3.2.1.3 Purchase behaviour
Differences in purchase behaviour can be based on the time of purchase relative to the launch of the product, or on patterns of purchase. The introduction of Burger king in India is targeted to people that can be positive, indifferent or even hostile to the product for various reasons. The readiness of the people to buy the product can vary. Special offers and advertisement can really enhance this trend.
3.2.1.4 Usage
Customers can also be segmented on the basis of: heavy users, light users and non users of a product. A very clever strategy that suits our case here, as many writers suggest, is to seek to attract the heavy users rather than several light users, and then to vary our promotional efforts accordingly. This is because the profiling of heavy users allows the group to receive most marketing attention (particularly promotion efforts) on the assumption that creating brand loyalty among these people will pay “heavy dividends”. Sometimes the 80:20 rule applies where about 80% of a product sales come from 20% of its customers (Beer market).
3.2.1.5 Perceptions, Beliefs and Values
This is classified as a variable behaviour because perceptions, beliefs and values are often strongly linked to behaviour. Consumers are grouped by identifying these people who view the products in a market, in a similar way and have similar beliefs. Value-based segmentation is based on the principles and standards that people use to judge what is important in life. Burger King for example is well known globally and the customers expect to find high quality food in all their branches worldwide. Brands like Burger King, give you a promise that wherever you enter the premises, the product will be of the same quality standards. If a brand fails to deliver equal service and product standards in different countries, then it fails as a Brand therefore letting its customers down.
3.2.2 Psychographic segmentation
This involves grouping people according to their lifestyle, personality and characteristics. Burger King is generally targeted to people on the move, people with low income, students, kids, and individuals with cheap lifestyle preferences.
3.2.2.1 Lifestyle
Lifestyle segmentation attempts to group people according to their way of living as reflected in their activities, interests and opinions.
3.2.2.2 Personality
Personality segmentation involves segmentation by the personality of consumers. Personality and lifestyle segmentation is more likely to work, when brand choice is a reflection of self-expression. For instance a young teenager that expresses his or her rebelliousness by using a Levi’s garment.
3.2.3 Profile segmentation
It allows consumer groups to be classified in such a way that they can be reached by the communications media (e.g. advertising, mail). Profile segmentation is divided in three sub-categories: Demographic, Socio-economic and Geographic.
3.2.3.1 Demographic Variables
Different tastes between the male and female population as well as the different preferences for each specific age, pushed the marketers to create segments depending on the age of the consumers (children cereals, computer games, sweets and kids menus in fast food retailers), and the gender of the consumers (magazines, clothing, hairdressing, cosmetics).
Another important Demographic variable is Life-cycle. Disposal income and purchase requirements may vary according to life cycle stage (e.g. young single v. married with two children). Consumer durable purchases may be dependent on the segment of childless young couples as they are a prime targeted market for furnishings and appliances for setting up their homes.
3.2.3.2 Socio-economic Variables
Include social class, terminal-education age, and income. Social class is measured in varying ways across Europe. Like the demographic variable previously discussed, social class has the advantage of being fairly easy to measure and is used in media readership and viewership profiles
3.2.3.3 Geographic Variables
Geographic variables define customers according to their location. Burger King is a global fast food retailer, and deals with Geographic segmentation everyday. People in many countries have different eating habits and that’s why Burger King adjusts its menus in each country it expands in. For instance, to satisfy the vegetarians, they produced vegetarian burgers and meals and in Israel they have two types of menus, kosher and non-kosher. They also introduced meals in the UK, which were cooked with Indian recipes and Chinese recipes in order to attract the large amount of foreigners especially from India, Pakistan and Asia, which live in the UK.
3.3 Future trends in segmenting a market
Research shows that people are still eating out, but they are spending less. Value for money and an added-value experience are therefore important. Eating cheap is about to take on fresh meaning. Burger King announced that it plans to introduce 11 menu items -- from burgers to salads -- that will sell for 99 cents each, in the US. Meanwhile, McDonald's is gearing up to introduce over the next two months a similar $1 menu, including its Big 'N' Tasty burger and McChicken sandwiches. The new trend in the Fast Food Market, is to segment their products into cheaper meals. People also want more and more products on the menus, and especially products that suit their needs exactly. So the major fast-food retailers will have to pay attention into Micro segmentation. Micro segmentation is a marketing strategy that narrows and refines a market, into ever-smaller segments sharing many common traits. This helps create tightly focused direct marketing messages to smaller groups of would-be customers. So in order to satisfy them, Burger King and the other Fast food retailers are focusing their efforts to present products in their menus that meet their customers’ needs, in every country they operate. Adjustments in their menu and burger names or even the products that they use will be seen more often. Furthermore, the use of the internet is beneficial and a very useful tool to accomplish micro segmentation (pizza hut’s web site which offers the chance to create and order your own pizza using a specific programme). Lastly, the growth of healthy eating meals and organic food, which is becoming the trend in grocery shopping will affect the fast food retailers and try to satisfy the new growing segment in the market.
