Background and Management Problem
Vietnam's recent entry into the WTO presents significant opportunities for the aviation market, while also escalating challenges As the aviation sector expands, Vietnam Airlines (VNA) must focus on developing new markets and enhancing its flight route network.
Vietnam Airlines (VNA) became an official member of the International Air Transport Association (IATA) on December 5, 2006 This membership not only provides commercial advantages but also enhances VNA's brand recognition With the addition of the "Vietnam Airlines" trademark to IATA's member list, VNA's position in the international market is strengthened, alongside the improvement of service quality offered to passengers.
Vietnam Airlines (VNA) currently operates and codeshares to 38 international destinations across Europe, Asia, Australia, and the Middle East, while serving 18 domestic locations The airline's fleet consists of 40 aircraft, including 10 Boeing 777s, 8 Airbus A321s, 10 Airbus A320s, 10 ATR-72s, and 2 Fokker-70s VNA aims to expand its fleet to 86 aircraft by 2015 and enhance both international and domestic routes Notably, the airline plans to introduce a direct route to the United States, targeting a launch at the beginning of 2008.
The biggest difficulty faced by VNA when launching the route to US is competition, noting that 7 - 8 airlines currently transport passengers from the United States to Vietnam and vice versa
This study addresses the challenge of how Vietnam Airlines (VNA) can effectively penetrate the U.S market and compete with established airlines It will explore strategic approaches to enhance VNA's market presence and competitiveness in this key aviation sector.
The Project Objective
The objective of this project is:
To analyze the external and internal environment of VNA in relation to the US market
To develop marketing strategy for VNA to penetrate US market
To recommend strategic program for VNA.
Research Method
The resolution of this management issue relies on the strategic management framework established by Pearce and Robinson in 1997, while the competitive strategy is shaped by Michael Porter's concepts.
Theories in strategic management and marketing management and information in the external and internal of Vietnam airlines are to be applied to solve this strategic management problem.
Project Scope
Due to project constraints, this study will primarily concentrate on advertising strategies that will enable Vietnam Airlines (VNA) to effectively penetrate and influence its target passengers in the US market Consequently, VNA will develop tailored strategies to successfully engage this market segment.
Company Internal Analysis
The company’s vision is the desired future state It is an aspiration around which somebody might seek to focus the attention and energies of the organization
The mission statement articulates the organization's purpose and reason for existence, highlighting its unique qualities that distinguish it from competitors It outlines the core objectives that define its operations, including the specific products and services provided and the markets it serves.
The Objectives state rather precisely goals of the company, which are in line with its mission
The company profile depicts the quantity and quality of the company’s financial, human and physical resources
Every company comprises a series of activities aimed at designing, producing, marketing, delivering, and supporting its products These value-creating activities are categorized into five primary functions and four supporting functions.
Company External Business Environment
Market and Customers
The traditional method of analyzing customers and consumers relies on constructing profiles based on geographic, psychographic, and behavioral data This information is essential for effective market segmentation, as outlined by Philip Kotler in 1994.
Competitor profile
The analysis of the competitor profiles has several objectives: Identification of the current and of potential competitors, identification potential strategic competitor moves, identification of an effective strategy to compete
When creating a competitor profile, several key criteria are typically considered, including raw material costs, production capacity and productivity, product quality, pricing competitiveness, marketing and sales effectiveness, market share, financial stability, overall reputation, and industry experience These factors can vary based on specific situations but are essential for a comprehensive analysis of competitors.
Structural Analysis of the Industry
The five forces framework helps to identify the sources of competition in an industry sector (Figure 3), (Table 1)
SWOT Analysis
SWOT analysis is a strategic tool that provides a concise overview of a company's position by summarizing its internal strengths and weaknesses, as well as external opportunities and threats.
SWOT Matrix
The SWOT matrix serves as a valuable tool for conducting internal analyses within a firm This study operates on the premise that a successful strategy is developed by leveraging the company's strengths and opportunities while addressing and mitigating its weaknesses and threats.
