Is Mcdonald'S Failure in Vietnam A Unique Case?
Is Mcdonald'S Failure in Vietnam A Unique Case?
Is Mcdonald'S Failure in Vietnam A Unique Case?
Introduction
McDonald’s is the biggest name in fast food, with almost 14,000 stores in the US
alone, and over 38,000 restaurants in 119 countries and territories worldwide.1 Despite a
shrink in US sales in the past several years, the number of McDonald’s stores worldwide is
steadily increasing up until 2019, showing promising signs of continuous growth overseas.
The Vietnamese market is one of McDonald’s most recent entry, with the its first franchise
opening in February 2014. Vietnam is an emerging market with a large population of almost
reaps major success in neighboring countries with similar culture and culinary tastes such as
China and Thailand, its entry into the Vietnamese seems to be well delayed. Henry Nguyen, a
venture capitalist and son-in-law of Prime Minister Nguyen Tan Dung, claims to have
worked with McDonald’s for a decade to finalize the Vietnam franchise deal.2 In 2014,
Nguyen stated his goal of reaching 100 stores throughout Vietnam by 2024; Six years later,
McDonald’s only has 23 stores in only two major cities, Ha Noi and Ho Chi Minh,
significantly lagging behind Nguyen’s initial goal.3 McDonald’s, along with other fast food
chains, are failing in Vietnam, despite the country presenting itself as the perfect potential
market with a steadily growing consumer market. McDonald’s unsuccessful entry into
1
S. Lock ,“Number of McDonald's in North America 2018,” Statista, May 6, 2020,
https://www.statista.com/statistics/256040/mcdonalds-restaurants-in-north-america/.
2
Phuong Linh Nguyen, “Tycoon's 10-Year Crusade to Get a Big Mac in Vietnam,” Reuters (Thomson Reuters,
August 4, 2013), https://www.reuters.com/article/us-vietnam-consumers/tycoons-10-year-crusade-to-get-a-
3
https://mcdonalds.vn/cua-hang/06-0/
Vietnam goes deeper than just economic factors; McDonald’s inability to adapt to the local
taste, late entry to the market, as well as fierce competition with other fast food brands and
street vendors leave many uncertainties about the future of the brand in the Vietnamese
market.
McDonald’s has proven its success overseas through increasing international sales
that make up for the diminishing US revenue. McDonald’s initial strategy to expand to its
first international markets, like China and India, is to appeal to the middle to upper class
population; however, McDonald’s also caters to lower-income market thanks to its plentiful
affordable options.4 McDonald’s business motto: “think global, act local” is the key to its
global success, as the company conducts extensive research into the key elements such as
local recruitment, especially at management level, to gain acceptance into the local scene as a
customer friendly and employee friendly brand, and gain easy association with local
government.
importance in promoting sustainability and giving back to the community, teaming up with
local organizations and schools in all countries the company operates in. This boosts
4
Bahaudin Mujtaba, “McDonald's Success Strategy And Global Expansion Through Customer And Brand
Loyalty” (Nova Southeastern University, 2006),
https://www.researchgate.net/publication/228490432_McDonald's_Success_Strategy_And_Global_Expansion
_Through_Customer_And_Brand_Loyalty.
5
Ibid., p.57
McDonald’s positive reputation, which they hope would attract more consumers to their
brand.
changes its pricing accordingly to income distribution and location of the country, making its
By following these strategies and careful adaptation to local culture, McDonald’s has
successfully penetrated many markets around the world, even countries with very high barrier
of entry like India. India is one of McDonald’s most successful market in Asia, despite tough
products. In addition to hiring locals, even for managerial roles, McDonald’s adapted its
recipes to use chicken and lamb instead of beef, and develops spicy flavors that meet with the
general preferred local taste. This put McDonald’s in a very favorable position in the Indian
government and public eyes, which fueled their major success in the country. This is a prime
political landscape; therefore, its entrance into the booming Vietnamese market should not
strategy.
