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Xin Chao Team Vietnam!

Thanks for the fun read. I gathered from your prelim analysis that you are keen to do the fast food industry in Vietnam?

Being a Ban Minh lover, I can understand why burgers are not selling that well in Vietnam. Jokes aside, I appreciate team's effort in relating appropriate economic concepts to analyse your findings. It is also heartening to note your creativity in conducting a consumer survey for this project. Although the target group should be the Vietnamese, since you are looking at that country specifically, your survey outcome can still be included in your report as an overview of consumer's behavior.

Stage 1 analysis comprised of also identifying the market structure of the product/industry (see highlighted portions in pic attached). As you continue to do your research, you will be able to identify the market structure eventually (in fact, there's one big clue in the cnbc video).

As a guide, you might want to use the below slide from “Non-competitive markets”

Please refer to my specific feedback for your prelim analysis under the respective points (highlighted). I have also labelled my feedback with the topic(s) that I am referring to for easy reference. You could use them as your sub header in report too! Just a suggestion. Please continue to work on your points further, either finding more evidence to support it or new points to be added into your report.

Just a heads up, in Stage 2, you will move on to look at how the fast food industry impacts the Vietnam economy and how Vietnam help this industry to grow.

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Producer and Consumer
- Taste and Preferences: Most Vietnamese prefer the taste of local food as compared to fast food. Therefore, it is important for producers of the fast food industry to improve on their menu options, such as incorporating hybridisation in their food menu so as to appeal and attract more locals to consume fast food.

- Number of buyers: Since there are only a few Vietnamese who prefers fast food, the fast food industry in Vietnam is not expanding as well as expected.

- Money income: With reference to the CNBC Vietnam video, it was mentioned that most locals prefer consuming local food from local food vendors mainly because local food are much more affordable as compared to the food at fast food restaurants.

- Price of related goods: Also, Vietnamese are spoiled for choice for food since there are many food vendors selling local food at cheaper prices, this defeats the value proposition of the fast food industry in Vietnam.

- Vietnamese prefer to share their food when eating in groups (such as with families or friends). Therefore, their go to food options will be hotpot, etc. and not fast food as burgers are not great to be shared.

Q. Identify the specific demand determinants you have explain above (T.E.N.P.M) to apply economic concepts more specifically.

Remember to expand your points about the local preference in your report.

Elasticity
- Fast food is a price elastic demand.This means when there is a change in price of fast food items, there is a more than proportionate change in quantity demanded.
-Firstly fast food has many substitutes.When the price of food from one fast food chain increases, consumers can easily look for cheaper alternatives.
-For example, when Mcdonald's burgers increase in price, consumers may turn to cheaper alternatives, such as burger king or kfc
- Secondly, the pricing in some fast food chains may be considered as a luxury to some consumers. This is depended on their usual spending habit on food and their income. For instance, if the consumer’s usual spend around $5 per meal, a $10+ Shack Shake burger would be considered too expensive and overpriced for them.

- An example would be how fast-food chains, such as McDonalds, fail in Vietnam. Street foods are more popular among the local as compared to these fast food chains. This is because the pricing of their street foods are way cheaper than the pricing of fast foods. Thus, from the point of view of the Vietnamese, fast food would be considered a luxury instead. Hence, fast food would be considered a price elastic demand as consumers are less willing and able to buy fast food when the price increase.

- We have gathered responses, asking whether consumers would still purchase if price were to increase to prove this point
- As shown in the survey,
as the price of the fast food increases to a larger extent,the amount of people willing to buy decreases even more, suggesting that the price elasticity of demand for fast food is price elastic. Quoting our survey, 54.9% of people would still buy a MacDonalds' Value meal if the price increases from $5 to $7 while only 19.7% of people would buy the meal if the price increases from $5-$10.

Q. Besides availability of substitutes, there is at least one more price elasticity of demand determinants that could be identified to cause the price elasticity of fast food to be high. Try to identify and support your point in your report.

Price Competition
- Different brands can afford to sell at different prices due to the size and how popular the  company is.
- Following the economies of scale, large and more popularized corporations such as McDonald's can afford to drastically lower their price as they have the a certain degree of market power in the fast food industry, leading to even greater competition in the industry as smaller brands such as Burger King and Taco Bell fail to keep up with the rock bottom prices.

The fast food industry has an oligopoly market structure, as the entire industry is dominated by a very small number of firms.  As the brands of the few firms are so prevalent in almost every country and state, it is extremely difficult for small firms to enter the market. The established firms all have the benefit of the economies of scale and can afford to lower their prices, whilst the smaller firms cannot, thus consumers would definitely patronise the former. The products sold are also generally homogenous, with the majority selling burgers and fries, with some outliers such as KFC and Pizza Hut which sells fried chicken and pizzas respectively. With such few firms heavily dominating the market, they each possess a significant amount of market power.

Q. By observing the strategies adopted by the fast food chains, what can you infer about the market structure of this industry?

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Vietnam's food service sector has over 540k outlets, over 430k outlets are local street vendors, but only 7k fast food outlets.

-consumers dedicate a sizable portion of their income in food
-local vendors can feed 4 times as many people as a single meal does than fast food at the same cost
-fast food is not a cuisine that excites the Vietnamese
-31% drop in visits for fast food in 2016-2018

Demand for fast food is basically lower than supply

Q. This video contains more information that you could tap on to beef up your report. Please re-watch and see if team can identify more information to support your points.

Source:
https://www.youtube.com/watch?v=l9pthhpd7So&feature=emb_title

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The average restaurant revenue of McDonald's is $2.6 million while for Burger King, it is $1.2 million.

Since there are many fast food chains in the market, McDonald's price elasticity of demand is elastic. Consumers would have various substitutes if there were to be a change in the price of products at McDonald's.

However, with McDonald's having more revenue, they are at a higher advantage in terms of marketing, faster service by hiring more workers, and also offering wider menu options such as meals for kids and breakfast meals unlike Burger King. For instance, in Vietnam, McDonald's adapted their menus to reflect the cultural influences of Vietnamese cuisines.

This is an attempt for McDonald's to increase their market power as they are aware selling similar products as other food chains in the market would only lower their market power.
McDonald's has it right in terms of quantity but as for quality, the debate on which chain is better still continues.

Buzzfeed posted an article saying McDonald's sandwiches are tasteless compared to Burger King.
https://www.buzzfeed.com/rafaelcapanema/burger-king-rules-mcdonalds-drools

The other video also include some strategies adopted by the fast food chain in Vietnam. It would be more applicable. Q. Why are they doing this? How does this affect market power? Which market structure typically does that?

Source:
https://www.youtube.com/watch?v=c-ELRmQndGY

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McDonald's vs Burger King - What Is The Difference? Fast Food Restaurant Comparison

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Source:
https://m.economictimes.com/photo/46801587.cms

Shows the price competition and the many stores the various brands own due to globalisation

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Source: https://pambrose.expressions.syr.edu/2018/10/17/billboard/