LEVENDARY CAFE ANALYSIS - Essay Example

Appraise and analyze the management issues that the CEO Mia Foster is facing. Reference to academic business theory is essential to answering this question. You should offer examples from the case study where possible. To qualify the management issues that the new CEO of Lavendery Cafe is facing, it would be necessary first to establish that Mia Foster’s stint in Lavendery Cafe is her first post as a CEO. Thus, she still cannot be considered as a seasoned CEO and still needs to prove her capability and efficacy for the responsibility. She still does not have any experience in establishing international or multinational brand either and while she had worked in a global accounting firm, the industry is way different from Lavendery Cafe and thereby did not provide her the necessary learning curve for her new job. The rest of the management issues that Lavendery CEO MIA Foster is facing sprouted on this relative inexperience of hers. The most obvious difficulty that Foster is facing is how to manage their China point person, Louis Chen. Chen made a remarkable progress in establishing Lavendery presence in China with only a short period of time. Even Foster admitted that Chen is an asset to the company only that he is difficult to manage. Chen seems non-cooperative with Foster in standardizing its operation according to its parent company in the USA as well as to conform to the company’s format in financial reporting. Chen’s adamant to respect Foster’s authority may have been attributed by the fact that he was hired by Lavendery’s founder Howard Leventhal and not Foster herself. They have several clashes with regard to their business strategy as well as their formats in their financial report. Chen seemed to have “redesigned” the concept of Lavendery Cafe in China that infuriated its Chief Concept Officer Lucian Lelerc to the point of asking Mia Foster to stop Chen now. Unlike in the United States where the concept of Lavendery Cafe is uniform and standardized with slight variations to accommodate a specific peculiarity of a regional market (i.e. offering few soup items and more drink options in the South and allowing one or two regional specialties to be added to its core menu where it is listed in its menu items in order of local popularity) Chen seemed to have taken the variation to the extreme with only Pudong and Beijing embassy row that has semblance to its counterpart in the US. Chen’s seeming non-cooperation to make his financial reporting conform with company format that is consistent with the Generally Accepted Accounting Practice (GAAP) is also a special concern for Foster because this can have implication not only in the operation of their business but will also have legal consequences. The Chinese operation is reflected in the financial statement of Lavendery Cafe which will also be reported in turn to the Securities and Exchange Commission according to GAAP standards. Any deviation from good accounting practices may be penalized by SEC especially in this time of heightened awareness in accounting (Enron aftermath) and this could affect the image and the brand of the company whose repercussions are long-term. This will also incur unnecessary cost and manpower in reconciling the format of financial reports in hiring an external financial analyst. In short, Mia Foster’s relationship with Louis Chen is problematic to say the least as Chen seemed antagonistic in listening to the directives of the CEO. Their conflict however in this kind of venture that involves multinational entity is not uncommon China due to their clashing culture and values (Tjosvold et al 168). With regard to whose perspective will works in China, it would also debatable to use Foster and Lelerc perspective as a yardstick in determining what is the best approach in gaining foothold in a foreign market considering that both do not have experience in establishing a brand in foreign market. Moreso when Lavendery Cafe’s foreign market presence is only limited to Dubai and China. 2. Produce an analysis of the future prospects of the marketplace in China using the detailed information from the Case study. Is China a challenge or is the USA parent company making “a mountain out of a mole hill”? Give examples to support your arguments put forth. China as a market is a challenge that needs to be surmounted. Its sheer size of the market (being the second largest economy in the world) presents an opportunity that is hard to ignore. It has a population of 1.4 billion people coupled with a double digit growth over the past decade in addition to the exponential growth of the Chinese food service industry which is valued at at RMB 1.996 trillion in 2009 makes the country ripe for investment and an ideal market. For companies such as Lavendery Cafe whose growth plateaud in recent years, China could become a growth driver for the company that could again revive its stock’s value in Wall Street. This tremendous opportunity also is not without challenge. Culture and perspective in China just differ from the USA or in Lavendery Cafe’s case, differ from the USA parent company where Chen labeled Foster (representing the parent company) to be coming from the place of ideas and concept and is unaware of the peculiarity of the Chinese market. He also cited that what can be done in the US market does not necessarily apply in China because people there have different preference in terms of taste. Another challenge that USA parent company operating in China faces is leadership and management style as what can be gleaned in the case. Chen was educated in Stanford and is aware of the leadership and managerial style of both west (US) and east (China) and used the appropriate leadership and manager style appropriate for the environment. The CEO, Mia Foster however finds the leadership and management style adopted by Chen as the “baron” type or the feudal type of establishing his own kingdom that is dominated by Chen. Also, Foster is having an issue with controlling Chen as a manager because she is operating from the mindset of a western manager. In the last portion of the case where her cogitations about Chen were recorded, she classified managers as go getter, baron and professional manager. In Foster’s mind, she classified Chen as go-getter that has transformed into a baron with her hope that he would evolve into a professional manager so that she could work with him smoothly. This is where her