Individual assignment 1 vietnam airlines is the national airline of the socialist republic of vietnam

IBSm301 - Nothing
International Business Supplied (IBSm301)


IBS301m – FALL 2021
INDIVIDUALASSIGNMENT 1

VIETNAM AIRLINE

Instructor
Student

Mrs. Cung Thi Anh Ngoc
Tran Thu Hang
HS150040

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TABLE OF CONTENTS
VIETNAM AIRLINE......................................................................................................
1.

Introduce of the company...................................................................................... 3
1.1.

About the company:......................................................................................... 3

1.2.

The Corporation's fields, branches and business lines:................................. 3

2.

Environmental analysis ( PESTEL)...................................................................... 4
2.1.

Political................................................................................................................ 4

2.2.

Economic.............................................................................................................. 5

2.3.

Social................................................................................................................... 6

2.4.

Tenological.......................................................................................................... 7

2.4.

Evironmental....................................................................................................... 7

2.5.

Legal..................................................................................................................... 8

3.

Industry analysis..................................................................................................... 9
3.1.

Intensity of Rivalry.............................................................................................. 9

3.2.

Threat of entry...................................................................................................... 9

3.3.

Bargaining Power of Suppliers......................................................................... 11

3.4.

Bargaining Power of Buyers............................................................................. 11

3.5.

Threat of Subtitutes............................................................................................ 12

4.

5.

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Recommendation.................................................................................................. 12
4.1.

Improve service quality...................................................................................... 12

4.2.

Establish a competitive pricing strategy............................................................ 13

4.3.

Develop access opportunities and ability to attract customers......................... 13
References.............................................................................................................. 15

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1.

Introduce of the company
1.1. About the company:
Vietnam airlines is the national airline of the Socialist Republic of Vietnam, a core
component of the Vietnam Airlines Corporation. The airline, under the management of a
seven-person board appointed by the Prime Minister of Vietnam, has routes to Southeast
Asia, East Asia, Europe and Oceania, with 46 destinations in 19 countries. Headquarters
are located at the two largest airports in Vietnam: Noi Bai International Airport and Tan
Son Nhat International Airport.

Vietnam Airlines is the largest shareholder with a shareholding rate of 69.93%
Jetstar Pacific Airlines. The airline holds a 49 percent stake in Cambodia
Angkor Air, Cambodia's national airline, and 100 percent in VASCO, a small
airline that specializes in flying in the southern region of Vietnam.
The airline is rated 3 stars, according to Skytrax standards. On June 10, 2010,

the airline officially joined the SkyTeam alliance, becoming the first Southeast
Asian airline to join the alliance.
By the end of 2011, the corporation accounted for about 80% market share of
domestic aviation market in Vietnam and about 40% market share of tourists
flying to and from Vietnam
1.2. The Corporation's fields, branches and business lines:
Air transport of passengers, baggage, cargo, parcels, parcels and letters.
Maintenance of aircraft, engines, spare parts, aviation equipment and other
technical equipment; manufacturing components, spare parts, aircraft supplies
and other technical equipment; providing technical services and spare parts for
domestic and foreign airlines.
Import and export of aircraft, engines, spare parts, aviation equipment (rent,
lease, hire purchase and purchase and sale) and other items according to the
State's regulations.
Providing technical services for ground trade; services at passenger and cargo
terminals; Freight forwarding services; commercial services, duty-free sales at
the airport terminals and in the provinces and cities; apron services at airports,
aerodromes and other aviation services.
Agency services for airlines; manufacturers of aircraft, engines, equipment and
spare parts; domestic and foreign transportation and tourism companies.
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General aviation activities (flying topographic photography, geological survey,
calibration flight of aviation navigation stations, repair and maintenance of high
voltage power lines, oil and gas service, afforestation, environmental inspection,
search and rescue, etc.) search and rescue, medical emergency, flying in service
of political, economic, social, security and defense tasks...).
Producing, processing, exporting and importing food to serve on board aircraft,
tools serving the air transport chain; export - import and supply of petroleum,

aviation grease (including fuel, lubricating grease and special-use liquids) and
other petroleum at airports, airfields and other locations.
Finance, finance leasing, banking.
Printing, construction, construction consultancy, labor import and export, and
scientific and technological services.
Investment abroad:
+

Buy and sell businesses

+

Contributing capital, buying shares or transferring contributed capital, selling shares in

accordance with law;
Other fields, branches and professions as prescribed by
law. Scope of business: domestic and foreign.

