Levendary Café: the china challenge

PRESENTED BY:GROUP 3

Corporate
strategy
 The Story.
• Howard Leventhal was the beloved
founder of the popular chain of 3500
cafes.
• During 2008, company’s domestic growth
was slowing so they wanted to explore
opportunities overseas.
• After a green flag from the research team,
china was going to be their next target.
• Term starting September 2009, Louis
Chen is named the CEO of Levendary
café china on an annual contract basis
that lasts for 2 years.
• January 2011, they go for an IPO. Howard
quits to pursue other interests.
• Mia Foster is named as it new CEO.
 Market research - China

• A population of 1.4 billion.

• Urban population rose from 36.2% in 2000
to 46.6% in 2010.
• By 2010, a new middle class emerged
whose per capita income surged.
• KFC was successfully running 3,000
restaurants and McDonalds had 1,100
outlets in 110 cities in China.
 Evaluation of entry in china
market
• They give full control to chen.
• Cultural differences.
• Transfer responsibility to chen.
• Lack of understanding of international
market.
• Chen didn’t follow international accounting
system.
 Existing Strategy
• Financial reporting according to China
Standards
• Not a Standard Restaurant Design
• Too much independence in China
Operations
• The ambience provided by U.S. is not
same across Chinese restaurants.
Suggested Changes for Mia
Foster

• Separate HQ for China Reporting to US

HQ.
• Infusion of more local taste. eg:
McDonalds
• Restaurant design to be standardized
according to U.S.
• Ambience should be maintained as per
U.S. standards
 Reporting Hierarchy

US HQ

China HQ

Rest1 Rest2 Rest n..

Q3. Prepare a specific action program for
Foster to help her deal with the need for
continued growth in China. What should
be on agenda for her meeting with Chen?
Ans. The Levendary Café was already
growing in China but the restaurants
opened in China were not as per the US
counterparts. So, though it was earning
revenue in China, its future revenues
might be affected both in US and China, if
it continues the present growth strategy in
• Prepare a fresh strategic plan for China. It appears that they did not
have a strategic plan for China in the beginning.
• The business model for China should be made with key strategic
choices like effectiveness of take away counters in China. If it has
worked in China they can be flexible enough to change the business
model.
• The company should implement Balance Score Card to keep Mr. Chen
aligned with the company’s vision, mission, goals and objectives.
• Ms. Foster should give Mr. Chen a team from US who have good
knowledge of core values of the company.
• All the restaurants’ ambience should be revamped immediately
according to US standard.
• In shanghai they should keep some low cost dumplings but should also
introduce the standardized menu of US.
Agenda for her meeting with Mr. Chen:
• Sensitize him about the core value of the
company.
• Discuss with him about the future growth
of Levendary Café in China.
• Convince Chen for following US
standards by showing him examples of
successful companies like KFC,
McDonalds etc in China.
• The staffs of Levendary Café should be
THANK YOU