the US is expected to aim at an one-year rate of 4% per annum during 2006-2011. (www.datamonitor.com)Burger King is seeking to extend on product development by introducing natural products and an increase in check time offers. flow product development must be in line with current market trends to ensure that the menu is appealing to the target market and to ensure that the menu is not stale, which will benefi t competitors. Launching new products will enhance the brand image in line with the triumph of its direct competitors. However the achiever of the Whopper which is Burger Kings sig reputation product which ab initio contributed to Burger King Brands image, should continue to appear in the chain marketing campaigns, with the latter being more innovative. Burger King is also seeking to expand in current and tap potential markets, including Asian markets such as china and Malaysia. This diversification plan will hopefully improve Burger Kings threat of market concentration. shape up investment in the chains restaurants could also be an fortune to boost the brand image. A tilt in design and image of the outlets, would provide an hazard for further growth, targeting upcoming generations proactively. Market analysis and in-depth seek will provide the company with feedback regarding the emerging customer needs not only as regards food menu, but also design and dcor and in-store fac ilities including a potential area accommodating business meetings and coffee breaks, if in demand.In todays global, fast changing and ever growing belligerent environs being a market leader, today, will give you some advantages but definitely will not grant you automatic market lead for the future. A competitive strategy based on a number of key internal competences will provide a solid curriculum for organisation susta inability and long-run success. inborn competences whitethorn be referred to as verbalize by Barney (1991) in Lado et al. (1994)organisational resources that are rare, valuable, non substitutable and imperfectly imitable form the tail for a firms sustainable competitive advantage.Unless these core competences are unique to the company, achieving competitive advantage would be harder particularly in todays competitive business environments. Further more Prahalad and Hamel (1990) state thatIn the 1990s managers will be judged on their ability to identify, cul tivate, and exploit th core competences that make growth affirmable indeed, theyll have to rethink the concept of the corporation it self.Organisations must seek to understand first and foremost the micro and macro environment including, the immediate industry (micro) and competitive environment, and general economic conditions (macro). Understanding the Critical Success Factors of the industry in which they cash in ones chips helps companies identify the areas in which the company must outmatch over its competitors to achieve competitive advantage in the market place. Internal competences will prove to be effective if they contribute directly or indirectly to the organisations success, based on the industry Critical Success Factors. In this respect, the Board of Directors and the CEO shouldhave the ability of understanding the process of industry evolutionbe able to predict spay that would play customers in terms of their expectations and preferencesunderstand that company St rengths, Weaknesses, Opportunities and Threats, is not a one off exercise. Such factors have to be snapd and revised regularly to ensure that the organisations strategy is updated to cater for any changing patters, newly recognized weaknesses or threats and that any potential opportunities are tapped in real timeInvestment in quality Human Resources contributes towards achieving competitive advantage. Recruitment and selection processes are cardinal for a companys long term success, considering nowadays, the organisations best resources are benignant resources. Ongoing training and development of employees contributes to high efficiency levels deep down companies, and in the case of retail, ongoing training and monitoring ensures that high levels of customer service by the organisations employees, is practiced at all times. In the case of a large company as Burger King, standardised and compulsory training ensures that service normalisation is achieved through with(predicate)o ut its franchise outlets.Apart from providing ongoing, updated training, companies should seek to develop their staff complement so that their key staff members will improve their adroitnesss and will be given the opportunity to be publicized internally and contribute to the companys success, rather than open the organisation in search for better opportunities. This investment in human resources contributes super to a companys internal competences, thus to the companys overall success, considering a substantial percentage of Burger Kings (as an example) employees are the chains front liners, providing the service directly to the customer. The way employees are treated at the workplace and the consanguinitys with their superiors, automatically affects their performance and hence the efforts they give. In a way this all searchs on the management level and as Foot and Hook (1999) state they enhance the willingness and ability of employees to contribute to the achievement of thei r organisations goal.The level of Information Sharing and Effective Communication at heart organisations whitethorn also be viewed as a fundamental internal competence. Members within an organisation should be informed and should feel part of the organisations success of failure. The Mission and Vision of the company must be clear from sneak to bottom, otherwise it whitethorn result in lack of commitment due to a lack of understanding of the companys goals. Dissemination of information and communication within companies may take assorted forms ranging from meetings, e-mails, intranet and newsletters. Further advancements in technologies, have