TRƯỜNG ĐẠI HỌC KINH TẾ QUỐC DÂN
-----o0o------

BUSINESS STRATEGY FOR VIETNAM AIRLINES
5 FORCES, SWOT AND PESTLE ANALYSIS
VRIO FRAMEWORK AND VALUE CHAIN
RESOURCES AND CAPABILITIES OF VNA
ANSOFF MATRIX, ORGANIZATIONAL STRUCTURE.

VIETNAM AIRLINES
Contents
.....................................................................................................................................................1
OVERVIEW......................................................................................................................................3
I. INTRODUCTION..........................................................................................................................3
1.1 Main products and markets.................................................................................................3
1.2 VISION, MISSION, CORE VALUES, GOALS, AND OBJECTIVES.....................................4
II. The influence of macro environment on VNA............................................................................5
2.1 PESTEL analysis..................................................................................................................5
a) Political-Legal.....................................................................................................................6


b) Economic............................................................................................................................7
c) Social..................................................................................................................................8
d) Technology.........................................................................................................................8
e) Environment.......................................................................................................................9
2.2 Critically analyse the macro environment by assessing the opportunities and threats.......9
III. Porter's Five Forces model.......................................................................................................11
a) Threat of new entrances.......................................................................................................12
b) Threat of substitutes.............................................................................................................13
c) Bargaining power of buyers.................................................................................................14
d) Bargaining power of suppliers..............................................................................................14

e) Competitive Rivalry...............................................................................................................15
IV. VNA's internal environment and capabilities...........................................................................18
V. Understanding and interpretation of strategic directions to VNA.............................................28
a) Strategic planning.................................................................................................................28
b) Business strategy.................................................................................................................28
c) Strategic direction.................................................................................................................29
d) Operating plan......................................................................................................................30
VI. Conclusion................................................................................................................................30
VI. References...............................................................................................................................31

OVERVIEW
In this report, I am going to select Vietnam Airlines to gather data for strategic analysis. By using
PESTLE and Porter's five forces framework, the impact of macro and microenvironment on the
business will be identified. Moreover, VRIO and value chain frameworks also make it easier to
analyze the internal resources as well as capabilities of Vietnam Airlines.

I. INTRODUCTION
1.1 Main products and markets


Vietnam Airlines is the country's national airline and was established in 1993 as the country's first
civil airline. The national airline Vietnam Airlines has reached out to the world market after several
years of service and non-stop efforts, and has become a brand recognized, trusted, and preferred
by many people. Vietnam Airlines received an IATA certificate in 2006, which is the International
Air Transport Association's certificate of reputation and protection.

Figure 1: Vietnam Airlines (source: VNA)

Main products & services and market
- Producing aircraft components, testing, navigating, and control equipment. Providing technical

for domestic and foreign airlines.
- Air passenger transportation (air transportation for passengers), air freight (baggage, cargo,
parcel, postal, mail).
- Oil and gas service, afforestation, environmental inspection, search and rescue, medical
emergency, flight for political, economic, social, security and defense missions.


- Supply trade, tourism, hotel services, and duty-free sales in isolated areas at international
airports.

1.2 VISION, MISSION, CORE VALUES, GOALS, AND OBJECTIVES

a) Vision
According to Kantabutra et al. (2010), the term "vision" refers to what the organization or
corporation hopes to do in the future. That is why vision is referred to as the company's or
business's long-term target. It can also last for 5-10 years and possibly even longer.
Vietnam Airlines vision: VNA has aspirations to become Asia's most trusted airline, as well as
the country's primary mode of transportation.

b) Mision
The mission is about the present. It states who you serve, what you serve, and how you do it
every day (Holland and Kelley, 2007).
Vietnam Airlines mission




Providing air transport services that are diverse and of high quality.
Create a pleasant work environment with knowledgeable employees and numerous




opportunities for advancement.
Assurance that stakeholders will benefit in the long run and that company will run
smoothly.

 The correlation between vision and mission
When it comes to the relation between the vision and mission of VNA, the degree of consistency
is relatively high. This particular reason for this circumstance is to become the leader in the
aviation industry in Asia and the main transport force in Vietnam, Vietnam Airlines have been
sketched out various specific tasks to achieve the ultimate goal. Thereby, it makes it easier for
VNA to know what to do at present and in the future. For instance, to become the leading airline
in Asia, VNA has been providing a variety of top-quality services to satisfy customers.

c) Core values
According to Heathfield (2019), values are distinguishing characteristics that distinguish
individuals and companies from their rivals.
Vietnam Airlines core values:



Safety is number one, and the foundation for all activities.
Customer-centric, VNA is aware of the company's growth and customer trust




Considering workers as the most valuable asset. To preserve harmony and strengthen
unity in the organization, all remuneration strategies are based on equity and deserving




benefits.
With innovation as the VNA's slogan of operation. VNA is actively innovating in all fields
with breakthrough thinking to achieve great success.

d) Goals and objectives
According to Clarizen (2019), goals are the results you want to achieve, often broad and longterm, while goals define specific, measurable actions that must be taken to achieve a common
goal or direction.

