April 15, 2013 Executive Summary Darken Is one of the world’s top performing companies In the food services Industry, with over 2,000 locations and 180,000 employees. Including many brands from luxury restaurants to quick and easy restaurants Darken has been able to develop brand names into clear strategic advantages, which lead to competitive advantages and keeping customers coming back for more. In this paper a team of marketing students analyze Darner’s current position In the market through research and apply concepts from class to develop a strategic plan for Darken moving forward.
Looking at the company through such lenses as source based view of the firm describes the firm’s most important assets. Using such charts as weighted competitive strength assessment and a nine cell attractiveness chart to show Darner’s current position and what they need start moving towards, allows the reader to develop an understanding of the team’s aspirations for the company. Table of Contents Company Tangible and Intangible Weighted Competitive Strength Assessment….. External Issues… Business Level Strategies Recommendations… ………………… Current Corporate Level Strategy…
Service Divisions Financial Weighted Competitive Strength Chart………………… Nine Cell Attractiveness Matrix… International Strategy… McKinney 7-S Model Utilization Company Environment Darken is one of the largest full-service dining companies in the world; they are also an extremely successful company. They have many strengths and a few competitive advantages, but like every other company, they also have some room for improvement. Some of the major strengths of Darken include its strong values, diverse workforce, size, recognizable and successful brands, and its people focused culture.
Darken has a number of strong values in place that they believe help the company learn, strive and grow. Some of these values include integrity and fairness, respect and caring, always learning, always teaching, being of service, teamwork and excellence. All of these strong values continue to help Darken as one of the most successful dining services in the world. Darken also has a very diverse workforce. Darken does not care where employees are from all they care about is making them feel comfortable as part of the team at Darken.
As the website states, “Even though we have a common vision, we embrace and celebrate our individual differences. We are strengthened by a diversity of cultures, perspectives, attitudes, and ideas. We honor each other’s heritage and uniqueness. Our power of diversity makes a world of difference. ” (Darken. Com) The size of the company is also a major strength. They have over 2,000 restaurants and more than 180,000 employees. This means that they are continuing to have success because cities continue to want their restaurants, which means more employees. Another major strength for Darken is their recognizable and successful brands.
This is strength for the company because these restaurants are well recognized and customers know they take pride in providing quality means and services. The final major strength for Darken is the diversity of food these restaurants have. They have seafood, Italian food, steaks, many other menu items and specialties that vary for each brand. This is strength for the company because these menu items attract customers in to the restaurants and the quality service will make most of its money with repeat customers so focusing on retaining old customers has to be at the top of managers broad strategic plans.
Just like any company, Darken also has some areas where they can improve in order to make them even more successful. These weaknesses include they are mostly internalized in North America, they have a low stock price compared to their competitors, Olive Garden and Red Lobster continue to see a drop in sales, reducing hours may create unhappy employees, and no new restaurants. Being mostly centralized in North America is a major weakness because expanding overseas can bring in much more profit. It’s great that there are so many restaurants here in the states, but expanding to other parts of the world would make Darken even better.
The low stock price compared to competitors is a weakness because it shows that demand for their restaurants is not as high as it is for their competitors restaurants even with Darken being much more diversified then say Buffalo Wild Wings. The continued drop in sales from Olive Garden and Red Lobster is a weakness because a company is only as strong as its weakest link. Obviously the economy is bad and people are beginning to eat out less and less, but Darken needs to find a way to get these two restaurants sales back up.
Because of the new “Abominate” law, companies with 50 or more workers could be hit with fines if they do not provide basic coverage for their employees. As a result of this, some restaurants are beginning to cut hours for employees making part-time workers instead of full time rockers. This is a weakness because cutting hours means less profits along with repeat or even new customers becoming UN happy with the new hours that they were accustomed too, or assumed. Having no new restaurants is a major weakness because it shows that the company is not expanding.
Darken has 7 well known restaurants in their portfolio. With a strategic acquisition of well-defined restaurant chain, they could be even more successful and more dominant in the full service dining market. Tangible and Intangible Assets Darken possesses a good amount of tangible and intangible resources that are important for the company to succeed. Using the four test of Resource Based View of the firm it was obvious that both the tangible and intangible resources play a huge part in making the firm unique. These resources also are meant to give the company a competitive advantage over their competitors.
A lot of the resources are imitable and shared by other companies, something that Darken has to realize may not be an advantage for them forever. Some of Darner’s tangible resources that are important to their company are the company’s employees, the buildings that each restaurant operates from, and their suppliers. Employees are resources that are able to be touched and in the tangible sense can work to keep the restaurants operating. The buildings house the employees and customers and make it possible for the business to operate and compete.
