BÁO cáo CHIẾN lược PHÁT TRIỂN của VIETNAM AIRLINE

BÁO CÁO CHIẾN LƯỢC PHÁT TRIỂN CỦA VIETNAM AIRLINE VIETNAM AIRLINES’ DEVELOPING STRATEGIES CONTENTS Page INTRODUCTION CHAPTER I – THEORETICAL BASIS CONCEPTS 1.1 Strategy in Business - Business strategy 1.2 The role of business strategy 1.2.1 The role in planning 1.2.2 The role in prediction 1.2.3 The role in control 1.3 The types of business strategy 1.3.1 Strategic business combination 1.3.2 Overall business strategy 1.3.3 Other business strategy THE FOUNDATION FOR BUSINESS STRATEGIES 2.1 Analysis and evaluation of external environment 2.1.1 Macro environment 2.1.2 Micro environment 2.2 Analysis and evaluation of internal environment 2.2.1 Human resources 2.2.2 Financial capability 2.2.3 The work of production and operations 2.2.4 Marketing activity 2.2.5 Operation management 2.3 Method of strategy analysis 2.3.1 SWOT matrix 2.3.2 IE matrix 5 6 6 6 7 8 13 13 13 14 14 14 15 15 16 CHAPTER II – THE SITUATION OF VIETNAM AIRLINES BRIEF INTRODUCTION OF VIETNAM AIRLINES MACRO ENVIRONMENTAL IMPACTS AFFECTING VIETNAM AIRLINES ACTIVITIES 2.1 2001-2010 Period 2.1.1 Economic, politic, and social 2.1.2 Legal Environment 2.1.3 Aviation Infrastructure 2.1.4 Tourism Infrastructure 2.2 2011-2020 period 2.2.1 Economic, politic, and social 2.2.2 Legal Environment 2.2.3 Aviation Infrastructure 2.2.4 Tourism Infrastructure MICRO ENVIRONMENT 3.1 Vietnam aviation market 17 17 18 18 18 21 24 24 25 25 27 28 29 30 30 3.1.1 Passenger markets 3.1.2 Cargo markets 3.2 The aviation industry environment 3.2.1 National airport development orientation 3.2.2 Airlines’ development orientation in Vietnam 3.2.3 Joint ventures with Laos, Cambodia, Myanmar airlines 3.3 Competitions and Strategies 3.3.1 Domestic Markets 3.3.2 International Markets 3.4 Vietnam Airlines financial reports EXTERNAL AND INTERNAL ENVIRONMENT ASSESSMENT 30 32 33 34 35 36 36 36 41 43 45 CHAPTER III – VIETNAM AIRLINES’ DEVELOPING STRATEGIES RESTRICTIONS AND WEAKNESSES 1.1 Delay in the equitization process and business renewal 1.2 Lack of uniformity in developing IT solutions and application 1.3 Developing quality services 1.4 Organization and human resource development SWOT ANALYSIS DEFINING VIETNAM AIRLINES STRATEGIES AND SUGGESTED SOLLUTIONS 3.1 Network expansion strategy (product diversification) 3.2 Fleet development strategy 3.3 Organization re-structure and human resource training 3.4 Service quality development strategy 3.5 Brand development strategy 3.6 Alliance and cooperation strategy 47 48 48 49 51 CONCLUSION 55 51 51 51 52 52 53 54 54 54 INTRODUCTION Air transport sector in Vietnam from its inception has become an important component of the national economy, and become one of the key economic sectors representing the first mode of transport progress and modernity The growth of its increasingly large role and have an important influence in the work of economic development - cultural - social security and national defence The trend of economic globalization and the trend of internationalization of economic life has pulled the growing trend of globalization in air transport development It is confirmed that air transport, especially international air transport, is also an important link of the global transport VIETNAM AIRLINES CORPORATION (Vietnam Airlines) as a core unit, the force of the air transportation industry in Vietnam, since its founding in 1956 until now has not stopped developing, expanded and improved services to become an airline of international standard Looking back 10 years (2001-2010), though many events have great influence as the terrorist attacks in the USA dated 11/09/2001, SARS in 2003, avian influenza from 2004 to 2005, economic crisis from 2008 -2009, Vietnam Airlines has always in the right direction, overcome difficulties and flexible, and fast and strong development both in width and depth to rise up from a lack of airline experience, small scale, unknown, it has an airline average size of the area, dynamic, effective, active participation in the trend in the image and quality of service is recognized Vietnam Airlines' fleet now has 70 aircraft; domestic route network of 20 points, 35 routes, international route network includes 26 points, 40 routes to 15 countries Transport capacity of VIETNAM AIRLINES reach 12 million passengers per year Ticketing system for Vietnam Airlines has grown to 43 countries VIETNAM AIRLINES owns an advanced labour force, devoted to their careers The number of Vietnamese pilots are 