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Analysis on management issues that the CEO Mia Foster is facing with reference to academic business theory Essay


Several business theories are applicable in the process of dealing with management issues especially on the buying behavior of individuals and marketing processes within international market (Gopalakrishnan, 2004). It is important for Foster to analyze such dimensions for the purposes of inventing appropriate processes capable of persuading consumers to buy products and services.

In most occasions customers purchase food products after undergoing a series of steps such as familiarizing themselves with the kind of food available for consumption and their distinctive tastes. Due to such experiences consumers make different buying decisions based on a number of factors such as cultural influences, environmental elements as well their own personality (Hughes and Morgan, 2006).

According to the case study, consumers though attracted to foreign fast food companies were still associating with restaurants serving Chinese food and those of Asian origin due to their affordable charges on food such as large fries which appealed to Chinese youths. At some point McDonalds adopted the same aspect which made Chinese youth willing to indulge in foreign fare.

This is based on Generic theory of buying behavior where consumers follow generic model on decision-making before finally purchasing new products within the market. Foster experienced challenge on handling menu variations for food, handling major business operations as well as organizing focused marketing team. Within Chinese market, the challenge was based on appealing to local preferences which mostly inclined towards rice-based dishes as well as low pricing.

The other issue was based on cultural theory of buying behavior, whereby most purchases are made based on cultural affiliations within specified regions. Within such context an individual’s culture refers to set of values and beliefs common to a particular community.

In regions like China, purchases are based on various aspects such as income and occupation which characterizes the strong middle-class and large population of women workforce. There is also growing trend on the culture of eating out within Chinese food industry as revealed by the increased per capita income within the middle class population (Lee et al., 2006).

Internalization as indicated in the case study has the capability of bringing about multicultural challenges within management as well as employment sector, since those involved are required to be familiar with standards of target market. This includes being familiar with native language within target market segment as the case of Louis Chan who was quite conversant with Chinese language.

However, the nature of competition within food industry calls for application of workable marketing principles capable of consolidating consumers from different cultural backgrounds. At the same time, the kind of advertisement, products and services utilized by Levender café needs to be directed towards assisting employees such as Mia Foster from different country background to overcome cultural barriers.

The other challenge involves need for application of appropriate line of strategies for the purposes of overcoming existing challenges within Chinese market. Lavendary café requires establishment of concrete knowledge on traditional values from different countries since Western and Eastern kind of lifestyle are quite different.

Good example is on management of finances, while Chen preferred the use of US GAAP methods, Foster was for the contrary opinion and wanted application of accounting method which would cope with high revenue expenditure in China. This shows that operations within international market require management’s sensitivity towards employment owing to presence of culturally diverse groups (Levenburg and Schwarz, 2008).

There is also challenge on proper management of resources revealed from the kind of disagreements arising on application of right financial tools for purposes of market analysis.

This is revealed from the case when Foster took over as the CEO of Lavendary Cafe and found out that Chinese subsidiary submitted all management as well as financial reports in their own format. Despite the finance team recommending the use of US Generally Accepted Accounting Principles (GAAP), Foster had contrary idea on financial management within China operations. Such misconceptions within Lavendary café’s management could lead towards drop in sales within its various outlets.

At the same time, issues on economic downturn, shifting of consumer tastes and preferences could significantly affect sales trend within international market. Management of brand image also presents one of the crucial aspects since it determines nature of consumer loyalty within specified market segments.

ccording to the case study, many American restaurants had struggled in China due to image portrayed, for example Pretzel Time’s failed due to use of its white decor which according to consumers reminded them of a bathroom. In the case of Lavendary cafe this is portrayed from the case where one of the senior managers is concerned about the image of Lavendary after he found out about the cheap outlets opened in China by Louis.

Analysis of the future prospects of the marketplace in China using detailed information from the Case study

According to the case study on Lavendary Café, majority of middle working class within Chinese market obtain their food from restaurants and tend to incline towards food with Asian tastes.

