Levendary Cafe: Survey of International Business Essay

Introduction

Levendary Café is a large American fast-food chain that has various stores within the United States. Started by Howard Leventhal as a small food outlet in one of the streets in the United States of America, Levendary Café grew consistently to become a food chain serving most of the cities in the United States.

With a policy of ‘Satisfy the customer and let the profits follow’, this firm attracted a lot of customers to its stores. During these early years, employees of this firm, under instruction of the founder, would go out of their way to ensure that the customers would come back.

Howard maintained that for a customer to make a repeat visit, the firm had to appeal to his or her sense of pride. The firm had to make them feel valued, by trying as much as possible to customize their service to suite every employees. According to Dogwood Alliance (2008), these extra services would include serving a hot soup other than a worm one based on the customer’s request, or an additional salad besides the ordered menu.

This endeared the firm to customers in areas where it operated. Working closely with Nick White, the chief operating officer, Howard saw the growth of this firm from a single store to a chain of outlets in the United States. The firm grew consistently in the local market to become one of the leading food chains in the United States. It was clear that the firm had become a force that could match other industry giants like McDonalds, Wendy’s and Taco Bells.

As this firm increased its presence in various cities within this country, it was clear that there was an urgent need to reconsider its strategy. According to Guenette (2008), the growth of this firm had almost stalled in the local market. This firm was running at a desirable profit but the growth in market share almost stalled by 2008.

The firm had fully exploited the local market and, therefore, the management had to look for a strategy that would help it increase its growth. After toying with various options, the management decided to venture into the Chinese market. A market completely different from the American market, Levendary Café was walking into a market full of opportunities and challenges in equal measure. This research focuses on the operations of Levendary Café in both the local American market and in the Chinese market.

Levendary’s Global Business Environment

The global business environment is increasingly getting challenging. Although the world has been reduced into a small village due to technological advances, there are factors that are unique to different regions around the world. Levendary operates in the United States and China. The market in the United States is very different from that in China.

Given the fact that the firm operates in the food industry, the meals preferred by the Chinese is very different from that of the United States. In order to understand the business environment for this firm, PESTEL analysis of the external environment for the two countries would be appropriate.

Analysis of the External Business Environment (PESTEL)

Environmental scanning can be done using PESTEL Analysis. This involves the analysis of political, economic, social, technological, environmental, and legal environments. Politically, various firms in the United States have experienced a relatively stable government.

The country has experienced a long period of political stability that has made it conducive for business. It has a very stable government that is supportive of business operations. The government of this country has ensured that the political environment of the country is peaceful enough to encourage business operations.

Lack of political stability would mean that various businesses are not in a position to conduct business normally. Some may even be forced out of the market with huge losses in case the instability is accompanied by looting and arson. The political environment in China has equally been stable. Despite the Tibetan revolution that was witnessed in 2008, the government has managed to bring normalcy to the political environment.

Economically, the American market has faced a number of challenges in the recent past. The US economy was the hardest hit by the 2008/2009 recession that hit various other countries around the world. This had serious negative effects on the firms’ revenues as many of the customers considered the products as non-basic. According to Ying (2006), when the economy of a country is on a decline, the purchasing power is reduced, and this reduces the viability of various businesses.

This firm was forced to cut down its operation levels somewhere in early 2009, as the market had a reduced capacity to sustain its operations. During this time, the Chinese market was very stable. It was not affected by this recession. This is one of the major reasons that influenced the decision of the management to choose China as an alternative market for this firm. During this period, this firm was growing in market share in its Chinese market.

The socio-cultural environment of this country is diversified depending on the demographical approach that is taken in the analysis. The United States is a country that is home to people of varying culture. The cultural practice of the Black Americans is different from that of the Hispanics, the Indian Americans, or other sub-groups.