372 people, aircraft technicians who help VIETNAM AIRLINES 1269 initiative in mining operations, aircraft maintenance VIETNAM AIRLINES has partnered with 80 airlines around the world are members of the Association of World Aviation (IATA) and SkyTeam global airline alliance Looking to the future, period of 2011-2020 is considered the strategic period, opportunities for innovative development of the aviation industry in Vietnam According to the evaluation of the economic organizations (IMF, WB, ADB ), airlines (IATA, ICAO) in the world, Vietnam is located in the dynamic growth potential of the world's most economic and aviation market Besides, this is a turning point in the stage of development of production technology of the aircraft manufacturer with the introduction of the new generation aircraft such as B787, A350, MRJ, Bombadier CSeries with the preeminent features on amenities and passenger services, using advanced materials, efficient fuel saving, environmentally friendly make opportunities for the young airline policy implementation, " the capture of opportunities” to raise competitiveness Under the plan, the period of 2010-2020 as well as deployment time and a complete range of development categories of aviation infrastructure in Vietnam with the launch of the Long Thanh International Airport, the services capacity reached 80-100 million passengers per year (reaching world-scale), Noi Bai International Airport, Tan Son Nhat with their capacity reached up to 50 million passengers per year (at regional scale), a series of local airport upgraded After the open sky agreement of CLMV sub-region (including Cambodia, Laos, Myanmar and Vietnam) is effective in April 2007, with the success of cooperation projects between Vietnam and Cambodia, established the national airline of Air Angkor Cambodia Cambodia (K6), together with efforts to negotiate actively to develop a similar model of cooperation in Laos and Myanmar, the coming years will be the time for comprehensive cooperation, mutual development of the national airline of CLMV sub-region, and Vietnam plays a key role, is the gateway of the sub-region Therefore, the organization for development and implementation for development strategy of VIETNAM AIRLINES to 2020 must be sync from market development strategies, route network, aircraft resources to strategic human resource development, branding, capacity sales, services, capital and operating mining policy, safety and security is essential to develop VIETNAM AIRLINES consistent with the trend of movement of business environment, the aviation market, to capture opportunities in the future, thereby elevation of Vietnam Airlines became the large airlines in the Asia-Pacific, with prestige, image are confirmed on the global scale, plays a key role in the operation of air transport of CLMV sub region, to contribute effectively to economic development - politics – society of Vietnam On research methods: Using direct study methods: Collecting information from newspapers, magazines, the Internet, and other statistics from the documents have been published, the financial statements, balance sheet and reports of business report in 2008, 2009 and early 2010, the rules and regulations of Vietnam Airlines Also using the group of analysis method, summary, comparative approach to analyze the business activities of the Company Structure of topics: On the basis of the program suggests, the group structure of the topics include: Introduction Chapter I: THEORETICAL BASIS Chapter II: ANALYSIS OF CURRENT SITUATION Chapter III: STRATEGIES FOR DEVELOPMENT OF VIETNAM AIRLINES AND RECOMMENDATIONS Conclusion CHAPTER I –THEORETICAL BASIS CONCEPTS 1.1 ‘Strategy’ in business – Business strategy The concept Strategy existed from ancient Greece This term was originally derived from military Later it developed into science and art of military command But from the '60s (XX century) strategy applied to business and from which "business strategy" was born There are many different definitions of strategy and each is very different depending on the concept of each author We would like to point out here the concepts of strategy suit to the subject and scope, the object of the research group: "Strategy is the direction and scope of an organization in long term to gain competitive advantage for organizations through the format of its resources in a changing environment, to meet market demands and satisfy the expectations of the concerned parties "(Johnson, G., Scholes, K (1999) Exploring Corporate Strategy, 5th Edition Prentice Hall Europe) Under the traditional approach, the strategy is the determination of the basic longterm goals of the enterprise, and the implementation of action plans to allocate resources, to achieve the objectives of the business identified Can also define the business strategy as follows: Business strategy: "As a series of commitments that a company uses to gain a competitive advantage by exploiting core competencies in certain markets” It may be said that business strategy is the way that businesses use to guide the future to achieve and sustain its development The nature of the business strategy is to outline the future image of regional business activity and the ability to exploit Business strategies used by basic meanings are: - Identify long-term goals of the business - Give the general action plan - Select the action plans, employ the allocation of resources to implement those goals 1.2 The role of business strategy 1.2.1 The role in planning Business strategy will help businesses identify their purpose in the direction of the future-oriented activities in the long term, is a solid basis for the implementation of the operation, help Administrator know, review and direct for their organization in right direction, by any method, and any time to achieve results 1.2.2 The role in prediction In the trend of globalization, the business environment is always fluctuating Therefore the environmental analysis and development of business strategies will help business managers are aware of opportunities, and risks occur at the same time aware of the strengths and weaknesses in their business Since then analyze and predict the environmental conditions in the future, to make appropriate strategies to take advantage of opportunities, strengths, reduce the risks, weaknesses to overcome any business challenges 1.2.3 The role in control Business strategies can help Managers use and allocate the resources appropriately, make appropriate decisions for each condition of the business environment, increase the links between employee, strengthen capacity to prevent and stop the risk occurring, avoid the financial risks Improve the efficiency of production of enterprises, so that enterprises can develop to sustainable stability 1.3 The types of business strategy 1.3.1 Strategic business combination This strategy is outlined based on the analysis of the environment inside and outside so that the enterprise can see clearly its strengths, weaknesses, opportunities, challenges and strategies that will be combined as follows: - Take advantage of strengths to exploit opportunities in business (SO); - Take advantage of the strengths is to limit the risk in trading (ST); - Take advantage of opportunities to overcome weaknesses (OW); - Minimize weaknesses to limit risks (WT) 1.3.2 Overall business strategy Strategy refers to the most important issues with significant long-term meaning and decisions of vital issues of the business, including categories: - Strategies focus on the key issue, not spread resources, focus on those activities is crucial for business; - The strategy is based on analysis of the comparative advantage of the business with other businesses to find their comparative advantages to develop business; - Creative strategy, exploration for new products and services; - Strategies to explore the possibility of the environment is to find the key factors 1.3.3 Other business strategies - Business strategy is on the front, rear, horizontal, vertical; - Penetration strategy and market development, product development; - The diversification strategy; - The strategy for risks prevention THE FOUNDATION FOR BUSINESS STRATEGIES The identification of business goals is the important beginning stage It requires that businesses must identify the tasks and objectives pursued by enterprises in their business At the same time, business processes must clearly indicate the validity and ethics of business to society When identifying the tasks and objectives, and business areas of the business, it is necessary to analyze the factors affecting the group, as the basis for the development of business strategy 2.1 Analysis and evaluation of external environment 2.1.1 Macro environment - economic environment, politics, society Macro environment includes factors of economic environment, political environment, social and cultural environment, lawful environment, environmental technology, natural environment, global