 Vietnam airline
According to VNA's annual report (2019), firstly, the goal for VNA is to increase operating
efficiency and become a 5-star airline. VNA has outlined the following specific objectives to
achieve that goal: VNA is aiming for 800 billion VND and 1000 billion VND in revenue from its
A350 and B787 aircraft fleets, respectively. Vietnam Airlines receives and consistently operates
16 Airbus A321neo planes and three wide-body Boeing 787-10 planes, all of which are brand
new and offer a variety of benefits, including more space, modern technology, and fuel
efficiency. Moreover, VNA intends to be a 5-star service quality by continuing to improve ground
and air products and services, as well as diversify its offerings, utilize technical solutions in the
development of goods and services to improve products and meet consumer needs.
Secondly, the goal of VNA is that by 2025, VNA will rank second in Southeast Asia after
Singapore. With a fleet of 300 aircraft and direct flights to the US and Europe without transiting
to third countries. To achieve that goal, VNA has outlined the following specific objectives. By
2020, Vietnam Airlines will contribute capital to more than 40 member units; The parentsubsidiary company complex will have assets of 6 billion USD, operate about 250 aircraft,
employ about 30,000 employees, transport over 320 million passengers with a revenue of over
5.5 billion USD.

II. The influence of macro environment on VNA
2.1 PESTEL analysis
The PESTLE model is an extremely useful strategic tool for predicting market growth or decline,

as well as analyzing competitive status (Schmieder, 2015).


Figure1: PESTLE Analysis (Source: Fhub.vn)

a) Political-Legal
Political variables have to do with the government's effect on the economy. Fiscal policy, trade
restrictions, and political stability are all examples of political issue. Consumer law, employment
law, and safety legislation are all legal considerations. These factors might have an impact on a
company's operations and product demand. (Stevenson and Marintseva, 2019).
The political system's stability is one of the causes that has a significant impact on a country's
economic growth as well as business policy, and it is often taken into account. Businesses
decide to invest in market expansion, especially in the growth of air transport companies' flight
networks. For example, in the past, the security situation in Iraq, Lebanon, and Thailand caused
airlines to cancel routes to these areas due to security concerns, and the political structure in
these countries is unstable. Since the airline industry in these areas is always fraught with risk.
Vietnam Airlines is one of the government-managed firms, which gives it an edge in terms of
capital funding, market security, and special financial policies in tough times. Terrorism, conflict,
disease, and gasoline costs, among other things, have an influence. In Vietnam, it currently has
monopoly status.
However, the domestic legal system has gradually improved, becoming more open and in line
with the trend of convergence (ASEAN, APEC, WTO, etc.), especially in international aviation
law. This will restrict the government's defense of Vietnam Airlines in Vietnam, but it will also

provide an incentive for the airline to reaffirm its place in the market over competitors. Vietnam
is regarded as a secure destination in the city, which indicates that more visitors and investors


can visit and explore the business market, increasing the likelihood of investment will rise in the
coming years, as will the volume of commodities sold in the markets.

On the other hand, Vietnam Airlines faces challenges from both the industry and tax policies.
VNA is required by government law to reimburse consumers, who have lost money due to Covid
19. To put it another way, the government protects consumers from oligopoly. In addition, when
Vietnam Airlines collects 100 percent, they must pay a 25% levy.

b) Economic
Economic conditions have a clear and significant impact on a company's financial condition.
(Mike, 2015).
Changes in the economy, such as GDP growth rate, inflation rate, degree of regulation, and
reform, have an effect on Vietnam Airlines' freight market. Abuse, a lack of fuel supplies, and the
government's implementation of AFTA and WTO accession commitments This would have a
direct impact on the source of goods exchanged in the industry, and will have an impact on
VNA's freight volume. According to the Government's report to the National Assembly on the
implementation of socio-economic (socio-economic) development plans in 2020 and five years
(2016-2020); expected plans for 2021 and directions and five-year tasks (2021-2025), Vietnam's
macro-economy remains stable, inflation is kept low, and quality improves. The economy's key
balances are improved, and growth is increased. As a result, the economic growth rate from
2016 to 2019 was extremely strong, averaging 6.8 percent every year.
Despite the fact that the economy will be severely impacted by the Covid-19 outbreak in 2020,
economic growth will reach 2.12% in the first nine months of the year. For the entire year, it is
predicted to expand at a rate of 2-3 percent. With this development rate, the country is regarded
one of the fastest growing in the region and the globe, owing to internal resources and the
capacity to diversify and adapt flexibly to changing economic conditions. Obviously, as the
social economy grows, an increase in both domestic and international spending would increase
the amount of products exchanged and traded in the market, resulting in an increase in
transportation demand. With the above signals about Vietnam's economic prospects, the
number of goods exchanged through airports will undoubtedly increase, which will add to
Vietnam Airlines' strong growth rate in the coming year.

