ASSIGNMENT 3 FRONT SHEET

Qualification BTEC Level 5 HND Diploma in Business

Unit number and title Unit 32: Business Strategy (574)

Submission date 21/10/2020 Date received (1st submission)

Re-submission date 20/11/2020 Date received (2nd submission)

Student name Bui Doan Hai Student ID GBH16523

Class GBH0806 Assessor name Nguyen Thuy Linh

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I certify that the assignment submission is entirely my own work and I fully understand the consequences of plagiarism. I
understand that making a false declaration is a form of malpractice.

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Table of Contents
I) Introduction...................................................................................................................................5
II) Strategic choices............................................................................................................................5
1) Strategic plan 1: Cost leadership – Market development – Strategic Alliance...........................................5
a) Business strategy..........................................................................................................................................................5
b) Strategic direction.........................................................................................................................................................6
c) Strategic method...........................................................................................................................................................7

2) Strategic plan 2: Cost leadership – Marketing development – Organic development................................7

III) Evaluate alternative strategies..................................................................................................8

References:.........................................................................................................................................10

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 I) Introduction
This paper is intended to provide American Airlines (AA) effective strategies in the current context
and recommendations for AA to penetrate the Vietnamese market. This article will be a continuation
of previous reports 1 and 2 on the analysis of factors that can affect AA in the process of creating a
strategy.

II) Strategic choices

As analyzed in previous articles, with the strengths in applying technology to its operating apparatus,
American Airlines has full potential to be able to expand into new markets. But i In the paper which
titled “AIRLINES IATA predicts airlines will lose $84 billion in 2020, but agency offers a roadmap for
recovery” published by CNBC, Anwar (2020) indicated that airlines are facing enormous risks as they
cannot accurately predict the end of the Covid 19 pandemic. Anwar (2020) also mentioned that IATA
a roadmap solution has been given. Roadmap will help airlines to control and ensure the safety of
their passengers, and the roadmap will also provide customers with safe locations for their trips.n
the chaos created by covid 19, the International Airline Transport Association (IATA) forecasts that by
2020, businesses in the airline industry could lose as much as $ 84 billion in revenue. In addition,
Anwar (2020) also stated that the rebound of airlines, although difficult to predict, is clear signs of
recovery when domestic flights and airline alliances will be the savior for the airlines in this turbulent
time. Based on the above information, below are two strategic plans that will be recommended for
AA when entering the Vietnam market.

1) Strategic plan 1: Cost leadership – Market development – Strategic Alliance

a) Business strategy
SABRE is a well designed software that matches the needs of the customers of American Airlines to
fly on a particular date wih the bookings available on that particular date. AA essentially paid itself
for a Sabre booking, so the numeric advantage that Sabre had gave it a cost advantage compared to
rivals in that they paid less in GDS fees. More specific, SABRE terminals are installed with the travel
agents which automates the process of airline ticket booking thereby reducing the denial of bookings
to its flyers. American Airlines creates a superior product differentiation that its competitors by
utilising its ticket distribution channel (travel agencies) more effectively using this state of the art

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 technology SABRE. As mentioned in report 2, thanks to the application of technology to the
management of ticketing agents, AA has succeeded in minimizing costs for agents and optimizing the
number of available seats per flight and succeed in applying cost leadership strategies to businesses.
The cost leadership strategy has been successfully implemented by AA and AA is recommended to
continue implementing this strategy as it expands into new markets.

b) Strategic direction
As an international airline, AA has many nonstop flights to many countries around the world but they
have not had any nonstop flights to airports in Vietnam. In addition, AA still does not have a
representative office in Vietnam, making AA's services inaccessible to Vietnamese customers. Beside,
in the article which titled “ Vietnam aviation in 2019 and the outlook for the future”, Le (2020)
indicated that Indisputably one of the fastest-growing aviation markets in the world, Vietnam, is not
going to stop its growth in 2020. Over the last few years the aviation industry of Vietnam, which has
a population of 96 million people, has witnessed massive growth. Over 100 million visitors came to
explore Vietnam in 2019 alone. The Vietnamese government believes that the numbers will keep
growing and by 2025 it is expected to serve more than 160 million visitors, both foreign and
domestic. Besides, Le (2020) also cited IATA's assessment of the Vietnamese aviation market as the
International Air Transport Association estimates that Vietnam will need at least 10 additional new
airlines to meet the constantly growing demand. In which, Vietnam currently has only five licensed
commercial airlines, with state-owned Vietnam Airlines and budget airline Vietjet Air dominating the
playing field. New player Bamboo Airways, operational now for a little over one year, low-cost carrier
Jetstar Pacific and Vietnam Air Services Company (VASCO), make up the rest of the market. In other
words, Vietnam is a fertile market for new airlines entering this market.