environmental impact images effect on the survival and development of the business a Economic environment (economic factors) The main factors affect the operation of enterprises in the economic environment are: The growth speed of the economy, interest rates, exchange rates and inflation rates Economic growth or recession has great influence to the enterprise, if the economy have higher growth will create many opportunities for businesses to expand operations, whereas if the economy economic downturn will lead consumers to reduce costs and increase the risk for businesses The interest rate will determine the demand of business policy on exchange rates, inflation also creates an opportunity or increases risks to the enterprise b Lawful environment and politics (elements on law and politics) Lawful environment and politics may impact significantly on the business can also create opportunities and vice versa can also create risks for the enterprise This environment includes: political stability, the policy of the legal system (ie investment law, labour law, environmental law resources tax policies, fees, regulations on advertising reports ) 10 not only contribute to the alliance reputation as the whole but to each carrier as well b Competing efficiently with other gateways in Southeast Asia and Asia Vietnam Airlines, given its ambitions and the current competitions as mentioned above, has clearly defined one of their development strategies is to turn Hanoi and Hochiminh City into the main gateways entering the region; compete effectively with other main gateways of Asia such as Hongkong, Bangkok, Singapore, and Kuala Lumpur: - Vietnam Airlines’ network shall be developed based on a hub-and-spoke model with high frequencies with good connections to/from Hanoi and Hochiminh City; step by step turn these two cities into the main hub airport of the region; - Vietnam Airlines is ready to take its position as a bridge between Vietnam and the international world Vietnam Airlines’ network is designed to connect with most of all main cities of the countries that have close relationship with Vietnam 44 3.4 VIETNAM AIRLINES FINANCIAL REPORTS Figures BUSINESS EFFICIENCY Revenue 2008 2009 30/06/2010 2009/2008 25.192.300 21.592.822 194.009 151.751 23.060.904 20.108.051 134.648 134.648 15.947.413 13.709.052 126.065 126.065 -8,46% -6,88% -30,60% -11,27% 26.576.392 5.123.429 1.778.569 5.175 2.324.364 1.192.128 1.076.783 126.882 (71.429) 32.130.797 5.265.858 1.477.614 1.850 2.964.749 1.548.208 1.115.296 378.151 (76.906) 34.672.493 4.198.348 1.195.269 1.910 2.185.282 1.506.363 484.649 260.807 (66.536) 799.962 500.415 554.716 +20,9% +2,78% -16,92% -64,25% +27,55% +29,87% -3,58% +198,03% +7,67% -37,45% + In stock 825.675 526.128 580.429 -36,28% + In stock discount reserve (25.713) (25.713) (25.713) - - Other short-term assets 215.359 321.230 261.170 +49,16% 21.452.963 1.318.014 16.997.784 2.522.700 14.407.614 36.326 31.144 906.412 317.906 276.439 532.759 (220.692) 2.230.753 26.864.939 4.066.369 17.668.397 2.157.160 14.904.049 25.580 581.608 1.847.453 1.103.881 421.472 549.259 (227.159) 3.282.720 30.474.146 5.192.334 19.359.336 2.801.390 15.668.906 23.227 865.813 1.968.510 1.224.939 421.472 549.259 (227.159) 3.953.965 26.576.392 32.130.797 34.672.493 +25,23% +208,52% +3,95% -14,49% +3,45% -29,58% +1767,5% +103,82% +247,24% +52,46% +3,1% +2,93% +47,16% +20,9% 20.459.154 25.178.980 27.514.111 +23,07% 6.530.827 1.696.741 7.832.028 2.251.655 7.196.304 1.267.495 +19,92% +32,7% Cost Profit (before tax) Profit (after tax) Financial status TOTAL ASSETS 1/ Short-term assets - Cash - Short-term Financial inv - Short-term debts + Passengers + Deposit + Others + Reserve - In Stock 2/ Long-term Assets - Long-term debts - Fixed assets + Visible fixed assets + Lease fixed assets + Invisible fixed assets + Construction costs - Long-term financial inv + Investment in subsidiaries + Investment in associates + Others + Oil price decrease reserve - Others TOTAL CAPITAL 1/ Accounts payable - Short-term debts + Short-term loan 45 + Seller payable + Costs + Others - Long-term debts 3.048.197 1.120.362 178.236 13.928.327 3.284.911 1.683.576 68.505 17.34 6.952 2.917.795 2.029.535 90.914 20.317.807 + Long-term loan + debts 2/ Ownership Capital 13.790.872 6.117.238 17.226.441 6.951.817 20.198.432 7.158.382 6.019.577 6.753.679 7.156.856 4.735.883 5.143.280 5.653.322 +12,20% +8,6% 301.131 849.183 97.661 329.180 1.005.070 198.138 329.180 1.005.070 1.526 +9,31% +18,36% +102,88% 0,78 