Being Happy Together Across the Globe?
As Mr. Michael Chan, Chairman and CEO of the Café de Coral group, thought about the directions his company should take, he felt a bit uncertain. The company, clearly the most popular Chinese Quick Serve Restaurant (QSR) in Hong Kong and a local success, had just celebrated twenty years as a public company. This success and longevity in the cut-throat world of fast food was remarkable, but Mr. Chan did not want the company to rest on its laurels. At his meeting this afternoon with senior management, Mr. Chan planned to suggest that the company needed to move outside of Hong Kong and follow a much more aggressive plan than it had followed when it had moved slowly into China (with both Café de Coral outlets in neighboring Guangdong Province and recently New Asia Dabao in Shanghai) and also into North America (by buying into and then purchasing outright the Manchu Wok chain) over the last several years. He knew that the company needed a very clear globalization strategy in order to move to the next level of growth and to find sustainable growth opportunities away from Hong Kong. Mr. Chan had no clear plan at this point and he needed input from his managers and the Board. Mr. Chan reflected on how Café de Coral was a household name in Hong Kong and was the most popular QSR in its home market. The company dominated the market in Hong Kong and continuously improved its brand image through innovations in food preparation at its centralized food processing and distribution centers in Hong Kong and across the border in Guangdong. It also had perfected methods of offering large menus (up to 150 items) that changed four times over the course of every day with different items added and other items taken off the menu two to three times a week to provide variety as well as fresh and delicious food in a quick-serve environment to its huge and discerning customer base.
Mr. Chan wanted to build on the company’s expertise in high volume and cost efficient food preparation and distribution and in offering great variety because he believed that these were the company’s unique capabilities that added value to the company’s success. But where should he do this building and how could he be sure that what worked in Hong Kong would work in markets around the world? Of course, North America, where fast food started and was still thriving, was a logical answer, but would Café de Coral be able to compete in a market that did not value menu variety, as far as fast food was concerned? As Mr. Chan thought about the big names in fast food in America, he concluded that the smaller the menu in North America, the more successful the place. Should he gamble on taking Café de Coral’s huge and ever-changing menus to a place where a few variations on a hamburger, on fried chicken or on a taco were what sold? In addition, the company had experience in North America with the limited menu format of Manchu Wok, which it now owned completely. What about Europe where there were some American fast food outlets and some interest in fast food but also where the market was not very accepting of the idea of fast food? There was no question that varieties of cuisines were welcome in Europe but the food had to be done with a certain flair. Could Café de Coral sell its big menu, as good as he knew it was, where the market distrusted the very concept of fast food? And what about greater expansion into China and the rest of Australasia? The
company’s cautious expansion into Southern China, where tastes were very similar to those in Hong Kong, had proceeded very well over the last ten years or so and the careful strategy through joint venturing in Shanghai with the New Asia Dabao brand had been successful in the last three years. But how should the company move across China and Australasia? It was good to be in the coastal and more affluent areas of China, but to succeed there and elsewhere in...