The suppliers are an important tangible resource because they supply each restaurant with the supplies that they need to operate properly. All of these tangible resources are important in the operation of the company as a whole. Darken also has numerous intangible resources that are an important part of the company’s success. Some of these intangible resources that attribute to the success of Darken restaurants are their great culture, service, diversity, community these intangible resources because without their culture being so strong there would be no room for the other intangibles to follow.
Darken has developed a culture of these other great intangibles such as service, diversity, community work, and sustainability. The service that Darken brings to the table is second to none and they make sure that their employees practice this awesome service on a regular basis. Darken also focuses heavily on diversity which is why they are known as one of the cost diverse companies in the industry. Community work is a big focus of Darken and they make it known that it is an important part of their success. Darken has been around for a very long time and is still striving to keep improving which shows the company’s sustainability.
All of these tangible and intangible resources that Darken acquired have separated them from other restaurant chains in the industry which gives them a slight competitive advantage. Weighted Competitive Strength Assessment This chart was produced using two competitors of Darken in the food services industry. The two companies are Pander Bread and Buffalo Wild Wing both of which are only a single brand. For this reason they are stronger than any one of Darner’s brand names or chain restaurants. But in this Chart they are compared to Darken as a whole to show the value of Synergy. (NASDAQ. Mom) External Issues One of the biggest issues facing not only Darken but the whole industry is making sure all restaurants are following ethical laws enforced by Abominate. Darken Restaurants including Olive Garden, Red Lobster, and Longhorn Brands are not abiding ethically under Abominate. Under the new health care law, companies with fifty or more workers could be hit with fines if they do not provide basic coverage for full time workers and their dependents. For Darken, which operates more than 2,000 restaurants in the U. S and Canada, employs around 180,000 employees this is a huge expense.
The Wall Street Journal reports that Darken is using the new health law to cut hours of full-time hourly workers to work less than 29. 5 hours, thus redefining them as part-timers. This can cause employees to become dishonest which may lead to bad service. The second big issue that can affect Darken industries is the threat of new entrants. As a company Darken needs to figure out what separates them from their competition and continue down that path. Recommendations for External Issues The first recommendation for Darken Restaurants is to continue the diverse workforce.
The diverse workforce is viewed as strength by Darken employees and other companies. The employees are valued from the start, where they share in a respectful and caring environment which will keep them honest and motivated. Darken is strengthened by a diversity of perspectives, attitudes and ideas. They honor each other’s heritage and uniqueness, as well as those of the customers. Another recommendation for Darken restaurants is to run a promotion for each of the restaurants. For example, if you spend over $70 at this restaurant you receive a coupon for 15-20% off at another restaurant in the Darken family.
The promotion money it gives them incentive to enjoy another meal at another one of our restaurants. Business Level Strategies In order for a company to be successful their main objective should be to focus on satisfying customer needs and preferences in order to achieve above average returns; generally done via business level strategies. These business level strategies entail actions taken to provide value to customers and gain a competitive advantage. These strategies are a direct result of the competition factor that the company is creating.
The five generic business level strategies are cost leadership, differentiation, focused low cost, focused differentiation, and using an integrated low- cost/differentiation strategy (Business Level Strategy). Current Corporate Level Strategy The restaurant industry is all about how your company or organization can gain a competitive advantage. Darken Restaurants, Just like any other company, seems to Ochs on business level strategies. However, only three of the five strategies are predominantly seen throughout Darken Restaurant Corporation.
The three strategies that Darken uses are cost leadership, differentiation, and using integrated low-cost/ differentiation strategies. Organizations are constantly competing to be the low cost leader for a wide range customer base. Price is based on internal efficiency in order to have a margin that will sustain above average returns and cost to the customer. Porter’s five forces model is very useful in helping with cost leadership. The model will help Darken identify their restaurants supplier power, threat of new entrants, threat of substitutes and buyer power (Business Level Strategy).
In order to attract current and new customers Darken Restaurants need to differentiate themselves from their competition by bringing the highest value to their customers. Value is brought to customers through unique features and characteristics of an organization’s products. Darken can create value for their customer’s by lowering buyer’s costs, raising buyer’s performance, and creating sustainability. Implementing a differentiation strategy is important in order to be adaptable to environmental changes, learn new skills and technologies, and be able to effectively leverage objectives across the business.
This should enable the firm to produce with differentiated features at lower costs (Business Level Strategy). Recommendation Darken should continue utilizing the business strategy objectives that has led to their success as a company. We do not find it necessary to deviate from the current strategies, because they are already one of the most successful companies in their industry. As long as Darken continues to differentiate themselves from their intention, customers will keep coming back. Darken focuses heavily on diversification. The company began to diversify by opening Olive Gardens, which became their second restaurant.
