: The China Challenge

Presentation By:
Divyani Jain (PFM16021)
Ritu Kumari(PFM16043)
 BACKGROUND
Howard Leventhal was the founder and
previous CEO of Levendary caf.
Multi-unit chain restaurant with chain of
3500 cafes in which 1200 were company
owned and the rest were franchised.
It was a soup, salad and sandwich
restaurant whose revenue grew upto $10
billion in 2010.
 Multi Unit Restaurant Business
In 2010, the U.S. restaurant and foodservice
industry was a $600bn industry with 960,000
locations.
Multi-unit concepts were generally categorized
into three industry segments :
Speciality establishments
Quick service restaurants
Casual dining
 Critical success factors in the U.S.
Brand
In the beginning of the caf, the founder emphasized
the culture of delighting the customer. The
company was also committed to evolving menu choice
to keep the brand fresh in the eyes of the customers.

Quality service:
The company gave up the standardization service
model, i.e., speed of service and order accuracy, and
rather emphasized personalization in service. This
approach brought Levendary Caf many customers
that mostly consisted of white collar professionals
and upper middle class women.
Local menu adaptions:
Levendary had a flexible menu in different 80
states it allowed one or two regional specialties to
be added to its core menu and listed its menu
items on order of local popularity.

Food quality:
The concept team in the company would roll out
a suite of new products, five times in a year and
always used healthy ingredients like
pomegranates or quinoa. Moreover, these new
products would have minor variants to adapt to
different flavours in different areas.
 Need for Expansion
By 2008, the companys domestic
growth began to slow, because it
lacks strong demand in small
towns in the Midwest and South.
 Chinas Overview
Population of 1.4 Billion
GDP Growth Rate 14.5 %

Increase in Urban
From 36.2% Jumps up by 28.8%
Population

2000 2009
 Increase in Per Capita Income
20000
18000
16000
14000
Leap of mighty 170%
12000 Represents a nearly 3
10000 fold increase

8000
Increased standard of
6000
living of middle class
4000
2000 Increased number of
working women
0
2000 2009
 Industry trends
2.5
Within 5 years the industry grew by 76.72%

1.5 Implies :
More and more people
are ready to eat out.
1
KFC and Pizza hut have
0.5 been a great success
already

0
2000 2009
Growth in Quick Service Section

2009

2000

0
100
200
300
400
500
 Scoping out the Industry

Poters Five Force Analysis


Rivalry (High)
The multi-unit restaurant industry is
dominated by independent full-
service restaurants, existing
American chains, and Asian chains
Power of Suppliers (Low)
Raw ingredients suppliers are
fragmented and usually differentiate
themselves by cost rather than quality.
Generally homogeneous pricing since
ingredients are commodities.
Lowering prices by buying in bulk

Power of Buyers (High)

Chinese consumers often seek the
lowest-priced option.
Buying power of a buyer is high
because of the low switching cost
and there are various other brands
available to choose from.
Threat of Substitutes (Medium)
Many Chinese households still cook
homemade meals with their families.
Young adults often buy from mall
food courts and night market stalls
instead

Threat of New Entrants (Medium)

Low start up costs
Low margins may weed out those
who are inexperienced
Decision Tree
Segmentation and Targeting
Strata 1: Cosmopolitan, Affluent,
Experimental, Mobile
Strata 2 : Neo Rich , Neo Urban, Youth,
Enthusiastic of US Branding

Strata 3: Middle Income, Family Oriented

Strata 4 : Low income, Traditional

Strata 5: Subsistence, Daily wage earners

Mias Dilemma
 Rationale
Giving Levendary China its own line of command grants
Chen the freedom to manage Chinas operations while staying
under the watchful eye of the CEO, who will make sure that
Chen is striking the right balance between staying true to
Levendary Cafs brand and catering to local Chinese tastes.
Chinas operation has no strategy in place. One strategic
vision is critical which should be followed by both Chen and
US Counterparts.
Should Chen defy the imperative to align Levendary China
under a consistent brand image, he should be swiftly replaced
by another manager who not only has network contacts but
also understands the importance behind presenting a uniform
front to the Chinese market.
The Answer lies in Restructuring
 Thank you for visiting

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