(Tiểu luận) vietjet penetration into thethailand

UEH UNIVERSITY

FACULTY OF INTERNATIONAL BUSINESS - MARKETING

VIETJET: PENETRATION INTO THETHAILAND

COURSE INFORMATION

Course: Global Strategic Management - 23D1BUS50308204Lecturer: Dr Nguyen Van Dung

2 SWOT analysis of the company 7

CHAPTER 2: ANALYSIS OF THE MACRO ENVIRONMENT 10

CHAPTER 3: ANALYSIS OF COMPETITORS IN THE TARGET MARKET 15

III Analysis of competitors in the target markets 15

1 Thai Airways International: 16

2 Entry mode – Joint Venture 17

2.1 Joint venture - Suitable Entry Mode 17

2.2 Advantage of this entry mode 19

2.3 Disadvantage of this entry mode 19

CHAPTER 5: CONCLUSION 21

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CHAPTER 1: INTRODUCTION

The airline industry plays a crucial role in shaping the modern era of global connectivity and travel In recent years, Vietnam has witnessed a remarkable growth in its aviation sector, emerging as a vibrant and competitive market in Southeast Asia With its breathtaking landscapes, rich cultural heritage, and burgeoning economy, Vietnam has become an attractive destination for both leisure and business travelers In this essay, we will explore the dynamic airline industry in Vietnam, focusing on Vietjet, a prominent player that has revolutionized air travel within and beyond the country's borders.

Vietnam's airline industry has experienced significant transformations fueled by a combination of factors, including robust economic growth, increased tourism, and favorable government policies The country's strategic geographical location at the crossroads of Southeast Asia has made it an ideal hub for air travel, connecting major cities in the region and serving as a gateway to the world As a result, Vietnam has made substantial investments in airport infrastructure, modernizing its facilities and expanding capacity to cater to the growing demand for air travel One of the key players in Vietnam's airline industry is Vietjet, a dynamic and innovative carrier that has quickly gained prominence since its establishment in 2007 Vietjet has played a pivotal role in revolutionizing air travel within Vietnam by introducing a low-cost business model that caters to a wide range of travelers The airline's commitment to affordability, convenience, and customer satisfaction has made air travel more accessible to a larger segment of the population, facilitating domestic tourism and driving economic growth.

This essay delves into a comprehensive analysis of Vietjet’s capacity as well as its international expansion to the market of Thailand, exploring its key elements, underlying factors, and far-reaching implications As a low-cost carrier hailing from Vietnam, Vietjet has disrupted the market by offering affordable air travel options, while ambitiously expanding its reach beyond domestic borders.

1.1 Company overview:

Vietjet Aviation Joint Stock Company, widely known as Vietjet, has swiftly risen as a formidable force in the aviation industry, armed with a robust and dynamic international strategy Established in 2007, it became the first private airline in the Vietnam aviation industry.

VietJet own the fleet of 77 aircrafts which focuses on the LCC model with low cost in operation and efficiency.

The 2022 audited financial statements reported that Vietjet’s consolidated revenue reached over VNĐ40.14 trillion, up 212 per cent year-on-year The long-term assets increased by over $200 million in worth The airline’s total assets surpassed VNĐ68 trillion with the debt-to-equity rate at nearly 1.3 which was considered to be good in the aviation industry Its payment of direct and indirect taxes, fees and charges to the State budget totalled VNĐ4.35 trillion

In 2022, Vietjet transported 20.5 million passengers on more than 116,261 flights, up 283 per cent and 186 per cent year-on-year respectively It led the domestic market in terms of passenger volume.

1.2 Company Vision and Mision:Vision:

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 favorite and trusted brand name.

• To operate and develop domestic, regional and international route network • To bring a breakthrough in aviation services

• To make aviation services to become popular means of transport in Vietnam and in the world • To bring joyfulness, customer satisfaction by providing luxurious and exceeding expectation services with friendly smiles.

Core value: Safety - Happiness – Affordable Price - Punctuality

1.3.VietJet’ s routes

VietJet Air serves 18 domestic destinations and 69 international destinations in 13 countries, as of June 2023 Vietjet's extensive domestic network within Vietnam, connecting major cities like Hanoi, Ho Chi Minh City, Da Nang, and Nha Trang, serves as a strong foundation for its international expansion From there, it has strategically expanded to various countries in the Asia-Pacific region, including Thailand, Singapore, Malaysia, South Korea, Japan, and China, cementing its position as a regional player.

VietJet’s domestic and international routes

Overall, it has had a profound reputation as a non-substitutable: Low-Cost Carrierairline.