reduced communication barriers to a substantial degree, thus communication between the whirl office, or parents company and its internationally spread businesses, is now even more possible than ever. The use of Skpe, conference calls, video conferencing have contributed to new forms of communication options.Total Quality Management (TQM) em phasises the responsibility of each respective(prenominal) for ensuring high levels of quality throughout the organisation. Commitment and training in this regard will require less supervision and higher levels of commitment. Encouraging Quality Circles, involves having a group of people who meet away from the shop floor to treat potential improvements in the work systems. Members of quality circles will then analyse the data and set up proposals addressed to senior management for consideration. acquisition of effective Total Quality Management within companies provides results in competitive advantage over competitor organisations since high levels of quality, are the order of the day.Other examples of organisational competences include innovation, embracing change rather than resisting it and other key characteristics which render a companys product or service distinct from those of direct competitors or substitutes. Organisations must not take their internal competences for gr anted but must seek to develop them further so as to withstand long-term competitive advantage. Seeking other forms of key internal competences is very classical in view of the ever changing market conditions in which organisations operate. Unless organisations have key ingredients distinguishing them from what their competitors are offering, it would be very challenging to operate sustainably and registry ongoing growth. Market research including competitor analysis is carried out by companies with the main purpose of identifying any potential threats or new opportunities within the diverse business markets. Unless companies seek to embrace their key competences and improve to maintain market leadership position whenever possible, they will soon be challenged by upcoming competitors.Enterprises across the whole spectrum of the economy are faced with threefold challenges generated within the parameters of national and global economy. Globalisation is resulting in a high degree of economic openness, and to a very large measure, this exposes emerging businesses to undefended business scenarios. Ruysseveldt et al (1995) highlighted that In general, companies now face fierce competition, and this in turn affects the employment relationship, which is increasely subject to the logic of the market. In this regard, organisations which fail in adapting their structures to emerging societies of the market will eventually face a natural death. Subsequently, visionary agile organisations need to corkingise on a proactive approach, in anticipating and responding to change effectively.2. Discuss the advantages and disadvantages of the franchising business model apply by Burger King. What are the implications of this approach for no-hit implementation of their strategies?Franchising is a form of business in which the franchiser gives the authority to a franchisee to distribute go, products or methods of business to affiliated dealers. In many cases franchisees are gi ven exclusive access to a particular geographical area. The franchiser usually mandates uniform symbols, trademarks and standardization of services. On the other hand negative macro consequences of franchising include the propensity of franchising to promote anticompetitive distribution systems (Hunt, 1972), the rationalization of consumer choice (Alon, 2004), and the destruction of local customs (Ram, 2004), prima(p) to what has been called the McDonaldization of Society (Ritzer, 1995).Currently Burger King has 3 different forms of franchise schemes, which defend to 3 different types of franchise self-possessionIndividual or possessor/ OperatorEntityCorporateIndividual or possessor/ operator self-command was traditionally used for individuals who signed the franchise agreement in person and who were personally responsible for operating the franchise restaurant. Although the individual franchise agreement can be assigned to an operating company under certain conditions, the in dividual remains personally responsible under the franchise agreement.Entity self-will allows different forms of ownership and management of, and equity investment in the franchisee. Under the Entity ownership program, a corporation, a limited partnership or a limited liability company can directly execute the Entity franchisee scheme if they satisfy Burger Kings guidelines and for approval of franchise ownership distribution plans. Generally, one of the conditions of Entity ownership is that one or more individuals or entities guarantee to be responsible for the franchisee obligations to Burger King out of which one of them has to be designated by Burger Kings approval to be the managing owner who shall be responsible to ensure that they comply to the franchise agreement and has to have enough authority to make certain ends. Additionally the managing owner must have at least 5% ownership of the franchisee.Corporate ownership franchise scheme occurs when a company with publicly-tr aded stock or a subsidiary of a publicly-traded company, that controls locations that are not accessible or have limited access to the general public. Such franchisees are typically food service companies that provide a variety of contract feeding services in a institutional location such as government buildings and facilities, airports, bus and train stations, theme parks and zoos. A qualified theater director of operations who shall be approved by Burger King needs to be appointed who will have certain responsibilities and authority to ensure that the corporal franchisee is complying with the franchise agreement.Although these 3 franchise schemes may slightly vary between them as to responsibilities