3.4 In the second part of this report, there will be an analysis of issues that should be taken into account if there was a possibility of expansion in a foreign market.
They are divided into:
- EXTERNAL (PEST analysis and micro environmental issues)
b) INTRNAL (skills and resources)
Under external factors for the specific company we will examine
∙ Expansion possibilities
∙ Economic and political influence
∙ Socio cultural differences
∙ Competition
Under Internal factors we will be examining
∙ Presentation of premises
∙ Costs of advertising
∙ Product line
Furthermore, we will apply the above factors in the chosen company which is Burger King, and illustrate the research with some graphs.
In case of a domestic market becoming saturated, it would be recommendable to expand in other countries. It can be argued, that significant factors such as the financial status of the company, volatile currencies or possible product adjustments to the requirements of the customers abroad, might act as a put off towards this proposal. However, penetrating a segment of a foreign market that has otherwise been underserved, could prove to be advantageous against competitor firms.
In taking up this decision, there are a number of variables that should be taken into account and it would be of paramount significance to regard carefully the opportunities and threats. Consequently, investing abroad would entail thorough research of potential alterations and analysis of any possible circumstances that could impact the company.
Which country should the expansion take place in? Undoubtedly the decision should go through a number of ‘filters’ before reaching the final stage.
3.5 EXTERNAL/ PEST analysis
3.5.1 Political and legal influences
Another essential issue, is the attitude that the government will adopt towards foreign investment in the specific country. In general rule a government’s good intentions towards a company will be illustrated by its willingness to cooperate by offering incentives.
3.5.2 Economic influences
A country’s infrastructure and economic status will act as either a deterrent or a trigger for an organisation to expand in it. In addition to that, the nature of the service or product offered, can also sway the indicator of success. This is to say that by enlarge, a wealthy an d technologically advanced country would choose technology orientated products in contrast to poorer countries that have agriculture as a basic economic provider and would choose rakes and tractors.
3.5.3 Socio cultural differences
Socio-cultural differences might encourage communication problems between the home and the host country due to the lack of tolerance from the former towards the latter or vice versa. A cultural difference might consist in that the individuals in a particular country for example, consume a vast amount of vegetables as opposed to meat due to their religion. Therefore it would be reasonable to presume that a meat production based company will not benefit.
3.5.4 Technological issues
The company has to ensure that they are technologically competent to proceed with the decision of expanding overseas.
3.6 Micro environmental issues
3.6.1 Market size
A segment of the market that is gradually developing and widening will raise demand in all the products and services. It will be highly profitable for a Computer firm if through research it came across to specific data which illustrates, that a country with a developing economy has not enough supply for computers to meet rising demand. A stable or decreasing market however, would only result in falling demand.
3.6.2 Country Attractiveness – Company Strength Matrix
The Harrell & Kiefer matrix is a superb tool for market scanning. Various parameters can be analysed in conjunction with “Country Attractiveness” such as “Competitive Strength. (Daniels & Radebaugh). This matrix highlights the fit of a company’s product to the country. In the top left corner of the matrix country attractiveness is the highest and the company has the competitive capabilities to exploit the opportunities (Appendix 5, Figure 6)
3.6.3 Competition
Competition in the local market is another essential factor to take under careful consideration. Individuals might be reluctant to consu me a new product in the market if there is a well-established company that provides the same product or service and has been doing so for a much longer period of time.
3.6.4 Costs of servicing the market
Costs of trading in a foreign market naturally increase the more the company expands. Importing and exporting will be done in a regular basis if for example the supplier of raw materials and the actual company are within a big geographic distance.
3.6.5 Profit potential
A company will have to have the ability to find distributors in order to be able to penetrate the market. Without that capability it will be not be feasible to establish market access.
