SWOT Marketing Analysis Assignment: Lufthansa Group (Term Paper Sample)

SWOT Analysis of Lufthansa Group
Introduction and Company Overview
The Deutsche Lufthansa AG was founded in 1926 as Airline Company based in Cologne, Germany. Over time the company has grown and right now it is a multinational with over 550 subsidiaries worldwide plus equity investments under the Lufthansa Group. The company includes segments such as Passenger Airline Group, Logistics, Maintenance Repair and Overhaul, Catering among others. The company has a total of 124,306 employees worldwide who are helping steer growth and competition in the market. As competition is imminent in the Aviation Market, all these segments of the company enjoy a leading position in the market.
As it is inherent in the life cycle of companies, the company has gone through tremendous challenges and opportunities for growth that has made it what it is today. Thus amidst all these, the company has always found a strength for renewal which is credited for it massive growth. For instance, there was a time which the company policy was ““growth through own strength”, trying to win market share to survive under hard competition,” which essentially was a gist to weather the hard economic times.
Notably, Lufthansa was a key player in the formation of the Star Alliance, an alliance of Lufthansa, Air Canada, SAS, Scandinavian Airlines, Thai Airways und United Airlines which essentially gave it the impetus to compete in the international stage, and made it one of the leading airlines in the world. The other aspect of this is joint ventures that the company has entered into. “Lufthansa participates in two strategically and commercially important joint ventures: the A++ transatlantic joint venture with United Airlines and Air Canada, the J+ bilateral Europe/Japan joint venture with All Nippon Airways and the commercial joint venture with Singapore Airlines (Lufthansa Group AG, n.d.).”
“In the year 2016, Lufthansa was also the airline which carried the maximum number of passengers.” Notably, the group has about 600 aircrafts, and in addition to the other segments like logistics, catering, MRO among others, the company was able to register 31.7€bn total revenue and 2,236€m Capital expenditure. The company has a serious competition in the market and this necessitates the address it business models and future standing in the aviation industry.
Lufthansa Strategies for Growth
As noted earlier, the company has various segments of operations and these require a robust strategic plan and subtle execution methods to ensure that there is value and business growth in the company operations. The above also extend to the leadership which offers guidance and direction to ensure that the structure and decision-making mechanisms work for efficiency and transparency plus smooth operations of the different segments. Therefore there need to be three components of strategic directions which include corporate-level strategy, business-level strategy and finally strategic leadership.
Corporate-level strategy ““Corporate strategy consists of the kind of initiatives the company uses to establish business positions in different industries, the approaches corporate executives pursue to boost the combined performance of the set of businesses the company has diversified into, and the means of capturing cross-business synergies and turning them into competitive advantages (Daniel, 2015, p. 30).”” This strategy is aimed at achieving profitability, sustainable growth and leading positions in the world market. The company has perfected this through its segments which are MRO, logistics, passenger service, tourism, technical services, information technology, catering among others. It is imperative to note that “such corporate level strategy are likely to be issues such as taking advantage of economics of scope, sharing activities, transfer of core competencies, and an increase in market power as well as blocking competitors through multipoint competition.”
Business-level strategy refers to the “variation in firm characteristics relevant to its competitive success or failure within a given industry (Daniel, 2015, p. 30).” This is the competition in a production-market segment thus requires competitive advantages and distinctive competencies to thrive. Thus the main idea which Lufthansa has built is to come up with strategies for changing market responses and this is evident by way they have diversified the flight experience and the numbers are increasing in terms of those who are carried as passengers across Europe. And this is seen through differentiation strategies employed by Lufthansa.
The final aspect is the strategic leadership which in essence has the impetus to envision, anticipate, and empower other people to bring and create strategic change as required in the structure of the company. For Lufthansa, the strategic leadership rests at the top; it is a top-down management approach that is made efficient with a well-structured system with a robust system of communication. Thus the formulation of policies and implementation is a reserve of the top-level management to ensure synergy, simplicity and well execution of the strategies as they are handed down.
These strategies and current formulation of the business system in Lufthansa is not an end in themselves. The market is diverse and there exist the strengths and weaknesses that the company can still bank on to ensure growth especially with the competitors eyeing to topple them. On the same note, there are opportunities and threats in the market that the company must keep an eye on.
Strengths in Lufthansa Group
1 Brand Image
“Lufthansa has strong brand recognition in Europe and global airline market and operates wide range of network worldwide ("Lufthansa cityline gmbh : Company profile and SWOT analysis," 2008).” The brand is shared among all its carriers and this gives all its segment a competitive advantage. For instance, Lufthansa airlines are the largest in terms of the number of passengers carried annually plus revenue. Due to its strong brand, the company has been able to expand its operations in air transportation, it has very strong financial position in the market and thus it can be able to address any changes in the market in terms of competition.
2 Focus on Technology
Technology is a key player in the success of Lufthansa Group in the aviation industry. For instance, “Lufthansa CityLine’s aircraft are equipped with latest aviation technologies including head-up guidance system, used for precision landings in conditions of minimum visibility; and electronic flight bag ("Lufthansa cityline gmbh : Company profile and SWOT analysis," 2008).” The company has also fitted its flights and operationalization systems with a management system that is able to monitor the flights, and ensure that all are safe on board. In addition to this, the company has invested heavily in technology as a key area of strategic advantage thus keeps abreast of technology and ensures that their technology is not out of date. “Lufthansa is one of the leading IT service providers for aviation industry, maintenance, meal services etc.”
3 Stronger Market Position
It is without a doubt that with strategic alliances and joint ventures, a company establishes itself strongly in the global front. The case has not been different with Lufthansa. For instance, the company carried about 7.7 million passengers in daily flights in 2016 across Europe, the largest than any other airline or competitors. It operates more than 600 different aircrafts and this gives the company a huge coverage in the European market. They are also making strides in tourism, catering, logistics and other segments that are giving it a stronger position and market stance in the global market.
4 Multi-passenger branding
“Lufthansa has brands under its umbrella which cater to almost all segments as well as permit the airline to cover all its segments and economy as the airline owns luxury and economy cabins, long haul and short haul and offers an entire spectrum of services (Bhasin, 2017).” This enables the company not to outsource services but rely heavily on its subsidiaries which is cost-effective and giving it more power in the market in terms of competition.
Weaknesses in Lufthansa Group
1 High-Cost Base
The company has huge operational costs which prompted it to adopt cost saving measures “which accounted for more than EUR2.5 billion savings in the airline’s bottom line between 2012 and 2014 (Bhasin, 2017).” It has the highest costs, and until this is trimmed, then its market base will dwindle and leading to market loss which is really unprecedented.
2 Geographical Niche
The company has majorly based its operations in Europe thus any extreme changes in weather in this zone would lead to decline in the number of passenger flights, cargo transportation among others. Moreover, hard economic times experienced in this zone may affect the company and its profitability. It therefore calls for expansion in other markets which will ensure stability in the flow of income.
3 Poor Labor Relations
The company has poor human resource strategies and this is occasioned by the number of times there have been strikes and labor stand offs between the company and the pilots or other employees in other segments.
Opportunities for Lufthansa
1 Recovering and Developing European Economy
The company can tap on the growth of European economies that are thus developing according to projections by the International Monetary Fund. Accordingly, it is projected that “Turkey is projected to grow by 3.3% in 2018, while Serbia is projected to grow by 3.5% in 2018; Hungary is projected to grow by 3.0% in 2018, while Poland is projec...