This difference is always witnessed in the type of food these different groups take. Levendary Café must take this into consideration when operating in the American market. Its menu must reflect this difference. The social structure of the Chinese market is very different from that in the United States. The type of food the Chinese prefer, their purchasing behavior, their tastes and preferences are defined by the Chinese culture. This firm must take this into consideration in order to achieve the desired result in this market.

In both the United States and China, technology has become a defining factor in the operations of business units. The technological environment that firm has to operate in is very dynamic.

Technology inventions and innovations, especially in the field of communication have been the main challenge and strength of this firm at the same time (Vettoretti, Munro, & Emerson, 2012). While this firm is left with nightmares of trying to guess what its competitors in the market are going to come up with overnight, it has used this technology to emerge as one of the leading firms in this industry in the United States.

With its entry into the China, technology has been very important in monitoring the developments in China. The chief executive would frequently communicate with the head of operations in China, Mr. Chen, through video-conferencing. However, technological changes remain so unpredictable and this firm is struggling to come terms with these changes. The dynamism of technology in this sector has forced to have a department that monitors technological changes relevant to this industry both in the United States and Chinese markets.

Legally, this firm has not faced major challenges. The laws that govern trade in the United States have been very favorable to this firm. The law encourages investments, defining how each firm relates to other firms. In the Chinese market, the firm chose Mr. Chen, a Chinese national who understands laws and regulations of this country.

China, just like the United States, has eliminated barriers to international investors. However, the two countries differ in their financial reporting structure. Levendary Café must uphold the law as stated in each of the two countries in its operations.

There are some environmental concerns that would be considered a challenge for the firm. The United States is one of the developed nations in the world. The market has a high purchasing power compared to other countries. The Chinese economy is also growing at a considerably high speed.

The two markets would, therefore appear very lucrative. However, there are some challenges that Levendary Café faces as it strives to expand its operations. The main threat that firm has to deal with in both countries is competition. The market has gotten increasingly competitive. According to Montiel (2011), many firms have come up with products, which are close substitutes of those that are offered by other firms in the same market.

The Main Competitors in the Industry

Levendary Café faces a strong market competition both in the local market and the market in China. In both markets, McDonalds is the market leader in this industry. McDonalds has numerous stores within the United States and various other countries around the world. The brand McDonald is very strong in this market as it has been in operations for a very long time.

In the Chinese market, McDonalds has cut itself a niche as a firm with an international structure and strategy in this industry, but one which also considers the local factors. A customer who visits McDonalds store in New York will easily identify a McDonald in China or any other part of the world. This has seen it attract international travelers (Onkelinx & Sleuwaegen, 2008). While Levendary entered the Chinese market in 2008, McDonald has been in this market since 1992.

This means that it is well established in this market. There are other strong competitors in this market such as Wendy’s and Burger King which are very strong in the markets in the United States. In China, there are various local food joints that have mastered the culture of the local market for years. With this knowledge, they have also cut their own share of the market with products that focus on the needs of the local Chinese.

Main Challenges Faced by Levendary Café

Levendary Café faces serious challenges in the United States and Chinese market. These challenges range from social issues, technology, legal, economic and health concerns. In the recent past, issues regarding the impact of fast food on health of the consumers have proven to be a serious challenge.

Health experts and researchers have found this to result in increased body mass index (Card & Krueger, 1994). Consumers of fast foods have, therefore, been found to suffer from excessive weight. There has also been increased awareness by many publication materials, which have discouraged fast foods. The fast food chains have been forced to adopted healthier alternatives as a way of addressing the rising health concerns.

Price instability in the market is another challenge that the management of this firm has to deal with. Commodity prices have been rising steadily over the years, especially due to the global economic crisis. The raw materials that this firm uses have been on a steady rise as the cost of living is pushed up. Commodities that have been experiencing price increase include livestock, wheat, and corn among others.

