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Outback Steakhouse "Going International" - Individual Case Study Analysis (no essay)

Outback Steakhouse "Going International" - Individual Case Study Analysis (no essay)

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  • 1. Outback Steakhouse – "Going International" Individual Case Study Uwe Wehner June 20, 2010
  • 2. I. Preface: This individual case study concentrates only on the most important facts mostly in bullet point style and not in essay style, to get a quick overview. It gives you a view about the conent of the text and the possible strategies. The case study can support case study - presentations and/or exam preparation. Not all questions signed are answered as they are answered already by parts of the previous questions. The case study is based on the "Outback – Going International" case out of the book of Mr. Robert M. Grant "Contemporary Strategy Analysis and Cases – 7th Edition". The "Individual Case Study" represents the opinion of the Author and has no demand to completeness. 06/20/2010 2  Uwe Wehner
  • 3. II. Assignment Questions for Case Study: Outback Steakhouse – "Going International" 1. What are the principal features of Outback Steakhouse’s strategy in the US? Why has the strategy been so successful? 2. What are the key elements of the international expansion strategy being proposed by Hugh Connerty? 3. Assess the proposed strategy in relation to (a) Should Outback Steakhouse expand internationally, or would it be better to expand through starting new restaurant chains within the US? (b) Does the strategy outlined by Connerty make sense? 4. If Outback is to expand internationally, advise Chris Sullivan on (a) The optimal rate of international expansion. (b) The best mode of entry into foreign markets (e.g. direct management, JV (Joint Venture), franchise). (c) Which country(ies) to enter first. (d) Whether Connerty is the right person to head the International Division. Additional Questions: 5. Do a SWOT Analysis of Outback Steakhouse. What does it suggest? 6. What are the 5-Forces by Porter? 7. What are the key success factors in the casual dining portion of the restaurant industry? Build-up a strategy on the Key Success Factors. 8. What are the primary elements of Outback’s strategy in the United States? What resources/capabilities have been critical to Outback’s success? Possible further Questions (can be found as part of previous questions): 9. What are the standout business and economic characteristic of the restaurant industry? 10. Assess the alignment between Outback’s proposed international strategy and these key resources and capabilities developed in the United States. 11. If Outback does expand internationally, what would you recommend as far as which countries to pursue first, the best mode of entry into these countries, and the pace of international expansion? If you recommend that Outback not expand internationally, how might Outback further develop its business opportunities in the U.S. 12. What major issues and conditions is the restaurant industry facing in the US? 13. What recommendations would you make to Outback Steakhouse to keep increasing sales and profit margins in his stores? 06/20/2010 3  Uwe Wehner
  • 4. III. Answers: 1. What are the principal features of Outback Steakhouse’s strategy in the US? Outback Steakhouse's strategy in the US – Principle Features: Strategy of Outback Steakhouse: Differentiation Astute positioning within the intensely competitive US restaurant business through differentiation strategy. Principle Features: 1- Differentiation Strategy (central of chain's differentiation: High quality of food and service, relaxed ambience and comfortable experience) 2- Limiting service to dinner (Outback serves only dinner) 3- Customer satisfaction 4- Outback Location and Australien Theme 5- Management and ownership structure, Benefits for employees 6- Human Resources - Selection of managers and employees 7- Long term relationship with suppliers and employees 8- Constant drive for innovation and improvement 9- Diversification: Entry into other market or restaurant concepts besides the traditional Steakhouse Market– JV with Carrabba's Italien Grill 06/20/2010 4  Uwe Wehner
