McDonald's and Denny's have had different levels of success in China and Japan based on how they adapted their operations to local cultures and tastes. McDonald's did not make significant adjustments and faced food quality scandals, while Denny's tailored its menu and locations to Asian customers and saw strong sales. Levendary Café is considering expanding to China, and lessons from McDonald's and Denny's suggest it should take a flexible, locally-focused approach like Denny's to succeed in the Chinese market.

1. LEVENDARY CAFÉ: CHINA CHALLENGE
The success stories of McDonald’s and Denny’s in China and Japan
McDonald’s and Deny’s, which are both standardized American restaurant
companies, have been operating in Asian market performing two opposite initial strategies of
conquering China and Japan. McDonald’s has entered the Chinese market without applying
rough adjustments to the local culture and tastes; whereas Deny’s Japanese menu has been
totally altered to meet Asian requirements.
As mentioned by the Rocketnews24 team, Deny’s in Asia may be considered a
gourmet restaurant, offering “varied and tasty menu that is quite different from what you can
get in the United States”. Aside from the adjusted menu options, Deny’s reputation asset has
been high. This is not the case with McDonald’s in China and Japan, a few food-safety
scandals arisen in Asia region (Fortune, 2015; The Street, 2015). Customers found objects in
McDonald's food in Japan, including a piece of vinyl and a human tooth. McDonald's sales in
China have also decreased due to the scandal with its local meat supplier, accused of selling
expired meat.
Correspondingly, the two restaurant chains’ further sales boosting strategies are
developing as follows. Providing Deny’s exquisite Asian menu takes time to be served, the
management decided to locate grocery shelfs inside to amuse customers with kids while they
are waiting for their orders (Rocketnews24, 2014). To win back its reputation, McDonald’s is
simplifying its menu and developing alternative options of selling burgers by giving its
customers multiple ways to order, including popular in Asia region kiosk and a mobile device
option (Finance; 2015). Moreover, McDonald’s has implied Asian tastes into its recent menu
star, Hawaiian pork BBQ burger. Asian tastes have been taken into account by McDonald’s
marketing team for its "World Mac Hawaii" campaign, designed “to tap into the strong
interest Japanese have in vacationing in Hawaii” (The Street, 2015).
As the matter of fact, McDonald’s has failed to overcome the sales decrease caused by
food quality scandals faced recently. Sales in Japan have now fallen for more than fourteen
consecutive months, according to Bloomberg data, as cited by The Street journal. In the case
of Deny’s Asia market methods, the management has developed a rigorous way of keeping
up with customers’ tastes. These frequent adjustments to local culture “have translated into a
remarkable business record” (The New York Times, 1991). The Deny’s Japanese chain is a
nice evidence that this nation should refine and rebrand a distribution business.

2. The pros and cons of standardization of brands’ business operations globally
Branded restaurant chains operating in Asia region are generally Japanese or Chinese-
controlled franchises of US companies, building their presence by adopting to different
cultural groups and geographic locations within the region (Schlevogt, 2000). To enter the
market and fit to local tastes, McDonald's once introduced a teriyaki burger, while Denny's
started from a fried pork cutlet and rice beloved by Japanese as well as Chinese. However,
the first’s brand management has currently decided to perform standardized business
operations in China and Japan, while Deny’s team “has succeeded by keeping its ear bent
toward consumers” (The New York Times, 1991).
There are definite pros of any brand evolution towards local tastes and inclinations. In
his research, Paul mentions modern business slogan: “Think local and act global”, - which
highlights the idea that such global expansion approach is best applied by adapting to local
trends and insights. Diversifying and adapting activities are assumed to be of the
opportunistic nature; whereas “strategic cohesion plays a secondary role” (Paul, 2000).
Mentioned business approach promotes rapid revenue generation. However, relevant
adaptation might require additional investment in the infrastructure necessary to serve new
markets, and it definitely discourages strategic consistency.
The opposite approach to global expansion could be characterized as follows: “Think
global and act local”. The slogan stands for holistic business strategy development, along
with management operating under the idea that a popular brand with its standardized products
can conquer even Asian markets. The springboard here is a unified strategy focusing on
standard products and optimal global sourcing (Paul, 2000). This approach’s main cons are
diversity stagnation and non-flexible uniform business strategies.
Considering the success of Deny’s in China and Japan, and the fact that “most
companies that have entered China have failed to become profitable” (Schlevogt, 2000), there
is no dilemma whether to follow local initiatives. The New York Times mentiones a highly
computerized business analytics as the main success of Deny’s in Asia region. Their P.O.S.
system is analyzing the pattern of sales of the stores by time, age and sex of buyers.
Providing the smart point-of-sale computer system is the source of the business magic (The
New York Times, 1991), the insight is evident: product offerings and promotion campaigns,
distribution and point of sale channels, pricing and timing, - have to be adapted to varied
customer groups, geographic locations and relevant unique cultures!

