FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS INDUSTRIAL ORGANIZATION ESSAY AN ANALYSIS ON SHORT-TERM ACCOMMODATION ACTIVITIES IN VIETNAM IN 2010 Course: KTEE408(2-1920).1_LT Mentor: Assoc. Tu Thuy Anh Author: Group 17 Members ID Vũ Thị Thu Nga 1714450079 Lê Khánh Ngân 1714450022 Tạ Mai Linh 1714450038 Hanoi, 2020 GROUP 17 MEMBERS AND ROLES NO NAME ID ROLE RATING 1 Vũ Thị Thu Nga 1714450079 Write Introduction, 10/10 Chapter 1, assigning task for members 2 Lê Khánh Ngân 1714450022 Write chapter 5, 10/10 Conclusion 3 Tạ Mai Linh 1714450038 Write chapter 2, chapter 10/10 3 TABLE OF CONTENTS INTRODUCTION……………………………………………………………………………….1 CHAPTER 1: THEORETICAL BASIS. Industry concentration level. The HHI index (Hirschman-Herfindahl Index).
Methods of minimizing the cost of the firms. On the spot exchange. Indices evaluate the performance of firms. Total assets turnover ratio (TTS).
Return on sales ratio (ROS). Return on assets ratio (ROA). Return on equity (ROE). Barriers to entry and exit from the market.
Brand positioning strategy. Merge and Acquisition activities (M&A). 11 CHAPTER 2: OVERVIEW OF ACCOMMODATION SERVICES INDUSTRY IN VIETNAM. The importance of accommodation services in Vietnam.
Characteristics of accommodation services industry. Some conditions for short-term accommodation business. Products of accommodation services industry. Existing types of accommodation services.
16 CHAPTER 3: THE MARKET STRUCTURE OF THE ACCOMMODATION SERVICES MARKET IN VIETNAM. Data description and processing. Scale of firms. Concentration of accommodation services.
CRm concentration ratio (concentration ratio). Herfindahl – Hirschman Index. Demand and market conditions of accommodation service industry. 27 CHAPTER 4: THE FIRMS’ BEHAVIOUR IN SHORT-TERM ACCOMMODATION ACTIVITIES IN VIETNAM.
Research and development of firms (R&D). The advertising strategies and marketing of firms. Business position strategies. Price strategy of the business.
Mergers and acquisitions of firms (M&A). 34 CHAPTER 5: EVALUATION OF EFFECTIVE OPERATION AND CHALLENGES FOR ENTERPRISES IN ACCOMMODATION SERVICES. The effective operation of enterprises (via ATO, ROA, ROS, ROE). Social welfare of accommodation service industry in Vietnam.
39 CHAPTER 6: SOLUTIONS TO DEVELOP THE ACCOMMODATION SERVICES. Solutions for tourism development planning. Solutions for state management. Solutions for market.
Solutions for scale and type of accommodation facilities. Solutions for finance. Solutions for quality and quantity of rooms. Solutions for additional services diversification .……………43 REFERENCES…………………………………………………………………………………44 LIST OF TABLES Table 3-1.
Vietnam’s accommodation services structure in VSIC 2007. 4 Firms have the highest revenue in the 2010 service sector. Vietnam' s market shares of accommodation services in 2010. The short-term accommodation activities businesses invested in R&D and total number of workers in 2010.
Statistic growth rate of accommodation industry (June 28, 2018). Total revenue and asset of firms in short-term accommodation industry in 2010. ATO, ROS, ROA and ROE of firms. 38 LIST OF FIGURES Figure 3-1: Market share ratio of Accomodation services in Vietnam 2010.
26 INTRODUCTION The world is thriving at an increasingly rapid rate. Along with it is the demand for leisure activities growing ceaselessly, including the demand for accommodation services. In Vietnam specifically, this form of business is starting to occupy a dominating share of the gross national income, reaping giant profits to private enterprises and the state. The services come in various forms and sizes, and are becoming more and more sophisticated in quality in order to fully meet the demand come from both tourists and locals.
As the size of the industry and market demand expands, foreign and domestic private investors also have plans to invest in projects and businesses that have the promising potential of high profits. Facing such developing potential of the accommodation services business in Vietnam today, leading businesses and small businesses need to improve their reputation, enhance their competitiveness and maintain their stable development through both short-term and long-term strategies, business expansion and service provision activities to attract external investment. In this context, the competitiveness arising between domestic and foreign enterprises is extremely high. In awareness of the imperiousness and practicality of the matter, our group would like to conduct a research on the topic “An analysis on Short-term accommodation activities in Vietnam in 2010”.
The report will provide insights from general to specific about the current state of the industry in Vietnam, the strategies used by businesses in the industry to enhance their competitive power, and at the same time assess the difficulties which firms may encounter during the process of industry development. From the analysis made on 2010 data, we will then refer back to the current situation of the industry in 2020 and suggest further policies for the future. Before going into the main content of the essay, group 6 would like to express our sincere gratitude to the lecturer in charge of the subject, Assoc. Tu Thuy Anh, who has accompanied us in the idea development process and advise us to write the 1 outline of the essay.
Your in-depth lectures are the source of inspiration for us to implement this topic and also help us to build the foundation and develop the direction of the essay. Due to the lack of practical insight and limited expertise knowledge, it is inevitable that our report still contains many flaws and shortcomings. We look forward to receiving your profound comments and guidance so that our report and intelligence will be more complete and complete in the future. Once again, we sincerely thank you.