  • 5. In Detail: 1- Differentiation Strategy (central of chain's differentiation: High quality of food and service, relaxed ambience and comfortable experience) o Consistently high-quality ingredients o Hand made dishes o Quality of food (central of chain's differentiation) o Preparation of limited number of menu items that appeal to a broad array of tastes o Generous portions at moderate prices o Casual dining atmosphere and highly attentive service attracting a diverse mix of customers o Bigger menue than the typical casual restaurants did in the 1980s o Restaurants are "fully staffed and fully trained" o Servers have not more then three tables to guarantee good service and provide familiar feeling to the customers o Customer sets the time and speed of serving o Provide relaxable and enjoyable experience, where customers are more likely to come back 2- Limiting service to dinner (Outback serves only dinner) o Limiting service to dinner (generally from 4:30pm to 11pm), which reduces the hours of restaurant management and employees o No lunch served  Less employees  Less costs  Freshest food, as prepared in the evening and not in the morning 3- Customer satisfaction o Important: employees will do what ever is needed to meet the needs and preferences of customers 4- Outback Location and Australien Theme o in residential areas rather then downtown o low rents o encourage of customer and employee loyalty, "The suburbs are our outback" 06/20/2010 5  Uwe Wehner
  • 6. 5- Management and ownership structure, Benefits for employees • Management and ownership structure o Providing restaurant management the opportunity to purchase a 10% interest in the restaurant they manage o directly owned restaurants with 71% to 90% owernship of Outback steakhouse Inc. (Partnership) o Each restaurant was headed by a "managing partner" o 10-20 restaurants are overseen by a regional manger (Joint Venture Partner JVP) • Extended Benefits to satisfy employees o All employees were eligible for the company's stock ownership plan o Health insurance available for all employees 6- Human Resources - Selection of managers and employees o "Tough on results, but kind with people" o Carefully choice of franchisees to ensure that all were fully committed to Outback's principles and beliefs o Aptitude tests o Psychological profiles o Interview with at least two managers o The goal was to dreate an interpreneurial climate that emphasized learning and personal growth 7- Long term relationship with suppliers and employees o Long term relationship with suppliers, viewed as "partners" o Satisfied staff and sound equipment 8- Constant drive for innovation and improvement 9- Entry into other market besides the traditional Steakhouse Market– JV with Carrabba's Italien Grill 06/20/2010 6  Uwe Wehner
  • 7. Why has the strategy been so successful? • Differentiation to other competitors with high quality of food & service and a customer orientated atmosphere and relaxed ambience as a comfortable experience. • Nevertheless the preparation of the food and high innovation and improvement • Customer's needs as highest important value • Limited service to dinner to reduce quantity of employees and costs and to guarantee quality of food • Location of restaurants are in the suburbs, to reduce costs and to improve relaxed feelings due to more room and not directly in the city • Management and ownership structure to guarantee self-identification of managers (to work for their own business) and benefit system to increase satisfaction of employees • Selection of employees acc. to their standards, to guarantee quality, same spirit and synergy • Long term relationship between supplier and employees which creates a good relationship between server and customer and guarantees constant quality of raw marterials • Diversification: Entry into other markets or restaurant concepts, as there is a saturation of steakhouse market expected. Currently open if the concept will bring success All this is responsible for the success of the Outback Steakhouse strategy with its features. This is not only a success for the franchiser, franchisees and their work- satisfied employees, it is also a success for the customers who are satisfied with the product and re-visiting the restaurants. Nevertheless not to forget the other stakeholders e.g. suppliers. Steakhouses are very popular, increasing growth and greater affluence and a declining role of family life resulted in increased eating away from home. Furthermore Outback Steakhouse fills the gap between high-priced and budget steakhouses. Using an Australien theme associated with the outdoor and adventure, providing not only excellent food but also cheerful, fun and comfortable experience. 06/20/2010 7  Uwe Wehner
