The hospitality and leisure industry in the UK has been growing tremendously over the past few years. This has been made possible by favourable business environment and economic conditions which are conducive for investment in leisure industry. The UK government has developed favourable legislation to allow investments such as allowing cross listings in its London Stock exchange as well as New York stock exchanges. This has given enough sources of capital to the hotel industry to carry out huge investments in the leisure sector. In this report we examine Burger King Chain of restaurants in the UK and state its likely problems in the next three years as well as suggest a business strategy that could help the firm overcome those problems.Problems Facing Burger KingProblems arise out of internal and external factors that do not favour the business operations in Burger King Business. The leisure and hospitality industry is among those leading in serving the general public and out of their contact with several players of the industry they are bound to face many problems.Problems Affecting DemandThe first problem which is faced by Burger King is that of fierce competition from local and international fast food restaurants which reduces demand. The leading competitor is the US based Macdonald's which has its firm presence wherever the Burger King exists. Moreover, there are other small fast food restaurants and supermarkets which are proving to be a challenge to the Burger King business. Therefore this problem of competition may persist and the only way for the business to continue is to develop counter measure innovative ways so as to retain its market share.Moreover, there are health concerns of the customers on the type of food offered by the restaurant. Since the restaurant is dealing with food considered to be chunk, it becomes a problem to sell to the population which is increasingly getting concerned about its health status (Osborne & Hayward2010, p. 1). There was a case where the Burger King was criticised for luring young children who are oblivious of their health to eat its chunk foods on a regular basis. Therefore this problem of health concerns may persist and as a result reduce the demand for its products.Furthermore, there is problem faced by lack of flexibility of its products. The Burger King has several outlets and it is difficult to change the type of its products on offer. This is due to the current investments in several areas which may not have available space for expansions so as to invest in other hotel businesses such as accommodation. Thus flexibility becomes a problem for its diversification prospects. Due to lack of flexibility to adopt new changing needs of customers, the restaurant may end up with reduced demand for its products as the customers move on to other establishments offering their needs (Jones & Lockwood 2002, p. 77).In addition, the Burger King has a huge network of its stores and as such may be faced with management problems. Huge chains can be hectic to manage so as to maintain the desired exact quality and as such since it involves a lot of different environments where their needs may not be exactly similar. Thus failure to meet requirements of a particular environment will cause reduction in its demand and subsequently lost business in that area. Therefore this problem is usually faced by several franchised establishments in a bid to maintain standard quality across all its outlets.
The lack of customer knowledge is another problem bound to affect the normal demand of the Burger King. The failure of the business to gain knowledge of its customer needs due to limited market research will definitely reduce the demand because the business will be out of touch with the customer desires. This problem is accelerated by the hostile customers who do not want to participate in any research concerning Burger King and other restaurant sectors.The other problem is information technology implementation problems (Frew 2004, p. 272). The Burger King needs continuous improvement in its application of technology to its processes so as to manage the huge network. However, there are problems associated with installation of technology and maintenance which may disappoint the customers. For instance, a failure of payment systems which may delay customers and as a result they will tend to avoid the restaurant in future. This will eventually cause reduction in demand.The other problem that is faced by Burger King is the limited products it offers. There are those customers who will need a full service restaurant complete with accommodation. Therefore demand for those particular customers will reduce because they will seek other restaurants and hotels offering all that they need. Thus the Burger King's problem of limited products can affect is business success.There are problems associated with managing capacity. The King Burger is continuously faced with challenges of excess or shortage in demand and as such should respond accordingly. For instance, where the firm faces excess demand, it should be able to increase its capacity so as to meet all the demand and that will guarantee further customer loyalty. However, if the customers do not find what they need due to shortage, it will be a blow to the firm because the perception of the customer will shift to other restaurants which have enough of their needs. This is a continuous problem of capacity management and if it fails it surely reduces the demand (Jones & Lockwood 2002, p. 75).Problems Affecting Supply
Limited time Offer
