However, come along with opportunities, many challenges might arise for firms in the transportation industry to adapt the environment: congestion traffic, unstable of fuel expenditure and overlap of tariffs policies. Recently, urban transportation in Vietname is one of the most pressing social; numbers of people migrated to urban increase faster than the development of infrastructure.
The number of vehicles such as automobiles, motorbikes increased while transportation infrastructure unsustainable; inconsistent results curb traffic accidents and traffic congestion is unsustainable, the number of deaths due to accidents traffic is high and the potential increased risk. Traffic ingestion in major cities such as Ha Non, Ho Chi Mini City is becoming increasingly complex. It shall be the challenges for policy makers, and is also a significant barrier in the process of arbitration and economic development of the country.
In addition, traffic accidents have become one of the costliest and deadliest in the field of public health worldwide. Every year, there are about 50 million people were injured and 1. 3 million people die from traffic accidents worldwide. In Viet Name, according to 2012 data, there are 10,081 traffic accidents killed 9,838 people and injured 7,624 others. And at the moment, Ha No’s population is 7. 1 million people (90 million nationwide) with millions of tourists every year in which international arrivals to Viet Name more than 6. 8 million and domestic tourists are counted for 32. Million, the participant of those tourist is also a pressure transport of Ha Non in particular and the country in general. Hon. Skim Coach Transportation was established for the purpose of activities in the passenger transportation business area. The company has been established only the name, but not yet commenced operations. It did not have formal business structure. We are a team of 6 members who will work as a group of experts in devising and implementing effective strategy to provide HACK appropriate advice and direction as consultants.
In order to help the company make decisions, we use the classical model with 4 steps: 1. Define goal specification and clarification. 2. Analyze the situation. 3. Construction of alternatives 4. Making choice or decision. In the course of scenario analysis, we have used a few as interpreting industry analysis model, Linen’s three-step model… To clarify the strengths and weaknesses of the internal as well as external factors. Finally, after analyzing all the strengths or weakness, advantage or disadvantage, we have suggested the company should switch model and business purposes.
INTRODUCTION Hon. Skim Coach Transportation (HACK) is a non-government company, newly established in the Ha No’s transportation industry. It is intended to compete with other vendors in the transportation industry. HACK look forward to providing short-distance transport services for people living in Ha Non. Business has been established in name only, but not yet activated. HACK is also considering the option of additional business as part of business operations and strategic planning such as it is also considering developing a business strategy to provide long distance transportation.
Five friends who met each other while studying at La Tribe University MBA at the Ha Non University established the HACK. But it has no resources or equipment. Moreover, it also has no formal business structure and five friends still support Hack’s activities while they are working full-time with their own work. And they only have financial capacity to support HACK in six months. Especially, one of them is pregnant and expecting her baby in next 3 months. PICK T did not really start doing anything, so business is currently being considered in its infancy.
EXTERNAL ENVIRONMENT It is necessary for Hon. Kier Coach Transportation that its owners have to understand external elements in order to make decision for the firm. The external elements are very important to any enterprises, they strongly effect to the survival and development of enterprises. Politics/Legal elements: Vietnamese politics is relatively stable. Vietnamese Government always encourages the development of private sector, in particular encourages all economic sectors in investing in public transportation.
The Government also allowing all economic sectors are involved in the implementation of public transportation projects funded by national budget, non-government organizations (DAB, WEB) if they have enough competency. For example, the project of building and operating high-quality buses in Ha Non was sponsored by the World Bank. Government of Viet Name and the People’s Committee of Ha Non has issued a policy on bus subsidies from the national budget. However, the level of subsidies is low that the quality of public transportation service is not high.
The public transportation firms in Ha Non have not yet focused on, invested in enhancing he effectiveness of management, the ability of their staff and service quality. Thus, sometimes, some buses ignore passengers at the bus stop or service officers in the bus had indecent behavior with their passengers like mass media mentioned. In Ha Non, the urban transport infrastructure system has been improved to restrict traffic congestion such as expanding lanes, constructing of ring roads around Ha Non, overhead highway, building overhead bridges through the major intersections of the town, etc.
In fact, it can be seen these solutions have also limited the traffic jams in the main roads at rush hours in Ha Non. Many highways connecting provinces together were also expanded or built help traveling from Ha Non to other provinces become easier. For example, Project North-South highway has the total length 1,811 km, with the first point is intersection with the Pap Van (Ha Non) and the endpoint is the intersection Chaw Va (Can Too).
The North – South highway was built includes 16 branches which are: Pap Van, Ca Gig, NIH Bin, Than How, Ha Tint, Quant Trip, Ad Nag, Quant Angina, Bin Dine, Nah Train, Pan Thee, Dad, Long Than, Ben Luck, Trunk Long and My Than (Can T ho). This project aids to shorten the time of the runners on the road from Ha Non to Ho Chi Mini. Besides, the new NON highway at the eastern of Ha Non is also been built makes traveling from Ha Non to Ha Long (Quant NIH) get more convenient and faster. These are advantage for transportation firms and traveling firms.
