BS7312A International Business Environment & Trade

Module Code And Title : BS7312A International Business Environment & Trade

Introduction

Internationalization is becoming an emerging trend for the companies that possess opportunities as well as challenges, in this scenario managers in the firm requires taking right decisions on right moment. Further, analysis of market before expanding the operations is considered to be important. The study is based on the case of Levendary Café: The China Challenge. The aim of this study is to evaluate the start-up opportunity for the firm, procedure of start-up establishment, identify the key issues, and suggest how it could be addressed. Levendary Café is a fast-food restaurant franchise established in the United States. Because of slow development in the United States, Levendary Cafe chose to expand internationally, following the emerging trend of operating in China. While Mia Fosters has been appointed as the new CEO, China became prioritised. Louis Chen seemed in command of commercial expansion in China. Several non-conformities have been observed following Peter Steel’s initial trip to China, therefore everything required to be harmonized.

International start-up opportunity in China for Levendary Café

By considering the case, it is evident that Levendary Café offers a number of distinct characteristics that set them apart from their competition throughout the quick relaxed restaurant category. They offer healthful soups, salads, as well as sandwiches made from high-quality components, as well as they are dedicated to offering great client assistance in a warm, friendly setting. Another component that positions Levendary Café ideology of ensuring customer satisfaction as a greatest strength as well as remains in strong position in the China competition is its versatility in menu adaptation with respect to the local preference.

The international extension into China was mostly influenced by the country’s declining domestic economy. Levendary has struggled to achieve significant development, notably in minor areas in the United States’ Midwest and South. The decision to locate in China has been made in response to the scramble by similar American restaurant chains to promote them throughout the industry. The firm has built 23 eatery sites in China, several of which are controlled immediately by the business and others which are franchisees. Following are the key elements that will help in characterising the international start-up opportunity in China for Levendary Café;

Economic opportunity

The China’s economy likewise created room for expansion. In 2011, China’s GDP increased by 9.3 percent. The nation has had positive economic progress that indicates higher disposable money amongst prospective buyers. Furthermore, the Chinese marketplace offers the majority of the key traits that a firm intending to build a food business would want. Along with it, the massive populace of 1.4bn individuals, yearly GDP development of 14.5 percent over the preceding generations. The robust middle category with per average income increased from RMB 6282 to RMB 17,175 all made China an excellent opportunity for Levendary Cafe.

Social opportunity

China’s rate of urbanization increasing from 36.2 percent of the sum in 2000 to 46.6 percent in 2009 made China an excellent opportunity for Levendary Cafe, which was experiencing a mature segment (Bartlett and Han, 2011). The restaurant’s development rate was only 1%. Furthermore, China has a developing lifestyle propensity to eat outdoors, as well as a significant increase in the proportion of female labour force participation, which appears to be a big grasp of the chance for the international start-up of Levendary Cafe in China. The entrance of Levendary Cafe into China was characterised by a desire to merge activities as well as ideas (Ross, 2019).

While Western fast-food firms received the most interest, eateries providing Asian food, especially Chinese, dominated the fast casual category. Such primarily small eateries catered to the preferences of residents for rice-based cuisine as well as affordable rates. Nevertheless, there have been few prominent local networks because to poor margins, vast variance in local culinary tastes, as well as, perhaps importantly, the difficulties variables had in standardising procedures (Ding et. al. 2020).

Apart from the above mentioned two elements, it is being evaluated from the case study that people’s shifting lives around the globe have driven them to depend more on the ease of fast foods rather than undertake their personal preparation. Despite the fact that almost every company sector has been affected by the worldwide economic meltdown, the fast-food sector has stayed resilient, generating greater growth as well as leading in more heated rivalry. Most clients spending is conservative, focusing on lower-cost foods instead of high-priced fine dining. In terms of the fast-food business, China does have the globe’s fifth highest percentage of consumption (Berger and Köhn, 2020). The marketplace has been seeing tremendous expansion inside the industry, with an average cumulative rate of growth above 25%. The rapidly expanding Chinese middle sector, together with the nation’s rising discretionary wealth, seems to be the primary driver of the industry’s rapid expansion.

The specifications of the Chinese Market differed from those of the Levendary Café’s inception throughout the United States. In the United States, they maintained all consistent across all of their locations, but that would not function in China, so they had to adjust (He et. al. 2019). Based on the experiences of other firms, such as KFC, the biggest famous restaurant chain, they learnt to adjust with the assistance of their Chinese alliance partners as well as local leadership.

Process of the business start-up in China

The Lavendary Cafe needed to join the Chinese market since they intended to organise and combine their activities with their idea. When the firm entered the Chinese market, Chen was given the authority to design critical plans and actions; however, the corporation supplied a basic operating structure. All of his actions and decisions must be made within the framework established by the firm. Louis, the firm’s designated manager in China, has years of expertise and a good connection with the major stakeholders throughout the China economy (Phillips and Moutinho, 2018).