Lastly, we would like to wish you plenty of good health and contentment to carry on your noble mission of passing on knowledge to future generations Foreign Trade University students. Best regards, Group 17. 2 CHAPTER 1: THEORETICAL BASIS 1. Market structure Market structure is a factor which has an influence on management decisions, include: number of firms competing in the market, firms size, assessments of technology and cost, level of ease at which firms can enter/exit the industry.
Business scale There is always existing a difference in the size of businesses operating in the same industry. Business size may change over time. Industry concentration level Definition Industry concentration is a tool for investors and legislators to come up with sound investment decisions as well as effective policies. The concentration level of the industry, also known as the market concentration, “is the level of production concentration of an industry in the hands of several large enterprises in the industry” (R.
It can be seen that the concentration level of an industry reflects the level of competition of that market as well as measuring the relative position of large enterprises in the industry. An industry that is considered to have a low concentration means that large firms do not have a significant effect on the supply in the market and that the market is highly competitive. Conversely, a high level of industry concentration means that large firms have market power. This case is also known as "monopoly" or "oligopoly".
In the past, industry concentration was calculated by adding up the market shares of some of the largest firms in the industry. In 1982, the United States Federal Trade Act was enacted, which uses the Herfindahl-Hirschman Index (HHI) as a standard market 3 concentration measure. Today, there are two commonly used indices to calculate industry concentration, namely, Herfindahl-Hirschman (HHI) and CRm concentration ratio. The HHI index (Hirschman-Herfindahl Index) HHI was named after economists Orris C.
Herfindahl and Albert O. Hirschmann, the Herfindahl-Hirschman (HHI) index measures market concentration, thereby knowing the level of competition of a certain market or industry. This index was first used by Hirschman and later Herfindahl, taking into account all points of the concentration curve, by summing the square of the market share of all enterprises in the industry. HHI is calculated as the sum of squares of the market share of certain companies multiplied by 10000 (R.Baye, 1958) HHI = 10000∑𝑛𝑖=1 𝑆𝑖2 In which: N is the total number of firms in the industry 𝑆𝑖 is the market share of the ith firm in the industry The HHI Index (or Herfindahl Index) is used to measure the size of firms in relation to the industry and is an indicator of the level of competition among firms in the industry and is usually calculated by the square of the sum of the squares market share of businesses and is in the range of 0 to 10,000.
If all firms in the industry have equal market share then HHI = 1/N*10.000 The HHI index can be determined using another formula: 1 HHI = 𝑛 + 𝑛𝑉 4 In which: n is number of firms in the industry and V is statistical variance of the market shares of firms, calculated using the formula: 1 ∑ 𝑛𝑖=1(𝑆𝑖 − 𝑛 )2 V= 𝑛 If all firms in the industry have equal market share (which means the market structure is perfectly symmentric, si = 1/n with all i) then V = 0 and H = 1/n. If the number of firms is constant, the larger variance due to the degree of market asymmetry between firms will generate higher index values. According to international practice, competition administration authorities often classify markets according to the following spectrum: HHI < 1.000: The market is said to be not concentrated.800: T he market is said to be moderately concentrated HHI > 1.800: The market is said to be highly concentrated Using the HHI index, the market will be classified into competitive level based on the following criteria: HHI < 0.01: Perfectly competitive market 0.1: Highly competitive market 0.18: Medium competitive market 0.18 ≤ HHI: High market concentration and have a monopoly tendency The bigger the HHI, the higher the level of concentration and vice versa, the smaller the HHI shows that no firrm has the more dominant power in the market. Advantage and disadvantage of HHI: * Advantage: 5 - Sensitively reflects the firm's entrance or exit from the industry.
- It is easy to calculate and take into account all points on the market concentration curve, which means assigning a bigger weight for larger firrms. * Disadvantage:: - It is unclear when comparing industries with equal concentration because it is not certain whether the size of firm in that industry will be equal or not. Concentration ratio (CRm) The concentration ratio, in economics, is a ratio that indicates the size of firms in relation to their industry as a whole. Low concentration ratio in an industry would indicate greater competition among the firms in that industry, compared to one with a ratio nearing 100%, which would be evident in an industry characterized by a true monopoly (R.
Formula: 𝑟 ∑𝑚 𝑥𝑖 𝐶𝑅𝑚 = 𝑖=1 = ∑ 𝑆𝑖 𝑋 𝑖=1 In which: N the total number of firms in the industry CRm is concentration ratio 𝑥𝑖 (i=1,…,n) is the Ith firm in the industry, ranking from biggest to smallest 𝑋 = ∑ 𝑛𝑖=1 𝑥𝑖 is total industry sales 𝑥 𝑆𝑖 = 𝑋𝑖 is the market share of the ith firm in the industry When m is different, conclusions about the degree of concentration of the market are also different. It should be noted that if there is a shift in output, sales or merger, the 6 concentration ratio may change, but 𝐶𝑅𝑚 may not be affected by that if large enterprises are not in the businesses shift in output, sales or merger. Different ways of selecting m will generate different results. Therefore, it is common to choose the value m = 4.
The CR4 index is also known as the concentration ratio of 4 companies. Methods of minimizing the cost of the firms 1. Vertical intergration A model of linking companies operating in the same industry value chain Advantage: Firrms are not dependent on external suppliers. Disadvantage: Firms lose their competitiven abilities.
Increasing management and administrative costs due to the expansion in organizational structure.