However, the too high tolls that to be applied to automobile traveling on these routes, is a major disadvantage for the transport enterprises today. Many transportation companies have reflected with the mass media that traveling on this highway is faster and more convenient, but road toll is too high, plus the high fuel prices led to business losses. In recent years, the Vietnamese Government has launched a variety of policies on taxes, charges for transportation. These policies create the increase in operating expenditure of transportation enterprises.
The corruption in the traffic police force mentioned in the mass media brings a large number of obstacles for the transportation business. Economic elements: Nowadays, Vietnamese economics is depressing in the global economic crisis, most industries of the economy are affected heavily. The finance resource that funded from foreign countries and non-governmental organizations for Viet Name o develop urban transportation infrastructure was significantly reduced. Even Vietnamese government also launched the policy of cutting down or limiting public expenditure.
As a result, the state budget for improving, investing in transportation infrastructure gets narrower. This is a big disadvantage for transport industry. In particular, the fuel prices increase brings many financial difficulties to enterprises or leads them to the loss or bankruptcy. At the moment, it is said that activity and investment in the transport sector is very difficult and enterprises will have to face many risks. Social elements: According to the report of Ha Non Transfers, the number of people using buses in Ha Non is growing recently, but it is not a trend.
The passengers are mostly students, retired people and low-income people because the cost is lower than other traffic means. Ha Non transport infrastructure is an interlaced system of small streets, tiny alleys with the small markets along the roads, small shops on the street. Ha Non people have a habit of using motorcycles to move and buy or shopping on the streets instead of using the bus. Especially, the theft, pick-pocketing on buses has not been solved also makes people afraid of traveling by this means. The poor economic management of the Vietnamese Government has made land prices and real estate increased unreasonably.
The average income per person in Viet Name is low compared with the world, but the price of real estate is highest in the world. This is the reason leading to the expansion of the roads becomes extremely difficult because of the cost of compensation for ground clearance is too high. For example, the cost to build the Xa Dan road is considered the highest in the world. As a result, it is difficult to Ha Non has a modern transportation infrastructure system and public transportation industry is very difficult to develop.
Changing Ha Non people’s habits of using motorcycles in order to use public transportation can only be done when the transportation infrastructure is more improved, better urban planning, and higher public transportation service quality. Traveling by bus will become trend if people see their traveling easily and conveniently. There is an noticeable issue that the compliance with traffic law of many Vietnamese is poor, drunk driving , crossing the red light, driving in the wrong lane leading to many serious traffic accidents.
This problem also brings risks to the transport business. Technology elements: Today, in the world, technology continues developing help to businesses in management, administration, production and sales. Befoul has appeared in the Vietnamese market but the price is high. Consequently, it is not be cared by transport firms though it is not pollute the environment. The development of information technology in Viet Name is an advantage to attract investment. Transportation industry could apply effectively technology in operating, managing.
The management software, global positioning systems, assuring devices mounted on the vehicle to help transport businesses saving operating expenditure and controlling all activities most efficiently. However, to have this advantage, enterprises have to spend a large amount of money to apply technology. This is an obstacle for Hon. Skim Coach Transport because it does not have the good financial resources. It can be seen that the external elements create many disadvantages more than advantage for firms in this industry, and it is unattractive to investors.
Developing public transportation is social development and improving the life quality of the people. To gain this objective, Viet Name Government should take strong, fierce and wisdom measures to overcome the above mentioned shortcomings. Government needs to build wise management policies such as issue of policy to real estate prices down to its true value, relying on that, the urban planning would not have to pay any reasonable costs. It is should be centralized shops in the streets in the trade centre to prevent people shopping on the crowded streets. Banning motorcycles and encouraging people to use public transport.
Improving the quality of service, security on public transport means. In the near future, we will overcome global economics crisis, the fuel price could decrease, and transport industry in Ha Non will be attractive and potential because of crowded population of this town. INDUSTRY ANALYSIS After analyzing general landscape to get over view about environment the company is doing business, HACK needs to understand deeply the industry which it is belong. Transportation industry has a vital role to play in our lives. It helps us to move, travel and carry baggage, goods from place to place very quickly and conveniently.
Besides, like many economic activities that are intensive in infrastructure the transport sector is an important component of the economy impacting on development and the welfare of populations. When transport systems are efficient, they provide economic and social opportunities and benefits that result in positive multipliers effects such as better accessibility to markets, employment and additional investments. However, this is not easy for every company to join this industry and become successful and is this industry really attractive. Based on model of interpreting industry analysis, the industry can be defined attractive or unattractive.
Threat of new entrant Identifying new entrants is very important because they can threaten the market share of existing competitors (Hit, Ireland and Hosking’s, 2009, up. 51). Threat of new entrant for transportation industry is very high because barrier to entry this area is low. There are a number of factors affect this trend: Low switching cost: Switching costs are the one-time costs customers incur when they buy from a different supplier. In this industry, customers can easily switch to other modes of transportation. They can choose to go by bus, by taxi, train or airplanes without costs incurred.
