Industry_Paper

C. INDUSTRY ANALYSIS 1. What is the product or service' Outback Steakhouse product offerings include a menu characterized by specially seasoned steaks and prime rib. It also provides chicken, ribs, fish and pasta entrees. 2. What function does it serve' Outback Steakhouse serves as a place providing excellent foods that satisfy one of the basic necessities of human, hunger; aside from that it also gives a cheerful, fun, and comfortable experience. 3. What are the channels of distribution' Outback Steakhouse distributes their product offering by choosing their joint venture partners and franchisees. 2. The following are some forces that determine the strength of competition among existing competitors of Outback Steakhouse Restaurant: 2.1 What is the Industry Size' In 1990s, franchising was the most popular means for rapid expansion. It was used as a growth vehicle by a variety of businesses, however, food service constituted the franchising industry’s largest single group. In 1992 alone, 3,000 franchisers were operating 540,000 franchised outlets all around the United States an average of one outlet opened about every 16 minutes. During this period franchised business sales totaled $757.8 billion, about 35% of all retail sales. Abroad franchisers operated an estimated 31,000 restaurant units. If the Outback Steakhouse plans to go international it should consider its competitors who already establish its outlet’s internationally. Below is a summary of Top 10 U.S restaurant franchises ranked by Sales: |1994 |  |Total Sales |International Sales |International Stores | |Rank |Firm |  |  |  | |1 |McDonald's |25,986 |11,046 |5,461 | |2 |Burger King |7,500 |1,400 |1,357 | |3 |KFC |7,100 |3,600 |4,258 | |4 |Taco Bell |4,290 |130 |162 | |5 |Wendy's |4,277 |390 |413 | |6 |Hardee's |3,491 |63 |72 | |7 |Dairy Queen |3,170 |300 |628 | |8 |Dominos |2,500 |415 |840 | |9 |Subway |2,500 |265 |944 | |10 |Little Caesar's |2,000 |70 |155 | 2.2 How fast is the industry growing' Franchised restaurants generally performed better than free-standing units. In 1991, franchised restaurants experienced per store sales growth of 6.2% versus an overall restaurant industry growth rate of 3.0%. 2.3 Are products differentiated' In a restaurant chain industry, products are reasonably differentiated, although they fall in the same category which is food. Each firm offers different specialization or innovation of recipe, in the end no product may taste the same. 2.4 Are there high exit barriers' There is only minimal level of exit barrier in the industry of franchised businesses in restaurant chains. It is easy to exit in the industry because of the following reason: • Salable asset – firms rarely buy asset that is used only for specific function, instead their assets are easily converted to cash and normally would not incur loss. • Low exit costs – there is low cost in exiting the industry. • Independent businesses – each franchise is a separate entity and does not depend on other franchise outlet therefore closing franchise outlet does not affect remaining outlets. However, in the case of Outback Steakhouse, one of their major exit barriers is their strong relationship with their supplier. They may obtain loss on contingencies due to contracts that were not fully terminated. 3.1 Who are the major competitors' The major competitors of Outback Steakhouse are the following: • Applebee’s with Abe Gustin as Chairman and CEO in (1995) • T.G.I. Friday’s with Curtis Carlson as the head of the company (1995) 3.2 What are their market shares' Not Applicable 3.3 In other words, is the industry consolidated or fragmented' The industry is fragmented since there is no single firm which has large enough share of the market to be able to influence the industry’s direction. 4.1 Who are the major customers of the industry' The major customers of Outback Steakhouse are the end users who usually preferred to eat in food chain because they are too busy preparing their meal. Busy working moms don’t have enough time to provide their children food to eat. That’s why they choose to eat in a fast food chain because they provide cooked and ready to eat food. Every one can be a customer of Outback Steakhouse regardless of age because every human is in need of food. 4.2 Are they powerful' In this kind of business there is a high influx of competitors thus customers have the power because they are the one who purchase the products and services. They are the life giving blood for the company, every single purchase they made is important to the firm because they contribute to the revenue of a particular firm. 4.3 What gives them power' Customers can easily switch from one seller to another and can easily vertically integrate backwards this gives them power over the product they are acquiring. 5. Are the suppliers powerful' Outback Steakhouse’s suppliers are powerful; the firm never replaced its supplier. Their current supplier is their only source for the raw materials of their current product which greatly affects the quality of their products. Their chief chef had noted that the firm won’t tolerate less than the best. As a whole their suppliers play a significant part in their success. Outback Steakhouse viewed their suppliers as their “partner”, and they maintain a good relationship with them. It would be costly for the firm to switch suppliers and their product quality would greatly be affected. 