Capital goods are any tangible assets that an organisation uses to produce goods and services e.g. buildings, machinery and equipment. At a national level, burger king develops and creates new capital goods (machinery). For example, with the aim to minimize waste Burger king developed the kitchen minder. The kitchen minder monitors the amount of sales on previous days and estimates how many patties, fries and other ingredients burger king will need to prepare. This minimises waste significantly and therefore reduces costs.
with reduced costs the difference between sale price and costs will increase meaning burger king has increased profits. Another very important capital good is the flame broiler. The flame broiler is a capital good because it is a piece of machinery used to produce other goods. At a national level, burger king developed the new broiler to decreases energy costs, labour costs and to enhance the flavour of patties.
Because these broilers don’t run all day and use less fuel the average restaurant can save up to 40% on its monthly energy costs, Making it worthwhile to install and invest the broilers into New Zealand burger king restaurants.
At a local level the flame broiler is constantly used and is managed carefully. Staff must put the required numbers of patties (as indicated by the kitchen minder) onto the broiler tray and turn on the broiler. The patties are then stored in heated containers and are ready to make burgers. If the patties are not used up within ten minutes then they must be thrown out. Although the patties are physically thrown out at a local level, the time of when to throw them out (ten minutes) is decided at a national level.
The consequences on society of burger kings decision to use the new flame broiler is that burger king customers (particularly past customers) may not like the new flavour of the patties and could stop eating at burger king. however it is more likely that members of society will enjoy the new patties and therefore buy more of burger kings meals. burger kings decision to throw out 10 minute old patties will also mean society will eat more burger king as the burgers are fresher. therefore burger king has a negative effect on the health of society. the new flame broiler also has a positive impact on the workers because it may be easier and less time consuming to operate the broiler, resulting in less work for employees.
Land is a very important factor of production as it is with land that burger king can runs its company. At a national level burger king must make important decisions about which piece of land will ultimately give the most profit e.g. airports, universities and sites close to popular attractions, are all sites that usually provide many sales. The hillcrest burger king is strategically situated on an elevated piece of land on cambridge road so that the large number of cars that pass by can easily see the burger king restaurant. If people see the shop, it is likely they will be tempted to purchase from burger king.
Therefore the more people that see the shop, the more revenue and profit that burger king will receive. the consequences on society of this strategic positioning is that the large number of cars that drive on cambridge road are likely to eat burger king more often more and therefore have increased health problems. Another way that burger king manages its land at a national level is by choosing how much space the car park, eating lobby, storage etc. takes up. Nationally, burger king has decided to remove many of the restaurants play grounds. The benefits of this decision are that burger king can sell the playground to increase profits and can put the extra land to good use e.g. use the extra land to build an outdoor eating area. The negative effects of removing the playgrounds is that burger king will not appeal to small children, resulting in less families eating at burger king and therefore a decrease in sales, revenue and profit for burger king. the consequences on society of the decision to add an outdoor eating area is that consumers will be able to eat in fresh air so some consumers will have a greater eating experience.
This outdoor eating feature could appeal to some members of society meaning that consumers will buy more burgers, resulting in an increase in health problems for society. by not having playgrounds less young children are going to eat at burger king which will result in an increase in the health of young children. At a local level, the management of the land can be split into two parts: management outside the restaurant and management inside the restaurant. Outside the restaurant, burger king will clean graffiti of their restaurant and off all their advertisements and also pick up rubbish off nearby footpaths.
This will increase labour and cleaning costs for burger king. inside the restaurant, burger king locally must manage the cleanliness of the land. this means making sure the floor is always clean and dry, the toilets are clean and there is no chewing gum or other food stuck to tables. burger king takes cleanliness serious because if the environment in which customers eat is healthy and clean the customers are likely to continue to shop at burger king, resulting in an increase in profit. the consequences on society of burger kings local cleaning decisions is that consumers will not be put off by rubbish and graffiti that would have been associated with burger king and therefore be more inclined to eat at burger king. it also means that the environment around burger king will be cleaner and more respectable.
