Levendary Cafe China

Strengths

• CEO and firm

-Foster career

-3 500 cafes of $10 billion

• Employees and service

-Operating tools and Learning

-Domestic demand

-Good service/ customer oriented policies

-Quality ingredients

-Environment/ interior design

-Trained chefs

-Chen first entrance in the market

• Operations

-Ad agencies

-Food laboratories

-Role of the Chief Operating Officer

• Product

-Branded grocery items

-Organic ingredients

• Firm philosophy and structure

-Menus adaptation

-health

-Administrative staff group + Chief Concept Officer (Keep up to date)

Weaknesses

• CPA not CAGE
• Goals and CEO

-CEO lack of international experience

-Want to expand because small towns business doesn't work

• Princing

-Royalties from franchises

-Marketing fees

-Overhead costs

• Chen

-Unwillingness to conform

-Professional manager?

-Dropped idea of Joint Venture for Chen

-Chen managed with a light touch

• Logistics

-Only meetings = far

• Financials

-Operating profit and income negatives

• Product and marketing

-Challenge for teams

-Difficult to prepare menus and boards

-New items boost image but not sales

• Service

-Problem operating metrics (speed service and order accuracy)

Opportunities

• Industry and opportunities

-U.S restaurants and food service= $600 billion industry with 960 000 locations

-Multi-units restaurant concept=30% of the industry

-Food service industry highly fragmented

• International expansion

-China and Dubai

• Opportunities in China Food industry

• Demographics

-Middle class

-White collars

-Women

-Chinese tastes

-Youth attracted by western culture

-QSR can charge more as people get richer

• Chen

-Good initial location Shanghai 2010

Threats

• Firm domestic growth slowing 2008

• Competition

-Highly competitive

-Sector grows fast

-International and Chinese: KFC, Mcdo, Applebees, Olive Garden, Panda Express, Chipotle, Pizza Hut, Mongolian Hotpot, HongKong Chain

-Copy of Chinese restaurant

-Independent restaurants-local chains

-American chains struggle in China

• Culture and adaptation

-Regional food tastes differences

-Adapt store design and menus

• Financials

-GAAP adaptation

-Financial analyst in Denver

• Political restrictions?

• Chen

-Hard to manage: made major changes

-Tense relationship with Foster

SWOT

China

"Tasty Fresh Goodness"

Brief Introduction

Mark Taylor CEO

Danny Wray Financial analysist

Julie Molierac Export Manager

Matt Walter Marketing Department

4 Ps Levendary Cafe

China

Price

Product

$8 -$12

• Quick casual restaurants
• Wholesome soups, salads, sandwiches
• High quality ingredients
• +branded grocery items

• 1.4 billion people
• Population growth
• Annual GDP growth: 14.5% over past decade
• Middle class emerged+ urban population (PCI 17 175)
• Women workforce
• Chinese taste are evolving
• Independent restaurants: rice-based dished and low prices
• Wide variations in regional food tastes
• Big consumers of pork (2nd worldwide)

• China entered modern fast food era in 1987 with KFC : Yum Brand outlet in Beijing
• QSR target families and youth (25-44)
• Western restaurants focuse on TASTE, presentation, speed and efficiency
• Change -> quality, freshness and customized orders

Top problems to conquer

-Finding/ paying for the right location

-Training staff

-Unrealistic expectations HQ

-Communication HQ and franchises

-Logistics

Place

Promotion

• 3 500 stores: 2/3 franchised
• City center/ financial, business areas -> "white collars" and "upper middle class"
• Menus items adapted to local popularity

• Advertising agencies: ad copy and images
• Communicate natural goodness
• Banners, table tents, window decals, menus boards

Porter's Five Forces

Threat of new entrants

Threat of substitute products

Strong – many different types of products available – especially in china. Strong threat of knock offs and theft of trade secrets.

a. Strong – lots of similar types of businesses..starbucks, Duncan donuts, many other café’s.

During economic

b. Even with low returns, the competition is strong and many multinationals are always trying to expand.

Diagnostic

Agenda

Emphasize Teaming/ Seek to understand

Strategic Development Committee

Define Roles (Chen’s Job Description)

Financial Statements

Intensity of competitive rivalry

Evaluation of entry into China market

• Questionable reasoning
• Wrong tools (CPA vs CAGE Framework)
• Lack of communication
• Timing
• Unclear expectations
• Chinese National – Chen (Real Estate)

Action items

Strong – Many companies, low concentration invites new entrants into china. Levendary seems to be in a weak point, inciting competitors to strike.

Financial Analysis

Choose Reporting Standard

Establish Auditor

Review Spending Ratios (i.e. Marketing)

Compare with HQ

Bargaining power of suppliers

Bargaining power of customers (buyers)

Medium – this along with the substitutes creates an environment to push down costs. The business model of Levendary is built upon high costs, so in China, any knockoff using inferior inputs could be a detriment.

Weak – Product inputs are easy to come by. The size of Levendary would also make them a very large purchaser of organic goods.

Questions

Question 1:

- Too quick, not planned- strategy, good choice with Chen, not well supported from home, compared to joint

venture - good, lack of communication, (Why: bad timing - CEO exiting), reporting lines, wrong tools for

homework (CPA vs CAGE),

Question 2:

- Changes that need to be made include:

• Mia to emphasize teaming/ chen not the enemy
• Initially keep Chen, more clearly define job description/expectations
• Secondary plan to replace Chen if not willing to cooperate
• Re-do Org Chart so VP, China (Chen) reports directly to Mia and other executives
• Quarterly report
• Strategy Development Committee with Chen and HQ Execs
• Specifically: Cultural Training, Marketing Expenses, Define Success in China, Define Core Values then

how they apply in China, Accounting Standards and Auditor, LT International Growth Goals