We select the food business, since nearly everyone has had direct experience with McDonald’s and Burger King, and though more expensive, many have been to a Benihana restaurant. Everyone would classify the first two as fast food restaurants, but Benihana has at least some fast food characteristics, with its limited menu and its aim to process customers in one hour through a highly standardized system. Certainly, though Benihana is different from the other two, and we will identify some of these differences.
The Enterprises Strategies:
The generic strategy of each enterprise forms a frame of reference for its operations strategy and is closely related to it. McDonald’s and Burger King are in the growing fast food industry. In 1985, McDonald’s was the largest with 6500 outlets in the United States and more than 8000 worldwide; recently it has been adding a new restaurant every 17 hours. Over six percent of the American population eat at a McDonald’s restaurant every day. Its strongest competitors are Kentucky Fried Chicken, with 4500 US outlets; Pizza Hut, with 4300; Burger King, with 3500; and Wendy’s with 3300. The fast food industry is comprised of more than 340 chains with 60,000 outlets in the United States.
McDonald’s generic strategy is to be the overall cost leader in the hamburger segment of the fast food industry, and, in recent years it has had about a 35 percent market share. McDonald’s aims for low cost; fast service; good, consistent quality in the food served; and very high standards of cleanliness and service.
The menu is very limited and is completely standardized, with virtually no options offered. (Their slogan is, We do It All for You). The service is extremely fast, with a combined waiting plus service time of just over two minutes. The prices for the quality of food are very low, and as advertising consistently tells fast food consumers, the volume is tremendous, with billions of hamburgers having been produced and sold.
McDonald’s revenues were growing at a brisk 29 percent annual rate during the 1970s, through 5951 restaurants worldwide (4998 in the United States) in 1980. The number of units was growing at an average annual arte of 15 percent.
Second place Burger King, with its 11 percent market share of the hamburger fast food business; has the familiar slogan, have It Your Way. The complete jingle commonly used in their advertisements is
Hold the pickles
Hold the lettuce
Don’t upset us
All we ask is that you
Let us serve it your way.
In spite of the slogan, Burger King’s menu is also very limited and standardized. It does not really push the idea of making everything to order, rather its personnel will tailor make items if the customer wants them to, but they clearly prefer standardized output, similar to McDonald’s. In addition, its service is fast, but not as fast as McDonald’s (just over four minutes of waiting plus service time). Burger king also takes pride in quality and low cost to customers, but its prices run about 10 percent higher than McDonald’s.
Though smaller than McDonald’s, Burger King was also growing rapidly in the 1970s (26 percent per year) and by 1980 it had 2766 units worldwide (2640 in the United States), less than half the total number of McDonald’s units. Other comparisons show McDonald’s system wide revenues were about three times those of Burger King’s, and its revenues per unit were about 36 percent greater than Burger King’s.
Burger King’s enterprise strategy in 1980 seems to be slightly different from McDonald’s, but it is not truly a differentiated strategy. It offers some customizing by allowing limited choices in how to dress the hamburgers, but it hopes that customers will take standard burgers without special orders. The enterprise strategy seems to be low cost, fast service, and controlled quality as was McDonald’s, but with some customization.