November 2, 2011

[OUTBACK STEAKHOUSE: GOING INTERNATIONAL]

Schulich School of Business

York University

SGMT 6000: Strategic Management

Case: Outback Steakhouse: Going International

Name: Jefferson Braz Number: 211910809

Jefferson Braz 2011 Schulich School of Business

November 2, 2011

[OUTBACK STEAKHOUSE: GOING INTERNATIONAL]

Study questions:
1. What are the principal features of Outback Steakhouses strategy in the US? Why has the strategy been so successful? Outback created its strategy to compete in one of the most competitive markets in the world in the restaurant industry and some very peculiar features contributed to its successful business: Astute positioning in the extremely competitive U.S. market; Providing high quality of food based upon the consistent process of selecting ingredients and preparation development; Creating a relaxed atmosphere for its customers and employees; Hiring, training, developing and retaining right employees for the right position; Creating ownership environment with the development of a co-op police that provide the general manager and JVPs to purchase percentage of the interests of the restaurants they are running; The strategy of limiting the service to dinner time which reduces the hours of management and employees and consequently improves the quality of service; Creating an innovative atmosphere for its employees; Selecting the location for its stores that fits with the strategy of no lunch service. Mostly in suburban areas. Although all these features above contributed to Outbacks strategy been so successful, in my view, the fundamental competence developed by Outback was the high quality of food creating the chains differentiation among dozens of others competitors in the U.S market. Outback views suppliers as partners that were committed to work and create a long term relationships. 2. What are the key elements of the international expansion strategy being proposed by Hugh Connerty? Hugh Connerty approaches for the international expansion was backed on tree principles and believes that, in his opinion, were essential to the development of the successful Outbacks operation in U.S.

Jefferson Braz 2011 Schulich School of Business

November 2, 2011

[OUTBACK STEAKHOUSE: GOING INTERNATIONAL]

First, he wanted the international expansion to be also an opportunity to their suppliers that had been working with since the Outback start-up and take advantage of the welldeveloped relationship instead of develop new suppliers aboard. Second, he believes that franchise should be the best approach because it could facilitate the understanding of local laws and getting permits, understanding the culture and also would be the best option in terms of capital expenditures related to properties, equipment and business development. In fact, this approach should allow Outback to focus on what was its better strength, support operations. However this strategy created a substantial issue that should be addressed before roll out, how to select the correct franchisee that fits with companys principles and believes? Third, Connerty initial geographical thoughts were go respectively to Canada, Hawaii, South America, Oriental countries and then some European countries. 3. Assess the proposed strategy. Be sure to address the following issues: a. Should Outback Steakhouse expand internationally, or would it be better to expand through starting new restaurant chains within the US? In my view, Outback should expand its operation internationally in order to diversify even more. Some reasons contribute to this conclusion: Outback has already developed some skills that could represent a strong competitive advantage an eventual new operation abroad. They have been struggling successfully in one of or perhaps the strongest and most competitive markets in the world, U.S., which means that they have acquired credentials to compete equally with any other competitors overseas; The U.S market would be facing saturation within five years; Outback has already started a new growth strategy by diversifying into an alternative restaurant concept, in another words, It had already started its Garrabbas Italian Grill restaurants, then the second step for would be go international. b. Does the strategy outlined by Connerty make sense? Connertys strategy is based in tree pillars. Enjoy long-term partnership with supplier, franchise approach, and believes that in some particular countries as potential markets. However, even though, those factors are crucial for the development of an international expansion, some other issues must be also considered. For example:

Jefferson Braz 2011 Schulich School of Business

November 2, 2011

[OUTBACK STEAKHOUSE: GOING INTERNATIONAL]

Market demand: For the selection of the possible targets of the expansion plan, some criteria must be taken into account like: disposable income, urbanization, demographics and a host of other social, economic and life style factors;

Cultural and social factors: Critical influences on customer preferences with regards to menu, dining conventions, restaurant facilities and overall ambiance;

Infrastructure: Proper means of transportation and communication, basic utilities such as power and water, equipment support, qualified labor, and etc;

Regulations and trade restrictions related to: food standards, business licences and contracts, franchise policies, employment laws, work conditions, and national agreements and so on.

4.

If Outback is to expand internationally, advise Chris Sullivan on: a. The optimal rate of international expansion; In my view I would start with a pilot project in one country abroad, for example Canada,

which is the closest country, has minimal cultural and language differences. However, while the U.S. strategy is to open around 70 new restaurants each year, which represents approximately 22% of growth rate, in Canada, the growth rate would be moderated, between 10 and 20 each year. This number also cannot be lower than that, otherwise it wont justify the amount of investment in marketing required and also to become an attractive business for the suppliers. b. The best mode of entry into foreign markets (e.g. direct management, JV, franchise); Basically there are two ways of entry into foreign market: by Transactions ( Exporting that means spot sales, long term contracts, foreign agent / Licencing that means Licencing patents or Franchising) or by Direct investments ( Join Ventures or Wholly owned subsidiary). The approach for international expansion adopted by Outback was by Transactions and more specifically by Franchising. Franchising is one of the most common methods utilized to overseas expansions now days and, in my view, considering that, by franchising, Outback can split the risk of the investment, they already had knowhow of franchising partnership and the local franchisees are more familiarized with the local culture and restriction policies which is definitely is fundamental during the business development phase. However there is an important issue that must be considered: By that time, Outback isnt a multinational recognized Brand, it means that, even though, they find franchisees that believe and are

Jefferson Braz 2011 Schulich School of Business

November 2, 2011

[OUTBACK STEAKHOUSE: GOING INTERNATIONAL]

disposed to invest capital into this business, substantial efforts in terms of brand development must be made in order to make this venture successful. c. Which country(ies) to enter first; I would consider the closest country first, thus Canada, and then considering infrastructure and similar cultural characteristics U.K. But obviously that further and profound studies must be developed in terms of national resources availability, firm-specific competitive advantage, tradability and cultural differences in order to have a precise idea of which country would fit better with Outbacks expansion strategy. d. Whether Connerty is the right person to head the International Division. In my opinion, this analyze is quit superficial because I dont know Connerty personally, however, even though Connerty has a franchisee development background in the U.S. market, the position of head of Outbacks international division would require a person with strong international business development and trade skills. So in this case, Connerty would have an important role during the internalization process but not as leader of it.

Jefferson Braz 2011 Schulich School of Business