Analysis of Outback Steakhouse Inc
... INTRODUCTION Outback Steakhouse is one of the most successful restaurant chains in the U. ... steakhouse chain with over 200 stores throughout the United States in 1995. With experienced entrepreneurs Chris Sullivan, Bob Basham and Tim Gannon as its management, Outback implements a strategy motivated by distinctive factors unusual to the industry. Being one of the biggest success stories in corporate America, Outback is faced with the opportunity for expansion abroad. This brings about various considerations as to the targeted market and how Outback can guarantee success in these markets. ... PEST ANALYSIS 2.1 Political & legal Outback currently has 164 restaurants in U. ... market to saturate in 4 to 5 years, Outback plans to go into international markets. ... Outback also needs to note any restrictive trade policies such as those governing the import of commodities and equipment, as well as tariff rates. ... 2 Economic In deciding which overseas market to enter, Outback needs to consider a number of factors such as the size of economy, GDP per capita, patterns of production, market economy, business practices, real growth rate, et cetera. If the market proves to be not profitable, it is unlikely that Outback will enter it. ... 3 Sociocultural A bottom reason for Outback’s existence was that in-home consumption of meat, especially beef, had declined but consumers continue to patronize restaurants for good steak. This allows Outback to tap the opportunity in providing quality steaks at an affordable price. ... These will impede Outback’s expansion plan in contrast. ... 4 Technological Technology does not seem to play an extremely important part in Outback’s restaurants, thus little can be discussed in this aspect 3 PORTER’S 5 FORCES 3. ... However, considering Outback provides exceptional value at the average entrée price, consumers are unlikely to demand price decreases. ... 3 Bargaining power of suppliers – Moderate Suppliers are viewed as “partners” by Outback where long term relationships are created and maintained. Since quality of food is highly valued by Outback, suppliers are under pressure to provide products of high superiority. At the same time, cost considerations are of priority to Outback as its profit margin hinges on the difference between cost and the low price of its food. ... 4 Threat of substitutes – High Other than steak which is its specialty, Outback’s menu also includes chicken, ribs, fish and pasta entrees et cetera. Thus, those who prefer food other than steak are open to other choices at Outback. ... However, Outback has been voted as the best steakhouse chain in the country within 6 years of operations, together with other awards. ... 4 OUTBACK’S STRATEGIES 4.1 The strategies Outback’s success in the restaurant industry can be attributed to the various strategies that it used. ... 1 Positioning Strategy One strategy that Outback employed is its excellent positioning strategy. More for less More for more Less for less More for the same Figure 1: Illustrating Positioning Strategy Outback positioned itself as “more for the same”, that is, customers get more value (benefit divided by cost) at an average price. This attracts a substantial customer base and also prevents Outback from engaging heads-on with the major players in the market who usually charge premium prices. ... Outback prides itself in offering quality steaks, therefore supplier-relationships are extremely important. Outback views its suppliers as ‘partners’ and strive to work closely with them. Long working relationships, on top of high levels of trust and confidence, ensure that suppliers understand the needs and culture of Outback very well. Such strong supplier-relationships allow Outback to ensure its upstream activities flow smoothly, translating into an advantage over its rivals. ... 3 Choice of location and expansion strategy Outback has been successful in locating her restaurants. ... Specifically, Outback was able to tap into the local expertise of existing food business owners, by granting them franchise of the restaurants to expand the number of outlets. ... 4 Community development and brand building To establish the brand name of Outback, the company adopts a unique strategy of getting involved in community events. The corporate office was involved in several non-profit activities in the Tampa area and also sponsored major national events such as the Outback Bowl and charity golf tournaments. ... This has enhanced the cohesiveness of the employees and at the same time, earned immeasurable benefits for the brand name of Outback. ... In this way, Outback could cater to a large number of customers who each have different preferences. ... However, such also entails high food costs, which were about 40% of total costs at Outback. ... 6 Image With an Australian theme associated with the outdoor and adventure, Outback aims to be a place providing not only excellent food, but also a cheerful, fun and comfortable experience. ... Outback engages in the policy of “tough on results, but kind with people”. The following summarize Outback’s compensation plan to its employees. ... Outback gives employees opportunities to make mistakes and learn from them, providing them with greater confidence to explore new ways. ... Outback allocates 45% of the restaurant’s floor space to kitchen areas to allow employees more space to work with. ... This brings about better financial results for Outback and also motivates employees to work harder which in turn translate into high customer satisfaction. ... 8 Management team The founders of Outback - Chris Sullivan, Bob Basham, and Tim Gannon, each have more than 20 years experience in the restaurant industry. ... On the other hand, Hugh Connerty, the newly appointed President of Outback International, was a successful franchisee for Outback. He had extensive experience in the industry, and has set up the Hooter’s restaurant chain prior to joining Outback. With such an experienced management team, Outback’s success is of no doubt. ... 2 Sustainability and transferability of Outback’s competitive strengths As discussed, Outback has some very important strategies that propelled it to today’s success. ... 1 Positioning strategy Rivals can easily imitate Outback’s strategy of offering ‘more for same’, though it may not be very feasible for some as profit margins will be sacrificed. ... Thus it seems that Outback’s positioning strategy may prove to be sustainable though the sophistication of Outback’s rivals and their respective actions are factors to consider. ... 2 Strong relationships with suppliers The strong relationship between Outback and its suppliers has enabled Outback to have a competitive edge over its rivals, thus, it is very valuable to Outback. Rivals may try to imitate this aspect of Outback’s strategy. ... Conclusively, it is very likely that Outback’s relationships with its suppliers are sustainable in the domestic market. ... However, if the suppliers have no international presence, such will not be feasible and Outback needs to look for alternative ways of getting materials. ... 3 Choice of location and expansion strategy Currently, the expansion strategy adopted by Outback is a prudent approach. ... However, if the restaurant chain expands into foreign countries, a similar approach may be equally successful in establishing the Outback brand. ... In going international, Outback needs to consider if such quality could be maintained, and at possibly lower costs. ... 6 Image The theme of Outback restaurants is attractive but if several other restaurants come up with a similar theme, Outback may no longer seem unique.