530_AS1_Phan Phu Truong_GBS200816

ASSIGNMENT 1 FRONT SHEET Qualification BTEC Level 5 HND Diploma in Business Unit number and title Unit 18 Global Business Environment (530) Submission date April 12, 2022 Date received (1st submission[.]

ASSIGNMENT FRONT SHEET Qualification BTEC Level HND Diploma in Business Unit number and title Unit 18: Global Business Environment (530) Submission date April 12, 2022 Date received (1st submission) Date received (2nd submission) Re-submission date Student name Phan Phu Truong Student ID GBS200816 Class GBS0904A Assessor name Nguyen Kim Hao Student declaration I certify that the assignment submission is entirely my own work and I fully understand the consequences of plagiarism I understand that making a false declaration is a form of malpractice Student’s signature: Grading grid P1 P2 M1 M2 D1 Summative Feedbacks: Resubmission Feedbacks: Grade: Assessor Signature: Internal Verifier’s Comments: Signature & Date: Date: Table of Contents I Introduction II Main contents PESTLE analysis Political Economical Social Technological Environmental Legal Key drivers affecting a specific industry to go globalization based on Yip’s model Market driver Cost driver Competition driver Government driver Opportunities Threats The complexity of strategic challenges faced by organizations when operating in a global environment International trade laws Global Economy Global supply chain management 10 III Conclusion 12 References 12 I Introduction Some Japanese firms have recently considered withdrawing their manufacturing plants from China to establish new ones in other countries such as Vietnam As an intern at an investment consulting firm in Vietnam, I am responsible for assisting my team in preparing a report for a potential Vietnamese client to review the effects of globalization and its drivers and challenges for the Vietnamese company and industry This report is made to persuade the potential Japanese partner to collaborate with the Vietnamese firm in expanding their business into the Vietnam market Company introduction KFC is an acronym for Kentucky Fried Chicken, one of the brands of Yum Brands Inc (USA) KFC specializes in fried and grilled chicken products, with side dishes and sandwiches made with fresh chicken KFC is known in Vietnam by another familiar name, Kentucky Fried Chicken KFC entered the market for the first time in December 1997 at the Saigon Super Bowl mall Up to now, KFC's restaurant system has grown to more than 140 restaurants, present in more than 21 major provinces/cities across the country The KFC brand goal is to bring consumers a leading brand of food, creating bright and fun for people of all ages Young in the soul, dynamic in life is the strategy of the KFC brand in Vietnam (KFC Viet Nam, n.d.) (Source: zomato.com, n.d.) II Main contents PESTLE analysis Political Vietnam's political stability is one of the top factors attracting investors to Vietnam When looking at some countries in the region, it is easy to see that most of the countries have experienced coups or political crises, while Vietnam's politics has always been stable and secure This ensures consistency in economic development policy The Vietnamese government has shown its commitment to economic liberalization and international integration Vietnam joined the WTO in January 2007 This should give a major boost to Vietnam’s export-led economy and should spur the country’s economic liberalizing reforms Besides, it reduces barriers for foreign companies Economical According to the General Statistics Office, Vietnam's GDP in 2021 is estimated to increase by 2.58% compared to 2020 In the context of the COVID-19 epidemic seriously affecting all sectors of the economy This is a great success for Vietnam in disease prevention and maintenance of production and business GDP per capita increased by 2.7 times between 2002 and 2020, reaching nearly 2,800 USD During this time, the poverty rate (based on a daily income of 1.9 USD) fell sharply from more than 32% in 2011 to less than 2% According to the General Statistics Office, the consumer price index (CPI) in November 2021 increased by 0.32% compared to the previous month The average consumer price index in the first 11 months of 2021 increased by 1.84% over the same period last year, the lowest average increase in 11 months since 2016 The controlled inflation rate will stimulate economic growth, encourage consumption, and increase consumer demand Social According to Facebook's 2020 report on the major