  • 8. 2. What are the key elements of the international expansion strategy being proposed by Hugh Connerty? Hugh Connerty's Key Elements of International Expension Strategy: 1- Find the right franchisee partner (for) abroad • Franchise the international operation with domestic company-owned stores HERE and franchisees THERE (abroad) • Biggest decision is how to pick the franachise partner (he will concentrate on) • "We are going to select a person who has synergy with us, who thinks like us, who believes in the principles and beliefs." I have learned that people (in other countries) think very different than Americans." 2- Focus on the strength – Support Operation • Suppliers have to check to build up plants abroad o Outback wants to be a opportunity for our suppliers internationally o Outback has a high loyality to their suppliers (never changed suppliers) and expecting the same of them 3- Geographical expension – first close to home, then tackle Latin America and the Far East • Going International as very long-term project: o "The first year will be Canada. Then we'll go to Hawaii. Then we'll go to South America and then develop our relationships in the Far East, Korea, Japan ... the Orient." o "The secound year we'' begin a relationship in Great Britain and from there a natural progression throughout Europe • Connerty believed that his experience in developing outback Franchisees in the US would provide the guidelines for overseas expension • "That isn't different than the rest of the world" 06/20/2010 8  Uwe Wehner
  • 9. 3. Assess the proposed strategy in relation to (a) Should Outback Steakhouse expand internationally, or would it be better to expand through starting new restaurant chains within the US? Internation Expansion Strategy of Connerty: 1- Find the right franchisee partner (for) abroad 2- Focus on the strength – Support Operation 3- Geographical expension To 1 - Find the right franchisee partner (for) abroad: • difficult, because Outback Steakhouse is not present in countries abroad o intensive control of standards necessary o regulations and trade restrictions in foreign countries • nevertheless interviews of applicants possible in the US for abroad or in the internatinally, but problems as above -> very good Human Resource Department of Outback Steakhouse To 2- Focus on the strength – Support Operation: • Forcing suppliers to build up plants abroad could exceed their abilities o Bankruptcy of suppliers could lead to shortage of supply abroad and in the US • Large distance abroad, instead of nearer location to USA leads to higher cost and being present at the location abroad • Easier handling and control of suppliers closer to home country (e.g. Canada, Mexico or Latin America) • Searching of new supplier abroad would increase costs due to controlling, bulding-up same understanding of business and quality, to get same standard and "to get together". • Only to support operation instead of active handling and providing solutions for franchisees the "going international" project will not succeed To 3- Geographical expension: • Saturation of US Market within approx. 5 years • During that time international expension needs to be well situated • Starting with closed countries to US first and then anglo-saxon countries abroad, 2nd other suitable countries (needs to be investigated, acc. to marktet) • First get experience internationally with one project (pilot-project) and then build-up step-by-step • Franchisees or joint venture depending on country Due to all these facts, Outback Steakhouse should expend fistly national in the US than expend close to the US-Market in Canada and Mexico (NAFTA) or Latin America, as this is easier to control. But Mexico and Latin America Market needs to be investigated if suitable. Nevertheless, the expension needs to be properly planned. 06/20/2010 9  Uwe Wehner
  • 10. (b) Does the strategy outlined by Connerty make sense? No, the strategy of Connerty does not make sense and is only from his intuition. He didn't do any investigations about the following: • Where are the growing steak restaurant markets abroad? • Where do we have suffiecient demand? And is our differentiation strategie suitable in these countries. Do we need to change our strategie? • Is a diversification abroad maybe useful? Are there growing markets of other restaurants (e.g. fish, turkey, ...)? • What are the regulations and trade restrictions abroad? What countries do make problems in kind of franchising, JV etc.? • What about the supply chain in the foreign countries and supply • What are the cultural and social factors in possible countries? • Where should the location be selected acc, to demand, infrastructure, supply and raw materials? Connerty has only experience in franchising and not in JV and thinks the business it every where the same as in the US, just adaptation. This is wrong and not professional. All the above questions need to be taken into consideration and well thought before acting. A strategy from intuition without analysis will mostly lead to a failure. 06/20/2010 10  Uwe Wehner
