Answer:

1. Levendary Café entered the Chinese market in a wholly-owned foreign and opportunistic
approach. By entering as a wholly-owned foreign business, the Café looked forward to being in a
position to retain control of most activities such as the brand image, capability to monitor store
operations, and financial reporting practices. This method of entrance into the Chinese market
posted several roadblocks. However, it was a tradeoff that the café accepted in the effort to attain
full control in guiding its direction in China. Levendary Café could also have opted for a strategic
alliance, joint venture, or partaking in an acquisition as alternatives to the wholly-owned enterprise
(Kluyver, 2010, p. 107). However, such choices could have led to the café not retaining complete
control over its operations.

While evaluating the viability of Levendary’s entry into China, a few factors have to be discussed. At
the time of entry into China, the nation had a population of 1.4 billion with an average 14.5% yearly
growth (GDP) in the past ten years. GDP serves as a point of reference to many prospective
entrepreneurs in their decision making (Cavusgil, Knight, Riesenberger, Rammal, 2014, p. 6). The
nation’s demographical emerging trends were also promising. The nation’s urban population had
risen by 10.4% of the nation’s total population from 2000 to 2009. Also, the country had a resilient
middle class bearing a per capita earnings of roughly RMB 6,282 to RMB 17,175 considering that in
at that time, RMB 1 was equivalent to USD 0.15. Moreover, China had a rising lifestyle inclination to
eat out, a large escalation in the number of women in the labor force, and an affluent middle class
promoted the advancement of the country’s food services industry. Levendary Café’s biggest
American competitors such as KFC, McDonald’s, and Pizza Hut had also successfully entered China
using vastly different approaches (Bartlett, Ghoshal, 2002, P. 7). These conditions affirmed the
viability and an advantage for Levendary Café’s venture into China. However, the viability also had
its disadvantages as the market also attracted other competitors in the industry.

Levendary Café’s entry to China was characterized by an urge to blend operations and concepts.
Upon entering China, Leventhal had given Chen full control although a transparent tactic and a well-
laid out plan and strict rules on standardization and how to implement the plan was in place. Louis
was a viable manager based on his experience and connection with various stakeholders in China.
Chen was also asked to develop a strong market position to allow franchising by requiring him to “do
right by the concept.” However, Chen’s operations were hardly managed as Leventhal managed him
with a light touch. Levendary Café’s in China were to be run by strict rules approved by the concept
group, allowing modification concerning the ‘look and feel’ of the enterprise.

These measures were to help in adapting resources and expertise to the Chinese stores enabling the
Café to connect with Chinese youths guaranteeing its future. However, the enterprise in China is
running under an entirely different model compared to that in America. Chen aspired the enterprise
to adapt to the evolving tastes of the Chinese in various areas. Chen also lacks a clear strategy for
growth. The complete diversion from normal operations is attributable to lack of proper
communication and lack of control by the headquarters’ management for the past 18 months in
which Chen operated without reference to US management.

The café’s headquarter had to acknowledge the extreme differences in culture between China and
US. Chinese consumers differed from those in the US in food preferences and habits. Chen was
smart enough to recognize this difference by being flexible and customizing the food Chinese’s
Levendray cafés offered to the closed community. However, this flexibility was disadvantageous as it
was killing Levendary’s identity turning it to a whole different café in the attempt to adapt to the
new culture. The café should have used its competitive advantage of serving its legendary organic
fresh foods as a strength since most Chinese consumers prefer fresh food.
Also, Chen should have focused on the personalized services that labeled Levendary as a source of
competitive as Chinese restaurants lacked such services. Levendary was disadvantaged in that it
lacked international experience. They ought to familiarize with operations and problems associated
with international ventures to gain a strong position in the market. Finally, Levendary was
disadvantaged by the lack of control over financial reports in China that do not follow identical,
standardized, and accepted reporting principles. Louis had no excuse failing to adhere to GAAP in
financial reporting; this matter required immediate correction to guarantee the Café’s
accomplishment.

Chen was inclined to obtaining the highest profits as possible while sacrificing Levendary’s image. To
be successful, the enterprise cannot only standardize its products, pricing, distribution, and
promotion of the franchise as it must adapt to the extreme and promising markets, China offers.