The firm had given him orders to develop a strategy to put the business in a good place by embracing the method of franchise and whatever else methods are necessary and acceptable to achieve the aim. Chen’s activities were less restricted since his job was only moderately monitored by Leventhal, the CEO. The firm has embraced a very stringent strategy in running the Levendary Café in accordance with the guidelines set by the company’s board of directors. The firm had permitted some levity solely in the standards governing the appearance of the groups and their venues (Asmussen et. al. 2019).

In-depth study on the food tastes of various groups in different parts of the country must be conducted, and a detailed transcript must be produced on what types of food pairings might alienate customers, because such pairings are eliminated from the menus. Mia must also be tasked with performing an inquiry and examination into the latent components, the modification of which might result in a dramatic shift in the business’s direction (Bartlett and Beamish, 2018). Mia could avoid clashes with Chen as well as interested parties if she undertakes such study because she is well-versed in the firm’s predicament.

These practices were implemented by the corporation in order to lure Chinese teenagers to its Café and stores. This will assist the organisation in establishing a long-term devoted consumer base in China. The corporation has arranged its Chinese branches as well as shops in a manner that differs from that used in the United States. Chen, the manager, has advised the company’s stores that they must conform to the preferences and tastes of the traditional practice. It was apparent that Chen had not established a concrete strategy that would lead the organisation to success (Ambos et. al. 2019).

Chen has made no reference to the methods that the corporation used in the United States and has embraced an entirely new vision for operating in China. As a result, there was a lack of adequate interaction across the company’s many sections. The Lavendary Cafe needed to join the Chinese market since they intended to organise and combine their activities with their idea. When the firm entered the Chinese market, Chen was given the authority to design critical plans and actions. However the corporation supplied a basic operating structure. All of his actions and decisions must be made within the framework established by the firm. Louis, the firm’s designated manager in China, has years of expertise and a good connection with the major stakeholders throughout the China economy. The corporation’s products are manufactured in its home nation and supplied to customers all across the world. In this case, if there are any affiliates, they function practically as distribution centres through whom the items are marketed to the completed product.

Bartlett & Ghoshal matrix

A variety of strategic options had been evaluated in the growth plan by utilising the Ghoshal as well as Bartlett paradigm.

BS7312A International Business Environment & Trade 1Figure 1: Ghoshal and Bartlett framework (Source: Business2you, 2017)

International strategy

Another tactical option open to Levendary is worldwide plan that requires less global integration as well as local acceptance because the majority of activities may be handled from the headquarters (Ferreira and Ferreira, 2018). The corporation’s products are manufactured in its home nation and supplied to customers all across the world. In this case, if there are any affiliates, they function practically as distribution centres through whom the items are marketed to the completed product.

Global strategy

It is well understood that worldwide growth occurs when a corporation spends money on operations that take place outside of national boundaries. As a consequence of global organization as well as an emphasis on cost-effectiveness, the bulk of items are run under such a label (Anglès, 2019). The advantages of this approach include the possibility of serving more consumers and increasing brand recognition. The disadvantages of this procedure are that it is fraught with danger and that various nations have varied laws and regulations. This strategy solution for increasing efficiency may be included by Levendary.

Multidomestic strategy

The manufacturing as well as marketing of commodities from many regions of the world is referred to as multinational strategy. Levendary must carefully consider the benefits and drawbacks of this method. They are not permitted to engage in commercialization beyond their own nation. In terms of operations, personnel, and commercial choices, Levendary would use a decentralised strategy to its affiliates or organisations throughout the world. The benefit of this proactive strategy for the selected organisation is that it creates job possibilities; nevertheless, the negative is that it puts local suppliers under pressure.

From the all, in the process of expansion into China, the cafe had employed global strategy.

Problems facing Mia Foster and how should she address

Mia is dealing with a number of challenges. One example is the reporting procedure from China to the United States. This problem must be resolved in order to prevent the dangers that come with not following US Generally Accepted Accounting Principles (GAAP). China’s accounting standards are not as severe as those in the United States; therefore, because the Levendary Café is largely headquartered in the United States, it is a critical regulation to follow. Prior they expand the number of outlets across China as well as develop into a greater share of total income, she has to standardise the accounting method to meet that of the US (Bartlett and Han, 2011). They had to comply with the regional tax regulations in China or risk getting close down. Putting in place the necessary procedures to convert financial documents to US style will be an expensive endeavour.

