Burger King Vs. McDonalds

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Burger King and McDonalds have historically been pretty similar companies. They both provide fast and convenient food for a low price, and tend to offer similar types of food. This past year, however, the two companies have been losing some of those similarities. As a result of this, both have been performing differently as well.

For almost every player currently in the fast food industry, the last couple of years have been rough. Consumer preferences have been changing, there is more competition, and economic problems have hit the industry hard in comparison to many other industries. Burger King, however, has been able to make some progress while their biggest competitor, McDonalds, has continued to take a hit. The reason behind this seems to be the difference in strategy both companies have chosen.

As Burger King continues their attempts to rebrand themselves, they’ve done a couple things that have worked out well for them. Most notably, they have reduced the size of their menu but increased the quality of items they continue to offer. McDonalds on the other hand continues to develop and offer more items. This has caused an increase in complexity and a decrease in the quality of what they’re offering. After looking at how both companies have performed over the last year, it’s pretty obvious that Burger King has taken the better route.

When attempting to choose the process strategy of a company, the executives need to focus on customer requirements, cost, and efficiency. Burger King’s strategy has done a good job in all of these aspects. They’ve been able to increase the quality of the products they offer, tailoring them the preferences of their customers, while also reducing cost. Their money isn’t tied up in new product development or in item lines that aren’t attractive to the market. McDonalds has basically done the opposite. By continuing to develop and introduce multiple new products, their cost has risen and they haven’t been able to focus on what their customers’ preferences are. McDonalds is big enough and does have the money to do this and not notice any substantial loss in market share, but if they continue to do it, that might not continue. If the trends of this last year continue, the gap between them and Burger King is only going to get smaller.

The view of McDonalds seems to be that their strategy has worked in the past, so eventually it should work again. Do you think that Burger King is just utilizing a recovering economy, and that their new strategy will eventually stop working when it fully recovers, or is this a trend likely to continue? Is it better for a fast food restaurant to place more value on quality or variety?


Yum! Stock Takes a Hit: Forecasting Can’t Predict Everything




Yum! Brand Inc., the company that owns Pizza Hut, KFC and Taco Bell, saw a drop in their stock price Tuesday as they altered their profit forecast for the next year. The change in their forecast was due to multiple factors, the main being the second food-quality scandal in their Chinese locations. Additionally, in their US locations, Pizza Hut has noticed increased competition as their competitors continue to offer steep discounts as well as introducing new items to consumers. Taco bell has also made things difficult as they continue to add new product lines. As these factors continue to take their toll, the difficulties of sales forecasting within the food industry have become glaringly obvious.

The first food scandal that affected Yum! and their stock price occurred in September, when one of their suppliers (OSI Group LLC) was investigated for tampering with food expiration dates. Immediately following the probe, Yum! cut ties with the vendor and took legal action against them. The problem, however, was that the incident made their sales forecasting difficult for the rest of the year. Although they had cut ties with the supplier, public opinion was already affected and sales would also be affected to some extent as well. To compensate for this loss of sales in China, Yum! rolled out $1 items at their US Taco Bell locations. While this did help for the loss of revenue, it made the sales forecasting for the company even more difficult. Not only was it now a guessing game trying to estimate the loss in sales resulting from the food-safety incident, but sales for the newly introduced $1 items would also have to be estimated. To make matters worse, a second food-safety scandal hit the company in July.

In July, a Chinese TV report showed workers at a different supplier reusing meat that had fallen to the floor. Again, Yum! cut ties with the employer and took legal action, but again sales were negatively impacted in their Chinese locations. In the US, Taco Bell continued to complicate the company’s sales forecasting as they introduced yet another new line of items with their breakfast products. Although Taco Bell did manage to increase their sales by 3% as a result of this as well as other strategic moves, it is still a perfect example of the difficulties that exist with sales forecasting.

For any company, forecasting is a difficult task. For a company like Yum!, it almost seems impossible. How do you think forecasting should be carried out at a company like Yum! to avoid these types of problems? Is there a way to factor these types of events into sales forecasts to avoid huge hits to stock prices or is it just a risk of the industry? I personally don’t think that the stock price for companies in this industry should be so dependent on such a volatile number, but I also can’t think of a better way to value them.