Contemporary Issues in International Business

This report discusses the contemporary issues faced by Levendary Café in expanding its business in China. It analyzes the profitability and revenues of stores in China and USA, and suggests changes and strategies for success in the Chinese market. The report also highlights the importance of effective communication, multinational teams, and managerial capability in achieving business goals.

Running head: CONTEMPORARY ISSUES IN INTERNATIONAL BUSINESS
Contemporary issues in International Business
Name of the student
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CONTEMPORARY ISSUES IN INTERNATIONAL BUSINESS
Table of Contents
Introduction......................................................................................................................................3
The Appropriate Expansion Path.....................................................................................................3
Comparison of the profitability and revenues of stores in China and USA....................................4
Figure No 1: Comparison Chart of China and US Leverage Café stores....................................4
Figure No 2: Chart of revenue and sales of US Leverage Café stores........................................5
Figure No 3: Chart of Income Statement of China Leverage Café stores...................................6
Changes and Strategies....................................................................................................................6
Standardization Advantages and Disadvantages.............................................................................7
Future Decisions..............................................................................................................................7
Multinational Teams........................................................................................................................9
Managerial Capability.....................................................................................................................9
Role of Global headquarters in China...........................................................................................10
Decision Making in Strategic and Operational Level Functions...................................................11
Relationship with Chen..................................................................................................................12
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

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Introduction
Levendary Café is a privately owned US based café. It came out from the private equity
ownership in the year 2011. In the following year Mia Foster was named as the CEO of the
company in the same year. The company was the owner of around 3500 café chains all across the
country. The following report is based on the different kinds of contemporary issues that have
been bothering the management of Levendary café over its expansion policies in the Asian
Market (leveragecafe.com.cutestat.com 2019). The report has focused on the expansion of the
business in China which has been the most attractive market of Asia for the last few years.
The Appropriate Expansion Path
Expansion forms one of the most important tasks of the modern business. The
management of different business units is concerned with the expansion of the business in the
global market. According to, Child and Lu (2018) the better the expansion, the better will be the
chances of future sustainability and revenue. The recent expansion of the company to China has
both been applauded as well as some of the section of marketing experts have raised eyebrows
on the company’s aims to establish itself in China as they believe that going by the requirements,
the management of the company will be unable to change itself according to the locational
requirements (leveragecafe.com.cutestat.com 2019). However, Mia Foster has the belief that the
organization can easily fit into the Chinese market giving the example of McDonalds which has
not altered itself but successfully expanded in China. However, the case of American restaurant
Denny’s has totally altered all its menu and service presentation types to local Japanese ones.
The transformation of Denny’s has also been equally successful as it has been doing good

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business in Japan. Therefore, the company has to think of an appropriate expansion policy to
establish itself as a successful restaurant in China.
Comparison of the profitability and revenues of stores in China and USA
The stores of Levendary Cafes in China and USA are not too different from each other.
The expansion in China happened at such a crucial juncture when the company was facing a
decrease in the domestic growth. With an annual GDP of 14.5% and a large population to serve,
China was the perfect opportunity for Leverage to start their business. The rise in the urban
population and the entry of other US food chains in the China market was another major reason
for the company to expand into China. The profitability and profitability of the company in
China and the US have been analyzed with the help of a table given below.
Figure No 1: Comparison Chart of China and US Leverage Café stores
Source: (academia.edu 2019)

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The above shown chart has provided the annual sales, revenue and menus of both the US
and China Stores of Levarage. The stores in China are relatively much small than that of USA
and cramped too. The average presence of customers in the stores of both the country is seen to
be much higher in USA. With a average footfall of close to 2500, the stores of USA outclass that
of the China stores by a huge margin. The amount of sales is thus much higher and better
compared to that of the China stores.
Figure No 2: Chart of revenue and sales of US Leverage Café stores
Source: (academia.edu 2019)
The net income of the US leverage stores is around 800,000. The presence of large
number of stores and effective management of the organization has been the key to the success
of the organization in the market.