Among the problems affecting supply of its food products is the ever increasing cost of supplies. The changing environmental conditions have reduced crop production and as a result cost of food products for its business is set to increase. This forces the King Burger to take time seeing favourable markets which in itself is expensive. The expensive supplies will cause the Burger King to adjust its prices upwards to maintain its margin. However, this will be a recipe for reduced demand which is price elastic.In addition, there is a problem associated with shortage of supplies in the market. This is a problem which makes Burger King loose on customers for particular products since they cannot obtain supplies for them. There will be need to procure supplies even from overseas so as to obtain in the local market. This is a problem which may be magnified by the lack of proper procurement mechanism and strategies especially due to the nature of food products which are highly perishable. Therefore, the shortage problem is associated with its supply and may eventually lead to reduced business.The other problem is associated with low quality supplies. The restaurant industry receives supplies on continued basis for regular operations. However, there are situations that arise out of poor quality supplies which has a negative impact on the final product offered to the consumer. Therefore, the Burger King must always monitor each consignment of supplies so as to evade the poor quality goods. The subjecting of audit to each supply is in itself a problem due to its labour intensive nature and requires huge expenditure on labour.Furthermore, there is a problem is associated with shortage of skilled labour supply. Since there are several restaurant industries, they are capable of absorbing skilled talents which may leave burger King with shortage of staff. The supply shortage of quality workforce is a problem because the company may not be able to meet the quality standards for its customers. The poor quality will reduce the customer loyalty and eventually lower the demand capacity. Since the people are the most valuable assets, shortage gives problems to the company.Business Plan Strategy for Burger King to Overcome ProblemsFor the Burger King to solve the above problems affecting its demand and supply, it must adopt competitive strategies. The business plan strategies should be aimed at reducing the threat by potential and existing competitors and their substitute products, increase the client bargaining power, increase supplier's bargaining power and avoid direct competition. These strategies should be in a position to take offensive and defensive action to establish the Burger King in the restaurant sector (Cunill 2005, p. 5). The following strategies are favourable for Burger King to adopt so as to solve the stated problems;Market Niche StrategyThis concept of market niche is based on the fact that Burger King should concentrate on a certain market segment allowing it to limit the scope of competition. Once the restaurant has positioned itself in a market niche, the management should focus on achieving leadership position in the market segment. The company will be able to know its customers in the market focus and specialize in unrivalled food service. It has been shown that companies obtain high degree of segmentation is in a position to achieve higher returns in a particular sector (Cunill 2005, p. 9).However, the implementation of this strategy should be adopted cautiously since there are risks associated. The concentration on a particular segment can limit the scope of reaching a huge market and it may reduce its profits in the overall. Also, the competitors may benefit from their increased large market focus in enhancing their cost effectiveness by using similar resources in the whole market as compared to the niche market player. Thus the strategy will work excellently for burger if it can be able to differentiate a market segment successfully and be able to meet all its requirements (Cunill 2005, p. 9).Differentiation StrategyThis is a strategy that ensures that the company is perceived by its customers and suppliers to be unique. This may be in terms of products, quality and even customer care services (Cunill 2005, p. 8). Therefore the Burger King should formulate strategies aimed at differentiation of its entire business. This will attract and retain its customers who will be loyal to the brand name and cases of reduced demand by competition will have been averted.The differentiation concept allows higher prices and wider margins than companies that have not been differentiated in the market. This is because a customer would prefer a quality service or product at higher price as compared to poor quality at a lower price. The Burger is also in a position to implement its differentiation strategy through its value chain. The modification can be implemented by the restaurant at any point in the chain from supplies, production, distribution and customer care service (Cunill 2005, p. 8). Therefore the restaurant has a lot of options to implement working strategies and increase demand levels.Cost Cutting StrategyThe company can engage cost cutting strategies in its business processes which will allow it to enjoy better margins while keeping its prices low. The Burger King should negotiate with its suppliers due to its high purchasing power so that they are offered discounts and price reductions. The company should be very careful so as not to purchase low quality goods out of reduced prices but rather employ more cost cutting measures along the value chain (Cunill 2005, p. 7 & 8; O'Fallon and Rutherford 2010, p. 24).These value chain costs may include use of technology to reduce the labour costs as well as modification of activity chains to reduce the overall costs. The cost reduction strategy is very important in ensuring that the Burger King is able to meet its growth strategies while maintaining its existing market share without fall in demand due to upward price adjustments (Cunill 2005, p. 8).The huge problem faced by leisure and hospitality industry in mainly on the competition. Therefore any company in the industry must be able to apply business strategies aimed at solving the problems brought about by competition. Finally, it is normal for a business to have problems and the best way is to face them with strategies capable of overcoming those problems.
Related Management essays