Southeast Asian economies, Vietnam is one of the countries with the highest level of preference for branded goods, with 54% of people tend to come to famous and long-standing brands This figure is much higher than 45% in Malaysia and 43% in Thailand According to the General Statistics Office, the proportion of the urban population increased by 14.3 percentage points after 30 years, from 20.1% in 1989 to 34.4% in 2019 The urban population's increased pace of life and their desire for faster and more affordable food options The fast-food industry is also fueled by a languid population that expects food to be delivered to their door Food is an indispensable part of Vietnamese culture Vietnamese people love to eat and believe that eating delicious food can bring harmony and closeness to family and relationships In general, Vietnamese people not care about nutrition as much as Westerners They care more about the quality of the food Technological According to statistical reports, there are currently 68.17 million people using internet services in Vietnam in January 2020 An increase of 10% compared to 2019 65.00 million people are currently using social media to entertain, connect with friends, share moments, and life tips, and even promote sales According to Q&Me (2021), 87 percent of people have ordered fast food online Grab Food and Now are the most popular methods for ordering fast food online As a result of this trend, many restaurants now allow customers to order food online Environmental Nature has bestowed upon Vietnam a plethora of biological and hydrological diversity The north of Vietnam has a humid subtropical climate with high temperatures in mountainous areas, while the south has two seasons: rainy and dry, with average temperatures ranging from 25 to 27 degrees Celsius Despite Vietnam being in the tropical climate zone, there is still some difference between the two regions, allowing Vietnam to have a diverse food supply According to public opinion research implemented by GlobeScan, consumers in Vietnam tend to favor socially responsible companies In Vietnam, 47 percent of those polled said they had supported a socially responsible company in the previous year, compared to a global average of 33 percent Legal The Intellectual Property Law No 50/2005/QH11 regarding rules for securing and enforcing legal rights to license of invention, industrial designs, semiconductor integrated circuit layout designs, business secrets, trademarks, trade names, and geographical indications Law on Food Safety No 51/2001/QH10 stipulates the rights and obligations of organizations and individuals in ensuring food safety; conditions for ensuring food safety, food production and trading, and food import and export; advertising, food labeling; food testing; risk analysis for food safety; prevent, prevent, and remedy food safety incidents; information, education, and communication on food safety; responsible for state management of food safety ➔ Through PESTEL analysis, Vietnam is a potential market for the fast-food industry to expand and develop And KFC is one of the leading companies in this industry in Vietnam Key drivers affecting a specific industry to go globalization based on Yip’s model (Source: Research Gate Website, 2017) Market driver KFC's dishes have conquered diners and are loved all over the world This success of KFC began with Colonel Harland Sanders opening the first "Kentucky Fried Chicken" franchise in Utah in 1952 KFC was later one of the first American fast-food chains to expand went international, opening stores in Canada, the United Kingdom, Mexico, and Jamaica in the mid-1960s KFC became the first Western restaurant chain in China in 1987 Nowadays, there are more than 20,000 KFC restaurants in 109 countries and territories worldwide KFC serves more than 4.5 billion pieces of chicken annually and about million customers a day worldwide This brand accounts for a 2.82% market share of the global fast-food industry according to research data from T4 2020 In Vietnam, KFC has grown to more than 140 restaurants, present in more than 21 provinces KFC is said to be the most frequently visited fast food restaurant chain in Vietnam, with 45% of respondents frequenting its store, according to a survey by market research firm Q&Me based in Ho Chi Minh City The top reasons cited to love KFC are good food (66%); convenient location (63%); suitable for families and young people (60%); and variety in the menu (56%) (Nhu, 2021) Cost driver By 2019, the