Bài viết này nhằm phân tích chiến lược của VietJet Air (VJC), hãng hàng không giá rẻ hàng đầu Việt Nam (LCC), và trình bày các phân tích quan trọng về môi trường vĩ mô của ngành hàng không bằng cách áp dụng khuôn khổ PESTEL và phân tích năm lực lượng cạnh tranh của Porter. Phân tích chiến lược sâu hơn bằng cách sử dụng Strategy Canvas và kết thúc bằng cách áp dụng ma trận tác động không chắc chắn và ma trận kịch bản tương lai để xác định các vấn đề chiến lược trong tương lai. Báo cáo đã chỉ ra rằng sự cạnh tranh giữa những đối thủ cạnh tranh hiện tại và quyền lực của các nhà cung cấp là khốc liệt hơn so với các lực lượng khác. VJC đã thành công với Chiến lược Đại dương xanh về giá cả thấp trong ngành hàng không, dịch vụ thân thiện và dễ dàng đi lại. Đồng thời, bài viết đã xác định rằng giá nhiên liệu và ngành du lịch là hai yếu tố không chắc chắn quan trọng và thảo luận về bốn kịch bản trong tương lai để nêu ra và giải quyết các vấn đề chiến lược.
Trang 1Date submitted: April 06, 2021
Word count: 3220
STRATEGIC ANALYSIS REPORT
OF VIETJET AIR
NBS 9126: STRATEGIC MANAGEMENT
Trang 2This paper aims to analyse the strategy of VietJet Air (VJC), the Vietnamese's leading low-cost carrier (LCC), and exhibits the critical analysis of the aviation industry's macro-environment by applying PESTEL framework and Porter's Five-Forces analysis Further strategic analysis using Strategy Canvas and concluding by adopting impact-uncertainty matrix and future scenarios matrix to identify future strategic problems
The findings point out that the rivalry among current players and suppliers' power is more intense than other forces VJC was successful with the Blue Ocean Strategy in low-cost prices, friendly services, and ease of travel The paper identifies that fuel prices and the tourism industry are two critical uncertainties and discusses four future scenarios to raise and solve the strategic issues
Trang 3VietJet is the first Vietnamese private own airline, which began operating in 2011, after several delayed attempts from 2008 The carrier became occupied the largest market share in the domestic market with 43% after ten years and upgrades to 80 young average age airplanes It operates services across Asia and has 149 routes, including 54 domestic routes and 95 international routes (2021), reaching 100 million domestic and international passengers (2020)
Macro-environment analysis
Analysing the macro environment is necessary to achieve a comprehensive view of the air transport industry, therefore, predicting and planning the market issues in the firm's strategies (David, 2009)
PESTEL Analysis
This report applies the PESTEL framework (Aguilar, 1967) to analyse the Vietnamese aviation industry's five influential elements, which impact VietJet's strategies Political, Economic, Social, Technological, Environmental, and Legal aspects will be discussed in the upcoming paragraphs
Vietnam is a political stability country in South East Asia (UK's Government, 2021) Participated in multilateral cooperation organisations such as APEC (1998), WTO (2007), and various Free Trade Agreements; the popularity of air travel rose, boosting revenue Furthermore, the industry easily accesses up-to-minute technology and enters the worldwide market The government motivates aviation growth by supporting policies to make it an essential factor in the country's development (Vietnam's Government, 2018) However, the threats are foreign competitors, who plan to enter the world's seventh fastest-growing airline market (ITA, 2020)
Trang 4According to The World Bank (2020), Vietnam has fast economic growth through two decades, which affects the air transport industry Despite the Covid pandemic, Vietnam’s economy expanded by 2.91% (2020), and it is ranked at the highest growth rates in the world (IMF, 2021) Those resulted in the growth of foreign investment, GDP per capita, tourism industry, and 20% growth in the aviation market over the past five years Vietnamese inflation proportion was forecasted to increase
by four percent in the next few years (appendix 1, Aaron, O., 2021) The problems will appear with the fluctuation of input cost, including labor costs, subcontract tender prices, and fuel prices (the main component of airline’s cost, approximately 20%, E Mazareanu, 2020)
In terms of social, the Vietnamese population will reach above 101 million in 2025 (Statista, 2020), and the total number of people under 35 years old has 55.5% of the population (Population Census Report, 2019) This phenomenon provides a larger domestic market and also a low-cost labor resource However, the young population structure and the increase of the middle class, which is expected to reach 26% by
2026 (Worldbank, 2020), require improvement to meet the instant gratification and the better service quality in the social changes
The development of technology creates several opportunities and challenges Vietnam will construct six new airports and upgrade most tourism airports (ITA, 2020); it will improve modern fleets, ground services, and open new entrants' opportunity, threatening current players Another, information technology (IT) and internet growth create better conditions for the firm's customer service activities and improve customer satisfaction The airlines should maintain and upgrade their IT systems regularly and monitor the social networks, a two-bladed knife; it dramatically impacts the brand images