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2. Mia Foster should strive for change. One change is that she should seek to work with care,
patience, and as a team with Chen. This is advantageous as it will reduce friction between Chen and
her, and help them develop better solutions and a strategic plan for expanding the enterprise in
China without conflict (Ghemawat, 2010, p. 222). She ought to work with Chen to understand the
new market better, and try to seek an understanding of why Chen made such decisions for the 23
franchises in different regions of China. Mia should also conduct her research on the differences in
food culture between the Chinese and Americans, food tastes in different parts of China, café
atmospheres suited to different locations in China, and slogans used by Levendary that could not
appeal to Chinese cultural values. She should also research on adjustments that were made for the
enterprise to grow and on the potential needs to be met for the Café’s successful expansion.
Conducting such research would help her be in a better position to discuss her opinion with Chen
before making decisions to avoid conflict with him. Such an endeavor would help in averting
conflicts with the process, the problem, and stakeholders Contractor, 2011, p.233).
Mia should then try to make Chen appreciate that standardization is achievable and relevant. After
establishing a conducive relationship with Chen, she should focus on changes in the headquarters.
First, she should work to ensure that the enterprise adapts to the Chinese society. This would help in
adjusting operations to the Chinese and foster success. To adapt to change may call for changes in
the management style, pricing, café offerings, promotion, café locations, and the café’s atmosphere.

Secondly, Mia should enact changes to financial reporting procedures. To ensure proper reporting,
she should strive to establish a Chinese headquarter to take care of financial records prepared in
Chinese format and then reports to the US headquarter. This would be significant in avoiding conflict
and complications between the management for both sides. Also, it would help the enterprise to
conform to the financial reporting standards in China hence avoiding confrontation with the law.

Mia should also ensure that the business is flexible. Flexibility of businesses is influenced by systems,
internal forces, and enterprise structures augmenting the reaction of the business to various
markets (Inkpen, Ramaswamy, 2006, p.373). Under flexibility, the restaurant should retain its design
in consistency with US franchise models. However, the restaurants could vary in size to suit the
various locations. Such a change would permit the franchise to grow. Finally, Mia should urge
management to acquire more Chinese contacts. These contacts could include partnerships that
could help in negotiations with companies, stakeholders, and individuals in China to enable the
creation of an organizational structure incorporating the Chinese and American cultures promoting
success in both nations. Such partnerships will guarantee the growth of the Levendary franchise.
The enterprise’s vision should be changed to incorporate an International look by ensuring a balance
of localization’s benefits with the economies of standardization, few changes in management styles,
and enacting a McDonald’s style food menu design for its Chinese franchises. However, the quality
and the Levendary brand must be retained for the business’s success.

3. Mia requires taking a definite course of action to ensure she is capable of dealing with growth in
China. The two cultures lack a link that the headquarters is not understanding. The hierarchical
structure in the USA takes a top-down approach whereas that in China takes a bottom-up approach.
To adapt to the Chinese culture and market, the firm requires several actions. The enterprise should
train its employees on the Chinese market and Culture. The firm should also enact effective
procedures that facilitate the generation of services and products that meet the expectations and
requirements of its customers. The Firm should then increase its inventory specifically in China,
increase franchising, and focusing on other cities as expansion opportunities.
Foster should then conduct numerous research through methods such as opinions on sales, claims,
and feedback from customers, group interviews, and surveys. Finally, Mia needs to steer the
enterprise towards adopting change. This act should be followed by a cultivation of confidence and
friendship for business with all stakeholders. The company should also make substantial, lasting
agreements with various Chinese contacts to develop services and products that meet the
customer’s expectations. Mia should also ensure that intercultural relations are maintained. The
recommended course of action she should take consists of two stages.

First, Mia should ensure the firm follows KFC’s and other American competitor’s approach to the
market. She should then encourage, recognizing, motivating, and training. Transparency should then
be prioritized by setting up necessary properties (Lewis, 2000, p.6). Mia should then build a team for
Louis, and try to make him understand the core values running Levendary café. Foster should then
renovate the existing layout of the Chinese stores. The second stage should entail calling for more
investment from the US. For the final action, Foster should have more control on Louis.

In conclusion, adhering to the proposed strategy would ensure Foster’s confidentiality in handling
Chinese stores, and enable her to develop a workable marketing plan that satisfies everyone (Wall
Street, Foster, and herself) (Volberda, 2011, p. 222). Such an approach would ensure success and
better trade-offs for the Levendary Cafés in China.