AA is a long-established airline with a variety of aviation services such as passenger and cargo
transportation. AA's transportation services cover the entire sector of the air transport industry. In
addition, thanks to the successful application of cost leadership strategies and variety of service
packages, AA offers customers a very competitive price for competitors in the same industry (AA,
2020). This means that AA can fully bring their existing services to a new market. This strategic
direction can be defined as "market development". With competitive prices, AA can completely

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 compete with competitors in the same industry in the Vietnamese market. Besides, according to an
article published by VOV (2016), Vietnamese customers tend to prefer foreign products over
domestic products, which can create a great opportunity for AA in this market.

c) Strategic method
In the aviation industry, expanding operations into a new market requires businesses to have an
abundant resource, and entering a market also brings a huge risk, especially during this crisis period
caused by the covid 19 epidemic. According to Anwar (2020), in the current chaos caused by Covid
19, the small and solitary airlines will be the ones most at risk of bankruptcy if they do not receive
government aids. In fact, AA and the world's largest airlines (British airway, Canadian Airline, Cathay
Pacific and Qantas) have formed an airline alliance under the name Oneworld Alliance - one of the
largest airline alliances in the world. Nowadays, 13 world-class airlines in Oneworld Alliance have
come together to provide the highest level of service and smoothest connections to more than 1,000
destinations around the globe. From check-in to security and boarding, oneworld member airlines
work together to make customer flying experience as seamless as possible. The alliance between
airlines will equip its members with incredible benefits when they can share the necessary resources
to improve service quality. In the case of American Airline in the Vietnamese market, AA is
recommended to form an airline alliance with major airlines in Vietnam. This can help AA take
advantage of the available resources of allies in Vietnam such as parking lots; fuel source; ticket
distributor; representative office; etc. This will help AA reduce costs when entering new markets.

2) Strategic plan 2: Cost leadership – Marketing development – Organic development

In strategic plan 2, the business strategy and strategic direction will be used in common with
strategic plan 1. In this section, AA's strategic plan will be focused on strategic methods only.

In strategic plan 2, AA is recommended to use organic development as a strategic method for its
market expansion into Vietnam. As analyzed above, aviation experts and organizations have
identified that Vietnam's aviation market is a potential market with a lot of resources that can be
explored for new players.In the paper which titled “Vietnam's third budget airline finally takes off”,
Onishi indicated that Vietnam market is a fertile market for low-cost airlines. Just a decade ago, in
Vietnam, traveling by plane was a luxury travel for Vietnamese, but today with the emergence of

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 low-cost airlines, traveling by plane has become should be popular and familiar with Vietnamese
people. In addition, as mentioned above, IATA has rated Vietnam as one of the fastest growing
countries in the aviation industry, combined with aritcle published by BaaVietnam (2020) which
asserted that domestic tourism in Vietnam continues to grow despite being adversely affected by
covid 19. Vietnam is a potential market for AA to enter. AA is recommended to continue exploiting
their strengths in the low-cost airline segment by entering the Vietnamese market with a brand new
low cost airline brand under the manage of AA. This strategy can be defined by "Organic
development".

By entering the Vietnamese market through a brand new low-cost airlines brand, AA is able to
efficiently exploit domestic flights within Vietnam. Besides, with a brand name, AA can become more
pure and familiar with Vietnamese customers. AA is recommended to apply the Saber data
management system to this brand new brand in order to equip it with the same strengths in cost
leadership as AA itself.

III) Evaluate alternative strategies

In order to evaluate 2 strategies which were mentioned above, the author will use SAFe as an
measurment tool to give a reliability and feasibily strategy for American Airlines. In particular, SAFe
assessment tool – SAF strategy model is defined as a strategy model to assess the business strategy by
consider the suitainability, acceptability and feasibility of the strategy to the business (Oxford, 2016). The
analysis below will follow that 3 factors to assess 2 types of strategic plans which were defined above.

In term of suitaibility, at this time, Covid -19 has been created a downturn in the airline industry in
particular and economic environment in general. Decrease costs of doing business is the key solution to
survive and maintain the sustainable business position of every businesses. So, cost leadership strategy
should be applied by American Airlines to lower their cost in every business processes. Both of strategic
plan sets above are match with this criteria because of both of them are considering cost leadership
strategy as one of the strategies in the strategic plan. In other words, by applying one of the strategic
plans above, American Airlines will equip themselve the sustainability and strengthen their business
position in this Covid – 19 downturn context. In particular, both of strategic plans above are suitable
with American Airlines in this Covid – 19 downturn context.

