Merger, Acquisition And International Strategies – Burger King Corporation And Tim Hortons Inc

Acquisitions and mergers are both management strategies where companies buy sell or merge companies or a portion of the company. Companies acquire or merge with other companies, competitors or complementary companies, in order to maximize their profits among other benefits including increasing convenience. Business collaborations increase the amount of disposable resources available to a both corporations this fostering expansions (Bena& Li, 2014). Companies find it easier to penetrate markets that its corporate partners have already conquered. This is mainly because customers feel that they do not need to take a leap of faith to trust a company that has a strong relationship with the corporation that they already know and trust.

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Corporations that have a history of successful mergers tend to attract partnerships with more ease than the ones with no track record of such business collaborations. This coupled with the increased resources enable a corporation expand and exploit more opportunities both locally and internationally (Bena& Li, 2014).A corporation that has a history of mergers and acquisitions, such as Burger King Corporation,hasadded advantages over one that operates solely, such as Sonic Corporation.

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An Assessment Of The Strategies That Were Employed By Burger King Corporation To Merge With Tim Hortons Inc In 2014

Burger King Corporation is an American restaurant chain that specializes in fast food including French fries, Hamburgers, Sandwiches, Coffee, Soft drinks, Desserts, and Milkshakes among others. Keith J. Kramer and Matthew Burns founded Burger King in 1953. The Food Chain has experienced great success and is currently the second largest fast food vending chain in America, after McDonalds, with over 11,000 stores, 1000 of those being company owned. It has its presence in approximately 56 countries worldwide and serves more than 15.7 million customers daily (Reference for Business, n.d.).

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Mergers and acquisitions have an immediate impact on both organizations as they dictate changes in ownership, organizational structures, and ultimately its operations. The major consideration for this merger by Burger King was financial benefit that the company would gain from the merger. This was a good move since Burger King has been reporting a decline in revenues since 2012, which may be attributed to anincrease in competition and re-franchising of its over 360 company-owned restaurants that took place in 2013 (Burger King. n.d.). Two corporations combined to create one of the leading fast-food restaurants chain, the 3rd largest, worldwide. The new company has over 18,000 restaurants and its presence in over 100 countries. Burger King received paid $12.5 billion in cash and the remaining $9.5 billion in debt financing package (Burger King. n.d.).  One of the main benefits that Burger King was to derive from this merger was low tax charge. The new Company’s headquarters are located in Ontario, Canada, where corporate taxes charged are lower than those charged in the U.S. For Burger King, this was a good strategy for reducing its tax expenditure as the new company allows Burger King to be taxed under Canadian taxation laws, which do not impose double taxation on offshore profits like U.S taxation laws. Burger King will no longer pay double tax charges for its offshore profits, which were previously subject to both U.S. taxation and that of the country of origin. Additionally, the Burger King located in Canada will enjoy low tax charge.

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Although the Burger King will still be paying US taxation for profits generated from its U.S operations, the merger will save it significant amounts in relation to its offshore tax charges. In 2013, only 58 percent of Burger King’s net profits came from America and Canada. The total foreign profits (excluding Canada) were about $98.15 million, this profits were taxed again on repatriation under the U.S. corporate tax rate of 35 percent. The second portion of double taxation cost the company approximately $34.35 million (Burger King. n.d.). The company will be able to save this amount, plus savings from taxation of its Canada generated profits, in future. Reduced tax charge would boost the Company’s profit margins significantly.

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The compatibility of the organization’s cultural traits is a critical in determining whether a company is a good match for a merger as it will determine the extent to which talent retention can be achieved. Organizational culture shapes an organization as it dictates how the organization conducts its day-to-day activities, its disputes solving processes and its management structures.  Understanding the cultural practices of an organization has to be done over a period of time since what organizational cultural behaviors should be, as listed on paper, may be different from what they are in reality. Burger King is an American based company while and Tim Holtons is a Canadian based company, which may cause differences in cultural practices between the two companies but since the companies do not intend to integrate their operations, the impact will be minimal or even negligible.

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A Company That Would Be A Profitable Candidate For Sonic Corporation To Acquire Or Merge With

Sonic Corporation was established in 1953 and has grown a renowned hamburger chain, fifth largest, in America. The company has maintained a commendable success rate most of which it attributes to its low employee turnover rates (Sonic Corporation, 2012). The company creates favorableworking environment, which boosts job satisfaction. The company’s success is evident, having over 2,2172 restaurants spread across U.S (Funding Universe, 2012).  Even with such a good success track record, the corporation could benefit from expanding and venturing into the international market.