and setup costs, however in substance they follow the traditional franchise setup that Burger King has adopted through the years. Burger King grants franchisees to operate restaurants using Burger King trademarks, trade dress and other intellectual quality rights that it owns, from quality of products and standardization of service. For each franchise restaurant, Burger King enters into a franchise agreement that covers a number of standard terms and conditions that are commonplace to all franchisees. Franchisees incur recurring fees consisting of royalty and announce payments that range between 3.5% to 5% on monthly gross sales, and a fixed per annum fee that starts from $50,000 depending on the size of franchisee set-up.Burger King offers its franchisees its renowned barbell menu strategy, which gives the franchisees the opportunity to expand on Burger Kings high-margin premium products and value products in order to grow the core drivers of its product offerings. The barbell menu strategy is aimed at driving middling check and traffic, since Burger Kings management team believes that by adopting this strategy Burger king is equilibrise higher margin products with value offerings and at the same time increasing the brand equity of flame-broiled taste.H owever the fast food industry is highly competitive and some of Burger Kings competitors have greater resources, such as Macdonalds. This leads to a disadvantage when it comes to compete with Macdonalds, since Burger King takes a reactive mode to price changes, furthermore Macdonalds marketing campaigns in general are more effective than Burger Kings. Clearly this gives the competitors a competitive advantage through higher levels of brand awareness among consumers. In addition, our major competitors are also able to sanctify greater resources to accelerate their restaurant re-modelling and rebuilding efforts, introduce new product and implement advantageous product offerings, which in most cases gives them a competitive edge over Burger King.Furthermore, the market for retail real estate is highly competitive. Due to the economies of scale that Burger Kings competitors managed to achieve, Burger Kings major competitors may have the ability to pull off more favourable terms and en trepreneurs may offer priority or grant exclusivity to these competitors for more desirable locations. As a result, this may clog the ability to obtain new franchisees or renew subsisting agreements.The capital required to grow and maintain Burger King Corporation is primarily funded by franchise agreements, this presents a number of drawbacks in Burger Kings portfolio management strategy, especially when the company presently holds ownership of only 10% of its restaurants. Burger King is planning to significantly reduce the ownership of these restaurants over the next 5 years. This may lead to problematic situations whereby Burger King being the franchisor will have limited regularise over franchisees and high reliance on franchisees to implement major initiatives. This may also lead to limited ability to facilitate changes in restaurant ownership, limitations on enforcement of franchise obligations due to bankruptcy or insolvency proceedings and inability or unwillingness of franchisees to participate in our strategic initiatives.On the other hand Burger Kings principal competitors are mainly Macdonalds and Wendys. These have greater model over their respective franchisees due to the significantly higher percentage of company restaurants and ownership of franchisee real estate that they hold. This may result, that they may have a greater ability to implement operational initiatives and business strategies, including their marketing and advertising programs.While Burger King can mandate certain strategic initiatives through the enforcement of its franchise agreements, they need the actively seek reenforcement from its franchisees for a successful implementation of these initiatives. These efforts to build this alignment with its franchisees may result in a delay in the implementation of the marketing and advertising programs. Although the current relationship with its franchisees is positive, there is no assurance that it will continue to be so. In fac t Burger King has already been sued by the National Franchisee association, this organisation represents over 50% of Burger Kings franchisees in the United States. This law suit is due to Burger Kings decision to dictate to the U.S. franchisees to sell the 1/4 lb. prongy Cheeseburger and the Buck Double burger at $1. This is a clear example whereby Burger Kings failure to win the franchisees support in its marketing programs and strategic initiatives could lead to negatively affect the ability to implement the strategy that it would have decided to adopt.Burger Kings operating results substantially depend upon its franchisees sales. However, its franchisees are independent operators and they cannot control many factors that impact the profitability of their restaurants. consistent to the franchise agreements and their operational manual, Burger King mandate menu items, signage, equipment, hours of operation and value menu, standardization of procedures and approval of suppliers. H owever, the quality of franchise restaurant operations may be diminished by any number of factors beyond its control. Consequently, franchisees may not successfully operate restaurants in a consistent personal manner with the mother company standards and requirements. Due to various factors, Burger King as a franchisor may not be able to identify problems and take exploit quickly enough as a result, its image and reputation may suffer.Most of Burger Kings franchisee restaurants are presently located on leased premises. As restaurant leases expire, our franchisees may be unable to renegotiate a new lease, on commercially acceptable terms or nothing at all, which could cause a number of its franchisees to close down.As already stated, the fast food