Customization and Standardization of The Business Strategy of Foreign Enterprises in Vietnam. The Mcdonald'S Case and The Fast Food Sector
Customization and Standardization of The Business Strategy of Foreign Enterprises in Vietnam. The Mcdonald'S Case and The Fast Food Sector
Customization and Standardization of The Business Strategy of Foreign Enterprises in Vietnam. The Mcdonald'S Case and The Fast Food Sector
E-ISSN: 2663-3337
P-ISSN: 2663-3329
IJRMMS 2019; 1(2): 44-50 Customization and standardization of the business
Received: 17-05-2019
Accepted: 20-06-2019 strategy of foreign enterprises in Vietnam. The
Dr. Nguyen Hoang Tien
McDonald’s case and the fast food sector
Saigon International
University, Vietnam
Dr. Nguyen Hoang Tien
Abstract
The 21st century brings together a number of changes in all fields. The market evolved continuously
and it is becoming more and more difficult for businesses to differentiate from their competitors and to
gain and maintain a leader position in their industry. When it comes to business strategies and market
approach, how some foreign typical brands in fast food industry have conducted in terms of global and
multinational approach, in particular, customization and standardization Factors. The purpose of this
paper is to study, demonstrate to some critical strategies of foreign businesses such as Mc. Donald’s
brand as one of the most successful fast food chain in the world. This paper is organized as follows: in
the first section, I will give brief introduction to the first step of it into Vietnam market parallel with
some results of analyzing particular strategies used by Mc. Donald’s and how these strategies are
effective. Then, in comparison with other typical brands like KFC and Lotteria is to illustrate and
contrast clearly. Finally, the paper will debate about positive efficiencies as well as corporate social
responsibilities.
Keywords: Business strategy, fast food industry, customization and standardization, Mc. Donald’s fast
food
1. Introduction
According to the dynamics of global development, the indispensable trend in technology
development, science and technology, economic activities, culture has changed rapidly and
strongly. The need and the pace of human life is increasing, so eating is sometimes fast and
convenient for consumers. Many companies with fast food businesses appearing that be
well-received are constantly developing and serving people. Fast food is produced in
packaged or pre-processed form, which is increasingly spread and adapted globally. Fast
food had been rapidly growth up to 26%. It is due to fast food able to maintain a stable price,
making dishes more affordable for consumers. Besides that, improving lifestyles leading by
Vietnamese had help to increase the demand for fast food in Viet Nam. Government of Viet
Nam allows fast food operators to operate more efficiently with franchising regulations. In
Vietnam, there is a potential consumer market with nearly 100 million people, mostly young
people with over 60% under 35 years of age. GDP is steadily rising at over 6%, average per
capita income growth have been in the past 10 years and reached over $ 2,200 a year in
2017. The continued growth of the manufacturing sector, the market is more stable to enter
for foreign investors, hence standard of living for the local increases, spending power of
people increases too, market opportunity available. The promising market, especially the fast
food retail market, has become a "delicious pie", lucrative and appealing to foreign
businesses. Despite KFC and Lotteria had did a nice job operate in Vietnam and popular
among Vietnamese, the fast food industry is still remain competitive. With young population
and fast income growth, there will be a promising market for foreign fast food companies to
invest in Viet Nam (Viet Nguyen, 2014) [14] and Mc. Donald’s also appeared and divided
market share. It is profitable for McDonalds’ to enter the unsatisfied market which they can
maximize profits by following first the highest expected profit opportunities around the
Correspondence globe, and allocating resources across markets in a way that exploits all the best
Vinith Kumar opportunities first (Anderson, Erin, Gatignon, 1986). Mc. Donald’s, originated in California,
Saigon International USA, 1954, has become one of the most recognized and respected brands in the world. The
University, Vietnam
success achieved includes that they have established more than 30,000 franchising stores in
119 countries, serving more than 47 million people each day, and generating about $15
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billions revenues annually. And with its focus on risk through standardization of service product and service
aversion, McDonalds’ can expand abroad only once they design and delivery achieving global ecconomy of scale and
have exhausted opportunities within their home market, and lowest unit cost which is an import tenet of economics
that they then expand first in market that share similar (relative to product and production orientation). It also
culturally or in close geographic proximity to those they are means “one size fits all” (Jain, 1989, pp. 70-79) [9]. There
already in, and that they exhaust opportunities in each are three factors that promote standardization below. Firstly,
market before moving into new ones (Lambson & Jensen, globalization and enhancement of technology lead to
1995) [10]. international trade, easy access to communicate and travel.