Economic Landscape
6
Ibid., p. 59
7
“Vietnam GDP Growth Rate 1985-2020,” MacroTrends,
https://www.macrotrends.net/countries/VNM/vietnam/gdp-growth-rate.
Vietnam is one of the fastest growing country in Association of Southeast Asian
Nations (ASEAN) region, boasting an average GDP growth of 5.3% since its economic and
political reform Đổi Mới in 1985. Thanks to trade growth, the Vietnam’s GPD per capita rose
rapidly from $1000 in 2008 to $1550 in 2012, an impressive 55% increase.8 With rapid
the fast-food sector experienced a boom in 2010, with Western chains like Pizza Hut,
Domino’s, Carl’s Junior, Burger King, Subway, and more, entering the $94.5 million
market.9,10 In the upcoming years, the fast-food market demand enjoys steady growth, totaling
to $113.3 million in 2011, $130.3 million in 2012, $149.9 million in 2013, and $175.4
million in 2014, the year that McDonald’s entered the market.11 This market demand is
expected to continue expanding, as Vietnam has the fastest-growing middle and upper class
8
Lien Hoang, “McDonald's Takes a Bite out of Vietnam,” China | Al Jazeera (Al Jazeera, February 22, 2014),
https://www.aljazeera.com/indepth/features/2014/02/mcdonald-takes-bite-out-vietnam-
201421913317804216.html.
9
“Fast Food Catches On in Vietnam,” Promar Consulting, August 19, 2013,
http://www.promarconsulting.com/company-news/catching-up-with-the-fast-food-in-vietnam/.
10
Ngoc Ninh Ta, “Lotteria Business Case” (The National Economics University - Hanoi, 2015),
https://sites.google.com/site/group1mba13/.
11
Ibid.
population in ASEAN; Boston Consulting Group estimates that this number would increase
wealthier population has more disposable income to spend, they start looking to foreign
brands for premium products. Vietnam’s consumer spending is growing at 7.2% annually,
rising from $76 billion in 2008 to $167 billion in 2018, which is the fastest in the region.13
Additionally, Vietnam has a very young population, in which around 60% of the 90 million
people are below 35 years old.14 Therefore, despite its late entrance, McDonald’s still regards
Political landscape
12
Lien Hoang, 2014.
13
McKinsey & Company, “Seizing the Fast-Growing Retail Opportunity in Vietnam” (McKinsey & Company,
2019), https://www.mckinsey.com/~/media/mckinsey/industries/retail/our%20insights/how%20companies
%20can%20seize%20opportunity%20in%20vietnams%20growing%20retail%20market/seizing-the-fast-
growing-retail-opportunity-in-vietnam.ashx.
14
“Insight Handbook 2019” (Kantar World Panel, 2019),
https://www.vietdata.vn/fileman/Uploads/tbBaoCao/10046/FMCGGrowthReportVietnamInsight20190717Oth
erEN.pdf, 20,23-24.
Corruption Perception Index – Vietnam15
country but implementing different tax incentives and loosening laws concerning foreign
ownership. However, Vietnam’s Corruption Perception Index (CPI) remains very low, with
year 2011-2014 at 31/100, and hit 37/100 in 2019, only 6 points higher than 2014. Therefore,
entering the Vietnamese market might be difficult, especially confronting with potential
easier if they award the franchising right to a local who is well connected with the
government, in addition to helping the firm avoid complications with the Foreign Corrupt
After a careful selection process that took up almost a decade, McDonald’s has agreed
to grant Vietnam franchise licensing right to Henry Nguyen, who is also the son-in-law of
15
“Corruptions Perceptions Index for Vietnam,” Transparency.org, accessed July 1, 2020,
https://www.transparency.org/en/cpi/2014/results/vnm.
Prime Minister (at the time) Nguyen Tan Dung.16 Prior to Mr. Nguyen wining the franchising
rights, there were many rumors to why McDonald’s did not enter the Vietnamese market,
most about McDonald’s adamance on importing all of its supplies and the Vietnamese
government not agreeing to the firm’s wish. However, in 2013, the deal went through with
McDonald’s still importing most of its supplies and only sourcing two ingredients locally:
tomatoes and lettuce. Mr. Nguyen claimed his expansion goal for McDonald’s will be “step
by step” instead of rapid expansion, with goal reaching 100 stores in the next decade.