The environmental aspect plays an essential role in this industry Covid-19 and the
bad weather conditions resulted in decreased total flights in Vietnam by 31.9% (Hanoitimes, 2020) It is a crisis "Aviation's recovery from the COVID-19 crisis will
be a long-haul flight" (Eurocontrol, 2020); in an optimistic prediction, the Vietnamese aviation industry will be recovery by 2023 (Hanoitimes, 2020) This downturn generates an obstacle for all start-up businesses Besides, the encouragement in
Trang 5reducing carbon footprint was implemented by all airlines In 2017, VJC signed an SFCO2 agreement, which reduced fuel consumption and CO2 emissions to save input costs (AJOT, 2017) Companies’ action to save the green environment is not only an illustration of their social responsibility, but it also contributes to their profit maximization
The new legislation brought an advantage for the airline companies' expanded strategy and created a fiercely competitive market (Vietnamlawmagazine, 2019) The maximum ownership percentage of foreign investors increased, attracting more investment capital to current companies On the contrary, the minimum capital for airlines was reduced, creating threats from new participants Nevertheless, the approval for new airlines was banned until 2022 because of the impact of Covid 19 (Simple Flying, 2020) Many of Vietnam's start-ups are still awaiting government approval after the recovery
Porter’s Five Forces Analysis
The Five Competitive Forces shape the company's strategy (Porter, 2008) By analysing suppliers' and buyers' bargaining power, the threat of new entrants and substitutes, and the rivalry among existing players to understand VietJet's position and competitive advantage in the Vietnamese aviation market
The Vietnamese airline market has high bargaining power of suppliers Boeing and Airbus are two major suppliers who easily control nearly 99% of the market share (CNBC, 2019) The firms often sign long-term contracts with their suppliers, who provide favorable credit interest, so they do not have other selections to develop their fleet Another, the special requirement of labour resources is a challenge for this industry However, with the industry's investment plan, including the construction
of the new airports, improvement of ground services, and the development of training systems (Vietnam’s Government, 2018), the air transport companies will be benefited
The buyers have low bargaining power First, the customers are highly price-sensitive, while various businesses deliver a different levels of aviation services
Trang 6Each airline has a niche; Vietnam Airlines serves standard services, VJC and Pacific Airlines are LCC, Bamboo Airways, and Vietravel Airlines focus on hub tourism areas Additionally, the benefit from internet growth helps the product's information is easy to access, leading to low switching costs Nevertheless, social media's popularity and consumer protection regulation will significantly impact buyers' power
in the future
Although the industry is the fastest-growing group globally, new entrants threat does not hugely affect Five existing firms have experience in flight operations and well-known brands It is a barrier for start-up businesses in this industry Moreover, the capital requirement is a big challenge, although the new regulation reduced the minimum charter capital for newer (Vietnamlawmagazine, 2020) The preparation time for a newer is too long; for example, Vietjet Air needed four years Finally, the close governments' regulations and the limitation of foreign businesses entering are challenges for new players A typical example is the four failures of AirAsia to enter
to Vietnamese market (Vnexpress, 2019)
The risk substitute is also an essential aspect with a medium level For the domestic market, the diversity of transportations creates a threat for flight firms Consumers can choose suitable forms of transportation, depending on the distance, time, and price The government's policies to upgrade transport infrastructure lead to increasing other forms' competitive advantages in the future However, in a fierce competition market, the LCCs offer affordable tickets, and air travel is the fastest and high level of convenient to compare with others
This industry's competition is very intense with five companies in the market (graph 1) and a new player, Vietravel Airlines The fixed costs are incredibly high; thus, it makes firms hard to leave the industry Before 2010, Vietnam Airlines (the nation airlines) accounted for over 90%; the growth of Vietjet had changed the market picture Furthermore, it will adjust considerably under the pressure of new ambitious players (Bamboo Airways is a subsidiary of the Vietnams' leading resort property group, and Vietravel Airlines is a new investment of Asia's leading travel agencies) Therefore, each travel airline will conduct the appropriate strategies with their targeted customers to maintain and increase their market share
Trang 7Graph 1: Market share in the domestic aviation industry in Vietnam 2019
(Vietnambiz, 2020)
