Wednesday, August 27, 2014

Burger King/Tim Horton's Merger

With the recent merger of the Burger King and Tim Horton's fast food chains being a popular topic lately, I could only wonder what kind of changes this new agreement could bring. Obviously, the two companies foresaw some benefits to this agreement, but I was really curious to figure out how they were able to predict - or forecast - that they'd be more successful working together instead of standing alone.

Here, I turn to the five key concepts in forecasting, which I encountered in An Introduction to Supply Chain Management. Simply, they are 1) impact of technology, 2) social issues, 3) political issues, 4) legal issues, and 5) environmental issues. Both companies looked critically at least some of those points, and deduced that a merger would be smart. But how? With this merger, the Burger King/Tim Horton's fast food enterprise became the third largest in the world (Forbes). That's certainly nice. But in particular, I think the first key forecasting concept - technology - is going to make this deal sweeter (literally and figuratively) for Burger King. Burger King has been struggling for years to compete with McDonald's and Starbucks for breakfast customers, so having the ready-made formula for success during breakfast hour from Tim Horton's s going to be invaluable to Burger King (The New Yorker). Tim Horton's technology, including their coffee and doughnut recipes and the manufacturing processes for those items, might be the key to opening a successful breakfast service at Burger King. It's safe to say that Burger King executives probably noted this benefit while forecasting their future as owners of Tim Horton's.

Incorporating Tim Horton's breakfast genius into Burger King will also elevate both restaurant chains to a more prominent international stage, something both companies have struggled with, particularly Tim Horton's. But this merger is not without its negative side effects as well. Perhaps it's not as big of a deal as I think it might be - an issue with my forecasting ability, I am sure - but immediately after the merger was announced, the American public accused Burger King of buying Tim Horton's simply for tax reasons. This negative sentiment might create social issues surrounding the Burger King name in the U.S. and perhaps discourage customers from buying their next lunch at such an "unpatriotic" restaurant. The same might occur in Canada with the Tim Horton's franchise. With most attempts to expand Tim Horton's into America utter failures, the company doesn't have a great track record for making the "Canadian way" appeal to American consumers, so after long, Tim Horton's might have tone down their patriotism too (The New Yorker). Like Burger King "abandoned" the U.S. for tax purposes, Canadians might feel that Tim Horton's is betraying them as well. Both scenarios create social issues that may impact both companies' sales in their homelands. These issues can also be viewed in a political way - key forecasting concept #3.

So, this issue of predicting the benefits of a merger by using the key principles of forecasting from the reading is no easy task, and the tides can change at any moment. It's important that this new fast food conglomerate continues to update its forecasts to keep this merger as successful as it seemed the day Burger King and Tim Horton's agreed to it.

P.S. - There is a Tim Horton's, the first in this area, that opened in Washington, PA a little less than a year ago. Go try it!

And here are my sources:

http://www.newyorker.com/business/currency/burger-king-wants-deal-tim-hortons
http://www.forbes.com/sites/clareoconnor/2014/08/26/burger-king-and-tim-hortons-make-it-official-merge-to-form-third-largest-fast-food-company/
http://www.newyorker.com/business/currency/burger-kings-un-canadian-plans-tim-hortons

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