However, the point in time when Nguyen was awarded the franchising rights, the Vietnamese
economy seemed to be faltering, raising many questions on the timing of entry as demand
for fast-food started to slow down already. McDonald’s spokesperson Becca Harry stated:
“[Henry Nguyen’s] marriage did not preclude him for participating in what was a very
competitive selection process for our partner in Vietnam,” and Nguyen insisted his
relationship with his father-in-law has nothing to do with why he won the franchise deal. 17
Nevertheless, no one can deny McDonald’s potential advantage in navigating and dealing
with Vietnamese bureaucracy would be much easier with the assistance of Mr. Henry
Nguyen’s connections. Bill Hayton, a former foreign correspondent, said: “Having the
second-most-powerful man in the country as father-in-law is like having a golden ticket and
McDonald’s is choosing to focus its targeted market to younger people, as they make
up the majority of the population. Millennials (born between 1980-1996) and Centennials
16
Phuong Linh Nguyen, 2013
17
Ibid.,
18
Mike Ives, “McDonald's Opens in Vietnam, Bringing Big Mac to Fans of Banh Mi,” The New York Times (The
New York Times, February 7, 2014),
https://www.nytimes.com/2014/02/08/business/international/mcdonalds-chooses-its-moment-in-
vietnam.html.
(born after 1996) make up 65% of the Vietnamese population, and make up the two largest
consumer bases in Vietnam. Millennials and Centennials share some similar traits of being
tech-savvy, seeking out and being eager to embrace new experience: Vietnamese millennials
are tech-savvy, early adopters of healthy lifestyle and responsive to innovative product that
would provide convenience and save time; Centennials are social media obsessed, always
seeking new experience with friends, and love to adopt new food and drinks trends.19
According to a Young & Rubicam online study of 18-35 years old generation, 43% of the
Vietnamese in this demographic falls under the segment “Optimists”: Optimists are open to
different cultures; prefer brands with a reputation, and love the idea of capitalism.20
Additionally, Ho Chi Minh city, Vietnam’s largest urban city, is also home to a large
population of “Hungry Climbers” (38.1% of population), in which trends, the desire to appear
These market segmentations indicates that Vietnam is a very attractive market for
Vietnam doesn’t simply mean there is another fast-food option; it is a confirmation that
Vietnam is catching up to its neighboring peers. The surging upper-middle class and business
people, who often travel overseas to neighboring countries like Malaysia or Singapore, seem
to not understand why McDonald’s is everywhere but Vietnam. Le Thi Tuoi, a customer at
McDonald’s grand opening, mentions that she has eaten McDonald’s overseas, and
comments: “Vietnam has developed already, right?[…] So of course, you have to let the
citizens know about all the things the world has, Vietnam should have it, too. We
Vietnamese are proud in that way. So I've been waiting for [McDonald's] to come here.” 22
19
Kantar World Panel, p.19,23-24
20
Ibid.
21
“Seven Global Clusters -- Asian Perspective” (Hakuhodo Global, 2017), https://www.hakuhodo-
global.com/wp_admin/wp-content/uploads/2017/09/2011.pdf.
22
Lien Hoang, 2014.
McDonald’s coming into Vietnam is a big deal, and is undoubtedly extremely attractive to
the younger and middle/upper class population of Vietnam as it signifies that ability to be
eat the same burger as other developed countries around the world.
