Professional Documents
Culture Documents
MCDONALD’S
Hồ Gia Mẫn
Table of Contents
I. EXECUTIVE SUMMARY 3
II. INTRODUCTION 4
II.1/MCDONALD’S BRIEF BACKGROUND 4
II.2/ FAST FOOD GLOBAL MARKET 4
II.3/ MCDONALDIZATION 4
III. INTERNATIONAL BUSINESS STRATEGY OF MCDONALD’S 5
III.1/ COST LEADERSHIP AND GROWTH PILLARS 5
III.2/ TRANSNATIONAL STRATEGY 6
III.3/ ENTRY STRATEGY OF MC DONALD’S IN VN 7
III.4/ BUSINESS MODEL OF MCDONALD’S 8
IV. MCDONALD’S SWOT ANALYSIS 8
IV.1/ STRENGTHS 8
IV.2/ WEAKNESSES 9
III.3/ OPPORTUNITIES 10
III.4/ THREATS 10
V. ISSUES FACING THE COMPANY 11
V.1/ MACRO ENVIRONMENT 11
1. Economic factors 11
2. Social and demographic changes 11
3. The waste of technological devices 12
V.2/ MICROENVIRONMENT 12
1. Late-Night Workplace Violence 12
2. Intensive competition of the industry 13
3. Price 14
4. Changing in consumer taste 14
5. Preference changing 15
VI. RECOMMENDATIONS: 16
VI.1/ BOOST LOW-COST STRATEGY 16
VI. 2/ DEVELOP A MORE MOBILE DISTRIBUTION SYSTEM 16
VI. 3/ DEALING WITH THE HEALTH-CONCERNS 17
REFERENCES 18
APPENDIX 25
3
I. Executive Summary
This report discusses the case of Mcdonald’s, possibly the most well-known fast-food chain
today, for better comprehending the notion of international business strategy by evaluating
current McDonald's strategy, the concerning matters, and proposing recommendations. The
scope of issues and recommendations will take place in the Vietnam market.
To comprehend the context of Mcdonald’s, we will first determine its use of corporate-level
strategy through its M-C-D growth pillars and cost leadership strategy. The transnational
strategy of the firm will also be covered along with the franchising entry mode.
Once we decide which corporate strategies were implemented and how they affected the
company's overall success, we will look at internal and external factors to analyze strategy,
assess the risk and orientation of Mcdonald’s.
After having processed the information on cur, it is possible to evaluate the current issues that
Mcdonald’s is facing from a macro and microenvironment, and finally, introduce the feasible
recommendation.
4
II. Introduction
II.3/ McDonaldization
Owing to the expansion to more than 100 countries around the world, McDonald's has become
a symbol of globalization. The evidence is the term "McDonaldization” describing the situation
when a society adopts the fast-food restaurant, according to George Ritzer, 1993. This shows
that McDonald’s is not only a thriving restaurant chain but also one of the companies leading
the trend of globalization.
5
known as a quick-service restaurant chain (QSR). Self-service kiosks in the restaurants assist
customers to have their orders checked quickly. To adapt the digitalization, McDonald’s
develops an app called MyMcDonald’s with features like rewards or promotions. Aiming to
door-to-door service, McDonald’s is present in several food delivery platforms such as
GrabFood or ShopeeFood. The last D is “Drive-thru” that is system placed outside the
restaurants to ease the process of order without having to step out of the vehicles and find a
place to park. Hence, these growth pillars of McDonald's helped this company adapt to the
changes by the COVID-19 pandemic.
Besides maintaining customers' loyalty, McDonald's also shoots for entering new markets. As
in the annual report 2020, revenues come mostly from internationally operated markets. This
explains McDonald's choice to expand globally by transnational strategy.
Besides the taste, different serving sizes also add some modification. Because the appetite of
the Japanese differs from that of Americans, the serving sizes of burgers, fries, and drinks in
Japan are smaller.
It can be assumed that expanding internationally by franchising is a beneficial method. One big
advantage is that the fast-food firm gains the majority of the income and revenue from the
monthly fees of 5% and rent paid by its franchisees. Margins coming from company-operated
restaurants accounted for only about one-seventh of what comes from franchising restaurants.
Another benefit is that, McDonald’s have the opportunity to spread worldwide leading it to be
one of the best global brands (Interbrand, 2021)
8
McDonald's prioritizes servicing families, children, and business people in order to remain its
customers' “favorite place and way to eat.”. The major activities of this fast-food corporation
are the marketing and sale of food and beverages. McDonald’s has adhered to each one of the
qualities with a value proposition: consistent high-quality food supplied fast and consistently
worldwide (mcdonalds.com, n.d).
For McDonald's, the connection improves resource management; it can cut expenses by having
platforms for exchanging critical information with consumers (Harker & Egan 2006). Raw
materials or acquisition, and labors are the most expensive component of McDonald's cost
structure. Rent and utilities, depreciation, and marketing are the next components in this cost
structure while employees and restaurants on a-locations are the company's two most important
resources.
