...Lufthansa: Going global, but how to manage Complexity? Lufthansa is the leading, probably pivotal, member of the largest alliance, the Star Alliance. If globalisation means complexity, alliances are even more complex to manage than individual companies because they lack the hierarchical conflict resolution mechanisms that individual companies can employ. Important questions to Lufthansa: * Is the current strategy sufficient to maintain Lufthansa’s position as one of the few profitable airline companies, given the uncertainties and dynamics in the highly competitive but cyclical market? * Has Lufthansa done enough to reduce complexity in the right places and survive the competition, especially against the background of customer satisfaction and high value added? * Are all the employees in the corporation embraced culturally? * Is Lufthansa prepared for the sustainability challenges – in particular global warming – which create new uncertainties? Surviving the changes in the airline industry In 1992, due to the first war in Iraq, Lufthansa was close to bankruptcy just like other airlines as international air traffic has been reduced. Therefore Lufthansa has offered point-to-point connections on high traffic density routes. Also they targeted the business class passengers with new offerings such as Virgin Airlines. From the early 1990’s a minimum of 3% reduction in cost was needed every year and likely to continue. The economic and political events had a negative...
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...due to wars and terrorism activities, Lufthansa became a member of the largest alliance of airlines called the Star Alliance. They used this as a strategy to survive in the globalization of the airline industry. Lufthansa used this strategy because there were high barriers to mergers and acquisitions of airlines due to regulations. Therefore, the alliance gave companies the power to penetrate global markets and also manage their companies on an individual basis. Explain what means the company has used to expand internationally. Lufthansa is known for surviving financial turmoil in the past when others were engulfed in bankruptcy and receiving bailout packages their governments. Lufthansa was close to bankruptcy and facing fierce competition from low cost no frills airlines the company sold fifty percent of its stake in the Thomas Cook Tourism Company to KarstadtQuelle. They also sold parts of LSG Sky Chef which handled catering. Lufthansa wanted to raise money and cut cost. Before this strategy Lufthansa acquired Swiss Air as a way to expand globally. They used that strategy to look for share holdings in other airlines. That was the reason why they did away with Ground Globe Airport Service and financial divestments in order to concentrate on corporate strategy to expand internationally. Identify and describe the elements and objectives of Lufthansa’s cooperative strategy. Lufthansa decided to create what is called the Lufthansa Regional, where fifty percent of German...
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...Lufthansa 2000: Maintaining the Change Momentum Prepared for: Business 497a Professor Don Fujitani Section # 15663 Prepared by: Amiel Traynum Elin Ghadimian Josh Sherriff Ross Zalavsky Ryan Neal External Environment: Global: Worldwide events such as the Gulf War, followed by a recession, put a burden on the airline industry and on Lufthansa as a company. These events caused a major decrease in the amount of seats filled in the airline industry. In 1991 the Seat Factor decreased to about 57 percent in Europe, compared to 65 percent worldwide. Socio-Cultural/ Demographic: You can infer from the case that the growing alliances in the airline industry have been increasing due to globalization. In 1991, Lufthansa had an increase of passenger numbers by 11% due to German re-unification. Legal/Political: The airline industry was strongly regulated by the government in the US and most of the airline industry was owned by the government in Europe. This changed in the US when deregulation of the industry began in 1978 as airlines gained more lenience in operating their business. Before becoming privately owned and profitable in 1997, Lufthansa was a state-owned, national airline carrier of Federal Republic of Germany and the government had strict control over both routes and landing slots. Regulations for the rest of Europe were not as strict. Economic: In the past, an economic recession contributed to the major problem...
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...Airline Lufthansa Companies Strategic Change and Strategic Challenge for Lufthansa Introduction The biggest airline in Germany- Lufthansa is one of the leading airline companies in the world, but it suffered from the danger of bankruptcy in 1991. However, the flexible strategic change programs made it survive. Thus, the implementation and effects of those programs are obviously attractive and deserve further study. Moreover, current business environment is full of opportunities and challenges, which poses Lufthansa to identify relative challenges and adopt some reaction to respond. Therefore, this report will discuss two parts: one is strategic change programs and the other is current strategic challenges for Lufthansa. In the first part, it will evaluate the strategic change programs which Lufthansa applied and also cover the effects of leadership and politics. The second part of this report will analyse the strategic challenges for Lufthansa based on current and future business environment. I. Strategic changes for Lufthansa Strategy is argued to be a useful tool for an organization to achieve its target in the long term, and its contribution to development of the organization is evident. However, it is impossible to use one strategy to respond the changeable demand due to the dynamic external environment, so the organization should change their strategies to adapt the market. 1. Strategic change program According to Balogun and Hailey (1999)...
