Vietnam- Airlines Group Assignment Scm201 - Introduction To Supply Chain Management.pdf

TABLE OF CONTENTS

1 Introduction 2

1.1 Introduce Vietnam Airlines (4P) 2

1.1.1 4P 2

1.1.2 Overview about HR/FIN/MKT-Sales 3

1.1.3 Strengths & weaknesses (SWOT) 4

1.2 Market research to the product 6

1.2.1 PESTEL analysis (Political & Economic) 6

1.2.2 Target customers 8

1.2.3 Opportunities & Threats (SWOT) 9

1.2.4 Porter’s five forces 11

1.3 Organization’s need/ demand planning 14

1.3.1 Forecast 14

1.3.2 Number of aircraft as 31/12/2022 14

1.3.3 Organization Demand 14

2 Suppliers market analysis (Market Intelligence research) 15

2.1 Supplier market overview 15

2.1.1 Markets & Trends 15

2.1.2 Supply base & Leasing costs 15

Vietnam Airlines passengers can expect a warm welcome andattentive care The airline provides many amenities such asinformation on ticket prices, flight schedules, entertainment areas,and hotels; Book and reserve seats through ticket distribution agents;Shuttle service from the transfer station to the airport and vice versa;takeoff and landing procedures; In-flight services include flightattendants, entertainment and food services These services may bemore diverse depending on the customer's ticket class.

b Price

In general, travel prices of Vietnam Airlines compared to otherdomestic airlines are higher, but if compared with internationalairlines, the prices are suitable for the services that Vietnam Airlinesoffers However, the airline has many different prices depending ondifferent ticket classes to meet the needs of each customer.c Place

Vietnam Airlines, being the first airline in Vietnam, has expanded itsdistribution system to various locations both domestically andinternationally In the domestic market, Vietnam Airlines has its

headquarters in Hanoi and operates branches and units in Hanoi,Danang, Ho Chi Minh City, and 16 provinces and cities nationwide.In the international market, Vietnam Airlines has branches in 20countries and territories.

d Promotion

Vietnam Airlines sponsors national, cultural, and social events,participates in major national and international events, supports theVietnamese community abroad, and collaborates with the NationalTourism Administration for TV shows promoting Vietnam's culture.The airline advertises through various media channels andoccasionally through television It engages in charitable activities,such as transporting books and providing financial support for floodvictims Vietnam Airlines uses the image of its own staff to promotethe airline, avoiding the use of celebrities to maintain its reputation.

1.1.2 Overview about HR/FIN/MKT-Sales

a Human Resource

The civil aviation industry requires strict regulations and proceduresfor procurement and supply, requiring HR analysis to ensureemployees understand these Strong negotiation and contractmanagement skills are crucial, as they enable the Purchasingdepartment to negotiate prices and manage contracts effectively ThePurchasing department must effectively manage risks, ensuresuppliers meet safety and quality standards, and maintain supplyavailability Staying updated with new technologies and purchasingprocesses can improve efficiency and optimize the purchasingprocess.

b Finance

The Purchasing department must allocate a budget, manage costs,ensure financial availability, and evaluate its performance Financialanalysis is crucial for budget allocation, tracking financial metrics,and identifying improvement opportunities The civil aviationindustry requires effective financial risk management, involving

identifying and evaluating price, exchange rate, supplier risks,transportation costs, asset management, payment processes, andfinancial risk factors to optimize procurement activities and reducecosts.

c Marketing-Sales

The Purchasing department is vital in business, establishingrelationships with suppliers, negotiating prices, and providinginformation, ensuring competitive pricing, quality goods, andcustomer satisfaction It is vital in customer informationmanagement, gathering needs, evaluating supplier performance, andimplementing measures to improve satisfaction.

1.1.3 Strengths & weaknesses (SWOT)

a Strengths

- Vietnam's strategic location at the gateway to Southeast Asia,adjacent to four mainland countries and the East Sea, is a key factorin the Asia-Pacific region and global trade Sea transport is crucialfor international commercial and military traffic, influencing theregion.

- Vietnam Airlines, a renowned brand in Vietnam, ranked second inthe Top 10 Best Brands in 2020 by YouGov Despite limitedoperations due to the Covid-19 pandemic, the airline has madesignificant efforts in implementing effective prevention measures.Skytrax airline rating has given it a 5 star rating, while AirlineRatings website has given it a 7/7 star rating Vietnam Airlines alsosupports social work, such as transporting frontline forces andresettling stranded people.

- Vietnam Airlines currently uses 19 Boeing 787 aircraft, offeringamenities like mobile 5-star hotels and LED technology The A350business class has 29 seats, a recline of up to 180 degrees, and a15.4-inch wide entertainment screen The A321 aircraft has a shorterdistance between seats and a wider seat width, while the economyclass has a 32-inch seat width, a 6 inch backrest, and a 9-inchpersonal screen.