How can Mc. Donald’s achieve such success? There are As Thomas L. Friedman said: “Globalization is the
many formulating strategies, which we could use for our inexorable integration of markets, nation-states and
analysis of their recipe of success such as Porter’s technology to a degree never witnesses before – in a way
competitive strategies model, which includes differentiation that is enabling individuals, corporations and nation-states
and low-cost leadership; or Miles and Snow’s ‘strategy to reach around the world further, faster, deeper and cheaper
typology’, which defined prospector, defender, analyzer, than before and in a way that is enabling individuals,
and reactor strategy. Obviously, it is extremely important corporations and nation-states to reach around the world
for Mc. Donald’s to choose the most appropriate strategy to father, faster, deeper and cheaper than ever before.
be successful. From my personal point view, to be an Secondly, standardization versus adaptation; standardization
Analyzer is the most suitable strategic position for them to (globalization) develop standardized products marketed
develop their business as a whole especially when they worldwide with a standardized marketing mix; essence of
facing an extreme complex continuously changing world. mass marketing. In terms of adaptation (localization) mix
As Miles and Snow defined that “The analyzer tries to standardization and customization in the way that minimizes
maintain a stable business while innovating on the costs while maximizing satisfaction; essence of
periphery. It seems to lie midway between the prospector segmentation; think globally and act locally. Lastly,
and the defender. Some products will be targeted toward westernization and Americanization: domination of global
stable environment in which an efficiency strategy designed favorite brands or products (Mc. Donald’s, Starbucks,
to keep current customers is used. Others will be targeted KFC). It is assumed that public will accept global products.
toward new, more dynamic environment, where growth is International business strategy: means effectively
possible.” (Daft, 2005) [5]. It is also very important to matching an MNEs internal strengths (relative to
consider how Mc. Donald’s applies these strategies and how competitors) with the opportunities and challenges
their strategies interact with their business structure and the found in geographically dispersed environments that
external environment when entering the Vietnamese market. cross international borders. Such a precondition is to
create value and satisfy stakeholder goals, both
2. Theoritical framework domestically and internationally. (Verbeke, 2013) [15].
Fast food is a term used to refer to foods with pre-cooked or
pre-cooked ingredients that are sold in restaurants or shops To build the international business strategy is through four
that can serve customers quickly, conveniently and steps
inexpensively. Users can eat on the spot or ask to pack Analysing external and internal environmental factors.
away. In the fast food industry field, when foreign Planning strategies.
enterprises do business is that customization and Carrying out strategies.
standardization strategies play an important role to meet Managing and controlling during the process of
each different market but still guarantee international implementing strategies.
standards. Firstly, customization on the other hand refers to
the tailoring of the campaign according to the needs of an Base on international marketing theory and criteria
individual or groups of individuals. These are high margin practice of categorising international business strategy:
products where the volumes are low and the buyers are few. global consequence and local flexibility.
Secondly, standardization: achieving maximum productivity
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KFC, Lotteria, Jolibee, Pizza Hut and others has been exist In contrary, the disadvantage of a multi-inland strategy is
in Vietnam’s fast food industry for few years. But even that it does not allow the company to exploit the economies
when Mc. Donald’s inherits optimistic effects from previous of scale in developing, producing or marketing products. It
brands, the Vietnamese market is not entirely easy market to is often the case that a multi-national strategy raises costs
newcomer like it. for international companies and forces them to set higher
Mc.Donald's is one of enterprises select strategy for prices to recover those costs.
standardizing its product. Mc.Donald's serves customers
with the best quality food. The raw materials for processing 4.3 Other illustrative cases of international business
are placed and purchased from suppliers for a long time. strategy
The food is highly prepared and consistent. Mc. Donald’s 4.3.1 KFC case
dishes are considered and customized according to the The main competitor that McDonald will face in Vietnam is
customer's criteria. KFC which has 130 outlets and operate within year.
