international management individual assignment this assignment is submitted as a requirement for the final exam

INTERNATIONAL SCHOOL

VIETNAM NATIONAL UNIVERSITY, HANOI

INTERNATIONAL MANAGEMENT INDIVIDUALASSIGNMENT

This assignment is submitted as a requirement for the final exam

Student Name: Nguyén Dire Duy Student ID: 18071057 Class code: INS3027.01 Lecturer: Nguyen Thi Lieu Trang

Hanoi, December 2021

TABLE OF CONTENTS

PART 1: ABOUT THIS REPORT PART 2: COMPANY INTRODUCTION

PART 3: VIETNAMESE MARKET ASSESSMENT

3.1 Advantages of McDonald in Vietnam’s market: 3.2 Disadvantages of McDonald in Vietnam’s market: PART 4: BUSINESS ENTRY STRATEGY ANALYSIS

4.1 External Analysis 4.1.1 PEST Model

4.1.1.1 Political Factors 4.1.1.2 Economic Factors 4.1.1.3 Socio-cultural Factors 4.1.1.4 Technological Factors 4.1.2 Five-Force Model

4.1.2.1 Threat of New Entrants 4.1.2.2 Bargaining Power of Buyers 4.1.2.3 Bargaining Power of Suppliers 4.1.2.4 Threat of Substitutes

4.1.2.5 Intensity of Rivalry in the Industry 4.2 International Analysis

4.2.1 Global Standardization Strategies 4.2.2 Localization Strategies

4.2.3 Adaptation Strategies in Vietnam 4.3 Business Strategies for Vietnamese Market

4.3.1 Corporate-level Strategies 4.3.1.1 Concentration 4.3.1.2 Diversification 4.3.2 Business-level Strategies

4.3.2.1 Product Differentiation Strategies 4.3.2.2 Local Product Development 4.3.2.3 Place Differentiation Strategies 4.4 Modes of Market Entry

PART 5: FAILURE OF MCDONALD IN VIETNAM

5.1 Differences in food culture are the main reason why McDonald's failed in

PART 1: ABOUT THIS REPORT

With today's strong development of production forces, as well as the science and technology revolution, transnational Corporations (TNCs) are and will continue to be the driving force behind the process' acceleration Globalization has an impact on all aspects of socioeconomic life on a global scale They are a driving force in the dissemination of science, technology, and technology, as well as a model for implementing a contemporary commodities production organization McDonald's, a fast food restaurant chain based in the United States, has a global presence McDonald's success is due to a number of elements, one of which is a worldwide business approach The technique of analyzing the worldwide business strategy of fast food giant McDonald's is used to develop an international business plan As a result, | chose the study topic “analysis of McDonald's entry strategy into the Vietnam market" as the focus of my scientific inquiry

McDonald's is one of the most recent multinational food and beverage companies to join the Vietnamese market, despite the fact that other rivals have long been present and effectively operating in the country This article re-examines a new and cautious market penetration strategy used by McDonald's in recent years in Vietnam, with the goal of determining if such a slow and steady approach will secure McDonald's future

success

PART 2: COMPANY INTRODUCTION

McDonald's is the world's largest foodservice retailer, with over 35,000 local outlets serving about 70 million consumers per day in over 118 countries It was founded in 1954 as an American enterprise The business is committed to providing high-quality meals and great service in a clean and pleasant environment at an accessible price McDonald's goal is to become its customers' preferred place and way to eat and drink It is always enhancing its service quality and giving delightful experiences with popular items like French Fries, Big Macs, and Chicken McNuggets, as well as other distinctive McDonald's experiences

McDonald's is committed to upholding its worldwide standards in Vietnam, which include:

e Food of excellent grade @ Excellent customer service e@ A pleasant and clean atmosphere e Excellent value for money

PART 3: VIETNAMESE MARKET ASSESSMENT

3.1 Advantages of McDonald in Vietnam’s market:

The Vietnamese people's level of living is rising: per capita GDP is 2.785,72 USD (2020) This income is sufficient for people to willingly spend 4-6 USD on a McDonald's dinner without hesitation

