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Case Analysis: Darden Restaurants Inc.

In: Business and Management

Submitted By crazyariesgrl
Words 1737
Pages 7
Company Name: Darden Restaurants Inc.
Website: http://darden.com/
Industry: Restaurant
Background and History: Darden Restaurants Inc. was founded in 1938 by Bill Darden. At the time, Bill was just nineteen years old and opened his first restaurant called the Green Frog. It was a small restaurant, a twenty-five seat luncheonette, in Waycross, Georgia. It promised to give “service with a hop.” Thirty years later after the success of the Green Frog, Bill Darden and Charley Woodsby opened the first Red Lobster in Lakeland, Florida. A few years later in 1975, Bill Darden mentored his good friend Joe R. Lee who became the first president of Red Lobster. Twenty years later Joe R. Lee was named the first Chairman and CEO of Darden Restaurants. Today, Red Lobster is the largest full service seafood dining company in the world serving nearly three million people a week. In 1982, George McKerrow opened the first Longhorn Steakhouse in Atlanta, Georgia. The restaurant became famous when it remained opened during a very severe and infamous snowstorm offering $1.00 beers and food specials. Travelers who unfortunately got stuck and couldn’t make it home sought refuge in Longhorn. They were won over by great steaks, and hospitality leading Longhorn to become a huge success. By 2007, Darden celebrated the addition of the Longhorn Steakhouse brand to the company. Also in 1982, the first Olive Garden opened in Orlando, Florida. It was originally part of the General Mills Company and offered Italian-American cuisine. In 1995, however, Darden split from the General Mills Company. It became its own publicly traded company on the New York Stock Exchange, and was named after the company’s founder to become as it is known today Darden Restaurants Inc. That same year the Darden Restaurant Inc. Foundation was founded and gives millions of dollars to organizations each year. In 1982, Ned Grace opened the first Capital Grille in Providence, Rhode Island. It became nationally acclaimed for its dry-aged steaks, award winning wine list, and club like atmosphere. Its brand was also brought it in 2007 with the Longhorn Steakhouse brand. While both are steakhouses, the Capital Grille is more upscale and more expensive then Longhorn Steakhouse. Darden Restaurants introduced a new restaurant named Bahama Breeze in 1996. The restaurant was designed to feel like a Caribbean escape to customers. It featured island inspired food, and hand crafted tropical drinks making it a new and unique brand to add under the Darden Restaurants Company. In 1998, Darden Restaurants introduced the Darden Diamond Club. This was created to recognize and celebrate outstanding achievements of the top restaurant leaders. The same year also brought the Brilliance Award. This was created to recognize excellence among support center employees. Only a year later the Darden Dimes employee assistant fund was created. It is a fund for Darden employees from other Darden employees to help co-workers in need. It is an optional fund where an employee donates .10 cents or more a week from their pay checks to help raise money for employees who suddenly find themselves under unfortunate times. Seasons 52 joined the Darden chain in 2003. It offers a menu with all items less than four hundred and seventy-five calories and cooked with no butter. Their menu changes four times a year to coincide with the change of the seasons. Also in 2003, Clarence Otis became the new CEO and Chairman of Darden. Drew Madison was named the new President and Chief Operating Officer of the company as well. In 2010, Darden Restaurants announced its sustainable restaurant design initiative. They opened their first LEED (Leadership in Energy and Environmental Design) certified restaurant, an Olive Garden in Jonesboro, Arkansas. This new design is to help benefit the environment by using less energy within the restaurant. It is how Darden Restaurants plans to move toward being Green. In both 2011 and 2012, Darden has been on the Fortune 500’s best companies to work for list. (Darden.com, Timeline)
Porter’s Five Forces Analysis Power of the Buyers: Buyers’ bargaining power is very strong due to absence of switching costs when choosing different restaurant to dine. Customers a well informed of pricing and quality of products served at many restaurants. In today’s slowly reviving economy the buyer is very price-sensitive, which puts upscale segments within the Darden Restaurants brand on the spot to reconsider their price point and offering alternatives. With rising prices for many ingredients the power of the buyers is increasing as they are aware of many restaurant pricing in their area, and among chains. Power of Suppliers: Suppliers’ bargaining power in the restaurant industry is very weak, since each company in the segment accounts for the big fraction of the supplier’s sales. Many restaurant companies purchase a large percentage of their meats from one supplier, and seafood from another. Their choice in their supplier and limiting it to only a few is maintaining consistent quality throughout all the restaurants in the chain. The cost of switching to a different supplier is relatively low as well as there are good substitutes for supplier’s product. Competitive Rivalry: The restaurant industry is highly competitive because of slowly growing buyers’ demands, no cost of choosing another restaurant to dine, and a substantial amount of restaurants to choose from. Revenues of the restaurants depend on customer traffic that can be influenced by strong and aggressive marketing. Competitive advantage can be also