GROUP PROJECT OF MICROECONOMICS
Oligopoly market of Vietnamese Aviation GROUP NO: 3 Student’s Full Name Student’s ID Uông Gia Bảo 22207144 Nguyễn Ngọc Trà My 22206333 Phạm Minh Khôi 22206945 Đặng Trí Hoàng 22206408 Dương Nguyễn Như Quỳnh 22207277 Lý Đổ Nguyên 22206932
Course Code : 1091
Academic Supervisor : Phung The Vinh HCM City, November 10, 2023 COMMITMENT
I have read and understood academic integrity violations. I pledge with personal
honor that this work is self-administered and does not violate academic integrity. HCM city, November 10, 2023
(Full names and signatures of all students in the group) i
TAG ASSIGNMENT OF EACH MEMBER'S CONTRIBUTION Student Code: Assigned tasks Weighting Confirmation implementatio actual signature n contributions according to results Uông Gia Bảo
22207144 1.Theoretical basis 100% of oligopoly market Nguyễn Ngọc 22206333 2.Overview of the 100% Trà My market of aviation industry here in vietnam (2.1-2.5) Phạm Minh 22206945 2.Overview of the 100% Khôi market of aviation industry here in vietnam (2.6-end) 3.Analysis actual operation of vietjet air company details(3.1.1-3.1.2)
Đặng Trí Hoàng 22206408 3.Analysis actual 100% operation of vietjet air company details(3.1.3-3.2)
Dương Nguyễn 22207277 3.Analysis actual 100% Như Quỳnh operation of vietjet air company details (3.3-3.6) Lý Đổ Nguyên 22206932 3.Analysis actual 100% operation of vietjet air company details (3.7-3.8) 4.Command and suggestion (4.1-4.3) ii COMMENTS OF LECTURER
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........................................................................................................................................ iii ABSTRACT
The final report of Microeconomics presents an overview of Vietnam's aviation
industry, the theory of the industry's monopoly market as well as the specific example
of Vietjet Air to clarify the market type. We have researched and learned more about
the knowledge and theory learned in Microeconomics so that we can successfully
complete the report. Journals, books, reference materials and other relevant
information about the industry that I research on the Internet are also collected by us
and included in the report as a secondary source of data. Therefore, in the process of
working and implementing reports, it will be difficult to avoid mistakes and lack of
knowledge. We hope you can give us comments to make our report more completed. iv TABLE OF CONTENTS
COMMITMENT............................................................................................................i
TAG ASSIGNMENT OF EACH MEMBER'S CONTRIBUTION..............................ii
COMMENTS OF LECTURER...................................................................................iii
ABSTRACT................................................................................................................iv
TABLE OF CONTENTS..............................................................................................1
ACKNOWLEDGMENTS.............................................................................................4
LIST OF FIGURES......................................................................................................5
LIST OF ACRONYMS................................................................................................6
1. THEORETICAL BASIS OF OLIGOPOLY MARKET............................................7
1.1 Concept of Oligopoly market.......................................................................7 1.1.1
What is oligopoly?..............................................................................7 1.1.2
Understand oligopoly.........................................................................8
1.2 Oligopoly characteristic................................................................................8
1.3 Demand curve on competitive market..........................................................9 1.3.1
The demand curve graph is kinked.....................................................9 1.3.2
Monopolistic collusion.....................................................................10
1.4 Economies of scale from oligopolies..........................................................10
1.5 Products......................................................................................................11
2. OVERVIEW OF THE MARKET OF AVIATION INDUSTRY HERE IN
VIETNAM..............................................................................................................12
2.1 History of establishment and development process of Vietnam's aviation
industry...................................................................................................................12
2.2 Vietnam’s market characteristics................................................................15
2.3 Why is it such a type of market?................................................................17 1
2.4 The current situation of Vietnam's aviation industry..................................18
2.5 Product characteristics................................................................................19
2.6 Characteristics of supply and demand of the market..................................20
2.7 Advantages and disadvantages of the market.............................................22
2.8 Orientation of market development in the future........................................23
3. ANALYSIS ACTUAL OPERATION OF VIETJET AIR COMPANY DETAILS 24
3.1 Vietjet Air company overview...................................................................24 3.1.1
History of establishment...................................................................25 3.1.2
Products and services.......................................................................25 3.1.3
Organizational structure...................................................................27 3.1.4
Operation Regulation.......................................................................29
3.2 Market research information......................................................................29 3.2.1
What is market research?..................................................................29 3.2.2
Vietjet's market research method......................................................30
3.3 Market development along with Vietjet's development prospects..............32
3.4 Vietjet's business model.............................................................................35 3.4.1
