Case analysis vietjet air

Successes a Lower price In Vietnam, there are two largest airlines in the market, Vietjet Air and Vietnam Airlines, which account for almost the entire domestic market share.. Vietnam Ai

MINISTRY OF EDUCATION AND TRAINING

EASTERN INTERNATIONAL UNIVERSITY

COMPANY ANALYSIS

VIETJET AIR

BUS 378 - Business Environment

Lecturer: Mr Hien Pham

Group 7

Tran Thi Tuyet Trinh 1632300195

Luu Thi Mai Trinh 1632300051

Pham Thi Ngoc Anh 1632300061

Truong Mai Ngoc Ha 1632300157

Binh Duong, 2020

Table of Contents

I Company profile 4

II Cornerstones of the successes and failures in the history 5

A Successes 5

a) Lower price 5

b) Cost optimization 6

c) Marketing strategy 6

B Failures 7

a) Avoid responsibility 7

b) The staff is not dedicated 8

c) Long delay-hour 8

d) Accidents 9

III Main Analysis 10

1 SWOT Analysis 10

1.1 Strengths 10

1.2 Weaknesses 10

1.3 Opportunities 10

1.4 Threats 10

2 PESTEL Analysis 11

2.1 Political factors 11

2.2 Economic factors 11

2.3 Sociocultural forces 11

2.4 Technological factors 12

2.5 Environmental factors 12

2.6 Legal and regulatory factors 12

3 BCG Matrix 12

IV Key challenges and how it took actions to handle them in the company development history 14

a Price Strategy 14

b Improving customer service quality 14

V Upcoming challenges in the next five years 15

a Competitive Domestic Market 15

b Expanding International Network 16

VI What made this company stay in the top 10 largest private enterprises in Vietnam recent years? 16

VII Recommendations 19

a Continue to expand 19

b Build strong brands 19

c Improve yield management systems 19

References 20

Association (IATA) with the Operational Safety Certificate (IOSA) Vietjet is ranked among the highest in the world with 7 stars by AirlineRatings.com, a prestigious organization specializing in the assessment of safety and products of global airlines The company’s vision is 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 consumption products on the e-commerce platform and being a favourite and trusted brand name Besides that, its mission is to operate and develop domestic, regional and international route network; bring a breakthrough in aviation services; make aviation services to become popular means of transport in Vietnam and in the world; bring joyfulness, customer satisfaction by providing luxurious and exceeding expectation services with friendly smiles

Vietjet operates 80 A320 and A321 aircrafts which can operate more than 385 flights per day and carry more than 65 million passengers, with 105 routes covering destinations in Vietnam and international routes to Japan, Hong Kong, Singapore, Korea, Taiwan, China, Thailand, Myanmar, Malaysia, Cambodia, Vietjet has a plan

to expand its flight network throughout the Asia-Pacific region to expand regional

routes and have signed procurement contracts for a new and modern generation of aircraft with major aircraft manufacturers in the world.

Currently, the Vietjet’s Board of Directors consist of seven members who are madam Nguyen Thanh Ha (Chairman of the Directors), madam Nguyen Thi Phuong Thao (CEO) , Dr Nguyen Thanh Hung (Vice President), Mr Chu Viet Cuong, Mr Dinh Viet Phuong, Mr Luu Duc Khanh, Mr Donal Boylan (Vietjet Aviation, 2018)

II Cornerstones of the successes and failures in the history

A Successes

a) Lower price

In Vietnam, there are two largest airlines in the market, Vietjet Air and

Vietnam Airlines, which account for almost the entire domestic market share Each firm represents a different business model Vietnam Airlines follows the FSC (Full Service Carrier) model to provide full service while Vietjet Air follows the LCC (LowCost Carrier) model set the target of reducing the price to the lowest possible level

An important point of the airline industry is that customers are very sensitive

to the tickets’ price If other essential businesses offer high prices, consumers still have to buy However, most of the Vietnamese people buy air tickets with the main demand for traveling As a result, if the price is too high, customers are willing to give

up and switch to alternative services Therefore, it is very important to offer

competitive fares

That is also the reason why in Vietnam, the LCC model of Vietjet Air has many advantages over the FSC model This has also been proven in the past when Vietjet Air quickly created a large market share even though it had just entered the market for less than 10 years