Residents prefer local food to foreign dishes especially of western origin. Statistics reveal that most of restaurants in China provide food with Asian taste the same applies to street vendors who majorly deal with food stuff and beverages (Knight, 1997). At the same time, statistics further shows that the ratio of male to female is almost equal with female and youths forming good percentage of the population. Such set-up calls for creative branding with symbolic Chinese images and incorporating traditional values.

Chinese food related segments comprises of traditional consumers, adventurous and uninvolved consumers. The case study clearly indicates that the number of adventurous consumers from the middle class are higher hence services improved based on time and quality of food supplied (Lee et al., 2005).

Shopping habits within the United States and international market can be described based on factors such as; importance attached to product information, delightfulness during shopping, nature of pricing mechanism applied, image of the restaurant and their products (Lee et al., 2005).

Revelation from the case study shows that majority of the population prefer casual eating habits especially in companionship with friends and families, and this provides an opportunity for Lavendary Cafe to specialize in fast foods. The increase in the number of eating outs within Chinese market can be attributed to societal changes and long working hours.

Owing to available opportunities Lavendary cafe should focus on providing international customers with reliable and quality services. The financial forecast as mentioned within the case study is one of the tools appropriate for determining future prospects within Chinese market for Lavendary Cafe’.

The issues surrounding foreign exchange rates are crucial especially when dealing with both Chinese currency and US dollar. This is since fluctuations in currency rates might at times affect delivery of sufficient and quality products owing to increased prices of products.

However, quality of food products within international market is measured based on hygiene and satisfaction levels (Lee and Sukoco, 2007). There is need to observe hygiene and health standards as portrayed by United States image on its products. This acts as an attractive and motivating factor towards purchase of foreign products by native consumers. Chinese population considers variety and pricing attached on products as one of the basis for making their purchases.

This can be shown in the case study, from the fact that McDonald’s affordable charges on large fries appealed to Chinese youths hence making them willing to indulge in foreign fare (Kreiser et al., 2002). Success within Chinese market depends on satisfying middle class population, male bachelors and providing unique product design which also considers nature of labelling (Hemelgor, 2002).

Application of the five forces

Five forces of competition model by Michael Porter provides good basis for describing the nature of food and beverage industry within China. Porter’s Five forces is used to refer to aspects such as; threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and rivalry among various firms within food industry.

The food and beverage industry as described in the case study is considered to have high degree on threat of new entrants since the cost of entry into the food and beverage business is low and at the same time the industry is continually growing. Good example from the case study points out on the changes experienced within Chinese chains, whereby upon learning from foreign competition, they began to focus on standardization as well as tight control of raw materials, food preparation and in-store service.

Such conditions led to the entry of restaurants such as; McDonalds, Dar Jia Le, Country Style Cooking, Hong Kong-based Little sheep, KFC having more than 3000 restaurants in China, independent full-service restaurants which dominated Chinese food industry with total of over 2.5 million outlets nationally.

In the present situation there are several restaurants and food outlets with no dominant firm. Consumer trends based on customer value business model, reveals that location and target group is an important aspect when is comes to establishment of restaurant.

The aspect of location, quality food provided and brand name makes the criteria on which markets are penetrated. This can be explained from the fact that quick service sector was highly competitive and growing fastest in China. McDonald’s entry in China was marked by its menu featuring its famous Big Mac, McNuggets as well as French fries.

They enriched their menu by adding China Mac with black pepper sauce, pork burgers and red bean ice cream. However, their affordable charges on large fries appealed to Chinese youths hence making them willing to indulge in foreign fare.

The aspect of location can be revealed from Chen’s action of opening an outlet in the corner ground floor location within new high-rise office building. The strategic location of the restaurant provided instant attraction amongst white-collar employees from global financial firms within the same building.

At the same time, positioning done by Chen on new location provided convenience on casual dinning with table service. However, there also seems to be lack of government regulation and at the same time most restaurants offer same line of food services hence making low barriers to entry. Capital investment required for start of such business is also low in China (Kao, 2009).

