1. What is the likely strategy Burger King is pursuing?
Answer- The likely strategy Burger King is pursuing is the broad-differentiation strategy. By acquiring Tim Hortons, Bk will gain access to a broad range of customers by offered not only burgers and sandwiches, but coffee and baked goods as well. By purchasing Tim Hortons, Burger King will become the third-largest fast food restaurant company in the world, with about $22 billion in system sales (mostly franchised) and over 18,000 restaurants across 100 countries Burger King is known for using tax-cutting strategies. They have been able to reduce their worldwide taxes by more than 60% over the last few years. By purchasing Tim Hortons, BK can change its tax domicile to Canada and save millions by switching to the favorable corporate income tax rates. The US corporate tax rate is 35%, whereas the Canadian corporate tax rate is 35%, before various deductions and loopholes.
2. What is the likely reaction of competitors?
Answer- Although, the deal is good news for the investors and the share prices of both the companies has gone up, the two major competitors- Mcdonald’s and Subway are likely to remain unfazed. Even if Tim Hortons and BK merge locations, Mcdonald’s and Subway will still have more locations globally. Mcdonald’s already offers its own café line and Subway offers coffee and baked goods as well.
3. Do you think they will be successful?
Answer- As there are no laws being broken in BK acquiring Tim Hortons and moving their HQ to Canada, I think they will be successful in cutting their tax costs. However, they have a long way to go before they can catch up to/beat Mcdonald’s and Subway for the #1 spot.
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