Strategy Formulation
Marketing Strategy
The marketing strategy intends capture a larger market share of an existing market through market saturation and market penetration or development of new markets for the current products
Advertising is a non-personal form of promotion that is delivered through selected media outlets that, under most circumstances, require the marketer to pay for message placement
• Newspapers, Magazines, Professional and technical magazines
• Cinema, television, radio, outdoor advertising and transport advertising
• Interactive communication media, Place-based media (the fitness center, supermarket, airport, in the aircraft…)
• Trade fairs and exhibitions, sponsorship of sport or art events
General Introduction about US and VN – US relationship
General
The United States is a vast country, encompassing a total area of 9,159,123 square kilometers, making it the fourth largest in the world, following Russia, Canada, and China, and accounting for 6.2% of the Earth's land area Its geography includes the state of Alaska in the northwest and the Hawaiian archipelago in the Pacific Ocean, stretching approximately 4,500 kilometers from east to west and 2,500 kilometers from north to south.
Population, overseas Vietnamese in US
U.S has many euthenics groups, racial, cultural and languages In July 2004, U.S population is 293.027.571 people, 77.1% is white, 12.9% is black, 4.2% is Asian (approximately 12 million), 1.5% is U.S aboriginal, 0.3% is Alaska & Hawaii aboriginal and Pacific Islands and 4% from other origins
According to the 2000 US Census, the Vietnamese community in the United States comprises approximately 1.2 million individuals Notably, 46.3% of overseas Vietnamese, around 566,519 people, reside in the Western states, with California and Washington being the primary locations Additionally, 15.28% of the community, approximately 187,018 individuals, live in the South West Central region, particularly in Texas Furthermore, 12.42% of overseas Vietnamese, or about 152,059 people, are found in the South Atlantic, while the remaining population is distributed across various other regions, each accounting for 4-6%.
- 7 - overseas Vietnamese live in Middle Atlantic, North Central , Mountain, South Central (Figure 7: overseas Vietnamese allocating in USA (US Census in 2000)
U.S is divided in 50 states, each state has its law and constitution, but it isn't against federal constitutional Federal government seize the power management including: general tax policies, foreign policy, international trade, bearing responsibility for copyrights, national defense, metrology system, weights and measures, money issuing
US is an excess of imports over exports country, besides US build satellite economic model to produce consumer goods and import back to US
California's economy ranks as the seventh largest in the world, generating a gross income of $1.550 trillion and accounting for 13% of the United States' GDP With a GDP per capita of approximately $35,019, California plays a significant role in the national economy.
U.S Air Transport Market
Outbound market
Between 1995 and 2005, the number of U.S outbound passengers traveling to foreign countries increased steadily from 5% to 10% This growth was notably interrupted in 2001 and 2002 due to the impact of the September 11 terrorist attacks, the Iraq War, and the SARS epidemic in 2003, all of which significantly affected the U.S aviation market and the global travel industry.
- 5 big outbound markets in U.S: UK, France, China (including Hong Kong), Italy, Germany.
Inbound market
Visitors coming to U.S with the commercial purpose is 24%, approximately 5 million guests per year, traveling and visiting relatives is around 76% approximately 15 million guests per year
Businessman coming to U.S is mostly at the Eastern states and California in West Most of businessman come in/out U.S that have resident period of time in U.S is 6 days normally
Seventy-seven percent of tourists visiting the U.S do so primarily for travel, while 14% come to visit relatives and participate in additional events On average, these visitors stay in the U.S for about eight days.
Airline Transporting Market Between Vietnam and US
Vietnam - US aviation market according to Origin & Destination
In 2006, the US-Vietnam aviation market recorded 339,600 passengers, with 94.15% traveling from the US to Vietnam (320,409 passengers) and 5.85% from Vietnam to the US (19,191 passengers) Forecasts indicate that passenger numbers between the US and Vietnam are expected to grow rapidly, at an annual rate of 15% to 20% from 2007 onwards.
2010, especially, after Vietnam joins The World Trade Organization development ratio can be decreased a little and stable at the average of 10% per year in the following five years (Table 4) (Figure 10)
Passengers structure
In the US-Vietnam travel market, overseas Vietnamese account for 66.5% of the total origin and destination (O&D) traffic in both directions Following Vietnam's accession to the WTO, there has been significant growth in both leisure and business travel segments, leading to an increase in their share of the passenger demographics from the US The majority of travelers from Vietnam consist of business professionals, overseas students, and emigrants seeking to reunite with their families.
