Macroenvironment

1. Macro environment (PESTEL)

a) Political / Legal
- Vietnam political situation is supposed to be stable at the moment and there
would not many changes in regulations as well as administrative systems of
Vietnamese government in the next years. This is one of the very important
factors which help entrepreneurs build their right strategies because political
situations have a great effect on domestic consumption
- Vietnamese government has had a lot of policies to encourage Foreign Direct
Investment (FDI) => According to RESOLUTION No. 103/NQ-CP OF
AUGUST 29, 2013: On orientations for higher efficiency of foreign direct
investment attraction, use and management in the coming period, the
government tried to complete the regulations so as to strengthen the
management of labor in foreign investment projects and attract more and more
foreign direct investment in our countries
- Challenges: also as mentioned in RESOLUTION No. 103/NQ-CP OF
AUGUST 29, 2013, the government also recognized the limitations are
attributed mainly to the legal and policy systems which still have many
asynchronous, overlapping and inconsistent provisions, and to the fact that
Vietnam has not yet been proactive in and properly prepared necessary
conditions for assuring the effective operation of FDI, such as infrastructure,
human resources, domestic enterprises, planning, rational technical barriers,
etc. The appraisal and grant of investment certificates in some cases are not
strict, failing to fully comply with planning and the capacity of the technical
and social infrastructure systems. The inspection, examination and supervision
of FDI projects remain irregular and ineffective. Methods of investment
promotion are slow to be renewed, investment promotion activities from central
to local levels have not yet been closely coordinated and prove to be inefficient.
On-spot investment promotion through supporting licensed projects to be
implemented in a convenient manner has not been given due attention.
Vietnam’s investment environment has revealed a number of limitations,
becoming less competitive than many regional countries.
b) Economic
- Since the financial crisis from 2008 has influenced on Vietnam economy, the
number of the unemployed has increased significantly, people’s consumption
has been melting down. However, at the time McDonalds launch the first
restaurant in Vietnam (2014), the economic situation was better. According to
tradingeconomics.com, the average annual growth rate of GDP from 2008 to
2018 is 6.88% => Vietnam has the stable growth rate of economy. With its
targets are medium- and high-end classes of customers, McDonald’s do not
have to worry about the market when Vietnam has a rapidly growing economy
with more than 90 million people who all want a taste of American fast food
 - Challenges: However, we also need to look into the side effects of economy
and its future trends. As the announcement of McDonald’s Vietnam’s owner,
all raw materials are imported from the global supplying chains of McDonald’s
(beefs from Australia, pork and potatoes from US) while these imported
products are highly taxed in Vietnam, tax rate for imported beef is 5%, potato
is 20%. If McDonald’s does not have any intention to find domestic partners to
supply those materials, it will have to spend a huge budget on not only tax
payment but also transporting.
c) Socio-cultural
- Demographic: Vietnam’s population is quite young, almost citizens were born
after the war so they will easily accept and adapt new trends from western
countries.
- Culture: Fast food has been playing an essential role in Vietnam. Especially, in
modern and busy life, especially, in big cities where people have to work a lot
and need more time for other activities rather cooking at home. There are many
fast-foods were sold at the small stalls or kiots on the street in Vietnam such as
“Banh Mi”.
- Trends in particular life style: Vietnamese people seem to prefer the fame. The
large number of the young comes to fast food restaurants not only to have a fast
and convenient meal, but also to state that they are in a famous restaurant. They
go to the restaurant not only to eat but also to take pictures and upload them to
their social network such as Facebook or Instagram.
 Opportunities:
- Looking into other fast-food brands like KFC, Lotteria, …they also had big
welcomes from the Vietnam market because they were so new, tasty, and
western.
 Challenges:
- Most important reason is that fast food has been proved to be harmful to
human’s health, causing obesity and other diseases because of not fresh
ingredients.
- Another challenge is that there are some foods can be served faster than
McDonalds like “Banh Mi”. They are also cheaper than McDonalds meals (just
$1) in comparison with McDonalds (the cheapest hamburger costs 2$), which
costs twice more than Banh Mi.
- Furthermore, it would not be easy to change eating habits of Vietnamese
because of different tastes between western and eastern cuisines. We cannot
predict that McDonald’s will not follow the pathways of prior fast food
companies or not
d) Technological
- With the free high-speed Wi-Fi system installed in the restaurant, customers
can access the Internet using a laptop or from the phone comfortably.
- McDonald’s also applied their drive-thru section with a touch-activated screen
that makes it easier for customers to order, they only need to punch in their
 orders without queuing. It also provides features including music aiming at
queuing vehicles and a wall of window on the drive-thru side to allow customers
to have a look at their meals being prepared right from their cars’ windows
- McDonald's has had an official online website in Vietnam, a Facebook page, an
Instagram account, which makes it easier for clients to find and search for the
menu and other promotions of McDonalds. McDonalds also developed
McDelivery for consumers to buying and ordering meals by online selling
system and delivering them to customers.
 Microenvironment of Mc Donald
I. Microenvironment of Mc Donald
1. Supplier: Mc Donald has global supply chains. Bargaining power of Supplier is moderate.
- Beef: Lopez Foods