3. Recommended managerial strategies for Levendary China
While the Levendary brand’s performance in Asian market had been in line with the
forecasts on financial results, Mia Foster, its CEO, was concerned about the president’s of
Levendary China, Louis Chen, visions and market strategies. On the one hand, Levendary’s
recent entry into the promising China market had been skeptically observed by the Wall
Street. And on the other hand, China locations incorporated “dramatic departures” from US
brand platform concepts, including both: stores’ design and menu offerings (Bartlett, 2013).
Judging from McDonald’s and Deny’s Asia region market expansion stories, it could be
highly beneficial for Levendary Café to be flexible and adapt to local visions. “Think local
and act global” should become the brand’s Asia market strategic approach!
Qualities a good global manager should possess
A clear vision of a global manager profile might be of current importance considering
the modern business globalization trends. Such characteristics as knowledge received,
experiential and cultural background, as well as individual psychological inclinations, are
widely discussed in the relevant scientific research. Nevertheless, Baruch (2002) denies the
fact that there could be such a concept as a global manager, arguing the fact that corporations
should realize that business strategies in global management might be quite diverse,
particularly with regard to the human element.
As cited by Baruch (2002), the Big Five personality test is widely applied to evaluate
psychological characteristics of a personality for HRM purposes. This test uses the Big-Five
factor markers from the International Personality Item Pool: extraversion, agreeableness,
conscientiousness, emotional stability, intellect/imagination (Goldberg, 1992). Sean P.
Neubert from Rochester Institute of Technology believes that “the five-factor model is a valid
predictor of workplace performance”, his research indicating the cognitive ability to be the
strongest correlator of task performance. However, Baruch claims the Myers-Briggs
inventory to be a more useful framework. According to the inventory, people can be
characterized by the following preferences: their general attitude (extraverted or introverted),
the functions of perception (sensing or intuition), and the functions of judging (thinking or
feeling). Even skeptical Yehuda Baruch considers intuitive managers more inclined to notice
cultural differences; moreover, those with the perceiving feature prevailing over judging
inclinations “would experience less frustration and anger at delays and differences in the way

4. business is conducted, and more patience with the pace of business in some countries”
(Baruch, 2002).
Yehunda Baruch also suggests that researches should focus on the question of
creation an individual and organizational frame of mind, which finds globalization to be an
integral part of working life. This idea intertwines with the global manager concept
envisioned by Paul (2002). The scholar believes in a company’s mindset notion, which refers
to the way a company perceives the world, which also affects its business strategies.
Developing a global corporate mindset is truly important for modern business globalizers, as
it determines the extent of encouraging cultural diversity and maintaining a certain degree of
strategic cohesion. Moreover, Haas and Nüesch (2012) claim that more and more corporate
teams have individuals coming from different cultural backgrounds, making the subject of
national diversity management a highly important skill.
To sum up, a global manager should possess not only an international experience
including a foreign language knowledge, but also some psychological inclinations such as
extraverted cognitive approaches, to successfully function in a team with a global mindset!
The president’s of Levendary China characteristics
To successfully navigate the Chinese business environment, one should possess
sufficient understanding of the local culture, which is obviously a strong side of the
president’s of Levendary China, Louis Chen. Moreover, managing a global brand in Asia
region requires highly developed cognitive skills, an ability to easily perceive and process
new information, mixed with business intuition and risk capability. Considering all the
variety of local cuisine servings, offered in Chinese Levendary cafe’s menu despite the US
brand standarts, along with nice financial results, the Chinese branch’s president has not only
applied his intuition beneficially for the company’s profit, but he has also evaluated and
analyzed Asia market tendencies successfully. However, presentation skills, an evidence of
personal extraverted inclination, could be improved, providing Chen’s inefficiency in
negotiations with Levenndary’s top managers, Mia Foster in particular.

