I Introduction

McDonald's is business that provides a fast-food restaurant chain with 36,000 restaurants in
119 countries. McDonal’s serving 43 million customers a day under its own brand. The company
was founded in 1940 by brothers Richard and Maurice ("Mick & Mack") McDonald. However,
the platform of today’s successful business is that Ray repurchases McDonald’s and develops
into one of the world's most successful fast food business projects.

The purpose of the report is analysis of McDonald’s internal and external environment to create
opportunity to be a profitable investment, demonstrate both the positive and negative
influence/impact the macro environment has on business operations, and determine the
internal strengths and weaknesses of specific businesses and explain their interrelationship
with external macro factors

Structure of the report:

Part 1: Analysis of competitive environment by five force model

Analysis 6 factors of macro environment by Pestle model

Part2: internal analysis of the company by analyzing the following factors:

Core value or Mission or Vision

Organizational structure and Human resources

Brand name or brand equity

Financial strength/ factors

Fix/physical assets, Market resources

Technology base or Research and Development

Part 3: how strengths and weaknesses interrelate with external macro factors by SWOT

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Analysis of McDonald’s competitive environment

1. Definition of Five force model

The “five Porter’s force” model was introduced by Michael Porter Who is famous business
manager. The key point that Porter presents through this model is that all business sectors are
under competitive pressure from 5 forces, including:

 Threat of new entrants

 Bargaining power of suppliers
 Bargaining power of buyer
 Threat of substitute products
 Rivalry among existing competitors

On the other ways, “five force” model is presented clearly through this diagram:

2. Applying five force models to analyze McDonald's business opportunities in Vietnam market

A) Rivalry among existing firms

Vietnam is one of the countries with a young population who tend to eat fast food than other
food; it has become a great potential market for F&B industry. According to statistics of Dcorp
R- Keeper Vietnam (DN provides POS solutions and technological ecosystems for F&B

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businesses), there are 540,000 restaurants in Vietnam, including about 430,000 small stores,
7,000 restaurants specializing in fast food service, 22,000 coffee shops, bars and over 80,000
well-invested restaurants. Over the years this number has increased rapidly and significantly.

Industry growth: According to Statista, the revenue in the Food and Beverages segment
amount US200m in 2019. Revenue is expected to show an annual growth rate (CAGR 2019-
2023) of 19%, resulting in the market volume of US407m in 2013. In the Food & Beverages
segment, the number of users is expected to amount to 19.7m by 2023

Loyal quality: They can easily switch from one restaurant to another without any switching cost
if they are unsatisfied. Customer loyalty to fast food is decreasing day by day with so many
competitors. The buyers easily protect any price increase by McDonald’s and shift to other
competitors

Number of competitors and Diversity of competitors: if McDonalds wants to entrance

Vietnam, McDonald will have to face at least 3 names that are very formidable: KFC, BBQ and
Lotteria. To be specific:

KFC: KFC (Kentucky Fried Chicken) is the brand of the second most popular fast food chain in
the world after McDonald’s. KFC mainly sells fast-food dishes made from chicken and the most
famous dish is Fried Chicken. KFC started arriving in Vietnam in 1997. Currently KFC has 71
stores in eight provinces and cities, the most of which are in HCMC with 45 stores, the rest are
in Hanoi, Can Tho and Ba Ria-Vung. Tau, Bien Hoa, Buon Ma Thuot, Hue and Hai Phong.

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Burger King: is the world famous fast food chain with groundbreaking Hamberger recipe and
100% beef material imported from Australia. King BBQ has 13 restaurants in Ho Chi Minh, Hai
Phong, Da Nang, Ha Noi

Lotteria: Lotteria is a world famous fast food brand that originated in Japan, then Korea and
now has great success in many other countries. In Vietnam, Lotteria is currently one of the fast
food brands close to Vietnamese consumers. Lotteria is leading the fast-food industry in
Vietnam with over 210 restaurants in approximately 30 cities/provinces throughout the country
and these number are increasing incessantly