  • 11. 4. If Outback is to expand internationally, advise Chris Sullivan on (a) The optimal rate of international expansion? Firstly it is advisable to start with a pilot project in one country abroad for example in the UK as it is an anglo-saxon country and similar to the US. The expension in closed to US countries like canada the expectation of the growth rate there will be the same as in the US, approx. 27%. Beside the expension in the US the expension in Canada should be lower as we entry the market there. I would suggest 15-20 new frenchised Outback Steakhouse Restaurants. Firstly supplied by the US suppliers and build up step-by-step local supplier system. (b) The best mode of entry into foreign markets e.g. direct management, JV (Joint Venture), franchise First entry into the UK market with a direct management to increase experience abroad with location in London. After build-up of a proper supply chain to expend in the UK with franchising. In Canada by franchising and control firstly through US management. Build-up of a supply chains in Canada and afterwards control through local management. (c) Which country(ies) to enter first As already discussed, Canada and UK first. This needs to be further investigated. (see further questions). (d) Whether Connerty is the right person to head the International Division? Connerty is not the right person for the job as "Head of the International Division"/ "President of Outback International" as he has no experience abroad and not the experience to lead organisations abroad. His experience is limited to the US (Northern Florida and Southern Georgia) as franchisee of a number of Outback restaurants. Acc. to his understanding of building up business abroad – • "The first year will be Canada. Then we'll go to Hawaii. Then we'll go to South America and then develop our relationships in the Far East, Korea, Japan ... the Orient.", • "The secound year we'' begin a relationship in Great Britain and from there a natural progression throughout Europe", • "That isn't different than the rest of the world", • "I have learned that people (in other countries) think very different than Americans" he seems not to have the right awareness of the problems coming up in this field of business and not the experience. Neverthless his way of investigation is wrong as well. 06/20/2010 11  Uwe Wehner
  • 12. 5. Do a SWOT Analysis of Outback Steakhouse 5.1. External Analysis: 5.1.1. Definition of the market: • Casual dining restaurants • Class market • Medium price segment 5.1.2. What are the 5-Forces (by Porter) of the Restaurant Market/ Steakhouse Market National and international Rivalry Supplier Power Buyer Market Power Attractiveness Entry Substitutes Rivalry: HIGH Competitive Rivalry • Competition in the restaurant industry is very strong due to the fact that all restaurants are basically going after the same potential customer. • Fragmented restaurant industry (high Segmentation of the industry) • Many global restaurant chains Buyer Power: HIGH • Buyers do not depend on suppliers (restaurants) • Alternative sources are available for the customers • Low switching costs for the buyers • High concentration of buyers/customers • Loyalty customers come back 06/20/2010 12  Uwe Wehner
  • 13. Threat of Entry (Most important): LOW Depending on barriers to entry • low capital investments necessary • customer loyalty moderate • (Differentiation of Outback Steakhouse is moderate) <- not generally based on market • Economies of scale available for large restaurant chains. Outback steakhouse: economies of scale for advertising and purchasing • Entry barriers for franchising possible, depends on country The possibility of new entrants joining the industry is high as it does take a low investment to start a restaurant. The customer loyalty is moderate, as customers change behavior and taste. The differentiation of Outback Steakhouse is moderate, nevertheless apart from steak houses and grills, competitors are casual diners, fast food chains and goceries. Threat of Substitutes: HIGH Reduction in demand for products as customers switch to alternatives • Many substitutes with similar products available (apart from relaxing and outback concept), e.g. grills, other steak houses, diner segment, fast food chains and grocers • (Any restaurant can satisfy basic human need to "satisfy hunger") -> generall • Cooking at home Supplier Power: MEDIUM • Concentration of suppliers is low/medium (internationally depending of country) • Many suppliers are available (internationally depending of country) • Switching costs are moderate (but needs to be considered that quality of beef is important) • (Very high linkage of Outback Steakhouse to their supplier acc. to the high quality) <- nnot generally based on market Looking at the five forces by porter, the market is a ½ Star Market and therefore not attractive. 06/20/2010 13  Uwe Wehner