The importance of the McDonald’s brand name has been proven to be remarkable,
as Vietnamese flocked to its first store in Ho Chi Minh city, lining up for hours to have a taste
of the famous Big Mac. McDonald’s first store in Vietnam was the first to be a 24 hour
service drive through restaurant, which additionally attracted many curious citizens to its
unusual drive through. The restaurant served 40,000 people in the first two days, and
remained wildly popular with the younger population in the next several months, serving up
to 5,000 people a day. Three months later, McDonald’s opened its second store in Ho Chi
underdeveloped, Vietnamese suppliers lack the quality and consistency standard required by
ingredients overseas. McDonald’s only use two locally source ingredients: lettuce and
tomatoes; beef is imported from Australia; potatoes and pork are imported from the US, and
boxes and cups are imported from China or Australia.23 Consequently, McDonald’s supplies
are all subjected to a 5%-10% import tax, making it difficult for McDonald’s to price its
23
“McDonald's to Expand Operations in Vietnam,” Vietnam Briefing News, July 22, 2015,
https://www.vietnam-briefing.com/news/mcdonalds-expand-operations-vietnam.html/.
Despite its reputation of being affordable in many developed nations, McDonald’s
often priced out when entering developing economies. McDonald’s, therefore, position itself
to target the wealthier population in Vietnam. However, the price of just a single Big Mac is
priced at 66,000 VND (US$2.85), while the average price of a bowl of pho in Ho Chi Minh
ranges from around 30,000 VND to 50,000 VND (~US$1.5-US$2.25). At Relish & Sons, a
popular full-service burger restaurant in Ho Chi Minh, you can also get a burger for a little as
70,000 VND.24 Therefore, pricing is definitely not McDonald’s value proposition in Vietnam,
but it must rely on other aspects such as commitment to food quality and friendly service.
Competitive environment
McDonald’s late entrance into the Vietnamese market poses as 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. At the time of McDonald’s entry, Lotteria had
the largest market share of 51%, as the South Korean firm has the first mover advantage of
entering the market in 1998, and bringing an Asian taste profile that is closer to the
Vietnamese palate.25 KFC came second at capturing 32% market share, and 17% is the rest.26
Despite McDonald’s being a famous global brand that came in with an interesting store drive-
through store concept, the hype died down very quickly as it failed to standout from other
Not only does McDonald’s struggle to compete against other fast-food brands, its biggest
competitors are actually local street vendors, who provide very cheap food very fast.
24
Relish & Sons menu. http://relishandsons.com/#
25
Mai Nguyen, “Is the Golden Age for Fast Food over?,” Is the golden age for fast food over? - News
VietNamNet, 2016, https://english.vietnamnet.vn/fms/special-reports/160034/is-the-golden-age-for-fast-
food-over-.html.
26
Ngoc Ninh Ta, 2015
McDonald’s came to fame thanks to its affordable, convenient and fast service; however, in
Vietnam, street vendors can effectively beat McDonald’s in every facade. Vietnamese people
are also spoiled with food options, especially cheap food, as there are around 430,000 street
vendors, 80,000 full-service restaurants, 20,000 cafes and bars, in comparison to only 7,000
fast-food stores, and only 16 McDonald’s stores around the country in 2018. Unless
McDonald’s is able to offer something extremely unique, it seems that the firm is getting
Analysis
McDonald’s is far behind its goal of reaching 100 stores in Vietnam by 2024.
Currently, the firm barely reached one fourth of its goal and is now facing very slow growth
as its other fast-food giant competitors also suffer similar fate. McDonald’s really failed to set
itself apart from other fast-food chains that entered Vietnam earlier, despite its proven
success in many Asian countries. After 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.27 By the end of 2017, McDonald’s
Vietnam has its own very strong local cuisine that is hard to beat in terms of price and
taste; therefore, adaptation to local taste has been a somewhat effective strategy adopted by
Vietnam’s biggest fast-food chains such as Lotteria, KFC and Jollibee. Since Lotteria and
Jollibee are both Asian-based fast-food chains, the adaptation to local taste process has been
easier due to similarity in ingredients the taste; KFC is the only Western-based chain that
27
Lien Hoang,“Turning 1 in Vietnam, McDonald's Sees Mixed Performance in Asia,” February 13, 2015,
https://www.voanews.com/east-asia-pacific/turning-1-vietnam-mcdonalds-sees-mixed-performance-asia.
