Outback Steakhouse Goes International

Outback Steakhouse Goes International

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The two first Outback Steakhouse stores were created by Chris Sullivan, Bob Basham and Tim Gannon in 1988 in Tampa. Within 7 years, the company became "the fastest growing US steakhouse chain with over 200 stores throughout the United States". In 1994, the company's stock increased from $22.63 to $32. Moreover, Outback Steakhouse seen as an example of a great success story was awarded many times.
In the context of this successful evolution of the company, the question of its internalisation and the conquest of other markets became obvious to the company. In 1994, Hugh Connerty was appointed president of Outback International and was in charge to lead to company abroad knowing that it would be a critical change.
This case study states the problem of the global expansion of a company and the strategic and operational anticipated changes it must take into account to make this internationalisation a success. Can the reasons of Outback Steakhouse's success within the United States also be applied to other markets? If not, what are the inputs the company needs to take into account before being global?
The potential international expansion of Outback Steakhouse can not be considered before explaining the reasons of the success of the company in United States through an environment and company analysis. Finally a few recommendations will be given to the company in order to help it to settle a suitable global strategy.

The reasons of Outback Steakhouse's success on the US market rely on its corporate strategy which stresses mainly on its strong corporate culture and leadership. In this area, Outback Steakhouse benefits from a core competitive advantage compared to its competitors. Indeed, the case states that the turnover for general managers and employees is the lowest in the US food industry. Managers are highly motivated by higher wages than in the rest of the industry ($100,000 per year instead of $60,000-$70,000 in the rest of the industry) and employees benefit from profit participation, trust relationship with the management and a deep commitment in the company's activity. They also enjoy from a relative autonomy, a week schedule that is less important than in the rest of the industry (from 50 to 55 hours instead of 70 hours in other restaurants) and health insurance. The culture of the company focuses on "long term well being" for all the "outbackers" who all share the same values: hospitality, sharing, fun and courage.

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It also focuses on quality and performance through a quality policy with its suppliers considered as long term partners ("We won't tolerate less than the best") and the best services they could give. Indeed, 40% of their total costs were dedicated to high quality products and ingredients so that quality can be considered as well as a core competitive advantage for the company.
Regarding the positioning of the company, Outback Steakhouse decided to provide "not only excellent food but also a cheerful, fun, comfortable experience" to customers and since the beginning, the company selected the places to settle restaurants where there are more people in the evening ("B-locations [with] A-demographics strategy"). They focused their activity on the statement that people are willing to consume meat, especially beef but can not always afford such a product at home. Their idea was then to serve "quality steak at an affordable price" and other diversified meals to stick to consumers' taste preferences.
To get more famous and known, Outback Steakhouse used only local advertising and word of mouth methods to communicate about its restaurants. But in 1994, when Nancy Schneid arrived in the company as Outback Steakhouse's vice president of marketing, a full scale national media program was settled to advertise on the restaurants. This communication policy coincided with the expansion opportunities Outback Steakhouse met by opening many other franchisees in the early 90's.

Considering Outback Steakhouse's successful development in United States and the fact that within few years the US market would have been saturated, the company started to think about capture other markets around the world. This raises many interrogations regarding Outback Steakhouse's strategy: how to increase expertise of new markets worldwide and optimize their integration? Can a strong corporate culture be exported outside an initial market? How to increase their awareness worldwide without losing their original culture? And how to adapt their services to different cultures?
Outback Steakhouse wanted to expand its activity in the early 90's by opening 300 to 350 new stores including some with the joint venture on the Italian dining segment. This new opportunity happened at a time when demography and people's habits and ways of life changed: both parents, whose incomes have increased, are working and they more able to afford a diner at the restaurant than before. There was also an increase of franchising businesses in every sector, especially on the food industry which offered consumers more choices to experiment. These changes were at that time universal with the globalisation. The best example being the one of Mc Donald's which settled successfully in almost every single country of the planet. This major change was notably facilitated by the increase of international transportation and communication, higher educational level, women in the workforce, demographic concentration in urban areas, young people eager for new products... What is more, with the fall of communism in the early 90's, new markets became available.
Outback Steakhouse's will to settle on other markets was then fully justified but not as easy as they thought. Internationalisation represents some danger as well such as the misunderstanding of local cultures and religions, the fact that they might not find the same target as in the US in other countries and meet the problem of restrictive trade policies in some countries that might be a barrier for the company. However, Outback Steakhouse's strategy was rather prudent as they wanted then to open new restaurants step by step, continent by continent starting from Canada and South America, Hawaii, to Asia in Korea and Japan and finally to Europe through a first integration in UK.

There are few recommendations that could be given to Outback Steakhouse in order to make its internationalisation a success and to keep its strong position on the US market.
Nationally, they could increase their advertising at a national level thanks to bigger media and better integrate shareholders in the company's culture. They also might be careful about finding a good and different target market for the Italian dining segment in which they started activities thanks to a joint venture.
On the international point of view, Outback Steakhouse should maybe be careful about the legal environment of the markets on which they want to settle, try to adapt its services and offers to the different cultures they will meet and as it is suggested in the case study, choose carefully local suppliers with high quality standards before anything.
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