Target customer................................................................................36 3.4.2
Value Propositions...........................................................................36 3.4.3
Core Capabilities..............................................................................37 3.4.4
Financial model................................................................................38 3.4.5
Services............................................................................................38 3.4.6
Value creation..................................................................................39 3.4.7
Customer journey.............................................................................39 3.4.8
Cost structure....................................................................................39 3.4.9
Price mechanism..............................................................................40 2 3.4.10
Revenue model.................................................................................40
3.5 Marketing methods applied........................................................................40 3.5.1
Vietjet's pricing strategy...................................................................40 3.5.2
Vietjet's advertising strategy.............................................................41
3.6 Personnel size.............................................................................................42
3.7 Finance.......................................................................................................44
3.8 Risks...........................................................................................................45
4. COMMAND AND SUGGESTION........................................................................46
4.1 Comments..................................................................................................46
4.2 Review.......................................................................................................47
4.3 Recommendations......................................................................................48
BIBLIOGRAPHY.......................................................................................................50 3 ACKNOWLEDGMENTS
This report is the result of learning about the aviation market that our team gained
after a semester of studying with the extremely enthusiastic and thoughtful guidance
of Mr. Phung The Vinh - lecturer of Microeconomics of Hoa Sen University. In
addition, I would like to thank all team members for contributing ideas and working
together to develop and improve this report as best as possible. 4 LIST OF FIGURES
Figure 1- Kinked Demand Curve Diagram.................................................................10
Figure 2-Collusive Oligopoly......................................................................................11
Figure 3-Economies of scale for Oligopolies..............................................................11
Figure 4 Domestic customer quantity by month and year...........................................22
Figure 5-VietJet's Flight Attendants............................................................................25
Figure 6-VietJet's Organization Structure...................................................................28
Figure 7-Vietjet General Director Dinh Viet Phuong welcomes Indian passengers to
Vietnam on one of the airline's flights.........................................................................35
Figure 8-Business Model Map....................................................................................36
Figure 9- Pilot students at Vietjet Aviation Academy are trained by experienced
teachers.......................................................................................................................44
Figure 10-Vietjet Air's Consolidated Financial Report...............................................45 5 LIST OF ACRONYMS AC Average Cost COVID-19 CoronaVirus Disease 2019 FMCG Fast Moving Consumer Goods FSC Forest Stewardship Council IATA
International Air Transport Association ICAO
International Civil Aviation Organization IOSA IATA Operational Safety Audit LCC Low-Cost Carrier LRAC Long-run Average Cost MC Marginal Cost MR Marginal Revenue P1 Price 1 PR Public Relations Q1 Quantity 1 VASCO Vietnam Air Service Company VJAA Vietjet Aviation Academy 6 INTRODUCTION
Microeconomics is included in the curriculum by Hoa Sen University to equip
students with basic knowledge about the microeconomic environment, market types
and related theories. The core objective of the final report is to assess the knowledge
acquired as well as apply it to the reporting topic. This is a great opportunity to
improve our skills and practical knowledge when learning and researching about business industries.
The objective of the topic
- Objective 1: Understand the concepts and theories of each component in the microeconomic environment.
- Objective 2: Firmly grasp the concept of the four types of markets and distinguish them.
- Objective 3: Have an overview of Vietnam's aviation industry and Vietjet Air. Report structure
This report consists of 4 parts
- Theoretical basic of oligopoly market
- Overview of the market of aviation industry here in vietnam
- Analysis actual operation of Vietjet Air company details - Command and suggestion CONTENT
1. THEORETICAL BASIS OF OLIGOPOLY MARKET
1.1 Concept of Oligopoly market 1.1.1 What is oligopoly?
Oligopoly is a type of market that exists in an economy. In an oligopoly, a small
number of companies control the market. The main characteristic of an oligopoly is
that none of these companies can prevent the others from having significant influence
in the market. It has a concentration ratio that measures the market share of the largest
companies. Furthermore, there is no exact upper limit on the number of firms in an
oligopoly, but the number must be low enough that the actions of one firm have a
significant impact on other firms. Oligopoly is different from monopoly, which is a market with only one producer. 7 1.1.2 Understand oligopoly
Market structures come in many forms and different scales. This term is used to
describe the differences between industries, which are made up of different companies
selling their products and services. Most market structures aim for perfect
competition, which is a theoretical structure that does not actually exist.
