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McDonald's Sees Potential in Vietnam
CEO Don Thompson discusses possible expansion in Asian nation after opening of first restaurant there.
McDonald's Corp. Chief Executive Don Thompson says Vietnam offers tremendous opportunity for the American fast-food giant, which recently opened its first restaurant in the country's largest city.
The global chief executive visited Ho Chi Minh City on Feb. 10 for the official opening to huge crowds, declaring the McPork—a sandwich offered uniquely in the country—to be "fantastic" and unleashing balloons decorated with the company's golden arches.
In addition to offering Vietnamese customers their first Big Macs, the restaurant also offers Vietnam's first drive-through. Scooters, some carrying a child holding a McDonald's balloon squeezed between two parents, lined up to place orders.
McDonald's chose Henry Nguyen as its primary franchise operator in the rapidly developing Southeast Asian country. The Vietnamese-American investor is the son-in-law of Vietnamese Prime Minister Nguyen Tan Dung. A second McDonald's is scheduled to open in three months.
The challenge for the company is maintaining excitement over the opening and building a customer base willing to pay about double for a Big Mac over what it costs for noodles from the city's street vendors. It must also compete with other global fast-food chains, such as Yum Brands Inc. YUM +0.16% 's KFC and Burger King.BKW +1.57%
Mr. Thompson spoke with The Wall Street Journal about the market potential in Vietnam, slow sales in Japan and Vietnamese noodle soup. Edited excerpts:
WSJ: Why Vietnam now?
Mr. Thompson: We think it's great opportunity [to be] in the country and to have a partner like Henry. It's the combination of those two things, along with the fact that we have done quite a bit of research relative to the infrastructure and supply chain to make sure that we can have the kinds of products we want to have in Vietnam with high quality standards for McDonald's. It's a very young and vibrant market place and we think that it's time to have a McDonald's experience here in Vietnam.
We've never looked at it as being late in any markets that we've gone into. We look to see if there is opportunity with customers there for us to continue to build McDonald's brand to satisfy McDonald's customers there. We believe the country is more than ready for McDonald's, so we don't look at it as coming late, we look at it as the opportunity to build the business. What's interesting is we have the first drive-through in Vietnam. And we have the opportunity for people with scooters to come through. We are pretty excited about being here, excited about the growth potential.
WSJ: Do you have any sense of the size of the market?
Mr. Thompson: We know that there are over 90 million people and we only have one restaurant today. So somewhere between the 90 million and the one that we have today, we think that there are many restaurants we can have. We don't have specific growth target for Vietnam at this point. We have market potential and we'll look at that. We do know we can open up quite a few more restaurants.
WSJ: Have you tried Vietnamese pho?
Mr. Thompson: Now, what is it? I think I may have tried it last time I was here. It's in a pretty large bowl, like noodle soup?
WSJ: Yes. Are you thinking about developing McPho?
Mr. Thompson: (Laughs) You know, it is interesting. In certain markets, we have local favorites. Even in a market like Hawaii, we have salmon soup. We don't serve salmon soup in any areas around the U.S. We have different dishes that we serve, different porridges in Europe. Of course in India, we sell no beef at all. I'm sure there'll be some other products, but McPork is the example we had today. It's very good.
WSJ: Can you talk about expansion targets?
Mr. Thompson: Right now, it's really about making sure we get the first restaurant running well, satisfying all customers here, making sure they come back again and they bring friends with them.
Then it will be good for the second restaurant to be duplicated, [so] the level of services are similar to the restaurant today. That is the challenge for McDonald's—when you want to go from one to two, to three, to 10, to 20, to make sure that we can replicate the level of service, the level of food quality, the level of cleanliness that you see here and maintain that.
We want to make sure that is the number-one criteria, that's the goal. Because when that happens, everything else, we can replicate. If we have a restaurant that isn't now running well, we shouldn't be building more, we have to fix that one.
WSJ: What's behind slow sales in Japan?
Mr. Thompson: I think that our Japanese company, they have been trying to do the same thing we've been doing around the world. That is to make sure that we are strengthening our consumer relevance, make sure that the products that we have are the right products based upon the environment we are in.
Japan is a very different competitive environment, from the convenience store base to some of the traditional restaurants. This is the environment that we have to make sure that we navigate through appropriately. Our team there is attempting to do that. They have attempted to do that through our partnership. I know that they are trying to make sure that they can reestablish the relevance. We have had a challenge with that, but I'm confident that we will get the result and move forward.
WSJ: Can you talk about yourself and your career with McDonald's?
Mr. Thompson: I've been with McDonald's for 24 years and it's absolutely wonderful and a blessing for me and my family. I love the McDonald's system, I love all of our family members, all of our employees, suppliers, franchisees. I love seeing customers satisfied. I'm an electrical engineer, I came from a different background, the aerospace industry. And then I left that function and took off the suit and tie and went to work in our restaurants, and I've never looked back. I've always enjoyed the energy of the restaurants, and I'm blessed to be able to be in this position. I don't take it lightly, I get a chance to represent 1.8 million employees, and all of our suppliers and franchisees. It's a humbling opportunity and it's a very energizing one. It's a wonderful opportunity for me.
Source: The Wall Street Journal