Darken now has nine different restaurants that all serve a different style of food. The style of food ranges from Italian, Caribbean, steak and seafood. Service Divisions Darken has a couple cash cows services. Longhorn Steakhouse, Olive Garden and Red Lobsters are the cash cow restaurants that Darken owns. These services have owns are the most popular restaurants and bring in the most revenue for the company. Darken has two star services that would be The Capital Grille and Bahamas Breeze. These services have much room for growth and have a large market share. The only question mark that Darken has is Seasons 52.
It is still unclear in what direction Seasons 52 will go. Eddie Vs. is the only dog that Darken owns; it is not very successful and is only retaining profits from a small amount of its restaurants. Financial The financial of their main companies this year were in the billions. Olive Garden has 3. 6 billion in sales, while Red Lobster had 2. 7 billion in sales, and Longhorn right Enid them with 1. 1 billion. With this amount of sales they have been able to increase their market share from 2. 55 in 2008 to 3. 58 in 2012 and are looking to increase to somewhere between 5. 75 – 7. 5 in 2017. They have currently been decreasing their long term and short term debt and have been increasing their assets of each division showing that Darken restaurants is only on the rise and is doing everything correctly to get there. Weighted Competitive Strength Chart Competitive Strength Measure Importance Weight Darken Rival A Rival B Rival C Market Share 0. 15 10/1 . 5 11. 15 61. 90 21. 0 Match or Beat Rivals on key attributes 0. 2 7/1 . 4 21. 40 5/1 . 00 31. 60 Benefit from strategic fit 0. 05 91. 45 4/. 20 81. 40 Bargaining leverage w/ suppliers/buyers 8/1 . 60 4/. 80 81. 80 21. 0 Brand Image 31. 15 61. 30 21. 10 Valuable Capabilities 0. 1 91. 90 21. 20 71. 70 51. 50 Sum of weights 7/1 . 05 51. 75 31. 45 Overall weighted competitive strength scores 11. 10 4/. 40 7. 85 2. 3 5. 25 3. 15 Nine-Cell Attractiveness Matrix Strong (6. 7 and up) Average (3. 3-6. 7) weak (0-3. 3) High (6. 7 and up) Darken= High 7. 20 and Strong 7. 85 Rival A-High 6. 75 and weak 2. 30 Medium (3. 3-6. 7) Rival B=Medium 5. 10 and Average 5. 25 LOW (0-3. 3) Rival LOW 2. 95 and weak 3. 15 International Strategy Darken Restaurants is using the international strategy of growth by acquisition.
They are very successful when it comes to this process and have made many acquisitions over the last couple of years. Darken simply began with the restaurant we know today as Red Lobster, after they started, the restaurant began to develop quickly and reached 400 locations and became a stylish dining restaurant in Just over a fifteen year span. The first acquisition that the company made was of a New York steak souse that did not do so well and only a couple individual locations still exist. In the early sass’s Darken opened their first Olive Garden in Florida.
Olive Garden was able to develop into the restaurant it is today by chasing after Tuscany, Italy styles and many different Italian cuisines. Furthermore Darken was not quite done with expanding at this point and diversifying their company to different cultures. The next business that they had opened was the restaurant known as Bahamas Breeze; this is a Caribbean style restaurant. They also opened a sports bar style concept restaurant called Smokey Bones and Season 52. After they were done creating all of these restaurants Darken decided it was best for them to sell some and acquire a couple new ones.
They began by selling Smokey Bones and buying out their biggest competitor Rare Hospitality, they made this acquisition for a cost of 1. 4 billion dollars. When buying this company they gained two new very successful restaurants, the Capital Grille and the Longhorn Steakhouse. After this acquisition Darken went forth and bought two other restaurants, these were Eddie Vs. which has a couple locations in Texas, and Yard House which is the most upscale out of all of the restaurants that Darken owns. When it comes to this strategy Darken should change anything that they are doing.
Since 2008 their sales have been increasing every year with a slight drop in 2011, but this is expected with the way the economy and even with the bad economy term debts and are paying with more cash for items than they are taking out in debt to pay for these items. In this past year Darner’s sales were in the billions of dollars and they look to increase this in the current year. This recommendation is superior to any other suggestion because what Darken is doing now makes sense and they are building from every mistake they have made.
