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 - – increasing energy prices, technology disruption, challanges to central banks by blockchain based private currencies, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion,
cloud computing is disrupting traditional business models, there is backlash against globalization, 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 -
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.
Ability to recruit top talent
– Hedge Lufthansa is one of the leading recruiters in the industry. Managers in the Lufthansa: To Hedge or Not to Hedge... are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Successful track record of launching new products
– Hedge Lufthansa has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hedge Lufthansa 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.
Learning organization
- Hedge Lufthansa 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 Hedge Lufthansa is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Lufthansa: To Hedge or Not to Hedge... Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Hedge Lufthansa digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hedge Lufthansa 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.
Effective Research and Development (R&D)
– Hedge Lufthansa 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: To Hedge or Not to Hedge... - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
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 -
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Lufthansa: To Hedge or Not to Hedge..., in the dynamic environment Hedge Lufthansa has struggled to respond to the nimble upstart competition. Hedge Lufthansa has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Increasing silos among functional specialists
– The organizational structure of Hedge Lufthansa is dominated by functional specialists. It is not different from other players in the Global Business segment. Hedge Lufthansa needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hedge Lufthansa to focus more on services rather than just following the product oriented approach.
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.
Interest costs
– Compare to the competition, Hedge Lufthansa 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.
Products dominated business model
– Even though Hedge Lufthansa has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Lufthansa: To Hedge or Not to Hedge... should strive to include more intangible value offerings along with its core products and services.
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.
Skills based hiring
– The stress on hiring functional specialists at Hedge Lufthansa 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.
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 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.
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 -
Better consumer reach
– The expansion of the 5G network will help Hedge Lufthansa to increase its market reach. Hedge Lufthansa 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.
Buying journey improvements
– Hedge Lufthansa can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Lufthansa: To Hedge or Not to Hedge... 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.
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.
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 Hedge Lufthansa in the consumer business. Now Hedge Lufthansa can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
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. Hedge Lufthansa can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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. Hedge Lufthansa can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Loyalty marketing
– Hedge Lufthansa 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hedge Lufthansa 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.
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 -
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hedge Lufthansa 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: To Hedge or Not to Hedge... .
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. Hedge Lufthansa 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.
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 Hedge Lufthansa with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Hedge Lufthansa 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. Hedge Lufthansa can take advantage of this fund but it will also bring new competitors in the Global Business industry.
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.
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.
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.
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.
Regulatory challenges
– Hedge Lufthansa 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.
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.