B) Bargaining power of suppliers

Number and size suppliers: the supply of input materials is one of the most important issues,
however, it is easy to recognize that McDonald’s in particular and fast food companies in
general, it basically will take great advantages from suppliers First of all, Vietnam is an
agricultural country. Cultivation and animal husbandry are two major development sectors in
Vietnam, which has created a huge advantage for McDonald's when it is possible to use
indigenous materials. Company always is proactive to find material and reduce costs

Focal company’s ability to substitute: : Almost suppliers of raw materials for fast food
companies in Vietnam are still mostly small suppliers and no connection. This is a great
advantage of McDonalds not only in dealing input supply prices but also extremely easy to add
or replace old suppliers with new suppliers.

In conclusion, it can be said that the competitive pressure from suppliers towards McDonald’s
when entering Vietnam market is very little and almost negligible.

C) Bargaining power of buyer

Number of customers: In the Food & Beverages segment, the number of users is 14.2m in
2017 and is expected to amount to 19.7m by 2023

Buyer’s ability to substitute: The buyers of McDonald’s have many options available in the
market today.

Switching cost: if customers are unsatisfied, they can choose other restaurant without any
switching cost

Price sensitive: In Viet Nam, Restaurants are not being pressured into boosting prices because
of beef, cheese and pork prices always keep in the balance way

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Difference between competitors: Speeded
Service System, Popular self-service style:
customers instead of sitting on cars are eating
on the spot, now they have to stand in line
waiting for their turn to bring food

D) Threat of substitute products

Number of substitute products available: In

Vietnam market, the variety of fast food is very
large such as fried chicken, fat hamburgers,
Sandwich and salad, bread, pizza hut

Buyer propensity to substitute: in addition, for

many people the health play an important role
in their life. They tend to choose something good
or nutritious meals for the lunch

Relative price performance of substitute: Recently, Vietnamese traditional fast food is also
developing and favored by the taste, nutritional standards but the price is reasonable than the
foreign fast food.

Perceived level of product differentiation: The taste of Vietnamese people with the
characteristic "delicious and healthy", completely different from the fat and rich of the dishes
imported

It can be seen that the pressure from replacement products for fast food products is really high.
A lot of assignments from mass media have provided the risks to eat fast food; this challenge
puts companies in the industry in a very dangerous situation

E) Threat of new entrants:

Customers’ number

Vietnam market is a relatively large market for the food industry, besides the efforts of fast
food firms have made Vietnamese tastes somewhat acceptable to products.

Profitability

It tends to increase over the years. According to a report from the Ministry of Industry and
Trade, the total turnover of the fast food industry in 2018 was US149m approximately. In the
future, with the globalization, this number will increase more and more.

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Number of enterprises in the industry

The fast-food market in Vietnam at the present is considered to be very bustling with quite a
number of names, big and small, and big firms from foreign countries such as KFC, Lotteria, and
BBQ ... are still accounting for the majority of market share compared to domestic enterprises.
Thus, despite the pressure from the competition of many rivals, with the large market and high
profitability, the attractiveness of Vietnam's fast food industry is still relatively large. Industry
entry barriers are also not high. Furthermore, Data on inputs, qualifications, inventions, human
resources, protection of government.... The food industry does not have a high requirement for
specific capital, techniques and resources. The distribution system and brand are really barriers
here but in Vietnam, the main fast food shops are only distributed in big cities, densely
populated areas and have a high standard of distribution. They are not yet considered to be
developed

 It can be affirmed that the fast food market in Vietnam is a potential market when
meeting the factors attracting investors. Although it is a fierce competitive environment,
if you know how to use the right strategies, this will be a fertile ground for McDonald’s

Analysis 6 factors of macro environment by Pestle model

1 Politics

The advantages of politics:

In terms of politically domestic policy, the government kept a political stability and showed
some positive signs. 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. For example, the freedom of the press seemed to be
extended. Since the entrance to WTO, Vietnamese government has had a lot of policies to
encourage Foreign Direct Investment (FDI). In detail, according to Resolution No.103/NQ-CP
issued on August, 29th, 2013 “on the orientation towards enhancement of efficiency in
attracting, using and managing foreign direct investment capital in the near future.