0,63 0,67 0,57 0,58 0,47 0,77 3,34 2,78 20,3% 0,78 3,62 2,54 16,86% 0,79 3,84 2,7 15,87% 4,54 4,44 29,98 12 9,99 36 4,23 85 30,93 11 8,72 41 3,86 93 0,6% 0,57% 5,02% (1.407.398) 0,58% 0,46 2,11% (2.566.170) - Ownership Capital + Investment + Financial reserve + Construction investment - Others FINANCIAL FIGURES 1./ Pay ability 1.1 Short-term (times) 1.2 Instant (times) 2./ Financial structure 2.1 Total Assets/Debts (times) 2.2 Ownership/Dept (times) 2.3 Fixed Assets (times) 2.4 Self-sponsored 3,/ Operation Efficiency Figures 3.1 Floating Capital cycle (cycles) 3.2 In Stock Cycle (cycles) 3.3 In Stock duration (days) 3.4 Incomings cycle (cycles) 3.5 Debt collect (days) 3.6 Payables (cycles) 3.7 Debt settlement (days) 4,/ Profit figures 4.1 Return on Sales (ROS) 4.2 Return on Assets (ROA) 4.3 Return on Equity (ROE) Nett Floating Capital (million VIETNAM AIRLINESD) (2.997.956) (Source: Vietnam Airlines 2008-2009-2010 Financial reports) c) EXTERNAL AND INTERNAL ENVIRONMENT ASSESSMENT 46 +7,77% +50,27% -61,57% +24,54% +24,91% +13,64% Based on the above assessment, after having detailed discussion with relevant personnel at Vietnam Airlines, our group has collected together the factors that could affect Vietnam Airlines and come up with the following matrixes: Matrix external environment assessment of Vietnam Airlines (EFE) External factor Economic Growth Rate Increasing average income per head Air transportation market’s demand Banking rate and financial market Stable political environment and law Inflation Traditional culture factor Consumer’s habit Increasing input price Total Importance 0,2 0,2 0,2 0,05 0,1 0,05 0,05 0,05 0,1 Level 4 3 2 3 Total 0,6 0,8 0,8 0,15 0,3 0,1 0,1 0,15 0,3 3,3 Total relative importance mark of Vietnam Airlines is 3,3 It can represent that the company is responding positively to the opportunities and threats The company is making the best of opportunities which were brought from economic growth, people's income and the growth of market demand However, in the company’s strategies it would pay more attention to the unfavourable factors of policy, the trend of increasing input prices in order to propose suitable business strategies Matrix internal environment assessment of Vietnam Airlines (IFE) Internal Factors Organization Structure Human resources Staff Morality Service quality Management activities Financial Capability Sales and Distribution system development Marketing activities IT development 10 Relationship with other agencies , partners 11 Management Leadership Capability Total 47 Importance 0,05 0,05 0,1 0,1 0,15 0,1 Level 2 3 Total 0,1 0,1 0,3 0,3 0,6 0,3 0,1 0,1 0,05 3 0,3 0,3 0,1 0,05 0,15 0,15 0,6 3,15 Total internal important mark is 3,15, which is quite well Considering the relevant factors, we can see that the strongest advantages of Vietnam Airlines are the Management & Leadership capability However, the company should pay more attention to its human resources, organization structure, and IT development d) The Internal-External (IE) Matrix EFE Strong Average Weak High Medium Low IFE Considering the above IE matrix, we have witnessed the current situation of Vietnam Airlines, being in the fast developing zone Having gone through the analysis of Vietnam Airlines’ external and internal environment, readers could somehow see the opportunities, threats, strength, and weaknesses Through this, our group shall continue to consider the strategies which are most suitable for the airline itself 48 CHAPTER - VIETNAM AIRLINES DEVELOPING STRATEGIES RESTRICTIONS AND WEAKNESSES 1.1 Organization and human resource development Well-trained human resources, qualified professional, high capacity is a core strength of Vietnam Airlines, but even in this strength also remains limited The development of human resources is still scattered and not uniform, lacking long-term vision and has not kept pace with rapid development of Vietnam Airlines, especially with labour force characteristics such as the driver, crew Techniques etc This practically causes lack of national human resource and rent foreign human resources with remarkable density In the period 2001-2005, Vietnam airline just might rent from 80 to 90 pilots per year, term of 2006-2008 with from 130 to 140 pilots per year, but until at the end of 2009 up to 180 pilots, and in the end 2010 it expectantly would be 324 pilots from abroad, make up 47, 37% total number of pilots Vietnam airline need to exploit The rent of foreign pilots are not only spend much but