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Levendary Cafe China

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Julie Molierac

on 23 October 2014

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Transcript of Levendary Cafe China

Brief Introduction
Mark Taylor CEO
Danny Wray Financial analysist
Julie Molierac Export Manager
Matt Walter Marketing Department
Evaluation of entry into China market

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

Emphasize Teaming/ Seek to understand
Strategic Development Committee
Define Roles (Chen’s Job Description)
Financial Statements

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
Porter's Five Forces
Action items
Financial Analysis
Choose Reporting Standard
Establish Auditor
Review Spending Ratios (i.e. Marketing)
Compare with HQ
Intensity of competitive rivalry

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

Threat of substitute products

Bargaining power of suppliers

Bargaining power of customers (buyers)

Threat of new entrants
b. Even with low returns, the competition is strong and many multinationals are always trying to expand.
Strong – many different types of products available – especially in china. Strong threat of knock offs and theft of trade secrets.
During economic
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.
Strong – Many companies, low concentration invites new entrants into china. Levendary seems to be in a weak point, inciting competitors to strike.
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

-Ad agencies
-Food laboratories
-Role of the Chief Operating Officer

-Branded grocery items
-Organic ingredients

Firm philosophy and structure
-Menus adaptation
-Administrative staff group + Chief Concept Officer (Keep up to date)
Goals and CEO
-CEO lack of international experience
-Want to expand because small towns business doesn't work

-Royalties from franchises
-Marketing fees
-Overhead costs

-Unwillingness to conform
-Professional manager?
-Dropped idea of Joint Venture for Chen
-Chen managed with a light touch

-Only meetings = far

-Operating profit and income negatives

Product and marketing
-Challenge for teams
-Difficult to prepare menus and boards
-New items boost image but not sales

-Problem operating metrics (speed service and order accuracy)
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

-Middle class
-White collars
-Chinese tastes
-Youth attracted by western culture
-QSR can charge more as people get richer

-Good initial location Shanghai 2010
Firm domestic growth slowing 2008

-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

-GAAP adaptation
-Financial analyst in Denver

Political restrictions?

-Hard to manage: made major changes
-Tense relationship with Foster
"Tasty Fresh Goodness"
4 Ps Levendary Cafe
Quick casual restaurants
Wholesome soups, salads, sandwiches
High quality ingredients
+branded grocery items
$8 -$12
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
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
Full transcript