  • 14. 5.1.3. What are the key success factors in the casual dining section of the restaurant industry? What are the driving forces? 5.1.3.1. Key Success factors of restaurant industry – casual dining /(differentiation): • Convenient Location • Maintaining brand reputation and Marketing • Familiarity with local customers preferences (differentiation – steak restaurant) • Innovation of menu • Operational efficiency • Human resources • Price-performance relation • Service and Food Quality (differentiation - steak restaurant) 5.1.3.2. Driving forces of restaurant industry – casual dining – National/International: PESTEL - Analysis Possible Driving forces: • Political o Taxation o Foreign trade restrictions • Economic Factors o Interest rates o Money suply o Inflation o Unemployment o Income • Sociocultural o Population (demographics) o Income distribution o Lifestyle changes o Attributes to work and leisure o Consumerism • Technological o Industry focus of government o New discoveries (food) • Environmental o Waste disposal o Energy consuption o Environmental laws • Legal o Competition law o Employment law o Health and safety o Product fafety 06/20/2010 14  Uwe Wehner
  • 15. Important Driving forces - NATIONAL: • Changing consumer tastes, lifestyles, consumption • Income distribution • Laws and restrictions (Environmental laws, competition laws, employment laws, health and safety laws, ...) • Macro-economic conditions (frequent of customers, prices paid by customers/income of customers, unemployment...) • Micro-economic conditions (Raw material prices, ...) Additional Important Driving forces - INTERNATIONAL: • Foreign trade restrictions • Population (demographics), ... Factors for Market Selection and Entry: (Beri-Index) • Macro-economic conditions • Political environment • Infrastructure • Cultural norms and social structures • Political and legal risks Available Information/Determinants choosing a country: • Demographics • Infrastructure • Income • Trade laws 06/20/2010 15  Uwe Wehner
  • 16. 5.2. Internal Analysis (SW): 5.2.1. What are the "Key Success Factors"? How to increase customer value? Key Success factors of restaurant industry – casual dining /(differentiation): • Convenient Location • Maintaining brand reputation and Marketing • (Experience in franchising (franchising industry)) • Familiarity with local customers preferences (differentiation – steak restaurant) • Innovation of menu • Operational efficiency • Human resources • Price-performance relation • Service and Food Quality (differentiation - steak restaurant) Key success factors can be different from country to country and needs separately investigated. The key success factors include "how to increase customer value". 5.2.2. What resources and capabilities do we need to deliver these "Key success factors"? 1- Resources - What Resources do we need to deliver KSFs? • Buildings and equipment (interieur) • Location • Distribution (supply network) • Reputation • Human resources (Capacity of: R&D, preparation of meals, Service, managers, marketing) 2- Capabilities - What Capabilities do we need to deliver KSFs? • (Strategic Management – Business Development) • Administration and Management – Operational efficiency • Quality Management of supply and finished product • Human Resource Management to get the right managers and employees • Marketing (Brand reputation abroad, ..) • Product Development (Menu, meals, ...) • Research & Development (Research, New Product Development Innovations, Research of customer's preferences, Innovation of menu) • Production – efficiency, quality • Procurement/Supply, decrease of procurement prices • Logistics (Shipment, Storage, Inventory Control, Planning, Coordination) • Sales 06/20/2010 16  Uwe Wehner
  • 17. Looking at the "Resources" of Outback Steakhouse, all pre-requisites are available and well selected. At the "Capabilities" the following needs to be improved or integrated to get a competitive advantage: • Administration and Management – Operational efficiency • Product Development (Menu, meals, ...) • Research & Development (Research, New Product Development Innovations, Research of customer's preferences, Innovation of menu) • Production – efficiency • Procurement/Supply, decrease of procurement prices to get higher profits and decrease prices. As there are to less information about the direct competitors, we can not say more about the necessary improvements. 5.3. Conclusion of SWOT – Analysis: 5.3.1. Internal Analysis (SW): Strength: • High quality to affordable prices and innovative concept (price-performance relation) • Good reputation, brand awarness and image in the US • Excellent Human Resources Department • Differentiation Strategy (customer orientation) • (Strong entrepreneurial spirit) • Good supplier relation • Experience in local franchising (US-Market) -> going international • Relaxing atmosphere (Australian Theme) • (Location of restaurants (suburbs)) Weaknesses: • No menu inovation (R&D, Product Development) • No international experience -> "going international" • No brand awareness in foreign countries -> "going international" • Very tight linkage to suppliers (dependency) -> "going international"(prices, ...) • Partial product line, reduced to beef (apart from Carrabba's Italien Grill) • (Serving only dinner (not serving lunch crowds)) • operational inefficiency compared to competitors 06/20/2010 17  Uwe Wehner