6.1 Do significant entry barriers exist' Yes, a lot of significant entry barriers exist as Outback Steakhouse is planning to go international. 6.2 What are they' Entry barriers for Outback Steakhouse can be divided into two categories. The first category is the external factors that can be attributed to the country(ies) to which Outback plans to enter into. It includes: • Country Market Factors such as size of target market, competitive structure (Oligopolistic to monopolistic), local marketing infrastructure • Country Production Factors such as quality. Quantity, and cost of raw materials, labor, energy, and other productive agents in the target country as well as the quality and cost of the economic infrastructure • Country Environmental Factors such as Political, economic, and socio-cultural character of the target country—government policies and regulations pertaining to international business. Geographical distance which has impact on transportation costs. Size of the economy, absolute level of performance, relative importance of economic sectors—closely related to the market size for a company’s product in the target country. Dynamics including rate of investment, personal income, changes in employment. Socio-cultural factors such as cultural distance between home country and target country societies. Closer the cultural distance, quicker entry into these markets. On the other hand, internal factors as entry barriers refers to Outback itself; the struggles they’ll be facing when they go international. These include: • Company Product Factors - Products that are highly differentiated with distinct advantages over competitive products give sellers a significant degree of pricing discretion. Products that require array of pre- and post-purchase services makes it difficult for a company to market the product at a distance. There are also products that require considerable adaptation. • Company Resource/Commitment Factors- The more abundant a company’s resources in management, capital, technology, production skills, and marketing skills, the more numerous its entry mode options. Conversely, a company with limited resources is constrained to use entry modes that call for only a small resource commitment. Size is therefore a critical factor in the choice of an entry mode. Although resources are an influencing factor, it must be joined with a willingness to commit them to foreign market development. 6.3 Are they effective in protecting their business against existing competitors, thus enhancing profits' Outback Steakhouse is doing all the best ways of protecting their business against the other competitors. They have a good quality of product offerings plus the customer delight experience they commit to their customers. As based on their reports of income statements, they achieved increases as years go by. 7.1 Are there any close substitutes for industry products and services' Yes, other than Outback Steakhouse restaurant chains like T.G.I. Friday’s and Applebee’s they are offering the same products in the restaurant industry. 7.2 Do they provide pressure on prices charged in this industry' They provide prices that are closely the same with some of their competitors so that customers will have a hard time in choosing where they will spend their meal. 8.1 What are the basic strategies of competitors' Applebee’s positioned itself as a neighborhood bar and grill and offered a moderately priced menu including burgers, chicken, and salads. • T.G.I. Friday’s which was owned by Carlson Companies, Inc. began to focus on building their hospitality group of restaurants through expansion in the U.S. and overseas due to expected sales drop. 8.2 How successful are they' • Applebee’s ranked 20th in sales and 36th in stores. It is one of the largest casual dining chains in U.S, and experienced a rapid growth in which was mainly fueled by domestic expansion. • T.G.I. Friday’s ranked 19th in Top 50 U.S Restaurants report with 15.7%, and 19.4% growth in revenue, and store respectively (1994). It operates a total of 550 restaurants in 17 countries with 1/3 sales from activities outside U.S. 9.1 To what extent is the industry global' Outback Steakhouse is a food chain that operates domestically; they conduct their business only in U.S but currently planning to go international. They are just expanding within the vicinity of United States with 200 franchises. 9.2 Are there any apparent advantages to being involved in more than one nation' Not yet, they are still planning to expand their business abroad. If ever they will be successful in going out the U.S., advantages will arise such as increase in competitive advantage and increase in sales. 10.1 Is the industry regulated' Outback Steakhouse belongs to the restaurant industry which is driven by regulations. 