This Levendary Cafe: The China Challenge case study focuses on analyzing the issues faced by the business and providing recommendations that would help the business to grow in China further. The issues that Levendary Café is facing are standardizing the operating procedures across the cafes in China and lack of compliance in accounting procedures between the US and China operations. It is also facing the problem of strategies that have to be adopted for the expansion of its business in China. Finally, it must tackle the decision that needs to be taken by Mia Foster regarding the future responsibilities of Louis Chen in the organization.
Christopher A. Bartlett and Arar Han
Harvard Business Review (4357-PDF-ENG)
October 24, 2011
Case questions answered:
- What should Mia Foster, the new CEO of Levendary Cafe, do about Louis Chen?
- How should Levendary Cafe manage its international operations?
- What recommendation(s) would you make to Mia Foster on the issue she raised at the end of the case?
a) What strategy should Levendary adopt to drive its expansion in China?
b) Who should have the responsibility to make and implement those changes? What changes should be made in roles, responsibilities, and relationships that link Chinese management to the Home office?
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Levendary Cafe: The China Challenge Case Answers
EXECUTIVE SUMMARY – Levendary Cafe: The China Challenge
The issues that Levendary Café is facing are standardizing the operating procedures across the cafes in China and lack of compliance in accounting procedures between the US and China operations.
It is also facing the problem of strategies that have to be adopted for the expansion of its business in China. Finally, it must tackle the decision that needs to be taken by Mia Foster regarding the future responsibilities of Louis Chen in the organization.
This report focuses on analyzing the issues mentioned above and providing recommendations that would help the business to grow in China further.
After analyzing the case, our team recommends restructuring the organization, standardizing the Menu and ambiance of the outlets in China, expansion of the Levendary brand in China through franchising, and opportunities for additional revenue generation after expansion.
INTRODUCTION
Levendary Cafe, with 3500 branches in the US, is a famous quick casual restaurant in the US known for its high-quality ingredients and commitment to service in a comfortable and friendly environment. The company’s founder, Howard Leventhal, believes in the principle of “Delighting the customer” and has incorporated the same into the company’s culture. More than two-thirds of its cafes are franchised in the US. The company has currently expanded its operations in China.
The key player is Mia Foster, the newly appointed Chief Executive Officer. Next are Howard Leventhal, Peter Steele, the Chief Franchise Officer; Lucien Leclerc, the Chief Concept Officer; Nick White, the Chief Operating Officer; and Louis Chen, Vice President of China. The latter is handpicked and appointed by Howard Leventhal. Louis Chen is responsible for expanding the operations of Levendary Cafe in China.
In this report, we will analyze the key issues that Levendary Café is facing towards expansion in China and provide recommendations for resolving these issues.
CASE ANALYSIS
The primary issue is outlets in China deviating from the concept of quick casual dining to Quick dining in suburban outlets. The standardization of the Menu and ambiance, which had been one of Levendary’s core concepts, was missing among the suburban outlets in China. Even the Menu lacks wholesome choices like its US counterparts.
From the analysis, we understand that Mia Foster, the newly appointed CEO of Levendary Cafe, considers everyone’s opinion, takes up a neutral stand when a conflict arises, and responds in a composed manner. Yet, she is assertive in the decisions she makes when it comes to the core values of the organization. She’s also known for her frank communication style.
On the other hand, Louis Chen, VP of China, though he has established a strong base for Levendary Café in China with 23 outlets in 1.5 years, is a highly opinionated person with a lack of long-term vision. He has a good influence on the local crowd, understands the Chinese market, and is highly experienced in real estate but is inexperienced in the Restaurant Business.
As observed in Exhibit 3, though the outlets in Metro-Suburb China have huge customer traffic, the average check stands around $2, which is very low when compared to the other outlets. This value is even below par with other quick casual restaurants where the average check is around $8-$10. These are also the outlets where the menu has been completely changed.
From Exhibit 4, we observe that Levendary Cafe China is doing good business with a net loss of $143,620, which includes the pre-opening expenses of $391,392. This indication is a positive sign that indicates the company is moving towards break-even.
By comparing Exhibit 2 and Exhibit 4, we can find that there is a scope for additional revenue generation through Royalties and Levendary branded grocery items like in the US.
RECOMMENDATIONS
1. What should Mia Foster, the new CEO of Levendary Cafe, do about Louis Chen?
As Mia Foster, I would recommend the following actions to be taken:
I would get the Chief Franchise Officer Peter Steele to…
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