Passengers distribution by US Departure/ Destination
California's strategic geographical location positions it as a major gateway for passenger transport to the U.S., particularly in the trade market between the U.S and Vietnam Despite a recent decline in passenger traffic to the West due to direct flights from Northeast Asia to the Eastern and Midwestern U.S., California is expected to maintain its status as a primary transportation hub in the coming years.
Connection Gateway
Generally to the passengers departuring/ arriving LAX (Los Angeles), TPE (Taipei) is the biggest connection gateway, the next is BKK (Bangkok)
From the past until 2004, the TPE gateway was the preferred choice for passengers traveling to and from San Francisco International Airport (SFO) However, following United Airlines' launch of flights from the U.S to Vietnam via the Hong Kong (HKG) gateway at the end of 2004, passenger traffic through HKG surged significantly in 2005.
The general feature is the oversea Vietnamese departuring from LAX, SFO also have the tendency to choose the flights through the TPE gateway, maybe
- 10 - because TPE has the variety of flights connecting to Vietnam or its airfare is competitive (Table 6-7)
Competitors profile
3.3.5.1 Competitive rate based on the origin/ destination in LAX/ SFO
When comparing LAX and SFO, LAX serves a larger population, including overseas Vietnamese, overseas Chinese, and Americans traveling to Vietnam, alongside a higher frequency of airline operations However, when evaluating specific metrics, such as the overseas Vietnamese population and the number of flights through the TPE gateway, the growth indices for SFO and LAX appear comparable, indicating a similar competitive landscape between the two airports.
3.3.5.2 Competition through the TPE Gateway
Considering the competitive products, along with the other connecting flights through TPE, the position of Vietnam connecting flights in Taiwan, Vietnam or
Vietnam's entry into the TPE-US airline market faces significant challenges, as established carriers like China Airlines and EVA Air dominate the sector with a strong tradition of service Consequently, Vietnam's market share in this route remains minimal, leading to intense competition in both product offerings and pricing strategies.
Feature of sale system
Currently, more than 70% of airline tickets in the US market are booked through the Airlines Reporting Corporation (ARC), an intermediary that facilitates the booking and payment processes between airlines and agents in Northern US This system operates similarly to the Bank Settlement Plan (BSP) used in Europe and Asia To date, ARC comprises 135 airlines, approximately 23,000 agents, and 175 travel agencies across the US.
Summary
The Vietnam-US aviation market has experienced consistent growth, averaging 9% annually from 1998 to 2006, despite setbacks in 2001 and 2003 due to the September 11 attacks and the SARS epidemic Vietnam's recent accession to the WTO presents significant opportunities for the aviation sector, while also introducing new challenges As the market expands, Vietnam Airlines (VNA) must focus on developing its market presence and enhancing its flight route network.
The direct flight from Vietnam to the US has significantly enhanced cooperation and exchanges between the two countries in various areas, including culture, economy, and politics, particularly following Vietnam's accession to the WTO Vietnam Airlines (VNA) plays a vital role in promoting Vietnamese traditional culture among its passengers, achieving a high satisfaction rate among Vietnamese communities in the US This presents a valuable opportunity for VNA to tap into the Overseas Vietnamese market, which will remain a crucial segment in the US-Vietnam trade landscape for years to come Consequently, California, home to 39.5% of the Vietnamese American population, emerges as a key destination for targeted marketing strategies.
Vietnam Airlines (VNA) faces significant challenges in launching its route to the U.S due to intense competition, as 7-8 airlines already operate flights from the United States to Vietnam With various connecting flight options available through Taipei, VNA must contend with strong rivals like China Airlines and EVA Air, particularly regarding product offerings and pricing strategies.
These analyses will help VNA to realize the opportunities and threats when launching the route to US
History and development process
Since its inception in 1956 with just five aircraft, Vietnam Airlines (VNA), formerly known as Vietnam Civil Aviation, has undergone significant transformations After the nationalization of Gia Lam Airport, VNA commenced operations as an independent airline Over the past fifty-one years, it has continuously evolved, expanding its fleet and enhancing its services to
Established in 1995 by Vietnam's Prime Minister, VNA Corporation is dedicated to trade, services, and both passenger and cargo transport, adhering to the State’s Civil Aviation development plans Our responsibilities include developing investment strategies, securing funding, acquiring and maintaining aircraft, and managing the import and export of essential materials and equipment We actively pursue partnerships and joint ventures in compliance with national laws, ensuring efficient use of state resources and funds for business growth Additionally, we focus on incorporating new technologies and providing ongoing training to enhance the skills of our staff, which has contributed to significant growth in passenger traffic over the years.