  • 18. 5.3.2. External Analysis (OT): Opportunity: • Add. Diversification through JV/acquisitions/alliances apart from "Carrabba's grill (Horizontal Integration) • Purchasing of small companies that supply products of need (Backward Integration) • Integration of a delivery service with Internet Ordering System (Forward Integration) • Expension of offered menu • Expend business internationally • Additional opening hours for lunch crowds (also partly or as pilot projects) Threat (Bedrohung): • Saturation of US-Market within five years • Competitors with new concepts and innovations (national and international) • Concept may not work in every foreign country (rejection) • Cultural differences and economic barriers (tariffs, regulations, laws, labor laws and unification, ...) • Inability of suppliers to follow internationally, host suppliers need to be found • Health concern about red meat consumption What does it suggest? The SWOT analysis shows, where Outback Steakhouse has got it strengths and where its weaknesses and especially where they are good in. They are completly focused on US-Market and the have to master high barriers to be successful in future to go international. Especially the country selection for international expension is a key element of success. 06/20/2010 18  Uwe Wehner
  • 19. 6. What are the 5-Forces (by Porter) of the Restaurant Market/ Steakhouse Market National and international Rivalry Supplier Power Buyer Market Power Attractiveness Entry Substitutes Rivalry: HIGH Competitive Rivalry • Competition in the restaurant industry is very strong due to the fact that all restaurants are basically going after the same potential customer. • Fragmented restaurant industry (high Segmentation of the industry) • Many global restaurant chains Buyer Power: HIGH • Buyers do not depend on suppliers (restaurants) • Alternative sources are available for the customers • Low switching costs for the buyers • High concentration of buyers/customers • Loyalty customers come back 06/20/2010 19  Uwe Wehner
  • 20. Threat of Entry (Most important): LOW Depending on barriers to entry • low capital investments necessary • customer loyalty moderate • (Differentiation of Outback Steakhouse is moderate) <- nicht generell auf Markt bezogen • Economies of scale available for large restaurant chains. Outback steakhouse: economies of scale for advertising and purchasing • Entry barriers for franchising possible, depends on country The possibility of new entrants joining the industry is high as it does take a low investment to start a restaurant. The customer loyalty is moderate, as customers change behavior and taste. The differentiation of Outback Steakhouse is moderate, nevertheless apart from steak houses and grills, competitors are casual diners, fast food chains and goceries. Threat of Substitutes: HIGH Reduction in demand for products as customers switch to alternatives • Many substitutes with similar products available (apart from relaxing and outback concept), e.g. grills, other steak houses, diner segment, fast food chains and grocers • (Any restaurant can satisfy basic human need to "satisfy hunger") -> generall • Cooking at home Supplier Power: MEDIUM • Concentration of suppliers is low/medium (internationally depending of country) • Many suppliers are available (internationally depending of country) • Switching costs are moderate (but needs to be considered that quality of beef is important) • (Very high linkage of Outback Steakhouse to their supplier acc. to the high quality) <- nicht generell auf Markt bezogen Looking at the five forces by porter, the market is a ½ Star Market and therefore not attractive. 06/20/2010 20  Uwe Wehner
  • 21. 7. What are the key success factors in the casual dining section of the restaurant industry? Build-up a strategy on the Key Success Factors. 7.1. Key Success factors of restaurant industry – casual (lässig) dining /(differentiation): • Convenient Location • Maintaining brand reputation and Marketing • Familiarity with local customers preferences (differentiation – steak restaurant) • Innovation of menu • Operational efficiency • Human resources • Price-performance relation • Service and Food Quality (differentiation - steak restaurant) 7.2. Driving forces of restaurant industry – casual dining – National/International: PESTEL - Analysis Possible Driving forces: • Political o Taxation o Foreign trade restrictions • Economic Factors o Interest rates o Money suply o Inflation o Unemployment o Income • Sociocultural o Population (demographics) o Income distribution o Lifestyle changes o Attributes to work and leisure o Consumerism • Technological o Industry focus of government o New discoveries (food) • Environmental o Waste disposal o Energy consuption o Environmental laws • Legal o Competition law o Employment law o Health and safety o Product fafety 06/20/2010 21  Uwe Wehner