financial statements of KFC Vietnam Joint Venture Company Limited recorded net revenue of VND 1,498 billion, an increase of more than 1% compared to 2018 Thereby, KFC always looks for the optimal ways to reduce costs and optimize production They take advantage of places where there is continuous excess production capacity and large potential customers In addition, they optimize production by using available materials from the country that they add to import besides still using and maintaining their recipe and knowhow stored in the US KFC has improved its operational efficiency by applying new technologies in food processing and preservation In addition, by recognizing the market and choosing a good business strategy, KFC has optimized costs to create uniformity in its brand image During tough times for the fast-food industry By improving its image, implementing the "Soul Food" campaign, innovating its brand image with a series of reorganized store chains with the same tone It can be said that they have used one of the favorable features of the franchise form to optimize cost reduction, create uniformity, and increase their image value (Nguyen, 2018) Competition driver Vietnam's Fast-food market is highly competitive with many big brands such as KFC (USA), Lotteria (Korea), Mc Donald's (USA), Pizza Hut (USA), Popeyes (USA), Jollibee (Philippines), Burger King (USA), and several smaller brands Specifically, KFC accounts for 48% of the market share, Lotteria with 26%, PizzaHut with 5%, McDonald's with 5%, the rest belongs to Popeyes, Jollibee, BurgerKing, and other food companies Which, KFC, Lotteria, and McDonald's are often widely covered in big cities Meanwhile, Jollibee and some other brands are more popular in smaller cities This makes fast food companies in the industry face stiff competition to maintain their market share and at the same time capture more market share from other brands (text.123docz.net, n.d.) Government driver Global activity and a significant increase in free trade agreements open import and export opportunities, more foreign investment, attracting development and technology transfer; That is the problem of improving the business environment with the legal system, infrastructure, traffic, or issues related to sustainable development This allows fast food companies to have convenient logistics and efficient sourcing, which has also proven effective when considering product development costs (tapchicongthuong.vn, 2021) Opportunities Asian consumers are tending to prefer Western-style food As the pace of life is accelerating along with the increasing introduction of Western culture and lifestyle, the demand for fast and convenient fast-food culture is higher than ever According to VietMAC's research, the fast-food market in Vietnam is currently very developed with 19,700,000 transactions per year, bringing in VND 869 billion in revenue The growth rate of this industry is about 26%/year With most of the population under the age of 25, this younger generation will be more and more receptive to foreign tastes and products Besides, with products such as fried chicken, hamburgers, salad, or French fries, an agricultural country like Vietnam can completely become an abundant source of supply In addition to the rapid development of the economy and the increasing consumer demand in modern life, the Vietnamese fast-food market is fertile land for investors (123docz.net, n.d.) Threats Currently, Vietnam is a promising market for businesses and that is also attracting big bosses to compete with KFC such as Jollibee, Lotteria, Pizza Hut, Burge, and especially McDonald's with soft prices than other fast-food brands Besides, KFC and other fast-food restaurants are considered harmful to human health with the fatal disadvantage of being fat, high in protein, and low in fiber The complexity of strategic challenges faced by organizations when operating in a global environment International trade laws The World Trade Organization (WTO) is a global international organization to establishes and maintains free, transparent, and favorable global trade Vietnam's accession to WTO has created more position and strength of Vietnam in the international arena Vietnam's economy changed very positively in 2007 such as GDP growth increased by 8.48%, industrial output increased sharply by 10.6% In addition, the total import-export turnover is equivalent to about 160% of GDP, of which nearly 90% of GDP is imported In addition, the amount of capital committed