What the world knows as the Levendary Café today once started as a small salad, soup and sandwich eatery. Over the years, however, this eatery with humble beginnings has morphed into one of the world's most profitable businesses in its industry. Though it began in the United States, Levendary now has extensions in countries as far as China.
However, the changing market dynamics in the region have put the company on the receiving end of major financial blows. These concerns came just when the company was changing top leadership. In this Levendary Café case study, we zoom the lenses on the individual factors that gave Levendary an edge and ultimately, those factors that serve as threats to the company, considering its new leadership.
First off, we dissect the restaurant business to tell you just where the Café fits into. According to studies, the Multi-Unit Eatery Business makes up over 30% of the foodservice industry. The industry in itself is a whopping $600 billion in size. But not all Multi-Unit Eateries fall into the same category. So far, they are three. Casual Dining, Quick Service Restaurants, and Specialty Establishments. Levendary Café has properties of the first two. That puts it in the Quick-Casual category. Two attributes that characterize ideal QC businesses include wholesome foods and a dedication to offer quality service in the most congenial manner and environment.
That said, the company continued on a steady cruise until top management began expanding operations into China. This move brought to mind two possibilities. First, the possibility of maintaining the original concepts and menu selections thereby making the Café fit for American customers in China. Or that of making menu and style changes that befits a Chinese populace. Already, the twenty-three new stores opened in China had already been run on the first option.
However, when a new CEO comes on board to change that, troubles escalate at the managerial level. Many of the US-based executives insist on having things done the American way, regardless of location. They fear that when Americans, who know the café and travel to China, maybe shocked at the sudden change in the menu selections or shop designs.
The Executive in charge of operations in China had advised that, unless Levendary Café adapted to their new climate, their business might take a hit. But while that is happening, analysts continue to ask why the company entered the Chinese market in the first place.
The choice to move into the Chinese market was as a result of the supposed grouching growth of the US domestic market. Already, China's GDP growth as of 2011 was recorded at 9.3% as opposed to the US’s 1.7%. The decision could not have been coming at a better time. China Market’s needs were different than the foundation Levendary Café had in the US. But to enter China, the company had to adapt. The same has been true of KFC, which happens to be the most successful foreign-owned fast-food chain in the country at the time.
Secondly, their reason to join was fuelled by the increased market activities in the QC sector at the time. Owing to the participation of more women in the labor force, a rising prosperous middle class, and a budding lifestyle inclination to eat out more often.
Levendary gets most of its strength from its incredible leadership. From there springs its policies, the good service delivery and the creation of outstanding environments and designs as well as a responsive human resource (a.k.a. People’s Department). For one, it’s CEO, Mia Foster has a great career record. That includes the right skill sets and string of experience required to run the Café. Maia Fister had, in the past, worked for big US-based fast food companies. That gives her considerable exposure to the American food industry translating to familiarity with the numerous challenges and opportunities that the food industry presents. The company’s China President, Louis Chen is hardly any different. Beyond a great academic resume, the executive possesses the level of entrepreneurial vigor required to thrive in the cutthroat competition of China. More so, he has considerable knowledge about the Chinese market. And most importantly, Chen shares a deep-seated passion for the foodservice industry.
While Mia Foster possessed a great resume for running the company back home in the United States, she had no sufficient exposure or experience in operating an international restaurant. If anything, she only had much exposure in the hospitality industry, hotels precisely. Loius Chen on the other hand also has almost no work experience beyond China and perhaps may never have worked in the foodservice industry.
It is also safe to say that Chen was not willing to follow the existing standards of the parent company. While this may have passed for some level of grit and knowledge at play, it did not. Rather, his unusual manner of handling the business throws top-level management into a frantic rant about the risk of losing their hard-earned American customers.
For Levendary Café, the opportunities abound in no small proportions. For one, their move into China comes with huge prospects for the company. They have the resource to pull off a heavy expansionist project. The company, as sources believed also had enough resources to enter the Dubai market in the UAE. So resources are not lacking at all. Then there is the Chinese growth factor. China's growing GDP and low labor costs, among other factors, provided a launching pad for the company. They had a ready market of over 1.4 Billion people waiting to be tapped. Their US market cannot give a quarter of that. Also, china’s growing middle class proved that their services and products were affordable to a large majority of individuals and their families. That would establish their customer base pretty fast.
Perhaps Levendary’s biggest threat came, not from competitors, but from the huge cultural barrier it has to penetrate before serving its Chinese customers and winning their loyalty. Chinese consumers are sensitive folk. A slight mismatch of expectations could break send them running away. Thet meant Levendary must master the wide variety of regional food differences between china and the US and channel that knowledge into good use. Since most Western food does not count as a priority to most Chinese folk, building a menu simply out of an America-first mentality may sound patriotic, but spell disaster and doom for the business.
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