- Vietnam Airlines is reviving its brand image amidst the Covid-19pandemic by partnering with SpaceSpeakers Group to promote itsculture and image The airline creates trend-catching content usingyouthful images and technology, such as Augmented Reality andCreative Communications This approach increases customerinteraction and engagement, attracting users to become "hardcorefans" of Vietnam Airlines The airline's SWOT model highlights itsinnovative marketing strategy.

b Weaknesses

- Vietnam Airlines faces increasing competition from other low-costand regional airlines in the increasingly competitive aviationindustry, potentially putting pressure on the airline to improveperformance and maintain market share.

- Vietnam Airlines faces a potential weakness in cost management dueto the significant investments required in aircraft, fuel, andinfrastructure in the aviation industry.

- Vietnam Airlines has made significant improvements in servicequality, but still needs to focus on areas like in-flight food, amenities,and staff service to ensure customer satisfaction.

- Vietnam Airlines must prioritize training and development of itshuman resources to enhance service quality and meet the evolvingaviation industry's development needs.

- Vietnam Airlines faces significant challenges in expanding andupgrading its infrastructure, including airports, runway systems, andconcourses, to meet its growing transportation needs.

1.2 Market research to the product1.2.1 PESTEL analysis (Political & Economic)

a Political❖ Advantages

- Political stability: Stable politics in Vietnam with a single politicalsystem, the Communist Party of Vietnam, creates confidence forinvestors, attracts foreign direct investment (FDI) and supportsdevelopment of the aviation industry.

- Government support: The fact that Vietnam Airlines is astate-owned enterprise plays a key role in enjoying incentives frompolicies to support Vietnam's aviation industry, proactively promotedby the government through tax incentives and facility upgrades.flexible infrastructure and licensing process to promote the overall

development of the aviation industry and also create a significantcompetitive advantage for Vietnam Airlines.

- International relations: Strengthening diplomatic and economic tieswith regional and global partners fuel tourism and trade, boosting airtravel demand for Vietnam Airlines.

❖ Disadvantages

- Geopolitical tensions: The war has increased geopolitical tensions inEurope and Asia This may lead to flight and travel restrictions,affecting Vietnam Airlines' business operations For example,Vietnam Airlines had to cancel some flights to Russia and Ukraine.- Unexpected Instability: The war has caused global economic

instability, causing many consumers to cut back on travel spending.This could reduce overall travel demand, affecting Vietnam Airlines'passenger numbers.

b Economic❖ Advantages

- Robust Economic Growth: Vietnam's projected GDP growth of 6 6,5% in 2024 translates to rising disposable incomes, fuelingincreased spending on travel and benefiting Vietnam Airlines.- Expanding Middle Class: The burgeoning middle class within

-Vietnam represents a significant and growing market segment withincreased demand for domestic and international travel.

- Strategic Investments: Investments in fuel-efficient aircraft andtechnological advancements can optimize Vietnam Airlines'operational efficiency and reduce costs, boosting profitability.❖ Disadvantages

- Fierce competition: The aviation industry is highly competitive, withregional and international airlines vying for market share.- Economic slowdown: The COVID-19 pandemic and political

tensions can lead to an economic recession, affecting Vietnam'stourism industry and Vietnam Airlines' operations Reducedinternational and domestic visitors, increased costs, and limited

flight routes are negatively impacting tourism demand and businessactivities Moreover, soaring and volatile fuel costs bite into profits,potentially forcing the airline to raise fares and dampen passengerenthusiasm.

- Currency fluctuations: A strong Vietnamese Dong strengthens theeconomy but makes Vietnam more expensive for foreign tourists,potentially reducing international passenger numbers and impactingVietnam Airlines' profitability.

1.2.2 Target customers

a Demographic

Age Mostly middle-aged group (30-45)Geographic location Urban areas, big tourist cities

Average income A-class income group (more than 15 millionVND)

Education University or postgraduate education group

b Behavioral

Attitude Interested in tourism and businessPlace Online channels (official websites)Occasion Special occasions (for business or travel)Purpose Problems-solving (about work or travel

problems)Frequency 1-2 times/month

c Market share potential

a Opportunities

❖ Regaining market share potentially

- GDP in 2022 is estimated to increase by 8.02%, setting a record overthe past 10 years, which is a positive signal for the aviation industrybecause aviation often increases when the economy develops In thefirst quarter of 2022, international visitors to Vietnam by airaccounted for the highest proportion, reaching nearly 90.5% of thetotal number of international visitors to Vietnam, while visitorsarriving by land and sea still decreased.