2.

Environmental analysis ( PESTEL)
2.1. Political
The stability of the political system is one of the factors that greatly affect the
economic development of a country as well as the business strategy of enterprises.
when enterprises decide to invest in expanding the market, especially in the
direction of developing the route network of air transport enterprises. For example,
the security situation in Iraq, in Lebanon, Thailand recently, airlines often cancel
flight routes to these areas for security reasons and unstable political system, due to
aviation business. in these areas often have a high level of risk.
Vietnam Airlines is among the companies under the management of the Government, this is

an advantage due to the support of capital, business protection, and financial policies,
especially in difficult times due to the influence of the government. terrorist activities, wars
and epidemics and fuel prices, etc., currently hold the monopoly
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position of exploitation in Vietnam. However, the domestic legal system has gradually been
adjusted, improved, more transparent and in line with the integration trend (ASEAN, APEC,
WTO,...), especially international aviation law. In Vietnam, this will limit the protection of
the State for Vietnam Airlines, but it is also an opportunity for Vietnam Airlines to reassert
its position against competitors in the market of air transportation. Air freight. Vietnam is
considered a safe destination in the region, this is also a signal that the number of tourists
and investors will come to visit and explore the investment market, the prospect of
investment volume will increase. in the coming years and the amount of goods traded on the
markets will also increase.

2.2. Economic
Vietnam Airlines' freight business is not immune to fluctuations in the economy,
such as factors such as GDP growth rate, inflation rate, level of control and reform.
corruption, the scarcity of fuel sources, the government's implementation of AFTA
commitments and commitments when joining the WTO, etc. will directly affect the
source of goods exchanged and traded on the market, which means it will affect
impact on the cargo volume of Vietnam Airlines.
Vietnam is the 46th largest economy in the world. Its nominal GDP in 2018 was
worth $245 and is expected to reach $265 billion by the end of 2020 (Trading
Economics, 2020). The country has made a lot of progress in poverty eradication
and lifted 45 million people out of it between 2002 and 2018 (The World Bank
Group, 2020). Its economic outlook for the next few years is positive and robust. It
is interesting to note that Vietnam has come out as one of the largest beneficiaries of
the trade dispute between China and the USA. However, it should also be noted that

Vietnam has been struggling with high price increases for years.
Obviously, when the social economy develops, the amount of domestic and foreign
investment increases will increase the amount of goods traded on the market, which
means the demand for transportation will increase. With the above signals about
Vietnam's economic prospects, it will certainly increase the volume of goods traded
through airports, which will contribute to Vietnam Airlines achieving a high growth
rate in the coming years.

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2.3. Social
Each country and territory has its own unique cultural values and social factors, and
these factors are the characteristics of consumers in those regions. Cultural values
are the values that make up a society, which can foster the existence and
development of that society. Therefore, common cultural elements are protected on
a very large scale and closely, especially spiritual cultures. In addition to culture,
social characteristics also make businesses interested in market research, social
factors will divide the community into customer groups, each group has its own
characteristics, psychology, income different input:
+

Average life expectancy, health status, nutrition, eating

+

Average income, income distribution

+

Lifestyle, education, aesthetic views, life psychology

+

Living conditions
Along with the development speed of the economy, culture also has changes in line
with the modern rhythm of life. People are saving more and more time, with
increasing income, aviation is the right choice of many people.
In the past few years, Vietnam has been rated as a safe destination, the leading tourist
attraction in the world, which has made the number of tourists to Vietnam increasing,
especially the number of visitors from Europe. , North America , Japan , Korea ...

