Should Outback Steakhouse expand internationally, or would it be better to expand through starting new restaurant chains within the USA? Critically discuss.

There are both pros and cons if Outback Steakhouse should expand domestically or to expand internationally. Anyway, on a critical review of the various factors, it would be rational to argue that the company should expand internationally.

First of all, there are constraints if the company stay in US. This is because it is noted that the market in US is more matured and saturated, which means that the competition is greater (while the growth is slower). Contrary to that, many markets in foreign countries are less competitive, and being served by family-owned businesses only. In other words, foreign markets are less saturated and less competitive. Furthermore, there is a trend of declining role of family life and the increasing habits of eating outside. Aside from that, many of the other fast food retailers such as McDonald’s. Burger King and KFC had half of their sales derived from international landscape. That indicates that western foods are accpeted by people in the foreign countries, which indicates that it is a viable idea for Outback Steakhouse to internationalise.

Aside from that, it is noted that Outback Steakhouse had already reach a point of slow growth if the company remain in US. Based on Ansoff theory of growth, when the market penetration strategy (i.e., penetrate existing US marketing, with existing product) is less feasible or not attractive, other option such as market development shall be pursued as well (Morrison, 2009, 2011). It is therefore actually inevitable for Outback Steakhouse to expand to new markets (especially considering the fact that if the existing idea is so successful, why not try it out in foreign countries… especially those countries that have cultural proximity to the US). Then, to not expand will also cause the company to lose competitiveness, from global perspective, as the trend of globalisation had hastened, and any local business should expect that competition will comes from other countries (Dicken, 2011). Indeed, it is witnessed that even firms from emerging countries are trying to expand to the developed countries aggressively. As such, it would be better for Outback Steakhouse to expand proactively to this global market, rather than waiting its territory to be invaded by the foreign businesses.

However, it must be acknowledged that there are some difficulties that Outback Steakhouse should overcome in order to achieve business success in the international arena. If these barriers or challenges cannot be tackled effectively by Outback Steakhouse, it is perhaps better for the company to just stay in US market. First of all, there are cultural differences, which such differences may require Outback Steakhouse to adjust its marketing strategies, business practices and even business processes – so to adapt to local circumstances (i.e., include to better manage the employees, or to meet the different preferences and needs of consumers in the different market). In other words, localisation of business practices is critical – as many existing business practices may become ineffective or even counter-productive under the new business environment (Lunnan & Traavik, 2009; Zhang, 2003). Then, other issue that must also be overcome include: the differences of infrastructure (that will affect the conduct of business), the different institutional environment (such as the legal and legislation differences), and also supply chain management under a new environment.

However, the barriers to internationalisation should not be used as excuses to not to expand to the global market. This is particularly relevant given that many other companies, such as firms from the western companies, able to gain huge success and profitability in the eastern countries – despite that the fact that the cultures of western and eastern countries do differ significantly. With that in mind, the conclusion is that Outback Steakhouse should go international – with the proper mindset and preparation to overcome those challenges mentioned above.

If Outback is to expand internationally, advise Chris Sullivan on: (a) The optimal rate of international expansion. (b) The best mode of entry into foreign markets (e.g. direct management, joint venture, franchise). (c) Which country / countries to enter first.

There are indeed some guides that can be followed on the rate of international expansion. This is because experience on internationalisation (i.e., the knowledge, know-how and network in a foreign country) is critical in affecting the possibility of business success of a firm in the foreign markets. Indeed, based on the Uppsala model of internationalization, which also known as the Stage Theory of Internationalization (Johanson & Vahlne 1977), a firm should increases its commitment incrementally as it increasingly learns more about the market due to its progressively higher involvements. This is because new knowledge is crucial for success in a new market – but to acquire such knowledge also demand time (Johanson & Vahlne, 1990). That is also not to mention that modification (i.e., local adaptation) is crucial for success, but that are costs to be incurred as well (Omar & Porter, 2011). Indeed, it is found that for a service oriented firm, experiences (in a foreign market) is more critical factor affecting the eventual outcomes of a company – as compared to those manufacturing oriented firm (Erramilli, 1991). As such, the optimal rate for Outback Steakhouse to expand will be dependent upon the rate at which it gains new knowledge and experiences in the new markets.

Then, it is also acknowledged that there are different types of market entry strategy. Each of these strategies has their respective pros and cons. Some of the different types of entry strategies include these: (a) exporting, (b) licensing, (c) joint venturing and (d) wholly owned foreign investment (Forlani, Parthasarathy & Keaveney, 2008; Johanson & Vahlne, 1992; Buckley & Casson, 1998). For that, based on the transaction cost economics (TCE), a company should choose about either equity or non-equity market entry modes based on the transaction costs analysis (Maekelburger, Schwens & Kabst, 2012). For that, it is valid to argue that the best option is to go for joint venture. First of all, this has been the business model of Outback Steakhouse – whereby it demands some commitment from the other partners. Such an arrangement can be duplicated as well. Indeed, based on transaction cost economics (TCE), it is possible for Outback Steakhouse to have some control on a joint venture, to safeguard its assets such as its property rights protection (Maekelburger, Schwens & Kabst, 2012), or the business model. Then joint venture also allows organisational learning, with can be essential for risk reduction associated with new projects (Glaister & Buckley, 1996). In a way, it is possible to allow the company to have easier access to new markets, knowledge, capabilities, and other resources (Beamish & Lupton, 2009). This is especially important when Outback Steakhouse is to expand to a country of huge cultural differences, which will cause the company find it too difficult or too costly to pursue worthwhile business objectives on its own (Das & Teng, 1999). Last but not least, joint venture would also allow the company to leverage on the local partner’s knowledge about the local institutional framework, local consumer tastes, and business practices (Barkema & Vermeulen, 1997; Kale & Singh, 2009; Beamish & Lupton, 2009).

On the third issue, to select the country to enter is an important topic in the context of international business, because some countries are more attractive, while some not. Then, there are also issues that a company may thrive in certain countries, while not in the others. One of the important topics on this is that a company should expand to country of cultural proximity (Malhotra & Sivakumar, 2011). For that, Outback Steakhouse should venture to countries such as Canada, UK or France first, even attempting countries in far east, such as japan, Korea or China. Secondly, distance of a foreign market will also be a factor affecting the outcomes of internationalisation (Perks, Hogan & Shukla, 2013). On that, Canada seemed to be a viable choice, due to proximity of distance, and therefore lower costs to experience the internationalisation process. Thirdly, it is also critical to survey about market potential, as some market do have huge potentials as compared to other smaller countries (Imbach, Moser, Rehbock & Ruigrok, 2012; Malhotra & Sivakumar, 2011). Fortunately, the coutnries suggested such as Canada, UK, China, Japan and even Korea, do have the sufficient market potential for Outback Steakhouse to venture into.

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