5. The CEO’s of the Levendary group characteristics
As opposite to the suggested profile of a successful global manager, who should
possess international management experience, Mia Foster, the CEO of the Levendary group,
lacks the desired background. The ideal career pattern, as cited by Paul (2000) should
alternate between local, global, local and again global assignments. The scholar mentiones
SmithKline Beecham following a policy which requires candidates for senior management
positions to have a "2+2+2" experience. The requirement means hands-on experience in two
businesses, in two functions and in two countries. New assignments broaden managers’
perspectives and establish informal networks of contact and relationships, according to Paul.
International assignments might assist solving country-specific problems, providing such
experience built learning-oriented skills. Mia Foster has shown misunderstanding of cultural
differences as well as failure in developing long-lasting relationships with the Chinese
network’s president. In fact, Paul mentiones in his research that in some extreme cases the
personal mindset of the CEO becomes the single most important factor in shaping the
organization's mindset; whereas individuals with their own particular experiences will most
likely develop different mindsets and hence react differently to the same situation. That was
the case with Foster-Chen relationships.
The role of headquarters (HQ) in the operations of foreign subsidiaries
Relationships between headquarters and foreign subsidiaries provoke a reasonable
debate and contribute to the most crucial issues concerning the management of multinational
enterprises (Birkinshaw et al., 1998; Birkinshaw and Morrison, 1995). Foreign subsidiaries
contribute to MNEs’ global value chain (Goerzen and Beamish, 2003) and customers’ loyalty
towards the whole brand. In fact, the global approach and described earlier notion of HQ’s
mindset is important to define the degree of relevant influence and establish beneficial
managerial practices.
Professors Beddi and Mayrhofer (2010) researching the relationships developed
between headquarters and foreign subsidiaries, suggest the idea that location and distance
shape the correlation of managerial influence and decision making freedom. According to the
professors, over the last few years, MNEs have heavily increased their investments into
developing countries and emerging markets, which is different from operating via mature
markets. The role of foreign subsidiaries located in emerging countries has thus considerably
increased. Beddi and Mayrhofer (2010) consider this evolution to be a starting point of

6. raising new challenges for the relationships of MNEs with their foreign subsidiaries. As cited
in the resource, subsidiaries of MNEs are embedded in their local environment (Hennart,
2009), establishing relationships with different local actors (governments, suppliers,
distributors, clients, etc.) (Asmussen et al., 2009). Moreover, the environment of emerging
economies differs considerably from the environment of mature markets.
Mentioned facts imply the idea of required decision making freedom embedded into
subsidiaries’ responsibilities, providing the latest act under conditions different to already
established and mature markets. However, the top management from the head office should
develop an overall market conquering strategies, as well as ensure their quality control.
Moreover, constant processing and analyzing the financial outcome of these strategies under
implementation should be performed by HQ in close co-operation with the subsidiaries’
management.
Subsidiaries’ operational and strategic freedom
In fact, the distance separating the headquarters of the MNEs from their local
subsidiaries may affect relationships between them. In the business literature, many scholars
refer to the concept of psychic distance as it is developed in the Uppsala model (Beddi and
Mayrhofer, 2010). Psychic distance notion includes various elements such as linguistic,
cultural, industrial, educational, managerial, etc. As cited in Uppsala model, “it reflects
distance as it is perceived by managers and tends to decrease once the company gains more
experience in foreign markets” (Johanson and Vahlne, 1977).
Correspondingly, it is quite obvious that internationally experienced top management,
providing it is the case, should take into account self level of knowledge and cultural
awareness as compared to the local branch’s managers knowledge base and experiential
background. Whether the new market is following some unique local rules, and the local
executives are educated and experienced enough to act as the local decision makers, laissez
faire approach should be applied.
However, there is an extent to which operational freedom should be allowed. The
limits lie within the concept of strategic coherence and cohesion. Any globalizer should keep
its intangible assets, reputation and customers’ loyalty, safe from a wrong direction
orientation. That is why, providing there is a management team unity in business
development vision, and the main strategy developed by the HQ is being followed, the

7. operational activities independence for subsidiaries’ management is an important element of
business development through varied markets expansion.
Direct HQ involvement VS laissez faire-like approach
Publicis is the world’s fourth largest communication group. It offers a complete range
of communication services, mainly through three autonomous global advertising networks,
Leo Burnett, Publicis, Saatchi & Saatchi. Its turnover counted in billions of Euros, the group
operates in more than 100 countries and employs approximately 50,000 professionals.
Divided into networks, the MSE allows each subsidiary relevant independence, though the
top management of each network assures the strategic cohesion, while co-operating deeper
with emerging markets’ subsidiaries. Because of cultural distance, managers of geographic
areas usually spend more time in emerging countries to understand local characteristics. This
is not the case in developed countries. As cited by the Uppsala resource, Scandinavian and
Middle East region manager believes he has to consider the specific local characteristics of
the Middle East in order to define which is the best possible strategy for each local agency;
this is an important issue that he must deal with in the Middle East, Scandinavian approach
being quite different (Beddi and Mayrhofer, 2010).
The emergence of a visionary leader is considered by Paul (2000) to be “a major
catalyst in breaking-down existing geographic and competitive boundaries”. Good examples,
provided by Paul (2000) are Michael Eisner of Walt Disney Company and Mark Wossner of
Bertelsmann, who “have both played a dominant role in propelling their companies to
positions of global leadership”.
However, the geocentric vision of IBM appeared to leave a growth opportunity to a
start-up company. Focused strictly on hardware development, the IBM’s HQ failed to
implement the laissez faire approach, when the company’s five engineers decided to promote
software strategy. They later decided to leave IBM and establish own company under the
name of SAP, which is now a global player (Paul, 2000)!