10.2 What influence do regulations have on industry competitiveness' Regulations may influence a company’s competitiveness in either beneficial or unfavorable ways. Regulations such as employment regulations, health and safety regulations, and product safety regulations help the company which is competing in employees, service, and food quality. Regulations like trade laws and environmental regulations serves as a barrier to prevent companies from doing business feeling. VI. ALTERNATIVE COURSES OF ACTION 1. Strategic Alliance Outback Steakhouse will create an alliance with competitors from their target country who are also planning to expand their market in U.S., in other words there will be a mutual benefit for each of them. |Advantages |Disadvantages | |Can penetrate targeted market in a short period |May deal with diverse or conflicting operating | |of time. |practices. | |Resource sharing between alliances. |May deal with conflicting objective, strategies, | |Spread risk of failure. |corporate value and ethical standard. | |Acquire new knowledge from alliances. |Time consuming for managers in terms of | |Increase strategic flexibility. |communication, trust and building. | 2. Horizontal Integration Acquire an average-established firm in the same industry that operates outside the United States. |Advantages |Disadvantages | |Faster way to penetrate markets globally |Increased cost | |Reduce competition |Increased risk. | |Increases the firm’s size. |Possible lack of fit | 3. Establish a formal organizational structure who will design a blueprint detailing where the firm wants to be at some future point in time and what resources are needed to get it there. It pertains to ways of achieving milestones and explains how plan will be put into operation. It addresses where the firm wants to be at a future time, what things should be done and what will be the preparations needed to be done. This should be prepared with personnel involved with implementation. |Advantages |Disadvantages | |It provides clear objectives as to what the firm |The company might commit high costs for | |wants to achieve |establishing the middle management team necessary| |Helps to achieve desired outcomes by providing |for the implementation of the plan. | |measurable |The plan might not meet the needs of the target | |Enables firm to use resources effectively and |market and be focused on the firm’s target goal. | |efficiently | | |Reduce risks where possible and prepare | | |contingency | | VII. FINAL DECISION After thorough evaluations, the group came up to a final decision that Outback Steakhouse should adopt the action plan where the firm will establish a formal organizational structure who will design the blueprint detailing where the firm wants to be at some future point in time and what resources are needed to get it there. This action plan will solve the overall present problems, and the future problems the company may encounter when it enters the international market. When there is a formal organizational structure, the decisions, plans, and strategies will become centralized, synchronized, well – managed and viable. VIII. DETAILED ACTION PLANS The following steps are necessary to attain the goal of retrenchment, that is, to minimize labor costs to increase net profit. |Activities |Responsible Person/Department |Time Frame | |Hire officers to fill middle management |Top Management, Mr. Chris Sullivan, |One week | |positions |Chairman | | | | | | |Conduct a general meeting for all the | | | |officers of the organization regarding |President of Outback International, | | |the construction of operational plan for|Mr. Hugh Connerty |One week | |globalization | | | | | | | |Construction of operational plan | | | | | | | | | | | |Establish operational objectives | | | |together with the officers | | | |Assign respective officers who will | | | |supervise each operational department, | |Four months | |then give details of the operational | | | |plan by specifying Marketing Plan, |Board of Directors headed by Chairman| | |Production Plan, HR Plan and Financial |Chris Sullivan | | |Plan. | | | | | | | |4. Choose Target Market and cautiously |Chairman Chris Sullivan and the Board| | |implement operational plan |of Directors | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |Mr. Hugh Connerty, President of | | | |Outback International together with | | | |the rest of management team | | | | | | | | |Three months onwards | Outback Restaurant opened in the Philippines with a simple goal: to be the best in the Philippines. From the time it first threw open its doors in 1997, Outback Restaurant has hewed in close to this mission, and has successfully brought to the country a great dining tradition that took root in the breathtaking and rugged Australian frontiers, where men savored the bounty of land and sea, and freely experienced nature's offerings in the spirited company of friends who enjoyed life to the limit.  Outback Steakhouse is a steakhouse concept with more than 1,200 locations spanning 22 countries. Established in Tampa, Florida in 1988, each reastaurant is a friendly, casual and relaxing place embodying the spirit of the Australian Outback with bold flavorful food, excellent service and attentive staff. USEL became the franchisee for Outback Steakhouse in South East Asia in the year 2000. Since then, it has successfully brought to the region a great dining tradition. Ten years of serious food, generous portions, concentrated service and a friendly, casual ambience has made Outback Steakhouse the restaurant of choice by many. Although steak and other meat items make up a good portion of the menu, the concept offers a variety of chicken, seafood and pasta dishes. With staff strength of over 300 dedicated Outbackers, USEL currently owns and operates restaurants in Singapore, Philippines, Indonesia, Malaysia, Bangkok and will continue the spread to South East Asia's region wid