Burger King PESTEL ANALYSIS
Burger King is among one of the most well known fast food brands in the world. The fast food brand has an impressive global presence and is found across 100 countries and US territories. Given the number of Burger King restaurants open worldwide, it is the second largest fast food hamburger brand in the world. By December 2015, the brand had around 15000 restaurant stores open worldwide. The most important thing about Burger King is its franchise based business model. The brand has more than 95% of its stores run by franchisees. The company owns just 800 of the total 15000 restaurants and the rest are run by franchisees. Burger King manages a large marketing and advertising fund where its franchisees contribute around 3.5% to 5% of its sales. While most franchise based business models experience some common troubles, Burger King’s model has proved more efficient and reliable. The fast food brand is also investing in international expansion and better quality of customer service.
[ PESTEL is an acronym for Political, Economic, Social, Technological. Environmental and Legal. These are important forces affecting businesses all over the world. A Pestel analysis analyses how, why and where these forces affect businesses and how business brands can fight their effects. These factors are important for any international business and understanding them can affect your international growth and profitability. ]
Political factors play a central role in business and can have a major effect on business and profitability. These factors affect businesses at several critical points. A business trying to expand overseas can come across political barriers. It is why collaboration and international trade agreements help businesses grow and expand overseas. Countries where the political environment is unfriendly, businesses find it difficult to grow and a lack of political stability can also result in economic instability and in turn loss of revenue. Burger King is trying to grow in Asia and it is why the political environment in the Asian countries matters. China and India have a very poor record in terms of ‘Red Tape’. While till some years ago entry into China was difficult because of the high level of red tape barriers and not just China in India too doing business has remained difficult till the latest anti corruption move took place. The business environment is now better which is good for the International brands trying to penetrate the Indian market. Burger King had a slim presence in the Indian subcontinent but is planning to expand after partnership with a local Indian firm. Political factors in this way have a direct relationship with the business environment of a nation. Political havoc results in supply chain and business disruption and loss of revenue. Geopolitical factors in the 21st century have also affected businesses deeply. Terrorist and the resulting havoc have affected business scenario in both Western and Eastern nations. The high level of regulation following the terrorist attacks in US, UK and France resulted in a very high level of regulation in these areas leading to a decline in tourist activity. In turn these things affect the hospitality and restaurant industry too. The overall role of the political factors in the business industry is very big.
Economic environment and environmental factors can have a deep and direct effect on the businesses and the business environment of a region. The world economy has been through a recession. Economic activity in most regions has returned on track. There have been some fluctuations and despite that economic growth has happened faster in most nations. Asia is particularly the most shining part of this story and most brands have flocked to the Asian nations in order to find growth. Economic challenges can affect sales and revenue. In the 21st century, world economy has been through difficult phases. During the recession, the brands were forced to cut down costs and to lay off employees. The period of recession was also difficult for the customers since several millions jobs were lost and people’s buying power had reduced greatly. Due to it, brands’ profits and revenue were reduced. Now, that economic activity has risen and the level of employment too has risen, brands are again seeing profits. However, from time to time important economies like Brazil, Russia and China have been through economic fluctuations. Demonetization in India dealt a severe blow to local and international businesses. The American dollar has grown stronger since the recession which has also reduced the profits of the American brands. It proves the deep impact economic factors can have on businesses and how they can affect businesses’ profitability and revenue. If the level of economic activity is high, the level of employment also remains high and it leads to an increase in purchasing power of the customers. Overall, a higher level of economic activity means better business and higher profitability. Burger King’s profits and revenue are also affected by economic factors. In the recent years, the brand’s revenue and profits have risen which is because of the rising economic activity around the globe.
Socio-cultural factors too have a central role in the context of business. Changing social scenarios and trends can affect businesses and their profitability. The 21st century has seen an overwhelming growth in the use of IT and internet. Now, a higher number of people are using smart-phones to access information and for shopping. Society and culture both are important forces that have an effect on how people shop and the brands they like. Burger King is focusing on the use of IT and technology for faster growth and for consumer convenience. Now more people order food online and review food quality and service. More of them are now found on social media and follow their favorite brands on Facebook and Twitter. IT and digital technology are also playing an important role in marketing. Now most brands are found on social media and market themselves through websites and other digital channels. Culture also plays an important role in marketing. From one region and from one society to another, the culture differs and how people can be reached and influenced also differs. Brands need to have different strategies for marketing in different cultures. Burger King also employs the same strategy. Its promotional strategy in US is different from that in Japan. From one market to another and one culture to another every fast food brand including Burger King employs a suitable strategy to match local expectations and to match the local demands. In this way socio-cultural factors affect businesses at various levels.
Technology has grown to acquire a central role in the context of business. The businesses that are technologically ahead of the others are considered more competitive and remain more profitable. Businesses seeking faster growth and higher revenue are investing in technology. Technology is helping businesses at several points and is everywhere from finance to HR, marketing and sales. Burger King has also invested a lot in technology and uses it for marketing and sales. In the recent years most fast food brands have started investing in technology and digitization and Burger King is also not an exception. Technology is making brands popular and helping them reach a large customer audience. Social media has taken over marketing and every brand is reaching its customers and engaging them using social media. However technology’s role has become even greater and businesses are using innovative technologies like AI to reach their customers and provide them personalized experiences. These technologies are changing the world of marketing like never before and changes are happening faster with technology. Now that technology has become key to growth no brand can do without investing in AI and interactive websites to grow their customer connection.
Environmental factors have acquired an increased value in the 21st century. Sustainability is now a serious issue that most brands are investing in. It is not just for cost saving or for marketing a better image but for creating higher value. Saving the environment is important and the investment these brands are making in it will become an asset for the coming generations. This is not just the need of the time but also a better method to connect with the millenials who appreciate the brands that value environment and community. Burger King is also investing in sustainability and CSR. Apart from serving great quality food, the brand is also well known as a great employer that cares for its employees’ welfare. It provides nutritional information related to the food it serves to its customers and also takes care that its menu remains healthy. Food innovation is an important focus at Burger King. However, innovation does not end at food but it also invests in and cares for its people. BK is equally invested in sustainability where it has taken important steps towards addressing the environmental challenges.
BK’s Corporate Responsibility page notes:
“We continuously review our policies on animal welfare, sourcing and environmental impact to ensure that we remain good corporates citizens in the communities we serve.
Our people are engaged and committed. Our teams actively research and develop ways to make changes that will positively impact the environment without compromising operational standards. For example, we know that recycling and waste management are two of our biggest environmental challenges. We remain committed to working with suppliers to find ways we can reduce, reuse and recycle.” (BK – Corp-Respon)
Investing in environment and corporate responsibility is good for the bottom line, the brand image and employee morale. Cost savings are a direct benefit one can realize by focusing on sustainability. However, the overall benefit coming from investment in community and environment is much bigger and benefits both the business brand and the community. Burger King’s investment has also benefitted it in the form of increased employee morale and a happier and healthier bottom line.
The legal and regulatory issues have also acquired an important place in the context of business in the 21st century. In case of the fast food businesses too they are under increased pressure from legal and regulatory authorities. Apart from quality, animal rights and other issues are also causing higher pressure from various authorities including government bodies and private organizations advocating animal rights. Since the brand was founded in 1954, BK has also been through several legal battles. Sometimes it was on the giving end and at others on the receiving end. BK faced various cases in its history starting from those related to animal rights to those related to its presence in the Middle East. In several cases while BK did not face legal disputes, still controversies erupted related to ethics and social justice. BK was also involved in trademark lawsuits in US and Australia.