also cause the active exploit and national security not ensured as using Vietnam pilots In recent years, a number of flight attendants aren’t supplemented as planed, the supplementary number per year from 150-200 while demand is from 200-250 people In airports, direct exploited forces also don’t catch up with speed of growing flights and passengers, because of work’s pressure, many staffs leave their work consecutively is a practical problem happening Productivity of indirect labour zone is still low Officer planning task and rotation expanded but in somewhere haven’t developed effectively yet Appointing and rotating officers, especially officers in project and outgoing aren’t determined yet In some fields, officers are still lacked and weak, so when the replacement is necessary, task requests are not satisfied 49 Developing quality services In many years ago, Vietnam airline changed effectively about service quality, according to Sky Trax’s appraisement (consulting and apprizing aviation’s service organization), arrangement of Vietnam’s total quality is being improved, increase 21 ranks from 70/137 in 2005 to 49/167 in 2009 The result of arrangement changed from many standards to reach stars –rank, until now star standard ended, 7/12 standards of ground service and 2/10 standards in the air service are apprised stars However Vietnam Airlines is basically a stars airline and remarkably inferior to other brand name airline in area such as, Malaysia Airlines (MH), Thai Airways (TG) which had stars rating and many categories had stars even, and it is also less competitive in appealing the VIPs who can pay highly but demand a quality service level The assessment results table of Skytrax in 2006-2009 Ranking 2006 2007 2008 2009 Vietnam World Ranking 57 67 62 49 Airlines Asia parcific Ranking 22 26 28 25 Malaysia World Ranking 6 Airlines Asia parcific Ranking 6 Thai World Ranking 4 10 Airways Asia parcific Ranking China World Ranking 112 89 83 47 Southern Asia parcific Ranking 30 32 31 23 (Source: Skytrax.com) The ratio of slowness in cancelling the flight has been improved Mentioning about the ratio of punctual flight to ten Asian Pacific cities , according to AAPA, in the period of Jan 2009 to the end of June 2010, the number of punctual flight of Vietnam has reached 91.2%, even it’s higher than the 89.4% of 12 airlines in its area 50 On Time Performance table of Vietnam Airlines 2006 2007 2008 2009 6T2010 86% 84% 89% 88% 88.81% (Source: Vietnam Airlines Operation Center) 1.2 Lack of uniformity in developing IT solutions and application Vietnam Airlines has been the leader in applying the advanced information technology in business administration The core information technology programs such as, accounting and financial management, sales management, new booking system, e-commerce Websites…has been successfully deployed which contributes to strengthen the professional management, provide more convenient service for customers However Vietnam systems, there is no Airlines has no long-term strategic development synergies between infrastructure and of IT applications and between the application of information technology management of Vietnam Airlines IT applications have been promoting efficiency in each block, but have no effect in linking blocks The system could not be connected with each other online so it causes lateness and lacks of supporting the overall management of Vietnam Airlines, the information flows less correct and then the connecting solution is usually passive and expensive cost 1.3 Delay in the equitization process and business renewal Along with consolidating the organization system, Vietnam Airlines has actively implemented the pilot policy of big firm and its branches In the end 2006, there are 11/15 firms of Vietnam Airlines has been transferring joint stock companies After equitization, in general, all the firms work out stably and develop well However the equitization process of Vietnam Airlines and its remain branches are Airlines Petroleum Company and three Commerce Enterprises which developed 51 slowly, extended and not be under the original plan which cause many difficulties in raising additional capital for further development However, we also have objective reasons for the delay in the equitization that causes by the impact of financial crisis, world recession and reality in Vietnam in 2008-2009 Choose strategic investors ( foreign investors), determine the value of advantage in rent land of business at the