Extend the Overseas' Market in China: Cheesecake Factory - Research Proposal Example

HOW CHEESECAKE FACTORY EXTENDED THE OVERSEAS MARKET OPERATIONS IN CHINA Table of Contents Table of Contents 2 Introduction: 4 Background of the company: 4 Research Aim: 5 Research Objectives: 5 Research Questions: 5 Rationale of the Study: 6 Problem Statement: 7 Literature Review: 8 Business Expansion in International Markets: 8 Models for assessing business opportunities: 10 International Business Operations: 11 Factors affecting international business functions: 13 Research Methodology: 14 Research Philosophy: 15 Research Approach: 15 Research Design: 16 Research Strategy: 16 Research Methods: 16 Sampling: 17 Data Collection: 17 Research Ethics: 18 Timescale: 18 References: 20 Introduction: With the growth in business competitiveness, the scope for business houses to maintain their brand position has narrowed down. Moreover, with the increasing acknowledgement of internationalization concepts such as globalization and FDI, business firms have gained access to operate in the global market place (Lymbersky, 2009). However, operating in the international business segment also includes facing challenges such as balancing the relationships with the host nations, creating a mutually beneficial platform for stakeholders of the firm and the business organization and finally identifying and fulfilling the consumer requirements in the business process (Brusoni & Prencipe, 2009). This research proposal focuses on the process of business expansion adopted by American Bakery firm The Cheesecake Factory. The study will mainly reflect on the overseas activities of The Cheesecake Factory in China and the aspects related to the business expansion process. Background of the company: The Cheesecake Factory was established in the year 1975 by Oscar and Evelyn Overton. Initially, it began as a small shop in Detroit and was converted to a cheesecake supplier for the local restaurants (The Cheesecake Factory, 2014). Later on the business was shifted to Los Angles where the suppliers were the given the form of a restaurant 1978 by David Overton. This was the first Cheesecake Factory Restaurant. The initial strategy of The Cheesecake Factory Restaurants was to provide the customers with ultimate dining experience (The Cheesecake Factory, 2014). Presently The Cheesecake Factory is operating with more than 175 restaurants out of which 165 are being operated under its own brand, while 13 restaurants are being operated by Grand Lux Café and one by The Rocksugar Pan (The Cheesecake Factory, 2014). The international expansion process of The Cheesecake Factory began in the 2011 as they expanded into the Middle East by partnering with M.H. Alshaya Co in Kuwait (The Cheesecake Factory, 2014). This marked the beginning of a new business role for the firm as they started catering their services to the global consumers. In 2013, they extended to the Caribbean by opening a Cheesecake Factory Restaurant in Puerto Rico (The Cheesecake Factory, 2014). Recently, the company has started focusing on the Asian markets for enhancing the scope of growth and development of the firm. Research Aim: The aim of the research is to assess the process of business operations by The Cheesecake Factory in the Chinese market. The study will reflect the various factors that influence the process of business operations and expansions in the international markets. The researcher also intends to assess the change in the style of management required for doing business in overseas countries. Research Objectives: To analyze the process of business development in the international market place. To identify the factors influencing the process of internationalization of business houses. To examine and evaluate the changes required in the management style for operating in the international market place. Research Questions: What factors influence the internationalization process of The Cheesecake Factory? What changes will be faced by The Cheesecake Factory in managing their business operations in China? Rationale of the Study: Operating in the international business segment is full of challenges and threats that can hamper the business growth of the corporate houses. However, with the acceptance of the global concepts such as FDI and globalization, business firms have gained access to operate in the international market place with limited national barriers. Dyson (2010) mentioned that operating in the international market place presents greater growth opportunities but also includes uncertainties of operating in a new market place and dealing with the new stakeholders’ requirements. The managerial process considered by the firms in the international market place differs based on the requirements of the company and the nature of the market they are focusing on (Stonehouse & Campbell, 2008). The theoretical underpinnings of international business practices have also been criticized by authors such as (Ghoshal, 2009) and (Lindgreen & Finn, 2009).Ghoshal (2009) reflected that theoretical concerns in global business operations are mainly focused on the nature of organization and the underlying risks that are present in the new market places, however the changes that evolve with the market development are presented in the existing studies which reduces the efficacy of the existing theories in specifying the best practices in the international business operations. Parker (2011) argued that understanding the strategic point of view provided in the theories of internationalization and the business expansion strategies provides the basic framework which directs the business houses market expansion in overseas market. Considering the contemporary scenario of business segment where competitiveness and technological growth are driving the corporate development, the effects of the socio-economic and cultural factors on business expansion will be measured in order to evaluate the effectiveness of the business practices in the long-term situation. Problem Statement: This research matter has been considered in order to assess the best practices in establishing and managing international business process. The growth of the business competition in the global market place has pushed the firms to search for new opportunities. The essentiality of developing a competitive advantage and develop a sustainable business process has opened the international market place for the corporate firms. On the other hand, creating overseas business units includes various