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Sonic Corporation would gain a number of benefits from merging withWimpy U.K., a U.K. based restaurant chain that specializes in hamburgers. Wimpy offers high quality fast food and excellent services to customers in a relaxed environment, similar to Sonic drive in.  Wimpy has its presence in a number of countries including United Kingdom, India, Cairo, Ireland, South Africa, and Kuwait. This could be advantageous the Sonic Corporation, who are yet to penetrate the international market. Through merging with Wimpy, Sonic Inc would gain a partner with experience and crucial knowledge on International markets as well as it would get the financial backup to expand its operations.  Presence of wimpy in a number of countries would help Sonic Drive-in marketing its products in those countries as Wimpy already has an existing customer base which are likely to accept Sonic Drive-In more readily.

Burger King’s International Business-Level Strategy And International Corporate-Level Strategy Analysis

Burger King has achieved and maintained success in the both locally and in the international markets employing business-level and corporate-level policies that pay attention to their customers and observe their different cultures. Burger King employs transnational strategies in which it pursues a happy medium between its domestic and global strategies (David, 2007). The firm balances the need for productivity with that of adjusting to local favorites in the different countries it operates in. It markets its products in the international markets using the same brand names and main menu items it provides locally with some minimal alterations to suit the market’s culture and too.

The main primary business-level strategies employed by Burger King is its utilization of differentiation of their products in different nations to ensure that the needs of the customers are met despite the difference in culture.  Burger King can provide products that are unique from those provided by their competitors (David, 2007). The firm’s ‘have it your way’, ‘the King’ and ‘be your way’brand promises encompasses the company’s operations especially in its provision of goods and services.  It aims to give the customers the opportunity to govern the experience they have with the Burger King. For example, the concept behind The Subservient Chicken campaign where a customer asked a chicken to do ridiculous things and since Burger King customers gets things their way, the chicken obliged. This concept differentiates the brand through offering effective customer service that makes the brand unique as customers felt that they could own it.

Recommendation:

Combining this strategy with price leadership would have great impact on Burger King’s market share. Burger King’s prices are slightly higher than its main competitor, McDonald, which is one of the main reasons why the company remains second, trailing McDonalds. Reducing their prices coupled with their excellent customer service would boost sales significantly.

One of the corporate-level strategies that Burger King employs to acquire international feat has been to increase the quality the food that it provides to its customers across the nations (David, 2007). The cultural trends are increasingly moving towards healthy eating and more and more people are conscious of what they eat. This has made Burger King increase its products range to include healthier alternatives as well as their old products that are not so healthy but have an already existing customer base. The company has been advertising some of its menu items as ‘healthy’ so as to attract the health conscious customers.

Recommendation:

Burger King could benefit from adopting policies that will allow it to swap its industrially produced ingredients, such as meat used in burgers and vegetables used in their salads, for organically manufactured ones.

A Business-Level Strategy And One Corporate-Level Strategy That Sonic Corporation Should Consider

A business-level strategy that Sonic Corporation can employ to gain competitive edge and penetrate the international markets with ease is cost leadership. This involves offering their products at prices that are lower than their competitors so as to attract more customers (David, 2007). Sonic Corporation already utilizes this strategy across its American stores through its Happy Hour offer. The offer allows customers to buy drinks at half their normal price during given time intervals of certain days. Employing a similar strategy in the international market would attract many customers hence giving the restaurants an opportunity to create a lasting impression. The customers would also get to experience the products and services offered which would entice them to visit the restaurants during the happy hour and normal working hours too.

A corporate-level strategy that Sonic Corporation could employ when venturing into is their policy of maintaining low the international market is its human resource management policies that help to reduce employee turnover rates. Sonic Corporation employees and management has been a big contributing factor to the company’s success in America and it could help achieve success when the company expands. The firm gives its managers an opportunity to partner in the business, which motivates them to deliver positive results and ensure that the company obtains its goals. When this strategy is employed on a global level, it will increase the company’s chances of success since the those charged with governance of the restaurants in the different nations will have personal interest in the success hence will have higher motivation.

In conclusion, mergers and acquisitions help companies expand their operations thus boosting their revenues and profits. Though Burger King Corporation does not represent all companies; there are several lessons that can be deduced from their successful merger. Additionally, employing the appropriate business-level and corporate-level strategies can help corporations to successfully increase their market share and exploit their opportunities for growth.

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