Adewale Adedeji
Mgmt 670
Case Analysis for Ruth’s Chris
1.What did Hannah do to make a first cut in the list of potential variables? How did he
get from 200 to less than 35 potential new markets? Which variables did he use in his
decision making and why?
Hannah created a criterion that included the factors that were key to Ruth’s Chris success
and used that to narrow down the potential new markets. The variables were beef-eaters
(their primary customers are beef eaters), legal to import U.S. beef (Ruth’s Chris only
used USDA Prime beef therefore it had to be exportable to the new country),
Population/high urbanization rates (restaurants needed to be in densely populated areas),
high disposable income (fine dining restaurant with an average cost over $70), if people
went out to eat (if they didn’t go out to eat, then it made no sense), and affinity for U.S.
brands (overtly anti-US countries would not accept Ruth’s Chris and eat there).
2. What other, unused variables might prove useful when assessing the attractiveness of
particular international markets? Why?
Political stability should be added to the list of variables. An instable government could
lead to problems for a Ruth’s Chris franchise in that country. The restaurant would go
through a hard time get the proper clearance to set up operations, war could break out and
a risk exists of the government or a new government power taking claim and repossessing
the restaurant.
3. What would be your choice of top 5 opportunities? How did you reach your
conclusion?
Singapore
There is a growing affinity for Western-style products and way-of-living and it has
potential to bring in strong revenues. Singapore has a per capita beef consumption of 71.1
kg with a population of around 4 million. Its urbanization rate is 100% which tops all
countries and has a per capita GDP of $28,100. It has a highly developed market-based
economy and is the 5th wealthiest country in the world in terms of GDP (PPP) per capita.
It is the 3rd most expensive Asian city to live in so it falls in the market Ruth’s Chris
caters to. Lastly, rival Morton’s has a restaurant there.
U.K.
The U.K. is a developed country with high standard of living. Their per capita GDP is
$30,300 comparable to the U.S.A’s so they can afford the products at Ruth’s Chris and
eat frequently. They have a high urbanization rate and have a stable economy, the sixth
(PPP) largest economy in the world. They have high per capita beef consumption at 79.6
kg. They have little risk due to political stability, affinity for American brands, and
similar eating habits.
Germany
For many reasons similar to the U.K’s. Germany has a high standard of living and their
per capita GDP is $30,400, the largest national economy in Europe and ranked fifth by
GDP (PPP) in the world. They have high per capita beef consumption at 82.1 kg. Affinity
for U.S. brands in Germany is not as strong as the U.K.’s and if consumers can relate
Ruth’s Chris to a well-known German brand or with a local subsidiary, it would ensure
success.
Bahamas
It has high per capita beef consumption, second only to the U.S at 123.6. It possesses an
urbanization rate at 89% and a per capita GDP at $20,200. It has a small population, but I
believe its high level of tourist activity would compensate for that and also bring in
money from tourists on vacation.
Spain
Spain has high per capita beef consumption, third behind the U.S. and the Bahamas.
Spain has good size population of over 40 million with a 77% urbanization rate. Its per
capita GDP is $25,500 making it the eighth largest worldwide.
4. Hannah was focusing on franchising as his choice of entry. What other entry modes are
there? What are the strengths and weaknesses associated with each mode of entry from
Hannah’s perspective?
Other modes of entry include joint ventures (JV), licensing, exporting, and wholly owned
subsidiaries (foreign direct investment). Only 3 of these are possible due to their industry
– JV, FDI, and franchising. JVs help Hannah enter the market easier with local market
knowledge and allies, less investment required, and more profit. JV’s weaknesses are
difficult to manage, distance from headquarters, greater risk than franchising, and insider
knowledge lost. FDI’s strengths include direct control over operations and brand and
total profit, and its weaknesses are higher risk than other options, more commitment and
resources and more difficult to manage. The last option franchising, the benefit’s
includes less risk for Hannah, steady income, and brand growth and the disadvantages are
less control, less profits, and loss of intellectual property.
5. How does the industry impact the choice of the international entry mode?
Being in the fine dining restaurant, it limits your entry options to franchising, FDI, or
joint ventures. While other industries with tangible products such as electronics or
consumer goods have more options opened to them when it comes to international
expansion, Hannah is limited to these three modes, and even less depending on the
political, cultural, social, and legal environment.
6. What are some actual internal and external challenges Hannah will face when opening
his restaurants abroad? How can he alleviate these challenges?
An external situation that does not allow for quick is expansion is the worldwide
economic crisis. Disposable income has reduced greatly and has resulted in conservative
consumer behavior. Also, the credit crunch reduces consumer liquidity and causes an
internal challenge. The credit crunch also prevents Ruth’s Chris from borrowing in order
to expand. Hannah can hold of his expansion plans till the market gets better or scale
back.
Another external variable that is to be considered by Hannah are political. Many of the
prospective countries that he hoped to enter did not allow the importation of US beef.
Therefore, Hannah must either break down these political barriers or find another method
for procuring this resource.
An internal challenge for Ruth’s Chris is deciding exactly how they are going to expand
into new markets, and expand in general. They must consider what mode of entry they
are going to take. They can alleviate this challenge by thorough market research and
choosing the proper mode of entry.