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...Lufthansa; An analysis of SWOT and KSF’s Table of contents: 1.0 Terms of reference: 2.0 Procedure: 3.0 Findings: 3.1 SWOT: 3.1.1: Strengths: 3.1.2 Weaknesses: 3.1.3 Opportunities: 3.1.4 Threats: 3.2 KSF’s: 3.2.1 KSF by industry: 3.2.2 KSF by Organisation: 3.2.3 KSF by Customers: 4.0 Recommendation: 5.0 Conclusion: 6.0 Bibliography: 7.0 Appendix A – Critical Source Evaluation 1.0 Terms of reference: This is a 1000 word report by me analysing the Strengths, Weaknesses, Opportunities, Threats and key success factors for the German airline giant (€17bn turnover) Lufthansa. The report will be handed in on October 25th in the BUS101 1-hour seminar. 2.0 Procedure: This report is based solely on secondary research, which in hand is based predominately on the most current information accessible, i.e. the internet and news articles. It has been attempted, as far as possible, to rely solely on acclaimed sources, but more on this issue can be found in Appendix A. 3.0 Findings: 3.1: Strengths: One of the major strengths of Lufthansa is brand recognition. Lufthansa has one of the strongest airlines names in Europe and China; being “the leading European carrier in the Chinese market” (“Eighty Years Lufthansa in China, 2006). This is obviously a big advantage pertaining to customer loyalty, since its name is one of the first to come to the customer’s attention when booking a flight. Besides from the commercial part of flights, Lufthansa...
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...Lufthansa: Going Global, but How to Manage Complexity Elizabeth Olive Dr. Matthew Ademola Business 499 June 11, 2010 1. Describe the type of international strategy the company has chosen. Lufthansa has chosen a transnational strategy through which the firm looks to achieve both global efficiency and in their home market. The firm has focused on building a shared vision and individual commitment through an integrated network that includes its five business segments, alliances, and partnerships. Lufthansa uses this strategy to continue with their strategic goals regarding its core business activity passenger transportation’s vision to be a top leader at home and across-borders. These networks allow Lufthansa to manage its connections with its customers, suppliers, partners, and alliances at home and globally more efficiently. In addition, it helps to implement value-based and cost saving strategies options in regards to the products and services offered to different markets. Lufthansa’s aim in 2009 was to maintain and expand their position as the leading European quality carrier. In order to succeed the firm has focused on long term growth prospects of securing and building their market position at home then following international expansion. The firm’s position has allowed Lufthansa’s group to choose an international strategy that allows them to act with farsightedness in how to differentiate and customize their services and products to local and global markets by...
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...Caso 3.5 Lufthansa El caso Lufthansa se trata sobre evaluar una acción financiera que tomo en su entonces presidente Herr Ruhnau en el Enero del 1985. La acción era comprar una flota de 20 aviones tipo jet a Boeing por un monto de $500,000,000 pagaderos contra entrega en un lapso de un año. El dólar en su momento se encontraba en el mejor precio de la historia y se mantenía incrementando de esta manera el cambio en su momento (enero 1985) era de DM 3.2/$. Las opciones que tenía en su momento el Sr. Ruhnau, eran: 1. Permanecer al descubierto 2. Cubrir la exposición completa con contratos a plazos. 3. Cubrir una parte de la exposición y dejar el resto sin cubrir. 4. Obtener dólares en su momento y mantenerlos hasta que se deba efectuar el pago. El señor Ruhnao utilizo la opción 3, protegiendo el 50% de la inversión a DM3.2/$ y dejando el resto al incognito si sube o baja el cambio de DM/$. Para mala fortuna de Lufthansa y el señor Ruhnau sucedió lo que él pensaba que iba a suceder el dólar tenía que devaluarse y para enero del 1986 cuando tocaba hacer los pagos el cambio era de DM2.3/$ de esta manera los costos de las opciones eran los siguientes: Alternativas Tipo Relevante Costo total en DM 1. Descubierto DM 2.3/$ 1,150,000,000 2. Cobertura 100% DM 3.2/$ 1,600,000,000 3. Cobertura 50/50 ½ DM 2.3/$ + ½ DM 3.2/4 1,375,000,000 4. Compra de dólares cierre DM 3.2/$ 1,246,000,000 Viendo que en se nota que la acción...