3.7 The micro economic issues and PEST analysis mentioned above only examine the external factors that might shape the decision of investing in a foreign market. However, there are INTERNAL FACTORS to be examined concerning the company and whether it has the ability to expand. These are the following:
3.7.1 Skills
The company must take into account whether the employees may have the appropriate skills to undertake expansion. Such skills would be:
- Willingness to learn and adapt in a new environment
-
Flexibility
3.7.2 Resources
This involves careful consideration of resources that are already available and if they are sufficient to proceed with trading. Ensuring that sufficient finance is available and that the equipment and buildings can be financed is critical. Adding to that, the company needs to assess whether more employees are needed and if training needs to be given to them.
3.8 In this report we are going to examine what Burger King would be called to reflect upon, in order to gain a market share abroad, as well as good potential return on the investment they would make in a country that they have not yet expanded.
“In 1954, James McLamore and David Edgerton opened their first Burger King restaurant in Miami, Florida. hey had extensive experience in restaurant business and believed in offering reasonably priced quality food, served quickly, in attractive and clean surroundings” (Burger Kings website). This is the world of fast food.
Since then, Burger King has expanded and fast food is largely consumed all throughout the globe. Undoubtedly, it has based its huge success upon people’s lifestyle in to day’s society, which particularly involves the constant procrastination of a healthy standard of living. People nowadays would rather buy a quick meal in Burger King as opposed to cooking at home. Generally, one could argue that the more stressful and demanding a society becomes, the more the individuals are inclined to sway towards an ‘easy solution’.
The constant growth of Burger king and food chains in general, reflect the needs of the current market, which are quick service and tasty food. Fulfilling those needs to the maximum potential will ensure that fast food outlets will not cease to exist and that they will keep expanding.
Expansion however, might not only come as a result from the ever-growing customer requirements but also due to the low presence of Burger King outlets in the country that is to be invested, in comparison to near saturation in most US and UK cities.
Assuming that Burger King will want to expand in India, there are a number of issues that ought to be taken into account.
3.9 EXTERNAL FACTORS
3.9.1 Expansion possibilities
This would entail a series of decisions that will have to do with the way the will acquire the expansion. In the past, one of the factors that have helped to increase the Company's expansion and growth has been the sale of restaurant franchises. “By 1961, McLamore and Edgerton had acquired national franchise rights to the Company, which was then operating 45 restaurants throughout Florida and the Southeast” (Burger King Website). The company’s probable main concern would be to inquire about franchises in India.
3.9.2 Economic and political influence
A company as big as Burger King would carefully evaluate the present state of the economy before reaching a conclusion. There are a few important points about the economy. (Table 1 and 2, Appendix 1)
3.9.2.1 “It has been predicted by the IMF (International Monetary Fund) in Washington that the Indian economy is set to grow 5.5 per cent in the fiscal year to March 31, 2003.” (India times)
3.9.2.2 Additionally after an annual review of India's performance "The economy is projected to grow at 5.5 per cent in 2002-03, assuming a modest recovery in the industrial sector." The IMF said.
3.9.2.3 The Indian economy is expected to grow 5.4 per cent this year, up from 4% last year. (Appendix 3, Figure 4).
It would be of convenience for Burger King to invest in a time when the economy is in its peak as opposed to when it is declining. As shown from the information gathered above, the best year to invest into expansion of the business as far as economy is concerned would be 2002 and 2003. This is due to the boost of the economy by 5.5 in the industrial sector.
High success rate in the UK by offering the current products is not synonymous to success by offering the same in a foreign country. This theory is based on the following aspects.
3.9.3 Socio-cultural differences
It is widely known that the Indian population by vast majority do not consume beef due to religious restrictions. Cows are sacred animals in their culture and not only do they avoid eating them but they also condemn consumption of that meat in any form or shape. Additionally, a great number of individuals are vegetarians and very much un acquainted to the western culinary habits. It would be therefore, sensible to reach the conclusion that Burger King would not have a successful carrier if they mainly invest in burgers.
3.9.4 Competition
Competition might be a cunning enemy to an initiating company. Well established local food chains might mean that Burger King has to ‘steal’ the competitions market share in order to establish stability and begin to generate profit thereafter.
3.10 Internal Factors
3.10.1 Presentation of premises
Restaurant decoration has traditionally been important in creating memorable images for Burger King Consumers. Burger King Corporation was the first fast-food chain to introduce dining rooms, allowing customers a chance to eat inside. “Drive-thru service was introduced in 1975, and now accounts for approximately 50% of the business Take-out". This gives the business a chance of trading without having the premises constrain. In the case of Burger King, both take away and eat in service targets both the people that might be rushing or coming from work and would want a quick snack as well as a numerous family that would want to sit in and have a meal inside.
