VietNamNet Bridge – Experts believe that McDonald’s, though
being a global well-known brand, will still face a lot of big changes in the
Vietnamese market.
The presence of McDonald’s or the
announcement of the fast food giant to land in a market always catches the
special attention from the public.
The idea of penetrating the
Vietnamese market has become more realistic when a high ranking manager of
McDonald’s in late August arrived in Vietnam, where he had working sessions
with some competent agencies. The purpose of the visit was reported as “seeking
the business opportunities in the lucrative market.”
The fast food giant, who has been
present in 119 countries all over the world, was thought to keep indifference
to the Vietnamese market. While other big fast food franchisors, including KFC,
Lotteria or Jolibee, have been in Vietnam for some years already, McDonald’s is
still outside the market.
However, McDonald’s has
unexpected released the plan to join the Vietnamese market, a part of its plan
on quick business expanding towards Asia.
The economic crisis in Europe has
badly affected the business growth of McDonald’s in the market which brings 40
percent of the total revenue. The traditional North American market, which
makes up 30 percent of the total revenue, has also become saturated.
In fact, the board of directors
of McDonald’s understands that it should not expect too much from the European
or North American markets. Therefore, the giant believes that it needs to speed
up the plan to go toward the east.
In the vast market of China,
McDonald’s, with the network of 1100 shops, has to compete with KFC (YUM!), a
redoubtable rival which has 3500 shops.
Though Kenneth Chan, Managing
Director of McDonald’s China stated that the giant does not intend to compete
in terms of the number of shops, but it strives to provide best quality
products and best services, the hamburger giant understands that it needs to
enlarge its network as soon as possible.
Therefore, besides the shops
opened by the company itself, it has been also trying to expand the network
under different modes – franchising, licensing and developmental licensing,
hoping to obtain 2200 shops by the end of 2102.
What will challenge McDonald’s in Vietnam?
South East Asia, including
Vietnam, has become a favorite market not only for McDonald’s, but also for
other big names such as Burgerking, Wendy’s, Starbucks, Yum!, Subway.
However, experts can see great
challenges McDonald’s would meet when joining the Vietnamese market. These
might be also the reasons that explain why McDonald’s comes to Vietnam later
than other fast food giants like KFC, Lotteria or Jolibee.
The challenges could be the
material sources which still cannot satisfy the demand of the company, the
special taste of Vietnamese consumers. McDonald’s might foresee that it would
not only have to compete with the other fast food giants, but also with the
take-away shops on pavements – the favorite style of Vietnamese people.
However, what the public expects
to see is the pricing policy to be applied by McDonald’s in Vietnam.
The prices of Big Mac, one of the
main products of the chain, is considered the index for McDonald’s to assess an
economy. The Big Mac price in China is now the lowest among the company’s
markets.
In general, in the first phase of
operation, McDonald’s would target high income earners, and would target medium
income clients later, when the network becomes large enough to cut costs. And
experts believe that the same policy would be applied in Vietnam.
If McDonald’s plans to expand its
network through franchising, very few Vietnamese partners would be able to
cooperate with the giant, because very few investors can spend 800,000-1.3
million dollars to set up a shop with the brand. So this would be a great
challenge for McDonald’s in implementing its plan to obtain 100 shops in
Vietnam.
Another challenge would relate to
French fries. The overly high import tariff on the products would badly affect
the business efficiency. J. Simplot, an US agriculture expert, once noted that
it would be very costly for the US fast food chains to maintain the typical
characteristics of the US potatoes.
DNSG
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