Example Of Outback Steakhouse Case Study

The article evaluates the critical success factors that made Outback Steakhouse succeed in the competitive restaurant industry where the failure rate for startups is 75%. The success of the company can be attributed to a number of factors. The entrepreneurial acumen of the founders Chris, Bob and Tim, combined with their experience in the industry contributed to the setting of up of a unique venture with a sustainable business model. The three could identify a market opportunity. The country faced a decline in the demand for meat while the market experienced unprecedented popularity of the steakhouses. Ability to develop a business model that bridges the market gaps through competitive pricing and quality led to the success of the company.
The company fused the consumers’ culture in the business plan. Effective business strategies consider the consumer behaviors and psychology to tap into a recognized opportunity. Evidently, the company factored in the Australian consumer behaviors characterized by outdoors and adventure themes. The company adopted a market positioning strategy under the auspices of, efficiency, quality and value. The focus is quality/excellent food combined with customer happiness through fun, cheer, competitive hospitality and comfort. The experiential marketing strategy augured well with the popular feature of the target market. Further, engagement in corporate social responsibility especially in Tampa region enhanced publicity for the organization through the community projects and interaction with current and potential customers.
Adoption of internal marketing concept and collaborative business model proved effective. The concept of internal marketing calls for a company’s extreme value of the employees by focusing on their welfare, needs and development. When the employees are given chance to learn from mistakes and feel valued, their productivity and relationship with the employer would be positive. The net result is higher output and good relationship with the customer and reduced turnover. Further, the success of Outback emanated from the collaborative association with the suppliers. The suppliers are recognized as partners. The business model relates with the principle of ‘bargaining powers of the supplier’. Thus, the company shared the profits with the suppliers through competitive pricing of $15 to $16 for the steak, unlike the competitors. The suppliers became loyal making the services reliable. The partnership model also worked well in terms of ownership of the company.
Ability to offer three levels of ownership- individual, stock ownership and franchising, enhance the partnership arrangements and widened the capital base. The speed of the company’s internalization process emanated from the flexible ownership alternatives especially franchising in the US market and later other markets. For example, from exhibits 1 and 4, between 1990 and 1994, the growth in revenue was almost 20 times. The figures stood at $25 and $456 million respectively. While the expansion process had some challenges, the trust in the partners and rigorous evaluation process coupled with a strong management led to market stability. The company management made a good strategic decision to enter the US market at an opportune time. By 1993, the demographics of consumers offered the best opportunity for the business. The US had slow population growth rate, higher demand for non-homemade food as many parents became employed, the changes in consumer tastes, as well as higher disposable incomes from the baby boomers. The ability of the management to analyze these factors and make a decision to enter the market demonstrates excellent strategic thinking and business intelligence. The strong internal management is also eminent in cost management. The company had very consistent and predictable expenses across the years. Over the years, the company had a consistent cost of goods sold that stood at 39% of the sales, with the total expenses averaging about 85% of the sales. A strong balance sheet and ability to manage long term debts enhance investor confidence. For example, the company had about 70% of its long assets in the form of property and equipment, see exhibit 6. The strong long term asset position however is dwarfed by growing long term debt. The company had weaknesses in the management of working capital. The decline in cash and cash equivalent between 1993 and 1994 demonstrate poor management of current assets relative to the current liabilities. The situation could pose liquidity challenges and ability to meet short-term obligation using the internal resources.
While the company had issues with the balance sheet, the increasing revenue and going internationalization demonstrate market and investor confidence. The quality and reliability based positioning, strong marketing and management, as well as flavorful menu, makes the company very competitive. The management can ride on the entrepreneurial leadership, strong brand image and corporate culture to position the company better in the market. The management can also implement a more coordinated internalization process and a better product differentiation that suit all the global markets.