Management Issues at Lavendary Café
There are a number of issues being experienced by Mia Foster, who is the new CEO of Lavendary Café. Firstly, one of the main challenges she faces is that of uncertainty. Most CEOs, especially the ones who serve in such a position for the first time, are adversely affected by any uncertainties that may arise from new regulations, credit markets, and the global economy. The challenge brought by uncertainty can make some CEOs withdraw from long-term strategies and turn into short-term plans, which have lower risks (Warhurst, 2005).
This is the same situation the new CEO of Lavendary Café has to contend with. She is also affected by the uncertainty regarding her plans to expand the Lavendary business by venturing into the Chinese market. She fears that the business may fail to pick up in China; she feels that the expansion should be thoroughly discussed before it is implemented (Bartlett & Han, 2011).
Another issue the new CEO faces is complexity; Lavendary Café is a big business with very many outlets in the United States and for that reason, the business is quite complicated. The complexity of big businesses is aggravated by other factors such as growth of the world’s economy, advancement in information technology, and diversity in business management (Chesbrough, 2010). Complexity is well explained by systems theory, which asserts that businesses operate as systems in which intricate parts are effectively united to achieve the main goals. The new CEO of Lavendary Café faces the issue of complexity, which is caused by the expansiveness of her organisation (Bartlett & Han, 2011).
The other issue that the Lavendary boss faces is the lack of trust and transparency among her managers and business partners. It is not easy for managers and business partners to trust each other sufficiently since they are aware that one of the groups can take advantage of the other. As a result, none of them wishes to remain transparent and fully committed to the projects that are initiated by the business.
The issue of trust and transparency is explained by the contingency theory, which requires CEOs to make decisions based on the situation on the ground and not the wishes of each manager or partner (Szulanski & Jnsen, 2008). In the case study, the new CEO appears to have problems with Louis Chen as a result of their lack of trust and transparency toward each other (Bartlett & Han, 2011).
Lavendary Café’s Success in China
There are a number of avenues that the Lavendary Café management can utilize to enhance the success of the company in China. Firstly, the presence of Louis Chen in the country is a great advantage to the company, especially now that it plans to enter the market. Chen has vast knowledge on the Chinese market given that he has been able to start and run various businesses in the country. Most of the businesses that Chen has put up in the country have prospered. He has also been a close partner to the Lavendary Café for a long time and as a result, he understands the way it conducts its business operations. In summary, Chen offers the most effective link between Lavendary and the Chinese market (Bartlett & Han, 2011).
Secondly, China has a very big population, which constitutes close to 1.4 billion people, which would offer a wide market to Lavendary’s products and services if the company decided to venture into the market. Most people in China like to take their meals in restaurants and hotels; Lavendary Café can offer these customers a variety of products and services. However, for Lavendary to capture a significant part of the Chinese market, the organisation should be flexible in terms of the products it offers. For instance, most Chinese citizens do not like eating dairy products; Lavendary should be ready to start producing non-dairy foods in the Chinese outlets it will put up (Bartlett & Han, 2011).
The move by Lavendary to take its operations into the Chinese market is a great opportunity for it to expand its business and increase its revenues; consequently, the claim by the main branch in the United States does not hold. There are several opportunities in China that the organisation can explore to ensure that the expansion program becomes a success. Firstly, China has a big population, which would offer a significant market for Lavendary’s products and services.
As a result, there is a high probability that Lavendary will increase its sales if it ventures into the Chinese market. Secondly, Lavendary has two main ways through which it can enter the market: it can enter the Chinese market through franchising contracts with well-established companies in the country and through individual partners such as Louis Chen (Bartlett & Han, 2011).
Effective Approach for Lavendary’s Proposed Expansion Program
The most effective approach that Foster needs to adopt in her meeting with Chen is agreeing on a franchise deal. Foster should insist on expanding Lavendary’s business operations by venturing into the Chinese market through establishing franchises with some of the well-established businesses in the country. Franchising helps to reduce the risk of failure when a company enters a new market; on the contrary, relying on the services of a single person, as proposed by Louis Chen, has a higher risk of failure (Chesbrough & Schwartz, 2007).
Through franchising, the management of Lavendary Café will be in a better position to determine the main preferences of the Chinese market. According to the business theory, which states that a business should first determine the preferences of its target market before it starts, working closely with established businesses in a particular region is the most effective way by which a business can get to learn the characteristics and preferences of the target customers as they constitute the new market into which it plans to venture (Luiz, 2002).
Secondly, by insisting on entering the Chinese market through franchising, the new CEO will be giving the firm’s management personnel a chance to test all the assumptions and possibilities before the expansion program is eventually implemented. According to the business theory, before a business is set up, its management team should take time to test any assumptions or even other factors that may affect the success of the implementation program.
If Lavendary adopts the franchising method of doing business, it will not need to waste a lot of time carrying out these tests since the partner companies are expected to have vast experience and knowledge of the target market (Chrisman, Chua, & Sharma, 2005).
Finally, franchising will enable the new CEO to evaluate all the short-term and long-term benefits of venturing into the Chinese market in the shortest time possible. According to the business theory, businesses should weigh all the long-and short-term benefits they expect to accrue if they venture into a particular market. The management of Lavendary can effectively establish such benefits by using the records of the companies it plans to partner with when expanding their operations by venturing into the Chinese market (Jackson, 2008).
References
Bartlett, C. A., & Han, A. (2011). Lavendary Café: The China challenge. Harvard Business Review, 4357, 1-13.
Chesbrough, H. (2010). Business model innovation: Opportunities and barriers. Long Range Planning, 43(3), 354-363.
Chesbrough, H., & Schwartz, K. (2007). Innovating business models with co- development partnerships. Research-Technology Management, 50(1), 55-59.
Chrisman, J. J., Chua, J. H., & Sharma, P. (2005). Trends and directions in the development of a strategic management theory of the family firm. Entrepreneurship Theory and Practice, 29(5): 555-576.
Jackson, S. E. (2008). Making growth make sense for retail and franchise businesses. Journal of Business Strategy, 29(3), 48-50.
Luiz, J. (2002). Small business development, entrepreneurship and expanding the business sector in a developing economy: The case of South Africa. The Journal of Applied Business Research, 18(2): I-21.
Szulanski, G., & Jnsen, R. J. (2008). Growing through copying: The negative consequences of innovation on franchise network growth. Research Policy, 37(10), 1732-1741.
Warhurst, A. (2005). Future roles of business in society: The expanding boundaries of corporate responsibility and a compelling case for partnership. Futures, 37(3): 151-168.