types of risk factors such as integrating with the culture of the consumer, understanding the national and the regulatory policies in the business process. These factors reflect the importance of business expansion and the risks associated with. The study is mainly based on the business expansion of The Cheesecake Factory which is an American bakery firm. However, the business expansion of The Cheesecake Factory has mostly been into segments that reflect huge difference in culture, taste and lifestyle. The first international Cheesecake Factory Restaurant was opened in Kuwait and now they have spread their operations to Asia Pacific. Studying the business practices of the concerned firm will help in evaluating the aspects and the strategies used in the international market place. The alignment of the needs and expectations of the Chinese consumers with the western bakery products will help in revealing the factors considered for business expansion in the overseas market by The Cheesecake Factory. Literature Review: Business Expansion in International Markets: The international business practices have been initially considered as an essential part for economic growth and thus theories such as Comparative Advantage Theory (David Ricardo), Absolute Advantage (Adam Smith), eclectic theory (John Dunning), etc were developed by researchers. However, as the business scope narrowed down with increasing competition, the necessity of operating in a larger market place became a national as well as corporate concern and internationalization was refocused as a commercial prospect. Lindgreen & Finn (2009) stated that association of the term business expansion with internationalization has transformed the processes into a corporate concept rather than economical, but the corporate perspective of internationalization also includes the existing economical and financial theories. Collis (2010) noted that internationalization of the business firms have mainly focused on the revenue earning process while the national concerns have been neglected. On the other hand, Lavie, Haunschild & Khanna (2012) explained that as firms are trying to create a global platform for transparent transactions the national policies and regulatory norms can create barriers in the process. Jansson (2011) focused on the influence of market structures for the business expansion and the factors that relate to the business expansion process. Jansson (2011) stated that majority of the nations are trying to develop a mixed economy that promotes both public and private sector business opportunities. The bargaining theory is based on the development of a mutual development platform for business and national growth. The bargaining theory reflects the benefits of all the stakeholders involved in the process of internationalization and highlights the benefits for and roles of all the parties. McEvily, Eisenhard & Prescott (2009) stated that the bargaining theory influences the decision making process of the internationalization process in perspectives of all the stakeholders. Lavie, Haunschild & Khanna (2012) criticized that the external factors such as the competition in the market or the cultural factors are not considered in the bargaining theory. Grosse & Behrman (1992) developed a model for highlighting the relationship between the multinational firms and the host nations: (Source: Grosse & Behrman, 1992, p - 105) The above model focuses on the aspects of power balance between the host nations and the business firms operating in multiple markets around the world. The model reflects the scope to assess the strong and weak points for each of the stakeholders but does not reflect the scope of opportunities. Lindgreen & Finn (2009) stated that the bargaining theory and model mainly reflects the position of the associated stakeholders in the internationalization process in order to integrate the benefits but fails to consider the changes in the operational scenario because of the business expansion process. In short it can be stated that business firms have to consider the concerns of the host nation and the stakeholders related to the process of business expansion while identifying the future risks and uncertainties that may arise as a result of the operational process. Models for assessing business opportunities: Collis (2010) stated that operating in the global market requires capability to indentify the appropriate business opportunities and also assess the probable risks in the market. Fifeld (2012) noted that most of the companies develop their internationalization strategies based on their current strengths and weaknesses and the probable changes are neglected in the planning process. The process of operating in the international market has become more complex and firms are trying to create opportunities for ensuring sustainable business processes. In such a situation, it is essential to ensure that the direction for business growth and expansion has been selected appropriately. One of the most commonly used techniques for assessing business opportunities is the use of Asnsoff matrix. The Ansoff matrix helps in developing strategies for future growth of the business. Figure 2: Ansoff Matrix (Source: Fifeld, 2012, p - 54) The ansoff matrix presents four different situations for an organization. These four situations relate to the present situation of the firm and help them in assessing the most profitable and sustainable business strategy for growth and expansion. However, Collis (2010) mentioned that the ansoff matrix does not focus on the external aspects related to the business expansion processes such as the existing competition, changes in consumer behavior, support of the stakeholders and the sustainability of the industry. Lindgreen & Finn (2009) acknowledged that assessing the present situation of a company is not enough to decide on its future actions. In the contemporary scenario, new strategies are being formulated such as strategic alliances, joint ventures, etc in order to enhance the scope of business in foreign markets. Apart from this other factors such as political, legal and economic obligations of the host countries also influence in the business process of the firm. For example, the internationalization process of retail giant Tesco for investing in India as an individual enterprise was not accepted by the Indian Government which urged the company to create merger with Indian retail firm Star Group operating under the TATA Group (Lavie, Haunschild & Khanna, 2012). The necessity