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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

Barbarians at the Gate

Locals can beat foreign giants -- sometimes

By Cesar Bacani


STARTED IN 1975, THE Jollibee ice-cream parlor was a modest success. But it wanted more. Much more. Jollibee founder Tony Tan Caktiong had his sights set on owning the Philippines' top fast-food chain. The problem: McDonald's, the U.S. giant that invented the concept of food on the run, was planning to open Golden Arches all over Manila. Wendy's and Burger King were already teasing Filipino taste buds. Given his country's fascination with all things foreign, should Tan hook up with a non-Filipino fast-food brand?

He didn't. Instead, Tan, 43, developed products that appealed to the Filipino palate -- moist hamburger patties, crispy fried chicken and pansit palabok, a local noodle dish. Today, sales top $230 million, more than twice that of McDonald's; the home-grown fast-food king has 200 outlets, again more than double its foreign rival. Jollibee has opened 16 restaurants in Malaysia, Hong Kong, Guam, West Asia and the U.S. And irony of ironies, it is bringing in foreign brands such as Délifrance bakery products and Australia's Donut King to the Philippines. "We need to satisfy the changing tastes of consumers," says Tan.

But not every Asian David could stand up to a giant. India's Ramesh Chauhan battled Coke almost single-handedly in the 1970s. When a nationalist government forced out the U.S. multinational in 1977, Chauhan's Parle Exports turned Thums Up cola, lime-and-lemon drink Limca and other softdrinks into national brands. "It's a bad thing for us to be dependent on foreign companies for products we have successfully demonstrated can be made locally," the tycoon said in 1992, when Coke was preparing for an Indian comeback. But a year later, he flew to Atlanta and sold his brands to the Americans for a reported $60 million.

What makes a local company beat the majors? "I'm not very sure whether one can generalize and comment on the ability of Indian industry to stand up to global competition," says motorcycle magnate Rahul Bajaj, who has been named to The Asiaweek Business Hall of Fame. "We will have to analyze on an industry-to-industry basis, and perhaps even a company-to-company basis." He could just as easily be speaking about other countries. The quality of a firm's products and its business savvy are obviously part of the equation. Also important, however, is the foreign rival's determination to dominate the field.

Take Jollibee. McDonald's was building up market share until economic recession and political instability hit the Philippines in the 1980s. The American giant decided to slow down. "But we proceeded with our strategic plans," recalls Jollibee vice-president for finance Raffy dela Rosa. By the time the country was back on track, the homegrown fast-food chain had left McDonald's behind.

Jollibee spends millions on advertising and promotions aimed at children and families. Today, 3% of total sales are set aside to continue building brand loyalty. In one 1995 market study, nearly 100% of respondents said they knew the Jollibee brand. About half said they eat Jollibee products. "The Jollibee mascot [a human-like bee] is probably the most widely recognized character in the country," says dela Rosa. The company also emphasizes fast and friendly service, clean and comfortable premises and modern kitchen facilities.

Founder Tan says Jollibee is "reinventing competitiveness." That means expanding the number of brands, broadening the company's international presence and enhancing strategic strengths. "In the light of the shifting competitive environment, we have taken a broader, more global view of our business," says Tan. "We're leveraging the preeminent position of the Jollibee concept and our mastery of food- service technologies to cater to more market segments." Jollibee has opened the full-service restaurant Mary's Chicken and Ribs, for example, to appeal to professionals and the middle and upper classes.

Where Tan is expanding, Chauhan is marking time. The former Indian beverage king seems content to bottle Coke and his former brands in Bombay and New Delhi. Chauhan declines to say why he sold out. But a Parle senior executive says the boss's hand was forced by Parle's 63 bottlers: "They were all so enamored with the apparently wonderful offers Coke was making that they threatened to switch camps." If so, they may now be ruing their decision. Arguing that the bottlers do not have the resources to see through its plans in India, Coke wants to buy up to 80% of their shares.

"This bottling plant has been in our family for the last two generations," says M. Manickam of Chennai Bottling in Madras. "We won't sell the controlling stake at any cost." But Coke, which has won New Delhi's nod to invest $700 million in India, may yet tempt him, as it did Chauhan. Or as Pepsi, which returned to India in 1990 after leaving for business reasons in 1954, managed to do with Bombay soda maker Duke & Sons. "We were made an offer [in 1994] we simply couldn't refuse," says former Duke & Sons co-owner Noshir Pandole. "The alternative was to fight a losing battle against powerful multinationals who have unlimited financial muscle and few scruples."

It may be madness to be caught in an epic battle between Coke and Pepsi. But hall-of-famer Bajaj has proved that a local brand can avoid being trampled, at least in the motorcycle industry. Japan's Honda, Yamaha and Suzuki as well as Italy's Piaggio all compete in India. But Bajaj Auto is still the country's biggest seller with 46% of the motorcycle and motor scooter market -- from 37% ten years ago. "We are very conscious of the strengths of the world majors," says Bajaj. "Hence, while strictly monitoring and honing our comparative advantages in low-cost manufacturing and strong distribution, we are also upgrading our technological skills."

How important is government protection? Bajaj Auto benefited from New Delhi's anti-foreigner stance, though India opened up the motorcycle industry in the mid-1980s. Hong Kong takes a largely laissez faire attitude. That did not stop the territory's casual-wear maker U2. "Young people love to buy high-quality clothes, but they're not so brand-conscious," says U2 marketing manager Lawrence Law. "So we give them good clothes at affordable prices." U2 takes pains to differentiate itself from Esprit of the U.S. and Italy's Benetton by stressing value-for-money.

Underpricing foreign rivals is also the route taken by Manila's Concepcion Industries Inc., but unlike U2, it is not following an avoidance strategy. CII is going head-to-head with U.S. brands Carrier airconditioners and Kelvinator refrigerators. "There is no difference in quality between them and our Condura brand," claims CII chairman and CEO Raul Concepcion. Tariffs on imported appliances help the company price its Condura airconditioners and refrigerators some 5% lower than foreign makes.

What would happen if Manila were to cut customs duties? CII says it would remain competitive. It spent $28 million on an airconditioning plant and R&D center it opened last year, and has set aside another $25 million for a new refrigerator factory. "We have the lowest [airconditioning] production cost in Southeast Asia," says CEO Concepcion's 34-year-old son, Raul Joseph Concepcion, who oversees the Condura line. The brand now accounts for at least 25% of the Philippine aircon market. The young Concepcion adds: "To succeed in brand marketing, you have to give good value for the consumer's money." That may be the most important lesson of all. Whether local or foreign, the company that knows the buyer is king has the best chance of winning.

--Reported by Antonio Lopez / Manila, Shirish Nadkarni / Bombay and Law Siu Lan / Hong Kong


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