Theme 10: Product Standardization and Adaptation

When Firm B first started the chain in 1997, it had a selection of 12 to 25 cakes. Four years later in 2001, when it went into fusion meals, it had only four items on the menu.

But Today, Firm B has more than 50 types of menu selection, 20 types of fusion food, 40 cake creation and pasties in addition to a flavorful range of ice-cream and beverages.

Only 15% of product adaptation applied in the foreign countries. The cake products are all standardized. Firm B exports the raw ingredients for cakes making to the countries

expanded in order to tighten the quality control. In the interview with its CFO, she elaborated the way Firm B adopted the combination approach of global and local:

We have centralized kitchen in Petaling Jaya (Malaysia) to distribute the cake to all the café chains throughout Malaysia. Ingredients in cake are premixed in order to control the cake quality. We‟ve centralized kitchen in overseas, we train them and monitor them. We‟ll give them the formula of cake making to overseas outlets. We export certain cake and food ingredients to the countries expanded. In China, there is one centralized kitchen. In Thailand, there is one centralized kitchen. In the Philippines, there is one centralized kitchen… Cheesecakes are imported straight from Malaysia. But, certain food like local food [in host countries], even pasta, we will prepare in their own outlets, not in centralized kitchen.

It was found that Firm B made adjustments to its food but not the cakes in Western countries. As a way to offer consistent cakes to all outlets in every single country, Firm B built a centralized kitchen in each country to supply standardized cakes to its outlets.

Standardization of cakes was necessary to attract international market while a wide variety of adapted local foods such as Tom Yam was served to Thais and noodles to Chinese. This was ascertained in the interview with its CFO, she recognized the product standardization and adaptation as the strategy in expanding overseas:

Every foreign market has its own distinctive characteristics. We‟ve to customize our product based on the demographic of a country. In China, the customers there are not really used to western cuisine. So, we customize the local preference by offering noodle-related food to cater Chinese market.

In China, Firm B‟s core product, cake, cannot be the main meal for the Chinese.

Therefore, it has to offer a variety of noodles which are the Chinese favorite (Top 10 Malaysia, 2011, May). In the interview with its CFO, she described how menu was adapted to the taste and preference of other foreign markets:

In Singapore, we offer Singaporean Laksa (Singaporean-style Malay spicy noodle soup), Malay Fried Rice, Japanese Soba (Japanese noodle), Lasagna, spaghetti, Lamb Stew (western food). In Malaysia, we don‟t sell Nasi Lemak (coconut-cream rice); but we sell in Singapore, Thailand, and China; they love it. We also offer Mee Mamak (Indian Muslim‟s noodle) and Laksa Johor (Johorean-style Malay spicy noodle soup) in China; they like it. We realize that Chinese like noodles,

that‟s why we offer to them. Tom Yam which is Thai food is also popular in our China‟s market. This is because Chinese like sour and spicy. Same goes to Laksa (Malay spicy noodle soup) in Singapore. We also sell Chicken Parmigiana which Australians like it and promote roti canai (Indian bread) in Australia.

Firm B concept is flexible; it offers different menu items in different countries. Malaysian favorites such “nasi lemak” (coconut-cream rice), “mi goreng” (fried noodle), “laksa”

(Malay spicy noodle soup), and “Tom Yam” (Thai spicy food) are available in some overseas outlets like Singapore, Thailand, and China; even Malaysian “roti canai” (Indian bread) is served in Australian outlets. These types of food are acceptable owning to its short psychic distance with Malaysia. In the interviewed with its CFO, she stressed how the concept of “think global act local” facilitated its expansion in international market:

We‟ve over 60 different types of cakes and 20 over types of baked desserts which are standardized. We‟ve also food that tailored to suit quite number of people which we call fusion food. This is East meets Western. Our cakes and café concept are recognized worldwide. This factor reduces the factor to penetrate to foreign markets.

Many entrepreneurs from U.S., U.K. and Europe are willing to have joint venture with us. We‟re having ongoing negotiation with them. They believe in our concept since about 15% of product offered is tailored to local palate [in the host country]…While for Southeast Asian market, we don‟t modify our food menu so much because the palate is quite similar among customers there. For Middle East, we‟ve to modify part of our menu because there are different menu items for different seasons.

In Southeast Asian region, the similarity of culture had eased the menu offered since the taste and preference were almost identical. In Middle East region, Firm B had to alter its food to a certain extent in order to adjust to the palate of the Arabs (Business Times, 2007, August 27). Since some products were adapted to foreign markets, they may have to source locally in the host countries. In the interview with its CFO, she confirmed that the adapted products were sourced locally:

Cheese, kebab, duck noodles, fish ball soup, [but] not so much about lamb and chicken are adapted and sourced locally. In China, noodles are very popular. We always look for agents. [For] Cheese product, we have agents. The agents can help us to find other suppliers; we can also get online like Alibaba.

Except for cake ingredients, Firm B sourced locally especially the raw products which offered in that country. However, not all raw ingredients are sourced locally. She further explained about the imported raw ingredients and the reasons for importing certain raw product from other foreign countries:

Flour [is exported] from Malaysia; diary product and nuts are [imported] from Australia and New Zealand. Marshmallow which consists of gelatin is imported from Pakistan where we can get halal food. Malaysian‟s marshmallow is low in quality. For local Malaysian market, lemongrass is not [imported] from Thailand, but from Malaysian vegetables suppliers….[However,] Lemongrass and limau purut (Tom Yam ingredients) are imported from Thailand to China. The reasons are because the distance from Thailand to China is nearer, easier and better quality compared to if these ingredients were imported from Malaysia. If we export to china, we will face certain problem in custom department. In China, we‟ve to translate every single word into Chinese. That‟s why we let Thailand to export to China. This can reduce our difficulties to do translation. In China also, the cakes have to be sent in for quality check before it can be released. It took about one month to be approved.

To control its food quality, Firm B had to look from other countries to source its raw products in the case where the local suppliers were unable to meet its specification. As a result, it had to import in order to meet its stringent requirement. For example, diary product and nuts were imported from Australia and New Zealand; Marshmallow was from Pakistan; while Lemongrass and limau purut (Tom Yam ingredients) were imported from Thailand to China. In this case, the quality of raw products is not compromise when it operates in international market; it insists on the strategy to import for better alternatives and quality control.

In China, Firm B faced difficulties to obtain certain ingredients especially lemongrass in making “Tom Yum”, the typical Thai food. It had tried to import Malaysian lemongrass, but failed to do so as Thai lemongrass was more welcome in the Chinese market. Thai lemongrass was selected not only because of its quality, but also good bilateral international trade between Thailand and China.

Overall, by localizing and standardizing the product, the firm is able to maintain its presence in the international market. For its standardization strategy, she admitted the advantage:

Yes. Standardization can minimize the difference among the countries. It‟s one of the criteria to be successful. We assure when customers go everywhere, the quality is the same. Customer feedbacks are very important. We give people assurance that it‟ll be the same everywhere.

The standardization practice imparts consistency and ensures the quality is always maintained for all of its international outlets.