Analysis of critical issues or management in a foreign business environment
The expansion of businesses in the international environment has emerged as one of the competitive strategies that are used by firms. Most of the challenges that are witnessed by firms in the international business environment revolve around the issue of managing in a new business environment, which denotes variations in business culture (Arunjo, 2007). The new Chief Executive Officer, Mia Foster, has the challenge of ensuring that the company establishes itself in a totally new market.
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The new market has different business conditions and a totally new culture of management. However, Foster has fear that the company events are run by Chen. She fears dissolving the local culture of the company as depicted in the business dimension that was taken by Chen (Rentfrow, 2010). One reason why the company sought to expand into the international market was the shrinking domestic market, which implied a reduction in productivity (Bartlett & Han, 2011).
As an expansion and a competitive strategy, the entry and operation of the company in China as a new business destination was meant to help the company in regaining its competitive scale by quelling the impacts of the shrunken operations in the mother country.
China had proved to be an attractive market for a number of United States’ firms that operate in the restaurant sector. During her early years of tenure as the new CEO of Levedary Café, Mia Foster was interested in monitoring and standardizing the operations of the company in China, which were being spearheaded by Chen.
Foster sought for a means of ensuring that the standardization of the reporting models was done. Adopting a standard model of financial and business reporting as that used by Levendary in the mother country of operation proved to be difficult for the operations of the company in China (Bartlett & Han, 2011). This is one area of challenge in international business management. It denotes the difference in business culture between the mother country and the foreign location.
The entry model for any business in the international market is quite critical and determines the rate at which the company harmonizes the operations in the subsidiaries in relation to the operations in the mother firm as a way of ensuring that the conflict of management does not arise.
Two issues come out in the case, which must be addressed in order for the operations of the company in China to be enhanced. The variation in business culture between the United States, which is the mother country of Levendary Café, and China which is the foreign business environment for the company comes out in two main things. These are legitimacy and conformity (Ferreira, Li & Jang, 2007).
According to Ferreira, Li and Jang (2007), the two things have to be considered as they are critical to the successful operation of a company in a foreign market. The issues form part of the hybrid model of entry and operation of a firm in the foreign business environment.
There is, therefore, need for Foster to allow the company operations in China to follow a model of financial reporting that goes in line with the legislation on taxation in the country. Emphasis on using a reporting model that is used in the parent country is bound to result in non-conformity with the business environment in China, thereby jeopardizing the operations of the company in the country.
The attributes of a business model often change with the environment in which a business expands into. It is, therefore, critical for the Foster to discuss with Chen the aspects of change that are expected as far as the expansion of the company operations in China is concerned. Sticking to the parent company model can result in the stagnation of the company due to lack of adaptability to the foreign market environment.
When operating in a foreign business environment, it is critical to consider the tastes and preferences of the customers in the foreign market and adopt the practices in the local market as a way of enticing and attracting customers in that environment (Hise & Choi, 1995).
Analysis of market prospects in China and adaptability of Levendary Café in the market
A study of the international business environment denotes that China is one of the fastest growing markets in the world. The scale at which the Chinese economy, and by effect the Chinese markets, is growing has kept opening space for the incorporation of foreign firms in the market.
The country, therefore, presents a lot of opportunities for multinational firms from all over the world. According to the Levendary Café case, it has been noted that a substantial number of firms from the United States have successfully entered and set up subsidiaries in China.
In fact, this was the guiding factor behind the decision by Levendary Café to expand its operations into China. Most of the large United States multinationals in the restaurant have been able to enter and expand their operations in China through franchising (Bartlett & Han, 2011).
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However, it should be noted that the model of business that has been used by the United States multinationals to franchise in the Chinese market is based on the foreign model that is embraced in China. This reiterates the relevance of a firm to adapt to the local business culture as a foundation of expanding business operations in a foreign business environment.
The rate at which foreign firms in the restaurant business are entering China is quite high, which poses questions over the future competitiveness of the Chinese market to multinational firms.
There is one notable trend in the restaurant industry in China, which depicts a challenge to the multinational firms from the West, among them Levendary Café. The realization of the opportunities that prevail in China has attracted an array of other multinationals from within the region in the country. This raises several concerns on the operation of western multinationals in the Chinese market.
