Jessica Young
Marketing In India and Asia
July 27th, 2014
Levendary Café – The China Challenge
Evaluation: Chinese Market Entry
After reviewing Steele’s analysis, it is appropriate to say that Levendary Café has entered the
Chinese Market in an unusual way. There are typically two modes of entering a foreign market. Some
companies are successful by changing their entire menu while keeping the same look and feel. Other
companies are successful by maintaining a universal and standardized approach. When Chen brought
Levendary Café into the Chinese market, he did not follow either of these paths. Each restaurant location
that Chen opened had different menu options and did not operate using standardized methods.
In the United States, Levendary Café is a quick-casual restaurant serving soups, salads, and
sandwiches. The café distinguishes itself with high quality ingredients and a commitment to service. Upon
entering into the Chinese market, Levendary Café has lost this brand focus. Steele’s analysis provided
detailed descriptions of each of the 23 China locations. Although the first store conformed to Levendary’s
design standard and menu selection, other locations held alarming changes. This poses a major problem for
successful entry into the Chinese market because Levendary Café’s concept and image can be ruined.
Analysis: Success in the Restaurant Franchising Business
In order to be successful in the restaurant franchising business, a company must follow a few key
guidelines. First and foremost, it is crucial to have a full understanding of the market that a company would
like to enter. The company must understand the consumer behavior of the local people as well as the
locations cultural and religious practices. These elements are highly complex and require serious
knowledge and insight. Therefore, it is strongly recommended to hire someone who is familiar with the
location to lead the foreign office. It would be extremely beneficial to hire someone who can speak the
local language, as well as, someone who is familiar with the local neighborhoods. These assets will be
particularly helpful when determining store locations and will speed up the process of permitting,
incorporating, and staffing stores.
Once a foreign office leader is hired, it is important for company to choose a mode of entry into
the foreign market. As previously mentioned, a company can either change their entire menu while
maintaining the same look and feel or a company can maintain a universal and standardized approach. It is
imperative for a company to choose one of these modes of entry in order to have a focused and strategic
plan.
Once a particular mode of entry is determined, it is important that the corporate office maintains a
healthy relationship with the foreign office. Both office locations must work together to share information
and resources in order for the strategic plan to be carried out efficiently and effectively. Although, both
locations need to work together, it is also vital to allow the foreign office some freedom to make necessary
decisions that work for the new market. The employees working in the foreign office understand the new
market the best and they should be trusted to make appropriate decisions that benefit foreign market
expansion. This being said, there must be guidelines to ensure that the new venture does not loose sight of
the strategic plan.
Lastly, it is important to protect the integrity of a companies reporting structure. Once a company
enters a foreign market, it is necessary to formalize the reporting process. An international financial analyst
should be hired to manage the companies’ finances abroad. Although this may be expensive, adapting
foreign management and financial reports to fit a company’s particular reporting format is not a sustainable
practice if revenues are significant.
Managing International Operations and Marketing
As shown in Exhibit 1, Mia Foster must make several changes both in China and in the corporate
office if she wishes to successfully expand into the Chinese market, while maintaining a positive brand
image and reputation. First and foremost, Foster must work with Chen to determine a mode of entry so that
they can work towards one strategic vision. I propose that Levandary Café continue to enter the Chinese
market by changing their menu, while maintaining the same look and feel across all restaurants. This mode
of entry has proved to be successful for companies such as Pizza Hut and Denny’s in India and can be used
as sources of reference for Levendary Café.
I have made this proposal because Chen has noted that the standardized offerings will not meet the
needs of the customers in the Chinese market. He stated that the standardized Levandary Café model only
works well in Pudong and Beijing’s embassy row and that other locations must adapt store design and
menus in order to be profitable. Seeing that Chen is extremely familiar with the Chinese market, I believe
his insight should be trusted and valued.
Although Chen possesses valuable insight, I believe he has not maintained the brand identity of
Levendary Café in the Chinese market. I agree that the menu selection needs to be adapted to meet
customer wants and needs. However, I do not support Chen and his decision to change the layout and
design of the restaurants that he has launched. If Levendary Café wants to maintain their positive brand
image, then there must be a certain level of consistency across restaurants. Having different restaurant
layouts and formats confuses the customer and portrays a weak brand image. Therefore, I propose that
Chen makes the appropriate changes to ensure that all new and existing Levendary Café’s in the Chinese
market conform to a specified design and layout that provides the customer with a clear and consistent
brand message.
In addition to these changes in China, Foster must make some changes in the corporate office if
she wishes to continue to enter the Chinese market successfully. Firstly, Foster must address the reporting
issues that the company is currently facing. In order to formalize the reporting process, I recommend that
Foster hires an International Financial Analyst. Chan argued that it is too expensive and that it will
complicate expansion efforts in China. Although Chan makes a couple valuable points, it is necessary to
protect the integrity of the companies reporting structure.
I also suggest that Foster visits Chen in China so she can gain a better understanding of what is
going on in the Chinese market. Foster should also sit in on meetings between White and Chen to ensure
that she is fully aware of the stage and status of the Chinese market entry initiative. When Chen was given
the position as VP of China, Foster was not CEO at the time and, therefore, was not fully aware of the
Chen’s vision and responsibilities. Ultimately, Foster needs to spend more time with Chen if she hopes to
align their ideas into one strategic plan.
In addition to these changes, Foster may want to consider adding a position to the executive
committee that is responsible for overseeing global growth. A Global Growth Director will be beneficial to
the company if Levendary Café is interested in expanding in other foreign markets. This position will aid in
the communication efforts between the corporate office and all other foreign offices.
Action Plan: Global Growth
Although Levendary’s entry into the Chinese market has proven to be very challenging, the
company has gained some valuable lessons on global growth initiatives. I believe that Levendary Café has
the knowledge and the resources to expand into other foreign markets, such as other Asian markets, if they
use the Chinese market as a basis for comparison. Based off of lessons learned in the Chinese market, I
have proposed an action plan for global growth.
When planning a Levendary Café growth initiative, structuring and staffing is a first priority. As
seen in Exhibit 2, I recommend that Levendary Café introduce a Global Growth Director to their executive
committee to oversee and manage all global growth initiatives. Once this position is created, all VP’s of
foreign markets will report to this Global Growth Director. This ensures that all company growth initiatives
are being executed at their fullest potential by providing access to valuable resources and knowledge that
White and Foster may not be able to provide. White may be able to oversee Chen and the Chinese market
entry. However, if the company attempts to enter additional foreign markets, White may not have the time
or expertise to manage everything.
By establishing a Global Growth Director, the company can ensure that global growth initiatives
are getting the focus that is required and that White can attend to his other responsibilities as Chief
Operating Officer. The Global Growth Director will also be the liaison between foreign markets and the
United States. Global communication has been a major problem in the Chinese market initiative. This
position will help eliminate these communication problems and will make knowledge and information
more readily available to both the corporate and foreign offices.
Exhibits:
Exhibit 1 – Managing International Operations and Marketing
Suggested Changes Foster should make in China and in the corporate office:
Exhibit 2 - Levendary Organizational Chart