28
Nga Nguyen, “Các Hãng Thức Ăn Nhanh Đua Nhau Lỗ,” Báo Thanh Niên (Báo Thanh Niên, September 13,
2018), https://thanhnien.vn/tai-chinh-kinh-doanh/cac-hang-thuc-an-nhanh-dua-nhau-lo-1002617.html.
seems to be successful in their adaptation to local palate. Some experts point out the reason
why locals don’t seem to resonate strongly with the McDonald’s menu is because burgers
after often associated with beef, and Vietnamese traditionally consume more pork and
chicken.29 This gives an advantage to KFC, Lotteria and Jollibee as their menu align more
closely with Vietnamese traditional diet. However, McDonald’s is taking very careful steps
approaching the diversification and localization of its menu, as it risks losing its unique brand
identity if the brand starts offering local menu, which would weaken McDonald’s presence in
Vietnam even more.30 McDonald’s can learn from Burger King’s attempt to localize by
adding fried chicken and fries to their menu, only to see its minimal effectiveness as this fast-
However, McDonald’s is not the only fast-food brand that is struggling in Vietnam.
Many foreign fast-food brands have been reporting losses since they entered the country.
Lotteria and Jollibee, two major players in the fast-food scene, both reported major losses of
433 billion VND and 400 billion VND respectively. Pizza and donut chains are not doing any
better, also reporting huge losses. KFC is the only chain that is the green for year 2016 and
2017, reporting a profit of 1.3 billion VND (~US$56,000) in 2016, and 103 billion VND
(~US$4.5 million) in 2017.32 Experts believe this number is still very low considering the
29
Lien Hoang, 2015
30
Ngoc Lan, “Not to Everyone's Taste,” VnEconomicTimes, 2017,
https://vneconomictimes.com/article/business/not-to-everyone-s-taste.
31
Mai Nguyen, 2016
32
Nga Nguyen, 2018
33
Ibid.
Burgers and pizzas are losing its following in Vietnam as consumers shift their
preferences to Japanese food, BBQ and Hotpot when they choose to dine out. Culturally,
Vietnamese people prefer a communal dining experience, in which they order food to share
with the table; fast-foods often do not offer the same kind of communal experience that
people would seek when going out to eat. Vietnamese tastes are shifting away from what
might have been “Western curiosity” to go back to Asian-centric offerings and dining
34
Minh Hoang Tran, “Vietnamese Diners Put down the Burgers and Pizza in Favour of Japanese, BBQ and
Hotpot,” Making market research agile, connected and decision focused, 2019,
https://www.decisionlab.co/blog/vietnamese-diners-put-down-the-burgers-and-pizza-in-favour-of-japanese-
bbq-and-hotpot.
Conclusion
flopping in Vietnam. Despite having very strong government connection and backing, as well
as a distinctive brand name that brings almost a cultural significance to its entry into
Vietnam, McDonald’s is unable to capture a steady following like KFC or Lotteria due to its
late entry into the fast-food scene. Furthermore, Vietnam has a very strong street vendors
scene that could deliver food faster and cheaper than McDonald’s, something that the brand
is world famous for; consequently, McDonald’s is left to position itself in the premium
market, which would only allow the brand to capture a smaller portion of the market.
However, McDonald’s failure is not simply due to its price and time of entry. but largely due
to the fast-food craze dying down, and Vietnamese people preferring a different type of
dining out experience that do not necessarily align with the business model of burger or fried
chicken fast-food chains. Due to this preference shift, not only McDonald’s, but the whole
Western fast-food industry is failing in Vietnam, in which large established chains that have
existed in the country are consistently in the reds. There must be some radical restructuring to
the whole industry to localize both the menu and dining experience without sacrificing the
McDonald’s unique brand name. There are still many uncertainties when it comes to what
McDonald’s chooses to do next in Vietnam, but if it doesn’t take quick actions, McDonald’s
might exit the market that it took almost a decade to finally enter.
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