1. Difficult road for Mia Foster, New CEO Introduction I Company Overview I Market
Analysis I Industry Analysis I Problems Plan of Action I Recommended Approach I
Conclusion Lack of internal mgt exposure Wall street’s confiden ce Stock Price Chen’s
Attitude China’s Local taste GAAP Cost
2. 3. Company Overview Introduction I Company Overview I Market Analysis I Industry
Analysis I ProblemsI Plan of Action I Recommended Approach I Conclusion - Mia
replacing departing founder/CEO of the company - 3500 quick casual - Franchised -
Publicly traded - Flexible marketing and menus in America - Domestic demand - High
quality fast food - Customer oriented policies - Risk taker - Organic ingredients - Keeping
up to date (CCO) - Interior design Forget today’s profit. Have a positive impact on
customers U.S.A
3. 4. Market Analysis Introduction I Company Overview I Market Analysis I Industry Analysis
I Problems I Plan of Action I Recommended Approach I Conclusion Increasing GDP
Stock Market Speculation Lucrative Market Sticking to strategy of international expansion
 To check the untapped potential Success of competitors like KFC , Mc Donald Local
market Saturation Why China ?
4. 5. Industry Analysis Introduction I Company Overview I Market Analysis I Industry
Analysis I Problems I Plan of Action I Recommended Approach I Conclusion China :
Food intake is increasing Eating habits are different than Americans Largest producer
and consumer of Rice
5. 6. Q1) What is your Evaluation of the way Levendary Café has entered the China
Market? Introduction I Company Overview I Market Analysis I Industry Analysis I
Problems I Plan of Action I Recommended Approach I Conclusion
6. 7. • The organization foundation- Blending Concepts and Operations
7. 8. Leaping into china Louis Chen, a strong market position. Right concept, flexible, bright
future. Expanding: The Investigation China was conducive for investment, population and
GDP growth An affluent middle class, foreign fast food companies attracted the most
attention. Serving the U.S market Customer delight, customer meet request Local menu
adaptions, the American consumer, evolving menu choices.
8. 9. Q2) What changes should Mia Foster make? Specifically, what should she do about
Louis Chen? What changes would you propose at headquarters? Introduction I Company
Overview I Market Analysis I Industry Analysis I Problems I Plan of Action I
Recommended Approach I Conclusion
9. 10. Changes Mia Foster should make • Financial Reporting - There should be a China
HQ to take care of the Financials reported in Chinese format. US HQ China HQ China
restaurant 1 China restaurant 2 China restaurant n
10. 11. Changes Mia Foster should make • Restaurant design – Restaurant design should be
consistent with US restaurant designs. Restaurants can be small or big to suit the
location. • Food Menu – McDonald’s style menu design should be used. • Louis Chen –
Foster can try to make him understand that standardization is important and can be
achieved.
11. 12. Q3) Prepare a specific action program for Foster to help her deal with the need for
continued growth in China. What should be the agenda for her meeting with Chen?
Introduction I Company Overview I Market Analysis I Industry Analysis I Problems I Plan
of Action I Recommended Approach I Conclusion
12. 13. • Levendary Café is a MuR Business. • There seems a missing link between the two
cultures that is not being understood by headquarters . • Heirarchical Structure: • USA:
Top -Down Approach. • China: Bottom- UP Approach. • The adaptation China requires
for a business from the USA.
13. 14. • Phase 1: • Building a team for MR. Chen. • Making Chen understand what are the
Levendary Café’s core values. • Renovating the current layout of the stores. • Phase 2: •
Invest more from USA. • Have more control on Chen from Foster.
14. 15. Recommended Approach Introduction I Company Overview I Market Analysis I
Industry Analysis I ProblemsI Plan of Action I Recommended Approach I Conclusion
Follow KFC’s and other successful American restraunts approach - Motivate & recognize
- Train the employees Transparency by setting up processes Team for Chen
15. 16. Conclusion Introduction I Company Overview I Market Analysis I Industry Analysis I
Problems Plan of Action I Recommended Approach I Conclusion  Following proposed
strategy  Confident about the meeting with Chen  Flexible Marketing Strategy 
Satisfying all : Wall street, Chen and foster  Trade offs