Assignment strategic management fianal report strategic management issues of vietjet air (vietjet aviation joint stock company

VIETNAM NATIONAL UNIVERSITY UNIVERSITY OF ECONOMICS AND BUSINESS ASSIGNMENT: STRATEGIC MANAGEMENT Fianal report: Strategic management issues of Vietjet Air Vietjet Aviation joint st

VIETNAM NATIONAL UNIVERSITY

UNIVERSITY OF ECONOMICS AND BUSINESS

ASSIGNMENT: STRATEGIC MANAGEMENT

Fianal report: Strategic management issues of Vietjet Air

(Vietjet Aviation joint stock company)

CODE : BSA2005 3 Semester II of the academic year 2020 — 2021

Lecturers: PhD Nguyen Phuong Mai

OUTLINE

Part 1: Company overview

1.1 Brief history of Vietjet Alt 0.00.00 eect eect ett treet ere ere O3 1.2 The company’s mission statement: Mission, Vision, Major goals,

Core values ee ee ne rete cee et xxx xxx xxx cs+ ỞỘ Part 2: Environment analysis

2.1 Identify and assess the key factors in the macro environment and industry environment that may have positive or negative impacts on the industry in which

Mi Z0 2.2 What are the distinctive competencles of Vietjet AIr? L5 Part 3: Strategy analysis

3.1 Identify the corporate-level strateey that the firm 1s pursuing? 17 What are the advantages and disadvantages associated with the company’s choice of corporate-level strategy?

3.2 What general business-level strategy that the company is pursuing? 19 What are the advantages and disadvantages associated with the company’s choice of business-level strategy?

3.3 What are your suggestions to sustain the firm’s competititve advantages’ 20 Part 4: References Quoc cv 20

Final report: A report about the strategic management issues of Vietjet Aviation

Joint Stock Company

PART 1: COMPANY REVIEW

- Abbreviated name: Vietjet., JSC

- Trade name: Vietjet Air

- Business code: No.0102325399 issued by Ha Noi Department for Planning and

1.1.2 Vietlet Airˆs history and development

-2007: Vietjet Air was established on 23 July 2007

-2011: Launched the first commercial flight from Ho Chi Minh City to Ha Noi on 24 December

-2012:

® Launched Vietjet’s new slogan “Enjoy Flying”

e Expanded domestic flight network to six new destinations including Vinh, Da Nang, Nha Trang, Da Lat, Phu Quoc, and Hai Phong

¢ Received the first aircraft from the firm order placed to Airbus

¢ Launched Vietjet Cargo Joint Stock Company

¢ Launched Thai Vietjet Jomt Stock Company

-2015:

-2016:

-2017:

Inaugurated five new domestic routes and two new destinations including

Thanh Hoa, and Can Tho

Inaugurated three new international routes to Singapore, South Korea, and Taiwan

Inaugurated Vietjet Training Center

Achieved IATA Operational Safety Audit certificate from International Air Transport Association (IATA)

Inaugurated nine new domestic routes and three new destinations including Dong Hoi, Chu Lai, and Pleiku

Inaugurated two new international routes and one new destination to Yangon

(Myanmar)

Signed an agreement to establish an Airbus Training Center in Vietnam Signed a contract for purchasing 20 new A321 CEOs and NEOs from Airbus Officially became a member of International Air Transport Association (IATA)

Inaugurated nine new domestic routes and two new destinations including Can

Tho, and Hue

Inaugurated international routes to new destinations including China, Tatwan, South Korea, and Malaysia

Listed company’s shares on Ho Chi Minh Stock Exchange (HOSE)

Groundbreaking Ceremony of construction of Vietjet Aviation Academy project

Attended APEC Da Nang Summit

Inaugurated new routes to increase the total number of domestic routes to 38 Inaugurated new international routes to many destinations in Thailand, China, Cambodia, Taiwan, South Korea, Myanmar increasing the total number of international routes to 44

-2018:

-2019:

Opened flight routes to Tokyo and Osaka, Japan

Signed MOU (Memorandum of Understanding) for long-term engine maintenance service with CFM International Signed a USD 7.3 billion agreement with Safran - CFM, GECAS in France