c) Social



All cultural and social elements in a region or a country will have a significant impact on the
country's consumption characteristics. Factors like population growth and consumer behavior, etc
(Dalirazar, et al., 2020).
Urbanization growth and rising middle-class populations could boost the affordability of air travel.
The urbanization rate is an indicator of air travel trends as urban dwellers have above-average
incomes and are often located closer to airports. According to the United Nations, the
urbanization rate in Vietnam is currently 37% and is expected to increase to 40.9% by 2025.
Consumption will largely be driven by a growing middle-class population. It is forecasted to
account for more than 38%. Vietnam's total population in 2025 as estimated by Boston
Consulting Group.
In terms of consumer behaviour, as the customer of today has evolved, airlines, like any other
business, establish social values. Airlines are forced to implement adjustments in order to satisfy
evolving consumer needs. Passengers are increasingly choosing airlines that provide a diverse
range of services at reasonable pricing. In recent years, business class travel has declined,
resulting in a considerable loss for the company.

d) Technology
In a brief amount of time, technology becomes outdated. This review will assist you in selecting
the appropriate technologies to meet consumer demands. After giving it some thought, you can
quickly make financial choices on using technology. This technological innovation-related
influences may have a positive or negative impact on business and market growth (Nick, 2017).
Since this is a unique form of company that demands high operating protection, the aviation
industry is known for the rapid adoption of modern and emerging technology. The ramifications
are serious, and the harm to the property is almost permanent. Vietnam Airlines' aircraft fleet is
constantly updated to represent modern aviation technologies, primarily by incorporating
equipment from well-known aircraft manufacturers such as AIRBUS, BOEING, and others, as
well as improvements to the aircraft's structure and body aircraft, engines, and control systems to
increase the aircraft's operating performance and size. Scientific and technology advancements

have resulted in the production of new generations of aircraft with highly sensitive requirements.
Longer operating speeds, more efficient engine thrust, greater aircraft size, lower noise levels,
better fuel economy, and so on are all conditions for civil aviation transportation. Vietnam Airlines
is manufacturing aircraft such as the Boeing 777, Boeing 767, Airbus A320, A321, and others.
This is one of the most crucial considerations in assessing the accuracy, cost-effectiveness, and
competitiveness of air transportation goods.


e) Environment

There is a growing interest in ecosystems and the tendency to label "green" is more and more
common. People's perceptions of the environmental effects of product manufacture and use
have shifted as a result of these trends. Global climate change, ozone loss, erosion, the
disappearance of rare animals, acid rain, hazardous waste, sewage emissions, and noise
pollution have all become major environmental concerns (Nick, 2017).
Noise pollution, air pollution and climate change are factors that affect VNA in general as well as
the aviation industry in particular. In current traffic, noise caused by aircraft must be mentioned,
which is infrequent but very large in residential areas near the airport, especially when aircraft
take off and land. In a residential area near Tan Son Nhat airport, people feel very
uncomfortable when they hear the hissing of an airplane. Infrastructure such as houses and
buildings here also show signs of cracking due to the shock of the sound coming from the plane.
According to 2003 statistics, there are 57 million deaf or hard of hearing people worldwide, the
main cause is noise pollution. In addition, human productivity will be impaired in environments
with 50 dB of noise, especially for intellectual labor. Aviation is a large consumer of fossil fuels,
consuming 5 million barrels per day. These fuels actually account for around 2.5 percent of all
carbon emissions, a figure that could grow to 22 percent by 2050 as other sectors emit less
carbon. VNA faces many difficulties in dealing with the above issues when it comes to
environmental responsibility.
Therefore, growing companies' production costs and encouraging them to use more friendly
goods and services more effectively, allowing them to achieve a competitive edge.


2.2 Critically analyse the macro environment by assessing the opportunities and threats


At present

OPPORTUNITIES

THREATS

1. Stable politic

1. Pilots and technicians are scarce

Vietnam is regarded as a secure

Domestic airlines such as VNA needs around

destination in the area, which indicates

200-250 pilots per year, according to the CAAV.

that the number of visitors and investors

In addition, the requirement for instruction to

flocking to the country to visit and

transition from a helper to a main pilot, and from


explore the market will rise in the

trainees of basic training pilots to auxiliary pilots

coming

for aircraft in service, occurs approximately 170-

years,

creating

a

great

opportunity for VNA.

200 times each year.

2. The pollution of the air quality is caused
2.With a population of over 90 million

by carbon emissions.

people, income is rising.

Customers' awareness of environmental safety

Tourism is becoming more popular.


will grow in the future, and if airlines do not take
steps to curb air pollution, they will restrict their
air travel.

3.