Mc. Donald's serves customers with the best quality food. Vietnamese customer familiar with KFC brand with a
The raw materials for processing are placed and purchased growth rate of 20 to 30 new restaurants per year, said Le
from suppliers for a long time. The food is highly prepared Hoai Nam, KFC Vietnam’s marketing director. KFC stands
and consistent. Mc. Donald's dishes are considered and for Kentucky Fried Chicken, one of the brands of Yum
customized according to the customer's criteria: Firstly, Mc. Brands Inc. (USA). KFC specializes in fried and grilled
Donald's original goal was to aim for a standardized menu chicken products, with accompanying dishes and
with ingredients that tasted the same regardless of country. sandwiches. Currently there are more than 20,000 KFC
But when it comes to operate in different countries, Mc. restaurants in 109 countries and regions worldwide. KFC
Donald's realizes that a little change in taste and ingredients entered Vietnam in 1997, KFC opened its first restaurant in
will make the locals more satisfied, which also makes Mc. Ho Chi Minh City. Nowadays, the KFC restaurant chain has
Donald's successful. Secondly, with the ability to anticipate grown to more than 140 restaurants in more than 21 major
and satisfy the real needs of customers is their greatest cities and provinces across the country, employing more
success, for instance, the store did not work well on Friday than 3,000 workers and creating more jobs in the subsidiary
because most of the population was Catholic and they did industry in Vietnam. With this success, KFC encountered
not eat meat on this day, Mc. Donald's has decided to add many difficulties when entering the Vietnamese market in
fish sandwich menus and apply to stores around the world. 1997. Phrase "fast food" and its taste is very little known, so
Furthermore, Mc. Donald's is especially focused on KFC has suffered losses in Vietnam market for seven years.
designing and opening international standard training Facing with this difficulty, KFC has launched an important
courses to train future franchisees so that ensure the full strategy of product of pricing and distribution system. KFC
range of Mc. Donald's restaurants and the management first introduced a global standardization strategy:
skills. Lastly, Mc. Donald’s orientation is the quality Unique Kentucky Fried Chicken: A delicious, crispy fried
standard. The strict quality standards that Mc. Donald’s sets chicken made from 11 different spices and herbs is the
out are for the input material supplier. Supply must be good cause of millions of KFC fans everywhere without
and quality to create a safe product for consumers. So, to exception Vietnam. Professional service style: KFC team
recruit a suitable supplier, Mc. Donald’s designed the always welcome customers with friendly smiles and ready
program so that its supply partners were allowed to become to serve with the most speedy manner. Dense distribution
input suppliers. Mc. Donald’s will send its staff directly to system, located in places convenient for guests. Customer
inspect and supervise the quality to choose the best supplier. service: the style of service is quite unique, the common
To the standardization factor – global strategy has exploited feature is self-service to create equality. Diverse menu is
the economy of area and explored the impact of experience suitable for each locality: Beside traditional fried chicken,
curve. When the business sector of the company is in the KFC also bring dishes suitable with taste and demand of
business incentive policy of the country that the company is consumers in each locality.
targeting. Products brought to these countries are the Free car service. Business location: KFC stores all have
inherent products of the business they not only meet many very nice location, right in front of large, airy streets.
trade barriers but also receive the favor of the governments Almost its restaurant system is whether in a supermarket or
of these countries. At the same time, it does not bear much a shopping center where there are so many shoppers.
opposition from the organizations and people of that Space is cool and designed for all ages. This can be both a
country. Otherwise, the products of the company in each destination for families and a place for gathering friends.
market are the same, ie with the same type of products will KFC always ensure the quality of its products. Strong
be brought to the whole domestic and foreign markets where human resources, professional training: After having set the
the change in shape, design, quality, is not significant even standard for the whole KFC system in order to have a stable
without. Rather, there is not much difference in the demand and growing position in Vietnam. KFC constantly
for a particular type of consumer product in every market. In researches the market to come up with the best solution.
comparison with customization factor – multinational
strategy, the key advantage of multi-inland strategy is that it 4.4 Product Strategy: Since joining the Vietnamese
meets local requirements. This strategy allows companies to market, KFC has been striving to differentiate its product
research the preferences of consumers in different markets, strategy so as to enhance competitiveness with other rivals
responding quickly and effectively to new consumer by flavoring the mixture of 11 spices. Not only it does make
preferences. The result that companies expect when a difference, but diversifies the product to create a very rich
introducing new products is that consumers will perceive menu as well. Besides traditional dishes such as Hamburger
value higher than competitors' products, allowing the fried chicken, KFC has processed a number of dishes to
company to adopt a multi-locational strategy that is priced. serve Vietnamese foods such as crispy boneless chicken,
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soft bread, rice chicken, mixed cabbage Jumbo; the size of only beautiful but also focus on food preservation. Lotteria
Hamburger also changed, becoming smaller to fit the is based on recycling programs and environmental friendly
Vietnamese size. Product catalogs are sorted by categories policies, so food is stored in recycled plastic and glassware.
to help consumers easily choose their favorite food.