The disadvantages of politics:

Beside these above advantages of political status in Vietnam affecting McDonald’s strategies,
there are still minor hindrances. Though our government has been encouraged corporations
with FDI to invest in Vietnam, there have been a number of complicated procedures and
documents. Moreover, Vietnamese administrative controlling systems are not explicit. The

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corruption still exists in a variety level of authority. These facts are time consuming and cause
an unfair competition

2 Economic
Economic growth in 2018 reached 7.08% compared to 2017, the highest increase in 11 years

Inflation is controlled. Consumer price index (CPI) in 12/2018 decreased 0.25% compared to
the previous month; The average CPI in 2018 increased by 3.54% compared to 2017, under the
target set by the National Assembly; CPI in December 2018 increased by 2.98% compared to
December 2017

The financial crisis from 2008 has influenced on Vietnam economy, the number of the
unemployed has increased significantly, and people’s consumption has been melting down.
However, the situation has been a bit better from the end of 2012. While other big brand
names in fast-food industry such as KFC, Lotteria, BBQ, Jollibee experienced the worst
economic situation

McDonald’s chose the right moment to enter Vietnam. 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.

3 Social cultures

Vietnam’s population is quite young. Therefore, on one hand, young and dynamic people easily
accept and adapt new trends from western countries. On the other hand, fast food has been

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playing an essential role 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.

A restaurant with tasty food, nice space and decoration and reasonable prices is an ideal place.
Besides, 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. That is the reason why fast food in western countries is nothing
more than the one with low prices and convenience whereas in Vietnam it is supposed to be a
luxurious food for medium and high classes. With this trend, the chain of McDonald’s stores will
have a potential and big market in near future.

4 Technological

As many other modern stores, McDonald’s provides free wireless internet access inside of their outlet in
order that their customers can easily browse internet while eating. However, the most outstanding
innovation of McDonald’s came from 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 provide
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.

In conclusion, even though McDonald just newly entered to Vietnamese fast food industry, it seems to
be their plan for the late arrival. In comparison with other giants, McDonald’s does obviously not have
disadvantages of a new comer, its advantages are even more outstanding than others’ because it has
finance, reputation and good relationships with the local authority

5 Legal

 Reviewing and removing excessive restrictions and allowing greater participation in

capital markets and financial markets on the principle of effectiveness and closeness
 To complete the regulations so as to strengthen the management of labor in foreign
investment projects
 To complete the mechanism and policies to attract foreign direct Investment into
supporting industries; study and draft the Law on Encouragement and Development of
supporting industries
 Performing additional study to supplement the criteria for application of investment incentives
other than on the sole basis of investment domains and geographical areas such as: projects in
supporting industries, highly value-added projects, projects consuming a large amount of
domestic material, projects with commitment to transfer advanced technology.

6 Environment
Viet Nam is blessed by the nature, with a great ecological and hydrological diversity. The
country is made up of equatorial lowlands, high, temperate plateaus and cooler mountainous

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areas. It lies in the inter-tropical zone and local conditions vary from frosty winters in the far
northern hills to the year-round subequatorial warmth of the Mekong Delta.

However, environment pollution is a serious issues in Viet Nam. It is estimated that 80% of the
lakesides have got polluted, 71% of lakes have suffered from pollution, 26% of the lakes still do
not have embankments, while 8% of lakes have partial embankments. Environmentalists have
called on to take urgent actions to protect the remaining lakes, or they would also disappear
one day.

For Environmental factor, Vietnam has a long coastal border (2500km) and is considered as one
of the most vulnerable countries due to natural disaster risks, climate change and sea level rise.
Enterprises in Vietnam have to take seriously into account the environmental factors to their
business planning and operating processes. Vietnamese peoples do not tolerate easily to
business practices that harm to environment. For example, the Vedan Vietnam Limited JSC, a
wholly Taiwanese-invested firm has to pay a “high cost” for its pollution to Thi Vai River, the
Coop Mart Supermarket System and retailers refused to sell Vedan’ products, promotional
activities encourage the clients to say NO with Vedan and the company is facing to bankruptcy
in 2007-2009.

