RMIT International University Vietnam

BUSM 3311 – International Business – A2

Subject Code:
BUSM-3311 / 4626

Subject Name: International Business

Location & Campus RMIT Vietnam , HCMC / Hanoi

Class Group Number: Group 3

Student Name: Tran Quynh Mai

Student Number: S3712382

Your Teacher: Tzach Ronen

Word Count: 1232

Introduction:

The fast-food industry is a potential market for businesses, it is estimated that $500 million, and
there is a tendency to grow ( Bestpricetravel 2020). Unfortunately, many big fast-food businesses
failed in Vietnam. There are some factors affecting the operation is tough competition, high
operating costs, and a little understanding of the taste of Vietnamese ( QSR media 2017). The
significant situation is Subway, the most famous fast-food company in the USA and other
countries ( Robert 2021 ). In 2010, Subway established its first outlet in Vietnam and tend to
expand 50 outlets after 5 years. However, it failed to increase its stores due to many reasons.
Therefore, this report aims to analyze Subway’s failure in the Vietnam market and suggest
recommendations for the company after those failures.

Analysis:

Subway is the biggest fast-food brand in the world, with the present in 95 countries in 2011. For
the strategy to gain 1000 stores in Asia, in April 2010, Subway had released the first store in Ho
Chi Minh city and tend to expand to 50 outlets in 2015 ( Song Huong 2011 ). Even though, they
have opened more than 44.000 stores in the world from the USA to Asia. However, after ten
years in Vietnam, they remain in only one store ( T.D 2020).

 Cultural misunderstandings:

Talking about cultural differences might have to mention the collectivism dimensions theory. It
said in collectivist cultures, communities recognize themselves as accepting an interdependent
concept of self. It combines people, namely, members of family, friends, and people from the
workplace. For people in Asia, especially Vietnamese, the social distance between people is
small ( Dhamrm 2019 ).

Subway has using a recipe originate from Europe to apply for the Vietnam market, with a menu
that includes bread with low calories, no lubricant oil, no fast, and healthy results in an insipid
taste of bread is suitable for individualism cultures. Moreover, the bread is used from cheese,
cereal, or oats, these ingredients are not Vietnamese favor ( T.D 2020). Indifference, in Vietnam,
people tend to more enjoy highly-seasoned tastes such as fish sauce, soup, soy sauce ( Thang
2020). Therefore, the slogan for health is not suitable, and persuasive for the Vietnam market.

 Competition with local bread:

Subway might have known about local bread. According to many types of research, bread was
created much long time ago, from when Vietnam was a colony of France ( Linh 2020 ). Since it
has much time to upgrade to be suitable for Vietnamese people. It has appeared everywhere,
from on pedlars to famous stores. In each province, native people have enhanced bread to proper
for locals, it made a different taste for bread ( Linh 2020 ). It is related to collectivist culture.
Moreover, the advantage of these stores that it does not waste the time of customer, within 1
minute, they can receive their bread, the culture of Vietnamese is efficiency. Besides, Traveller
has record Vietnam bread is one of the best street food must experience in life, this is a huge
pride for Vietnamese people when their specialty is mentioned ( Cuc 2017 ).In contrast, Subway
stores get more than 10 minutes from parking to go inside the store. Moreover, Subway has just
established nearly 40 years. ( Xuan 2020 ).

 Lack of researching to adapt to the market:

Theoretically, The dimension of conducting in the overseas market was adapted from the initial
research ( Mariola p8). Vietnamese taste regards to Asia culture, especially, the palate Asia is
increasingly growing, many people accept this palate. For these reasons, KFC is an example of
adapting the culture, by adjusting their menu to Vietnamese culture, they were successful gain
Vietnamese perspective. In contrast, Subway remains for the same menu from western culture,
which is not suitable for Vietnamese, this is a substantial mistake when do not research the
market carefully ( Thang 2020 ). Therefore, it failed in the Vietnam market.

Recommendation:

For this case of Subway, there are some recommendations that can help Subway to enhance their
strategy when they want to establish a franchise in Vietnam. Firstly, Subway must pay attention
to the culture, it should strictly follow the process of traditional taste because Vietnamese is
rather their palate than overseas taste. Vietnam is a steady community, not easy to change their
behavior. Moreover, they can focus on product development to adapt Vietnamese palate.
Therefore, they can change their strategy by researching the behavior seriously, from this
process, they can enter to the Vietnam market easily. This strategy is characterized by meeting
high native demand, focus on researching, and demanding is the way they give themselves
opportunities to enhance their strategy and their process. For example, they can change their
process to produce merchandise by using local ingredients and cultural palate, from that they can
be more attractive from in Vietnamese perspective. Secondly, Subway can change their
reputation officer to Vietnamese person, according to research, its reputation officer is Mark
Mason Mcgrath, is a western person, who can not understand whole the culture. Therefore, he
might not adapt market efficiently. So if they can change to a local person, he or she can
understand the market deeply based on their experience, from that, they can hire employees who
help them to develop the strategy to be successful in Vietnam market.

Conclusion:

Subway’s failure to spread its company in Vietnam is certain. The reason for this failure base on
many different factors, especially the enterprise misunderstanding its culture and marketing
strategy to change and adapt to the new market culture. Moreover, to explain why they failed in
the Vietnam market, the company has not done effective market research when entering the
market. In short, this contributes to the lesson for subway preparation for the next attempt. The
purpose of this is to globalize and spread the company as well as decrease their risk when
entering or investing in a new market.

References:

1./ Lewis, R., 2021. Subway | History & Facts. [online] Encyclopedia Britannica. Available at:
<https://www.britannica.com/topic/Subway-restaurant-chain> [Accessed 13 April 2021].

2./ Guide, T., Drink, F. and Vietnam, A., 2021. An Overall Guideline on Fast Food in Vietnam.
[online] bestpricetravel.com. Available at: <https://www.bestpricetravel.com/travel-guide/an-
overall-guideline-on-fast-food-in-vietnam-1256.html> [Accessed 13 April 2021].

3./ QSRMedia Asia. 2021. Fast food chains fail to defeat local Vietnamese stalls. [online]
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7./ Cuc, T., 2021. Bánh mì Việt Nam lọt top 10 món sandwich ngon nhất trên Thế giới. [online]
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