Levandary Case Study - What Is Your Evaluation of the Way Levendary Cafe Has Entered the China Market?

                                      Levendary case study

                                          By Rahul Pahwa

Question:-1 what is your evaluation of the way Levendary Cafe has entered the China market?

Answer:-1 It is appropriate to say that Levendary café has entered the Chinese market in an complicated way. There are typically nine types of strategy to enter a foreign market such as franchising, Joint venture, Licensing etc.^[1]  the entrance of china was more opportunistic expansion rather than strategic. The huge population of 1.4 billion people and annual GDP growth of 14.5% over the past decade, China’s urban population rise from 36.2% of the total in 2000 to 46.6% in 2009, and the strong middle class whose per capital income surged from RMB 6,282 to RMB 17,175 (In 2010, RMB 1 = USD 0.15.) all made china as great opportunity for the restaurant that was facing a mature market that had a growth of merely 1%. Levendary main issue is not entering Chain's market but whether such decision is a right decision and if do so how to survive in such aggressively competitive market, to which extent the management have a detailed plan about and control over the penetration in the new market with the help of CAGE analysis which ultimately gives the company an adequate information about the culture and a proper communication with the management in china.^[2] When Levendary entered China they gave Chen the full control over the operations there, although a well-developed detailed plan and a clear tactic of how to implement this plan is a must. However it is clearly this is not the case whereas everything had been handed to Chen from A to Z. The chain of Levendary Café in USA are run by a strict set of rules and allowing modifications only after approval from the concept group regarding the “look and feel” of the firm whereas The Levendary Café in China is following a business model which is completely different from that of the US operation model. Chen wanted this café to adapt to the changing tastes of people from place to place. However he has no clear strategy or reasonable clarification for some actions such as locating some cafes in suburbs or in rural areas although there is so much room for expansion in the huge urban markets or turning some cafes into counter-only. The culture differences between US and China is another major issue that should be understood by Headquarter in US. Customers in China are different from those in US in term of their habits and food preferences. Chen was smart by being flexible when entered Chinese market because there are some features that could not be transferred easily into such closed community nevertheless killed the identity of Levendary and turned it to a completely different restaurant while trying to adopt to the new culture. He could have been using the differences as a competitive advantage and differentiate the restaurant among other rivals. Another issue is the lack of experience with the international market. Levendary headquarter should be aware of the international operations and the problem associated with and how to fit in and gain a strong position in such market.

...