If Darken were to switch strategies from their current one there is a potential chance that it does not work and it could be a major setback for the company. Furthermore based on the above information one can see that Darken is a growing company and is doing very well financially, with this there is no reason for the company to change their strategy and possibly Jeopardize all that they have accomplished with the current strategy. However Darken has to continually try to improve this strategy to maintain their strategic advantage.
This includes constant industry research and rends to discover the next big acquisition. Darken uses a strategy known as multi-domestic, when it comes to competing internationally. What this strategy allows is for Darken to customize its restaurants to fit the style of service expected to help fit the needs of the customers and the cultures surrounding their customers. They do this by presenting different chains of restaurants to fit different styles of the society, and they are very successful at what they do.
Darken has been able to attack pretty much every style of food that customers crave when they are looking to go out to dinner. They have done this with he ability to attract every part of the economy that they can both rich and poor. This strategy has worked very well and as time goes on Darken is only getting better at implementing this strategy across their company. The Team’s suggestion for this strategy is to keep it and to learn from their previous and future mistakes and build with everything they do. Along with this continual research as mentioned before will help Darken develop in to a sustainable industry leader.
As we have mentioned, Darken is a very successful company and is able to develop their brands quickly into industry leaders in particular restaurant disgorges. Not only this is important, Darken also has restaurants that other companies cannot even compete with in that specific category. This is the reason we feel that our recommendation is superior. We see no reason to change the strategy when Darken is the leading company in a lot of categories they have restaurants in and they are only growing larger and larger every year.
McKinney 7-S Model At Darken we strive to bring value to the customer through our upbeat restaurant environment, friendly customer service, freshly prepared foods, and a fantastic dining experience. We believe that by following the seven S framework of McKinney we will be able to find the strengths and weaknesses of our company and build upon those. The better we are as a company the more we will be able to bring to our customers. The seven S framework of McKinney is a Value Based Management (IBM) model that describes how one can holistically and effectively organize a company.
It can be used in a wide variety of situations where an alignment perspective is useful. These situations include but are not limited to the following: improving the performance of a company, examining the likely effects of future changes within a many, aligning departments and processes during a merger or acquisition, and determine the way in which corporations operate efficiently, effectively bringing value to the customer (The McKinney AS Framework). The first of the seven S components is shared values. What are shared values?
They are the interconnecting center of Muckiness’s model. In other words it represents what the organization stands for and believes in (The McKinney AS Framework). Darken Restaurants believes in and is committed to delivering genuine service to others. Whether it’s making an extra effort or a guest, helping our employees develop career skills or improving communities they serve. Darken is also a strong believer in equality, which is why their vibrant culture embraces diversity and inclusion as business imperatives.
Throughout all their restaurant locations the spirit of inclusiveness is woven into our strong, values- based culture that we believe gives us a competitive advantage over our competition. This is evident throughout the company starting with the founder Bill Darken, who opens his doors to everyone, and continues to make sure the workforce reflects the makeup of the local community (Darken Restaurants). The second S component of Muckiness’s seven S systems is strategy. Strategy describes how the company (Darken) plans for the allocation of firms scarce resources, over time, to reach identified goals (The McKinney AS Framework).
Does Darken have the right strategy when it comes to the environment, giving themselves a competitive advantage over their competition, and having the right environment and atmosphere to bring in the right customers? Darken is actively committed to sustainability. The business depends on available, affordable, high quality natural resources, which is why they have chosen to focus sustainability efforts on preserving, conserving and enhancing their ecosystems. Over the past several years, Darken has advanced in sustainability-related activities.
They have developed a sustainability strategy and established an Office of Sustainability and internal Sustainability Leadership Council and are continuing to identify and spread sustainable best practices throughout the company (Darken Restaurants). The third S in Muckiness’s seven S systems is structure. Structure has to do with the way the organization’s units relate to each other. Organizational structure s important for any company by providing guidance and clarity on specific human resources issues, such as managerial authority (The McKinney AS Framework).
The structure in Darken, similar to many other large corporations, is a top down approach, meaning that Darner’s top executives communicate by telling the middle managers, who then tell the lower level employees how things are going to run (Darken Restaurants). The fourth S in Muckiness’s seven S systems is system. The system step describes the procedures, processes, and routines that characterize how important work is before it is done: financial systems hiring, promotion and reference appraisal system and info system (The McKinney AS Framework).
Darken is a great company to work for due to the fact that they promote from within the company. Promoting from within the company gives their current employees a sort of motivation; if they work hard enough to grab the attention of higher management it will give themselves an advantage over other employees when a promotion is available. Muckiness 5th S, style he is mainly talking about leadership and the way the leaders lead. Darken has a top down approach which is obvious with such a large company. They have presidents for all of their major chains such as