Flight network
In the past five years, Vietnam Airlines (VNA) has significantly expanded its network and plans to continue adding new international and domestic flights Currently, VNA operates and codeshares on 38 destinations worldwide, including Europe, Asia, Australia, and the Middle East, while serving 18 domestic destinations In 2006, VNA transported approximately 6.8 million passengers, with over 3.1 million on international flights and 3.7 million domestically, generating more than one billion USD in revenue Additionally, VNA successfully carried an impressive 106 thousand tons of cargo in the same year.
Global Cooperation
Currently, VNA Corporation’s scope of business covers the following areas: Transportation of passengers and cargo - General sales agent for foreign airlines
Vietnam Airlines has established a robust network through 89 Interline Agreements and 10 Codeshare Agreements with prominent international carriers such as Cathay Pacific, Korean Air, and Singapore Airlines This strategic collaboration enhances the airline's operational efficiency and expands its global reach in the import and export of goods, including petroleum and plastic products Additionally, the airline offers comprehensive services in staff management, ground handling, and equipment leasing, ensuring a seamless travel experience for passengers.
VNA Fleet
Plan to develop VNA fleet in 2007 will be as follows:
B777: since April to the end of year will be 11 aircrafts (estimated)
Service quality at passengers' sight
Passengers expect VNA services to maintain slightly elevated rates, with many service aspects still meeting satisfactory standards The ticket reservation process, conducted via telephone, operates at a commendable level, nearing a score of 6 or 7 Key service elements include pre-flight formalities, airplane facilities, availability of newspapers, food portions, drinks, and in-flight entertainment, all contributing to the overall travel experience.
Frequent Flyer program
In 2006, the program reached a total of 99,788 members, marking a 50% increase from 2005 with an addition of 34,059 members This membership included 8,264 Gold members (8%), 12,551 Titan members (12%), 41,672 Silver members (42%), and 37,301 Registry members (37%) Notably, 36.8% of the members had correspondent addresses abroad.
Advertisements
Advertising strategy
Concentrating to exploit the strengths of VNA such as modern aircrafts, Business class and internationalizing the Frequent Flyer Program
Balancing the structure between strategical advertisements and tactical advertisements to strongly support the typical markets.
International advertisements
In 2006, the total budget for international advertisements reached 46.24 billion VND (approximately 2.89 million USD), reflecting a 2.2% increase compared to 2005 By December 31, 2006, 66% of the budget plan had received approval, with the remaining unapproved funds largely due to the lack of nominated advertising agents in France.
- 15 - market and of not operating the television advertising plan in Japanese market at the end of 2006) (Table 10)
Advertisements in Asian and Pacific Ocean zones
The paid budget was 370,074USD, occupying 90.2% of supplemented plan detailed as following:
Vietnam market advertisements
In 2006, the total approved budget for advertisements in the Vietnamese market reached 10.8 billion VND, representing 84% of the planned amount, with 16% of the budget still pending approval due to year-end advertising plans being postponed.
2006 to the beginning of 2007, increasing 76% vs 2005
From 2006 to 2008, VNA focused on developing comprehensive advertising strategies tailored for the Vietnam market, ensuring robust support for both domestic and international sales The company established key partnerships by signing outline contracts with prominent television stations and well-known newspapers across various provinces and cities, based on their projected capacities.
Sponsoring operations
Vietnam Airlines has successfully sponsored several significant events, showcasing its commitment to promoting Vietnamese culture and tourism Notable programs include the APEC CEO Summit, the Vietnam-Implicit Beauty campaign, and the trade village festivals in March 2006 Additionally, the airline supported the Come-Back-to-Source tours during the Hung Temple Festival and participated in the Hue Festival in May 2006 Other sponsorships include the Vietnam Symphony Orchestra and the Vietnam Intelligence Contest, along with the Vietnam Volleyball League in 2006, highlighting the airline's dedication to enhancing the nation's cultural and sporting events.