Labour resources are the workers/employees that are needed to operate a business. at a national level burger king develops a training programme to train and educate new staff about what is required and expected of them. new staff must spend 1 month practising at each station while under supervision of the manager e.g. practising at the cashier, cleaning equipment, making burgers etc. burger king invests a lot of time into the training of their new staff so that they do not need to be constantly supervised and that they are able to work fast and at a high standard at each station. nationally, burger will also determine how many workers are needed per restaurant. for example, hillcrest burger king is relatively large compared to other burger king restaurants and therefore it is likely that will have need more staff (total of 39 staff on their roster). at a local level, the manager will make decisions and assign important tasks to workers (depending on how busy it is) so that each staff member is working at a specific stage in the production process.
This is specialisation. as the worker does their specific task over and over again they will become more experienced and more efficient, resulting in an increase in productivity and economies of scale (where a firm’s output increases, the average cost per unit produced falls). to keep up with orders, the manager may call in employees and have them work at an even more specific task in the production process e.g. 1 person cooking the patties, 1 person putting the fillings in and another person wrapping, rather than having just one person doing everything. this increases specialisation. by having more workers, labour costs will increase, but burger king is able to produce food much quicker and keep with the orders. this will result in a reputation of quick service which means customers are likely to return. at a national level burger king has decide to have on call staff. if business is slow, the local manager may decide to send some staff home (as they are not needed as much) thus, decreasing labour costs.
If business is fast, the local manager may decide to call in workers. this is flexible labour. the consequences on society of burger kings decision for workers to only work on one part of the production process (specialization) has had a positive effect on some members of society but a negative effect on the employees. the positive effect on society is that consumers will receive a greater quality product and they are likely to get their burgers quicker. (due to workers gaining more experience). however the negative effect on the workers is that may become very bored while working (as they have little variation in their task). burger kings decision to have flexible labour has also had a negative effect on the workers because it is harder for them to make a schedule and they may be interrupted when doing something important
Entrepreneurship is the ability to take risks and organise all other resources and factors of production. at a national level, all the decisions that burger king makes are entrepreneurial decisions e.g the decisions regarding land, labour and capital. however, burger king will train the local managers to ensure their decisions involving the business are beneficial and ultimately profitable for burger king. this extra training for managers is an increased cost for burger king however, it is likely that the time invested into the mangers will pay off because they will make better decisions about burger kings local operations. at a local level entrepreneurship is managed by the manager. the manager must make decisions about what will give burger the most profit. for example, if staff are making and serving burgers before the required time, the manager will call in staff meetings to discuss the problem as to why production is slowing down.
With the extra training that burger king provides the managers with, the manager should be able to solve the problem. the manager could make changes in the production process or staff roster or the manager may even decide to lay off workers. it is also the local managers decision and responsibility as to if some staff get a promotion and/or pay rise. promotions act as an incentive to employees to work more productively and efficiently. the more efficient the staff are, the more profit that burger king will receive making it worthwhile to offer promotions and pay rises. the consequences on society of these entrepreneurial decisions is that customers are likely to get a better quality meal and a quicker.
All producers have goals. Burger king’s overall objective is to maximise profits. However, to maximise profits, burger king has more commercial goals such as: -Sales maximisation- when a firm wants to sell as much as possible without making a loss. -Increased market share- when a firm wants a greater share of the market e.g. dominating the fast food industry.
-Cost reduction- when a firm wants to decrease the cost of their products without making a loss (increasing the margin between sale price and cost per product). -Business expansion- when a firm wants to increase the number of stores that consumers can buy from.
Burger kings goal of business expansion has had positive and negative consequences on members of society. Burger king’s business expansion negatively affects other smaller fast food business e.g.
Local fish and chip shops because some consumers will switch buying from small businesses and start buying at the new burger king. The lack of sales for these small businesses (caused by burger king) will result in less revenue and profit. This could even result in the closure of small businesses and therefore the government may have to provide more benefits for the unemployed. Although burger king’s business expansion has had a huge negative effect on small local businesses, it has a positive effect on local unemployed citizens (particularly students). As new restaurants are launched, staff and managers are required for the running of the restaurant; this creates new job opportunities and therefore income for some members of society. If burger king expands its business, more fatty food will be available for society. This is a negative effect on society as more people will become overweight and unhealthy.
