The Levendary café case addresses one of the key issues that large companies today normally face in their endeavor to expand into new foreign markets. When domestic growth for any company has matured, it becomes imperative that international growth is undertaken. However, there exist many forces; both external and internal, that can affect such growth and development. These forces and challenges in new markets are similar to those in the domestic market, except that they happen in foreign countries.
This paper will conduct a SWOT analysis of Levendary Café, highlighting the key strengths which can facilitate their growth in the China market, its weaknesses which can derail their expansion into the new market, and the opportunities for growth, both internal and external, as well as the threats that it encounters in the face of its expansion strategy. This paper will also give the best approach for handling the Levendarycafé China expansion manager Louis Chen concern and will finally conclude by highlighting some strategies which can guide Levendary cafe into a more stable growth that will give investors confidence in the restaurant chain.
SWOT Analysis of Levendary Café
The strengths of Lavender Café spring out of their customer oriented policies, the domestic demand, the good service they provide, and the excellent environmental and interior designs, as well as human resource.
The CEO Mia Foster has a rich career that equipped her with critical skills and experience in the running of Levendary café. She had previously worked in a large American fast food company and this meant she had the experience of working in the American food industry, and is conversant with the challenges and opportunities that are present in the food industry. She also has a good education background that inculcates her with the necessary knowledge to handle challenges that may arise.
Louis Chen: in addition to Chen possessing excellent academic background, he had the energy and entrepreneurial spirit that is imperative in the growth of the China market. He was well equipped with background knowledge of the Chinese market which gave him an intimate familiarity with the neighborhoods Shanghai. He also had a network of contacts who would assist him in speeding the procedures for incorporating, permitting and staffing the restaurant. He also was passionate about the food industry and wanted to work in the food service industry.
Brand:Levendary café has created a name for itself; it has become a brand that people can associate with good customer services and healthy food. The founder emphasized on the culture of delighting customers and this attracted and retained the customers. Additionally, the company was devoted to evolving menu alternatives that kept the name of the Levendary cafe brand crisp in the eyes of its customers.
Quality service: Levendary café has aprinciple that emphasizes on personalized service as opposed to the standardization service model that focused on swiftness of service as well as order accuracy. This principle employed by the café attracted many heavy user customers, who consisted predominantly of executive professionals and women mainly from the upper middle class segment.
Local menu adaptations, food quality and quality ingredients: the café allowed for a flexible menu that was different in 80 different states. This allowed for one or two local specialties tosupplement its basic menu and itemized its menu entries on sequence of indigenous popularity. It also used healthy ingredients likepomegranates and, or quinoa. Moreover, the concept team in the café introduced a set of new products several times in a year, and these new products had minimal variations to adapt to diverse flavors in different locales.
The CEO of lavender café lacked internal exposure and experience in running a multinational restaurant chain. Foster had only worked within the hotel industry in the united state. Mr.Chenalso had no experience working outside China and he had also never worked in the restaurant business industry. This denied him the much needed experience to run an international company.
The unwillingness of Chen to conformto the industry and parent company standards. This portrayed an element of professionalism,especially coming from a professional manager. The manner in which Chen opted to expand was also a source of weakness; his lack of a strategy for expansion was a risky resolve which showed a lack of direction and leadership on the future expansion of the café in China. He seemed to be managing the cafes expansion on a light touch
The manner in which the parent company opted to enter the Chinese market is also a source of weakness. The plan to enter the Chinese market was implemented ineffectively. This can be depicted by the late realization by the management the need to adopt the GAAPs in respect to accounting for revenues collected. This step is expensive, and this forms the base for Chen’s refusal to make use of it and opted to minimize costs and attain his personal goals.
Another weakness is the lack by the company to have a strategic plan to operate, and the China manger explanation that he did not need a strategy for expansion due to the dynamics of doing business in China. He also had no strategic plan for the expansion of Levendary café in China and merely relied on, on the spot impulses. Additionally, the menu was very different not only from the ones in the parent company in the United States, but also from one place to the other. The sitting arrangement was also different as some restaurants did not have sitting space, and the types of utensil that were being used.
Opportunities available for Levendary café come in the form of Chen’s initial location in Shanghaithe Chinese’s demographic composition, the opportunities in the China food industry and the expansion plans for Dubai as well as further expansion in China.
Louis Chen,before his recruitment into lavender to manage their China office, Chen had worked in the real estate industry in ShanghaiChina. His familiarity with the region made him a key asset to the company as he had a clear and perfect understanding of the market dynamics and this would facilitate his strategy for identifying good areas for opportunities to expand the chain.
Availability of room for further international expansion. Lavendary café was an internationally recognized brand name that would be easily accepted in many countries. This provides broad avenues for global expansion. Additionally, the company’s expansion in China is far from exhausted as the Chinese market was still unexploited. Also the Dubai market expansion plan is a source of opportunity for the company.