- Vietnam Airlines accelerates restructuring, the airline itself hasorganizational structure, management model, capital sources, labor heading towards a consolidated revenue target of about 59,907billion VND this year Vietnam Airlines' consolidated revenuereached VND 71,701 billion, 20% higher than the plan and 2.5 timeshigher than the results of 2021.

❖ Expanding spacious diplomatic relations

- Vietnam Airlines has cooperative relationships with more than 100airlines around the world, including major airlines such as AmericanAirlines, Air France, Cathay Pacific, helping Vietnam Airlinesexpand its flight network and connect Vietnam with many countriesand territories around the world.

- Recently, Vietnam has become a comprehensive strategic partnerwith the US (9/2023), Japan (11/2023), and Australia (2024).- Opening direct flights between Vietnam and the US, Vietnam and

France helps the airline open up opportunities for Vietnamesetourists and businesses to access the US and French markets, whilecontributing to promoting economic and trade cooperation andtravel between Vietnam and these countries.

b Threats

❖ Fierce internal competitive risk

- The appearance of low-cost airlines in the domestic market such asVietjet Air and Bamboo Airways and foreign airlines such asSingapore Airlines, Cathay Pacific and EVA Air is a big challengefor Vietnam Airlines.

- Low-cost airlines can offer lower ticket prices than Vietnam Airlinesthanks to cost optimization, using smaller aircraft and less amenities.- Foreign airlines have wider flight networks, more experience andestablished brands, as well as lower operating costs than VietnamAirlines.

According to a reportfromtheVietnamAviationAdministration,inthefirst6monthsof2023,themarketshare of low-cost airlineVietjetrosetothetopwith 44%, followed by Vietnam Airlines with35.9%, JetstarPacificwith13%,BambooAirwaysaccountsfor4.2%andVASCOis2%.

❖ Special risks of aviation

- Airport technical infrastructure and air traffic control are still limitedand cannot keep up with the pace of development, leading to alimited number of parking spots at domestic airports.

According to the report oftheVietnamAviationAdministrationin2023, Vietnamese airports can onlymeetabout84.5%offlightsontime, the rest are delayed andinadditionthereareabout888canceled flights Overcrowding, flight delays, and rising ticketpricesarecommonphenomenaatVietnameseairports.

- The Vietnamese government has issued that airlines must participatein auctions to win the right to operate landing/takeoff times at large,international airports This makes it difficult for airlines to expandtheir flight network and operate international flights.

- After the epidemic, Vietnam's aviation human resources are severelylacking, according to experts The need for human resources willincrease, especially in the period 2023-2030 The aviation industrycurrently has about 44,000 employees, but according to experts, thisis not enough to meet the outstanding development of the aviationindustry.

- The requirement to maintain increasing aircraft utilization efficiencyand operate effectively to ensure revenue from aircraft operations ispartly met through reducing aircraft turnaround time at the airport.Vietnam Airlines may also suffer significant potential losses in theevent of an aviation accident or incident, leading to damage to assetsand image of Vietnam Airlines.

1.2.4 Porter’s five forces

a Threat of new entrants

Threat of new entrants remains quite low for the aviation industry,which is capital-intensive and new entrants require significant capitalinvestment and economies of scale Nevertheless, the Vietnameseaviation market is still growing and rehabilitating after COVID-19pandemic, attracting potential new entrants like regional airlines andlow-cost carriers (Vietravel Airlines (4/2020)) The Vietnamesegovernment holds over 86% stake of Vietnam Airlines, making itmore challenging for new entrants to compete with awell-established airline like Vietnam Airlines.

Tight government regulations and restrictions on foreign businessparticipation present challenges for new oversea players A typicalexample is the 4 failures of AirAsia when entering the Vietnameseairline market.

b Bargaining power of suppliers (aircraft leasing suppliers)

The strength of Vietnam Airlines suppliers in bargaining power isclassified as strong Factors affecting the power of suppliers in theairline industry would be mostly fuel and aircraft, which are allaffected by the external environment.

However, Vietnam Airlines also has a strong bargaining positionwith those suppliers due to its size and market share, along with bulkpurchasing arrangements, and strategic partnerships to negotiatefavorable pricing and terms.

c Bargaining power of buyers

The bargaining power of customers over Vietnam Airlines and itsindustry is medium Since there are few competitors in the aviationsector, consumers do not have many options, which are majorairlines in Vietnam Airlines such as Vietjet Air, and BambooAirways.

Conversely, since ending COVID-19 travel restrictions, Vietnam isregarded as the world’s fastest-recovering domestic aviation sectorand is the world’s 5th fastest-growing aviation market, expected toreach 150 million air transport passengers by 2035 (IATA) As wellas benefiting from the growth of the internet in the advent ofthird-party trip-booking websites and mobile applications, switchingcosts are negligible so that customers possess tremendousnegotiating power over airlines in the domestic market, wherepassengers are highly price-sensitive.