Then there is bargaining power of suppliers which can be considered as relatively high in China since the food and beverage industry requires range of supplies for normal operations of the business. Most of the suppliers within Chinese food industry are specialized in perishable products.

The only distinguishing factor amongst suppliers is the nature of packaging used for materials, technology applied, and nature of delivery and level of hygiene applied. Such competition based on distinguishing factors makes the costs high hence granting suppliers influence. The other factor which drives up the cost is the availability of many food outlets within the market.

Bargaining power of buyers within Chinese market is considered high based on high population. Most restaurants rely on cash sales from customers, however, customer retention is little challenging since availability of many food outlets makes switching costs low.

This shows that the industry in China is characterized by low member retention since consumers are willing to pay additional costs depending on quality of service and food offered this makes consumers to influence prices since they can easily switch companies (Levenburg and Schwarz, 2008).

Restaurants such as Lavendary Café face stiff competition in China from substitutes such as food outlets and street vendors. While food from the restaurant may be expensive, street vendors offer consumers quality food at affordable prices.

However, most street vendors depend on those preferring night-outs; the only benefit of restaurants is that they are not affected by changes in weather or political unrest since they are in-doors (Lee and Lim, 2008). Eating at home is also one of the substitutes though it does not provide the same social interaction as that from restaurants, despite offering significant conveniences.

Based on the above descriptions from the case study, it can be shown that services provided across Chinese food industry are relatively similar, making restaurants to offer affordable prices for the purposes of capturing considerable percentage of market (Lee and Peterson, 2000). From the case study, China can be considered to have good potential owing to its growing population with current population standing at 1.4 billion. There is also rising urban population and emergence of strong middle class with significant per capita income.

What would you suggest is the better approach for Mia Foster to adopt in her meeting with Louis Chen? Justify you answers with academic business theory support and examples of behavior approach and business practice from the case study and your own experience

Mia Foster should cooperate with Louis Chan in the first instances for the purposes of obtaining concrete information concerning operations within Chinese market. This is since Chan is considered one of the most successful managers within Chinese market. These include drawing crucial information from sources such as company’s corporate reports good example being the one presented by Steele showing the condition of Lavendary café within 23 locations in China.

In such cases the objective lies in trying to discover various aspects of the business which could be utilized for its success. A model referred to as ‘gap model’ was developed by Parasuraman and his colleagues and is used to assist in identifying gaps existing between the perceived quality of service given to customers and their expectations.

The model operates based on five gaps; (1) consumer expectation-management perception gap, (2) management perception-service quality expectation gap, (3) service quality specifications-service delivery gap, (4) service delivery-external communications to consumers’ gap and (5) expected service-perceived service gap. The case described could be related to Gap’s model part 5 where the expected and perceived services from Levendary’s headquarters were clearly nonexistent (Fareena and Merlin, 2000).

Gap-5 refers to the kind of service quality shortfall as identified by consumers whereas gaps 1-4 refers to various shortcomings found within entire organization (Fareena and Merlin, 2000). Within various outlets in different locations there was a clear gap between the service quality specifications from main menu and the delivery of those specifications to the consumers, since some locations had only serving tables and no chairs.

The research showed that Chen applied Levendary’s design standards and menu selection only in Pudong city. This shows that utilizing the right employees presents one of the most important aspects since it enables enrichment of company’s capabilities. Chen had used his own knowledge contrary to that of the company and changed various items in Levendary’s menu within some locations such as that in Beijing’s embassy row without the consent of top management team.

There was also replacement of Levendary’s classic chairs with plastic chairs from local furniture supplier. Application of such business principles does not necessarily compromise objectives of such for-profit enterprises but Mia Foster’s perspective was that many business practices in food sector offer similar services across the whole sector, hence expected all 23 Levendary’s outlets to have same design and menu.

Mia Foster should also utilize the gap model part 4 which allows CEO as leader of services provided within Levendary café to preview and counter check various designs and images used in advertising the company before consumers are exposed to them (Fareena and Merlin, 2000).