problem begun because she evaluate the efficacy of being manager from the lens of American or western perspective and Chen does not fit her mold of an ideal manager. Unknown to her, the “baron” managing style of Chen is the type of leadership needed in China for business to thrive and survive. Chinese culture expects an authoritarian/patriarchal or a “baron” type (in Foster’s words) of leadership (Domsch and Lichtenberger 79) and not the professional manager type that has strategic plan and metrices that would supposedly measure the efficacy of the manager. Foster is coming from a western perspective in dealing business that demands short-term profits immediately compared to Chinese perspective of gaining market share first (Tjosvold et al 168). Her approach in dealing the management issue with China is also inappropriate as she intends “to address it head on” (Bartlett 4356). This may be appreciated in the US but it will not work in China whose culture values strong interpersonal relationships and thus avoid direct confrontation (Baker 24). In this context we can interpret why Chen’s response to Foster was antagonistic because he took it as a confrontation where he complaint that he did not have the support of Denver. This however is a common misunderstanding between these two cultures where Chinese mainlanders often complaint about their western counterpart to be inattentive to their needs for respect (Tjosvold et al 169). 3. What would you suggest is be in the form of a bullet point list of topics with supporting?examples.??(33 marks) The size and magnitude of the Chinese market cannot be ignored. When markets in North America and Europe are maturing where sales are plateauing if not declining, emerging market such as China’s size makes it an ideal growth driver for companies. China however will not adapt to the brand or product that is introduced in its market. Considering its long history and deep seated tradition and established food preference (for Levendary Cafe’s interest) it will be the other way around instead at least for the present generation. For Levendary Cafe to survive and thrive in the Chinese market where many have failed, it must adapt to the preference market and veer away with the mentality that because it worked in the United States, it must also work in China. Such template mentality is doom to fail such as the case of California Pizza Kitchen, Applebee and particularly Pretzel Time who insisted of its white tile decor which may be pleasant decor to its parent country in the USA but reminded the Chinese market of bathroom which caused its failure in the Chinese market. Stressing localization of the brand to adapt this does not mean however that Chen will be given his kingdom in China where he can do whatever he pleases to the point that his initiatives will become a total departure to what made Lavendery Cafe a success. He should not also however be Instead, support and coordination must be provided to Chen whereby Denver headquarters can also monitor his actions. In addition, the following action points are recommended in the Chinese operation. Coordinate with head office – Chen must be given the support that he needed from the headoffice. Form a composite team that will assist Chen - this team could compose of the Chief Concept Officer Lelerc’s office, the Chief Operating Officer’s Office and CEO’s office. This team would serve as a support and study group on determining what is the best approach to succeed in the Chinese market, taking into consideration the nuances and peculiarities of the Chinese market as well as the established concept of Lavendery cafe. Distribute transfer of technology to integrate Lavendery Cafe’s concept in the Chinese operation – with how the case was spelled out, it seemed that it was only Louis Chen who is familiar with the Lavendery Cafe operation when he did rotating shifts at Denver Headquarters. This exposure must also be extended to key personnel to make integration between the Chinese operation and parent company possible. Mia Foster and other key officers in Lavendery Cafe who are going to deal with the Chinese market must also familiarize with the nuances and peculiarity not only of the Chinese market but also its culture and preferences because this has implication in their business – at present, it is only Chen who could see both perspectives being educated in the United States while also a Chinese descent. If key officers in the Denver head office will take the initiative to understand the peculiarity of both markets, there is a big probability that the seeming disconnect between the parent company and Chinese operation will be addressed that a consensus will be had on how to run the Chinese based Lavendery Cafe. Mia Foster and Louis must communicate more to establish rapport so that they can work more harmoniously in the future and not only talk when there are issues present. Chen must be made to understand the necessity of preparing financial reports in conformity with the company standard which is accordance to GAAP. He studied his MBA in the United States (Stanford University) so he knows the importance of submitting financial statement that is universally acceptable and in compliance with SEC regulation. A rebuke from the SEC for non compliance or any deviation will negatively affect the company’s image and this could translate to the depreciation of stock valuation considering that investors are now very sensitive to shady accounting practices after Enron and Worldcom scandal (The Economist). It would also help for Foster and company to undergo cultural sensitivity training so that they will become more effective in dealing with Chinese managers and employees. Works Cited Baker, Bud. "When In China …." PM Network 20.6 (2006): 24-25. Business Source Complete. Web. 31 May 2013. Domsch, Michel, and Bianka Lichtenberger. "In Search Of Appropriate Management Transfer: Leadership Style Of West German Expatriate Managers In The People's Republic Of China." International Journal Of Human Resource Management 1.1 (1990): 73-86. Business Source Complete. Web. 30 May 2013. The Economist (2002). Enron: The real scandal. Retrieved from http://www.economist.com/node/940091 [accessed May 27, 2013] Tjosvold, Dean, Hui Chun, and Kenneth S. Law. "Constructive Conflict In China: Cooperative Conflict As A Bridge Between East And West." Journal Of World Business 36.2 (2001): 166. Business Source Complete. Web. 31 May 2013. Read More