KFC not only focus on developing new product lines, 4.10 Customer service: Lotteria always has services to
changing products to catch up with consumers' tastes but meet the needs of customers according to the criteria of the
also paying special attention to the health of customers. For company is to help customers save time such as delivery
example, KFC has replaced soybean oil for vegetable oils service, party organization, consulting and so forth.
because the company claims that vegetable oils affect Although coming after KFC, Lotteria accounted for 70% of
cardiovascular health. the market by offering smart strategies for product
diversification:
4.5 Price strategy: More than seven years of penetrating Lotteria itself has a Korean tradition, but when it penetrates
into the Vietnamese market, KFC has adopted a low price to Vietnam. In comparision with diversifying its products, it
strategy to extend the market and gradually build a system also creates a very rich menu for young people.
that is close to consumers. KFC has been popular with many In Vietnam, the menu is diverse, attractive to meet the needs
consumers and has a large market share in Vietnam. of Vietnamese people with dishes, accompanied by
refreshments suitable for customers who want to experience
4.6 Distribution strategy: KFC chooses distribution new flavors.
locations in buildings, supermarkets, bookstores, trade If KFC is loyal to chicken products, Lotteria also has beef,
centers, Co-opmart, Bigc, and so on. Recently, KFC has pork, fish, squid, shrimp, many choices for customers.
expanded its restaurants in pavements and city center Vietnamese youths are especially interested in listening to
location. Korean music, watching Korean movies, and eating Korean
food. Taking advantage of this feature, Lotteria has invited
4.7 Promotion strategy: KFC always promote brand the influential people in the entertainment industry to
advertising and offer many attractive promotions. promote the brand. Moreover, many Korean films were
filmed in the Lotteria store, which also increased the interest
4.8 Lotteria case of Vietnamese people with Lotteria.
Lotteria is a well-known brand in Korea named after its
parent company – Lotte. It is now available throughout East 4.11 Comparison between KFC brand and Lotteria
Asia. So far, there are about 1,600 Lotteria stores worldwide brand
and more than 210 stores in Vietnam. The first store was in Two brands have some similar points in business activities:
Vietnam in February 1998 in Ho Chi Minh City after many
competitors in fast food, Lotteria had strong marketing and 4.12 Business products: Fast food, menus are all kinds of
sales strategies, for instance, Lotteria has started to focus on foods, including fried chicken, fries, hamburgers and soft
hamburger as a key product, with this strategy has brought drinks such as ice cream, Pepsi Cola. The quality is
Lotteria 70% market share, KFC 20%, Jolibee 5%, and the guaranteed to be safe.
remaining 5% to local businesses.
In order to develop globally, Lotteria also offers 4.13 Price: mainly ranged from 20.000 to 60.000 VND /
standardization such as: - Brand: with three main colors are piece.
red, white, yellow as well as youthful, dynamic and warm The store location is located in the lobby of the Coopmart
bring guests the gentle comfortable feeling as in the dining supermarket, where many people come to buy and can stop
room of the family. The symbol is also quite simple with the to enjoy.
letters L and O yellow stand together to remind people to
associate hamburger - products typical for Lotteria brand. 4.14 Space: clean, airy, use the main color is red and
yellow.
4.9 Packaging products: to fast food, packaging products Service style young, enthusiastic, attentive staff, history and
are also very important. Lotteria always aims to clean, safe uniforms.
and hygienic standards. As for the delivery of packaging not But still have some differences
Table 1: Differences between global food and beverage corporations: KFC Vietnam and Lotteria Vietnam
KFC Lotteria
Promotion Regularly, special 3rd program special - 3rd weekly customers will enjoy more preferential. Less
Brand KFC slogan: "The taste on each finger" is clearly identified with the logo to help employees
These factors are not guaranteed
identity more easily recognize.