As the country grows increasingly urbanized, Vietnamese people's spending patterns and lifestyles change, particularly among the young The rapid growth of fast food is aided by industrial life Fast food has become an integral part of modern, hurried life, particularly in major cities where people work long hours and require more time for activities other than cooking at home If fast food is regarded as a common food in the United States, fast food is considered quick food to save time in Vietnam, the definition of "fast food" has altered slightly Fast food fills a portion of the requirement for millions of young people in big cities to have access to Western-style services A restaurant with good cuisine, a great atmosphere and design, and reasonable rates is perfect, or we can grab a seat and eat it on the way to work or school Furthermore, Vietnamese people appear to value celebrity over anything else A big number of young people go to fast food restaurants not just for a quick and easy lunch, but also to brag about being at a well-known establishment

Vietnam is witnessing a huge construction boom aimed at building up its infrastructure and allied leisure sectors, including the expansion of fast food businesses, driven by the needs of its own people and rising commerce Specifically, although operating in our nation for more than 10 years, Lotteria and KFC have just recently developed, as shopping complexes, amusement parks, and theaters have been created and placed into operation

3.2 Disadvantages of McDonald in Vietnam’s market:

McDonald's has a number of problems, not the least of which being its late arrival into the market McDonald's entered the Vietnamese market for the first time on February 8, 2014, with a store opening ceremony in Ho Chi Minh City, despite having no prior experience in the country As a result, McDonald's is only regarded as a “latecomer" in comparison to its competitors, and is still investigating and approaching the market

Due to difficulties in obtaining raw materials and ensuring that product quality is comparable to that of the United States, Vietnam's self-sufficiency cannot satisfy McDonald's demands When food must be imported from another country, the cost of importing and shipping will increase the product's price Only veggies are now supplied by domestic firms The remaining components, like meat from Australia, must be imported from McDonald's supply networks in other countries

The McDonald's menu is unsuitable for Vietnam's meal sharing culture Vietnamese people are used to dining with and eating dinner with their whole family (or a group of friends) First and foremost, unless you aren't terrified of the teeth on the hamburger, clamps are seldom shared In summary, most individuals do not want to share their

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burgers Second, fast-food restaurants' "eat fast and give place to customers" attitude is incompatible with Vietnamese people's "sit back, relax, and share food" lifestyle Hundreds of thousands of local businesses with far cheaper and traditional rates compete with a few dozen McDonald's locations The traditional Vietnamese clamps ranged from 10,000 to 35,000 VND A McDonald's lunch, on the other hand, costs around 100,000 VND

PART 4: BUSINESS ENTRY STRATEGY ANALYSIS

4.1.1.2 Economic Factors

The economy has an impact on every firm, including the fast-food industry The number of jobless people has increased considerably since the 2008 financial crisis, which had a significant impact on the Vietnamese economy, and people's consumption has slowed It presented a serious threat to all enterprises, from little stores to major international corporations The situation has improved marginally since the end of 2012 McDonald's chose the perfect moment to enter Vietnam, whereas rival fast-food heavyweights such as KFC, Lotteria, BBQ, and Jollibee suffered catastrophic economic situations However, the economy and its future developments have

unforeseen repercussions All raw ingredients are imported from McDonald's worldwide providing chains, according to McDonald's statement for Vietnam's owner, and these imported commodities are significantly taxed in Vietnam, with the tax rate for imported beef being 5% and potatoes being 20% Furthermore, with the present COVID-19 epidemic, these tax impacts are becoming more severe

4.1.1.3 Socio-cultural Factors

The bulk of Vietnam's population was born after the war, hence the country's population is exceptionally youthful As a result, young and energetic people, on the one hand, rapidly embrace and adapt to new Western concepts Fast food, on the other hand, has played a significant role in contemporary and frantic life, particularly in big cities where individuals are required to work long hours and so require more time for other things than cooking at home A restaurant with outstanding cuisine, beautiful location and design, and affordable prices is perfect Furthermore, it indicates that the Vietnamese have a strong craving for celebrity A large number of young people frequent fast food restaurants not just for a quick and convenient lunch, but also to brag about dining at a well-known establishment That is why, while fast food is associated with low prices and convenience in Western countries, it is viewed as a magnificent meal for the middle and higher classes in Vietnam With this trend, the McDonald's store network will soon have a sizable potential market Nonetheless, the initial temptation cannot forecast a company's future development Other fast-food restaurants in Vietnam were warmly welcomed since they were new, tasty, and western People's enthusiasm for this western cuisine style waned as they became more acclimated to these sorts of meals, and the most important reason is that fast food has been found to be harmful to human health, causing obesity and other illnesses owing to stale ingredients Furthermore, modifying Vietnamese eating habits would be challenging owing to the disparities in tastes between western and eastern cuisines As a consequence, it's hard to say whether McDonald's will follow in the footsteps of other fast food chains or not