8. The extent to which a JV would be successful for the Levendary’s case
Whether a joint venture approach is right or wrong depends on the region of a brand’s
expansion. In general, recognizing the local diversity of markets and perceiving them as a
source of opportunity and development, while at the same time following the brand’s
strategic consistency across countries is mentioned by Paul (2000) to be “a conundrum global
companies face today”. Paul also cites Michael Porter, who explains that “globalness” adds to
the strategic advantages of companies which compete internationally. This observation leads
Paul (2000) to the conclusion that a company pursuing a global strategy should possess two
capabilities: the capability to enter any market in the world it chooses to compete in; and the
one to take an advantage of business worldwide resources in any competitive situation the
global company finds itself in.
Considering Asia region cultural conditions, there is a question whether a JV serves as
a beneficial arrangement for a branded restaurant chain entering the market. Regarding the
political situation, the legal course of the region allocates direct foreign investments into a
limited rights zone, restricting projects which include industries that already are well
established in China and demanding advanced technology application from wholly-owned
subsidiaries of foreign enterprises (Schlevogt, 2000). On the other hand, taxation incentives
and firm legal basis of JVs make these arrangements the most popular entry vehicle into
China. Equity Joint Venture, a subtype of a JV arrangement, seems to be even a more
beneficial one, as this is a limited liability company in which foreign and Chinese partners
invest jointly. Schlevogt describes the ways of relevant investments: capital contributions can
be made in the form of cash, machinery, equipment, intangible assets, and site-usage rights.
Additional benefit is that the Chinese partner can provide necessary access to supply in terms
of raw materials, as well as distribution channels to some locations. Notwithstanding all the
legal background of mentioned enterprises, in some cases “an EVJ might become a de facto
Wholly Foreign-Owned Enterprise by turning the Chinese party into a silent partner”
(Schlevogt, 2000).
Regarding the Chinese restaurant market in view of the business of Leventhal, a JV
could be successful business arrangement. Being a facilitator for the Chinese market
opportunities, such an enterprise might perform as a springboard for conquering the Asia
region. Moreover, the transfer of cultural aspect and resources’ easier access, - could become
available through Howard Leventhal’s group initial entering into such an arrangement.

9. Possible successful JV project’s threats
Decision making independence, provided by Wholly Foreign-Owned Enterprises,
offers greater control. JVs might be not easy to manage in some situations, as the burden of
an uncooperative partner might arise spontaneously as any cultures usually differ a lot,
withstanding different level of loyalty. Although the joint venture approach usually
facilitates a new market entering or a new product launch, JVs have proved to be very
troublesome for the foreign partner in a long run.
This was the case with Tiffany and Swatch group venture, which ended up with a
scandal and huge financial loses in 2013, a joint business deal arranged in 2007. The Swiss
watchmaker said at the time that Tiffany had been trying to block and delay the venture,
which was called Tiffany Watch Co (BBC, 2013). Another battle happened with Groupon
entering the Chinese market. Groupon was proclaimed to become China’s largest shopping
site, JV launched in partnership with China’s Internet giant Tencent. But by September 2011,
Groupon’s JV became another example of a Western Internet company to fail in China,
developing the list with Google already on it defeated by Baidu, and eBay’s failure to
compete effectively with Taobao (Zhu, 2011). Julia Q. Zhu, a leading expert on international
e-commerce in China and the Asia Pacific region, enumerates the following major mistakes
of the JV project: lack of local understanding by the foreign partner, misaligned management
structure, and a misuse of the numerous advantages the Chinese partnership had to offer.
In some situations, it is perfectly possible for foreign companies to build up personal
connections themselves, as an alternative to an obvious JV’s benefit of social links.
Leventhal’s group has initially performed this strategy by hiring well-connected and Chinese
culture-aware manager, Louis Chen. Nevertheless, many Chinese actually prefer to deal with
foreigners instead of their domestic or overseas compatriots. This is the so-called "blue eyes
phenomenon" (Schlevogt, 2000).

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