2 SWOT analysis of the company2.1 Strength

Vietjet's success in the international arena can also be attributed to its astute customersegmentation and tailored marketing initiatives The airline has effectively identified and targeted specific customer segments, catering to their unique needs and preferences By offering a

range of fare options, passengers have the flexibility to choose additional services and amenities according to their preferences, creating a personalized and differentiated travel experience Vietjet's marketing campaigns have also played a pivotal role in its international visibility The airline has gained attention through creative and sometimes controversial promotions, capturing the interest and curiosity of travelers This marketing prowess has helped Vietjet build a strong brand presence, attracting a loyal customer base while appealing to new and diverse market segments.

Another significant factor fueling Vietjet's international success is its relentless pursuit of route development Recognizing the importance of connectivity and passenger convenience, Vietjet has been proactive in adding new destinations to its network The airline has forged partnerships and secured landing rights in key markets, ensuring a wide array of route options for travelers Vietjet's extensive domestic network within Vietnam, connecting major cities like Hanoi, Ho Chi Minh City, Da Nang, and Nha Trang, serves as a strong foundation for its international expansion From there, it has strategically expanded to various countries in the Asia-Pacific region, including Thailand, Singapore, Malaysia, South Korea, Japan, and China, cementing its position as a regional player.

2.2 Threats

Lack of well-qualified partners to compete internationally: Vietjet has been negotiating with potential joint venture partners about establishing a low-cost airline in other Asian markets However, some did not materialize, and the only venture formed (in Thailand) encountered many obstacles.

Low price:While that is a competitive advantage, it is also a challenge for the airline Because lower fares mean lower revenue per passenger, there is less money to reinvest in other categories The company will have to pay more attention in investing in other aspects to bring in cash flow Besides, due to fierce competition, ticket prices seem to be less likely to be pushed up at any time in order to retain customers Vietnamese airlines also have little interest in pursuing more effective profit management techniques in the domestic market.

Sale and leasebacks: Sale and leaseback are often attractive to low-cost airlines because they can generate short-term profits In the long-term, however, this could become a weakness, according to CAPA, because airlines that do this hire-and-resell will stop paying higher-than-average rents as their age increases airplanes are getting higher and higher, and there is a high cost to return the plane.

2.3 Opportunities

Tourism and international development: Vietnam are being considered as a popular tourist destination, which increases the influx of international visitors to the country Currently, the airline has regular flights to Korea, Taiwan, Malaysia, Thailand and Cambodia China is the largest source of tourists and the fastest growing.

Airway network: VietJet until now has relied entirely on direct flights, typical of a new low-cost airline in its early stages of development However, Vietjet is determined to pursue the 6th commercial air transport right (the right to take passengers, cargo, mail from a second country to

a third country through the territory of the operator's country)

Codeshare flights: Vietnam is a developing country, so low-cost airlines are chosen by many people and are more willing to pay According to the Civil Aviation Authority of Vietnam, in the first half of 2022, the VietJet improved its market share by 4 percent to reach 36 percent, just behind Vietnam Airline

2.4 Threats

Fierce competition from both domestic and international carriers necessitates constant innovation and adaptation Vietjet operates in a highly competitive landscape where pricing, service quality, and customer satisfaction are critical differentiators The airline must continuously evaluate its market positioning, pricing strategies, and service offerings to stay ahead of the competition Moreover, navigating complex regulatory frameworks, complying with international safety standards, and addressing geopolitical considerations pose ongoing challenges for Vietjet's international operations

Airport overload makes it difficult to open more routes as well as flight frequency In Vietnam, several airport reported to experience overloading as there are increasing number of flight but the capacity is limited Vietnam government are trying to build larger-in-scale airport like Long Thanh but these are still in progress.

CHAPTER 2: ANALYSIS OF THE MACRO ENVIRONMENT

As the period from 2010 to 2015 was the time that VietJet entered the Thailand market, I will analyze the context of the country at the time.

Thailand has a diverse and dynamic economy It is considered one of the largest economies in Southeast Asia, with a strong focus on tourism, manufacturing, agriculture, and services The country has experienced steady economic growth, attracting both domestic and foreign investments A robust economy provides opportunities for Vietjet to tap into the growing middle class and rising disposable incomes, leading to increased demand for air travel.

Thailand GNI per capita from 2010 to 2015 (USD)

Thailand GDP per capita from 2010 to 2015 (USD)

In the early years of the period (2010-2012), Thailand's economy demonstrated robust growth The country rebounded strongly from the global financial crisis of 2008-2009 and experienced a GDP growth rate of 7.8% in 2010 However, growth moderated in the later years, primarily due to domestic political instability and external factors such as the global economic slowdown.