Burger king also has many non-commercial goals that are very important. Some of these goals include:
- -Minimising the impact that they have on the environment
- -Purchasing from national and local suppliers (rather than purchasing from overseas)
- -Supporting charitable organisations-such as canteen
- -Supporting and organising local sport- such as the Basketball tournament
These non-commercial goals require burger king to either donate, fund or increase unneeded costs. This contradicts burger kings overall goal of profit maximisation. However, by helping and supporting New Zealand charities and the local community, many members of society may feel loyal to burger king for the good they do, and therefore shop at burger king more often instead of shopping at competitors.
Pricing is one of the most important elements for the success for burger king, as it is with price strategies that the goals of burger king can be achieved. One price strategy that burger king has in place is the ‘Burger king Change Range’. Burger king reduces the price of singular items e.g. Medium frozen coke from $2.00 to $1.00 BBQ beef burger from $3.50 to $2.00 so customers come into the shop or drive thru for their cheap item and then are offered other regular (more expensive) items. Burger king may not be making any profit on the change range items (as the selling price may not be greater than the costs to make it), however the other items that customers buy will give burger king increased sales.
The negative effects of this price strategy are that it reduces the profit made on the change range items and it could also result in a price war if competitors cut their prices to compete. However, the strategy will satisfy burger kings goals of sales maximisation and increased market share. If customers buy a significant amount of regular priced items then the price strategy may also satisfy burger king’s most important goal of profit maximisation. the consequences on society of this price strategy is the burgers become more affordable, so consumers will spend an increased proportion of their income on these cheap burgers as they are saving more of their income. This can result in health problems and even obesity for some members of society.
Non price strategies
Non price strategies are methods other than price reduction that a firm uses to achieve their goals. This involves product variation and product differentiation. Product variation is the process that highlights and promotes actual differences amongst products. Burger king uses product variation with the whopper burger range. The six burgers vary in size and ingredients e.g. double whopper with cheese, whopper JR without cheese etc. this variation amongst burger kings signature meal, is put in place to compete with competitors (e.g. McDonald’s big mac) and to appeal to different tastes and income levels of consumers. Therefore, consumers may view the whopper variety as the better or the superior option, leading to more sales for burger king. Another way burger king uses product variation is by flame grilling their patties. Burger king has used this non price strategy since its founding in 1954 and is still in use today.
By flame grilling their patties, burger king adds a distinct taste to their burgers and appeals to consumers who want a more genuine and traditionally cooked Pattie. This will also increase sales. Burger king uses product differentiation as some of its non-price strategies. Product differentiation is the process in which firms make a product appear to be different from that of competitors. Burger king uses product differentiation with its branding, advertising, sponsorship, packaging and store locations. For example, burger king uses unique packaging when wrapping their burgers. On the packaging they add the ingredients of the burger, a description of the burger, the colours that represent burger king (red) and their motto (Taste is king). Without changing the actual product, the packaging makes the burgers appear very different to similar competitor’s burgers.
With 2 windows burger king on average serves 50 cars per hour. with the added window burger king serves on average 80 cars per hour. when burger king just had two windows customers would pay at the first and then pick up at the second window. however, as demand for burger kings meals has increased and burger employees have to prepare more complex meals, drive thru times have been very slow which means that customers have to wait a long time for their meal and they are less likely to purchase from burger king again. to increase the drive thru speed time burger king has decided to add in an extra pick up window so customers won’t have to wait as long. this extra window has had a positive effect on burger king as shown by the 60% increase of cars through the drive thru. although costs increase because of the installation of the new window and one more person is working at the new window, burger kings productivity has increased.
Productivity is calculated as outputs divided by inputs. with the added window, burger king has 60% more sales and a small amount of costs (inputs)-wages and installation. making the margin between sales and costs much larger than before the window was added. because of burger kings decision to add the extra window productivity has vastly increased. the consequence on society of burger kings decision to add the 3rd window is that consumers will spend less time waiting for their burger and therefore get to where they want to be quicker. another effect of the 3rd window is that the queue in the drive thru will be much smaller. if consumers see this small queue they are more likely to buy burger king than if the queue was large. resulting in less disposable income and in an increase in health problems. the consequences on the workers is that they will have to work faster and harder to keep up with the drive orders. these workers may receive a slightly higher income for the more demanding work they do.
Cite this essay
Burger King Factors Of Production. (2016, Sep 13). Retrieved from https://studymoose.com/burger-king-factors-of-production-essay