Alternative

transportation

modes

(train,

road)

of
are

limited.
Long distances and bad roads require
time and effort, while traveling saves
time and effort.
4. The number of tourists to and from
Vietnam has increased dramatically.
5.VNA

has


the

potential

to

collaborate with other airlines and
skyteam representatives.
When VNA joins the skyteam alliance
as an official member, the international
In future

network becomes more available.
1. people have increasing income

1. More and more competitors

and increasing demand for travel or

Government creates conditions and permits

tourism

many new airlines in the future


On the one hand, international travel with long-haul flights is the fastest growing segment and
contributes about 25% of the total CO2 emissions of the tourism industry (Lenzen, et al, 2018).
the total number of airline passengers is expected to double by 2036 to 7.8 billion passengers
per year. The aviation industry accounts for about 2% of total CO2 emissions from human

activities. However, Vietnamese people still prefer to use airplanes over trains or other means of
transportation because of the time savings. Only a small part is concerned about the air
pollution caused by the aviation industry. However, that does not have a significant impact on
Vietnam Airlines or the aviation industry.

On the other hand, passengers are getting more environmentally aware, and they will prefer
facilities that are less detrimental to the atmosphere, forcing airlines to find ways to reduce
pollution into the environment. Governments will also be under pressure to introduce
sustainable aviation regulations. In the future, VNA will have to invest more in R&D activities in
green technologies to minimize emissions into the environment. For instance, British Airways
has launched an initiative to make jet fuel from household waste. British Airways parent
company International Aviation Group is investing $ 400 million to develop sustainable fuels
over the next 20 years. In addition, the company is planning to build the first plant to turn waste
into fuel in Lincolnshire. Therefore, VNA as well as other airlines in Vietnam must continue to
find new ways to adapt to the changes. Many firms have to turn to new technologies to stay
ahead of the competition.



Strategy for VNA in the future
Although Vietnam Airlines is achieving a lot of success by adopting a differentiation strategy.
However, it is clear that many people want a good flight with an attractive price. Vietnam now
has many students who are young, middle-class, and from other countries. They may not
have enough resources to use conventional services but are dissatisfied with the low-cost
airlines' quality. Hybrid is the latest concept in international aviation, with the aim of offering
complete operation at affordable rates. By seizing the opportunities and incorporating the
right strategy, VNA will have more customer segments and also capture more market share.

III. Porter's Five Forces model



According to Porter (1979), this model aids us in analyzing the industry's strategic prospects for
companies. It includes five factors: the threat of potential competitors, the threat of alternatives,
the right to bargain by the supplier, the right to bargain by the customer and competitive rivalry.

Figure 2. Porter's five forces

a) Threat of new entrances
Individuals, firms, and enterprises who have not yet competed in the same market but are likely
to do so if provided the chance are considered potential competitors. This is also one of the
most significant risks to companies (Porter, 2008).
The threat of new entrants into the aviation industry is low due to the following factors. Firstly,
going into the aviation business needs a significant amount of fixed capital. Boeing 787, Airbus,
ATR 72, and other large aircraft types are used by Vietnam airlines. Cummins (2019) estimates
that the cost of a Boeing 787-10 and an Airbus A350 is more than $300 million USD.
Furthermore, for domestic airport business and international airport business, at least 100 VND
billion to 200 VND billion is needed to set up and sustain an airline business (Shira &
Associates, 2018). The smallest amount of capital required by companies involved in traveler
terminals, distribution centers, and gas and oil gracefully is VND 30 billion. Cover zones, news
administrations, path aid and regulation, as well as climate perception, must all be at least 65
percent owned by the government.


Secondly, when it comes to economies of scale, a company's size is often a significant factor.
The greater the company's size, the more costs it can save. The cost advantage that companies
achieve as manufacturing becomes more productive is known as the economic advantage of
scale. Economies of scale can be achieved by rising production and lowering costs. For startups trying to enter into the aviation industry, this would be a significant obstacle. As Vietnam
Airlines promotes large-scale production and services, it achieves economies of scale.
Passengers, baggage, merchandise, parcels, parcels, and mail are all transported by VNA.
They also manufacture a wide variety of aircraft components, spare parts, materials,