2.Business environment:

The business environment in Thailand is generally favorable, with supportive policies and infrastructure for businesses The government has implemented initiatives to promote foreign investments and facilitate ease of doing business However, it is important to note that there may be specific regulations and requirements in the aviation sector that VietJet needs to adhere to, such as safety standards and licensing procedures

Thailand's market attractiveness lies in its large population, strong tourism industry, and strategic geographical location The country serves as a gateway to Southeast Asia and attracts a

significant number of international tourists This presents an opportunity for VietJet to cater to both domestic and international travelers Thailand also offers access to resources such as skilled labor, aviation infrastructure, and strategic partnerships with local businesses.

3.1 Ease of doing business:

Ease of doing business can vary depending on factors such as regulations, bureaucracy, and legal frameworks While Thailand has made efforts to improve its ease of doing business rankings, challenges may still exist, and VietJet would need to navigate the regulatory landscape and comply with relevant laws and regulations.

Ease of doing business in Thailand in 2014 - 2015

Due to the World Bank statistics, Thailand’s ease of doing business index remained quite constant in the vicinity of 26, making it the 3rd highest in SouthEast Asia after Singapore and Malaysia.

Worldbox Business Intelligence Country Risk Rating in 2014

According to the data, Thailand was stable at the time despite the fact that political instability emerged as a significant challenge during the period from 2010 to 2015 Thailand experienced several changes in government, protests, and disruptions, which negatively impacted investor confidence and business activities The political situation contributed to economic uncertainty and affected both domestic and foreign investment.

4.Resources4.1 Natural Resources:

Thailand's geographical location offers strategic advantages for the airline industry The country is positioned as a regional hub in Southeast Asia, making it a convenient transit point for air travel within the region Thailand has a well-established network of airports, including major international airports in Bangkok, Phuket, and Chiang Mai, which serve as key gateways for domestic and international flights.

Additionally, Thailand's natural beauty and diverse landscapes make it an attractive tourist destination From stunning beaches and tropical islands to lush mountains and cultural heritage sites, these natural attractions drive tourism and increase demand for air travel The abundance of tourist destinations contributes to the growth of both domestic and international air traffic.

4.2 Human Resources:

Thailand boasts a skilled workforce that supports various aspects of the airline industry Trained pilots, cabin crew, ground staff, and maintenance personnel play vital roles in ensuring the safe and efficient operation of airlines The country has well-established aviation training centers and academies that provide comprehensive education and training programs to produce qualified aviation professionals.

The combination of natural resources, such as strategic geographical location and diverse tourist attractions, along with a skilled workforce and a culture of hospitality, provides a strong foundation for the airline industry in Thailand These resources contribute to the growth of air travel, tourism, and economic development in the country.

Thailand's society is deeply intertwined with the airline industry, playing a crucial role in the country's connectivity, tourism, and economic development Thailand's culture of hospitality and service-oriented mindset aligns well with the needs of the airline industry Thai society values graciousness and warmth, which translates into exceptional customer service and the renowned Thai hospitality provided by airline staff This human resource advantage contributes to the overall positive passenger experience and enhances Thailand's reputation as a welcoming destination.

As a result, millions of domestic and international travelers visiting Thailand each year, the society places a strong emphasis on tourism and travel, relying on airlines to facilitate convenient and accessible transportation options.

Being one of Thailand’s strength, Thai culture is rich and diverse, with influences from Buddhism, monarchy, and traditional customs Cultural sensitivity and adapting to local preferences are essential for VietJet’s marketing and customer engagement strategies Incorporating elements of Thai culture in branding, customer service, and inflight experiences can enhance the airline's appeal to Thai customers

CHAPTER 3: ANALYSIS OF COMPETITORS IN THETARGET MARKET

III Analysis of competitors in the target markets

The airline industry in Thailand before 2014 experienced significant growth and competition Thailand's aviation sector saw the emergence of several domestic and international airlines operating in the country Thai Airways International, the national carrier, played a prominent role, offering both domestic and international flights Other major airlines in the market included Bangkok Airways, AirAsia, Nok Air, and Thai AirAsia.

Competition intensified in the domestic market as low-cost carriers gained popularity AirAsia and Nok Air, with their affordable fares, introduced more options for budget-conscious travelers This led to a more competitive landscape and price wars among airlines.

Thai airline market share in 2014