As a sponsor, we successfully supported air travel for film associations from countries like Holland, Russia, and the United States, facilitating film shoots that showcase Vietnam's stunning tourist destinations This initiative not only promotes Vietnam's rich cultural heritage but also enhances the visibility of Vietnam Airlines in the global travel market.
Summary
In 2006, VNA successfully exceeded its estimated plan by 3.9%, serving nearly 6.8 billion passengers and solidifying its market position The airline increased its seat utilization and generated approximately 14 billion VND in revenue.
According to internal analysis, VNA can recognize that:
- Services make up impressions to Vietnamese, In-flight services (Foods and drinks) are mostly suitable for Vietnamese passengers
- Safety rate of VNA is pretty high
- VNA Aircrafts are new, modern
However, there are some limitations such as:
- Prices of aircraft renting and fuel are highly risen, have strongly affected the plan to develop the aircraft' businesses and budget balances of VNA
- VNA capital is not strong enough to invest the plane facilities and technical conditions
These analyses will help VNA to realize the strengths and weakness when launching the route to US
CHAPTER FIVE STRATEGIC ANALYSIS AND CHOICE
SWOT analyses
Based on the external environment and internal organization analyses, following points can be highlighted:
- VNA services make up impressions to Vietnamese passengers, In-flight services are mostly suitable for Vietnamese passengers
- Safety rate of VNA is pretty high
- Prices of aircraft renting and fuel are highly risen, have strongly affected the plan to develop the aircraft' businesses and budget balances of VNA
- VNA capital is not strong enough to invest the plane facilities and technical conditions
- Environments of politics, economy, society are stable, directly foreign investments fast increasing, to approximately keep increasing high and stable in next 3 years
VNA plays a vital role in promoting Vietnamese traditional culture, achieving significant engagement among the Vietnamese community in the USA With a substantial market opportunity, 46.3% of Vietnamese individuals, totaling 566,519, reside in the West, primarily in California and Washington Additionally, 15.28% or 187,018 Vietnamese people live in the South West Central region, predominantly in Texas, while 12.42% account for 152,059 individuals in other areas.
- 18 - living in South Atlantic; the rest of Vietnamese being distributed as from 4 to 6% in Middle Atlantic, North Central, Highland, South Central
- Vietnam economy has been restoring in a good condition, foreign investments have been increasing Air transportation markets have been increasing in good and stable conditions
- Vietnam has become the safest destination in the zone, tourism has been strongly increasing, there are more visitors come to Vietnam for many purposes
- New airport with high standards will put into exploit from 2 nd , September, 2007 helps VNA to upgrade customer service quality
The competition among airlines operating flights between America and Vietnam is intense, with approximately 7 to 8 carriers vying for market share These airlines benefit from various advantages, including competitive pricing and operational capabilities.
Natural disasters and epidemic diseases, such as bird flu and foot-and-mouth disease, pose ongoing threats that can significantly impact tourism and specifically affect VNA operations.
- The war between US and Iraq affected to aviation activities The fuel cost, insurance cost, security cost increased.
SWOT Matrix
Based on SWOT analysis, VNA can define the SWOT matrix and since then VNA can bring out the suitable strategies for this market (Table 11)
Marketing Strategy
Target segment
The overseas Vietnamese community is expected to be a key segment in the US-Vietnam market for years to come Therefore, developing targeted policies to engage this demographic is essential for effectively accessing the US market.
General strategy
Vietnam Airlines (VNA) aims to enhance its service diversity and quality by incorporating modern aircraft to attract target passengers The strategy focuses on introducing Vietnamese traditions to the US market while expanding its distribution network This approach allows VNA to leverage its strengths and capitalize on emerging opportunities.
This strategy enables VNA to address its budget and fleet limitations by capitalizing on the stable political, economic, and social environments, which are fostering rapid increases in foreign direct investments.
To segment the market to define suitable market, target passengers This strategy helps VNA to compete with CI and BR and reduce the threats when open route to US
5.3.2.4 Human resources developing and technology transfer strategy
This strategy enables VNA to attract investments that strengthen its financial capacity, expand its fleet, and enhance service quality and customer support, ensuring that the airline remains competitive in aircraft technology.
