The following sample essay on “Burger King – Customer and Market situation of the industry”: tells about fast food joints.
More and more people are becoming aware and conscious of what they eat. People prefer healthy food. Mad cow disease and foot and mouth disease has created an awareness which has made people wary of eating out side. More and more working or white collar people prefer eating outside now as working people are emerging and preferring eating or “grabbing a quick bite” while at work.
This has led to variety of fast food outlets emerging rapidly across the emirates.
Though fast food joints are designed and marketed as kid’s food and for teenagers we can see a growing trend of University students and white-collar workers preferring to eat at fast food joints. The need in people of today’s market is fast and cheap food which is “value for money” and easily available. We can see that though designed for kids and for family the emerging universities and educational institutes has led the fast food industry to a large volume of new customers.
Also the placement of fast food joints near trade hums and offices has prompted office workers to opt to have fast food.
The reduced nutrition concerns amongst consumers has been a boon for the fast food industry, which how ever is going through a slight depression due to the heath scares of foot and mouth and the mad cow disease. But as one marketing manager pointed out “these are just temporary phases in the industry, the fast foods industry is here to stay”.
We agree with the manager because we can see that even though of this slight depression fast food giants like Kentucky Fried Chicken (KFC) and Hardees and McDonalds are opening up more branches across the region.
Due to the lucrative market conditions we are seeing major global fast food players entering the market. The market in the UAE and the environment is such that due to the low entry barriers more and more fast food companies are opening up. Hence the market has become very competitive. We can see giants like Subway, Pizza Hut, Wendy’s, A&W and many more. The industry for Burger tough has remained very different. The major players in this industry are Hardees, McDonalds and Burger king. Amongst them selves these three companies have the 95% of the burger market, with the rest being captured by other brands.
The recent health scare though affecting sale everywhere in the world did very little sales drop in the UAE because of the Stringent health rules and with no such cases being reported here. The fact that the people and the masses looking for cheap and quality fast food option has initiated a promotional “value” war amongst the three giants. The three giants namely Burger king, McDonalds and Hardees have started various campaigns in which Low prices and gifts have been the prime attraction for the consumers.
Each brands has spent tremendous amount of resources and time into cashing in on this so-called “value for money” concept. The fact that consumers want variety and choice has resulted in each of the above-mentioned “Burger Giants” in creating variety of burgers. With McDonalds having seven different types of burgers, Hardees having thirteen different varieties of burgers and Burger King offering eleven different types of burgers. The three giants of the burger industry have maintained high level of competition and quality, which has made a barrier to entry by any foreign company.
Product and Price situation: The fact that Burger King has a whopping variety of eleven different types of burgers. An interesting claim Burger King claims is that there are 1024 different ways to make a whopper burger. The burgers of Burger King are considered bigger and more filling as compared to other burgers in the market. In asking 100 different people of their views on which burger is more filling 42% claim that definitely Burger King burgers are more filling, 30% prefer McDonalds burgers to be more filling and the remainder 28% claim that Hardees is more filling.
In a similar survey when asked as to which Burger outlet the consumers preferred on the basis on Value and Price 45% claim that McDonalds is better as its prices are way lower than any other burger outlet, and Burger King and Hardees coming up to 27% and 28% respectively. In the similar questionnaire the customers expressed that they considered and accepted the fact that though Burger King burgers are comparatively expensive they are more filling and of better quality as compared to McDonalds, yet the speed of quality of Burger King was far better in McDonalds.
The quality of burgers has changed somewhat in the industry because of the health scare ad nutrition concerns. The changing trends and the consumer demand had made a new series of burgers to emerge, the double and triple story burgers, i. e. not one patty but two to three patty of burger. Also the prices have been reduced considerably and burger king keeping in mind the variable demand and type of customers it has, it has ensured that it has three different prices for its burgers catering to the different tastes and preferences of customers it caters to.
Burger King has three different price strata, and each has three to four different kinds of burgers in it. Burger King had 12 Dhs, 15 Dhs and 18 Dhs burgers, each unique in their own attributes. The burgers them selves have become richer and tastier as stated by loyal consumers at Burger King. One of the hurdles that the burger industry here complains is the loss in the quality of its product due to the restrictions imposed on importing of meat, mutton and chicken. Also the restriction of launching their flag ship product of “Ham” burgers in the region due to the restrictions imposed by the Islamic religion.
Burger king cannot introduce their hamburgers, as neither can McDonalds. This restriction complains a manager from McDonald “does not allow us to being in all or the entire product range that we here at McDonalds can offer”. Also another reason why the quality of burgers vary over here as compared to any where else in the west is due to the imposition of laws making it compulsory to ensure that the meat in question id “Halal” or allowable by Islam. This has made Burger King and McDonalds to import meat from not their usual distributors but rather from local or regional importers.
