McDonald’s

1. McDonald's context when investing in Vietnam

First McDonald's store in Dakao, Dien Bien Phu, TP. Ho Chi Minh City opened
at February 8 2014 brings a lot of meaning, not only to consumers. McDonald’s
appears to be an interesting story in attracting investment and global brands into
Vietnam
The presence of other fast food brands such as KFC, Loteria, Burger King ... is
a challenge, despite the plan after the first store in Ho Chi Minh City. HCM, the
airline will open about 100 stores nationwide.
But the challenge comes from competitors is only a small part, the consumption
habits of Vietnamese people are the biggest barrier.
Just about two years ago, a Vietnamese brand with a "clone" of McDonald's,
VietMac, with a sandwich, also gained significant attention to consumers, but
now it will be difficult to find this fast food. Despite being well Vietnameseized
from rice to sauce.
In fact, the challenge with McDonald's has emerged in many of the larger global
markets. The first is from his hometown of America, McDonald's has
encountered difficulties when many consumers objected to even boycott. But
the United States only accounted for about 32% of sales last year. The
remaining 68%, McDonald’s earns from foreign markets, of which, Asia is one
of the important markets.
In the past year, however, the two countries that have contributed the most to its
sales are China and Japan, which have witnessed McDonald's severe decline.
Specifically, according to Business Week, in both countries, consumers are
losing craving for McDonald’s products.
Particularly in China, the US fast-food company has experienced a decline in
sales of up to 3.6% in the past year. Although in the last month of 2013,
McDonald's has announced plans to hire an additional 75,000 workers to focus
on its "revival" strategy in the year of the Horse.
While in Japan, since 2008 with product price increases, customers have
become less interested in McDonald's. The negligence in serving as well as a
series of hygiene and food safety scandals during the past time (not only in
Japan) has made diners in the land of the rising sun gradually away from fast
food restaurants.
For the whole 2013, McDonald's in Japan has reduced its sales by 11.6%,
making profits down 60% compared to 2012, to only 5.14 billion yen. Its shares
in Japan have therefore fallen 9% in the past 6 months.
Across Asia, according to Bloomberg, McDonald's sales fell by 2.1% in
December. More importantly, this is also the 4th consecutive month that the
reduction of over 2% is maintained. These figures reflect these gloomy realities
that will be a bad thing for the future of US fast food in Asia and a challenge for
the future in Vietnam.
Because according to Business Week, many Asian people are tired of
McDonald’s development path. Business Week also said that the new store in
the city. Ho Chi Minh City will not be able to help the company solve
difficulties across the region, especially when the delicate taste of Vietnamese
and many other Asians who are proud of traditional culinary arts has many
similarities
2. Factors motivate McDonald’s expand their business activities in
Vietnam:
Firstly, fast food has become a part of the daily life of young people because of
the rapid urbanization rate, increasing consumer demand, and stable quality of
life. Fast food cakes are constantly growing. According to a fast food industry
survey conducted by Nielsen Vietnam in 2010, up to 86% of consumers of this
product are aged 20-35. So as a latecomer, McDonald’s will also benefit from
the results that KFC has worked hard to build fast food habits for Vietnamese
people.
Secondly, McDonald's will not have to face too many difficulties to complete a
standard supply chain for its restaurant system in Vietnam, because domestic
manufacturers now have quite a lot of experience in coordinating with the fast
food system in advance.
Third, McDonald's culinary culture already exists in 200 countries around the
world, so persuading Vietnamese tastes is probably not too difficult a problem
for this giant.
Fourthly, McDonald's can easily import raw materials from neighboring
markets such as China, Thailand or Australia if suppliers cannot be found.
Next, even though after the convenient locations are occupied, the beautiful
place for McDonald's to develop the restaurant will not be too scarce if
McDonald's has strong spending. This is the reason why McDonald's chose Mr.
Nguyen Bao Hoang, founder of Good Day Hospitality and General Director of
In addition, the system of modern buildings, supermarkets or shopping centers
is still growing steadily every day in the trend of rapid urbanization and has
created more beautiful premises for fast food chains in Vietnam. .
Finally, the ability to attract market's interest in McDonald’s thanks to its
"number 1 world" reputation has been built around the globe
As usual, McDonald's chose Saigon as the starting point. With the highest income in the
country, Saigon is attracted by an active lifestyle and a Western-style lifestyle. But there are
two more important points that fastfood brands always choose southern cities to start with.
First, Saigon people tend to dining-out. After a day at work, they tend to go out and eat with
the whole family, rather than coming home and cooking like a Northern style.
Second, Saigon people are easy to receive and welcome food from other places. That is why
it is hard to find Saigon specialties, but it is easy to find specialties of all regions in the
country