These market structures are made up of a small number of companies in an industry
that control the market. Firms in an oligopoly set prices, whether collectively, within a
group or under the leadership of a single firm, instead of taking prices from the
market. As a result, profit margins are higher than they would be in a more competitive market.
Some barriers to entry such as (preventing new players from entering the market) in
an oligopoly include economies of scale, legal barriers, access to supply and
distribution channels, and regulatory requirements. capital and brand loyalty.
Oligopolies have historically included steel manufacturers, oil companies,
railroads, tire manufacturers, grocery chains, and wireless service providers. The
economic and legal concern is that an oligopoly could block new entrants, slow
innovation, and raise prices, all of which harm consumers. 1.2 Oligopoly characteristic
Oligopoly is considered stable. One of the main reasons is because participating
companies demonstrate the benefits of cooperation relative to the costs of economic
competition, then agree not to compete and instead agree on the benefits of cooperation. cooperate.
Twin companies find creative ways to avoid the appearance of price gouging, such
as using the cycles of the moon. Price fixing is the act of setting prices, rather than
letting them be determined by free market forces. Another approach is for businesses
to follow the recognized price leader so that when the leader raises prices, others will follow.
The conditions that allow a monopoly to exist include high entry costs in capital
expenditures, legal privileges, and platforms that capture value with more customers, such as social media. 8
Transformations in technology and global trade have changed some of these
conditions. For example, offshore manufacturing and the rise of mini-mills have
affected the steel industry. In the field of office software applications, Microsoft has
become a target of Google Docs, which Google funds with cash from its web search business.
1.3 Demand curve on competitive market
1.3.1 The demand curve graph is kinked
Figure 1-Kinded demand curve model
In the kinked demand curve model, the firm maximizes profits at Q1, P1 where
MR=MC. Therefore, a change in MC may not change the market price. It suggests prices will be fairly stable.
The kinked demand curve introduces certain assumptions
- Businesses are profit maximizers.
- If one firm raises its price, other firms will not follow suit. Therefore, when price
increases, demand is price elastic.
- If one company lowers its price, other companies will also follow suit because
they do not want to lose market share. Therefore, when prices decrease, demand is inelastic with price.
- This is how we get the 'kinked demand curve'
However, the kinked demand curve has limitations
- It doesn't explain how the price was arrived at in the first place.
- Firms can engage in price competition. 9 1.3.2 Monopolistic collusion
If firms in an oligopoly collude and form a cartel, they will attempt to set prices at a
level that maximizes profits for the industry. They will then set quotas to keep output at a profit-maximizing level.
Figure 2-Collusive Oligopoly
Prices and output in an oligopoly will reflect the prices and output of the
monopolist. The amount of Qm will be divided among the companies in the cartel.
1.4 Economies of scale from oligopolies
Figure 3-Economies of scale for Oligopolies 10
These elements can be sensed by customers, meaning they can perceive and
compare them with other competing products. In fact, when buying products,
customers often rely on these realistic factors to choose.
Marketing managers often try to visualize product ideas and benefits into realistic
elements that customers can perceive. Thus, the brand is an element of the product, when the product is branded.
Third, the extended aspects of the product are also known as the complete product -
it is the entire service that comes with the product.
Today, the set of services attached to products is increasingly rich such as
transportation, installation, warranty, credit, and user instructions.
When the first and second levels do not help businesses differentiate their products
from competitors, they often seek to differentiate through additional services provided to buyers.