engineering equipment, and other aviation-related products, as well as providing technical
support and spare parts to domestic and international airlines.
Finally, in terms of government policy, establishing an airline organization in Vietnam takes a
long time (3 to 4 years) due to various administrative procedures ( Shira & Associates, 2018).
The investment plan must be compatible with the State's overall business policy, and it must be
reviewed by both the Ministry of Trade and the Ministry of Planning and Investment.
b) Threat of substitutes
Substitute products are commodities or services that may be used in place of another with
similar benefits and purposes (Porter, 1979).
Threat of substitute for Vietnam Airlines is medium because of the several main factors as
follows. On the one hand, the client's cost of switching from using an airplane to using a train or
road is almost zero. Therefore, customers can easily switch to other means of transportation
without having to worry about the costs they have to spend. However, With the growth of the
airline industry, including the successful participation of private low-cost airline Vietjet Air and
the restructuring of Vietnam Airlines, airfares have declined and flight services have become
more varied. In recent years, an increasing number of Vietnamese citizens have chosen aircraft
as a mode of transportation to replace the railway or road, particularly for long distances
between North and South or abroad. Planes can be a faster mode of transportation than trains
in terms of travel time. The most critical and scarce resource is time. As a result, consumers on
business trips can select planes as their mode of transportation to save time. Air travel is
unquestionably the most comfortable mode of transportation for all. The plane is also quicker
than the airship for the same span. Reduce exhaustion and wait for a long time on the train after
that. Waiting in line to pick up tickets or objects around rush hour is often quicker than taking the
subway. In addition, the roads in Vietnam are also not good, so customers may get exhausted
after sitting in a car for several hours. Passengers on planes have grown by half in recent years,
from 14 million in 2010 to 20.7 million in 2015. In the meantime, the number of passengers
taking the train is diminishing. In 2015, the railway system as a whole only transported 11.2
million passengers (Chau Anh, 2015).



On the other hand, the airline industry would benefit from IDC's prediction for an increase in the
number of business travelers. However, this is a challenge to the aviation industry in general,
and to Vietnam Airlines in particular, as it is a great chance for businesses to provide effective
business travel services such as online and video conferencing (zoom, microsoft team,etc).
Customers can save both time and money by not having to travel to meetings and now meeting
via camera. However, the current situation does not seem to be serious and has a significant
effect on the aviation industry.

c) Bargaining power of buyers

The ability of a buyer to exert leverage on a company or lower the price of the goods or services
it sells is determined by their bargaining power (Porter, 1979).
The bargaining power of customers over Vietnam Airlines and its industry is medium. To begin
with, since there is few competitors in the aviation sector, consumers do not have many options.
Vietnam Airlines, Vietjet, and Bamboo Airways are the three major airlines in Vietnam. Every
single day, thousands of passengers are served by VNA's more than 300 flights. According to
Sacojet (2016), Tan Son Nhat International Airport is the first airport in terms of terminal size,
with almost 30 million passengers a year. To put it another way, while there are few sellers and
more customers, the buyer would not have a lot of power.
Conversely, Companies' competitive edge and purchasing leverage are built on the basis of
switching costs. Companies aim to raise consumers' switching costs as much as possible in
order to compel them to keep buying their goods even as prices rise year after year, without
having to fear that cheaper options with comparable features or prices will emerge. In aviation
industry, customers ' switching cost is very low. Customers can easily switch to another airline
just by buying a ticket, therefore they have more power over the companies.
Additionally, the majority of passengers are unaware of the costs associated with each flight,
such as staffing, airport fees, taxes, aircraft operating fees, ground personnel fees (which
include air

traffic control fees, fees charged to flight controllers, ticketing staff, and marketing staff), and

other expenses. As a result, they have no way of knowing if the sale price of each ticket is high
or low.


d) Bargaining power of suppliers
The number of vendors will decide the economic burden on the market and businesses, as well
as their bargaining strength (Porter, 1979).
The bargaining power of suppliers in aviation industry is high . The number of supplier providing
a few or only one but no substitute product is disadvantageous for the buyer, requiring the buyer
to look for other suppliers or substitute products. If the number of supplier is large, this pressure
decreases. Firstly, the main suppliers of VNA are aircraft manufacturers. Currently, Airbus and
Boeing are the two largest aircraft manufacturers in the world and are well known by many
people. And Vietnam Airlines also uses 2 types of aircraft from these 2 suppliers. Since the
number of suppliers is very small, the power of the supplier over VNA is very high, or in other
words, VNA does not have much choice in choosing aircraft from many manufacturers.
Secondly, cost of switching between providers in this industry is very high. Most businesses
have long term agreements with their suppliers. That way, businesses can optimize their input
costs as well as benefit from other perspectives. To give a clear example, Vietnam Airlines and
Air France Industries KLM Engineering & Maintenance (AFI KLM E&M) signed and awarded a
Boeing 787-9 aircraft engine maintenance contract worth more than 500 million USD. Vietnam
Airlines is a longtime customer of AFI KLM E&M in Southeast Asia and they have provided the
airline with maintenance services for many years. AFI KLM E&M is proud to continue to be
trusted by Vietnam Airlines, as a companion in the modern fleet upgrade program, with the
supply of spare parts, materials and maintenance of GEnx engines for the Boeing 787 fleet. -9
firm. This agreement also once again affirms the sustainable cooperation between Vietnam
Airlines and Air France in many fields.