airports have many difficulties The decision to issue the first shares in this period is very difficult to reach the aim of equitization Today, Vietnam Airlines actively continues to implement the route of equitization, transfer Vietnam Airlines and Airline Petroleum into Ltd a member state On the other hand, Vietnam Airlines begins to rent international finance consultants to evaluate Vietnam Airlines enterprise as well as research the suitable moment for equitization in order to ensure the benefits of the government, enterprise, investor and employees The main point of renewal the firm is establish airline Transportation Group Vietnam Airlines is researching, complementing, improving the project of setting up Airline Transportation Group to submit for prime minister’s approval SWOT ANALYSIS Having studied Vietnam Airlines business environment, our group have realized the opportunities, threats, strengths, and weaknesses of the company Given the objectives during 2011-2020, we have built up the following SWOT matrix, basing on which we shall define the development strategies for Vietnam Airlines: SWOT ANALYSIS OPPORTUNITIES (O) - Vietnam has a steady economic growth in the region - Stable political and social situation - Higher income per capita and much better living conditions - Fast growing domestic travel demands 52 THREATS (T) - Higher and higher inflation rate - World economy being affected by the many crisis world-wide - Higher prices for raw materials may rise cost STRENGTHS (S) - Strong and ambitious management with clear vision - Clear action plans being well supervised - Young and competitive spirit among staff - Strong Financial capability and capital mobilization - Good product and services which are being further enhanced WEAKNESSES (W) - Structure overlapping - Complicated administrative system which wastes more time - Too much manual handling, weak IT solutions and applications in day-today work - Front-line staff quality needs improvement in Language as well as communication skills - Stronger Brand name; known world-wide after joining SkyTeam Alliance, the 2nd largest in the world - The most well-known destination in the region Bangkok suffering from political & social threats S-O Strategies Market and network W-O Strategies Enhance Vietnam - Thailand’s crisis may affect overall travel demand to the region and Vietnam may be influenced S-T Strategies Strengthen W-T Strategies Take full advantage of DEFINING VIETNAM AIRLINES STRATEGIES AND SUGGESTED SOLUTIONS Having studied Vietnam Airlines carefully and with the above strategies, our group would suggest the following solutions: 3.1 Network Expansion strategy (product diversification) 53 - Designing Vietnam Airlines’ network based on the hub-and-spoke philosophy with Hanoi and Hochiminh City being the two gateways for the whole region; compete directly with other main gateways such as Hong Kong, Bangkok, Singapore, Kuala Lumpur; - Focus into the markets bringing Vietnam Airlines the majority of revenue such as Japan, Korea, and China Fully improve products to main destinations: + Japan:  focus on improving products (quality and frequency) to Tokyo, Osaka, Fukuoka, Nagoya – the current airports served by Vietnam Airlines  consider new potential airports such as Haneda, Tokyo and new products connecting the Central of Vietnam (Danang, Nha Trang) with main Japan cities + Korea:  focus on improving products (quality and frequency) to Seoul and Busan – the current airports served by Vietnam Airlines  consider new products to conveniently connect potential destinations of the two countries such as Danang, Nha Trang, Jeju - Carefully consider market situation before launching new products, especially long-haul flights such as to Europe and United States + Being now a government company, though supported by the Government in may ways, Vietnam Airlines need to operate base on a MCMR efficiency This needs to be reported to the Government for Approval; + Every one US or European route would make Vietnam Airlines suffer from a loss of 30 to 50 mil USD/year for at least the first years, which needs careful study and consideration in order to be efficient in a long-term process; 54 - Do also focus into increasing frequency of the supporting routes (domestic & CLMV) since they will play an important part in the efficiency of the trunk routes and the whole network 3.2 Fleet development strategy Given the network expansion plan, Vietnam Airlines need to invest into developing the