2. OVERVIEW OF THE MARKET OF AVIATION INDUSTRY HERE IN VIETNAM 1.
2.1 History of establishment and development process of Vietnam's aviation industry
Over the past 60 years, Vietnam Civil Aviation has established a glorious tradition
that is very proud; Developed from small to large, from rudimentary to modern, from
unfinished to complete. Born from the people's armed forces, through the journey of
more than 60 years of construction, growth and development; Vietnam's civil aviation
industry has built up achievements and feats, recorded in the history of the country,
the Air Defense - Air Force and the Transport sector. FIRST STAGE
The Decree establishing the Civil Aviation Department under the Government lays
the basis for the establishment of an organization of air transport, integration and air
exchange with other countries, and at the same time meets the aspirations of cadres
and soldiers wishing to serve the people traveling by air. January 15th every year is
observed as the traditional day of Vietnam's civil aviation industry. At the end of
1959, the number of aircraft of the Civil Aviation Administration of Vietnam was only
10, but 3,735 passenger and cargo flights were carried out on domestic routes. The
forces and means of the Air Force and Civil Aviation are constantly growing and 12
increasing. The aircraft is equipped with military and passenger transport aircraft with
a larger and more modern carrying capacity.
Entering the renovation period, with sharp economic thinking, making the most of
all resources, quickly grasping the opportunities of the market economy, the General
Department of Civil Aviation has requested the Council of Ministers to allow self-
balancing of some foreign currency revenues and expenditures in order to implement
the mechanism of business and investment autonomy, requested the General
Directorate to separate from the Ministry of Defense, subordinate to the Council of Ministers VIETNAM CIVIL AVIATION
In 1989, the Council of Ministers stipulated the functions, tasks and organizational
apparatus of the General Administration of Civil Aviation of Vietnam, performing its
functions as the state management agency in charge of civil aviation and performing
the functions of air transport and synchronous services. The Decree states that
"Vietnam's civil aviation is an economic and technical sector of the State; The
Directorate General of Civil Aviation is an agency subordinate to the Council of
Ministers." From now on, the state management agency in charge of civil aviation is a
civil agency, the economic activity unit is a state-owned economic organization
In 1992, the Council of Ministers established the Civil Aviation Administration of
Vietnam, under the Ministry of Transport and Post Office. The Civil Aviation
Administration of Vietnam is the state management agency in charge of civil aviation,
has legal status, has its own seal and budget, and is allowed to open accounts at the
State Treasury. Vietnam's aviation industry officially switched from centralized
accounting for the whole industry to an independent accounting mechanism.
In 1993, the Government Office announced the Prime Minister's conclusion that the
development direction of Vietnam's aviation industry in the period from 1993 to 2000
must focus on building and developing Vietnam's civil aviation industry into an
important technical economy, capable of serving the requirements of domestic socio-
economic development as well as taking advantage of all the possibility of expanding
economic cooperation with foreign countries; at the same time ensuring the
requirements of socio-cultural development, national security and defense. The Civil 13
encourage competition while ensuring a healthy competitive environment; improve
service quality and protect the interests of people using services; at the same time
carry out the review, remove difficulties for businesses; synchronously implement
throughout the industry the air transport restructuring scheme. Air transport has
created breakthrough and dynamic developments in international economic
integration, reaching out to continents and becoming an important factor attracting
investment, tourism and commercial and cultural activities between Vietnam and the world.
The decision of the Ministry of Transport has merged 3 Northern, Central and
Southern Airport Corporations into Airports Corporation of Vietnam. This merger has
contributed to concentrating enterprises' resources on investing in upgrading airport
and airport systems. Over the past 3 years since its establishment, Airports
Corporation of Vietnam has strongly promoted its superior resources to take
advantage of exploitation to achieve optimal efficiency in all aspects. Due to actively
regulating the internal resources of the Airports Corporation of Vietnam for
investment in the development of the nationwide airport and airport network, the
overall competitiveness of Vietnamese airports and airports for the region has been increased.
Over the past 60 years, Vietnam Civil Aviation has repeatedly changed its
organization and structure to suit the requirements and tasks of each revolutionary
period. But despite changes in organization and structure and under any conditions,
Vietnam Civil Aviation still strives to overcome all circumstances; excellent
completion of the task; meet the trust of the Party and the State and the people.
2.2 Vietnam’s market characteristics
According to experts, Vietnam's aviation industry has been developing strongly in
the past 10 years with double-digit growth, and is considered the group of countries
with the fastest growing aviation market in the world. This has demonstrated the
strong increase of firms in recent times.
Statistics show that Vietnam currently has 5 airlines operating commercially
including: Vietnam Airlines, Vietjet Air, Jetstar, VASCO and Bamboo Airways. In
addition, there are a number of other legal entities that have registered their businesses 15