to foreign direct investment has reached a record number of 20.3 billion VND Vietnam is increasingly attracting many large investors in the world to invest and become one of the countries with strong economic breakthroughs (agro.gov.vn, n.d.) The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) was officially signed in 2018, by 11 members The CPTPP's overarching goal is to reduce import taxes to 0% for all tariff lines According to a study by the Ministry of Planning and Investment, with other light and labor-intensive industries, the CPTPP can generate an average growth rate of 4% - 5%, and an increase in exports can reach 8.7% - 9.6% (cptpp.moit.gov.vn, n.d.) Global Economy International-expansion entry modes Type Exporting Licensing & Franchising Strengths - Fast-entry - Low risk - Fast-entry Low cost Low risk Weaknesses Opportunities Threats - Low control - An unfulfilled - Shifts in - Low local knowledge customer needs consumer taste - Potential negative - The arrival of new away from the environmental technologies firm's products - Impact of - Loosening of - The emergence transportation regulations of substitute - Removal of products international - New trade barriers regulations - Increased trade barriers - - Partnering and Strategic Alliance - - Acquisition - Shared costs reduce the investment needed Reduced risk Seen as the local entity Fast-entry Known, established operations Less control Licensee may become a competitor Legal and regulatory environment (IP and contract law) must be sound - Higher cost than exporting licensing, or franchising - Integration problems between two corporate cultures - High cost Integration issues with home office - - - - - Economies of Scale Unsaturated market Opportunity to explore and expand the market - Access to distribution networks (especially internationally) Access to greater resources (i.e., technology and finance) - Expansion opportunities with a large assets base Enhanced debt raising ability/ cheaper credit - - - - - Newer Business Models Declining Position of Brand in the Market Competitor Franchises Lack of communication between companies Competitor's products remain superior Enhanced regulatory interference Retention of loyal customers Retention of skilled Greenfield venture - - Gain local market knowledge Can be seen as the insider who employs locals Maximum control - High cost High risk due to unknowns Slow entry due to setup time - Tax benefits - Economic development incentives Can form partnerships with local businesses to increase market penetration - manpower - - - Political instability or lack of legal protection of ownership Immediate competition from the local players There can be high barriers to entry KFC entered Vietnam with a master franchisee through the establishment of a joint venture KFC Vietnam, so the opening of distribution stores in Vietnam will be funded by KFC Vietnam Then KFC will be more flexible in opening restaurants in big cities like Ho Chi Minh, Hanoi, etc in choosing the opening time and location This creates a competitive advantage for KFC compared to competitors Besides, the price for a franchise contract according to the regulations of the parent company is million USD In addition, the law on franchising in Vietnam in the early years when KFC entered Vietnam was not strict Therefore, to compete with alternative fast-food products in Vietnam and the big players in the world (text.123docz.net, n.d.) Global supply chain management Supply Chain Management (Source: chegg.com, nd.) Production From input materials such as chicken, sauce, vegetables, etc., KFC will process and transfer to cold storage and normal storage From these warehouses, the airline will move to KFC franchise stores nationwide KFC's output products are fried chicken pieces, deep-fried chicken wings, French fries, salads, drinks, etc., which are distributed at KFC stores to consumers The evaluation and quality control standards of KFC are based on international standards of Yum Brand Corporation of the US KFC only chooses reputable and quality raw material suppliers with quarantine certificates There are only a few businesses in Vietnam that are qualified to supply chicken to KFC such as CP Group, Unitek, Long Binh, and Nguyen Phi long (Ga, n.d.) Distribution KFC has a wide chain of stores throughout the city's districts and a strong delivery team, delivering goods to your door in the fastest time A perfect and convenient distribution model for consumers KFC chooses locations to open stores