Inaugurated new routes between Vietnam — Japan

Reached the milestone of 100 million domestic and international passengers

Expanded flight network with 139 routes including 44 domestic routes and 95

international routes

The fleet was upgraded to 78 aircrafts with young average age

Signed a purchase contract for 20 new generation A321XLR aircrafts with Airbus

Officially became a member of the Japan Business Federation - Keidanren With a fleet size of 70 airplanes and over 108 domestic and international destinations, Vietjet Airhas become the largest private airline to offer domestic services in Vietnam

1.2 Vietjet Air’s mission statement: Mission, Vision, Core values, Major goals

121 Mission of Vietjet Air

To operate and develop domestic, regional and international route network

To create breakthrough in aviation services

To make flying a popular means of transport in Vietnam and in the world

To bring joyfulness, customer satisfaction by providing luxurious and

exceeding expectation services with friendly smiles

1.2.2 Vision of Vietjet Air

To become a multi-national aviation group with a route network covering the entire region and the world, providing and developing not only aviation services but also consumer products on the e-commerce platform and being a favorite and trusted brand

1.2.3 Core Values of Vietjet Air

Safety - Happiness — Affordable Price — Punctuality

1.2.4 Major goals of Vietjet Air

“* Become a multinational airline corporation

Vietjet Air’s major goal 1s becoming a multinational airline corporation with a wide network of flights throughout the region and the world

“* Elevate strategic partners

Cooperate with strategic partners who are big names in the international aviation industry is Vietjet's way of “elevating its brand" as well as its service quality, dispelling concerns about the idea that “low prices are not high safety”

“* Expanding international flight routes

Initially, Vietjet entered the aviation market with domestic routes However, so far, Vietjet operates most of the routes in the domestic market In the following years, Vietjet will target high-income markets Vietjet's goal is no longer to compete domestically, but to compete with airlines around the world Vietjet will focus on

promoting new markets in Asia such as Japan, Indonesia, India and Australia

“* Focus on developing and training human resources

Less than 7 years of officially entering the aviation market, Vietjet has had breakthrough achievements However, in its development strategy for the period 2017-2022, Vietjet sets a growth target associated with sustainable development In particular, the focus is on human resource development and training

After many years of continuously being honored as “Asia's Best Employer Brand",

"Top Vietnam Best Places to Work", Vietjet has attracted high-quality human resources from more than 40 countries and regions territories in the world Vietjet Atr's goal is to become a multinational airline group with a wide network of flights

throughout the region and the world Therefore, Vietjet's human resources are selected

to fully meet the capacity and experience in the aviation industry (especially pilots, aircraft repair engineers, flight dispatchers, and flight attendants) On the basis of a

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healthy company culture, the foreign workforce together with the Vietnamese force

create a professional, international and high-performance working environment

PART 2: ENVIRONMENT ANALYSIS

2.1 Identify and assess the key factors in the macro environment and industry environment that may have positive or negative impacts on the industry in which Vietjet Air is based?

2.1.1 Identify and assess the key factors in the macro environment

A PEST analysis is a framework or tool used to analyse and the macro-environmental

factors that may have a profound impact on an organisation’s performance PEST model consists of 4 factors: Political, Economic, Social, Technology In this report, |

will use PEST model to identify and assess the macro environment of Vietjet Air 2.1.1.1 Economic factors

- Vietnam’s economy in rencent years has made great progress with an annual growth rate of 7% to 8,6% , per capita income increases Vietnam’s economy is changing: upgraded infrastructure, increased invesment With the growth rate of the economy, people’s needs are also increasing, in which mention the need to travel High-income people’s need to travel by air is increased

- Vietnam’s economy has reached a relatively high ( in the period 2011-2015, economic growth is estimated at 5.91% ) Besides, per capita GDP has increased by

more than 40% Our country’s socio-economic situations has had positive changes, in

the right direction; the macro-economy Is getting more and more stable These issues will create favorable conditions for the development of aviation transport

- Vietjet Air’s strength in financial force also lies in the fact that it receives loan

support from HDBank This also explains why Vietjet Air survived the 2008-2011 crisis, while some other airlines such as Indochina Airlines and Air Mekong had to close down

2.1.1.2 Political factors

- Vietnam 1s considered to have the most stable and peaceful political environment With a stable political background leading to unoccupied airports, free skies , unregulated , creating favorable conditions for airlines to do business

