PE PROJECT OUTLINE - GROUP 2 - DH48IBU04

Members:
1. Hoàng Đặng Phú Đức - 31221025241
2. Huỳnh Dương Phương Anh- 31221023804
3. Hồ Nguyên Kha - 31221025949
4. Hoàng Diễm Quỳnh - 31221023102
5. Lại Hồ Thu Vân - 31221021070

TOPIC: HOW HAS MCDONALD'S FAILED IN VIETNAMESE

MONOPOLISTIC COMPETITION OF FAST-FOOD SO FAR?
TABLE OF CONTENT
1. INTRODUCTION
1.1 Market overview
While McDonald's has great success in nearby nations like China and Thailand, which
share a similar culture and cuisine, entrance into the Vietnamese market appears to
have been delayed. Despite having especially strong government support and
connections, as well as a distinctive brand name that gives its debut into Vietnam
nearly a cultural importance, McDonald's is unable to establish a devoted following
like KFC or Lotteria because of its tardy entry into the fast-food industry. McDonald's
is left to place itself in the premium market, which would only allow the brand to grab
a smaller percentage of the market, considering Vietnam has a very strong street
vendor scene that could offer dishes faster and cheaper than McDonald's, something
for which the brand is famed worldwide.
1.2 Historical background
With approximately 14,000 locations in the US alone and more than 38,000
restaurants in 119 countries and territories, McDonald's is the most well-known name
in fast food. Despite a decline in US sales over the previous few years, McDonald's
locations elsewhere have been continuously growing up to 2019—promising signals
of ongoing expansion abroad. With the inauguration of its first franchise in February
2014, McDonald's is one of the fast food chain's newest entries into the Vietnamese
market. With a population of approximately 92 million in 2014 and a fast growing
middle class, Vietnam is an expanding market. However, McDonald's is well behind
its initial objective, with only 23 locations in only two large cities, Ha Noi and Ho Chi
Minh. Despite Vietnam seems to be the ideal prospective market with a continually
expanding consumer market, McDonald's is struggling here.
 1.3 Problem statement
McDonald’s faces fierce competition from other world-known fast-food brands and
street vendors in Vietnam. Before McDonald’s entered Vietnam in 2014, there were
already several established fast-food brands that were quite familiar to Vietnamese
consumers such as Lotteria, KFC, and Jollibee. In addition, McDonald’s also has to
compete with street vendors whose food is prepared in a blink of an eye and is
charged for low prices. McDonald’s. Moreover, the pricing problem is a big challenge
for McDonald’s. A meal at a McDonald’s outlet can range up to twice as much as a
local Vietnamese restaurant. It seems that the prices of McDonald’s are considered
premium for local customers and not something that they would spend regularly.
1.4 Research objectives
The goal of this report is to analyze the current situation of McDonald’s and strategies
that the US fast-food enterprise applied in Vietnam. In addition, comparisons between
McDonald’s and other well-known sellers and street food stalls in this market are
made throughout the report. Thus, the data and illustrations are carefully demonstrated
in this paper
2. MONOPOLISTIC COMPETITION LITERATURE REVIEW
2.1 Definition of Monopolistic Competition
First coined by​​Edward Hastings Chamberlin, Monopolistic Competition is a market in which
many producers compete against each other, offering products which are differentiated from
one another and are thus not perfect substitutes.

Characterized by the large number of buyers and sellers. Many firms can join the market to
compete for market share. And since every product within the market is differentiated, every
competitor is free to be the price maker, but it also means that every seller’s price has a
negligible impact on the market. Firms within monopolistic competition face a great deal of
non-price competition (via branding, advertising, quality of products, etc.) as they try to
differentiate themselves from their competitors while trying their best to gain a competitive
edge over them. As such, the price elasticity of products within the monopolistically
competitive market are typically very high.

The fast-food industry can and should be considered as a monopolistically competitive

market. Suffice to say, the market is cut-throat competitive with a high elimination rate.
Marketing and reputation are keys to success in such a market.