Graph 2 is a summary of five forces analysts in the Vietnamese aviation market After considering all things, the key focus should be to deal with the upper level of competition between the current players' rivalry (Spender, 2014) On the contrary, the other areas of the model tend to rise in the future, but it is less threatening than, thus, existing companies do not have to rely too much on these areas of their strategic operations
Trang 8Graph 2: Five Forces Analysis in Vietnamese Aviation Market
Strategy analysis
The report analyses VietJet's strategy by using the Blue Ocean Strategy concept Kim and Mauborgne (2005) argued that firms' strategic implementation impacts the same industry businesses' success level A Red Ocean refers to a competitive market space; the Blue Ocean refers to a market space that has an unexplored potential for rapid growth
Like Southwest Airlines, VJC has transformed public opinion in the aviation industry and built a new broad market VietJet has changed people's transportation by looking across the buyers and users’ chain (Path 3, Kim and Mauborgne, 2005) to serve the target buyer group, leading to discovering the new ocean blue The Vietnam territory stretches over 1100 miles with many small cities scattered, raising the demand for citizens' and visitors' transportation However, the constraints of road systems, safety, and travel time in land transport created potential air travelers at the lower end of the market in most of the population Additionally, Vietnam has a small LCC market among six ASEAN countries in 2011 (CAPA, 2011), when the beginning
of VJC
Using the Blue Ocean methodology, Graph 3 illustrates the people's transport industry in Vietnam – average airlines, VietJet Air, and in land transport The Strategy Canvas identified the key factors that VJC competes on and then rated the VJC offering and average airlines and Average express buses/coaches against We found that VJC scored better than on seven key factors and more focused on frequent point-to-point departer, price points, ease of buying travel, and ease of travel sectors
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Graph 3: The Strategy Canvas at VietJet Air
Analysing four action framework, which is reflected in graph 4, VietJet has implemented some actions to build up its successful strategy:
1 Reduction in ticket prices and raise the level of price points VietJet Air has mainly taken A321ceos with new 240-seat configuration from 2018 (CAPA, 2017) instead of 230-seat from 2017 onwards The increase in capacity raises the revenue and helps to decline the average costs The firm launched many late-night flights, which discount up to 30% on airfares (VietJet Air, 2012) because of the decline of input costs at off-peak times Moreover, prices were
9 Choices
of destinations
Level of Competing (1-5)
1 Price
2 Meals
3 Lounges
4 Choice of class and/
or seat
5 Hub connectivity
6
Luxurious cabin
7
Marketing
8 Speed 10
Friendly services
11
Frequent point-to-point departer
12 Price Points
13 Ease of buying travel
14 Ease of using travel solution
Average Airlines VietJet Air Average express buses/coaches
Trang 10reduced by reducing complementary products that scheduled airlines frequently served The simplification of the service process (using web-booking, self-check-in kiosks, and mobile tickets) contributed to improving the service speed It reduced the costs for resources such as labour costs
2 Elimination of frills model and complementary services such as hub connectivity, dedicated business class lounge, checked bags, meals, and seat assignments were considered ancillary sales
3 VietJet invested a massive budget in marketing and training activities to build
up its brand image and improve service quality Although the "bikini marketing campaign" was controversial during the initial period (similar to the advertising
of Virgin Atlantic in 2009), it made a strong impression; thus, VietJet was famous by the nickname "bikini airlines" (BBC, 2017) The firm created a new wind into the airline's marketing actions, which is more funny and familiar with the beach tourist country like Vietnam The firm also determined that friendliness is one of its fundamental values and raises it in all training processes (VietJet Air, 2020)
4 The company continuously expanded new destinations and increased the flight frequency It reached 139 routes in 2019 (appendix 4), and it also created ten new routes in the Covid-19 period VietJet tried to account for the biggest domestic market share first, and then it developed the international routes The increase in the choice of destinations and frequently departer improved its competitive advantage and revenue
5 The internet growth helped VJC create new ways to combine airline tickets with hotels and other travel services For instance, the combo between VietJet and resorts was introduced on its website with a wide range of selections All the travel sectors became its partners, and it raises the opportunities to earn growth revenue
With the initial slogan "Save more, Fly more", which is a part of the Blue Ocean Strategy, VietJet has succeeded in developing the aviation market and making air transport accessible to all tourists through affordably-priced safe-friendly-easy aviation services VJC has used Blue Ocean Strategy to reconstruct the market share picture From 2011 to 2016, VietJet Air increased its capacity rapidly