The development of the tourism industry leads to an increase in revenue of the
aviation industry thanks to the increase in tourists. Not only foreign tourists,
Vietnamese people are increasingly interested in traveling, including middle-income
people, which also significantly increases the number of passengers in the air
transport industry.
Another mentality of the Vietnamese people that exists is that flying shows class.
Vietnamese people have long considered flying as one of the ways to express and
assert themselves, which creates favorable conditions for airlines to tap into the
subconscious needs of consumers.

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2.4. Tenological
The peculiarity of the air transport industry is the speed of application of new and
advanced technologies because this is a special type of business that requires high
operational safety, if negligence leads to an accident. the consequences are dire and
almost impossible to recover the damaged property. Vietnam Airlines fleet is always

upgraded according to new aviation technology, mainly using technology of famous
aircraft manufacturers such as AIRBUS, BOEING, etc., combined with structural
and fuselage improvements. flight, engines, control systems to improve operational
efficiency and range of the aircraft. The development of science and technology has
created new generations of aircraft with specifications that better meet the
requirements of civil aviation transport such as longer range, stronger engine
propulsion, Larger aircraft capacity, lower noise, more fuel economy,... That is the
generation of Boeing 777, Boeing 767, Airbus A320, A321 aircraft... that Vietnam
Airlines is exploiting. This is one of the important factors determining the quality,
economic efficiency as well as competitive advantages of air transport products.
2.4. Evironmental
Vietnam is one of the most beautiful countries in Asia. It houses 8 UNESCO
heritage sites and received around 18 million international tourists in 2019. Tourism
has been an important actor to transform Vietnam’s agrarian economy to a service
one. However, it is worth noting that the fear of corona virus (COVID-19) has been
a threat to the tourism industry and public health.
Rapid economic development has led to unsustainable exploitation of natural assets
that may impact on future potential for growth. Vietnam is badly affected by air
pollution. Similarly, water pollution is a big problem and has significant impact on
human health. Vietnam is highly exposed to natural disasters such as volcanic
eruptions, floods, droughts, earthquakes, floods, and typhoons.
The geographical position of Vietnam is also quite favorable for the development of
the aviation industry, with its position on the edge of Southeast Asia, in the middle
of the international air route connecting from east to west, from north to south. for
the construction of a route network between the US and Australia with short flights
in Southeast Asia and inland of Vietnam.
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With the characteristics on the route network of Vietnam Airlines built according to

the model of "shaft - spokes" with high operating frequency, good transit service in
Hanoi and Ho Chi Minh City, creating a competitive advantage with other airlines.
international freight flows to/from Indochina, Southeast Asia; gradually turning
Vietnam into a regional air transshipment hub, competing directly with major hubs
such as Hong Kong, Bangkok, and Singapore. Vietnam Airlines actively cooperates
in bilateral trade with international airlines, expands flight routes, overcomes
subjective limitations, and gradually selects partners to join a global alliance in line
with the trend. The general development of the world and the actual capacity of
Vietnam Airlines, if well applied the position of Vietnam's natural factors will
contribute to a significant increase in the airline's cargo output in these markets.
However, Vietnam Airlines has not fully exploited this advantage.
2.5. Legal
Although there are incomplete and overlapping laws, Vietnam has introduced many
regulations on air transport. The introduction of the Civil Aviation Law of Vietnam
has created a basis for airlines to conduct their business activities. Vietnam has
begun to open the civil air transport industry to the private sector, but with strict
terms and conditions, the establishment procedure is still complicated. At the same
time limit the participation of foreign investors , when it is stipulated that foreign
investors only contribute 49 % of the shares in the joint venture airlines . 2007 is an
important year in the history of Vietnam's aviation industry with the passage of a
law allowing the establishment of private airlines and foreign investors in the
Vietnamese aviation market, opening the event. This is the presence of one of the
largest airlines in the world - Qantas ( Australia ).
Vietnam also began to negotiate and sign with a number of countries on the opening
of the airspace, as with the United States. countries in the Mekong sub-region ... ,
creating opportunities for the aviation industry to develop abroad.
Another strict regulation of legislation related to the aviation industry is the emission
protocol. This is a fairly strict regulation on reducing emissions of aircraft. In the world
today, there are struggles to reduce emissions from air transport, putting airlines

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in passive conditions, forcing airlines to take measures to reduce emissions into the
atmosphere.