The fast-food market of Vietnam can be divided into two subgroups: the fast-food chains
(KFC, Jollibee, Lotteria, McDonalds, etc), and the various street vendors selling traditional
Vietnamese cuisine. Even if the cooking process is the same, each item or service has a
unique quality that they alone offer, such as meals, flavors, or presentation styles. These food
sellers also possess market power and can set prices higher or lower depending on the
variations between their products. Since there are no requirements for complex machinery or
sophisticated technical apparatus, the market is easy to join and to exit.
2.2 Economic Efficiency under Monopolistic Competition
- Companies in monopolistic competition produce at a level where marginal
cost and marginal income are equal in the long term.
- There is no barrier to entry in this market so any firm can enter this market to
set up their business when firms are making a profit.
- McDonald's falls under a monopolistic competition market structure. A
monopolistic competition market is a market that has several sellers, and each
seller is selling a slightly different product, for example, Burger King and
McDonald's are selling burgers but of different types and flavors
(Economicsonline.co.uk, 2013).
- However, Lancaster (1991a) mentions another reason for product diversity:
that every consumer may prefer variety. Many consumers prefer to live in an
industry with a wide range of goods and services. Therefore, there are more
incentives for businesses to compete with others to attract more customers
through advertising and developing business strategies.
- McDonald's claims to serve as a Drive-thru model and has a playground for
children that are said to be different. (Brands Vietnam, 2014)
- Launched at the end of 2017, Experience of the Future (EOTF) is a project to
change and reorganize key McDonald's restaurants with the desire to bring a
breakthrough experience, entice diners and turn them into customers. become
loyal customers. (iPOS, 2022)
3. THE COMPETITION OF THE fast-food INDUSTRY IN VIETNAM
3.1 Current Situation of McDonald’s in The Vietnamese Market
- McDonald’s is far behind its goal of reaching 100 stores in Vietnam by 2024.
- At the end of March 2022, McDonald's Vietnam expanded its area along the
length of the S-shape when it officially opened its first store in Nha Trang
City. In November 2022, the opening of McDonald's Vinhomes Times City
marked 28th outlet of McDonald’s
- McDonald’s first year in Vietnam, the brand already saw the sign of a
slowdown, in which suppliers stated that there were volume projections that
weren’t met in 2014, when the brand was at its strongest.
- By the end of 2017, McDonald’s was losing 500 billion VND (~US$22
million) in Vietnam.

Strategy

- Service strategy
+ Drive - through sector: provide a new purchasing experience for
customers.
+ Offer 24-hour service: hasn’t been used by any fast food restaurants.
 - Location strategy: McDonald's's first outlet business location is on one of the
busiest streets in Ho Chi Minh City with the goal of catching the number of
people moving in and out of the center at work and after-hours. In early
December 2017, McDonald's expanded to Hanoi, located at a superior location
with 2 street fronts and facing Hoan Kiem Lake, a famous place with a lot of
Vietnamese and foreign tourists.

3.2 Existing rivals

3.2.1 McDonald’s Product Differentiation - Street Vendors
- Another indispensable function street vendors play is to provide a great variety
of food 24/7 all year around. Types of food may alter with the rhythm of
season. Street vendors may be considered equivalent with fast-food because a
dish is often ready in no time, yet it is not mass-produced and contains
significantly less fat. (Vietnam Online, n.d.)
- You can get an abundance of food even when you are on a budget by going to
street vendors. Street food prices in Vietnam are much lower than in
traditional restaurants. Street vendors serve dishes for as low as about $1.44
AUD, $1.32 CAD, $19.19 MXN, or $1 USD. Many Western countries charge
five to ten times that amount for the same dish (Vietnam Visa, 2019)

3.2.2 McDonald’s Product Differentiation - Other fast-food

Chains
- McDonald’s late entrance into the Vietnamese market poses a significant
obstacle for the brand, as many foreign fast-food chains such as Lotteria, KFC,
Pizza Hut, and Jollibee have entered and gained market knowledge.(News
VietNamNet, 2016)
- According to Statista, McDonald's only possesses 28 stores, while Lotteria and
KFC currently have 210 and 153 stores, respectively..

3.3 Entry barriers

- It is difficult for foreign fast-food chains to adjust concepts and ideas to suit
the culture of VN, while the local brands can satisfy the local people’s habit of
eating. (Wang, Tran, & Nguyen, 2014)
- fast-food service is not as fast as Vietnam food service.
- Local food is more competitive than fast-food.
- fast-food companies have a higher price in comparison with local food.
- Vietnamese prefer healthy food to fast-food.
 4. THEORY APPLICATION AND RECOMMENDATIONS FOR
MCDONALD’S

4.1 Recommendations for McDonald’s

- Redesign the interior of the restaurant: Provide different kinds of tables to

meet the demands of different groups of customers such as families, friends,
couples, and individuals.
- Diversify the menu based on Vietnamese people’s taste.

4.2 THEORY APPLICATION

5. CONCLUSION
Having had resounding success internationally, McDonald’s entered the Vietnamese fast-food
market in hopes of achieving the same results. Instead, they were faced with an incredibly
hard market to gain footing into. These struggles came from many factors of pricing,
customer service, cultural differences, and the mismatching in taste of the cuisine. Realizing
this, we produced this research project with goals of identifying as well as recommending
several strategic changes to their customer service and their menu so that McDonald’s can
achieve greater market success within the harsh environment that is the Vietnamese fast-food
market.