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Figure No 3: Chart of Income Statement of China Leverage Café stores
Source: (academia.edu 2019)
The net income of the China Leverage stores has running in a loss. The following amount
is quite common as because the company has less stores in China and has entered the market
some few years back. However, the management of the organization has to take positive steps to
avoid loss in the coming years or else it will lead to the shutdown of the company in China.
Changes and Strategies
The management of the organization has to change some strategies to increase the
revenue of the company and avoid loss making. The best strategy that can be taken in such
regards can be the adaption of local menus and changing the nature of the business to adapt to
the Chinese conditions (leveragecafe.com.cutestat.com 2019). The CEO of the company must

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intervene in the process and take regular updates of the situation. The success in China will be
highly important for the expansion plans of the business in Asia.
Standardization Advantages and Disadvantages
The advantages of Standardization are as follows;
a. It helps in the reduction of the costs by lowering the cost of installation of the
equipments.
b. It also reduces the need to maintain the huge amount of inventory as well as the lowering
of the maintenance costs
The disadvantages of the Standardization process for Levarage are as follows;
a. The absence of uniqueness and lack of differentiation can be harmful to the reputation of
the business
b. The local competitors of the organization can take stock of the situation and arrange for
tailor made products that will be readily accepted by the customers
Future Decisions
Levendary Café entered the Chinese market and went for rapid expansion. The
management of Levendary in China opened up 23 different stores in new locations of China. The
operational power of the stores was provided to Louis Chen, the Vice President of the Chinese
operations of Levendary (leveragecafe.com.cutestat.com 2019). However, the time when the
management of the company implemented to rapid expansion policies in the country, the
restaurant started to lose their standardizations in different manners (Child and Lu 2018). First
of all the stores lost their menu standardization and secondly they lost their store standardization.

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The absence of variety and uniqueness in the menus were the main reasons behind such a
downfall. For example the management of the company in USA provides Soups, salads and
sandwiches, but unfortunately their Chinese counterparts do not offer salads and soups which
was undoubtedly a large gap in the service quality of the restaurant in China. The absence of the
famous cheese soup is cited to be the other reasons that have a negative impact on the success of
the restaurant in China. The absence of proper seating arrangements, obsolete furnitures and
cramped restaurant spaces makes the restaurant even more unattractive. Such a gloomy picture
will force people to avoid the restaurant and instead opt for other American food chains like
McDonalds and KFC. The lack of standardization in both menu and café appearance has led to
the detoriation of the company in the market. The local Chinese food chains have taken
advantage of the situation and have been producing similar items with a blend of local mix to
attract Chinese people.
Mia being the CEO of the company has to implement some immediate and long lasting,
positive changes that can be beneficial for the success of the organization. Mia will have to
ensure the services of Chen as he will be key to the operations of the restaurant in China. The
absence of the support of Chen will not help as because Mia will be left blank and will not be
able to control him or hold him accountable for the underperformance of the organization in the
market. The management of Levendary can use the services of the franchisee based
organizations. This will be helpful for the company to control the entire image and the standard
operations easily without any failure (Grant 2016). The implementation of the franchisee can
help in the input of menu customization but Lucien; the chief concept officer must approve the
customization of the food to ensure the quality and the wholesomeness of the organization.
Therefore Chen must be kept within the company to ensure future operations of the organization.

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Multinational Teams
The completion of the cultural analysis of the two countries, that is respectively of the
United States and China, the management found out that the key issue that plagued the
performance of the company in the country was Communication. Lack of effective
communication was key to the absence of proper performance. The absence of communication
led to the differentiation in the business which was key to the success of the business in the
mentioned Asian Country. According to, Guilmoto and Jones (2016) values in the workplace
have a large impact on the business and therefore, the absence of values can lead to problems. It
is important for the organizations to ensure the presence of a great value and culture in the
workplace. The market analysts appointed by the management of the company came out with the
conclusion of forming well trained and highly disciplined multinational teams which can lead to
the success of the business. The multinational teams can also ensure the success of the
organization by means of analyzing the Chinese culture and implementing them into the
organization. It is important for the team to provide proper training to the operation manager of
the stores and the employees of the store. Chen has to take additional responsibility for the
business operations in order to ensure success in the business and regulate smooth and sound
operations.
Managerial Capability
The managerial capability of both Mia Foster and Chen has been in question for a
number of times. This is because there have been problems in the capability of the organizations
in the market. Mia Foster is left with a very difficult decision as because being the CEO of the
organization she has to take a decision that will result in the profitability for the company and
also choose an action plan that will ensure the long term success for the business. The presence