of the market has also to be identified in order to formulate an appropriate plan for the business sustainability in new market place. However, using Ansoff matrix can help the business firms in deciding on the appropriate strategy for internationalization according to the strengths of the company. International Business Operations: Operating in the international business place not only focuses on the business management process but also includes the factors related to the conditions of the host market and the nature of the consumers (McEvily, Eisenhard & Prescott, 2009). Brusoni & Prencipe (2009) stated that most of the host nations try to extract the maximum benefit out of the FDI in their nation, they try to ensure employment opportunities, revenue generation through taxes and high quality service or products from the firm in order to enhance the economic stability of the firms. Collis (2010) reflected that firms operating in the international segment develop their business strategy in a decentralized manner so that they can focus on the exact needs of their international units and develop specific strategies for the firm. For instance, Google Plc was banned in China as the Chinese government wanted security of their political information which was being presented in the Google search engine. In order to continue their operations in China, Google had to oblige to the conditions of the Chinese Government (Jansson, 2011). This example reflects the essentiality of considering the host country demands in order to ensure continuation of the service delivery process. Apart from this, Chinese Government also has strict regulations regarding the participation in the corporate social responsibility of the business houses which can influence the business growth of the firm. Stonehouse & Campbell (2008) reflected that operating in new markets also includes employing locals in order to manage and understand the needs of the local consumer base. McEvily, Eisenhard & Prescott (2009) focused on some of the internal functions of the businesses in order to operate in unknown and new market places and opined that managing the communication process with the consumers, media of the host nation and the regulatory bodies is the foremost aspect of developing a steady relationship with the business environment. Most of the firms try to build brand awareness in the overseas markets before they set foot outside their domestic market. This includes the process of creating mergers and acquisitions, strategic alliances, joint-ventures, partnerships etc with the firms operating in their target market places. For instance the case of The Cheesecake Factory reveals that they tried to create a strategic alliance with a local restaurant house of Kuwait before they were physically present in the market (The Cheesecake Factory, 2014).Stonehouse & Campbell (2008) observed that the overall conditions of creating international business practices and stated that relationship build up with the stakeholders of the business is the most essential aspect for successful business activities in overseas firms. Factors affecting international business functions: In the words of Parker (2011), improved business conditions in the international market place also signify complex rules and responsibilities to be followed by the firm. Jansson (2011) also mentioned that in case of developing the growth opportunities, a firm must assess the probability of future growth of the market. The use of Pestle framework and the Porter’s 5 Forces are often used in order to decide upon the nature of the market. The pestle framework reflects the condition of the external business environment and includes the analysis of the political, economic, legal, social, technological and the environmental stability of the market. Meanwhile, the Porter’s Fiver Forces model is used for analyzing the industrial condition. Parker (2011) argued that demographic nature of the consumers is essential for marketing products and services to a certain consumer group. For instance, IKEA was unable to sustain in the Chinese market because of the small housing structure and the lifestyle of the people. The products of IKEA were not acceptable to the consumers and this caused market failure of the business (Jansson, 2011). The social life style of the people and the cultural influence of the consumers are also taken into account while framing the business strategy for the overseas market. People tend to be attracted towards the products and services that are known to them Ghoshal (2009). However, Lindgreen & Finn (2009) argued that in the contemporary business situations, firms are creating the needs and demands for the consumers. For instance the development of the Smart Phone by Apple Inc created a new era in the use of mobiles all over the world, the concept of mobile internet surfing and creating a network of communication through various applications have enhanced the market scope of the mobile firms. Parker (2011) presented the importance of the alignment of the business objectives with that of the stakeholders of the firm in order to ensure mutual growth opportunities. Parker (2011) explained that when consumers can relate their expectations and their nature with the operational style of the business, they tend to be loyal towards the business activities. This brings in the aspect of communication and transparent business processes for operating in the overseas market. Stonehouse & Campbell (2008) reflected language barriers often created due to the differences between the culture of the host nation population and the domestic country of the business have to be nullified for ensuring a steady relationship buildup for the business house. These factors are essential in order to operate efficiently in the international market place. Research Methodology: Research methodology helps the researcher in adopting a proper scientific approach for conducting the study in a fruitful manner and fulfilling the research objectives appropriately (Cameron, 2009). In this study, the researcher has selected the mixed methodology that will include analysis of both primary and secondary data. The below section highlights the other aspects of research methods considered and the justification for selection of each research method. Research Philosophy: Research philosophy signifies the nature and scope of development of knowledge associated in a study. The research philosophies have been primarily segmented into three categories namely, ontology, axiology