3.10.2 Costs of Advertising
The company would have to take under consideration the corporation’s advertising campaign that would contribute to its success in the long term. Burger king should consider:
3.10.2.1 Coming in contact with local advertising agencies due to the lack of language communication.
3.10.2.2 Cost of advertising
3.10.2.3 Whether advertisements will be on a local basis
Perhaps the most impressive quality that Burger King possesses is its desire to continually enhance the product line and Brand image.
3.10.3 Product line
Burger King would have to carefully examine what sort of products they would offer. In the UK there are quite a few choices of which to make (Appendix 3, Figure 3)
- Grilled sourdough burger
- Bacon cheeseburger
- Value sized onion rings
- Side garden salad
- Flame broiled chilli
- Two crispy tacos
- Ice cream shake
- Baked potato
- Value sized soft drink
- Five piece chicken tenders
- Value sized fries
3.10.4 Burger King sales potential evaluation
In order to have a fair idea of how much profit the company is forecasted to generate, the managers should produce a sales evaluation of how many sales there have been made per outlet per year in the US and the UK and also which product made the most sales and under what circumstances. For example it may be reasonable to assume that soft drink and ice creams are mostly sold during summer time. The season however is not the sole indicator of sales boost or decrease… there are others such as
3.10.4.1 Financial status
3.10.4.2 Religion
We are going to present an example of a set of data that can be examined and analysed in order to illustrate which products generated the most profit in the US and the UK. This would give an approximate idea of what customers prefer (Appendix 4, Figure 5).
- CONCLUSIONS
The C.H.I.L.Z Agency arrived at the following main conclusions after six weeks of intensive investigation.
4.1 The fast food industry is a very profitable area worldwide, and Burger King has to compete with major fast food chains such as McDonalds, KFC, Pizza Hut and Wendy’s in order to gain competitive advantage and position itself in the peak of the fast food market. The best way to achieve their target is by innovating existing and new products and keep offering an excellent customer service and quality globally.
4.2 Companies and organisations have to bare in mind that market segmentation is a very powerful tool with many benefits and has to be managed wisely in order to achieve maximum profit for the product.
4.3 A lot of External (macro and micro environmental issues) and Internal (skills and resources) factors have to be examined before entering a foreign market.
4.4 Due to the fact that many countries have ethical & cultural beliefs and generally different eating habits, Burger King has to adapt its’ range of products in order to fulfil its customers preferences. Take Pakistan for example, people who live there only eat halal meat which means that Burger King will have to change their meat suppliers to offer halal meat to its’ customers.
4.5 As a company, we have conducted a PEST analysis and examined the following:
4.5.1 Political issues that would be any regulatory constraints.
4.5.2 Economic issues that have to do with volatile volumes and margins.
4.5.3 Social issues, which examine social attitudes and lifestyles as well as new expansion opportunities.
4.5.4 And last but not least, technological issues.
To conclude, a company should examine and go through all the possibilities and decisions that would be entailed in expanding. To make this possible, they will have to assess a wide spectrum of opportunities and threats that might arise.
4.6 Referring to the Country Attractiveness and Competitive Strength matrix as seen above we can approach a conclusion. Although the country attractiveness for India is low, the Competitive strength of the introduction of a new brand like Burger King is high. According to the matrix some selectivity or individualised strategies are needed here. Of course the matrix has been used with caution as there are also additional variables that can play an important role in a final decision, as seen above.
- RECOMMENDATIONS
5.1 C.H.I.L.Z Agency has made the following recommendations for Burger King Plc. We believe that Burger King has to expand its operations in India, because even if Indians have different eating habits, especially concerning beef, the huge population of India cant be ignored
by a company as large as Burger King and they will have to adjust their product line, in order to gain competitive advantage and gain more profits in a new market. Since McDonald’s, their biggest rival in the fast food market, has already expanded in India, Burger King will have to respond to that move and present a competent product line that will ensure they will compete and gain market share in India.
5.2 Innovation of their products would guarantee that Burger Kind would enter the market. However, in order to achieve and succeed in the expansion they will have to closely take in mind the different eating habits, values and beliefs of the people in India and act with respect to their religion. Because Indians are not eating Beef, a very smart approach on the subject has to be adopted and find new alternative solutions to replace the products made from beef with lamp, chicken or pork meat. Having thoroughly examined these issues, burger King is likely to succeed.
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