3.

Industry analysis

3.1. Intensity of Rivalry
In recent years, Vietnam's air transport market
has really exploded as private and state-owned
airlines vie for market share in a price war.
Vietnam Airlines is highly competitive among
domestic airlines such as VietJetAir, JetStarAir,
Bamboo Airways… In the future, low-cost airline
services will continue to expand and the level of
competition will increase.
Along with competition in the domestic market, Vietnam Airlines also has to
compete with airlines from countries inside and outside the region. Fares for flights
from Europe to Vietnam have dropped significantly. If in the past, these routes
Vietnam Airlines competed mainly with French and German airlines, now, when
German airlines have to give way to airlines from the Middle East, Vietnam Airlines
is forced to compete. compete with very strong opponents, difficult to balance.
3.2. Threat of entry
We can divide new entry competitors of Vietnam Airlines into two main groups:
small and medium airlines in the region, and major airlines in the world.
Small and medium airlines:

+

These are mainly newly established domestic airlines or small regional airlines that

have just opened routes in Vietnam, this group of airlines often take advantage of the following
advantages to compete:
+

Small and medium scale, compact management system leads to low cost.

+

Advanced technical technology to help reduce costs (take advantage of the Internet for

ticketing, use new generation aircraft more flexibly). For example, AirMekong

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uses Bombardier CRJ 900 series of jets, thereby doing unprecedented things such as
direct flights from Hanoi to Phu Quoc, Pleiku, and Con Dao.
+

Choose short routes, actively build new routes not yet exploited by Vietnam Airlines.

+

Divide a long flight into reasonable short segments (For example, with the route

HCM-Bangkok, a Cambodian airline can open a route HCM - Siemrep - Bangkok to take

advantage of a group of customers who like to travel. with the expectation that one trip can go to
2 places).
+

Established under the model of a low-cost airline (minimizing costs in many ways

such as: homogenizing seat classes, using only one type of aircraft, eliminating food services, free
newspapers, wanting to be For service, you have to pay extra.) For example, some airlines have
been established: VietJet Aviation Joint Stock Company (VietJetAir) or Air Mekong.
Major airlines in the world
.+ Because Vietnam's aviation market is quite small, this group of large airlines
often does not build direct routes as well as domestic flights in Vietnam.
However, these airlines can compete with Vietnam Airlines by:
o

Build a route to Vietnam with a transition to another country with a more stable

market (eg Thailand or Singapore) so that with the opposite direction from Vietnam they will be
able to lower prices a lot to promote their brand.
effectively, destroy the opponent, but the profit does not affect too much.
o

Use strong financial potential to conduct strong discounts to build a name, build

trust in customers, cause small competitors a lot of difficulties, even bankruptcy.
o

Linking with a domestic airline through the form of capital contribution. For

example: Qantas Airways once bought 30% of the shares and became a shareholder. With

Jetstar's strategy, thanks to its very strong potential, Quantas Airways has helped Jetstar offer
almost unbelievable prices.

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3.3. Bargaining Power of Suppliers
With about 300 flights per day, the purchase of products by Vietnam Airlines from
Dung Quat Oil Refinery will help businesses save on transportation and
warehousing costs and not be under pressure of foreign currency in the context of
the economy ( Pham.V, 2011) like nowadays. At the same time, contributing to
reducing the country's trade deficit balance. Since August 2010, Binh Son Refinery
and Petrochemical Company has sold to domestic and foreign partners more than
28,600 tons of Jet A1 jet fuel. It is estimated that each year Dung Quat Refinery will
produce about 400,000 tons of Jet A1 gasoline, meeting about 35% - 40% of the
current fuel demand for Vietnam Airlines.
3.4. Bargaining Power of Buyers
3.4.1. For individual customers
Vietnam Airlines has the following forms of support for customers:
-

For early and late evening flights, Vietnam Airlines will use the general price of 1,450,000

VND/way (excluding taxes and fees attached) for the route Hanoi - Ho Chi Minh City, this price has been
reduced compared to the previous rate. normally 34%.

