Name: of an “S” from China’s border to the

Name: Nguyen Thi Tuong
Vy

Date:23th January 2018

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1.     Introduction

     This report will mention KFC Company and
Vietnam. Overall, the purpose of this is evaluation about developed ability of
this company in this country. It will be presented based on structure:
introduce, company background, country background, PESTEL analysis, porter’s 5
forces, strategic recommendations, conclusion and reference list.

     2. Company background

     In 1991, KFC was known as an American fast
food restaurant. It is founded from Sanders Court & Café and First
franchise by Harland Sanders. Because of the fast development of this chain of
KFC restaurant and the age, Sander cannot control and sold the company for a
group of investors. After a lot of changes, KFC was deeded to “Yum! Brands”, a
restaurant company. Nowadays, KFC services a lot of products such as fried
chicken, chicken sandwich wraps, salads and soft drinks and became one of the
best fast food brands all over the world.

     3. Country

     Vietnam is a country which has the shape
of an “S” from China’s border to the southeastern extremity of mainland
Southeast Asia. The socialist Republic of Vietnam is built based on purpose
independence, freedom and happiness. Nowadays, it’s still a developing country
with a dynamic economy. Vietnam is rich in minerals include iron ore, graphite,
gold, chromate, granite and white sand. Because of the diversity about
topographic, the climate change significantly from place to place.

    4. PESTEL analysis

     Definition: PESTEL is known as a strategic
framework for analysis external influences on a business. Because of the
development of society, many macro-environments can affect strategic planning
like demographic change, tax changes, trade barriers, new laws. PESTEL stands
for political, economic, socio-cultural, technological, eco-environment and
legal. The organization uses this analytical system to business, strategic and
marketing planning, product development and research development. This is one
of the best effective ways to compare risks with successful rate to make
decision before working

      Diagram PESTEL analysis of Viet Nam:

Political
§ 
Policy of exchange rate is not stable
§ 
A member of WTO
§ 
The market economy with socialist orientation
§ 
Political stability
 

Economic
§ 
Developing country
§ 
High inflation (11%)
§ 
Stable and high growth
§ 
GDP decreased

Social
§ 
Young population
§ 
Pressure from information technology
§ 
Corporate Social Responsibility (CSR)
§ 
Pressure on updating of new technology

Technology
§ 
Investment for technology is low
§ 
Bad science and technology infrastructure
§ 
Backward technology
§ 
Popularity of credit card

Eco-environmental
§ 
Power shortage
§ 
Urbanization rate
§ 
Forest is destroyed
§ 
Many natural resource

Legal
§ 
Corruption issue
§ 
Environmental protection law(2005)
§ 
Poor quality of human resource in republic service
§ 
Food of unknown origin

 

 

     From the diagram above, it can be seen
that the policy of exchange rate is not stable in Viet Nam, over a thousand
companies have to purchase foreign currency to import material. However, Vietnam
is an agricultural nation. The poultry farming industry and cultivation in
Vietnam are able to provide enough material for KFC including chicken and
vegetable. Thus KFC company has not to import the material with higher cost
from other countries and it can help this company get more profit.

      Vietnam is one of the developing
countries in Asia, the industrialization request the local enterprises face up
to challenges in financial management. Meanwhile, GDP growth rate is decreasing
recent years. In the period time from 2000 to 2017, the averaged GDP growth
rate is 6.19 percent, this rate reached an all times high of 8.46 percent in
the fourth quarter of 2007 and a lowest of 3.14 percent in the first quarter of
2009 (Vietnam GDP Growth Rate). It means that Vietnamese do not earn so much
money from their work, so fast food is a good choice for them instead of the
meal from luxury restaurants. Thus, KFC can sell more products and get high
profit from Vietnam’s market.

      Corporate Social Responsibility (CSR) of
KFC Company include the implementation of humanitarian and responsibility for
ensuring economic growth, efficiency, compliance with laws on wages, insurance,
occupational safety issues for workers, business ethics and share with the
community difficulties. Vietnam is still a poor country, because of this
reason, performing good Corporate Social Responsibility will help KFC get more
strong support from the resident. To support this, on October 28th
2017, the staff of KFC Vietnam visited and donated Que Huong Charity Center in
Binh Duong Province. KFC also provided more than 250 lunch meals for children
and played with them. The charity centre is also received food, rice, milk,
notebooks, computers(KFC Vietnam- Sharing love).  

     The backward technology of Vietnam is
affected after the war, this factor prevents the development of economic. The
companies which want to business in Vietnam take a lot of time and money to
prepare the machine or import the equipment from outside. Similarly, KFC must
use outside equipment to make sure that everything be able to operate right and
fast because just only one error will change the quality of products. It leads
to KFC lose their customers for other competitors.