Product strategy
VNA is currently collaborating with AA to offer co-products on flights from LAX to SFO, as well as connecting routes from LAX/SFO to Dallas and Chicago This partnership provides VNA with flexible flight options for travelers.
2 above destination, VNA will has the co-product VN/AA to connect with remaining destination in US
5.3.3.2 The ground and in-flight service
Vietnam Airlines leverages the superior capabilities of the B777 aircraft to enhance its reputation in the market by providing consistent in-flight and ground services Additionally, the airline is simultaneously developing supplementary offerings, such as Transit Tours, to attract a broader customer base.
Price and distribution policy
Price and distribution policy should be built in accordance with customers’ profile, the sale customs of different market and correlate competition in each developing phase
This is the most important market of North America flight route where the main source of passengers hold a remarkable volume Hence, the sale and distribution need to be cautious
In the initial phase, VNA should implement promotional pricing strategies to attract customers, while in the long term, it can adopt a competitive pricing policy similar to other airlines However, VNA should avoid excessive reliance on discount pricing, as it may negatively impact its long-term growth and brand perception.
About sale network, VNA should consolidate and expand sale network, build suitable policy to targeted passenger, encourage agencies in US to sell for VNA
Vietnamese travelers fly to the U.S for various reasons, including visiting family, tourism, studying, working, and business opportunities Additionally, American expatriates working in Vietnam contribute to this passenger demographic Consequently, it is crucial to emphasize effective sales and distribution strategies tailored to these targeted travelers.
Promotion/ communication
Base on the customers’ profiles and features of US market, the advertising strategy for this new market need to be archived the following targets:
- Introduce a new route to our potential customers
- Advertise the preeminent products of VNA compared to the others, especially the using new, modern aircraft – B777
- Popularize our brand name to targeted passengers, making the difference in customer mind about Vietnam
- Coordinate closely with sales department
- Consolidate our good relationship with customers ặ build up the loyalty, create the friendly image
To effectively engage the Vietnamese community in the US market, advertisements in media and newspapers should target Vietnamese passengers and sales agents Additionally, Vietnam Airlines (VNA) should collaborate with US travel companies to promote both VNA and Vietnam as a destination, encouraging overseas Vietnamese to return for family reunions and business opportunities.
To effectively penetrate the Vietnam market, VN should launch new products targeting travel agencies, ticket agents, and the local community This can be achieved through mass communication channels such as press releases, television advertisements, and brochures Additionally, collaboration with hotels, local travel points, and embassies where numerous US experts and overseas Vietnamese reside will enhance visibility and engagement.
Carry out this strategy in the period of 3 years from 2008 to 2010 as following:
- Advertising, providing fast, clear and effective information about price, product, service policies to targeted passengers
We aim to communicate directly with our target customers through press releases to enhance their understanding of Vietnam Airlines (VNA) and to share insights about the common features of global airlines.
- Main message: Vietnam Airline - outstanding at products, sale networks, price policy - maximum satisfying the customers' need - being a close bridge for family's members, reunions
- Carrying on supplying information, successful advertisements about price policy and products; reasonably selecting means and milestones
- Increasing society and community activities to improve picture of Vietnam to make friendly to customers
- Through press and community activities to affirm VNA position
- Main message: Vietnam Airline is typical with international services and technological standards - as the typical picture of a renewed Vietnam
- Carrying on successful advertisements about price policy and products; reasonably selecting means and milestones
- Concentrating in society activities in real results, high education characteristics, and community support to make friendly to customers, build up the loyalty of passengers
- Advertisement samples express the interests, to be close, friendly to community and responsible to developing country
- Main message: Vietnam Airline - highly responsible against community - supporting and promoting, satisfying the developing need of socio economic of country
2008: presenting new fleet sample, flight network sample to express improving, activating, exceeding, and using pictures of family's reunions
2009: presenting advertisement sample to show customer’s feelings when use
2010: presenting advertisement sample to show community characteristics, friendly, and business association role against social responsibility
- Attached with price policy, products of Vietnam to increase coincidence, save cost, concentrating budget
- Supporting the subordinate program like family reunions,…
- Concentrating on the famous newspapers in 3 biggest cities in Vietnam, some famous newspapers in 2 cities in US (Los Angeles and San Francisco)
- Using media means at reasonable period to directly send information to each of target customer groups
- Selecting television channels, newspapers, magazines which have got a wide affecting, especially in 3 biggest cities as Hanoi, Danang, Hochiminh and LAX/SFO city in US
Conclusion
Vietnam's accession to the WTO and VNA's official membership in IATA present significant opportunities for growth, while also posing substantial challenges To thrive in this competitive landscape, VNA must establish itself as a reputable airline within the region and enhance its competitiveness to successfully integrate into airline alliances.
