Levendary Cafe: The China Challenge - Case Study Example

Levendary Cafe: The China Challenge Case Study When Mia Foster was appointed the CEO of the Levendary brand, she was well aware that the Chinese market held the greatest potential for the firms’ global expansion and in order to gain Wall Street’s confidence, she had to prove she could handle it (Bartlett 1). She was concerned that Louis Chen, who had been handpicked by the departing CEO, was being too radical in his adaptation of the Chinese branches. She first noticed Chen’s resistance to interference from the main branch when she suggested that the same auditor should be hired to deal with the accounts of both Denver and Chinese offices. While conceding that it was an expensive step, she rationalized that it was necessary considering that the company shares were being publicly traded. When he was briefed on this, Chen openly opposed and said it would be a waste of money and time and this would be a great inconvenience to his local operations. Therefore, as she travelled to China to meet with him the agenda of the meeting should be to discuss his apparent resistance towards the headquarters attempt to standardize operations in China. In addition, they should discuss how a balance could be arrived at between the running of Chinese and Denver offices so that the parent branch could contribute more to Chen’s operations. In this case, some of the issue that needs to be addressed includes Chen’s antagonism to attempts to implement uniformity in operations and the concern when sending over financial reports, as to whether the Chinese office would send them according to China’s accounting format. Therefore, before the financial reports could be incorporated with Denver reports they had to be reworked according to the US, GAAP-generally accepted accounting principles. It was evident to Foster that Chen was taking his independence a bit too far for a subsidiary and it was beginning to look as if the Chinese branch was being run independently of the home office. This posed a serious challenge since lack of unity and uniformity as likely to be viewed as a weakness by their both clients and potential investors especially considering that Wall Street recognized both operations as one firm. When Foster sent Steel to tour the Chinese operations, he came back alarmed and reported that the chain had departed so much from the standard US format given that in some branches there was hardly a single item in the menu that had not been changed. Clearly based on the figures, Chen was a capable manager and even Foster had admitted that she was “floored” by the fact that he had managed to open 23 branches in such a short time. One of the reasons he argued against interference from headquarters was that he was about to turn into profitmaking, and if they started changing matters they would undo everything he had worked so hard for. This is because in order to run a foreign subsidiary, one needs to be innovative and independent minded and there is no doubt that Chen was both. To break new ground as Chen had done requires flexibility that according to Foster meant moving from being an enterprising person to a local baron and finally an advocate for sustainability as well as being a professional manager. While Chen had achieved the first two, he seemed to have stagnated and was not transforming into an advocate for sustainability or a professional manager (Bartlett 10). For one, he was not a team player since every time Foster suggested that he conforms or at least adjusts his operations for the sake of the bigger picture, he responded with antipathy and stubbornness. His independent mind may have been suitable for running a single business, but in global operations, he was clearly out of his depth. His aversion to teamwork is shown when he tells Foster that if she puts new control, she will have to take responsibility if the growth slows down; ironically, he would probably not be as eager to distance himself if the opposite happened. These are attributes of someone who is unable or unwilling to corporate and in that regard Chen is not qualified to be running the Chinese branch in the long run unless it were to become an independent entity. A country manager is charged with the responsibility of introducing and running the operation in countries they are assigned, as well as acting as the main connection to the headquarters. Despite the fact that they are expected to report to the company CEO they mostly have a free reign in the new county. This is provided so that they can freely adapt their business to new economic and social cultural environments that the home management would not understand, as they are not on the ground. It comes with great responsibility and calls for managerial acumen as well as the wisdom to achieve the delicate balance between standardization and adaptation. From the examples provided there are two models that country managers can follow; for instance, Denny’ in Japan completely revolutionized their menu in line with Japanese taste and changed almost all the dishes until it was in essence only serving Japanese food with American branding. On other hand, MacDonald the have retained their menu in china with only a few exceptions and the service one expects in a New York branch is almost identical to what they would get in china. In the case study, Chen uses the former to justify his actions stating that the only branches that needed to retain the American standards are those near the airports and embassy serving a clientele of expatriates. In Levendary’s case, the issue of standardization versus adaptation is the main cause of antagonism between the subsidiary and headquarters, and it is evident that Chen has no desire to work in tandem with Foster and intends to change even the brand appearance. While one may go along with the argument on adapting the menu to the local tastes, there was clearly no need for him to replace the convectional upholstered wooden seats for plastic ones. In so doing he was taking adaptation to extremes which is what rightfully worried Steel, adaptation should not be such that it jeopardizes brand recognition since in the long run this could compromise sustainability. In Foster’s position, I would use my authority as CEO to Compel Chen to make some changes in the menu to balance between balance and brand recognition. The standardized restaurants in china were making substantially more profit for the firm than those that had adapted. From the exhibit 3 in the case study, one can tell there is likely more to the difference in profitability than the different locations (Bartlett 13). Thus, until adequate market research has been carried out in accordance to a workable and objective strategic plan, I would assume that the difference in food and service is a likely cause of low sales since the balance sheets indicate thus. The Beijing branch apart from having a menu similar to the US branches also has seating space while the Suburban one is a counter only operation. In addition, the menu is radically different with only chicken salad and chicken in tandem with the other branches. Furthermore, I would require that the suburban Chinese branch experiment with the standard foods and make a decision based on the result as opposed to acting on gut feeling and without a strategic plan like Chen. In conclusion, one of the main appeals that the Levendary and indeed every fast food chain in china capitalize on is the attraction foreign/American fare to locals wishing to diversify their dining experience. To this end, Chains like Macdonald and KFC have largely remained faithful to their American standards and with resounding success. In as much as adaptation is important, it should not be such that the product and centres end up being virtually unrecognizable as it would undermine the concept of global expansion. Work Cited Bartlett, Han, A. Levendary Cafe: The China Challenge. Harvard Business school. 4357. 2013. Read More