Size of the market is growing: The population of Ha Non is increasing rapidly at the rate of 7% per year (http://www. GOP. Gob. Van/) and more and more immigrant from other province nearby such as Thai Bin, Name Dine, Nigh An, Ha Phone.. With the number of . Then it is a potential market for transportation company to explore. High demand for public transportation: Recently, because of fluctuation and increasing in fuel price,( government adjusted fuel price 3 times from… ) there are a number of people shift from using private vehicle to public transportation like uses.
Environment awareness: Nowadays, due to diverse effects of global climate change on people’s lives and business and thanks to propagandist of media, public communication, social network helps to raise people’s awareness of protecting environment and using environmentally friendly products and services, so many people tend to use public transportation. Potential customers: there are a number of customers available in the market which the other existing companies has not meet their satisfaction such as students, workers, tourist and so on.
Position of supplier: In transportation industry is really high because the following reasons: There are only few suppliers in most categories such as fuel supplier, bus station or other equipment providers. Regarding fuel, it Is well known that fuel expense account for a large part of the transportation company expenses. In Viet Name there are only 14 petroleum companies like Petroleum, Pill, MIPS… ( petroleum. Com. Van) so they have strong power compared to HACK. It takes time and effort for the company to change from supplier to others.
Besides, Ha Non has several main long-distance bus stations like Kim Ma bus station, Gap Bat bus taxation, Gig Lam, My Dine bus station and each one serves a particular area, this is facing overcapacity and it is hard for company to provide services (Tramcar, 2012) Bargaining power of customers is very high. There are availability of many mode of transportation and customers can easily move to other vehicle, therefore customers has strong position compared to HACK. Threat from substitute products/services: High There is a number of transportation available for people to choose.
If they do not want to go by bus, they can use cars including hired cars, private cars, borrowed arc, motorbikes, bicycle, cycle or even walking. Rivalry among competitors: Intense Industry’s firms are mutually dependent, action taken by one company usually invite competitive responses. Competitive rivalry intensifies when a firm is challenged by a competitor’s actions or when a company recognizes an opportunity to improve market positions (Hit, Ireland and Hosking’s, 2009, p. 58). Regarding transportation industry, the firms face a fierce competition both direct and indirect.
Around Ha Non, there are some well-established bus companies with support from government such as Ha Non Transfers, Than Long Bus, ABA Yen which are dominant the market, especially Transfers currently holds an more than 80% market share of Ha No’s public transport services market. The company operates 926 public buses, which serve over one million passengers per day, accounting for 93% of the city’s total public transport users (http://www. Transfers. Van/). For longer routes like Spa, Ad Nag, Dine Been and so on, there are also a number of companies available at bus stations in Ha Non such as Vittles, Hung Than, Bin Mini, Back Ha… ND customers can easily book seat through phone. Travel companies also own fleet of coaches to serve heir own visitors to nearby tourist destinations such as Ha Long, Spa, Hue, Ad Nag…. Moreover, the means to transport tourists require high quality with full amenities. To invest in such vehicles HACK should have long-term and large finance resource. Beside direct competitors, HACK compete with indirect ones in terms of taxi, airlines and train. It is very convenient for customers to take a taxi through phone or even on the side of pavement.
There are a huge taxi companies existing in Ha Non now which run both short and long way with competitive price such as Airport taxi, Maim Line, CAP Ha Non, Hung luau, Than Nag, etc. Moreover, with the popular and convenient of airplane, more and more people choose this to travel. Taking a journey by flying with Viet Air, Jester Pacific (low cost airlines) or Viet Name Airlines (tradition airline) can help customers save time and feel healthier. Furthermore, airlines carry out a lot of promotion so their prices are quite flexible and affordable for most of Vietnamese people and tourists.
The poor management of government in this industry makes many individuals that do not have a business license can still involved in transporting passengers. Thus, it causes oversupply situation, unfair competition, traffic accidents, they are willing to use violence to have passengers and ignore Police. In addition, when entering this industry, the company has to invest a lot of money on buying vehicles, building premise so in case of remove from the industry the company will lose a number of asset values.
That is the reason why it is a big obstacle for the company to exit the transportation industry and try to maintain even the return on their invested capital is low or negative. Besides, the services the transportation companies provided are not fractionated so customers easily to move to use another mode of transport and when they find a differentiated products and services that satisfy their needs, they frequently purchase the product loyalty overtime.
Potential profit: For every company, making profit or in other word has positive status of income statement is very significant. Transportation industry has very low ROE, it is just around 4% it means if you invest 1 USED you get only 0. 041_SD return. Whereas, the capital required entering this industry is really high. Public Transportation Company receives support from government with the commitment to maintain t low price, so making huge profit is difficult.