III. Part 3 Conduct Analysis Company

McDonald’s Corporate Mission

McDonald’s corporate mission is “to be our customers’ favorite place and way to
eat and drink.” This mission statement highlights the significance of customers as
the business focus, while maintaining the company as a major influence on their
food and beverage purchase decisions McDonald’s corporate mission statement
has the following main components:

Customers’ favorite place to eat and drink

Customers’ favorite way to eat and drink

McDonald’s Corporate Vision

McDonald’s Vision is to be the world’s best quick service restaurant experience.

Being the best means providing outstanding quality, service, cleanliness, and
value, so that we make customer in every restaurant smile

McDonald’s Corporate Organization structure

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McDonald’s Corporation has a divisional organizational structure. Conceptually,
in this structure type, the business organization is divided into components that
are given responsibilities based on operational requirements. Each division
handles a specific operational area or set of strategic objectives. One of the aims
of this corporate structure is to support autonomy and organizational flexibility in
satisfying business needs in different organizational aspects and markets.

The benefit of structure

Having tight control of the firm

Easily operate the company

Improving employee’s performance

Atmosphere of cooperation and teamwork

The following chart is the organizational structure of McDonald

The disadvantages of structure

However, a disadvantage of McDonald’s organizational structure is that it tends to generalize
strategies for the performance-based divisions. This issue limits business flexibility. Thus,

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McDonald’s could improve its corporate structure by changing or adjusting how these
performance-based divisions are used in strategic implementation.

The human resource

With Flexible work, modern working atmosphere, high development opportunities ... are
factors that make McDonald’s a place of opportunity for 400,000 employees who are working
in 36,000 headquarters.

The human resource department at McDonalds is working as separate department and holds
an important place in almost all major operations of the organization. All managers therefore
take on human resource responsibilities. Employees are the most important resources in
McDonalds particularly in creating a competitive

Brand equity: McDonalds is one of the most powerful brand in the world with having $97.72
million in United States worth value( Statista in 2017). It main assets are its employees and
secret recipe of their sauces and burger patties. Moreover, its shake has much preference of
people.

Finance: MCDONALD'S CORPORATION's revenue decreased 7.87% in fiscal year 2018 compared
to the 2017 fiscal year to 21.03B. Net income increased by 14.10% to 5.92B.

Revenues reflect U.S. segment decrease of 1% to $1.85B, International Developmental Licensed

Markets & Corporate segment decrease of 54% to $446.4M, U.S. segment decrease of 1% to
$1.85B, Comp Store Sales (Growth-%). International decreases of 23% to 6%.

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Strong brand name, image
and reputaition. Mcdonalds í
the leading global foodservice
retailers with more than
34,000 local restaurants
serving nearly 69 million
people in 119 countries each
days. The McDonals’s image
is easy recognized every
where

Mcdonal is very serious on training managers. This company has its own program to train
managers the most professionally, which is called Hamburger University. As a result,
Mcdonals’s has many good managers who can help company development well

The ability to adapt to local taste is one of McDonalds’s streng. Partnership with best brand.
McDonald’s offers only most popular brand in it restaurants.

Weakeness

Unhealthy food: There are foods n menu of Mcdonalds largerly formed of unhealthy meal and
drink. Nowadays, people have trend to be take care them health, they tend to use healthy food.

Moreover, many others quit their jobs, especially part time employees because of low salary as
well as too high working pressure

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Strengths
(Internal, positive)
1. High market
penetration.
2. Global operation.
3. Partnerships with the
best brands.
4. Moderate
differentiation
5. Children are target
customers.
6. The second-largest
restaurant network
serving customers.
SWOT Analysis McDonalds in Vietnam
Weaknesses Opportunities Threats
(Internal, positive) (External, positive) (External, positive)
1. Easily imitable 1. Prosperous developing 1. Vietnam has a lot of
business. markets. fast food, not only
2. Low control on 2. Vietnam’s population is cheap but
franchise model quite young. convenient.
3. Unhealthy food 3. Vietnam's accession to 2. Cross-cultural
menu. the WTO will create difference.
4. Price competition. conditions for foreign 3. Increasing trend
companies to toward healthy food.
penetrate the domestic 4. Emergence of
market. numerous fast food
competitors.
5. Increasing trend
toward diet or
healthy eating.

