Levendary Café – should it

resurrect from a

culture shock?

An analysis.

The Story.

• Howard Leventhal was the beloved

founder of the popular chain of 3500

cafes.

• During 2008, company’s domestic growth

was slowing so they wanted to explore

opportunities overseas.

• After a green flag from the research team,

china was going to be their next target.

• Term starting September 2009, Louis

Chen is named the CEO of Levendary

café china on an annual contract basis

that lasts for 2 years.

• January 2011, they go for an IPO. Howard

quits to pursue other interests.

• Mia Foster is named as it new CEO.

The problem?

Levendary China’s income statement(2010)

- a loss of 143,620$

Did the research team miss something?

Was china market not ready for an american stylized

café – conflicts of culture?

Was Louis Chen an incompetent leader?

Did the organizational structure hamper the decision

making to prevent such loss?

Market research - China

• A population of 1.4 billion.

• Urban population rose from 36.2% in 2000

to 46.6% in 2010.

• By 2010, a new middle class emerged

whose per capita income surged.

• KFC was successfully running 3,000

restaurants and McDonalds had 1,100

outlets in 110 cities in China.

The levendary ‘concept’ of a

cafe• A healthful, wholesome eating. Tasty fresh

goodness. A rich experience.

• A quick-casual restaurant. Healthy diet

with an informal self-serve dining

experience. Sales driven by core items.

• Howard was usually heard saying, “let’s

forget about profits today. Let’s just make

the customers happy”

Hey I’m howard and..

Louis Chen and the issues

about standardization. • He opened 23 stores in the first year.

• Only 3-4 locations conformed to the

standards while others had alarming

variations.

• No seating at one, no salads at the other,

wooden chairs replaced by plastic ones

and much more.

• Means oriented v/s goal oriented.

– Goal oriented. Impersonal results

– Relates better with ‘what’ than ‘how’.

• Internally driven v/s externally driven

– Externally driven. Customer oriented.

– Less regard for business ethics and honesty

– Pragmatism overpowers ethical attitude.

Culture dimensions - Hofstede

• Local v/s professional

– Local. Identify with the boss.

– Less regard for the profession.

– No cross check with the standards or

specifications of a particular job.

• The degree of acceptance of a leadership

style

– Chen’s leadership style not in line with his

immediate boss’s (Mia’s) preference.

– Too negative and obnoxious attitude.