Another challenge she encounters is the adaption China asks of a firm from the United States prior it could be effective within their marketplace. The leader of the Chinese market accomplished just that, adapting as well as making the needed modifications to become effective, however Mia does not understand it yet. She is concerned with maintaining the same level and consistency of operation as in the United States. Regrettably, it would not function in China (Kesler et. al. 2019).

Mia must seek help from Chen in studying the local market and determining the motivation as well as approach for establishing 23 franchisees around the country. Mia must perform more research and analysis to help comprehend her tastes as well as the distinctions she exhibits when contrasted to the culture of the United States. In-depth study on the food tastes of various groups in different parts of the country must be conducted, and a detailed transcript must be produced on what types of food pairings might alienate customers, because such pairings are eliminated from the menus. Mia must also be tasked with performing an inquiry and examination into the latent components, the modification of which might result in a dramatic shift in the business’s direction. Mia could avoid clashes with Chen as well as interested parties if she undertakes such study because she is well-versed in the firm’s predicament (Westney, 2021).

Mia must keep the company’s as well as its procedures’ adaptability in mind as she implements these tactics. The technology used, the architecture and procedures in conducting out a procedure, internal forces, as well as the company’s sensitivity to various markets are the primary factors that determine the adaptability of the operations. The system must be flexible in order to infer the approach followed in the US model and so maintain consistency across eateries in the US and China. The scale of the stores as well as eateries may differ to accommodate the diverse sites. If the corporation goes through with this approach, the franchise segment will profit the most. Mia could provide further suggestions to the firm in order to establish ties in the Chinese population and with partners (Jaw et. al. 2021). Contact growth will help the firm in establishing as well as developing new relationships that will in turn aid in conciliations as well as discussions with key stakeholders. In doing so, the corporation must create an organisational framework that combines both the characteristics of the Chinese and American communities.

Conclusion and recommendations

By summing up the analysis, it has been identified that Levendary Café offers a number of distinct characteristics that set them apart from their competition throughout the quick relaxed restaurant category. In terms of the fast-food business, China does have the globe’s fifth highest percentage of consumption. The key issues identified were wrong choice of market expansion strategy. There are many strategic planning choices obtainable to Levendary Café. This one would be to shut down the majority the whole processes of Levendary Café in China as well as exit the market whether momentarily till an effective strategic planning method is in place before re-entering the industry or forever as well as shutting down all processes. The second alternative is to shut all Chinese-style eateries and replace them with cafés that follow a completely American idea. Other rivals, including McDonald’s as well as KFC, have retained a consistent consumer base while keeping their American character.

References

Ambos, B., Kunisch, S., Leicht-Deobald, U. and Steinberg, A.S., (2019). Unravelling agency relations inside the MNC: the roles of socialization, goal conflicts and second principals in headquarters-subsidiary relationships. Journal of World Business54(2), pp.67-81.

Anglès, V., (2019). Doing business in China: Challenges and opportunities. Global Business and Organizational Excellence38(2), pp.54-63.

Asmussen, C.G., Foss, N.J. and Nell, P.C., (2019). The role of procedural justice for global strategy and subsidiary initiatives. Global Strategy Journal9(4), pp.527-554.

Bartlett, C.A. and Beamish, P.W., (2018). Transnational management. Cambridge University Press.

Bartlett, C.A. and Han, A.R.A.R., (2011). Levendary Café: The China Challenge. Harvard Business School, HBP, (4357).

Berger, E.S. and Köhn, A., (2020). Exploring the differences in early-stage start-up valuation across countries: an institutional perspective. International Entrepreneurship and Management Journal16(1), pp.327-344.

Ding, S., Li, W. and Shen, L., (2020). China GDP Growth Will Surpass 6% in 2020. China’s Foreign Trade.

Ferreira, J. and Ferreira, C., (2018). Challenges and opportunities of new retail horizons in emerging markets: The case of a rising coffee culture in China. Business Horizons61(5), pp.783-796.

He, C., Lu, J. and Qian, H., (2019). Entrepreneurship in China. Small Business Economics52(3), pp.563-572.

Jaw, B.S., Foung, W.T. and Kung, S.H., (2021). Exploring the Complementarity of Global Entrepreneurship Human Management from the Perspective of Human Capital.

Kesler, G., Kates, A. and Kesler, K., (2019). Designing the Global Organization.

Phillips, P. and Moutinho, L., (2018). Creating the global organisation. In Contemporary issues in strategic management (pp. 101-117). Routledge.

Ross, P., (2019). Barriers to Entry: Overcoming Challenges and Achieving Breakthroughs in a Chinese Workplace. Springer Nature.

Westney, D.E., (2021). MNCS and cross-border strategic management (pp. 301-318). Oxford University Press: New York, NY.

Business2you, (2017). International Business Strategy. [Online]. Accessed through <https://www.business-to-you.com/international-business-strategy/>.

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