VietJet's target customers are young, dynamic customers who want to travel everywhere to explore as well as the mid-income earners who want to experience flying travel for the first time Therefore, from the beginning they have positioned themselves as "low-cost airlines" Then, identifying the right target customers of VietJet is a great success because at the time of it was launched, Vietnam Airline is a major airline only for high-income earners and with the introduction of VietJet, airplane travel is not too far-fetched In particular, the trend of "xách vali lên và đi" is

growing in recent times among young people who do not have high income, making VietJet Air more and more close and gradually dominate the domestic market The slogan "Bay là thích ngay", VietJet offers the best affordable flights, zero VND flights

as well as young, dynamic and beautiful flight attendants

From the very first days of introducing its low-cost flight strategy, VietJet has been very successful in positioning its brand in the hearts of potential Vietnamese customers, to become an airline company that many Vietnamese people consider first when they want to travel by plane (Khánh, n.d.; Trần, 2018)

b) Cost optimization

In order to implement the strategy of providing cheap prices for people, Vietjet air has found ways to optimize costs Currently, they only operate narrow body aircraft A320 and A321 only This is a specialized flight line serving short flights (5-6 hours of flight) allowing the airline to keep the same crew and return on the same day with an 8-10 hour shift, thereby reducing accommodation and salary expenses for crew Instead of charging the cost of baggage and food service together with ticket price, VietJet separates itself to serve passengers who really need it (Trần,2018)

Besides that, when many people think that promoting the brand by bikini models is not suitable for Vietnamese culture, many people think that this is also a good way to create a new breakthrough for an airline that many people haven't

thought of yet It can be seen that it is also an important part in helping Vietjet Air account for 29% and then 41% of the aviation market compared to 43% of Vietnam Airlines and outperforming Jestar Pacific after only five years of operation This is considered a speedy step, is a miracle for a fledgling airline

In general, the marketing implementation with the right strategy has

contributed significantly to the development and growth of Vietjet Air What helps Vietjet Air to win and succeed in the "sexy" marketing that many airlines around the world have also applied but failed is partly due to the way they know how to apply the

"consistent" and consistent rule Because from the very first day of launch, they have shown that this is a young, fresh and cheerful airline In addition, the mixed opinions about Vietjet's image accidentally make people pay more attention and know the brand of the company more According to CAPA calculations, Vietjet Air's brand identity in Vietnam has reached 98% (Khánh, n.d.)

B Failures

a) Avoid responsibility

When people are too familiar with the image of the company's bikini model to promote their brand, there are also some ridiculous PR forms of VietJet, especially in early 2018 It is known that VietJet Air is the airline have accompanied with the Vietnamese U23 football team in the AFC Cup earlier this year And the success of the national football team is unexpected, that is why every gesture of the soccer team has received great attention from the fans However, on the day the Vietnamese football team returned to the country, the image of Vietjet models in offensive

clothing appeared to welcome the U23 players made many people feel dissatisfied, even U23 boys still feel blush and confused Many people believe that this is crummy form of PR, PR is in the wrong place (Dương, 2018)

When being heavily criticized by the Vietnamese people, Vietjet General Director Nguyen Thi Phuong Thao said: “On the plane to welcome the U23 Vietnam team from Changzhou to Hanoi, there was a repertoire of random actors Inspiration performance This performance is not part of the company's program but is

voluntarily organized by the trip organizers Moreover, an actor voluntarily asked for signature and took pictures with the players and posted pictures on social media outside the repertoire space, creating frustration for the online community ” (Ngô, 2018)

Instead of frankly confessing, Vietjet publicly posted an apology that has beenedited twice but directed responsibility towards the model group and the tour's

organizers, saying that Vietjet itself was also surprised This is an explanation that cannot satisfy public opinion, making the matter be pushed higher According to many media experts, the case of Vietjet Air allowing a bikini model on a jet to welcome the U23 team could completely end better for the company if there is a sincere apology

b) The staff is not dedicated

On April 2, 2015, two Vietjet employees refused to serve people with

disabilities at Da Nang airport Specifically, the passenger is paralyzed with 2 legs who previously took a flight from Hanoi to Da Nang One day later, this passenger was refused service by Vietjet staff when he had a flight back to Ha Noi because of the reason that “the passengers cannot move by himself" which seriously violating theregulations on quality of passenger services and policy of the company After that, Vietjet publicly apologized to the passenger and fined the two above staff, and