S-O Strategies

1 Expansion in the market share by more investment in Asia (S3, S1, O1)

McDonalds takes advantage of the power of market share and the opportunity of the
relationship between McDonald's and franchisees. McDonald’s sets a strategy to expand its
market share by increasing investment in Asian markets.

We know Asia with a population of more than 1/3 population, a rapid economic growth with
many major markets such as Japan, Korea, India, China and Indonesia. According to the statistic
of 14134 consumers in 28 countries of AC Nielsen by the end of 2017 shows that Asia is the
hottest growing fast food market in the world. In Southeast Asia and Vietnam, 30% of
consumers eat outside at least once a week. Specifically, the percentage of people eating
outside the home at least once a week is Hong Kong 61%, Malaysia 59%, Philippines 54%,

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Singapore 50% ... This is a fertile land attracting many investors. especially in the fastfood
industry.

On the other hand, the franchise form is quite new in this area. However this is also a fastidious
market, many cultures with different customs, different tastes. Thanks to a relationship with
elevated franchisees McDonald's can better exploit this market thanks to franchisees' domestic
market insights to further develop their market share.

W-T Strategies

Applying 0 gram Trans-fat in all worldwide McDonald’s (W3, T5, T3)

The weaknesses are nutritional imbalances. This is a problem that can cause consumers to be
averse to the product, decreases sales, in the long term may be failure. Fast-food contains lots
of calories and cholesterol, it also cause obesity for those who tend to "abuse" them. There are
many fast foods that also cause an increase in blood sugar.

In addition, if you use a lot of fast-food, you will put a high amount of salt and preservatives in
your body, causing harm to your heart, kidneys, arterial hypertension and a type of saturated
fatty acid produced during processing. It is the same reasons that require enterprises to have a
strategy to improve product quality in the present as well as in the future before consumers
have a bad reaction to the product. On the other hand, legal actions related to health issues,
use of saturated fat and animal fat are set aside for McDonald’s challenges. Therefore, the
business has come up with a strategy to use healthy fats in all McDonald's stores around the
world. Create more trust for consumers about products. With this strategy McDonald’s
minimizes the threat of the market and seizes opportunities when consumer trends are
becoming more selective.

Focus on plan to win to attract customer in other countries

One of McDonald's strengths compared to other competitors is McDonald's plan to focus on

the 5P factor in marketing that is resources, products, locations, prices and promotions.
Consumers are becoming more and more fastidious, especially in the dining area. The original
purpose of McDonald’s is to target a standardized fast-food menu with the same taste and
quality, regardless of location. But McDonald's realizes that a slight adjustment of the taste and
local ingredients will make it much more successful. For example, in Israel, some Big Mac butter
cakes are not spread, to separate meat and dairy products according to the diet of many
customers.

In terms of price, it is difficult to be standardized globally, because consumers' income in each

country is different depending on the economy of that country. Therefore, McDonald’s sets

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different prices for their fast foods based on national analysis and research. In addition,
McDonald’s attempts to maximize localization of marketing programs, because it recognizes
that it will not be able to entice customers at all with just one general method. McDonald’s
clearly sees the need to "build a global brand, local marketing action". For example, in China,
McDonald’s realizes that television advertising will be a waste of money, because these are
often overlooked. Instead, McDonald’s uses newspapers to promote images. Similarly, in East
Asia, McDonald’s aims to be the children to get the best results. Of course, the last brand /
message is the same, they are only different in the way the process has been cleverly adjusted.

The close connection with the local workforce helps McDonald’s global business strategies
seem to be more successful than other rivals thanks to their understanding of the domestic
market. Along with the trend of globalization and the strong development of the two giant
markets of China and India, McDonald's has not missed the opportunity to enter and expand in
these two potential fastfood markets.

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