Lord Stow’s Bakery

Case Report

Marketing of Services

Submitted By:
Debopam | Eshana | Vineet | Yash | Satyaki | Vaishali
PGP/22/073 | PGP/22/075 | PGP/22/171 | PGP/22/173 | PGP/22/379 | PGP/22/402
Andrew Stow and Lord Stow’s Bakery

Andrew Stow was an English pharmacist turned baker who conceptualized the famous Lord
Stow’s Egg Tart from one of his visits to Portugal. Although Andrew never had a plan to be a
cook, he had a natural passion for cooking. His parents always found him cooking. While he
was working in Macau for a pharmaceutical company, he got bored with the job, and took up
an offer for work from Hyatt.
Later, he set up a small shop on his own, at an inexpensive place in the city. Although his
initial plans were only to tap the wholesale markets into hotels, restaurants etc, seeing the
growing popularity he soon started with the retail operations.
The real star of bakery was the Portuguese egg tart. Lord Stow’s Bakery earned 60% revenue
from it. Strict quality control was the cornerstone of Andrew’s business. He never
compromised on the quality of his products, discarded the ones which were old. No additives
and preservatives were added.
Andrew firmly believed that it was important to have cash in hand at the end of the month.

Lord Stow’s Bakery – A Brief Timeline

1989 – First Lord Stow’s Bakery in Coloane Islands

1992 – First branch in Business district of Macau

1994 – Second branch in Commercial/Residential Area in Macau
1995 – Lord Stow’s Egg Tart becomes popular among the Taiwanese
1997 – Separation of Andrew and Margaret. Division of business.
Andrew obtains service of franchise consultant in Singapore
Opens first franchisee in Honk Kong
1998 – First franchised store in Taiwan.
Hundreds of copycat stores emerged in HK, China, Macau and Singapore
1999 – Singapore store opening cancelled due to copycat.
Plans to open store in Philippines.
Did Andrew Stow “miss the boat” insofar as he did not immediately
grab all the opportunities offered to him at the height of his egg tart’s
popularity?

The decision on taking the risk to expand his business across geographies depend on the risk
appetite of the risk taker or business owner, in this case Andrew. The following points can be
considered to justify his decision to miss the boat:
1. Egg Tart’s popularity was limited only to international tourists and Airport passengers.
2. Expansion of the market led to the further growth of copy cats and being a concern for
brand dilution.
3. The product of Egg Tart remained an outright success even after 10 years of opening
other franchise
4. Bargaining power for Lord Stow’s was low, since he was not approached by any Big
MNCs yet.
5. There was a clear lack of management personnel in Lord Stow’s to lead to lead the
expansion plans.
6. Lastly, it was always a choice for Andrew not to expand, since he preferred a life of rest
and enjoyment.

Considering that his name and trademark are relatively unknown

outside of Hong Kong, Taiwan and Japan, should Andrew now invest
in advertisements?

Lord Stow’s Bakery did not require any advertisements for the Egg Tart in Macau. Macau
was a densely populated city, where word spread quickly. Additionally, Lord Stow’s bakes
spoke for itself due to the best ingredients and processes used. The store also received enough
free publicity from media.
But, when expanding to external markets, Lord Stow’s would require to have a dedicated
budget and advertisement, due to the following reasons:
1. The brand existence of Lord Stow’s outside Macau is very limited.
2. The product quality itself has taken a hit, given that all ingredients are not available in the
local market.
3. Existence of a number of copycats in the city will impact the brand value for Lord Stows.
Andrew should focus on two types on advertisement –
a) Informative advertisements to help customers find out the original Lord Stow Bakery
products
b) Advertisements highlighting the quality of food products and reviews by customers
Andrew offer Licensing agreements instead of Franchising
Agreements?

The different caveats in Franchising and Licensing, can be analysed as follows.

Basis of
Licensing
Competition
Legal arrangement in which an
organization (Licensor) will be selling the
Concept intellectual property rights to the local
company (Licensee) for a royalty.
Licensing is governed by the respective
Compliance Contract acts at a national level, and at an
Aspect international Level via the Paris
Convention.
The Licensor may entail some control on
the intellectual property given to the
Sphere of Control
Licensee but have no control in the
particulars of his business operations.
Involves a single time transfer of the
specific intellectual property by the
Nature Licensor to the Licensee, where the
training and support are not being
provided.
The Licensor can sell his Intellectual
Territorial Property to multiple Licensees in the same
Monopoly economic territory. Hence there is no
implicit monopoly in licensing.
Franchising
Legal system where the Franchisor
(Original Company) permits Franchisee
(Local Company) to use its business
model and brand for a specific fee like
an independent branch.
Protected by the respective Franchise
laws of their own territory. As of now an
international law specific to Franchising
has not been made.
Franchisor can exert considerable
control over Franchisee business and
operational models, by establishing
norms, inspections, and maintenance.
Involves consistent ongoing assistance
by the Franchisor to the Franchisee,
where the training and support were also
being provided.
Franchisor can only appoint one specific
Franchisee as its independent branch in
a specific economic territory. Hence
monopoly rights are allotted.

While following a franchise model, the following factors can be analysed with respect to the
case particular to Lord Stow’s Bakery.
Presence in
Factors Remarks
Lord Stow’s
Large Size with a more recognizable brand ✕ Not recognizable. Only word of
mouth was available
Fewer supporting services. Long term ✕ Was offering full service. Contract
contracts was for 1 year
Low overhead per outlet ✓ Cost reduction was there
Providing accurate and reliable information ✓ Singapore franchise was not opened
about franchise operations. as it was not profitable
Building a cooperative relationship ✓ Not a fixed license fee. It was varied
according to what Andrew felt
realistic
How fast should Andrew expand his oversees business given the
present economic crisis in Asia?

The key impact of Asian Economic crisis on economies can be broadly put together under
two headings:
1. Unstable exchange rates
2. The real estate crash
The pace of development gets directly impacted with the real estate crash, and international
expansion becomes unrealistic and risky with the unstable exchange rates.
• The crisis leads to unpredictable costs and might change consumption patterns
• Lumpsum receivables are susceptible to exchange risk
All factors suggest Stow to limit the pace of development