This is a Thunderbird Case Study.The national flag-bearer of Germany, Lufthansa, purchased twenty 737 Boeing aircraft in January of 1985 for $500 million. The payment was due in January of 1986 upon delivery of aircraft from the U.S. manufacturer. At the time of the purchase, the U.S. dollar was at a record high versus the Deutschemark, it had been steadily appreciating against the Deutschemark for five years. The CEO of Lufthansa, Herr Heinz Ruhnau, was responsible for determining what hedging, if any, would e used in conjunction with the dollar exposure.
Swot Analysis of "Lufthansa" written by Michael Moffett includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lufthansa Deutschemark facing as an external strategic factors. Some of the topics covered in Lufthansa case study are - Strategic Management Strategies, and Global Business.
Some of the macro environment factors that can be used to understand the Lufthansa casestudy better are - – technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , wage bills are increasing, increasing transportation and logistics costs,
there is increasing trade war between United States & China, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lufthansa case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lufthansa Deutschemark, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lufthansa Deutschemark 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 can be done for the following purposes –
1. Strategic planning using facts provided in Lufthansa case study
2. Improving business portfolio management of Lufthansa Deutschemark
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 Deutschemark
Strengths Lufthansa | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lufthansa Deutschemark in Lufthansa Harvard Business Review case study are -
Successful track record of launching new products
– Lufthansa Deutschemark has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lufthansa Deutschemark 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.
Diverse revenue streams
– Lufthansa Deutschemark is present in almost all the verticals within the industry. This has provided firm in Lufthansa 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.
Training and development
– Lufthansa Deutschemark has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Lufthansa 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.
Ability to lead change in Global Business field
– Lufthansa Deutschemark 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 Deutschemark in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Lufthansa Deutschemark 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 Michael Moffett 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.
Ability to recruit top talent
– Lufthansa Deutschemark is one of the leading recruiters in the industry. Managers in the Lufthansa 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 Deutschemark in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the Lufthansa 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.
Learning organization
- Lufthansa Deutschemark 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 Deutschemark is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Lufthansa Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Lufthansa Deutschemark 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.
Effective Research and Development (R&D)
– Lufthansa Deutschemark 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 - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Lufthansa Deutschemark is one of the most innovative firm in sector. Manager in Lufthansa Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Lufthansa | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lufthansa are -
Increasing silos among functional specialists
– The organizational structure of Lufthansa Deutschemark is dominated by functional specialists. It is not different from other players in the Global Business segment. Lufthansa Deutschemark needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lufthansa Deutschemark to focus more on services rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Lufthansa Deutschemark 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.
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 Deutschemark supply chain. Even after few cautionary changes mentioned in the HBR case study - Lufthansa, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lufthansa Deutschemark vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– After analyzing the HBR case study Lufthansa, 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Lufthansa, is just above the industry average. Lufthansa Deutschemark 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.
Need for greater diversity
– Lufthansa Deutschemark 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lufthansa Deutschemark is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Lufthansa can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Michael Moffett suggests that, Lufthansa Deutschemark 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.
Lack of clear differentiation of Lufthansa Deutschemark products
– To increase the profitability and margins on the products, Lufthansa Deutschemark needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Lufthansa Deutschemark has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Lufthansa Deutschemark even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Skills based hiring
– The stress on hiring functional specialists at Lufthansa Deutschemark 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.
Opportunities Lufthansa | 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 are -
Creating value in data economy
– The success of analytics program of Lufthansa Deutschemark has opened avenues for new revenue streams for the organization in the industry. This can help Lufthansa Deutschemark to build a more holistic ecosystem as suggested in the Lufthansa case study. Lufthansa Deutschemark can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lufthansa Deutschemark in the consumer business. Now Lufthansa Deutschemark can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lufthansa Deutschemark 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.
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 Deutschemark can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Lufthansa Deutschemark 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 - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lufthansa Deutschemark to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Deutschemark 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 Deutschemark 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.
Manufacturing automation
– Lufthansa Deutschemark can use the latest technology developments to improve its manufacturing and designing process in Global Business 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lufthansa Deutschemark in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lufthansa Deutschemark can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Lufthansa Deutschemark can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Leveraging digital technologies
– Lufthansa Deutschemark can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Learning at scale
– Online learning technologies has now opened space for Lufthansa Deutschemark 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lufthansa Deutschemark 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 Deutschemark to hire the very best people irrespective of their geographical location.
Threats Lufthansa External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lufthansa are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lufthansa Deutschemark 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 .
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.
Regulatory challenges
– Lufthansa Deutschemark 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 Global Business industry regulations.
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 Deutschemark 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 Deutschemark in the Global Business sector and impact the bottomline of the organization.
Consumer confidence and its impact on Lufthansa Deutschemark 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.
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 Deutschemark.
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 Deutschemark business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Lufthansa Deutschemark 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.
High dependence on third party suppliers
– Lufthansa Deutschemark 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lufthansa Deutschemark with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Deutschemark 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.
Weighted SWOT Analysis of Lufthansa 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 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 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 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 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 Deutschemark needs to make to build a sustainable competitive advantage.