e) Competitive Rivalry

Existing competitors are companies operating in the same industry as the business. If the

competitors are weak, the business will have the opportunity to increase prices and make more
profits and the business can implement a power expansion strategy. (Porter, 1979).
In aviation industry, the level of competitive rivalry is relatively high due to a few reasons as
follows. Firstly, the exit barriers is very high or the direct cost of leaving the industry is high:
barriers in technology, capital investment, constraints with employees, binding with the
government, related organizations (Stakeholder) and strategic and planning constraints. For
instance, strategic relationships between strategic businesses are an obstacle to leaving the


industry already in business. A product or service may have the same distribution channel or the
same means of production as another product or service. When leaving this industry, it will
cause many difficulties for other units in operation. Because of

these costs are high,

businesses will not leave the industry but stay in the industry to compete. These costs include:
market research costs, product repositioning costs, markets, administrative procedures.
The Vietnamese air transportation industry has erupted in recent years, with private and stateowned airlines competing for market share in a price war. High competition among domestic
airlines such as VietJetAir and Bamboo. In addition to rivalry in the domestic market, Vietnam
Airlines must contend with airlines from both within and outside the country. VNA used to deal
mostly with French and German airlines while flying from Europe to Vietnam. Today, German
airlines are forced to make way for Middle Eastern carriers. VNA is required to contend against
a powerful and challenging opponent. While VNA only has four routes to Western Europe (Paris,
Frankfurt, London, and Moscow), Middle Eastern carriers go to every city in the continent.



Radar plot

COMPARAT IVE INDUST RY ST RUCT URE ANALYSIS

Current

Future

Rivalry
5

Entry threat

Substitute threat

0

Buyer power

Supplier power

Figure 3: Rada plot


Entry threat
Substitute threat
Buyer power
Supplier power
Rivalry

Current
5
3
3

1
2

Future
3
2
2
3
1

1=High , 3= Medium , 5=Low, 2= Relative High

In the future, there will be a changes in terms of threat of new entrance and competitive rivalry.
Research firm Boston Consulting Group predicts that by 2030, about 16% of Vietnam's
population will be considered rich, up sharply from the figure of 5% in 2018. This will be a strong
growth engine for Vietnam aviation industry in the near future. The government will facilitate and
license new airlines as well as open more flights from abroad. For instance, according to the
decision approving the adjustment of the planning for the development of air transport to 2020,
with a vision to 2030, which has been approved by the Government, the target to 2030 is the
Vietnam air transport market. South is in the group of 4 leading ASEAN countries in terms of
volume transported; forming and developing 3 passenger and cargo transportation centers on a
par with ASEAN. Furthermore, tourism will be paid more attention in the future, so the
competition in the aviation industry is increasing. The emergence of many new airlines will
strengthen competition not only in terms of service but also in price. Therefore, the hybrid
strategy will help VNA take advantage of its competitive advantage and capture more new
customers.


IV. VNA's internal environment and capabilities
S

P

Firm infrastructure
-Legal: The Vietnam Ministry of

Inbound
Logistics

Logistics

VNA has applied the global

VNA and Air France

ticket booking application

Industries KLM E&M

authority to operate. Other legal

requirements of health, English

software through Webportal

signed a contract to

papers comprise the Vietnam

proficiency, strict and transparent


and Saber systems. Flight

maintain Boeing

activities, flight safety, flight

787-9 aircraft

documents are managed by

engines. With the

the EFB software system.

ability to maintain

entrance tests of the corporation.
- -Pilot training: VNA offers over 486
students from throughout the nation

publishes an annual report every

37 various training courses ranging

GEnx engines, AFI

year that summarizes their financial

from basic to advanced across the


KLM E&M will

situation and is available to investors

country.

ensure the good

and executives. VNA's primary

-Flight attendant training: There are 53

operation of

funding sources are its stockholders,

courses for flight attendants, with

Vietnam Airlines'

which include the Vietnamese

893 trainees, and 15 courses for

Boeing 787-9 fleet,

government, ANA Holdings Inc, and

chief flight attendants, with 196


helping the airline to

Techcombank.
Outbound

Procurement

recruited staffss must meet the

Transport license.
-Accounting and Finance: VNA

s

- Vietnam Airlines affirmed that all

Technology Development

Finance gave VNA preliminary

Aviation Law and Ministry of

Operation

Human Resource Management

-Planning: VNA sets particular

trainees.
Baggage handling training: VNA


Baggage system: The

targets for its airline to achieve in

check-in workers, like all other staff,

systems work along with the

their yearly reports, which are

must undergo training on how to sort,

local airport.

dependent on the state of the market

operate, and manage passengers'
bags.

more effectively
exploit long-term
international and
domestic routes.
(Vietnam airlines,


Marketing
& Sales


at the moment. All of the

Product development and market

Database Marketing: The

2018).

announcements are made available

research: VNA's marketing staff is

company's primary host

-VNA also has

to the press and customers. VNA's

constantly interested in hearing what

keeps track of all of the

procurement

plans also involve staffs training and

consumers have to say in order to

customers' profiles so that


professionals that

organizing internal events.

improve their flying experiences.

they may recommend

work with vendors

-Government relations: At Vietnam

promotions to them.

both locally and

Airlines, the Government performs

Internet Sales: Fb and

globally to negotiate

two roles: The first is the owner, the

Google ads are used to

materials.

second is the state manager. As a


display numerous adverts on

state manager, the Government has

the internet.

issued a series of tax and fee

Call Center: There are

support packages

employees available to

Vietnam Airlines has had many

answer hotlines 24 hours a

advantages over private enterprises

day, 7 days a week for any

such as owning a long-standing

consumer guidance or

national brand, having many backing
In-flight training: VNA hostesses are

assistance.

