Levendary Cafe: The China Challenge Harvard Case Solution & Analysis

Levendary Café: The China Challenge

Solution No.1

Multi-Unit Restaurant Business

Multi-unit Restaurant (MuR) concept is classified into three industry sections. These are as follows:

levendary cafe case solution

levendary cafe case solution

  • Specialty Establishments: It includes Starbucks, Dunkin Donuts and Baskin-Robins, which mainly cover beverages and snacks less than $5.
  • Quick Service Restaurants: This concept also comes under "fast food" industry. For instance, McDonalds is efficiently and effectively capturing the food industry at global level.
  • Casual Dining: It refers to the brands like Olive Garden, Outback and Applebee's that provide the table services for dinner facilities.

Porter’s Analysis

            Porter Analysis is a useful tool in order to analyze an industry. It will be helpful in designing strategies and goals on a long term basis. It sets a direction for the new entrants so as to analyze the industry factors before entering in to the market (Porter, 1980).

Bargaining power of buyer

            Buying power of a buyer is high because of the low switching cost and there are various other coffee brands available to choose from.

Bargaining power of supplier

            Bargaining power of a suppler is also high due to the high demand of the coffee at global level.  As there are some strong suppliers that are operating in the coffee industry, hence, their bargaining power is high.

Threat of Substitute

            Threat of substitute is high as various alternatives available in the industry. Other competitors are offering unique kind of coffee and other soft drinks at affordable rates.

Threat of New Entrants

            Threat of new entrants is very high because there are established competitors operating in the industry like Starbucks, Dunkin Donuts and other coffee brands. Multinational companies are trying to expand in the industry that is one of the major threats for companies, which are currently operating in the industry.

Rivalry among Competitors

            The competition in the industry is immense because established players are operating in the industry like Starbucks, McDonalds, Caribou Coffee and Dunkin Donuts.

Solution No.2

Success Factors in the United States

            Legendary’s management was focused on value addition activities for their customers. They always value their customers in order to retain their interest in buying from them on a continuous basis (Frederick, 1996). Instead of focusing on the numbers, they concentrated on offering products as per customers taste and buying priorities. One of the best features that contributed in a very significant manner towards their success in the American market was giving importance to customers’ feedback and queries. If customers had any suggestions regarding the betterment of organization, then they immediately implemented it within the organization. The other key implementations were speed of service and order accuracy in order to ensure that the store operations were running smoothly. The organization's marketing department was also working efficiently and targeted the customers from the rural, urban and suburban areas so as to strengthen their customer base. Marketing department focused on product development (Wong, and Tong C, 2012) and market segmentation (Bhanji, 2012) practices in order to gain competitive advantage in the industry (Porter, 2008).  Levendary successfully launched the new items in the menu that attracted customers in a significant manner.

Potential Institutional Voids in China

            There are several institutional voids in China for the organization to become a part of the industry. Some of them are as under:

  • Administrative licensing and product approval
  • Competition and dominance of Chinese firms
  • Strict rules of investment restrictions
  • Government policy reforms
  • Identification of talented workforce
  • Cultural Barrier
  • State Owned Enterprises

Solution No.3

            Several factors attracted Levendary for entering in the Chinese market. Foreign fast food brands encouraged Levendary a lot to enter in the industry. There was a tremendous increase in the number of women workforce and middle class population. Foreign investors considered China as the best place to invest due to the low labor cost. GDP of China was also increasing rapidly, which was also the main factor for entering in the country. Levendary wanted to compete from top brands efficiently and effectively in China.

            In United States, Levendary's performance was up to the mark to attract customers in the coffee industry. Its product development and market segmentation processes assisted them while entering in the Chinese market. Another factor that assisted facilitated Levendary was the effective research and development department, which also contributed a lot in their success in the United States.

Chinese Market V/s United States Market

            Some of the main differences in the Chinese and American market are:

  • Labor cost
  • Taxes
  • Economic Situation
  • Population
  • People Preferences

Governmental Regulations...............

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This case is about Mia Foster, who barely days into her new job,  is confronted with a critical issues and problems at Levendary Café, a ten billion fast food enterprise. Quite a few of her staff have become concerned that the company's growth into China is deviating far away from Levendary's philosophy of store menu  and design. Foster has been concerned by the noncooperation of Louis Chen, president of Levendary China Division, to consent to the Levendary's planning and reporting processes.

Furthermore, financial figures depicts that Chen's struggles for this cause have gotten strong results and this tells  that he is familiar with Chinese market far better than U.S HQ is.  Chen has put up resistance to attempts by Foster and many others to discuss plans for China. As Foster goes to China to have a meeting with Chen she is confronted with  a dilemma that  will impact the future of Levendary and also the entire globalization effort.

by Christopher A. Bartlett, Arar Han

13 pages. Publication Date: Oct 24, 2011. Prod. #: 4357-PDF-ENG

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Levendary Cafe: The China Challenge

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