  • 22. Important Driving forces - NATIONAL: • Changing consumer tastes, lifestyles, consumption • Income distribution • Laws and restrictions (Environmental laws, competition laws, employment laws, health and safety laws, ...) • Macro-economic conditions (frequent of customers, prices paid by customers/income of customers, unemployment...) • Micro-economic conditions (Raw material prices, ...) Additional Important Driving forces - INTERNATIONAL: • Foreign trade restrictions • Population (demographics), ... Factors for Market Selection and Entry: (Beri-Index) • Macro-economic conditions • Political environment • Infrastructure • Cultural norms and social structures • Political and legal risks Available Information/Determinants choosing a country: • Demographics (Bevölkerungsstatistik) • Infrastructure • Income • Trade laws 06/20/2010 22  Uwe Wehner
  • 23. 7.3. Possible Strategies besides Diversification and opening hours: a) Marketing campain • Pros: o Higher market share through more restaurants o More frequent visits (loyality of customers) o Long term relationships build • Cons: o Marketing costs o Service needs to takle boom b) Going International • Pros: o Increased global Market share o Lower raw material and employee cost (depending on country) o Economies of scale o economies of scope • Cons: o High entry costs o Unfamiliarity with culture o Different laws o Different culture and tastes o Different customer needs and expectations o Time and cost consuming 06/20/2010 23  Uwe Wehner
  • 24. 8. What are the primary elements of Outback’s strategy in the United States? (see above) What resources/capabilities have been critical to Outback’s success? 8.1. What are the "Key Success Factors"? How to increase customer value? Key Success factors of restaurant industry – casual (lässig) dining /(differentiation): • Convenient Location • Maintaining brand reputation and Marketing • (Experience in franchising (franchising industry)) • Familiarity with local customers preferences (differentiation – steak restaurant) • Innovation of menu • Operational efficiency • Human resources • Price-performance relation • Service and Food Quality (differentiation - steak restaurant) Key success factors can be different from country to country and needs separately investigated. The key success factors include "how to increase customer calue". 8.2. What resources and capabilities do we need to deliver these "Key success factors"? 1- Resources - What Resources do we need to deliver KSFs? • Buildings and equipment (interieur) • Location • Distribution (supply network) • Reputation • Human resources (Capacity of: R&D, preparation of meals, Service, managers, marketing) 2- Capabilities - What Capabilities do we need to deliver KSFs? • (Strategic Management – Business Development) • Administration and Management – Operational efficiency • Quality Management of supply and finished product • Human Resource Management to get the right managers and employees • Marketing (Brand reputation abroad, ..) • Product Development (Menu, meals, ...) • Research & Development (Research, New Product Development Innovations, Research of customer's preferences, Innovation of menu) • Production – efficiency, quality • Procurement/Supply, decrease of procurement prices 06/20/2010 24  Uwe Wehner
  • 25. • Logistics (Shipment, Storage, Inventory Control, Planning, Coordination) • Sales Looking at the "Resources" of Outback Steakhouse, all pre-requisites are available and well selected. At the "Capabilities" the following needs to be improved or integrated to get a competitive advantage: • Administration and Management – Operational efficiency • Product Development (Menu, meals, ...) • Research & Development (Research, New Product Development Innovations, Research of customer's preferences, Innovation of menu) • Production – efficiency • Procurement/Supply, decrease of procurement prices to get higher profits and decrease prices. As there are to less information about the direct competitors, we can not say more about the necessary improvements. 3- General: General Resources: • R1 – Finance (Capital, Cash, Debitors/Creditors, Suppliers of Money, Securities, Borrowing Capacity) • R2 – Physical (Plant, Labor, Buildings, Equipment, Machines, Land, Production Capacity) • R3 – Location • R4 – Distribution (dealership network) • R5 – Technology (Patents, Copyrights, Trade Secrets, Business Systems, Databases, Intellectual Property) • R6 – Reputation (Brands, Relationships Customer/Supplier/Dealer) • R7 – Culture • Human Resources (Skills, Capacity, Motivation) General Capabilities: • C1 - Strategic Management • C2 - Financial Management • C3 - Quality Management • C4 - Government Relations • C5 - Human Resource Management • C6 - Product Development • C7 - Research & Development (Research, New Product Development Innovative/Fast Cycle) • C8 – Engineering • C9 – Procurement • C10 – Logistics (Shipment, Storage, Inventory Control, Planning, Ins/Outs Coordination) 06/20/2010 25  Uwe Wehner
