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 - – talent flight as more people leaving formal jobs, technology disruption, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices,
challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
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.
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.
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.
Training and development
– Lufthansa Airways has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Lufthansa 2012 Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
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.
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.
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.
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.
Analytics focus
– Lufthansa Airways is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Heike C. Worner can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
Successful track record of launching new products
– Lufthansa Airways has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lufthansa Airways has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
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.
Weaknesses Lufthansa 2012 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lufthansa 2012 are -
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 harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lufthansa Airways is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Lufthansa 2012 can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Lufthansa 2012, it seems that the employees of Lufthansa Airways don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Lufthansa 2012 has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Lufthansa Airways 's lucrative customers.
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.
Aligning sales with marketing
– It come across in the case study Lufthansa 2012 that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Lufthansa 2012 can leverage the sales team experience to cultivate customer relationships as Lufthansa Airways is planning to shift buying processes online.
Interest costs
– Compare to the competition, Lufthansa Airways has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Need for greater diversity
– Lufthansa Airways has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Lufthansa Airways supply chain. Even after few cautionary changes mentioned in the HBR case study - Lufthansa 2012, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lufthansa Airways vulnerable to further global disruptions in South East Asia.
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.
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 -
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lufthansa Airways can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Learning at scale
– Online learning technologies has now opened space for Lufthansa Airways to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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.
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.
Manufacturing automation
– Lufthansa Airways can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Buying journey improvements
– Lufthansa Airways can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Lufthansa 2012 suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lufthansa Airways can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Lufthansa 2012, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 -
Consumer confidence and its impact on Lufthansa Airways demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Lufthansa Airways business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Lufthansa Airways needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Lufthansa Airways can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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.
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.
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 .
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lufthansa Airways in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Increasing wage structure of Lufthansa Airways
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Lufthansa Airways.
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.
Technology acceleration in Forth Industrial Revolution
– Lufthansa Airways has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Lufthansa Airways needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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.