IV.1/ Strengths
● Brand Awareness
McDonald’s has already been a highly-recognizable Food & Beverage brand worldwide. The
secret is its integration and adaptation to any culture throughout the world. Moreover, an
organization with an excellent service attitude, ample cleaning space, delectable cuisine, and
9
good service enhance this brand's value. McDonald’s also has a varied menu and plenty of
activities such as contests, minigames, or functions.
McDonald's maintains a high-quality level by using food safety and quality protocols. Before
generating the final product, McDonald’s will scrutinize the entire food process. The company
also launched the Food Safety Advisory Council to review the products and visit the supplier
site. There is a quality center in each country, helping them to maintain the local quality
standards.
McDonald's owns more than half of the land and 80% of the structures in its restaurants across
the entire chain. During 2018, the brand was supposed to run 37,855 restaurants in about 120
countries, with about 35,085 franchises and the remainder company-owner. Rents, royalties,
and launch fees of the franchised restaurants were $11.01 billion, accounting for more than half
of McDonald's revenue in 2017.
IV.2/ Weaknesses
McDonald's operated a total of 39,198 outlets across the world. However, the brand is taking
some risks due to the complex network of franchised and company-operated restaurants.
According to a Forbes.com article from March 2017, McDonald's has lost half a billion
consumers. Many McDonald’s customers complain about some initiatives such as drive-thru
menus that scroll too fast and are too confusing. Customers have not been drawn in by the
costly execution of "Experience of the Future" (Forbes, 2021).
● Expensive price
According to the United States Census Bureau, the average monthly income for Americans is
2,998 U.S dollars (2019). Whereas, the figure for Vietnamese citizens is 184.57 U.S dollars.
Precisely, a cheese beef burger- the cheapest burger from McDonald’s costs 2.15 U.S dollars,
which means that it makes up 1.17% of the average monthly income of a Vietnamese while in
the U.S, the same dish accounts for only 0.13% of the average monthly income of its residents.
10
Thus, McDonald's is quite expensive to Vietnamese consumers. On the contrary, other street
food with whole ingredients is cheaper which costs from 0.66 to 1.32 USD dollars.
III.3/ Opportunities
In early 2014, McDonald’s came to Vietnam, later than many other fast-food brands.
However, there were still some potential chances for McDonald’s in Vietnam
As a manager from Lotteria describes, Lotteria appeared in Vietnam in 1998, at that time, the
growth rate of Lotte was just a minor of 10%. This figure, from 2005 to 2010, had grown up
to 20% (Thanh Nhan, 2013). Besides that, as Hoang (2014) mentioned, the Vietnam market
has always been a potential market. Indeed, in the last two decades, Vietnam has developed
significantly. In addition, the Ministry of Industry and Trade in 2013 also indicated that in the
past 2 years, the growth rate of big fast-food brands in Vietnam has always been over 30%.
● Existing market
As can be seen, Jollibee, KFC, Lotteria are among the first movers of junk food in Vietnam. In
the 1990s, fast food was probably strange to Vietnamese people. It took KFC 7 years of loss
just to shape the fast-food style in Vietnam, even though they also had to change a lot to fit the
local eating culture. However, in 2011, the growth of the junk food industry was 26%. Thus,
McDonald’s would take a number of advantages, although it is a “latecomer”.
III.4/ Threats
There is a variety of cheap street food in Vietnam, which could be the barrier that prevents the
integration of McDonald’s in the pool of eating-out food. The dish directly served from the
11
bamboo rattan such as bun rieu, xoi can be easily found on many streets of the cities. The core
values of fast food are fast-convenient-cheap.
Another competitor to McDonald’s could be the convenience stores, which are popular among
teenagers and young adults. These food stores are places for gatherings with friends or
colleagues as their leisure activities. The fast-food meals from these stores are diverse and
inexpensive. Furthermore, these foods are also adjusted to fit the local and served at reasonable
prices. Consequently, it can threaten McDonald’s success in the Vietnam market.
When consumers now shift to healthier food options. Consumers now care more about calories,
ingredients as there is a rise in health awareness among consumers. Indeed, a report by Nielsen
showed that 41% of Generation Z and 32% of Millennials would “pay a premium for
sustainably sourced ingredients”. As a result, many restaurants add organic and nutritious
dishes to meet the needs of this trend. The propensity will intimidate a fast-food chain like
McDonald’s.
in Vietnam, thousands of people lined up for a long time just to please their curiosity
about the famous fast food brand (Le, 2014).
In addition, the fact that people in large cities become busier is also a significant issue
of McDonald’s. This is reflected in the e-news khoahocdoisong.vn: “many people even
do not have time for a meal, especially breakfast” (Ha, 2018). Therefore, dining-out has
become a waste of time. In point of fact, to buy a famous Big Mac burger, people have
to go to a McDonald's restaurant, park the car and then order. The process is time
consuming. , especially when the restaurant is crowded, as cited from an article of
Vietnambiz, “it can take 10 to 15 minutes to buy a burger from McDonald’s” (Quan,
2020). It can be said that, on the daily basis, street vending carts are more popular than
McDonald's restaurants due to the convenience advantage
V.2/ Microenvironment
1. Late-Night Workplace Violence
McDonald's has carried out extended hours of operation policies. This still happens even when
among its national competitors, the company has the longest work time. In its 2003 Plan to
Win, McDonald's aimed to increase shop convenience by extending work hours. This leads to
the controversy of late-night workplace violence. For more information, statistics show that
more than 90% of McDonald's stores extended their hours between 2003 and 2007, in which
approximately 40% of McDonald's stores operated 24 hours a day by 2007. As a result, fast-
food restaurants workers were the victims of late-night crime. Violent incidents that take place
between 10 p.m. and 4 a.m. account for 40% of the total incidents at hundreds of McDonald’s
locations with robberies, sexual assaults, battering, and other forms of harassment and abuse
among the instances. In recent years, McDonald's has been criticized by its employees.