Vietnam Airlines (VNA) faces significant challenges and limitations compared to other airlines operating in the US market To enhance its competitiveness, VNA must systematically address its weaknesses and improve service quality across its entire flight network, particularly for routes to the US, which are experiencing intense competition Additionally, VNA should focus on developing procedures, service standards, human resources, and facilities at every stage of its operations This article proposes effective strategies for VNA to penetrate the US market and bolster its competitive edge.
Vietnam Airlines aims to establish itself as a reputable airline in both the regional and international markets by implementing strategic orientations and developing tailored plans for various markets.
Recommendations to VNA
- Build up sale network at US and Vietnam market, focus on target passengers
- Build up toll-free call centre for US market to serve target passengers
- Employ the FFP (frequent flyer program) for US market, cooperate FFP with American Airlines
- Expand and speed up the cooperation with other airlines which are exploiting US domestic flight
- Build up service standard level for this flight Especially, focus on Economy Deluxe class
- Seeking and selecting ground handling company at US
- Orientating sale services for the Vietnam- US flight in US, Taiwan, Vietnam
In August and September 2007, investigations were conducted in the US and Taiwan to determine the most suitable destination for a new flight, comparing Los Angeles (LAX) and San Francisco (SFO) Key factors analyzed included direct market capacity, supporting capacity of the US interior market, potential market rates, passenger and cargo transportation capacity, average turnover, exploitation costs, and competitive rates Following the completion of these investigations, a press seminar plan was established to present the findings and recommendations.
- VNA should urgently carry out sale systems through internet to satisfy the market need and to increase the air transportation turnover
1 PGS TS Hồ Đức Hùng, (1997),“Marketing căn bản-nghiên cứu”, NXB Giáo duùc
2 Tổng công ty Hàng không VN, (2007) “ Báo cáo đánh giá sản phẩm, tình hình thực hiện kế hoạch bán năm 2006 và kế hoạch bán 2007”, Ban kế hoạch thị trường
3 Tổng công ty Hàng không VN, (2007) “ Báo cáo tình hình hợp tác thương mại giữa VNA và các Hãng hàng không quốc tế“ , Ban kế hoạch thị trường
4 Ashok Ranchhod, (2004), “ Marketing strategies: A Twenty-first Century
5 Michael Porter, (1998), “The competitive strategy”, Newyork, The Freepress
7 Philip Kotler, Gary Armstrong, John Saunders, Veronica Wong, (2001)
“Principles of marketing”, (third European Edition 2001), chapter 3 pages 74, chapter 8 pages 264, chapter 19 pages 661
8 Pearce and Robinson, (1997), “Strategic management”
9 Prof Jean-Piere Baeyens, (2006), “An Introduction to Marketing”, Solvay Business school, University of Brussels
Figure 1: Value- Creating activities (chapter: 2.1)
Figure 3: Five Forces Framework (chapter 2.2.3)
Figure 5: Strategy Formulation Process Flow in a Company (chapter 2.5)
Figure 6: Geography of United States (chapter 3.1)
Source: http://www.maps.com
Figure 7: overseas Vietnamese allocating in USA (chapter 3.1.2)
Source: ( as population inquiry in 2000 USA – US Census)
Figure 8: US passenger total traveling abroad from 1995 to 2005
Source: market research data from marketing planning Division – Vietnam airlines, 2006
Figure 9: Tourist passenger total travel to US from 1995 to 2005
Source: market research materials from marketing planning Division – Vietnam airlines, 2006
Figure 10: VietNam-America airline market according to Origin & Destination (chapter 3.3.1)
Non-Vietnamese US to VN Vietnamese US to VN
Source: market research data from marketing planning Division – Vietnam airlines 2006
Figure 11: Organization chart of Vietnam Airline (chapter 4.1)
Source: http://www.vietnamairlines.com
Figure 12: 10 Codeshare Agreements of Vietnam Airline (chapter 4.3)
Source: http://www.vietnamairlines.com
Table 1: Structural Analysis of the Industry (chapter 2.2.3)
Threat of entry and entry barrier New entrants to an industry typically bring in substantial resources, new capacity and a desire to gain market share
The threat of new entrants in an industry is influenced by the presence of entry barriers and the potential reactions of existing competitors Entry barriers are obstacles that hinder companies from entering a market, and they can include factors such as large economies of scale, significant product differentiation, substantial capital requirements, high switching costs, effective access to distribution channels, and local cost advantages.