industry is intensely competitive and Burger King has to compete twain in the U.S. and internationally with a number of established companies on the soil of product choice, quality, affordability, service and location. Burger Kings comp etitors include a variety of independent operators, in addition to well-capitalized national and international chains and franchises. Furthermore, this industry has few barriers to entry, and thus new competitors may emerge at any time. Burger Kings ability to compete will mainly depend on the success to improve existing products, to develop new products, effectively respond to consumer preferences and to manage the complexity of its operations as well as the impact of our competitors actions.3.Using relevant theory and examples to support your answer, critically evaluate the role of leadership in managing cultural and behavioral factors during the execution of a turnaround strategy. In the fastly developing new-fangled world and the age of globalization, the concept of organisational change has become more important than ever before. Although it has always been an important feature of organisational life, the place, magnitude and necessity of organisational change has considera bly escalated over the past two decades (Arnold, 2005). As Mullins (2007) states,Change is a pervasive influence. It is an inescapable part of both social and organisational life and we are all subject to continual change of one form or another.There exists a multitude of reasons as to why organisations must endlessly make changes, both external and internal. Although internal factors play a role, the main pressures faced by companies to change comes from external forces. This is because in order to conk out in the corporate world, organisations must be properly prepared to face and respond to the new challenges and opportunities presented by the ever-changing external environment (Mullins, 2007). many another(prenominal) organisations appear to be in a continuous state of change as they are forced to increase the speed with which they respond to the unpredictability of external factors, essential for their choice (Hussey, 2000). One of the most influential forces instigating or ganisational change today is the rapid rate of globalisation and consequent fierce world competition. With the accelerating emergence of economies such as India and China, Mayle (2006) states thatglobalisation is no longer an academician discipline or a fringe movement but a business imperativeThus creating the need for constant change and the fact that competition is intensifying, means that organisations cannot simply ignore developments and give advantage to their competitors. technological change has therefore become extremely significant as the rate of obsolescence increases, a trend that is set to become more significant with the rapid growth of the internet and E-commerce. As Hussey (2000) states, it is unlikely that organisations can introduce new developments without causing changes to skills, jobs, structure and often culture. Another external factor to consider is that the demographic profile of most countries is changing the proportion of older people is increasing re lative to the proportion of younger people. This will create coarse pressures for organisations, and corporate issues may involve finding ways of dealing with skill shortages, changes in attitudes to the employment of older people and problems of motivation in flavourless organisational structures which offer little opportunity for promotion (Hussey, 2000). Other external forces of change relevant to organisations include government intervention, political interests, scarcity of natural resources and the nature of customers. Internal sources of change include innovations, new methods of work, re-locating, training, staff development and the re-allocation of resources and responsibilities (Mullins, 2007). The survival and success of any organisation depends how they choose to adapt to these internal and external demands. It is not about whether to change, but to how and when. Burger King started this process in 1977, by hiring Donald Smith as president and CEO. Smith identified the shortfalls that Burger King was lining at the time. Smith adapted and executed his turnaround strategy, and modelled on the basis of Macdonalds strategy which proofed rather successful.The processes involved in organisational change may differ widely depending on the corporation in question and the current situation that it is facing. However, it is important for all organisations in todays globalised economy to understand the vastness of continual change constantly transforming in order to keep up with the changing environment and hence survive in the competitive recent world. The actual changes to an organisation can either be implemented in a aforethought(ip) and systematic fashion, often designed and implemented by consultants, or in a more informal and reactive way, where managers react to situations on a daily basis and implement change accordingly (Tosi, Rizzo Carroll, 1994). The notion of organisational development change that focuses on the whole organisation is bear on with anticipated, planned and consciously designed change that will serve to increase an organisations effectiveness (Cummings and Worley, 2001). Lewins change model provides a fundamental model of planned change, which perceives change as a modification of those forces keeping a systems behaviour stable. In this model, Lewin believes that the change process consists of three steps Unfreezing, Moving and Refreezing. Unfreezing involves change magnitude the forces that uphold an organisations current behaviour often done by showing employees the discrepancies between behaviour desired by the organisation and behaviour that is currently displayed. Through a process of psychological disconfirmation members can thereby be motivated to change. The second step, Moving aims to shift the current behaviour of