13
Hundreds of workers demonstrated and went on strike in 2019 to demand higher pay and to
condemn unsafe workplaces (Haddon, H., 2019).
In the global market, besides the fact that McDonald's is leading in the industry, there are
multiple competitors within the ground. According to Investopedia (2021), in the fast-food
industry McDonald’s has to compete directly with Burger King who has more than 18,000
locations in more than 100 countries and $20 billion in revenue. In addition, YUM brands and
Wendy’s are also contributing to creating a competitive market with a large amount of capital.
Likewise, in Vietnam, McDonald's competes against plenty of massive global competitors such
as KFC or Lotteria. As was pointed out in the threat analysis section, street vending carts are
indirect rivals of the company.
3. Price
Moreover, indeed, the standard of living of Vietnamese people increased gradually, GDP per
capita was still a minor number ($2,030). Overall, the price of McDonald’s has been a little
higher in comparison with its direct rivals. Thus, it has been difficult for McDonald’s to
compete for market share in Vietnam. When its competitors such as Jollibee or KFC sell a food
combo at 2-2.5 USD, McDonald's offers above 3 USD/ each dish. Hence, in comparison with
other rivals, its price is assumed too expensive for the majority of Vietnamese.
5. Preference changing
As the market becomes more commercialized, more foods from all over the world are imported
into Vietnam, prompting a shift in customer behavior. Since delicacies from other nations have
been substituted, Vietnamese consumers are less likely to spend money on fast food (Aggregate
Foodservice Monitor, 2018).
According to Statista, the change in packaged food and beverage consumption expenditure will
be -4 percent in 2020. Customers will not have enough money to pay for fast food because they
have many other things to pay for. In addition, the price of McDonald's is higher than other
food chains as well as street foods in Vietnam.
Healthy food demand is increasing as many individuals are concerned about how to eat to
safeguard their health. As what the essay has mentioned in the SWOT analysis, McDonald's
have to face the negative perspective of selling junk food . As a solution, McDonald's has
created a menu with nutritional dishes such as salads in the Australian and American markets
(McDonald's menu, n.d). In the Vietnam market, however, McDonald's has not yet
concentrated on adding healthy meals to the menu, instead of sticking to the original fast-food
menu with fried chicken, burgers, and french fries. While KFC, Lotteria both have salad or
fruit on their menus, McDonald's has yet to put in place. Hence, this leads McDonald's to be
inferior to its competitors in Vietnam.
16
VI. Recommendations
Nowadays, in the Vietnam market McDonald's can apply cloud kitchens for serving customers.
According to the article by Thành N. (2019), organizing a restaurant in cloud kitchens is easier
and more cost-saving for retailers. As can be seen clearly in COVID-19 lockdown, customers
would like to order food for delivery. So, a cloud kitchen is a potential method for restaurants
because it can save the cost from staff and spaces. Through that, the company can more easily
release promotions to satisfy customers.
To lower the price of the products in Vietnam, McDonald’s might consider offering discounts
and coupons on its app or other delivery apps. Through its MyMcDonald’s app, the firm can
enhance customer integration and loyalty via rewards and redemption. This will also help
McDonald's gain a foothold in the fast food industry in the Vietnamese market. Customers love
discounts. Therefore, with the application of these digital coupons, McDonald’s can increase
the sales and reach more target customers when customers tend to look for special offerings
conveniently on the app.
Continuing implementing self-serve ordering kiosks is also a great method to reduce cost. As
a result, McDonald’s cost of labor deficit will be lower as customers will now be able to make
orders on their own. Although those kiosks still have a lot of complaints (as mentioned in the
Issues section), they may help reduce the cost of in-line waiting. McDonald's should upgrade
its self-serve kiosks and the drive-thru system. Therefore, the enjoyable experience of
consumers will help increase the efficiency of the restaurants.
With the aim of reaching health-conscious customers, McDonald's should focus on marketing
strategy. This can be done through promoting the healthy menu via menu boards, store promos,
and advertising campaigns . These campaigns emphasize the mission of Mcdonald's, which is
to enhance the food quality and offer nutrition options for its customers. By doing this,
Mcdonald's will be able to convey a "healthier" image, thus gaining the trust of customers,
boost the customer awareness, and shifting their brand recognition.
18
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Appendix
Average 45,000 vnd 62,000 vnd 61,000 vnd 77,000 vnd 75,000 vnd
price/ combo
(4)