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of a variety of alternatives to the company leads to the sustainability of the business in the
market. Both the managers are new in the following business line and have a lack of experience
in marketing. Chen who is extremely confrontational may not be the best fit to be the best CEO.
However she has been instrumental to build a good relationship with the previous CEO and have
been getting quality tips from him (Guilmoto and Jones 2016). This has been helping the
organization as well as her to improve her skills and act as a perfect manager. Chen’s energy
and enthusiasm has helped him to establish a strong market position for Leverage as he has been
able to expand the business in China on a positive note. On the other hand, it has been that Louis
Chen has taken some wrong decisions on totally avoiding cheese and introducing dairy products.
He was wrong in adopting to turkey and chicken as people in China loves pork more. The
absence of professionalism in Chen concludes that it will be tough for him to be a professional
manger (Koehn Yin and Yin 2015). This is because he never concentrated on the company goals
and rather tried to introduce concepts on his own. This led to different problems in China. Chen
also became defensive during his communication with Mia Foster which clearly looks an
unprofessional behavior from Chen’s side.
Role of Global headquarters in China
The global headquarters of the company will be playing an important role in the success
of the business in China. It is important for the US Company to arrange high level meetings to
decide on the strategy of the business and ensure its successful implementation. As Chen is
having some problems in addressing the issues of the Chinese operations he must be provided
with additional support from the global headquarters. According to, Hamilton and Webster
(2018) the support may include the likes of the appointment of new managers for each division
in China who will assist Chen in operating the stores in a smooth manner. The report of the

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operations will be provided by both the managers and Chen to the US headquarters. The US
headquarters will be key in this case as the CEO will analyze the report and provide a detailed
analysis to see whether there is anything needed for the business or not. Apart from this the
global headquarters must ensure the implementation of a new training regime for the employees
of China where the Chinese customs and the Chinese traditions will be taught and established
accordingly. The knowledge of the Chinese customs and the change in the menu and decoration
of the restaurant in line with the local likings can be helpful for the success of the business.
Decision Making in Strategic and Operational Level Functions
The Strategic decision making autonomy can be given to the franchisees or foreign
subsidiaries that will be having a stake in the Leverage stores. The decision making prowess of
the stores will help the organization to easily carry out complex business operations that they
think will be fit for the success of the organization. It will be important for the franchisee to
control the stores in an independent manner (Hamilton and Webster 2018). The CEO of the
company will not intervene in the decisions but will appoint Chen to have a look into the matters.
The incorporation of the strategy is the first thing that needs to be completed in the following
business. The use of the balance scorecard and the monitor of the organization’s performance
against the strategic goals of the business enterprise is essential for the expansion and smooth
performance of Leverage. The implementation of the strategic decisions by a foreign subsidiary
can also help to ensure the stability of the local customs which will be equally important for the
business.

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Relationship with Chen
The agenda of Mia Foster will be a reminder of what the Levendary brand stands for and
how the brand will be adapting to the regions when it goes to China, the brand will not be
compromised. Mia will have to ensure a healthy relationship with Chen in order to stabilize and
smoothen the operations of the business in the market (Koehn Yin and Yin 2015). The presence
of Chen in the Chinese operations is highly essential as he has been successful in opening 23
different stores in the country within a short period of time. The experience he has on Chinese
market will be instrumental to the success of the organization in China. The CEO must ensure a
stable and sound relationship with Chen and provide him with an organizational chart of the
international division. She will also employ Chen to set up meeting with Chinese business
owners in order to make leverage a household name in the Asian country.
Conclusion
The report has shown different issues in between the global management of Leverage and
the Chinese operations. It is important for the organization to bring stability to the Chinese
operations in order to ensure the sustainability of the business in Asian countries. The report has
presented a clear picture of the business and has presented some recommendations to overcome
the issues and challenges.

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References
Anon, (2019). [online] Available at:
https://www.academia.edu/9052880/ARAR_HAN_Levendary_Caf
%C3%A9_The_China_Challenge [Accessed 14 Apr. 2019].
Child, J. and Lu, Y., 2018. Management Issues in China: Volume 2: International Enterprises.
Routledge.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Guilmoto, C.Z. and Jones, G.W. eds., 2016. Contemporary demographic transformations in
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Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Koehn, P., Yin, X.H. and Yin, X.H., 2015. The Expanding Roles of Chinese Americans in US-
China Relations: Transnational Networks and Trans-Pacific Interactions: Transnational
Networks and Trans-Pacific Interactions. Routledge.
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Smith, A.D. and Beaves, R., 2016. A Look Case Study of Small NE Ohio Manufacturing Firms
and their Aspirations for Possible Expansion to China.

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Tian, X., 2016. Managing international business in China. Cambridge University Press.
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