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...Herr Heinz Ruhnau was the chairman of the German airline, Lufthansa. On February 14th, 1986 he faced losing his chairmanship over the partial hedging decision he made one year prior. The investment he made January 1985 was a purchase of seven hundred and thirty-seven jets from Boeing Aircrafts with an agreed upon cost of $500,000,000 due in one year. Ruhnau based his final hedging decision on the fact that the U.S dollar had been rising against the German Deutschmark at a fast pace over the previous five years. His instincts were that the U.S dollar was at its peak in 1985 and would decline over the next year. This expectation is what drove his executive decision to hedge half of the five hundred billion or $250,000,000 at the forward exchange rate of DM3.2/S and leave the other $250,000,000 completely uncovered. By the delivery date, Herr Ruhnau was correct in his assessment of the dollar to Deutschmark foreign exchange rate. Even though the dollar had depreciated he was still under scrutiny for, “recklessly speculating with Lufthansa’s money (3).” Background & Issues involved: Herr was summoned to meet with the Lufthansa board for the forward partial hedge and not for the $250,000,000 he left susceptible to foreign exposure risk. The board identified four main errors Herr made in the decision making process of acquiring those 737 jets: 1. Purchasing the Boeing aircraft at the wrong time. The U.S dollar was at an all-time high at the time of purchase in January 1985...
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...a) Marketing concept Deutsche Lufthansa is the flag carrier of Germany and the largest airline in Europe in terms of overall passengers carried. The name of the company is derived from Luft (the German word for "air"), and Hansa (after Hanseatic League, the powerful medieval trading group). The airline is the world's fifth-largest airline in terms of overall passengers carried, operating services to 18 domestic destinations and 183 international destinations in 78 countries across Africa, Americas, Asia and Europe. Together with its partners Lufthansa services around 410 destinations. With over 722 aircraft it has the third-largest passenger airline fleet in the world when combined with its subsidiaries. d) Marketin Mix - when marketing its products firms need to create a successful mix of: · the right product · sold at the right price · in the right place · using the most suitable promotion. To create the right marketing mix, businesses have to meet the following conditions: · The product has to have the right features - for example, it must look good and work well. · The price must be right. Consumer will need to buy in large numbers to produce a healthy profit. · The goods must be in the right place at the right time. Making sure that the goods arrive when and where they are wanted is an important operation. · The target group needs to be made aware of the existence and availability of the product through promotion. Successful...
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...Travis Vigneault & Nicola Tschopp The Business Size-Up Lufthansa has been impacted by a booming U.S. economy where the value of the USD has been increasing steadily since 1980. By January 1985 the USD was at record levels against other currencies. Many signs such as the current interest rate differential between the US and Germany indicate that the value of the USD might continue to rise. However, there is great speculation as to where the USD will be valued in a year as many feel that it is over-valued and a decrease would be beneficial for the world, especially the U.S. economy that has lost an estimated three million jobs due to lack of competition in international markets. U.S. Congress has a motive to lower the value of the USD to make exports more competitive in the global market as a weakened USD would attract more foreign investment and domestic production within the U.S. The airline industry has experienced significant increase in demand for transportation via air, specifically due to the increasing international trade resulting in more demand for deliveries to be made via plane. Lufthansa has witnessed much of this increased demand which can be seen in their increasing revenue and profits. The company’s inventory is composed of a fleet of Boeing 757s and Airbus aircrafts whose current inventory has barely kept up with demand and has almost maxed out its capacity. This increase in demand has forced Lufthansa to undertake an aggressive expansion program, specifically...
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...organization that the author will use is Southwest Airlines and Lufthansa to compare and contrast. The author will also describe or diagram a process or procedure that is similar between the organizations, and explain the process from beginning to end. The author will also explain why the process or procedure produces a competitive product or service in the domestic and global markets. In conclusion the author will explain how quality management affects the position of the companies in the domestic and global market. Effects of Quality Management The two organizations that are being compare and contrast are similar to each other are Southwest Airlines and Lufthansa. Southwest Airlines competes in the domestic market which is the U.S nation leading low fare carrier which continues to stand above other airlines offering reliable product and services with exemplary customer service. Southwest Airlines is the most productive airline in sky and offers customers a comfortable traveling experience with premium leather seats and plenty of leg room. Southwest Airlines recently updated its gate areas and improved its boarding procedure to make Southwest Airlines to be more convenient and simple. Southwest Airlines currently serves 68 cities in 34 states and soon to add two more cities. Southwest Airlines currently operates more than 300 flights a day and has more than 35,000 employees system wide. (Anonymous, (2011) Lufthansa...
