Levendary Café: The China Challenge Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Levendary Café: The China Challenge Case Study Solution

Low labor cost

The major cost which the company bears while entering into a new market is the operational cost. However,according to the remote financial specialists; China is considered as the best spot to have an expansion in, because of its lower-labor cost.

Effective research and development department

The company’sprogress in the local market is up to the mark, with the help of an effective research and development, which is why entering into the new market will be feasible for the company, with an inclusion of strong research and development.As the CCO of the company managed many of its departments; the overall performance of Levendary was strong in the US markets, because it was differentiated by being in the segment of “quick casual”.

Q2 (ii): Which entry mode has the company used?

A2 (ii): Entry Mode:

When the company decided to enter the Chinese market; it preferred to build a relationship with Chen,despite of partnership with the Chinese firm,because the entry in China was challenging and it tended to create many issues as well. This is a franchising model that is adopted by the president, to expand the company geographically. Levendary Cafe required to implement a well-developed plan and for this purpose;the management decided to make a handshake agreement. The agreement between Chen and the company consisted of two years contract that started in September 2009, and needed to be renewed every year to fulfill the need for changes in the terms.

Q2 (iii): How did its US foundation fit China market?

A2 (iii): US Foundation in China

The venture of the company with China was expected to be the best option for the company. Chen had some plans to make a successful entry in China, and through using this plan; he thought that the company could also get success in the global market, as tastes had started to evolve and Chinese people had become fond of consuming chicken and noodles, so adopting a menu according to their taste would fit the foundation of Levendary in China. The success of KFC, McDonalds and Pizza Hut in China were also the reason why the Levendary was expecting to be fitted in China.

As the company identified a majority of opportunities in the Chinese market; Levendary tried to use a different strategy to attract the Chinese market. There were many growth options for Levendary in China, and Chen also received the confidence of the CEO and shareholders and convinced them that entering the Chinese market would be a best decision for the company This was also because the company always offers different offerings to its customers, all while remaining in the same segment as the competitors, so this changing strategy of the company was also an enormous strength for it to have a successful growth in China. It is also expected that the Chinese people will also connect to the company because of such efficient tactics applied by the company.

Q3: Please discuss what the key issues facing Mia Foster are and what you would recommend her to address these issues?

A3: Key Issues

Mia Foster, the CEO of the company, has been facing different issues and challenges for Levendary Café, out of which, some key issues are described below:

Inefficient Reporting:

Mia Foster found that the Chinese accounting standards are not as strict as the US’s, and the company needs to follow appropriate standards for China. Moreover, the reporting process adopted by Chen for preparing financial statements is less efficient and comprehensive, and he was not willing to share the reporting and planning process with the upper management.

Slow progress:

Another issue identified by Mia is the adjustment with Chinese culture. As the leader of the Chinese-advertisement only adjusted and made the vital changes that were required to get fruitful results, but Mia doesn't seeresults which she was anticipating for.

Unfocused vision:

The biggest issue that Levendary Caféis facing in China is that Chen is not leading the franchises to support the vision of the company, which has become a threat because vision adds value to the company. Therefore, the vision of the company must reflect its vision in the operations of all the departments.

Different culture:

Mia also identified the fact that keeping the same standard as Levendary’s US market in China doesn’t tend to be a successful strategy for the company, because of the cultural and food differences between the US and China. The difference in the culture of the US and China is an issue, as the people of China only eat food from the restaurants and are always on the move, but the people in the US are more socialized and like to spend more time in restaurants, having chat than just having their dinner and evacuating the table.

Recommendations

Miamust appoint a regional media manager and financial analyst to remain updated with the GAAP and other Chinese operations. There should be conduction of regular board meetings, discussing various agendas so that the issues wouldn’t get matured and addressed as soon as possible, and there is a need of standardization of the reporting procedure, in order to match it with that of the US, before further expansion of stores in China.Mia should also raise a larger segment of total sales.

Moreover, the company should provide freedom to Louis Chen, as he is the only experienced person who knows the dynamics of operating in China.However, Louis Chen must make sure that he understands the core values and vision of the Levendary Cafe, for its expansion in China. In addition to that, the company should also focus on furnishing and ambiance of cafes’ promises, according to the preference of the Chinese culture, as people in China prefer to buy and take away, which is different from the US where people like to sit in restaurants or cafes and spend time with each other besides having their meal.

Conclusion

Levendary Café was doing well in the US market however, the company faced few challenges as well but its customer-centric approach was up the mark. However, there was a tough competition in the market due to a large number of competitors and no barriers to entry into the market. Therefore, the company decided to explore the new market that is China. In China, the company identified many opportunities such as; huge population, fast food trend, low labor cost, increasing rate of women, and middle-class workforce however, there are challenges as well such as; cultural differences, reporting requirements, and risks associated with the huge investment.The CEO, Mia Foster also lacked management skills because it was her first experience working as a CEO that is why it was difficult for her to manage these issues as the communication gap derived serious issues in China..............