Internal Analysis When looking at the internal factors of Burger King (BK) and Tim Horton’s (TH), the largest weakness is Burger King’s poor brand image. BK has global brand recognition but the poor image could be challenging to overcome and could even negatively impact TH’s image. TH’s image has allowed them to gain 70% of the market share in baked goods and 75% in coffee within the industry in Canada. In addition to TH’s high quality coffee they have followed trends by adding healthier options over the years, making their product offering a strength in today’s market.
BK has not followed social trends, and instead has held out on the addition of healthier options and promoted their high calorie, high fat food. BK’s refusal to focus on healthier options is a weakness in today’s environment and also a weakness going forward if they do not change. TH’s revenue growth, same-store sales growth and market share are a strength that can help stabilize BK’s slumping sales.
It also means that TH’s is doing something right – marketing, listening to customers, etc. Although TH’s has market share, brand recognition and image within Canada, its global brand recognition is slim to none.
In addition to BK’s unhealthy product line, bad marketing and controversial advertising have negatively affected BK’s brand image. Thus, BK’s poor brand image could overpower TH’s image, making it difficult to successfully expand TH’s outside of Canada. BK’s global presence (locations in over 100 countries) and size are an advantage for both TH and BK.
TH can expand its products and brand without many of the costs associated with expansion and there is still room for BK to continue growing internationally.
In addition, BK will move its headquarters from Miami to Canada, which will lower its tax rate from 35% to 26. 5%. Burger King-Tim Horton’s External Factor Evaluation Opportunities Weight Rating Weighted Score Gain of market share in the breakfast industry 0. 08 4 0. 32.
Expansion of Tim Horton’s (outside of Canada) 0. 08 4 0. 32 Take market shares from McDonald’s 0. 07 3 0. 21 Increased buying power (suppliers) 0. 06 3 0. 18 Expansion of healthier option (high quality image) 0. 09 4 0. 36 Technological advancements 0. 01 3 0. 03 Expansion of Tim Horton’s loyalty card 0.01 3 0. 03 Growth of fast-casual food industry 0. 09 4 0. 36.
Threats Weight Rating Weighted Score Decline of sales in fast-food industry 0. 09 1 0. 09 Strong competitive environment 0. 11 1 0. 11 Buying power (consumers) 0. 05 2 0. 10 Low barriers to entry 0. 03 2 0. 06 Social responsibility (health food movement) 0. 10 1 0. 10 Inflation/Rising food cost 0. 05 2 0. 10 Increased minimum wage 0. 01 2 0. 02 Burger King’s bad PR (social pressure) 0. 07 1 0. 07 External Analysis Much of the threats that BK and TH face have to do with competition.
The fast food and fast casual industries include large and small competitors and many of both. While the growing fast casual industry is an opportunity for a combined BK and TH, it widens the scope and number of competitors, which also makes it a threat. In addition, the fast food industry is seeing declining sales and this is a threat because BK is currently competing in fast food. These two industries have low barriers to entry, but the strong level of competition makes low barrier to entry a small threat, not a large threat. BK in particular faces a threat in its product offering.
BK has not jumped on the bandwagon with the healthy food movement and therefore, BK has been falling behind. They are not seen as socially responsible. Adding to the issues, BK’s bad press in regards to the TH acquisition could threaten the image of the combined company in addition to any potential legal ramifications or political pressure due to corporate inversion. Other external threats include the push by fast food workers for the minimum wage to be increased. If the federal government raises the minimum wage, it will have a negative effect on the margins or will force an increase in food/beverage prices.
This unrest, along with rising food cost and inflation will potentially be a large hurdle for BK and TH. BK and TH do have significant opportunities. These include expansion of TH outside of Canada and the opportunity to gain market share in the breakfast segment. BK has the opportunity to use TH’s menu to bring in healthier options and to compete in the growing fast casual industry. These opportunities have the possibility of overcoming many of the threats BK and TH face.
In addition, BK and TH have the opportunity to take market share from McDonalds, who has seen its sales decline recently. A larger company also means a potential for more bargaining power with suppliers, therefore helping BK/TH margins. TH offers a loyalty credit card, which may be appealing to US customers, especially with the number of US locations. This is an opportunity for the combined company to increase repeat purchases across all US and Canadian locations. In addition, BK and TH can look at streamlining their ordering/payment processes by implementing new technology.
Works Cited Trefis Team. “Burger King-Tim Hortons Cross-Border Merger Much More Than Tax Inversion. ” Forbes. com. 29 August 2014. Trefis. com. 27 September 2014. <http://www. forbes. com/sites/greatspeculations/2014/08/29/burger-king-tim- hortons-cross-border-merger-much-more-than-tax-inversion/> “The Morning Risk Report: Values and Reputation Risk in Fast Food. ”
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