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... The focus of this paper will compare and contrast the quality management of Southwest Airlines which competes in the domestic market and Lufthansa competes in the global market. I will describe procedures of similarity between both organizations. This paper will also explain how the process produces a competitive service in both the global and domestic market. Finally, I will explain how quality management affects both companies in the domestic and global market. Southwest Airlines was incorporated in 1967 and Lufthansa; which initially was Deutsche Luft Hansa AG developed in 1926. Today, both are extremely popular among the airline industry. Southwest Airline and Luftanasa are great examples of companies which have grown over many years of service. Procedures of Similarity between Southwest Airlines and Lufthansa Both Southwest Airlines and Lufthansa use the same format for booking their online flights, hotels, and rental cars. Their flight procedures consist of first determining whether the trip will be one way or round trip, next the departure city and arrival cities must be entered in, followed by dates and times of departure and arrival, next the number of passengers must be determined and finally both will search for flights to determine their availability regarding your information given. Southwest Airlines and Lufthansa offers booking of hotel as well. They both offer status checks on flights. Although, both offer hotel and car rental services in which they...
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...Business Failure Analysis Derrick Canty LDR 531 April 13, 2010 Tim Buchanan For several decades, Switzerland’s former national airline, Swissair, has had a reputation as being an almost perfect embodiment of traditional Swiss virtues like technical innovativeness combined with reliability and solidity at the same time. They were so financially stable that they were known as the “Flying Bank.” Established in 1931, Swissair epitomized international transportation until the late 1990s, when the management decided to follow the aggressive borrowing and acquisition policy known as the Hunter strategy. This strategy was a major expansion program initiated by Swissair aimed to grow its market share through acquisition of small airlines rather than entering into alliances agreements. The buying spree created a major cash flow crisis for parent company SAirGroup (Swissair Group), and was exacerbated by environment caused by the September 11 attacks. Those attacks put a void in the company’s plans and Swissair found itself hamstrung with debt. Unable to make payments to creditors on its large debt, and the refusal of UBS AG (Union Bank of Switzerland) to extend its line of credit a month later forced the entire Swissair fleet to be grounded in October 2001. Management was the blame for how this company failed because of failure to conduct a market research and not taking competition seriously. Swissair figured that they could just “muscle” the little guy and...
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...purpose may be to assess: profitability, survivability, growth, stability, dividends, risks and other factors which may affect your investment in that company. This paper focuses upon five aspects of reporting within the companies’ annual reports that were the most relevant to me as a user: geographic segmentation, the auditor’s report, presentation, fuel risk, and the letter to the shareholders. Delta Airlines was chosen as the base airline to compare the other three airlines to; China Southern Air, Emirates Air, and Lufthansa Air. The analysis resulted in a very distinct successor. Emirates Air lead all subcategories with nearly a perfect total score and ultimately provided a very user-friendly document based on the criteria assessed. Lufthansa Air and Delta Airlines rounded out the middle with average scores. Slumps in presentation were mostly responsible for Delta Airlines average score. A slouch in the ease of access to information within the Lufthansa Air’s letter to...
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...TURKISH AIRLINES HISTORY Turkish Airlines is the national flag carrier airline of Turkey, headquarter is in Atatürk Airport in Yeşilköy,İstanbul. Turkish Airlines was established on 20 May 1933 as State Airlines Administration. It services to 41 domestic and 202 international airports in Europe, Asia, Africa and the Americas. Turkish Airlines has been a member of the Star Alliance networks since 1 April 2008. The chairman of Turkish Airlines is Hamdi Topcu and the CEO of Turkish Airlines is Temel Kotil. Also with an operational fleet of nine cargo aircraft, they serves 47 destinations. Their domestic competitors are: Pegasusu Airlines, Onur Air, Atlasjet. International competitors: Lufthansa, Aır France, British Airways etc. Turkish Airlines award for Europe’s Best Airline, Southern Europe’s Best Airline and the World’s Best Premium Economy Class Airline Seat for years 2011,2012 and 2013. Also they have been selected the Airline of the Year by Air Transport News at the 2013 Air Transport News Awards Ceremony. Turkish Airlines was chosen as the offical carrier by Europe’s leading football clubs such as: Borussia Dortmund, Aston Villa and Manchester United. Moreover they made sponsorship and promotion with some athletes and actor: Lionel Messi, Kobe Bryant, Caroline Wozniacki, Kevin Costner and Wayne Rooney. Furthermore the company is the primary sponsor of the Turkish Airlines Euroleague since 2010 and...
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