fleet base on the network expansion plan above Basically, Vietnam Airlines will need to consider types of aircrafts: - Long-haul (B777, A350, B787) - Medium-haul (A321, A320) - Short-haul (small aircrafts with less than 100 seats) 3.3 Organization re-structure and human resource training - Based on the current business structure, plan to work with International Aviation Association and many partner airlines such as Delta, Korean Air, Air France (the developed airlines) to re-organize for business efficiency; focus on the carrier’s COMMERCIAL part because this would directly affect the company’s business efficiency & profitability; - Pilot & Crew training centre: with well equipped and modernized training equipment and simulators 2020 target: 80% Vietnam Airlines trained pilots; 20% rent/outsource; - New recruitment policies to attract well educated staff: income – working environment – promotions opportunities – training and rotation 3.4 Service quality development strategy - In-flight services and Ground services must be synchronous for each route (aircraft type, design, ); - Skilful Front-line staff standardization (training); - Quality check program built by Vietnam Airlines and carried out annually; 55 3.5 Brand development strategy - Connect and combine the brand and image of Vietnam Airlines with Vietnam tourism development programs - Public Relation (PR) is the main guiding tools 3.6 Alliance and cooperation strategy - Bilateral cooperation: maintaining the current partners together with looking for new partners in new areas and regions that Vietnam Airlines will focus to operate in the coming years - Multilateral cooperation: beside the commercial cooperation, seek for new schemes that could help each party to lower and save costs such as: co-locate at gateway airports; outsourcing 56 CONCLUSION In the background of integration and globalization of economy, business environment of enterprises changes could not always be anticipated Building and enforcing a business strategy is a progress to overcome obstacles Therefore, analyzing and forecasting exactly internal and external economic environment play important role in building business strategy Having analyzed the external and internal economic environment that could have effect on Vietnam Airlines, our group have built the above strategies, though not comprehensive but those are the strategies we thought we could focus on carrying out if we were working for Vietnam Airlines In parallel with those, we have also suggested the overall solutions that Vietnam Airlines could use partially during their development periods We realize that the four people of us, with such a limited time of research, would not be able to bring up something amazing but we approached the corporation based on the theories we have been taught in class We strongly hope that we would receive the detailed and precious guidance and instruction from the assembly 57 REFERENCES The development plan of Vietnam Airlines International Air Transport Association (IATA) reports 2009-2010 Strategic management textbook, international MA training program, Hanoi 2010 Strategic management textbook: Chief author: associate professor PhD Ngo Kim Thanh associate professor PhD Le Van Tam – National economic University Publishing House in Hanoi in 2009 Strategic management in economic globalization: associate professor PhD Dao Huy Huan – Statistical Publishing House MBA in your hands, strategic management: Author: LIAM FAHEY & Rober M.RANDALL – Translator Phan Thu – Editor Hoai Nam – General Publishing House HCMC Socioeconomic status 2009, Statistic General Directorate Audited financial report of Vietnam Airlines in 2008-2009-6M2010 Data report of total employees of Human Resource Department – Vietnam Airlines 10 Report of Sale & Marketing Department – Vietnam Airlines 11 Data and Report of the Corporate Planning Department – Vietnam Airlines 58 ... 14 14 15 15 16 CHAPTER II – THE SITUATION OF VIETNAM AIRLINES BRIEF INTRODUCTION OF VIETNAM AIRLINES MACRO ENVIRONMENTAL IMPACTS AFFECTING VIETNAM AIRLINES ACTIVITIES 2.1 2001-2010 Period 2.1.1... countries Transport capacity of VIETNAM AIRLINES reach 12 million passengers per year Ticketing system for Vietnam Airlines has grown to 43 countries VIETNAM AIRLINES owns an advanced labour... number of Vietnamese pilots are 372 people, aircraft technicians who help VIETNAM AIRLINES 1269 initiative in mining operations, aircraft maintenance VIETNAM AIRLINES has partnered with 80 airlines