such as supermarket buildings, bookstores, and commercial centers such as Parkson, Diamond Plaza, Maximark, Coop Mart Supermarket, and Big C The advantage of these locations is that this is where many people come to shop or work at buildings, and the objects that come here are diverse Some of them are middle class and above, which is the target customer group that KFC is targeting However, the system of supermarkets and commercial centers in Vietnam is not developing fast enough, so KFC Vietnam recently had to rent houses on the street to open its restaurant KFC's ice selection criteria are locations located in urban centers Currently, KFC has more than 153 restaurants in three major cities in the North, Central, and South Distribution channels spread in many localities help reach maximum customers (Ga, n.d.) Providing KFC services has a limited capacity, which manifests itself through several issues: - The fixed location of the point of sale, is concentrated in big cities, so customers with needs in other provinces have difficulty accessing the service - Service supply depends on natural and social resources, so the capacity to supply is limited, and human resources are limited, so when the number of visitors skyrockets during the holidays, it will be difficult to respond in time - Service supply is a fixed asset Because it is a fixed asset, wear and tear or damage also affect KFC's ability to supply Solution - It is necessary to constantly improve service quality, and train staff capacity to satisfy customers even when the number of guests is overloaded and a temporary shortage of human resources - It is necessary to calculate the number of visitors from time to time to ensure the maximum supply of goods and services - Continuously improve facilities and scale to reach more potential customers - Add additional services to increase competitiveness with competitors and improve service to retain existing customers III Conclusion The report shows the assessment of the impacts of globalization and the motivations and challenges for KFC Vietnam and the fast-food industry in general Thereby, showing that Vietnam has great potential to become a fertile market With extensive experience in the Vietnamese market, KFC Vietnam will be a promising partner with Japanese companies in business expansion cooperation References KFC Việt Nam (n.d.) Về KFC [online] Available at: https://tuyendung.kfcvietnam.com.vn/ve-kfc [Accessed 26 Mar 2022] Ga, M (n.d.) Quản lý cung dịch vụ ăn nhanh KFC www.academia.edu [online] Available at: https://www.academia.edu/34238101/Qu%E1%BA%A3n_l%C3%BD_cung_d%E1%BB%8Bch_v%E1% BB%A5_%C4%83n_nhanh_c%E1%BB%A7a_KFC [Accessed 12 Apr 2022] text.123docz.net (n.d.) Chiến lược cạnh tranh KFC thị trường Việt Nam - Tài liệu text [online] Available at: https://text.123docz.net/document/2470992-chien-luoc-canh-tranh-cua-kfc-tren-thitruong-viet-nam.htm [Accessed 12 Apr 2022] agro.gov.vn (n.d.) Tác động WTO với kinh tế - xã hội Việt Nam [online] Available at: http://agro.gov.vn/vn/tID8150_Tac-dong-cua-WTO-voi-kinh-te-xa-hoi-Viet-Nam-.html [Accessed 12 Apr 2022] cptpp.moit.gov.vn (n.d.) Hiệp định Đối tác Toàn diện Tiến xuyên Thái Bình Dương [online] Available at:http://cptpp.moit.gov.vn/default.aspx?page=news&do=detail&category_id=8be36248117a-4530-814c-555746b31c92&id=2d270726-ded7-408e-bd78-ae201558a7fc [Accessed 12 Apr 2022] Nhu (2021) Tiềm thị trường thức ăn nhanh Việt Nam [online] VNFranchise Trang Nhượng Quyền Thương Hiệu Hàng Đầu Việt Nam Available at: https://vnfranchise.vn/da-dang-thi-truong-thuc-an-nhanh-viet-nam/ [Accessed 12 Apr 2022] Nguyen (2018) Phân tích chiến lược kinh doanh KFC toàn giới [online] Flickr Available at: https://www.flickr.com/photos/141731990@N08/43287806104/ [Accessed 12 Apr 2022] text.123docz.net (n.d.) Chiến lược cạnh tranh KFC thị trường Việt Nam - Tài liệu text [online] Available at: https://text.123docz.net/document/2470992-chien-luoc-canh-tranh-cua-kfc-tren-thitruong-viet-nam.htm [Accessed 12 Apr 2022] 123docz.net (n.d.) Nghiên cứu marketing đề xuất cho sản phẩm fast food vietmac [online] Available at: https://123docz.net/document/6928996-nghien-cuu-marketing-va-de-xuat-cho-sanpham-fast-food-vietmac.htm [Accessed 12 Apr 2022] tapchicongthuong.vn (2021) Thu hút FDI vào Việt Nam từ Hiệp định thương mại tự hệ [online] Tạp chí Cơng Thương Available at: https://www.tapchicongthuong.vn/bai-viet/thu-hut-fdi-vao-viet-nam-tu-cac-hiepdinh-thuong-mai-tu-do-the-he-moi-co-hoi-va-thach-thuc-84348.htm [Accessed 12 Apr 2022]