3. Barriers of the expansion of business into Vietnam:

The culinary culture of Vietnamese people is very rich and diverse. This is an
eating culture that uses a lot of vegetables, many types of broths like pho,
vermicelli ... because the Vietnamese culinary system tends to blend subtly in
dishes.
The price issue is also a big problem because Vietnam is a country with low
GDP per capita, so with this income, how many people dare to spend from 4-6
USD for a meal at McDonalds. Is it possible that the number of people spending
is just the customers with a high income, the wealthy and the children of the
business. Therefore, KFC is still pursuing a low-price tactic, if McDonald's
enters Vietnam, it will surely have to consider this issue if it wants to compete
with this "eternal" rival here.
Thirdly, the fried chicken restaurant chains KFC, Lotteria and Jollibee have
spent more than 15 years of operation, having held a significant market share of
the fast food market. Therefore, it is not easy to say that McDonald's wants to
enter and survive in Vietnam, especially when the position of big companies in
Vietnam is quite solid.
If in a foreign country, McDonald's accepts to sell a franchise (this is a
commercial activity that the franchisor allows and requires the franchisee to
conduct the purchase and sale of goods and services by themselves), the
individual investor only 25% of the total capital needed to invest is invested, the
rest will be lent without a mortgage. Meanwhile in Vietnam, it is impossible to
find a bank that offers such loans without mortgage. Therefore, it is not easy to
expand McDonald's chain of stores quickly because of the huge capital needed.
More importantly, the problem of cost of new premises is the biggest issue that
McDonald's franchisee in Vietnam will face because the rent is very expensive
and sometimes there is no money to rent. It is expected that investors will have
to do business for at least 10 years to reach the rate of return.
Vietnam is the next destination when McDonald's has officially announced that
it will open its first store in Vietnam in early 2014. This is good news because
when this big man enters Vietnam, the fast food market will compete. The
competition is getting fiercer and the biggest beneficiary is none other than the
consumer. Because of McDonald's presence, all remaining fast food chains will
have to make more efforts if they do not want to be swallowed up by existing
market share.
b) Market strategies to overcome these barriers?
McDonald's wisely separates itself from the crowd when not choosing
downtown stores in major cities. McDonald’s decided to use a "skittish"
strategy - focusing on high-income customers who own cars. This is similar to
Starbucks having chosen the central area to attract foreign customers. This is
McDonald’s creative way. The word "center" here can be understood in many
different meanings, very flexible in the context of the customer segment that the
company is targeting.
According to statistics to 2011, the number of cars nationwide was over 1.3 million.
Assuming 40% of them are civil cars and divided equally in the two regions, the number of
civil cars in the South will be about 250,000 units. Thus, it can be seen that McDonald's is
wise to choose a location in the strategic road connecting Ho Chi Minh City with the northern
provinces and the southern key provinces in terms of tourism and economy such as Dong
Nai, Binh Duong and Ba Ria. - Vung Tau.
Almost certainly, customers who use cars will be very interesting to try out the unique
Driving Through service at McDonald’s Vietnam. Located here, it can be said that MC
Donald has become the "center" for the entire class of Vietnamese cars from South to North.

