Deutsche Lufthansa AG: A Competitive History SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Deutsche Lufthansa AG: A Competitive History
This note describes the competitive practices of Deutsche Lufthansa AG, the largest player in the German airline market, in response to challenges to its quasi monopoly on domestic routes. Starting in 1988, European governments deregulated the European airline industry in preparation for a single European market. In April 1997, the final phase of this process gave private airlines owned by a majority of EU nationals the right to operate freely on any of the domestic routes within the member states of the European Economic Area. From that time on, Lufthansa faced a series of challenges by both private entrepreneurs and established airlines, including Deutsche BA, Go-fly, Eurowings, Germania, and Preussag/TUI.
Swot Analysis of "Deutsche Lufthansa AG: A Competitive History" written by Matthias Hild includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lufthansa Deutsche facing as an external strategic factors. Some of the topics covered in Deutsche Lufthansa AG: A Competitive History case study are - Strategic Management Strategies, Policy, Strategic planning and Global Business.
Some of the macro environment factors that can be used to understand the Deutsche Lufthansa AG: A Competitive History casestudy better are - – challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy,
supply chains are disrupted by pandemic , increasing commodity prices, etc
Introduction to SWOT Analysis of Deutsche Lufthansa AG: A Competitive History
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Deutsche Lufthansa AG: A Competitive History case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lufthansa Deutsche, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lufthansa Deutsche 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 Deutsche Lufthansa AG: A Competitive History can be done for the following purposes –
1. Strategic planning using facts provided in Deutsche Lufthansa AG: A Competitive History case study
2. Improving business portfolio management of Lufthansa Deutsche
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lufthansa Deutsche
Strengths Deutsche Lufthansa AG: A Competitive History | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lufthansa Deutsche in Deutsche Lufthansa AG: A Competitive History Harvard Business Review case study are -
Successful track record of launching new products
– Lufthansa Deutsche has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lufthansa Deutsche 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.
Cross disciplinary teams
– Horizontal connected teams at the Lufthansa Deutsche 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.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Lufthansa Deutsche digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lufthansa Deutsche has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Organizational Resilience of Lufthansa Deutsche
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lufthansa Deutsche does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Lufthansa Deutsche is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Lufthansa Deutsche is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Deutsche Lufthansa AG: A Competitive History Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Deutsche Lufthansa AG: A Competitive History 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.
Ability to recruit top talent
– Lufthansa Deutsche is one of the leading recruiters in the industry. Managers in the Deutsche Lufthansa AG: A Competitive History are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Lufthansa Deutsche in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Lufthansa Deutsche is present in almost all the verticals within the industry. This has provided firm in Deutsche Lufthansa AG: A Competitive History 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.
High switching costs
– The high switching costs that Lufthansa Deutsche 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.
Analytics focus
– Lufthansa Deutsche 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 Matthias Hild 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.
Highly skilled collaborators
– Lufthansa Deutsche 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 Deutsche Lufthansa AG: A Competitive History HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Deutsche Lufthansa AG: A Competitive History | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Deutsche Lufthansa AG: A Competitive History are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Deutsche Lufthansa AG: A Competitive History 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 Deutsche has relatively successful track record of launching new products.
No frontier risks strategy
– After analyzing the HBR case study Deutsche Lufthansa AG: A Competitive History, it seems that company is thinking about the frontier risks that can impact Global Business 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.
Capital Spending Reduction
– Even during the low interest decade, Lufthansa Deutsche 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.
Increasing silos among functional specialists
– The organizational structure of Lufthansa Deutsche is dominated by functional specialists. It is not different from other players in the Global Business segment. Lufthansa Deutsche needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lufthansa Deutsche to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Lufthansa Deutsche has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow to strategic competitive environment developments
– As Deutsche Lufthansa AG: A Competitive History HBR case study mentions - Lufthansa Deutsche 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.
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 Deutsche supply chain. Even after few cautionary changes mentioned in the HBR case study - Deutsche Lufthansa AG: A Competitive History, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lufthansa Deutsche vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Lufthansa Deutsche, firm in the HBR case study Deutsche Lufthansa AG: A Competitive History needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Deutsche Lufthansa AG: A Competitive History, is just above the industry average. Lufthansa Deutsche needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Workers concerns about automation
– As automation is fast increasing in the segment, Lufthansa Deutsche 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Deutsche Lufthansa AG: A Competitive History 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 Deutsche 's lucrative customers.
Opportunities Deutsche Lufthansa AG: A Competitive History | 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 Deutsche Lufthansa AG: A Competitive History are -
Loyalty marketing
– Lufthansa Deutsche 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.
Building a culture of innovation
– managers at Lufthansa Deutsche 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 Global Business segment.
Creating value in data economy
– The success of analytics program of Lufthansa Deutsche has opened avenues for new revenue streams for the organization in the industry. This can help Lufthansa Deutsche to build a more holistic ecosystem as suggested in the Deutsche Lufthansa AG: A Competitive History case study. Lufthansa Deutsche 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 Deutsche to increase its market reach. Lufthansa Deutsche 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lufthansa Deutsche 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 Deutsche to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lufthansa Deutsche is facing challenges because of the dominance of functional experts in the organization. Deutsche Lufthansa AG: A Competitive History 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.
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 Deutsche can use these opportunities to build new business models that can help the communities that Lufthansa Deutsche operates in. Secondly it can use opportunities from government spending in Global Business sector.
Buying journey improvements
– Lufthansa Deutsche can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Deutsche Lufthansa AG: A Competitive History 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 Deutsche 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.
Using analytics as competitive advantage
– Lufthansa Deutsche 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 Deutsche Lufthansa AG: A Competitive History - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lufthansa Deutsche to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lufthansa Deutsche can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Lufthansa Deutsche can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lufthansa Deutsche 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, Deutsche Lufthansa AG: A Competitive History, 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 Deutsche Lufthansa AG: A Competitive History External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Deutsche Lufthansa AG: A Competitive History are -
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 Deutsche business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lufthansa Deutsche in the Global Business industry. The Global Business 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.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lufthansa Deutsche can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Lufthansa Deutsche 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 Deutsche can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Stagnating economy with rate increase
– Lufthansa Deutsche can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Deutsche Lufthansa AG: A Competitive History, Lufthansa Deutsche may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
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 Deutsche in the Global Business sector and impact the bottomline of the organization.
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 Deutsche needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Lufthansa Deutsche has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Lufthansa Deutsche needs to keep up with the evolution of technology in the Global Business 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.
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.
High dependence on third party suppliers
– Lufthansa Deutsche 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.
Shortening product life cycle
– it is one of the major threat that Lufthansa Deutsche is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Deutsche.
Weighted SWOT Analysis of Deutsche Lufthansa AG: A Competitive History 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 Deutsche Lufthansa AG: A Competitive History 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 Deutsche Lufthansa AG: A Competitive History 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 Deutsche Lufthansa AG: A Competitive History 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 Deutsche Lufthansa AG: A Competitive History 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 Deutsche needs to make to build a sustainable competitive advantage.