In the paper which titled “A better flight plan”, Heimlich (2017) argured that US Airline competition has
intensified, leading to in order to compete in the US aviation market, US airlines are grappling with their
strategies and vying for customers by devaluing air services. It can be seen that the US aviation market is

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extremely cramped and it is becoming increasingly difficult to compete. Therefore, developing and
expanding into another market is the leading solution. As mentioned above, expansion into the
Vietnamese aviation market has been recommended by the author as a strategic solution for American
Airlines. More specifically, as analyzed above, IATA assesses Vietnam's market as one of the fastest
growing aviation countries in the world. In addition, Vietnam is assessed by WHO as one of the countries
that have successfully controlled the Covid-19 epidemic and has resumed domestic tourism (WHO,
2020).The above makes Vietnam one of the safe markets for AA to invest in during this period. With the
opportunities in the Vietnamese market as outlined above, the market development strategy to the
Vietnamese aviation market will be accepted by AA's stakeholders.

As can be seen above, the main difference between the two strategic plan sets lies in the strategic
method. In strategic plan 1, with the recommended strategic method so that AA can expand the market
to the Vietnamese aviation market is the Strategic Alliance, the strategic plan 1 is considered as feasible
and will be accepted from the AA’s stakeholder. As analyzed above, with strategic alliance, AA will
receive a higher success rate with the market expansion strategy in Vietnam. The reason for this comes
from the fact that AA participated in the establishment of IATA - the largest aviation strategic alliance in
the world and they had experience in operating a strategic alliance. In addition, with the adoption of
strategic alliance, AA can save money when they can use the available resources of strategic partners in
Vietnam (suppliers, aircraft parking, warehouse , etc). In addition, Strategic alliance can help AA meet the
goals set out by the cost leadership strategy recommended above - something that will be difficult to do
when AA follow an organic development strategy. With the above analysis, strategic alliance will be a
feasible strategic method and will be highly accepted by AA stakeholders. In contrast, in strategic plan
2, organic development requires AA to have a large initial investment to enter the Vietnamese market.
This runs counter to cost leadership and spending too much money to expand markets makes it
difficult for AA stakeholders to make investment decisions - especially during covid - 19 downturns.

Based on SAFe analysis above, the table below will summarize the strategies chosen:

Set Suitability Acceptability Feasibility

1   
2 

Based on the result of the table above, AA are highly recommed to follow strategic plan set 1 which
includes cost leadership, market development and strategic alliance to increate the success rate of their
business market development strategy.

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References:
Anwar, N., 2020. IATA Predicts Airlines Will Lose $84 Billion In 2020, But Agency Offers A Roadmap For
Recovery. [online] Available at: <https://www.cnbc.com/2020/06/25/airlines-may-lose-84-billion-in-
2020-but-iata-offers-roadmap-for-recovery.html#:~:text=Menu-,IATA%20predicts%20airlines%20will
%20lose%20%2484%20billion%20in%202020%2C%20but,offers%20a%20roadmap%20for
%20recovery&text=In%20April%2C%20air%20travel%20declined,to%20stem%20the%20coronavirus
%20pandemic.> [Accessed 21 October 2020].

BaaVietnam. 2019. Vietnam Aviation In 2019 And The Outlook For The Future - BAA Training Vietnam.
[online] Available at: <https://baatraining.vn/2020/02/11/vietnam-aviation-in-2019-and-the-outlook-for-
the-future/> [Accessed 21 October 2020].

Heimlich, J., 2017. A Better Flight Plan. [online] Airlines For America. Available at:
<https://www.airlines.org/blog/u-s-airline-competition-has-intensified-leading-to-more-air-service-and-
lower-prices-for-consumers/> [Accessed 20 November 2020].

Onishi, T., 2019. Vietnam's Third Budget Airline Finally Takes Off. [online] Nikkei Asia. Available at:
<https://asia.nikkei.com/Business/Companies/Vietnam-s-third-budget-airline-finally-takes-off#:~:text=In
%20Vietnam%2C%20government%2Downed%20Vietnam,Airlines%2C%20all%20operate%20domestic
%20routes.> [Accessed 21 October 2020].

Iata.org. 2019. THE IMPORTANCE OF AIR TRANSPORT TO VIETNAM. [online] Available at:

<https://www.iata.org/en/iata-repository/publications/economic-reports/vietnam--value-of-
aviation/#:~:text=Air%20transport%20in%20Vietnam%20is,and%20around%202.4%20million%20jobs.>
[Accessed 21 October 2020].

WHO. 2020. COVID-19 In Viet Nam Situation Report 17. [online] Available at:
<https://www.who.int/vietnam/internal-publications-detail/covid-19-in-viet-nam-situation-report-17>
[Accessed 20 November 2020].

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VOV - VOV Online Newspaper. 2020. Vietnamese Prefer To Patronize Foreign-Made Goods. [online]
Available at: <https://english.vov.vn/market/vietnamese-prefer-to-patronize-foreignmade-goods-
319212.vov> [Accessed 21 October 2020].

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