4.1.1.4, Technological Factors

McDonald's, like many other modern businesses, provides free wireless internet access in its restaurants so that customers may browse the web while they dine

McDonald's most significant invention, however, was in their drive-thru area, which included a touch-activated screen that made it simpler for customers to order by allowing them to punch in their orders without having to wait in line It also contains components such as music directed at waiting vehicles and a glass wall on the drive- thru side that allows customers to watch their meals being prepared right from their car windows In conclusion, despite the fact that McDonald's only recently entered the Vietnamese fast food market, it appears that this is their late-entry approach McDonald's definitely does not have the disadvantages of a newbie when compared to other giants; in fact, its benefits are far larger than others' since it has the financial resources, prestige, and excellent partnerships with local authorities

4.1.2 Five-Force Model 4.1.2.1 Threat of New Entrants

Though it is not excessively expensive to create and operate a fast food restaurant, competing with industry heavyweights such as KFC, McDonald's, and Burger King is exceedingly difficult Their items are all the same, with different set menus and inexpensive prices McDonald's also has a great brand and strong customer loyalty On the first two days, more than 40,000 people queued to buy a Big Mac, according to sources As a result, a new entrant must invest a significant amount of money in order to achieve economies of scale and lower costs There are always local competitors when it comes to an international corporation like McDonald's Because not everyone becomes accustomed to eating fast food, many Vietnamese, especially the elderly, prefer traditional meals Even if there are numerous well-known traditional eateries, their scales are still small Some of them sought to open a range of businesses, but their quality, service, and control techniques were inferior to the original, resulting in customer dissatisfaction To summarize, due to the industry's strong barrier to entry, the risk of new entrants to the Vietnamese fast food market is quite low

4.1.2.2 Bargaining Power of Buyers

According to the five force analysis, buyer power is high in one firm if there are fewer buyers than sellers on the market Although there are some well-known brands in Vietnam, such as KFC, Lotteria, Burger King, BBQ Chicken, and Jollibee, supply power appears to be greater than demand When purchasers opt to make the seller's

things themselves, this adds to the buyer's power Because traditional Vietnamese families prepare and eat at home, this is a major possibility As a consequence, many people prefer to dine at a fast food restaurant that serves a wide range of items at low prices If replacement products are accessible on the market, buyer power is considerable Local cuisine competition is a disadvantage for McDonald's, although local restaurants should not represent a threat to McDonald's at this time without considerable capital expenditure to enhance economies of scale and measures to attract more customers McDonald's is said to have a monopoly on the fast food industry since it has complete control over its consumers

4.1.2.3 Bargaining Power of Suppliers

McDonald's has a global supply chain of high-quality items at cheap prices, and suppliers must be thrilled to be supplying such a large consumer firm Almost all raw materials, including beef, pigs, and potatoes, are imported from neighboring countries in the case of McDonald's Vietnam As a result, these items incur considerable transit, reservation, and taxing expenses While native suppliers have been denied access to multinational organizations because their products are not standardized and they lack the capacity to fulfill large orders, Vietnamese firms have traditionally seen foreign enterprises as competitors As a result, locating a McDonald's supplier in the United States is quite difficult By focusing on R&D, McDonald's may be able to invest in and build its own production plant in Vietnam, or transfer technology to a domestic dependable partner, lowering costs The bargaining power of suppliers is frequently moderate

4.1.2.4 Threat of Substitutes

As previously said, there are a range of substitutes for Vietnamese fast food due to the Vietnamese people's eating habits However, due to a lack of cash, expertise, and technology to scale up to big scales, they are no longer a major threat to McDonald's However, when people's appetites for fast food wane and their awareness of diseases linked to fast food, such as obesity and dyslipidemia, customers may opt for other options as a result of the merger of many businesses As a result, replacement goods and services pose a modest danger