sanctioned the chief and deputy representative of the airline at Da Nang airport (Trần,2015)

c) Long delay-hour

Airline delay is not an uncommon case, but it is the problem in Vietjetair because it occurred frequently Only during the holidays of May 30 - May 1, Vietjet Air had 175 slow flights, accounting for 22.6% of the airline's total flights This is also the airline leading the flight delay rate on this occasion At the end of May, 2019,the airline continued to annoy customers when it was delayed for nearly 6 hours According to the reflection, on May 20, flight VJ197 departed from Hanoi to Ho Chi Minh City, Vietjet Air delayed flight up to 6 hours, causing about 150 passengers to wait at Noi Bai airport late at night (Trần, 2015)

d) Accidents

On November 29, 2018, the flight VJ356 from Ho Chi Minh City to Buon Ma Thuot which was carrying 207 passengers, landed in an imbalance due to the loss of two landing gear in the front The incident caused 6 injured passengers to be

hospitalized, many passengers were slightly scratched The VN-A653 aircraft

received 2 weeks ago was suspended to serve investigation and repair (Đoàn, 2018)

Previously, another incident also occurred on flight number VJ162 of Vietjet Air Specifically, on June 7, 2018, when flight VJ162 moved to the runway for the plane to prepare to leave Tan Son Nhat (Ho Chi Minh City) for Hanoi, a snake

suddenly appeared on the luggage compartment of passengers , row number 15 of theplane Then the flight crew is forced to stop taking off, remove passengers from the solid area and notify the ground support unit After that, the flight crew turned the plane back to the parking lot The crew has carried out the process of bringing the passengers off the plane back to the station to ensure safety and wait for the

department responsible for handling the incident, performing the snake (Đăng, 2020)

On June 14, 2020, there was an airline flight from Phu Quoc, when landed at Tan Son Nhat airport at 12:10 p.m., was believed to be affected by heavy rain and wind, so the plane slipped off the only active runway (remaining runway is closed for investigation) Although no people were injured but the incident left Tan Son Nhat airport paralyzed for about 6 hours to fix the problem (Phùng, 2020)

When there were problems with Vietjet Air flights, some customers who frequently used this airline expressed concerns Specifically, Mr NMT, a customer who regularly uses Vietjet Air to travel, said: “I often use this airline for business trips, domestic travel, but recently when I am watching on media channels, I have known many problems with the airline flights which make me very worried Perhaps Iwill have to reconsider when choosing this airline company for my business trips." (Đăng, 2020)

III Main Analysis

1 SWOT Analysis

1.1 Strengths

Vietjet increases the market share rapidly during the year Vietjet was established

in 2011 however Vietjet became the largest company with 42% of market share and the company also receive the profit from 2013

The cost of products in Vietjet is lowest in Asia and all over the world Vietjet has profit after working 2 years and revenue is one of component to promote the success of most affordable airline

Vietjet also has a strength in doing marking because the company understand the psychology of target customers Vietjet has flights surrounding Vietnam with

affordable price It will let customers consider to choose the flights of Vietjet

Vietnam is the developing country so Vietnamese tend to choose an airline with affordable prices and flexible time It is a reason why Vietjet established after

Vietnam airline but most people selected Vietjet instead of Vietnam airline

1.4 Threats

The competition environment for aviation industry increase day by day Some airlines in Southeast Asia such as AirAsia and Lion also make a plan to have a joint venture partner in Vietnam More competitors want to join to home country of Vietjet

 Decreasing the quality of service also make customers reconsider about their selection If Vietjet have no good solutions, this reason can make Vietjet’s revenue decrease

 Overcrowding the airports is a difficulty to Vietnam and they can create more the flights with the flexible time

2 PESTEL Analysis

2.1 Political factors

Government has some policies to protect the passengers than aviation industrybecause many risks and deaths associated with aviation industry can be happened.Some insecurity factors can affect negatively the demand of customers and the airlinestart to lose customers because of these factors

The increase in GDP leads to increase the level of employment The market willhave the high skilled employees and expensive resources Vietjet can decrease thecost of training however increase the average of salary for employees

2.3 Sociocultural forces

Customers tend to choose the airlines including some factors such serivice, price,and flexible time Now, customers prefer the airlines which are providing the goodservice with affordable price With the reasons, Vietjet improve the service to adapt todemand of customers