Global Business Management

Write-up Assignment 4
Student: 徐筱晴
ID: R09724018

I . Restaurant industry’s international strategic tasks

(standardization or localization )

standardization • Brand

• Packaging and labeling

• Quality assurance, after-sales service

• Product standard

• Techniques and technology

localization • Purchase

• Marketing and sales

• Product

As a worldwide company, levendary needs to maintain its brand image to customers all
over the world. It should make consistency on packaging, labeling, quality assurance,
after-sales service and product standard. Secondly the headquarter should make effort
on the development of techniques and technology to maintain company’s core
competitive ability, and then apply the consistent techniques and technology
everywhere within the company. One thing needed to be pointed out is that
standardization can lead to lower cost since it achieves economy scale. If it is not
necessary, the company should apply standardization strategy.

As being in a restaurant industry, it is clear that people’s appetite varies from regions to
regions. It is without doubt that company should make some changes on products and
menu to adapt to locals. If there’s possibility to find suitable materials at lower price,
then the company can change its purchase method by regions, because this is also
based on cost consideration. Lately, customer’s behavior would not be the same by
regions, so company could use different marketing and sales method.

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II. Strategy and management of the entry of Levendary Cafe
into China
① Consideration of International Market Entry Mode

Consideration Content levendary cafe’s situation

External environment • Industrial environment The restaurant and foodservice
characteristics uncertainty
industry is highly fragmented
• Industry global
concentration
Government policy • Home country The Chinese government's attitude
government’s towards foreign companies may
restrictions
change at any time.
• Landlord government’s
restrictions
Organizational • Organizational ability Chen has lots of organizational
characteristics and scale
experience :

• Organizational • Experience as a retail property

experience developer

• Network of contacts

Landlord country • Landlord country risk

Chen has done a lot market research
location • Uncertainty of landlord before opening stores in China :

characteristics country market

demand
• The rising population of Chinese
• Intensity of cities and the increase of the middle
competition in the class have brought a trend of eating
landlord’s market out. Chen focuses his main
customer groups on young people.

• Fast food restaurants that sell

Chinese food account for the
majority share, but their gross profit
is low, and there are few
successful chains.

• KFC has came to China for a while

and performs well. It implicates that
part of Chinese customers welcome
these multi-unit restaurants.

Corporate strategy • Strategic goal Levendary wants to provide

factors wholesome choices and informal
self-service experience to customers
all over the world.

( Delight the customer )

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② International market entry mode
Mode opportunity advantage Disadvantage
Export • Initial stage of • Lower risk
• Harder to learn
internationalization
• Cost allocation market knowledge

• Unfamiliar with • Cannot enjoy

foreign market
operating benefits
• Limited ressources exclusively

• Trade barriers
Franchise
• Initial stage of • Lower risk
• Product service
internationalization
• Start learning local quality is difficult
• Unfamiliar with market knowledge to control

foreign market
without investing • Create future
• Limited ressources
huge resources competitors

• Suitable authorized • Cannot enjoy

partner
operating benefits
exclusively

International joint • Unfamiliar with • Lower risk

• Complex
venture foreign market
• Lowest cost
management

• Limited ressources
• Complementary • Create future
• A suitable joint resources competitors

venture partner
Wholly-owned • Familiar with foreign • Ensure product • Risk is too high

subsidiary market
service quality
• Huge setup and
• Rich resources and • Take advantage of operating costs

capabilities
landlord state • High exit costs
• Rich multinational policy incentives
management
experience and can
ensure core
competence and
quality

Since levendary cafe has been set up in the U.S. for several years before entering into
China, so it accumulates lots of resources. Levendary cafe chose to use international
joint venture at the beginning, because they were not so familiar with Chinese market.
After Chen showed up, they then adopted wholly-owned subsidiary since they can link
Chinese local markets and resources through Chen. At the same time, levendary cafe
wanted to make sure of brand consistency between headquarter and subsidiary through
wholly-owned subsidiary.

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③ Pioneer advantage and later-mover advantage

Pioneer advantage • Establish consumer recognition and

loyalty early

• Establish relationships with suppliers,

distributors or local stakeholders early

• Reach operational scale early

• Establish operating experience and

market knowledge early

later-mover advantage • Avoid excessive uncertainty

• Reduce education costs

• Learn and correct previous mistakes

Levendary cafe is regarded as a later-mover since KFC, McDonald’s and other foreign
restaurants has already entered into China. KFC and McDonald’s ’s exist proved that
Chinese welcomes these kinds of multi-unit restaurant, and Chinese are getting used to
eating out gradually. Levendary cafe can surely learn a lot from KFC and McDonald’s
experience.

Restaurant Characteristic
KFC
• Chinese joint venture

• Local menu
McDonald’s
• Restaurants retains a consistent worldwide look and
feel

• Local menu

Both KFC and McDonald’s use local menu, so it is reasonable for Chen to adapt menu to
locals. However, Chen may consider add up some new dishes rather than replacing
existed dishes with new ones. The missing of the existed dishes might lead to brand
valve deteriorated.

On the other hand, McDonald’s retains a consistent worldwide look and feel, and
Levendary cafe needs to learn from it. It is not a good idea to use plastic chairs instead
of its classic wooden chairs. It changes customer’s view toward the brand and loose
brand recognition.

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III. Roles, responsibilities, and relationships between
headquarter and subsidiaries

① Roles and responsibilities

Roles
Headquarter • Establish the company's overall
system, future direction, brand
positioning, brand value and the
company's core competitive
advantage.
regions.
Responsibilities
• Responsible for formulating the general
direction of the company's operations and
maintaining the consistency of the
company's development in various

• Master the company's core • Give the subsidiary the resources needed
technology and be responsible for the for local development, grant certain
main product innovation .
authorization, connect the subsidiary with
the landlord country, and cultivate the
subsidiary to have its own competitive
advantage.

Subsidiaries • When the parent company expands • Subsidiaries need to report the
overseas, it responds to the needs of company's current situation to the head
the landlord country to make office regularly to ensure that the main
measures tailored to local policies of the head office are successfully
conditions.
implemented in various places.

• By responding locally, it helps the parent

company to discover more market-
oriented future directions and achieve
global learning.

② Relationship :
• Not necessarily the master-slave relationship in bureaucratic organizations, and It
should be similar to the membership in a "network organization”. They should
influence each other in a good way.

• Local markets have different competitiveness. Through the local development of

subsidiaries, the heterogeneous capabilities accumulated by subsidiaries can be
circulated within the enterprise.Subsidiaries can provide the company with innovative
ideas and motivation for progress.

• The relationship between the parent and subsidiary will affect the performance of the
subsidiary in the host country market. It depends on the amount of authorization from
the parent company. When the parent company has less authorization, it is difficult
for the subsidiary to respond to local needs and achieve local links.

• The local operating behavior of the subsidiary will have an important impact on the
overall multinational enterprise. Such as affecting the company’s brand image and the
public’s brand perception.

• One of the sources of competitive advantage of subsidiaries is the transfer of

technology and resources from the parent company.

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IV. Mia’s action

Understad Mia should understand :

• What and why Chen did so far

• Chinese market (through Chen’s market research and

Chinese store inspection )
Agreement Make agreement on future plan together rather than
adopting only Mia’s or Chen’s approach, since no one
can be responsible for the result individually.
Rule Since the power distance is large in this company, it is
better to set up the clear rules.

Salary:

• Link Chen’s salary to company’s performance

Supervision and management：

• Send some parent company staff to work under Chen

• Establish a regular reporting system

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