Baggage tracking system:

prepared for everything, from

VNA, like many other airlines,

emergencies to serving lunch and

uses its own baggage tags

snacks/merchandise to passengers

and tracks luggage before

on board.

and after flights.

businesses such as service
companies, airport transportation.
According to the proposal of Vietnam
Services

Airlines, the Government as the
owner of the state capital supports
"refinancing" with a scale of 12,000
billion VND.


The interlinked value-added operations that transform input to output, so adding to the bottom

line and assisting in the creation of a competitive advantage (Kaplinsky, et al., 2001).
 From value chain of VNA above, we can see that they are all interconnected. More precisely,
the majority of VNA's activities are primarily reliant on its connection with the government. The
government and shareholders have a significant impact on VNA's financial status. As a result,
VNA must have adequate planning and serious outcomes beyond the initial period of
operation. In this scenario, the human resource will have an impact on how VNA operates.
VNA's personnel will require proper training and experience in order to work effectively and
provide a professional image to shareholders and consumers. Finally, being able to thrive in
the market necessitates a thorough awareness of the sector as well as the availability of
service. VNA's market researchers and negotiators devised crucial tactics and plans that
helped the company stand out, resulting in outstanding agreements with other partners
throughout the world. In order for VNA to survive and prosper in the industry, none of these
tasks could be overlooked.

Resources and Capabilities
Resources
We may split VNA's resources into two sorts in this section: intangible resources and tangible
resources:

 Tangible resource


Financial resource: VNA is owned by the state. In 2016, VNA issued individual shares to
foreign strategic investor ANA Holdings Inc (Japan), raising the charter capital to 12,275
billion dong. By the end of December 2020, the Corporation's consolidated revenue in
2020 was estimated at VND 42,523 billion, of which the parent company was estimated
at VND 32,983 billion, all exceeding the plan, respectively, at VND 1,937 billion (4.8 %)




and 448 billion VND (1.4%).
Human resource:
More than 20,000 officers and workers work at VNA, including 1,200 pilots, 2,500 aircraft
engineers, and 3,000 flight attendants (VNA, 2020). Vietnam Airlines' staff has been
swiftly revitalized and upgraded, particularly specific professionals such as pilots, flight


attendants, engineers, and aircraft technicians who are focused on development, steps
to reduce the number of workers who have to hire foreigners, especially pilots.
Regarding labor quality, the workforce of Vietnam Airlines is basically young: 72.5
percent are under the age of 40, with 32.6 percent under the age of 30 (statistics as of
31/03/2015). Employees with university and post-graduate degrees made up 45 percent
of the workforce. The management team is basically trained, has solid knowledge,
expertise and experience.
 Intangible resource


Brand: VNA was established in 1993. A modern airline with a brand that is widely
known for its distinct cultural identity. Vietnam Airlines has just been honored in the
Top 10 strongest brands in Vietnam by Campaign Asia - Pacific (2020) in
cooperation with market research company Nielsen. VNA is honored to be in the top
10 strongest brands in Vietnam besides major international brands: Samsung,
Honda, Apple and Vietnamese brands: Vinamilk, Vingroup, Trung Nguyen



Coffee,etc.
Experience: VNA's staffs are all well trained and assured to do an excellent job.
The reason for this was because VNA hired people based only on their abilities, and
then all of them had to go through a series of specialised training courses for




various jobs such as captain, pilot, and ground operators.
Customer loyalty: According to survey statistics conducted by Vietnam Airlines, the
airline's customer satisfaction index (NPS - Net Promoter Score) has steadily
improved in 2020, rising from 31 points in January to 53 points in June (October
2020). The average index for the year ending October 2020 is 40 points, up 13
points from the previous year's period. This shows the trust and love of customers



for Vietnam Airlines.
Supply chain: VNA's supply chain include purchasing and servicing aircraft from
manufacturers like as Airbus, which offers the most contemporary and fuel-efficient



aircraft on the market.
Technology: The airport provides the majority of the technology for VNA's aviation
service. On the other hand, VNA has its own research and development
department, which will deliver better solutions to flight managers.

VRIO FRAMEWORK


Vrio analysis is a great way to examine a company's resources and skills in order to get a
competitive edge (Barney, 2005).
Resources & Capabilities of VNA


V

R

I

O

Competitive implications

Finance: The state owns the company,
which has a number of stockholders
and is backed by the government.