     Vietnam is entering the critical phase of
the urbanization process corresponds to the current process of economic
development; the Vietnamese government has particularly focused on the
development of the urban system. Expanding consuming market, augmentation of
job and income are opportunities for international business to invest time and
money to grow their work in this country. Significantly, Ho Chi Minh and Ha Noi
are two cities which have fastest urbanization rate. Alternatively, their
expansion rates of 4.0 percent and 3.8 percent per year. It is much faster than
those of urban area in other East Asian Countries, except China (WB: Vietnam
urbanization among fastest in region). Vietnamese is being familiar with fast
food because of its convenient. If KFC company build more store in those cities,
it can be ensured about their higher consumption.

     In 2005, Vietnam’s government promulgated
environmental protection law. Manufacturing enterprises or service firms have
to build the environmental management, report of environment periodically.
Businesses will have to build cleaner production processes, invest the wastewater
treatment, the exhaust treatment better. It is not a problem with KFC- a
company famous about eco-friendly. KFC just need to find ways to solve the food
which their customer do not finish or decrease wasting food by service the
smaller meal which is more suitable to Vietnamese.

5.
Poster’s 5 Forces

                                                                       

                                                        Low

 

                         High                                                      
High

 

 

 

                                    Low                                High                                            

 

     Definition:
Porter’s
Five Forces Framework is
a tool for analyzing competition of a business. It draws from industrial
organization economics to derive five forces that determine the
competitive intensity and, therefore, the attractiveness (or lack of it) of an
industry in terms of its profitability. An “unattractive” industry is
one in which the effect of these five forces reduces overall profitability. The
most unattractive industry would normal profit level.

·       
Threat of new entrants: In order to take
part in fast food industry need a large amount investment, marketing and
product development. In Vietnam, the existing famous brand like KFC, Lotterria,
McDonald are very strong based on building large faithful customers. When the
customers feel familiarly with the tastes and service, they do not want to
change their ability to the new restaurant. Moreover, the government do not
have many regulations for the business within industry. Thus, the threat of new
entrants is low.

 

·       
Bargaining power of buyers: Nowadays,
the number of the restaurants which like KFC become more and more while the
number of customers increase unsignificant. In Vietnam, the customers who like
to enjoy fast food are from 7 to under 30 years old. Chicken, hamburger and
other fast food is not new anymore. The customers have many choices like McDonald,
Jollibee, Pizza Hut, Popeyes, Burger King and so on. Because of this reason,
KFC cannot raise the price or force their customers paid more for their
products. Needless to say that the bargaining power of buyers is high.

 

·       
Bargaining power of suppliers: The main
material of KFC is known as chicken, potatoes and soft drinks. Over a hundred
of supplier in Vietnam ready to co-operate to KFC because of the frequent and
bulk order. Moreover, the lack of product differentiation and a large number of
suppliers, the suppliers do not hold bargaining against KFC, they also cannot
raise their prices. So, bargaining power of suppliers is low.

 

·       
Threat of substitute product: There are
a large number of substitute products like rice, noodle, bread in Vietnam which
KFC do not service in their menu. Secondly, when KFC begin run their business
wherever in Vietnam, they must compete to another local and traditional food
here. KFC tried to improve this issue by offer free wifi service, discount for
group of person or value meal for the customers. It can be seen that threat of
substitute product is high.

 

·       
Competitive Rivalry: Fast food industry
began development long times ago and be one of the most competitive businesses
today. KFC is also facing to intense competitors to keep the top position in
the Vietnam’s market. Even though there are few different products, the common
dishes like chicken, fries, salad, soft drinks. Finally, each company attracts
each type of customer. Thus, the competitive rivalry is high.

6. Strategic recommendation:

    As can be seen from the Porter’s 5 forces,
KFC will achieve in Vietnam’s market if they know how to change their business
to suitable to Vietnamese.

DO:

ü Change
the tastes, products, sauces and soft drink to suitable to Vietnamese. Moreover
KFC should considerate about the drink and food trend in Vietnam (milk tea,
chesses, spicy food, …)

ü Building
the faithful employee and customers

ü Depending
on what type of customer, make more projects like setting up the birthday party
for children based on the number of meals and cheaper prices.

ü Investment
on machine to promote the speed and quality service

ü KFC
used reasonable, careful pricing tactics to penetrate the market

ü identified
a clear distribution strategy, hitting psychology of young people, who were
keen on Western cuisine.

DO NOT:

ü Raising
price

ü Provide
wrong tastes, amount of meal

ü Building
the network at places which is unconvenience transportation

7.
Conclusion

     In conclusion, this report showed KFC
company and Vietnam’s background and analysising the potential success of this
company in Vietnam’s market based on PESTEL analysis and Porter’s 5 Force. It
can be seen that

8.
Reference list

Vietnam
GDP growth rate (2017), trading economic. https://tradingeconomics.com/vietnam/gdp-growth