- Vietnam continues to affirm its integration policy, strengthen multilateral and

bilateral relations within the regional and global framework, in line with the

globalization trend of economic integration In parallel with the process of International integration, the State continues to adopt policies to improve the Investment environment, increase the attractiveness of foreign investment, and focus

on investment of multinational companies; To encourage and promote tourism development , to shift from exploring tourism business to building a real tourism industry , considering tourism as a spearhead economic

- The Vietnamese government's proposed 15% tax on imported fuel and investment in infrastructure to meet future demand is seen as an important step Vietnam has well implemented the conversion of paper tickets to electronic ones, next needs to promote freight transport

- a low-cost airline, focuses on young and dynamic customer segments and first-time

flyers, those with average incomes Customers who are proficient in using technology

and the Internet such as smartphones, email, social networks, online payment forms: visa, master card, and have a hobby of exploring, traveling often at the nght cost Most of Vietjet's customers are those who like to innovate, create, like to connect,

- While the concept of airlines 1s usually mature and formal, VietJet Aviation Joint Stock Company 1s a an exception This airline is famous for its bikini-clad flight attendants General Director of VJC , Ms Nguyen Thi Phuong Thao , once said that

this is a message of confidence and encouragement , if customers feel happy , VietJet Arr will feel happy

- Since its establishment, Vietjet has not looked at how much the aviation market share

has been captured, but only focused on how much more can be exploited VietJet

Deputy General Director said: “if you keep looking at the water that has been poured into the glass, VietJet will not see the opportunity of the glass to be poured more” Thanks to that "strange" thinking, VietJet saw a great opportunity: "With 100 million people, only 1% of Vietnamese people use air transport, the 99% chance is Vietjet's" VietJet is also not targeting customers who have already flown by plane With this thinking, Vietjet made a decision to target customers who have never been on a plane 2.1.1.4 Technology factors

- The change in technology has had the most direct and strongest impact on the

business activities of the aviation industry The first is aircraft manufacturing

technology This is the most important factor in the success of airlines The production

of safe , good quality , fuel efficient , business efficient aircraft of medium and large

sizes , ensuring flight requires high technology The introduction of these aircraft

made the previous aircraft lines obsolete, reducing the competitiveness of less innovative airlines

- The second technology affecting the air transport business is the Internet and

computer networks The development of communication technology makes flights

safer With the number of 21 million internet users today, it has opened the chance for airlines to carry out their buying and selling activities over the Internet In addition,

one of the regulations of the world airline association is airline members have to do

business based on the Internet, specifically you have to be online This requires domestic airlines to have a new approach policy, conduct business effectively but ensure safety

- Applying advanced technology is the Vietjet’s breakthrough compared to competitors in the market Vietjet Air currently uses over 20 advanced software to

manage its operations such as: Vietjet Air’s ticketing system is developed and

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managed by /ntelisys (Canada) ; Gatekeepers software for risk management, credit

card fraud detection and transaction verification; Aviator software to manage and

optimize flight revenue; flight analysis and flight safety operations are managed by the EFB software system

- Wih an investment orientation for Internet-based information technology, Vietjet Air

will build an expanded ecommerce tecnology platform to support customers most

conveniently tn purchasing tickets for goods and services from website VietJetair.com 2.1.2 Identify assess the key factors in the industry environment

Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape every industry and helps determine an industry's weaknesses and strengths Porter’s five forces are: Intensity of rivalry among established firms, Risk of entry by

potential competitors, Threat of substitutes, Bargaining power of suppliers, Bargaining

power of buyers

2.1.2.1 Intensity of rivalry among established firms

Vietjet's major domestic competitors are Vietnam Airlines, Jetstar, Bamboo Airways

- The match between Vietnam Airlines (VNA) and Vietjet Air (VJ) is a match of two opposing schools VNA has a high price but invests heavily in services Meanwhile,

VJ accepts to reduce many service quality and uses cheap guise to attract customers With a larger scale, VNA's revenue is also nearly twice larger than VJ's, but the pre- tax profits of both are approximately the same, showing that both strategies of the two

firms bring certain effects

- Vietjet has been facing increasing competition from another airline in the country,

Jetstar Pacific Jetstar Pacific is Vietnam's first low-cost airline, which started operations in 2008, but after years of no growth, they began a strategy of rapidly

expanding market share in 2014 Jetstar Pacific is now a formidable competitor and an important component of Vietnam Airlines’ overall strategy

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