Swot Analysis of "Lufthansa: To Hedge or Not to Hedge..." written by Stephen Sapp includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Hedge Lufthansa facing as an external strategic factors. Some of the topics covered in Lufthansa: To Hedge or Not to Hedge... case study are - Strategic Management Strategies, International business, Risk management and Global Business.
Some of the macro environment factors that can be used to understand the Lufthansa: To Hedge or Not to Hedge... casestudy better are - – there is increasing trade war between United States & China, increasing transportation and logistics costs, there is backlash against globalization, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation,
increasing energy prices, increasing commodity prices, etc
Introduction to SWOT Analysis of Lufthansa: To Hedge or Not to Hedge...
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lufthansa: To Hedge or Not to Hedge... case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hedge Lufthansa, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hedge Lufthansa 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: To Hedge or Not to Hedge... can be done for the following purposes –
1. Strategic planning using facts provided in Lufthansa: To Hedge or Not to Hedge... case study
2. Improving business portfolio management of Hedge Lufthansa
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 Hedge Lufthansa
Strengths Lufthansa: To Hedge or Not to Hedge... | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hedge Lufthansa in Lufthansa: To Hedge or Not to Hedge... Harvard Business Review case study are -
Analytics focus
– Hedge Lufthansa 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 Stephen Sapp 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
– Hedge Lufthansa is present in almost all the verticals within the industry. This has provided firm in Lufthansa: To Hedge or Not to Hedge... 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.
Highly skilled collaborators
– Hedge Lufthansa 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: To Hedge or Not to Hedge... HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Hedge Lufthansa has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hedge Lufthansa to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Hedge Lufthansa 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.
Low bargaining power of suppliers
– Suppliers of Hedge Lufthansa in the sector have low bargaining power. Lufthansa: To Hedge or Not to Hedge... has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hedge Lufthansa to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Hedge Lufthansa is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Hedge Lufthansa
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Hedge Lufthansa does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Global Business field
– Hedge Lufthansa 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 Hedge Lufthansa in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Hedge Lufthansa has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Lufthansa: To Hedge or Not to Hedge... 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.
Operational resilience
– The operational resilience strategy in the Lufthansa: To Hedge or Not to Hedge... 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.
Innovation driven organization
– Hedge Lufthansa is one of the most innovative firm in sector. Manager in Lufthansa: To Hedge or Not to Hedge... Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Lufthansa: To Hedge or Not to Hedge... | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lufthansa: To Hedge or Not to Hedge... are -
Need for greater diversity
– Hedge Lufthansa 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, Hedge Lufthansa is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Lufthansa: To Hedge or Not to Hedge... can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– It come across in the case study Lufthansa: To Hedge or Not to Hedge... 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: To Hedge or Not to Hedge... can leverage the sales team experience to cultivate customer relationships as Hedge Lufthansa is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Hedge Lufthansa 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 cash cycle compare to competitors
Hedge Lufthansa has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Capital Spending Reduction
– Even during the low interest decade, Hedge Lufthansa 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Lufthansa: To Hedge or Not to Hedge..., is just above the industry average. Hedge Lufthansa 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.
Low market penetration in new markets
– Outside its home market of Hedge Lufthansa, firm in the HBR case study Lufthansa: To Hedge or Not to Hedge... needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Lufthansa: To Hedge or Not to Hedge... 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 Hedge Lufthansa 's lucrative customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Lufthansa: To Hedge or Not to Hedge... 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 Hedge Lufthansa has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Stephen Sapp suggests that, Hedge Lufthansa 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: To Hedge or Not to Hedge... | 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: To Hedge or Not to Hedge... are -
Manufacturing automation
– Hedge Lufthansa 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hedge Lufthansa can use these opportunities to build new business models that can help the communities that Hedge Lufthansa operates in. Secondly it can use opportunities from government spending in Global Business sector.
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. Hedge Lufthansa 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. Hedge Lufthansa 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.
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 Hedge Lufthansa 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hedge Lufthansa is facing challenges because of the dominance of functional experts in the organization. Lufthansa: To Hedge or Not to Hedge... 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hedge Lufthansa 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: To Hedge or Not to Hedge..., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Hedge Lufthansa 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hedge Lufthansa 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.
Leveraging digital technologies
– Hedge Lufthansa 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.
Creating value in data economy
– The success of analytics program of Hedge Lufthansa has opened avenues for new revenue streams for the organization in the industry. This can help Hedge Lufthansa to build a more holistic ecosystem as suggested in the Lufthansa: To Hedge or Not to Hedge... case study. Hedge Lufthansa can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Hedge Lufthansa 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.
Using analytics as competitive advantage
– Hedge Lufthansa 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 Hedge or Not to Hedge... - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hedge Lufthansa 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 Hedge Lufthansa can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Lufthansa: To Hedge or Not to Hedge... External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lufthansa: To Hedge or Not to Hedge... are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hedge Lufthansa 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.
Shortening product life cycle
– it is one of the major threat that Hedge Lufthansa is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Hedge Lufthansa with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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. Hedge Lufthansa can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Hedge Lufthansa 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.
Technology acceleration in Forth Industrial Revolution
– Hedge Lufthansa has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Hedge Lufthansa 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.
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 Hedge Lufthansa 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. Hedge Lufthansa needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
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 Hedge Lufthansa business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Hedge Lufthansa
– 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 Hedge Lufthansa.
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 Hedge Lufthansa.
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: To Hedge or Not to Hedge..., Hedge Lufthansa 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 .
Weighted SWOT Analysis of Lufthansa: To Hedge or Not to Hedge... 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: To Hedge or Not to Hedge... 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: To Hedge or Not to Hedge... 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: To Hedge or Not to Hedge... 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: To Hedge or Not to Hedge... 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 Hedge Lufthansa needs to make to build a sustainable competitive advantage.