Regarding the product menu, McDonald's will still maintain traditional

products and position them at the same prices as ASEAN countries because
customers are middle class in Vietnam. However, because of their eagerness to
new things and McDonald's itself is a highly attractive brand, they can offer
promotions by quantity or some products tailored to Vietnamese taste to fill the
store area. Large store area and amusement park will be the attraction of
Vietnamese motorbike consumers to the store. Moreover, the location of
McDonald's is also quite convenient for circulation.
Strong brands entering Vietnam will often be interested in building brands from
the beginning with the goal of store sales. The original store was a prototype - a
prototype that the company could adapt to its expansion strategy for later.
Locating a favorable position for cars and Driving Through service,
McDonald's clearly demonstrates brand positioning aimed at the middle class
in society and maintain product prices higher than competitors to maintain the
level.
The level of McDonald’s is built from the difference from location, area, and
customer access. To ensure uniformity in the brand, make sure the decor and
quality of service at the store will be carefully designed and created unique.
From that perspective, we can easily understand when 90% of products are
imported to ensure product quality and brand.
The last story that Vietnamese food chain operators often forget is the training
programs to ensure the quality of service is commensurate with the other values
of the company. Avoiding this, McDonald’s has sent employees to train abroad.
The opening day is not rushed before the Lunar New Year but is planned after
the New Year when everything is carefully prepared.
Building a store at the traffic gateway of Ho Chi Minh City - the center of the
most dynamic economic region clearly shows the position of McDonald's when
attacking the middle market with high product prices and high quality services
for the economic region: Southern Health. This is a bold but feasible step for
McDonald's as the market in the city is cramped with hundreds of other fast
food brands available on every street corner. As other fast-food brands are
struggling to win.
4. McDonald’s human resource management in Vietnam:
The business is recruiting many young talents of the Millennials to serve the
plan of expanding the restaurant system.
Millennials, also known as Generation Y, consisted of people born from early 1986 to the end
of 2000. They were the first generation to come into contact with the Internet, growing up
with social media. From first-year students to people who have been working for 5-10 years,
the 18-31 age group is rated as the most dynamic labor force in the economy.

Nguyen Bao Hoang - Chairman of Good Day Joint Stock Company, the
franchising unit of McDonald's brand in Vietnam, said that the generation born
in 1986-2000 is suitable for the open working environment at McDonald’s.
The Millennials are also highly appreciated by Mr. Hoang at the recent Vietnam
Human Resources Conference 2017 held in Ho Chi Minh City. This
businessman expressed his intention to recruit many young talents to serve the
plan of expanding the restaurant system in the near future.
Mr. Hoang said that Vietnam now has more than 35% of the Millennials'
population. Unlike the previous generation, Millennials have more access to
technology. Most of them use social media to connect with each other, which
has a significant impact on the way the Internet era works.
He cited a report from Bentley University (USA) showing that, Millennials
work an average of 9 hours a day and 89% still work via email even after
running out of working hours.
By 2025, this generation will account for 75% of the global workforce.
Millennials are smart, learn fast and adapt easily. They like to work,
communicate with people who have the same culture and language.
Another strength is multitasking, ability to control and train skills, can work
flexibly at the office, at home, on holidays, via email or facebook, viber,
whatsapp, yammer
The working environment needs to be comfortable, motivated and culturally
appropriate with the diversity of perceptions, thoughts and ways of working of
all employees in the same company. In order to maximize the working capacity
of young people, they should be grouped together in the same voice, given the
opportunity to come up with new ideas, work and live up to their ideals.
At McDonald’s, young human resources are always welcome, given the
opportunity and appreciate their competence. This is also the cradle of excellent
managers, pioneering the innovation of fast food industry. Harry Sonneborn -
first CEO, Fred Tuner - second generation CEO; Don Conley - Vice President
of McDonald's ... are the key managers of the group raised from the normal
employee position.