The main issue in this case is not the entry strategy of Levendary Cafe into China but a communication breakdown between Louis Chen, the China CEO and the US head office due the following factors:
Management Styles: CEO Leventhal was very hands off with Chen, and allowed Chen to have full control over the operations and strategy for China. This differs from Fosters management style, which is more process driven and valued standardization.
Culture Differences: The various cultural differences between the two cultures is not being understood by the headquarter, who insists on enforcing its own rules and policies regardless of the local preferences.
Limited Experience: China is only the second international market that Levendary Cafe has entered besides a partnership in Dubai. Thus, there is limited experience with operating in a completely unfamiliar environment. Thus, CEO Leventhal relied fully on the expertise of Chen to execute the necessary actions in order to make the franchaise successful in China. In addition, Foster does not have any international experience and is not familiar with the China market. Her lack of local market knowledge will hinder her credibility with Chen and his response to her demands.
Levendary Cafe entered the Chinese market with on shop in a central location. This was crucial in its success and proved that Chen had great business insights on the local market. He then was able to utilize this case as both leverage to continue expanding into China we well as gaining credibility from headquarter.
2. What changes (if any) should Mia Foster make? Specifically, what should she do about Louis Chen? And what changes (if any) would you propose at headquarters?
Foster should proceed with caution so that she doesnt make any drastic changes to the current way of operations in China. She needs to emphasize to the market as well as Wall Street that Levendary Cafe takes its culinary due diligence seriously and that it has a sustainable growth strategy in China. Increasingly, American chains have thrown away cookie-cutter-style menus in favor of culinary localization, a flexible strategy that makes room for ingredients and dishes that reflect local tastes, culture and religious requirements.