-

Discounts for the elderly, customers who are Vietnamese citizens aged 60 years or

older, when buying tickets on domestic routes operated by Vietnam Airlines and Vasco, they will
receive a 15% discount from the ceiling price of economy class. regulated by the state
-

Ticket prices for children:

+

For Vietnam Airlines.
Children under 2 years old: 10% of adult fare
Children from 2 years old to under 12 years old: 75% of adult fare

+

Compare with Jet Star:
Children under 2 years old: free of charge
Children from 2 years old to under 12 years old: 100% of adult fare
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-

It is one of the measures that Vietnam Airlines is taking to meet customers' price

requirements.
3.4.2. For business customers
Cooperation in exploitation and development with other airlines such as:
JapanAirlines, China Airlines, Cathay Pacific….
3.5. Threat of Subtitutes
IDC's forecast for increased business travel is good news for the airline and hospitality

industries as they cater to this customer segment. This is also an opportunity for companies
that offer effective alternatives for business travel, such as web, video conferencing services.
Why spend a ton of money and waste precious time flying away to a meeting when you can
meet online or via video? But the success of these alternative services poses a direct threat to
the airline and hotel industries.

4.

Recommendation
4.1. Improve service quality
4.1.1. Passenger service
Simplify work processes, procedures, and processing time in order to save
opportunity costs "for customers.
Upgrade the lounge for the most customers, business
class. regular customers , important guests ( VIP ) .
Organize separate first-class lounges of VNA at some foreign airports.
Upgrade the quality of entertainment services for passengers on board (video,
audio, newspapers, souvenirs) and the quality of business services.
Consider reasonable service costs, with key priorities to ensure
competitiveness.
4.1.2. Commodity service
Organize private cargo flights by aircraft of small tonnage, short-range and
medium-range flying in the region to meet the needs of carrying low-priced,
high-volume normal cargo in the East region - South Asia.

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Focus on prioritizing the maximum exploitation of large freight flows (from
Vietnam to Northeast Asia, Europe and North America) through taking

advantage of cargo loads on passenger flights by wide-body aircraft ,
combined with the expansion of operations by cargo flights.
4.2. Establish a competitive pricing strategy
Developing a product selling price policy and optimizing revenue is always a
problem for businesses. With non-storage and non-storage goods such as air freight
products, this issue becomes even more important. The characteristics of air services
are intangible, the price determination should also be based on the perceived value
of passengers. Therefore, VNA needs to study and set up a price strategy in the
following direction:
Research the main factors to increase the ability to attract customers (quality
or price, brand reputation, safety) depending on the service or specific
conditions, but consider improving the quality instead of lowering it. prices
to attract customers.
When setting the price, it is necessary to take into account the potential value
brought to the customer such as time saving, safety, destination.
Continue to diversify fares according to customers , seasons of the year ,
time of day to take advantage of excess load.
Set a competitive price when offered in a market , for an object , at a specific
time.
Enhance price competition tricks to the extent permitted by law.
4.3. Develop access opportunities and ability to attract customers
Improve the operation of the network of branches and representative offices
in the country as well as abroad in order to establish a really effective branch
system.
Improve the quality of staff in offices and branches in research, market
analysis, development and implementation of marketing plans.
To diversify services and link transport - tourism to increase competitiveness for
both air transport and tourism. Continue to promote frequent flyer program ( FFP ) .
Negotiating and signing FFP association agreements with other
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airlines (especially alliance partners), corporations, hotels, credit card
companies, car rental... in markets big ; at the same time , participate in FFP
programs of other airlines.
Continue to advertise in many forms such as coordinating with travel
companies to carry out festivals, sponsoring major domestic and foreign
cultural and sports events to promote VNA's image, increase presence in the
international market.
Build an advertising program to the Vietnamese community living abroad,
especially in the US, in order to increase the rate of choosing VNA of this
object (currently the rate of choosing VNA for air transportation of this
object is is 35 % ) .

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