Lopez Foods
- Chicken and fish: Keystone Food
- Potatoe and Vegetable: Farmer
=> Pros: Mc Donald uses ingredients which are sanitary and tested
=> Cons: high expense for transportation, reservation and tax of these commodities. it is really
hard for McDonald’s to find a domestic suppliers because their product quality is not
standardized, and they do not have ability to supply a large quantity of order.
=> Solution: McDonald’s can invest and build its own manufacture in Vietnam or transfer
technology to a domestic trustworthy partner to minimize expense

2. Competitors: Threat of competitor is high: fast food market

a. In 2014:
b. In 2016:
(https://www.warc.com/newsandopinion/news/branding_and_scale_vital_for_fastfood_brands_i
n_vietnam/40890)
+ Lotteria: 17.9%
+ KFC: 11.4%
+ Other competitors: Burger King, Jollibee, Pizza Hut
=> Pros: Mc Donald already has its brand awareness or loyalty regarded to fast food:
=> Cons: They have been competing in not only quality, the variety of dishes in menus, but also
delivery services and other promotional campaigns. For example, Burger King is running a “hot
deal” to offer a full set at very low price, only 39,000 VND per a combo.
=> Solution: As a late comer, McDonald’s had better have its distinctive competences and
consider strategies which are suitable to Vietnamese customers and give them unique products
and services that other competitors cannot.

3. New entrant: Threat of new entrant is low: Though it is not too expensive to start up and
operate a fast food restaurant, it is really difficult to compete with established leaders in the
industry as KFC, Mc Donald, Burger King
=> Pros: Mc has brand awareness in VN. As reported, there were more than 40,000 people
queuing to buy a Big Mac only on 2 opening days.
=> Cons: the large number of Vietnamese, especially the old, prefer traditional foods. (However,
there are a lot of famous traditional restaurants, their scales are still small. Some of them have
tried to open a range of stores but their controlling systems, quality and services have not been as
good as the origin, which leads to customers’ dissatisfaction.)

4. Customers: buyer power is high:

- There are several well-known brands such as KFC, Lotteria, Burger King, BBQ Chicken,
Jollibee…
- Traditional Vietnamese families have the habit of cooking and eating at home
- However, demand of customer in fast food is high:
(https://www.statista.com/statistics/561300/vietnam-average-fast-food-consumption-per-week/)

Vietnam: How often do you eat fast food (any quick service restaurant) in any given week
(on average)?

5. Subtitutes: Threat of subtitutes in VN is high

- As mentioned above, there are a great number of substitutes on Vietnamese fast food due to
eating habit of Vietnamese people. However, at present they are far from a big threat to
McDonald’s because of their lack of capital, experience, and technology to develop into massive
scales.

II. Opportunities and Challenges:

1. Opportunities:
- According to Euromonitor International, Vietnamese fast food industry has a potential
development trend with a value of more than 543.6 million US dollars, annual growth rate went
up from 13.9% in 2012 to 15% in 2014.

2. Challenges:
- Rivalry within the industry is intense.

- Eating habits of old Customers are traditional foods

- Production cost is high because of high expense for transportation, reservation and tax of these
commodities
 Review the marketing campaign and activites

Goals
1. Short-term: 1 year
- Brand awareness: 60%
- Market share: 15%
- Has 4 restaurants in Ho Chi Minh City.
2. Long-term: 3 years
- Brand awareness: 80%
- Market share: 30%
- Has 10 restaurants in HCM City, approachs Hanoi market.

- Promoting BigMac as a key to compete with Vietnamese bread.

- Higher price (5-10%) in comparison with the competitors
+ 45,000-65,000 VND compare with other Vietnamese foods: 10,000-30,000 VND

Both short term and long term strategies of McDonald’s were fail because they couldn’t
actualize the goals they set up when they first got in Vietnam market. They set up the
goals to have 4 restaurants in Ho Chi Minh City and after 10 years, they could have
100 restaurants across the country. But after 4 years, they have just had 17 restaurants
so far, and McDonald’s as well as Burger King just have 2.8% market share in Vietnam.
The reason for this failure mostly because of the price, culture, and products.
They promoted BigMac as a key to compete with Vietnamese bread. However, it was
a failure because the price for a hamburger in McDonald’s is too high just for the
breakfast in Vietnam. The price for a BigMac is 4 times more expensive than a bowl
of phở. Moreover, Breakfast in Vietnam is not considered a main course. People will
come to McDonald’s to have a main course, and will go with a group of friends in some
specific events (birthdays, anniversaries,…). Besides, the street food in Vietnam is
cheap and delicious. As they are walking around the street, they can find bunches of
delicious foods to have breakfast (phở, sticky rice, bread,…). They do not need to have
their cars parked, go inside the restaurant and wait for eternity just for a BigMac to
bring to the class.
According to European Commission, Vietnamese people tend to spend most of their
income on grocery stores and small restaurants rather than fast food chain. According
to European Commission (70% of the income is spent on grocery stores vs. 1% in fast
food chains).
Besides, the price is not the only barrier for McDonald’s to succeed in Vietnam market.
For the US people, they prefer eating individually to sharing. In contrast, Vietnamese
people usually share food while a hamburger of McDonald’s is not a food that you can
share.