Another interesting fact is that the Burger Industry namely Burger King and McDonalds along with Hardees is that major share of the profit per burger comes from their own products that is as we see it a “Double Whopper Meal” comes for Dhs. 18 and it includes a “Regular” French fries and a “Regular” Coke… now if we see it individually we can get the burger for 13 Dhs. and the Cold drink and French Fries for 5 Dhs each, hence the combined prices would be 13 + 5 + 5 = 23 Dhs. yet Burger King charges us a bundled price of 18 Dhs. what we found out was that Burger king makes a chunk of its profit per meal on its Burger.
Hence Burger King can earn a different level of price and margin on each of its meals. Also in simple words Burger King makes more profit selling a single sandwich as compared to selling it as a bundle (with French fries and cold drink). Hence in this industry per unit margin of profit is tremendous but because of the stiff competition and challenges imposed by the three giants no entrants are allowed. Also we would see that a normal whopper burger of burger king would cost 8 Dhs. , yet if it were in a promotion it would be sold for 5 Dhs. thus prove that the margin of profit is extremely high. Distribution situation:
In terms of distribution we wish to discuss the number o branches and their locations. In that aspect McDonalds has far more branches and stall as compared to Hardees or Burger King. McDonald in its short span of few years has already established an extensive network of outlets through out the UAE with heavy emphasis on Dubai. Where as Burger king has only 6 outlets. Also McDonalds is located at many venues where it draws its synergies from the location it is in. we found that McDonalds has located its outlets at petrol pumps in major malls and also near residence and office or trade hubs, this allows them to attract customers.
We found that McDonalds drew a major advantage against Burger King by locating it self across the UAE and in the Globe so that it was accessible and available. This attributed to better product awareness. Burger King on the other hand has failed to establish itself so strongly in the Dubai market and UAE market, yet it has counted on Snob effect to draw its customers. Burger king how ever has located it self in few yet prime locations where it draws on from the high spending power of the consumers and also on accessibility (City Center). Promotion and Competitive situation:
The fast food industry in the region has shown the emphasis and the importance of promotion. In the burger industry itself we can see a promotional war-taking place between McDonald and Burger King, with Hardees playing a minor role. Where McDonalds and Burger king emphasizes on Value Meals and movie memorabilia, Hardees emphasizing on Big Gifts and prizes. But we can see that the Global Advertisement and promotional campaigns of these burger giants spills in to UAE also. Most of the promotional schemes undertaken here are very much similar to the ones undertaken in the region and hence no customization is seen.
Though lucrative market for both McDonalds and Burger King we saw that other than “value meals” both had nothing special for the Regional or UAE market. The competition between McDonald and Burger King is fierce as now both compete to capture a larger market share of the existing size of the market. Burger King has so far emphasized on its Value and quality and hygienic food. The Competition for Burger king and McDonalds is rising slowly but steadily from Hardees who underwent a radical face lift and change of logo and customer driven service standards, yet the real competition is coming from a wholly unpredictable side, the small cafeterias.
Yep though hard to believe these small sized cafeterias are spread out through out the entire UAE and cater to a large segment of the market. What we noticed was that on daily basis and on regular basis teenagers, college students and working class people preferred to go to these small cafeterias rather, and prefer Hardees and McDonalds and Burger king on special occasion or if quality is of prime concern or if time was of essence.
Surprisingly of the 100 students we questioned 85 accepted that they went more regularly to these small cafeterias than to anywhere else. The reason they stated was that these students stated was that these cafeterias were available everywhere and anywhere, they were much cheaper and they had good things to eat. Though baffling as it may sound we think that there is a common segment, which is competed by the burger industry and these small cafeterias.
The upper segment of the market with good marginal propensity to consume and with higher end of the income strata preferred burger outlets. The low-income group of people namely students who cannot afford or labor class prefer these cafeterias. And the teenagers/student and white collar people prefer either of the two, depending on their budget at that given time and the accessibility. We found that these classes of people namely the middle class were very flexible and would adapt to either of the two industries, i. e. urger or cafeterias.
When compared with price we found that both were cheap and the cost of a decent average Burger meal from Hardees/ McDonald/ Burger King would be same for a complete meal from these small cafeterias. We understood that the only thing, which differentiated or made the difference, was the quality of the food. As one student put it; “we students are ok with anything, it all costs the same for us, we are hungry and we need something to eat, now if it is a burger or if it is a cafeteria burger for us it is all the same”.
On asking a white-collar male bachelor, he replied “we have to be practical as bachelor I consider saving an importance, and if I can get a filling meal at one of these cafeterias which are near by why should I go further down the road to locate a burger joint? Unless I am looking for quality” it is indeed a threat, which needs to be addressed by the burger industry. The small cafeterias though catering to a different segment o the market, do sometimes and are taking growing share for the burger joint industry. They are a threat and need to be addressed for the future of burger joints.