Fast food companies cannot pass all these increases to the consumers because of the difficult times. As a result, the profit margins for these companies have been on the decline over the years. Fast food chains are also grappling with the problem of market saturation, especially in the American and other developed markets. Almost all the town locations in these developed markets have a concentration of fast food restaurants, which offer almost the same servings. This has led to increased competition.

The Organizational Structure of the Company

In every organization, there is always an organizational structure that defines how the organization is to be run, and how the command flows from one office to the other. Levendary has developed over the years to become an international firm. The following management structure defines various positions held by various leaders.

Chief Executive Officer

The firm is headed by the chief executive officer. Currently, the officer is held by Mia Foster. She is responsible for all the activities taking place within this firm. Heads of department reports to her.

Departmental Heads

The firm has five departments which are administration, franchising, concept development and management, business development, and operations. The administration division is headed by an Executive Vice President, while the franchising division is headed by a Chief Franchising Officer.

The concept development and management division is headed by a Chief Concept Officer, the business development division headed by a Vice President, while the operations division is led by a Chief Operating Officer. The figure below shows a complete management structure of this firm.

Source: (Bartlett & Arar, 2011)

Heads of Management Units

As shown above, below the departmental heads are various units, each headed by unit officers. The departments have various units, with the departmental head responsible for all the operations within that division. The heads of these units receives their command from the departmental head. Under the executive vice president, there is the finance unit, the legal unit, real estate unit, information system unit and purchasing unit. Under the chief concept officer is the marketing unit and food unit.

Under the marketing unit are the creativity sub-unit, the distribution sub-unit and the online sub-unit. Under the chief operating officer are the regional heads (both in China and the United States), the directors of catering and learning. Below them are various other officers, and finally the employees without managerial responsibilities like cooks, cleaners, messengers among others.

Impact of Culture on the Chosen Business’s Activities around the World

According to Bartlett and Arar (2011), culture plays an important role in defining the activities of a given business around the world. Levendary Café operates in the food industry that Gleave and Donald (2011) say is the most affected with issues relating to culture. Pork is very popular in a section of the American markets. However, this product is culturally unacceptable among the Muslims. In its operation, this firm must understand cultural issues that may affect its operations in that particular market.

The culture of the Chinese is slightly different from that of the United States, especially the buying behavior. Americans spend most of their income, while Chinese spend their income cautiously. The approach that this firm should take in appealing to the American markets should be different from that used in China. Issues on religious beliefs, cultural practices and the eating habits should carefully be taken into consideration by this management.

The Key Issues in Management at Levendary Cafe

The operational activities of this firm within the United States are running very smoothly. However, the strategy adopted by Louis Chen, the regional head is China, is worrying the top management of this firm. When taking up the position, Chen was given the mandate to make the presence of Levendary Café felt in China by coming up with as many outlets as would be possible.

He was given 18 months to accomplish this by the former chief executive, Howard Leventhal. Chen did not disappoint and within one year, he had opened 23 outlets in China. This was an attractive move. However, the top management was worried of his strategy.

He was running the operations of China single handedly, taking no advice from the head office in the US. What was worrying is that the approach he took in China was very different from the strategy that Levendary Café uses in its operations. He would justify his actions by saying that the Chinese market was different from that of the US. The top management was concerned, and something had to happen in China in order to harmonize operations of the firm. This forced the chief executive, Mia Foster, to fly to China.

References

Bartlett, C., & Arar, H. (2011). Levendary Café: The China. Harvard Business School, 10(24), 1-13.

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Gleave, S., & Donald, K. (2011). Financial Services: China’s Capital Markets the changing landscape. KPMG, 12(4), 1-40. Web.

Guenette, L. (2008). The McDonaldization of China. National Committee on United States-China Relations, 7(9), 1-97. Web.

Onkelinx, J., & Sleuwaegen, L. (2008). Internationalization of SMEs. Flanders District of Creativity, 3(11), 1-92. Web.

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Ying, B. (2006). Chinese Food Industry and Market Report. The Reporter. Web.