Firms from the region have a higher advantage when it comes to the rate of adaptability to the business culture in China. Contrary to the multinationals from the region, a firm like Levendary is still new in the country and is still struggling to gain footage in the country by adapting to a resounding culture that will enable it stabilize its operations in China without interfering with the general business model of the company.
Indeed, the Chinese market presents competitive challenges to the future of Levendary Café considering the fact that the market is attracting firms that have a higher competitive edge when it comes to the adaptability to the business environment in China (Bartlett & Han, 2011).
As noted in the case, the largest share of the restaurant sector in China is dominated by firms that serve Asian food. This is an aspect of culture, which denotes an advantage to the firms that come from within the Asian region as indicated in the case.
According to Wu (2008), cultural adaptability is one of the critical sources of disadvantage for foreign firms that are operating in China. It impacts on the management of the firms in the country. Insisting on exporting the local culture into China as is being done by Foster could compound the ability of the company to withstand the competition in the market.
It can be argued that the best way for Levendary Café to successfully expand and gain a competitive edge in the Chinese market is by pursuing a business model that allows it to make changes to its business culture. This could pave the way for the adaptability of the company to the local conditions in the market, which dictate customer trends.
While some practices can be maintained, it can be argued that the path that is taken by Chen makes sense and there is only need to streamline a number of activities that are critical to the retention of the overall culture of the company irrespective of the fact that it adopts to the cultural practices and determinants in China. According to Kogut and Singh (1988), it is critical to assess the factors of compatibility in culture between a mother country and the foreign country and establish a balance in these factors where possible.
This attests to the research by Gatignon and Anderson (1987), which denoted the difficulty of US multinationals in adapting to a foreign business culture in non- Anglo cultures. This is the reason why the combination of the models of business is often embraced by multinational firms by considering the cultural trends and their impacts on the competitive positioning of firms in the foreign market.
Recommendations on best practices of international management
The argument that comes out of the case is that Foster does not have a resounding experience in international management. The fact that she is charged with the responsibility of ensuring the company stabilizes its operations in the foreign business environment means that she has to learn a lot about the attributes of international management.
Unfortunately, she has to do this at work, which is quite challenging. In her meeting with Chen, who is steering the operations of Levendary Café in China, she has to adhere to a number of issues in order to be able to establish a worthwhile course for the operation of the company in China.
Understanding the technical aspects of the foreign business environment
According to Guillén (n.d.), the study and understanding of the foreign business environment are critical to the successful entry and management of a firm in the foreign market. As it comes out from the case, Chen has a substantial amount of experience about managing in China given he is a person who comes from the country and who has been able to understand the business environment in the country.
International management entails the understanding of the technical aspects in foreign business environments and how they play out as far as the effect on the operation of new firms in the market is concerned. Therefore, Foster has to prepare to listen to Chen as this will enable her to comprehend the technical aspects of management in China. Chen acts as a cross-cultural consultant in this case (“Cross Cultural Solutions for International Business”, n.d.).
The development of an adaptive strategy in the foreign business environment
After listening to Chen, it is easier for Foster to understand the reasons behind the approaches of business development that are taken by Chen. Though a number of ventures that had been established by Chen did not match with the model of Levendary, they had picked up in China. This proves a positive point concerning the ability of Chen to manage in China.
This implies that Chen is a key resource for the company in as a far as steering its adaptability in China is concerned. It is at this point that Foster can open up and discuss about the possibility of modelling the Levendary stores in China along the models of business that are embraced in the parent country.
The discussion ought to focus on the aspects of management and the models of business that can be exported by the company to China and those that need to be moulded from the foreign business environment. This attests to the concept of globalization of the business environment, where the understanding of the culture in a given business environment is key to the establishment of a competitive business model in that market (Gunn-Graffy, 2007).
Rationalization of integrating strategy in the foreign business environment
An integrative response framework of international management such as the one that was developed by Prahalad and Yves in 1987 can be used in the development of a strategy that will streamline the operations of the company in China. The model by Prahalad and Yves reiterates the need to balance between the local factors and international factors that prevail in the international business environment (Guillén, n.d.).
Such a balance is critical in ensuring that the identity of the company is maintained even as the company adapts to the cultural factors in the foreign market. The balance between customization and the standardization of business in the foreign market has to be given priority (Lynch, 2012).
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