The number of tourists is relatively
Customers The number of visitors is dominant, more often, especially with many foreign visitors.
low, mainly in the local youth
Other The excellent staff monthly is hanging in the row Not
Source: Own development
5. Discussion meals in cars, but also become the investment potential for
Can see the fast food world has very successfully created a many businesses. This development as well as many new
new industry of making huge changes to the way and time elements in cultural life, the spirit of the people, especially
devoted to human food consumption. Currently, the fast- in the developing countries such as Vietnam. This article’s
food industry not only was created to serve the drive quick analyses is to study and review strategies as well as
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solutions that overseas fast food businesses have done for their products. However, some recommendations for this
expanding their brands in other countries. Especially, Mc. brand has suggested: Firstly, McDonald’s should consider
Donald’s group is in Vietnam with customization factor – about having the delivery service for their products.
multinational strategy and standardization factor – global Consumers sometimes enjoy eating at their home and do not
strategy. From early days in Vietnam, McDonald has want to waste time coming to store to order food. Delivery
expanded system strategy with certainty, ensuring every service makes customers feel comfortable and convenient
point opens operate effectively. The most important things especially those customers who are busy with their work all
to McDonald is not only a number of restaurants but also the the time. Secondly, Mc. Donald’s should care more about
quality of service and customer experience: McDonald's advertising campaign. They can promote the products’
seeks to make customers more satisfied with fast service, brand not only through press, social network but also on
seeks to make customers more satisfied by creating a clean media either. Children and teenagers spends a lot of their
environment, finding ways to make customers more time watching movies and television shows, that’s the
satisfied with the higher quality products, seeking to make reason why advertising products on media can bring
customers more satisfied with the affordable prices. Thus it benefits to the company by attracting more attention of the
can be said of McDonald's key to success is their focus on customers. This may include promoting consumer health
customer satisfaction. Besides, having come before Mc. matters as well. Last but not least, Mc. Donald’s should
Donald’s other brands such as KFC and Lotteria have make their restaurants look always contemporary and bring
encountered a lot of difficulties and challenges; then, they refreshment to their customers in order to build strong
have set their own criteria to adapt with current market but customer relationship and maintain the company’s
in some extend they still guarantee global competitive competitive advantage over other competitors.
ability. According to cases of mentioned typical brands, we In order to strengthen company’s competitive advantage, we
can realize that marketing research is very important recommend Mc. Donald’s to apply the localization strategy
because it helps save time, limit risks, in addition to, in their business at Vietnam. This is because the products of
creative and customized element are essential to Mc. Donald’s were culturally different from what
international business strategy of foreign enterprises. Vietnamese normally eat. The information stated that the
majority of Vietnamese foods will add in lots of fresh herbs
6. Conclusion and recommendation and vegetables where the foods was considered as the
6.1 Conclusion healthy mix of light and refreshing flavors with very little
Mc. Donald’s Vietnam is now on the road leads to success added fats (Sim, 2013) [13]. Besides, Vietnamese foods also
in the future. However, Mc. Donald’s had a late entrance to depend deeply on the rice and peanuts. Therefore, Mc.
Vietnamese’s fast food market so they still face some Donald’s must localize their menu based on the culture of
challenges. Fundamentally, to achieve a prospective Vietnamese to suit the Vietnamese’s tastes and preferences.
achievement, Mc. Donald’s has to make long term goal by As an example, McDonalds’ can introduce the dishes like
maintaining its core strength which emphasize on having a "McThai" that combine a variety of herbs, vegetables and
continuous products development. Mc. Donald’s Vietnam meats. In addition, we recommend that Mc. Donald’s can be
also has to catch up with the economic growth of Vietnam more focus on children market because Mc. Donald’s had
to create many advantages and stand out from its built playground and providing a fantastic toys to the
competitors. children. Whatever how different the tastes and the local
There has been limitation in this paper. Its shortcoming is needs and wants are, McDonalds’ has paid considerable
not to conduct empirical study on a wide scale. The attention to the children in each country they have entry
qualitative research method is through searching datum, (Han, 2008). One of the reasons for Mc. Donald’s that needs
information from previous articles and available reviews. to concentrate on the children market in Vietnam which is
So, it is very hard to gather precise and detailed input data there are almost 26 million of children population in
for further researches. Hope that the research result of this Vietnam, thus focusing on children can build the stable
article may serve as preliminary and precondition for such business in Vietnam.
further researches.
Besides the results and analyses in this article, we would 8. References
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