Tremendous changes in the global competitive landscape threaten Deutsche Lufthansa AG, the largest airline group in the world. Three large Gulf carriers, Emirates, Etihad Airways and Qatar Airways, as well as Turkish Airlines, now stand to compete with Lufthansa on the traditionally profitable long-haul segment. Chairman of the executive board and chief executive officer has to act quickly if Lufthansa is to keep its top spot. Having ignored the threat from low-cost airlines in the past, Lufthansa must now be better prepared to respond. It is crucial that Lufthansa finds adequate strategic options for sustaining and further expanding its market-leading position. Heike C. WA?rner is affiliated with University of Regensburg.
Swot Analysis of "Lufthansa 2012" written by Heike C. Worner includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lufthansa Airways facing as an external strategic factors. Some of the topics covered in Lufthansa 2012 case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Lufthansa 2012 casestudy better are - – increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy,
there is backlash against globalization, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lufthansa 2012 case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lufthansa Airways, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lufthansa Airways operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Lufthansa 2012 can be done for the following purposes –
1. Strategic planning using facts provided in Lufthansa 2012 case study
2. Improving business portfolio management of Lufthansa Airways
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lufthansa Airways
Strengths Lufthansa 2012 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lufthansa Airways in Lufthansa 2012 Harvard Business Review case study are -
Effective Research and Development (R&D)
– Lufthansa Airways has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Lufthansa 2012 - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Lufthansa Airways are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to recruit top talent
– Lufthansa Airways is one of the leading recruiters in the industry. Managers in the Lufthansa 2012 are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Lufthansa Airways has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Lufthansa 2012 HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Strategy & Execution industry
– Lufthansa 2012 firm has clearly differentiated products in the market place. This has enabled Lufthansa Airways to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Lufthansa Airways to invest into research and development (R&D) and innovation.
Strong track record of project management
– Lufthansa Airways is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Strategy & Execution field
– Lufthansa Airways is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Lufthansa Airways in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Lufthansa Airways has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Operational resilience
– The operational resilience strategy in the Lufthansa 2012 Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High brand equity
– Lufthansa Airways has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lufthansa Airways to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Lufthansa Airways is present in almost all the verticals within the industry. This has provided firm in Lufthansa 2012 case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Organizational Resilience of Lufthansa Airways
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lufthansa Airways does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Lufthansa 2012 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lufthansa 2012 are -
Capital Spending Reduction
– Even during the low interest decade, Lufthansa Airways has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Lufthansa 2012, in the dynamic environment Lufthansa Airways has struggled to respond to the nimble upstart competition. Lufthansa Airways has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Lufthansa 2012 HBR case study mentions - Lufthansa Airways takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Lack of clear differentiation of Lufthansa Airways products
– To increase the profitability and margins on the products, Lufthansa Airways needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– After analyzing the HBR case study Lufthansa 2012, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Workers concerns about automation
– As automation is fast increasing in the segment, Lufthansa Airways needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Products dominated business model
– Even though Lufthansa Airways has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Lufthansa 2012 should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Lufthansa Airways is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Lufthansa Airways needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lufthansa Airways to focus more on services rather than just following the product oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Heike C. Worner suggests that, Lufthansa Airways is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Lufthansa 2012 HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Lufthansa Airways has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Lufthansa Airways, firm in the HBR case study Lufthansa 2012 needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Lufthansa 2012 | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Lufthansa 2012 are -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Lufthansa Airways to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Creating value in data economy
– The success of analytics program of Lufthansa Airways has opened avenues for new revenue streams for the organization in the industry. This can help Lufthansa Airways to build a more holistic ecosystem as suggested in the Lufthansa 2012 case study. Lufthansa Airways can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lufthansa Airways is facing challenges because of the dominance of functional experts in the organization. Lufthansa 2012 case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lufthansa Airways in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Lufthansa Airways can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Lufthansa Airways can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Using analytics as competitive advantage
– Lufthansa Airways has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Lufthansa 2012 - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lufthansa Airways to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lufthansa Airways can use these opportunities to build new business models that can help the communities that Lufthansa Airways operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lufthansa Airways can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lufthansa Airways to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Lufthansa Airways to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Lufthansa Airways has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Lufthansa Airways can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Lufthansa Airways to increase its market reach. Lufthansa Airways will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Threats Lufthansa 2012 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lufthansa 2012 are -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Lufthansa Airways will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Lufthansa 2012, Lufthansa Airways may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Lufthansa Airways.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Lufthansa Airways needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Lufthansa Airways is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Lufthansa Airways needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lufthansa Airways can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Lufthansa Airways in the Strategy & Execution sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lufthansa Airways with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lufthansa Airways can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Lufthansa 2012 .
High dependence on third party suppliers
– Lufthansa Airways high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Weighted SWOT Analysis of Lufthansa 2012 Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Lufthansa 2012 needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Lufthansa 2012 is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Lufthansa 2012 is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Lufthansa 2012 is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Lufthansa Airways needs to make to build a sustainable competitive advantage.