Introduction
External environment analysis is a comprehensive look at the organization’s strengths and weaknesses through examining the external factors of the market. There is a wide range of external forces that directly affect the sustainability and performance of the organization. The external environment analysis assesses the level of threat, risk, and opportunity in the outside environment. It helps the organization to make effective decisions on the basis of evaluation and improve the organizational performance. It helps the management to align strategies with the company’s environment. External environment factors are difficult to handle and some factors are uncontrollable that impact the performance of the organization. The paper will include the external environmental analysis of Darden Restaurants and evaluate the organization performance in the market. It will identify the different external factor that directly and indirectly affect the sustainability of Darden Restaurants.
Darden Restaurant Overview
Darden Restaurants Inc. is an American multi-brand restaurant that was founded in 1938. In 1968 William B. Darden founded the Red Lobster Inns of America and opened his first Red Lobster restaurant in Florida. It is a premier full-service restaurant company that own several restaurant chains including Bahama Breeze, Olive Garden, LongHorn Steakhouse, Seasons 52, The Capital Grille, Eddie V's Prime Seafood, and Yard House. It is a leading casual-dining operator with more than 1,500 restaurants in Canada and the United States. It offers an extensive menu featuring including crab, scallops, lobster, fresh fish, fresh fish, and other food with a pleasant environment.
The restaurant industry is the fastest growing industry that experienced rapid growth in the recent years due to increased tourism in the world. Currently, Darden is a global leader in the hospitality industry that has a number of satisfied customers in the market. It is offering advanced and innovative services through the contribution of 15,000 employees. It has strong leadership that developed different approaches to doing the business and managing its operations .
Competitive Analysis
The competition is high in the restaurant industry due to globalization and standardization, innovation, and uniqueness of services. The industry is often affected due to number and location of competing restaurants, consumer tastes, consumer behavior, traffic patterns, and customers’ purchasing power. Darden Restaurants Inc. has faced strong competition and developed different techniques to gain the competitive advantage. The company is affected by different competitive forces such as threats of new entrants and existing competitors. Darden Restaurants Inc. has achieved a good position in the market due to its strong brand reputation. Brinker International Inc., Dineequity Inc., and OSI Restaurant Partners LLC are potential competitors of Darden Restaurants.
The competition is very high between those companies to achieve a strong position in the market. The competition is high in type and quality of food, service, price, restaurant location, brand, personnel, effectiveness of advertising and marketing, and attractiveness of facilities. The prices and customers services are the most significant factors of competition. Darden Restaurants has developed different approaches to provide best services and food in reasonable prices to attract more customers and achieve competitive advantage in the market .
Techniques Analysis
Technique analysis focuses on Darden’s strengths, weaknesses, opportunities, and strategies. It covers PESTEL analysis, Five Forces, CPM, and areas of vulnerability may lead to a suboptimal performance in the organization.
PESTEL Analysis
The PESTEL Analysis monitors and analyzes the external environmental factors including political, economic, social, technological, and environmental that have an impact on the organizational performance. The political factors have a significant impact on the company operations. It is affected due to the government policies and actions in different regions of the US and Canada. Economic factors have a direct impact on the company’s growth, and it is affected due to different forces such as inflation rates, currency exchange rate, and economic climate, and others. The personal income and preferences of customers are directly associated buying behavior of the consumers. It reported that the personal income has been on a steady decline in the US that affected the consumers’ purchasing power.
Darden Restaurants has affected due to socio-cultural changes in different regions. It is reported that the US and Canada are advanced countries regarding social factors and human development. The restaurant should focus different age group and designed food and services accordingly. Technological factors have a greater impact on Darden Restaurants and it has grown dramatically. The restaurant industry is an innovative industry that introduced different technological changes in food and services. The organization should implement some innovations in food and services. Different environmental forces exist in the market that affects the company’s operation such as the competitive environment. Legal forces have a direct impact on Darden’s operations such as tax rates, antitrust legislation, and others.
SWOT Analysis
It identifies the restaurant’s strengths, weaknesses, opportunities, and threats. Brand recognition is the strong strength of Darden Restaurants. It has a diverse portfolio of different restaurants and variety of loyal consumers. It has effective leadership and a strong team of 15,000 employees that ranked it as one of leading organization in the world. The organization has owned restaurants rather than franchising that improved its operations, costs, and customer experience. Small business units and increased cost are significant weaknesses of the restaurant. It has limited operations and mostly established in North America.
The innovation and global expansion is a good opportunity for the restaurant to expand spread its operation in different countries. It can add new products and service to attract the more customers and enhance its revenues. High competition is a strong threat that can affect the restaurant’s operations. The increase in labor cost and raw material has increased the company’s cost in the region .
Porter's five forces analysis
The analysis focuses on the five forces that affect the restaurants including supplier power, buyer power, competitive rivalry, threat substitution, and the threat of new entry. The company can use different strategic tools to control the five forces and sustain its performance in the market. The management has focused on identifying forces, manage risk, and makes the effective decision for long-term sustainability. The company has experienced strong competition and the threat of new entrants always exists in the US and Canada market that may affect Darden’s performance. The government policies and inflation rate affect the supplier and buyer power that directly affects the company’s operations.
External Factor Evaluation (EFE) and Competitive Profile Matrix (CPM)
The matrixes identify and asses the current business conditions of Darden Restaurants and its position in the competitive environment. It is noticed that the restaurant is operating in the right direction with the contribution of 7,000 executive leaders. It has controlled the strong competition and increased the shareholders’ wealth. The company grew its sales and revenue and improved its reputation in the market. In 2016, the total sales have increased by $ 6.93 billion and Darden has expanded its operations in the different region. It has increased the customers’ satisfaction through delivering outstanding food, drinks and services with the pleasant environment .
Trends
The restaurant industry has focused the customers’ satisfaction listened to their demands and provided valuable foods and services to meet their expectations. It has introduced new trends in the market and serves the customers through innovative techniques. The new trends have affected the business operations due to low customers’ preferences. Darden is a global leader in the industry. The organization has focused its customers and offered valuable services to increase their satisfaction and happiness. It has introduced different trends such as traditional sit-down, consumer preferences, consumer spending, and their choices. It has served more than 320 million meals in a year and improved brand reputation in the market. The restaurant has experienced rapid expansion in its operations and improved its performance through service innovations. The organization is expanding its operations in foreign countries to serve the customers in different potential markets. It has highlighted the human factors offered an enjoyable environment, food, and services in reasonable prices .
References
Darden. (2016). Our Company. Retrieved from https://www.darden.com/our-company/doing-business-with-darden/international-franchising
Darden Restaurants . (2016). 2016 Annual Report. U.S: Darden.
Dividend, C. (2015). Relative Strength Alert For Darden Restaurants. Retrieved from http://www.forbes.com/sites/dividendchannel/2015/10/14/relative-strength-alert-for-darden-restaurants-2/#658d90e31985
Hoovers. (2016). Competition . Retrieved from http://www.hoovers.com/company-information/cs/competition.darden_restaurants_inc.b554d409812190cb.html