The bargaining power of buyers significantly influences an industry, enabling them to drive prices down and negotiate for improved quality or additional services Typically, buyers leverage competition among providers to enhance their advantages.
The bargaining power of suppliers significantly impacts an industry by influencing the prices of raw materials and the quality of goods and services provided This power varies based on several factors, including the market conditions of each supplier group and the significance of their sales or purchases to the overall industry compared to their total business operations.
The threat of substitutes refers to products or services that, while distinct, fulfill the same needs as existing offerings These alternatives can constrain an industry's profit potential and often establish a price ceiling for products or services.
Competitive rivalry among existing firms is influenced by several key factors, including a limited number of competitors, slow industry growth, the generic nature of products or services, high fixed costs, excess capacity, low entry barriers, and the focused strategies of rival businesses.
Strengths refer to valuable resources, skills, or advantages that enable a business to effectively compete and meet market demands When these strengths translate into a unique capability, they provide the firm with a competitive edge in the marketplace.
Weaknesses refer to limitations or deficiencies in a firm's resources, skills, or capabilities that significantly hinder its performance Common sources of these weaknesses include insufficient financial resources, limited management expertise, inadequate marketing skills, and a tarnished brand image.
Opportunities refer to significant favorable conditions within a company's environment, arising from key trends, overlooked market segments, shifts in competition or regulations, technological advancements, and enhanced relationships with buyers or suppliers.
Threats are significant challenges within a firm's environment that can hinder its strategic position and overall success These threats may arise from various factors, including the emergence of new competitors, sluggish market growth, and the growing bargaining power of key buyers and suppliers Additionally, changes in the regulatory landscape and advancements in technology can also pose serious risks to a firm's operations and objectives.
Table 3: Bandy commercial between U.S and ASEAN (Chapter 3.1.2)
Sources: http://www.census.gov/foreign-trade/balance
Table 4: VietNam -America airline market according to Origin & Destination (Chapter 3.3.1)
Source: market research data from marketing planning Division – Vietnam airlines, 2006
Table 5: Distribute passengers by America Departure/Destination (Chapter 3.3.3)
Source: market research data from marketing planning Division – Vietnam airlines, 2006
Table 6: Passengers from Lax to Vietnam through gateway (chapter 3.3.4)
OT KIX MNL NRT SIN KUL ICN HKG BKK TPE
Source: market research data from marketing planning Division – Vietnam airlines, 2006
Table 7: Passengers from SFO to Vietnam through gateway (chapter 3.3.4)
OT NRT ICN MNL SIN TPE HKG
Source: market research data from marketing planning Division – Vietnam airlines, 2006
Table 8: Service quality at passengers' sight (chapter 4.5)
0.12 Ticket selling at booking office Domestic
Food portions on plane Domestic
Source: data from marketing planning Division – Vietnam airlines, 2006
Table 9: Frequent Flyer program (chapter 4.6)
Source: data from marketing planning Division – Vietnam airlines, 2006
Table 10: Strategical advertisements in typical markets (chapter 4.7.2)
Japan budget paid 386,453 USD increasing 61.3% of plan
France budget paid 75,000 USD increasing 12.5% of plan
German budget paid 499,132 USD increasing 99.8% of plan
Russia budget paid 70,466 USD increasing 78.3% of plan
Australia budget paid 119,551 USD increasing 99.6% of supplemented plan Korea budget paid 164,458 USD increasing 96.7% of supplemented plan
Source: data from marketing planning Division – Vietnam airlines, 2006