and epistemology. According to (Toloie-Eshlaghy et al. 2011), epistemology is the most considered philosophy used in academic research. Epistemology has been further segmented into three sub-sections namely, positivism, realism and interpretivism. Positivism mainly focuses on analyzing the facts related to the subject matter and justifying them (Cooper & Schindler, 2010). On the other hand, intertepretivism is more based on the psychological factors and their interpretations rather than the facts (Morgan, 2007). Realism is known as the study of senses as it only states the facts prevailing in the concerned scenario and refrains from analysis them. In this research, both positivism and interpretivism philosophy will be used. Research Approach: Research approaches are used for assessing the direction of the study. Research approaches are of two types generally, inductive and deductive. Inductive approach is mainly used to widen the scope of a subject and develop a new point of view, theory or concept. However, Toloie-Eshlaghy et al. (2011) mentioned that inductive approach is also beneficial for analyzing qualitative and secondary data types. Deductive approach on the other hand, begins from a narrow objective and analyses the existing theories and models related to the subject (Huxham & Vangen, 2008). In this study, the researcher will use both inductive and deductive approach in order to evaluate the data collected and also fulfill the objectives of the study. Research Design: The research design helps in assessing the nature of data that will used and presented in the study. The different types of research designs that are used for academic research are descriptive, explanatory and exploratory designs (Huxham & Vangen, 2008). Descriptive design focuses on reflecting the data in an analytical manner where as explanatory and exploratory designs are more qualitative presentation of data (Morgan, 2007). In this study, the researcher will use descriptive design for assessing the primary data and secondary data collected. Research Strategy: The research strategy reflects the process used by the researcher for collecting the data and analyzing them. In this study, the researcher has considered the use of both primary and secondary data in order to answer the research question (Hakim, 2007). The primary data collection process will include online survey; if possible the researcher will also try to collect the primary data by conducting face-face survey (Morgan, 2007). In order to collect secondary data, the researcher will use the University library and also ensure high use of online dictionaries such as EBSCO, Emerald, etc to ensure use of valid and relevant data. Research Methods: Research methods are mainly of two types, qualitative and quantitative. The use of research methods can be done in mixed or mono manner. In mixed research both quantitative and qualitative studies are used while in case of mono research only one form of research method is used based on the suitability of the method. Quantitative method includes analyses of data in order to achieve numerical results (Morgan, 2007). The analysis process involves use of statistical calculations and tools such as graphs, tables, etc. On the other hand, qualitative analysis focuses gathering an in-depth understanding about the subject matter by analyzing the existing materials published on the subject matter. Sampling: The sampling processes included in academic research are mainly of two types’ probability and non-probability sampling. Probability sampling process is an unbiased selection process where each individual unit has equal opportunities of getting selected in the sample population (Huxham & Vangen, 2008). On the other hand, non-probability sampling selects the individual unit on a purposive basis based on their suitability for the study. In this study, the researcher will consider the selection of respondents in two parts. The first part will include the employees of The Cheesecake factories including the managers which will be done on the basis of probability sampling. The sample size for the employees of The Cheesecake Factory will be 100 respondents. On the other hand, for the qualitative analysis of the primary data the samples will include business analysts, corporate regulatory body members, market consultants, etc. The sample size for the quantitative analysis will include 10 participants. Data Collection: The data collection process for the study will be divided in two sections primary and secondary data collection. The primary data collection procedure will include surveys and interviews. The data collection from the employees of The Cheesecake Factory will be asked to participate in survey process, in case face-to-face survey cannot be arranged, online survey will be used. In order to collect data from the qualitative sample group, the researcher will try to conduct face-to-face unstructured interviews. The interviews will be recorded with the help of Smartphone which will later be reflected in the study. Research Ethics: The research ensures that the study will be conducted by considering all the ethical regulations mentioned in the University’s code of ethics. The data collected for the study will be used only for academic purposes and will be submitted to the University once the research is completed. Again, on the other hand, the researcher will keep the identity of the respondents secret and will not force any respondent to take part in the data collection process. The researcher will refrain from asking questions that may hurt the sentiments of the participants. In order to make justice towards the research, the researcher will ensure that the data being used are from valid and authenticated sources. Timescale: Main activities/ stages Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Topic Selection Data collection from secondary sources Creating layout Literature review Formation of the research Plan Selection of the Appropriate Research Techniques Primary data collection Analysis & Interpretation of Data Collection Findings of the Data Conclusion of the Study Formation of Rough Draft Submission of Final Work References: Brusoni, S. & Prencipe, A. 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Retrieved from: http://www.thecheesecakefactory.com/aboutUs/Sustainability/Sustainability Toloie-Eshlaghy, A., Chitsaz, S., Karimian, L. & Charkhchi, R. (2011) A Classification of Qualitative Research Methods, Research Journal of International Studies, 20, 106-152. Read More