Understanding the nature of attraction and retention of new customers within the industry provides an important aspect of marketing. There is also need to investigate whether or not success within food industry is inherent to the social enterprise business model, or whether it is relative to the successes of other companies within other sectors.

Mia Foster could have also applied friendly approach as depicted from disconfirmation of expectations model. This model entails four main constructs which include; expectations, performance, disconfirmation, and satisfaction.

This also could be related to my experience at Jordan’s restaurant in Murrumbeena where perceived performance of employees seems average and the expectations low due to the site where restaurant was located. However, walking inside the restaurant, whole perception was changed owing to comparison based on cleanliness, quality food and kind of hospitality accorded. The experience proved to be a positive disconfirmation which led towards enhanced satisfaction (Lee and Lim, 2008).

Conclusion

Market strategy analysis of Lavendary café based on five forces gives a clear picture on the points that requires much attention for success to be realized. It points out that unlike most other major food outlets, Lavendary has at one point resisted diversification and tried to focus on building its American image credentials and reputation for high quality products and services amongst high-end consumers.

At the same time Lavendary café should adopt certain elements of segmentation into their business model such as diversification based on their knowledge of the market in which they operate. However, some existing gaps within food industry primary among them being the use of public perception to their advantage.

References

Datamonitor, (2011) Tesco plc: Company Profile. London: Datamonitor.

Fareena, S, & Merlin, S. (2000). Services Marketing Management. The Journal of Services Marketing, 3(14): 188.

Gopalakrishnan, R. (2004). Unleashing Indian entrepreneurship-I: The changing Mindset. Business Line, Chennai, Periodical, June 11, p.1.Retrieved from

Knight, G. (1997). Cross-cultural reliability and validity of a scale to measure firm entrepreneurial orientation. Journal of Business Venturing, (12): 213–225. doi:10.1016/S0883-9026(96)00065-1.

Kreiser, P, Marino, L, D, & Weaver, K. (2002). Assessing the psychometric properties of the entrepreneurial orientations scale: a multi-country analysis. Entrepreneurship:Theory and Practice, (26): 71–94.

Hemelgor, B. (2002). A competitive analysis of corporate entrepreneurial orientation between selected firms in the Netherlands and the USA. Entrepreneurship & Regional Development, (14): 67–87. doi:10.1080/08985620110087023.

Hughes, M., & Morgan, R. (2006). Deconstructing the relationship between entrepreneurial orientation and business performance at the embryonic stage of firm growth. Industrial Marketing Management, (36): 651–661. doi:10.1016/j.indmarman.2006.04.003.

Kao, I. (2009). Tapping the world’s innovation hot spots. Harvard Business Review, (March):109−113.

Lee, S., & Peterson, S. (2000). Culture, entrepreneurial orientation, and global competitiveness. Journal of World Business, 35(4): 401–416. doi:10.1016/S1090-9516(00)00045-6.

Lee, L., & Sukoco, B. (2007). The effect of entrepreneurial orientation and knowledge management capability on organizational effectiveness in Taiwan: the moderating role of social capital. International Journal of Management, 24(3), 549–572.

Lee, S., & Lim, S. (2008). Entrepreneurial orientation and performance of service business, Service Business. International Journal (Toronto, Ont.), 3(1): 1–13.

Lee, S., Chang, D., & Lim, S. (2005). Impact of entrepreneurship education: A comparative study of the US and Korea. The International Entrepreneurship and Management Journal, 1(1): 27–43. doi:10. 1007/s11365-005-6674-2.

Lee, S., Lim, S., Pathak, R., Chang, D., & Li, W. (2006). Influences on students attitudes toward entrepreneurship: a multi-country study. The International Entrepreneurship and Management Journal, 2(3): 351–366. doi:10.1007/s11365-006-0003-2.

Levenburg, N. M., & Schwarz, T. (2008). Entrepreneurial orientation among the youth of India: The impact of culture, education and environment. Journal of Entrepreneurship, 17(1):15–35. doi:10.1177/097135570701700102.

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