Outback steakhouse international strategy

Outback Steakhouse – "Going International"

Individual Case Study

Uwe Wehner

June 20, 2010

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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.

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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?

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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

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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"

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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

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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.

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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"

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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.