The demographic composition of the Chinese market provides opportunities for growth forLevendary café. The Chinese’s population is growing and it is leaning towards the market segment which Levendary café is targeting. That is, the middle class, women and white collar work force and the youth who are attracted by western culture
The Chinese economy also provided an opportunity for growth. China’s GDP growth in 2011 was 9.3%. The country has enjoyed an upward economic growth trend, which reflects a larger disposable income amongst the potential customers. Additionally, the Chinese market possesses most of the significant features that a corporation attempting to establish a restaurant business. The country has a ready market in the form of the 1.4 Billion populations.A population that has an affluent middle class who have exhibited a positive trend in the lifestyle of eating out, indicating that the business can establish a customer base more quickly and easily.
Adaptation and Culture difference between the two countries forms the greatest threat to the company. There exists a broadvariation inregional food likings and tastes in China, such that it is very hard to meet the demands of every customer in flavor. Additionally, western food is not a favorite delicacy for Chinesepeople.It therefore becomes difficult to appeal to and maintain a stable customer base. There are challenges in making the menu, food as well as marketing teams.
The Lack of information about the Chinese food service industry is another threat. As a new entrant, Levendary café it is very risky for it to enter the Chinese market. Levendary café needs to be well aware of the policy as well as financial statement formatsrequired in the new market, finding good and reliable supplies.
Another threat to Levendary café is the threat of new entrants, threat of substitute products and prevailing competition. The presence of stronger, more established businesses providing similar types of businessespresents competition to the cafe. Additionally, manydifferent types of products are available, presenting a strong threat of knock offs and also the theft of trade secrets. The service food industry is highly competitive and grows very fast. This forces restaurants to change with market tastes and preferences; this coupled with the strong presence of other major international and Chinese brands present a strong threat to Levendary café, and in extent American chains in China.
What Mia Foster Should Do About Louis Chen
Mia foster has been unable to reason out with Chen. This conflict can be attributed to the negative attitude of Chen towards foster, as well as his poor leadership skills.Within the operations of any business, it is always a rule that the personal goals of every department arein synch with the overall goal of the entire company in order to avoid avenues for conflict and eventual failure. In this case, it is clear that Chen’s personal goals do not coincide with the objectives of the company, from which the expansion was undertaken. Chen’s strategy revolves around cost minimization with the overall goal of breaking even within the 1 year time frame as is consistent with his contract. On the other hand, The CEOs objective for tapping into the Chinese market was to attract a considerable customer base. This contraindication in the execution of duties and responsibilities forms the core source of the conflict.
There are two approachesavailable to handle this situation. First, the company should clearly redefine the job description of Chen in order to distinctly postulate the boundaries within which he should act.This will reduce the avenues for conflict between the two managers and dictate whose decision is final. The other option is to give Chen the leeway to handle the operations in China as he has a better understanding and grasp of how the market dynamics work and despite the conflict in terms of goals between the American office and the China office, Chen is making good returns to Levendary café.
Strategy and Recommendations
There are several strategy options that are available to Levendary café;The first option would be to close the entire operations of Levendary café in China and leave the market either temporarily until there is an effective planning strategy before re-entering the market or permanently and shutting all its operations.The second other option would be to close all the Chinese-like restaurants and in their place set up cafes that take a complete American concept. This strategy can be effective as other competitors such as McDonalds and KFC have managed to maintain a stable customer base while maintaining their American identity.
The third option is for Levendary café to allow the China operations keep on and place trust on Chen. This option will necessitate that foster and her team refrained from interfering with Chen’s mode of leadership and appraises his performance after a one year break-even time frame.The fourth option is for Levendary café to operate the China operations as a Chinese company, taking g on a Chinese marque. This will involve the café providing local dishes to its clients. This option is viable as it will attract a vast majority of customers like most localized cafes. However, this is a risky option as it will be forced to face stiff competition for the already established cafes providing similar services.
Other options would be for Foster to discuss with Chen the differences which have arisen with the difference in opinion with regards to the drivers of revenue. In Chen’s view, the key driver for revenues is the volume of sales, while to foster, the driver for revenue is identified as gross margin. This difference in accounting ought to be made a core agenda for a meeting, so as to facilitate reconciliation of revenues using a standardized approach: GAAPs methodology. Secondly, the significance of transparency in working towards achieving a similar goal should be explained to Chen and together with his team, he should be forced to develop operative communication and leadership skills, so as to maintain a coherent professional environment which is considered useful in conducting successful business operations. The final option would be for Levendary café to formulate an efficient strategy on an international level, where the restaurant assesses the trade-offs between local adaptations and cost reduction to determine whether to adopt a global, multi-domestic or transnational approach.
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