Yes

No

-

-

Competitive parity

HRM: A group of aviation professionals
who have been trained by VNA.

Yes

Yes


No

-

Temporary competitive
advantage

Distribution: dispersed across
Vietnam's airports

Yes

No

-

-

Competitive parity

Supply chain: Air carriers, parts,
gasoline, and other equipment are
provided.

Yes

Yes

Yes


Yes

Technology: It entails flight and
baggage handling.

Yes

No

-

-

Loyalty customers

Yes

Yes

Yes

Yes

Sustained competitive
advantage

Brand: Well-known by the customers

Yes


Yes

Yes

Yes

Sustainable competitive
advantage

Sustained competitive
advantage
Competitive parity

BENCH-MARKING
Bench-marking is the comparison of a company's performance indicators and procedures to
those of the best in the industry in order to learn and improve (Invernizzi, et al., 2018).

Relative strength (1-10)

Strategic importance (1-10)


Vietnam Airlines
The government owns it, and it is

Vietjet Air
Although the financial situation is

supported from the national budget.


dependent on the mother

(Rated: 10)

corporations, it is also aided by the

Because human resources are

government. (Rated: 8)
Recruited through university

selected from Vietnam's Aviation

collaborations and trained using

Academy, it is sustainable. (Rated: 10)
Domestic airports offer service to other

worldwide courses (Rated: 8)
Domestic airports offer service to other

domestic or international airports.

domestic or international airports.

(Rated 10)
Airbus A321 – 200, A330 – 220, A350

(Rated 10)

69 Airbus airlines are available for sale

– 900 XWB, Boeing 787 – 9

or lease, including the A320ceo,

Dreamliner, and ATR 72 are among

A321ceo, A321neo, and A321XLR.

the 90 aircraft owned by the company.

(Rated 7)

(Rated 9)
Concentrated on aircraft and services

Concentrated on aircraft and services

Technology that do not need technical techniques.

that do not need technical techniques.

Finance

HRM

Distribution

Supply chain


Loyalty
customers

Brand
Strategies

(Rate 5)
Overall, good service, but the fare

(Rate 5)
When compared to Vietnam Airlines,

price is expensive; as a result, clients

the service is medium; nevertheless,

have alternative options.(Rate 7)

because of the low price, clients may

A high-quality airline that caters to a

travel more. (Rate 8)
A low-cost airline caters to a broader

select group of passengers. (Rate 7)
Differentiation (Rate 8)

range of passengers.(Rate 9)

Overall cost leadership strategy (Rate
7)

 When VJA first entered the market, they immediately made an impression on
Vietnamese clients by offering so many additional modifications and cost-cutting
alternatives. However, with a long history compared to VJA, with the competitive
advantage that the airline offers a great experience with professional services. In 2019,
VNA was honored to be awarded as the Airline that carries the most tourists. Vietnam


Airlines has an unparalleled competitive edge in the intermediate and high customer
sectors, with 4-star service and great quality competition; this customer source offers
companies 7% growth in 5 years ( 2013-2018). That is the reason why VNA could be
able to compete with VJA.

Based on the analysis above, we can determine some of VNA's strengths and weaknesses:

Strength
S1: VNA is the national carrier with a well-

Weakness
W1: Because of the limited share of high-

known brand in the domestic and CLMV

income customers, average revenue on

markets.

international routes is still modest.


S2: Being Vietnam's traditional airline; local

W2: The quality of service is still inferior

products that are distinctive (grade C, GLP

compared to other major carriers in the

program)

region.

S3: The service system is synchronous,

W3: In the worldwide market, there is a lack

diversified, and limited depending on the

of competition.

supplier.
S4: The fleet has been renewed since
2015, with the addition of the A350-900 and
B787-9 to boost resource competitiveness
and keep the airline ahead of the curve in
terms of aircraft technology compared to
other airlines in the region.

ORGANIZATIONAL STRUCTURE



(VNA anual report, 2017) Figure 4: VNA organizational structure

VNA can divide its scope of work into a variety of divisions using functional organization to
achieve the best results. There is a general meeting of shareholders (GMS) under the
progressive system, which has the most power to regulate all actions in the corporation,
including the board of supervisors (BOS). Following that, BOS will transfer the objectives from
the partner to BOD. In other words, BOS serves as a link between the organization's two
highest levels, allowing them to maintain uniformity and order when deciding on task
assignments. Furthermore, the CEO is critical in establishing a relationship between the highest
levels of the chain of significance and the whole division. The CEO is the one who
communicates all of the aforementioned aims and goals to the personnel in each division, and
oversees how they may be most effective in their job. VNA manufactures a very definite and
efficient structure at the lowest level of the organization, which is all about division. To partition
the quantity of work, VNA manufactures a very certain and efficient structure. Many