  • 26. 8.3. What are the key drivers for Outback steakhouse to go international? Key drivers of globalization – go international: • Global market convergence o Global customers o Transferable marketing o Similar customer needs • Cost advantage o Economies of scale o Economies of scope o Country specific costs • Global competition o Competitors global • Government influence o Trade policies (e.g. South Korea/Japan no customs) • Satisfaction of US market within five years Overseas Strategy: • Multi domestic strategy with menues configured to appeal local tastes • Leverage: Australien Theme and American Brand name o International strategy o Need local knowledge on permits, marketing & wholly owned subsidiary/JV/franchising Markets to Enter: • Canada o Similar in purchasing power and infra structure to UK • UK o Leave as it is • Germany o Overcoming perceptions (Wahrnehmung) and competition in Germany • Japan o Incurring high costs, no customs • South Korea o Standards similar to Europe • Mexico o Economy, tastes, recession, infrastructure -> could be better • Dubai o Diverse immigrants o Tourists destination o Sea food imports 06/20/2010 26  Uwe Wehner
  • 27. GENERAL INFORMATION: Overseas Expension by US Restaurant Chains – Overview of the text: • International Marktet offered substantial growth opportunities for US restaurant chains • See Table 17.2 • Attraction of overseas market: o Less saturation compared to the US o Local competitors are independent, family owned restaurants rather then large chains o Anticipation/Expectations that market trends would follow those of the US  Greater affluence and declining role of family life would result in increased eating away from home • Reason/Key Impetus to overseas expansion – maturing US market • Not only competition intense, but growth was slowing in the US • Overseas markets also represented a substantial management challenge • Encountered Problems Overseas of other restaurant chains: o Market Demand  Factors: • Disposable income of customers • Urbanization • Demographics • Host social, economic and lifestyle factors • National preferences – Adaptation to local differences necessary o Cultural and social factors  Critical influences on customer preferences with regard to menus, restaurant facilities and overall ambience  Different employee management practices  Different entrepreneurial potential o Infrastructure  Transportation  Communication  Basic utilities such as power and water  Locally available supplies were important elements in the decision to introduce a particular restaurant concept  Ability to get resources to its location • Raw materials for food preparation • Equipment for manufacture of food served • Mobility for employees and customers essential o Raw material supplies  Need of local supplies of food and drink  Problems finding supplies in: • Sufficient quantity • Of consistent quality 06/20/2010 27  Uwe Wehner
  • 28. • And at stable prices  Physical distance can adversely affect a franchise concept and arrangement  Long distances create communication and transportation problems -> complex process of sourcing supplies -> overseeing operations -> providing quality management services to franchisees  Build up own Supply Chain costs: • Management Time • Money and could be substantial o Regulations and trade restrictions  Import restrictions are relatively unimportant, when food is locally sourced  Import of Restaurant equipment sometimes difficult and expensive  Restrictions on foreign direct investments only in developing countries  National regulations relating to food standards, business licensing and business contracts (far more challenging)  Establishing new business in other countries then US is more difficult acc. to regulations  Franchise Agreements = difficult area • Complex contractual agreements between franchisor and franchisee • Regarding trademark licensing, royalty payments, requirements for Quality Control and Quality Monitoring • Mostly no restrictions on franchising of foreign countries published and usual franchise terms are viewed as restraints on commerce  Employment laws, restrictions and system • dismiss or lay off employees • requirements for union recognition and national bargaining arrangements over wages and work conditions 06/20/2010 28  Uwe Wehner

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