obtained through changing prices and differentiating strategies. Threat of Substitution: Competitive pressure from the sellers that offer substitute products goes both ways: if there is a substitute of equal quality available there is almost no difference to switch over. Customer’s loyalty comes in to play as well, but if a guest is looking for quality food with less focus on the overall experience and atmosphere that Darden Restaurants offers they can switch to lower cost provider. Threat of New Entry: The threat of the new entrants is extremely high because of low entry barriers. Buyers’ demand is in the stage of growing after the economic downturn and promises to be steady. Product differentiation is relatively weak because all restaurants within the Darden Restaurants brand are offering the highest quality product and striving to provide quality service. Capital requirements to start a new business are relatively low.
Darden Restaurants Inc. Strategy Darden Restaurant’s competitive advantage is its financial success and sustainability. The common theme among all of Darden's sustainability efforts is collaboration through strategic partnerships to meaningfully identify and reach systemic solutions. (Darden Concepts, Inc, 2015) The business depends on available, affordable, high-quality natural resources. Over the past several years, Darden has invested in sustainability-related activities. They developed a sustainability strategy and established an Office of Sustainability and an internal Sustainability Leadership Council. They are now working to identify and spread sustainable best practices throughout the company. They’re also partnering with their suppliers and key stakeholders to protect resource availability and create long-term collective value through innovative approaches to ecosystem conservation and enhancement.
Specific Strategies Resource View of Firm: Darden has integrated a variety of sustainability measures into our operating standards for restaurants, such as requirements related to energy and water efficiency. They have also initiated an effort to more formally embed sustainability into their governance and accountability mechanisms to ensure sustainability considerations are being consistently integrated into decision-making across our company. Leadership: To help Darden in its sustainability competitive advantage Darden has given the role of sustainability in the business to a full Board of Directors. Darden's Sustainability Leadership Council (SLC) consists of the senior executives from most brands and many business units, including operations, supply chain, government affairs, human resources and business development. The SLC meets three times a year, advising on sustainability strategy, championing implementation in their divisions or brands and providing accountability for performance toward meeting sustainability goals and objectives. (Darden Concepts, Inc, 2015) Industry Life Cycle Strategies: Darden Restaurants Inc is at the mature stage in its life cycle. Since the company’s growth has slowed (while still expanding internationally) to a degree they are starting to shift their focus towards sustainability. This push for sustainability is a marketing effort to remain strong and stress the unique features of the product or the company to continue to differentiate Darden’s offerings from industry competitors. Strategic Alliances and Joint Ventures: Darden strives on working collaboratively and with a genuine commitment to find collective solutions and to learn from the experience and perspective of others. In 2012, Darden announced a formal alliance with the Partnership for a Healthier America (PHA). Darden made the most comprehensive health and wellness commitments of a restaurant company to date, pledging to reduce our overall calorie and sodium footprint by 10% by 2016 and by 20% by 2021, and to enhance the nutrition credentials of our children's menus. Darden also announced a three-year commitment to rebuilding troubled fisheries through targeted Fishery Improvement Projects. Darden is a member of a wide range of associations and groups that address various aspects of supply chain sustainability such as Global Aquaculture Alliance, National Cattlemen’s Beef Association, Global Roundtable on Sustainable Beef, Food Safety Leadership Council, and Business for Social Responsibility. (Darden Concepts, Inc, 2015)
Course of Action Recommended I believe that Darden Restaurants is on a great course to both helping themselves and alliances be a sustainable and competitive force within the industry. Darden has really put a lot of effort forward to keep the company itself, and all of its restaurants on its sustainability track. With Darden being a company that has been strong in the restaurant industry for the past forty years, and has been successful with many of its brand names sustainability is really the smartest move the company can make. While the company is still expanding; the rate at which it is expanding has slowed. Working towards keeping costs in check and making sure the company has a strong sustainability for many years to come is the right move.
References
“Darden Restaurants, Inc.” MarketWatch, Inc. 2013. http://www.marketwatch.com/investing/stock/dri
Darden Concepts, Inc. (2015). Sustainability - Darden Restaurants - A Leader in the Full-Service Restaurant Industry. Retrieved from http://www.darden.com/commitment/sustainability.asp

Darden Concepts, Inc. (2015). Darden Sustainability - Strategic Partnerships. Retrieved from http://www.darden.com/sustainability/default.aspx?lang=en&page=people§ion=strategic-partnerships
“Timeline. ” Darden Concepts, Inc. 2013 http://www.darden.com/…...

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