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Lord Stow

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Lord Stow’s Bakery
A Case Analysis

May 5, 2012
ATENEO GRADUATE SCHOOL OF BUSINESS

Submitted by:

Ryan Buenafe
Sonny Carlos
Melissa San Juan

CASE BACKGROUND AND SYNTHESIS
An English man named Andrew Stow and his wife opened the Lord Stow’s Bakery in the 1980s in Coloane Village in Macau. It was a modest small village shop wherein the pastries are supposed to catering hotels in Macau however neighbours insist to buy the good smelling goodies baked in the store.
Lord Stow’s Bakery suddenly became famous for one item – Andrew’s egg tart. Macanesians and tourist alike won’t mind going to Coloane just to get a taste of the egg tart and bring some home for their family and friends. The bakery became Macau’s tourist attraction and even can be considered as the country’s trademark. As for Lord Stow’s, the egg tart sales comprise about 60% of the bakery’s revenue.
Lord Stow’s business philosophy is to ensure that his produce is always fresh, healthy, natural, and of the highest possible quality. He refused to allow his range to include additives and preservatives which is common to other bakeries.
Although reluctant to go international, there were a lot of offers to franchise from people around the globe. The first franchise store opens in Mongkok, Hong Kong in 1997, in Taiwan in 1998, Japan in 1999 and also in the Philippines later that year. Thailand in 2000, South Korea in 2001. There were a lot of hesitations as there were a lot of copy cats of the egg tarts suddenly came in existence in the market and such has greatly affected the sales of Lord Stows Bakery.

CURRENT SITUATION
After Andrew Lord Stow passed away in 2006, His sister Eileen and his daughter continue his bakery and carry his standards of excellence.
Eighteen years after, Lord Stow’s Bakery in Coloane continues with its traditional, bespoke service and enjoys the English influence in the products for years to come. With presence over 5 countries in Asia, including the Philippines which has 10 branches in Manila. Lord Stow’s bakery is open for franchising in contrast of its initial reaction to expanding internationally.

REACTION TO THE CASE
The group think that it’s not surprising that Andrew’s egg tarts became a hit in Macau as the “herd behaviour” phenomena is quite widespread in mainland China including Hong Kong and Taiwan. Evidently that is what happened when the Portuguese egg tart was introduced in Macau, long queues at the bakery that purchasing behaviour is typical herd behaviour. Word of mouth was became the tool of the increasing sale of Lord Stow’s bakery, people got curious on the long queue and such got interested on the hype. Higher media reports came in and such more people got hooked in the infamous egg tart of Macau.
With all the hype for the Portuguese egg tart, it’s understandable the oblivious reaction of Andrew to the increasing offers of going international as for one, he was just thinking of a small time business at that time and expanding internationally was not initially thought of. Two, the sales in Macau itself is unbelievable high that what is expected which for a small time owner would be more than enough. Third, a lot of cup cats entered the market and such was hesitant that his product may not be likely differentiated among the others. Lastly, we believe that the lack of knowledge of the location is also a factor for Andrew’s hesitation since coming from the West and moving in Asia would pose him to be guarded as this involves some risks.
Although it is an excellent idea to introduce product internationally for it is an affordable means of growing a business, however it poses a lot of risk and must require that the franchisee must have an in depth local knowledge to ensure there is a market for the product or services and sales can be optimize without jeopardizing the principles and manner of operation the original store is working. Just like what happened when Lord Stow Bakery opened in Hong Kong, so much demand for the egg tarts that it almost put at risk the quality of the product.
It is advisable therefore that the franchisor and franchisee must come to common agreement on how the operation of the business will adapt to the different factors that may affect the business because of socio cultural influences of the country they will operate.

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