So efficiency improvements in technical fleet management are being sought by pooling the fleets engines across the Group in future, for example, in order to maximise their useful lives and better coordinate maintenance. Additionally, its extensive global network and Star Alliance partnership increase access to various routes and destinations. How can passengers upgrade their seats or book additional services with Lufthansa? Arista, The Network Stalwart (NYSE:ANET) | Seeking Alpha Nevertheless, a greater degree of integration would offer increased efficiency to the Lufthansa group. The Lufthansa Group is thus seeking to further improve on its already good position as an employer within the aviation industry as a whole. *Nearest financial year to calendar 2013. Connecting with the customer Will Apple take a big bite out of the banks? | Financial Times Lufthansa: Business Model, SWOT Analysis & Competitors 2023 Additionally, heavy investment in maintaining safety policies and adhering to environmental regulations contribute to overall costs. One effect is to funnel strategic options into subsidiaries whose costs and effectiveness are often questionable - and which if unsuccessful result not only in internal disruption, but also diversion of resources. It is used to analyse traffic to determine if it is automated traffic generated by bots or a human user. The automation of customer services is also being further expanded. What is the frequent flyer program offered by Lufthansa? Lufthansa is a strongstatus symbol amongst Corporate/Business men, 5. The Lufthansa group (including its minority stake in Brussels Airlines) has five hubs: Frankfurt, Munich, Zurich, Vienna and Brussels. The weaknesses of a brand are certain aspects of its business which are it can improve to increase its position further. In particular, a further increase in its customer orientation, accelerating innovation and digitalisation, corporate responsibility and sustainability, modern forms of work organisation and value-based management will ensure that the Lufthansa Group is ready for the future. We consider Lufthansa group's strengths, weaknesses, opportunities and threats in the context of these, and other, issues. Artificial intelligence has long been a big part of Tesla CEO Elon Musk's career. Furthermore, the company generates supplementary income through collaborations, partnerships, and investments in other aviation and travel businesses, such as codeshare agreements with other airlines and its membership in the Star Alliance network. Lufthansa has developed a strong position in its use of joint venture agreements with United Airlines, Air Canada and All Nippon Airways. Almost one quarter of its European seats are in Eastern/Central Europe, compared with 13% for Air France-KLM and 10% for IAG(week of 6-Apr-2015, source: OAG). Economies of scale will thus be realised consistently and flight operations with competitive structures and a good operating performance will be scaled up. This cookie is associated with Akamai and is used to differentiate between traffic from humans and bots. As illustrated in the Value Chain diagram, Lufthansa Deutsche has five generic categories of primary activities . The Lufthansa Group is one of the biggest airlines worldwide and a leading European airline group. Overall, these measures will enable the Lufthansa Group to offer its customers a unique product experience and thus significantly differentiate itself from the competition. As noted above, Lufthansa also plans to develop a sub-fleet of wide bodies reconfigured to provide seating better adapted to point to point leisure routes. Some factors like increased competitor activity, changing government policies, alternate products or services etc. Passengers can upgrade their seats or book additional services like extra baggage, in-flight entertainment, or special meals through the Lufthansa website or mobile app, as well as via phone or on-site at the airport. The Deutsche Lufthansa AG: A Competitive History (referred as Lufthansa Deutsche from here on) case study provides evaluation & decision scenario in field of Global Business. To this end, the Lufthansa Groups traffic system is continuing to be developed into a multi-traffic system, consisting of hubs, point-to-point traffic and intermodal offerings. The Lufthansa Group has contributed to the progress of the aviation industry. The simple fact is that, even if the Gulf carriers could be stopped or at least slowed down, there will always be a new competitor with a better way of doing things. Dialogue with the Companys stakeholders is also a component of sustainable corporate governance. CAPA Membership provides access to all news and analysis on the site, along with access to many areas of our comprehensive databases and toolsets. In view of changes to the structures of supply and demand, an even greater focus on the customer is a core element of the Group strategy. Exclusive services for customers like lounges, frequent flyer programs, first/ business class services etc, 9. The Lufthansa Groups successful joint ventures are therefore being developed and partnerships expanded in all key markets. This note describes the competitive practices of Deutsche Lufthansa AG, the largest player in the German airline market, in response to challenges to its quasi monopoly on domestic routes. Competitive Advantage, Organisational Culture and Lufthansa's Moreover, the Eurowings brand will move into long haul markets, operated by SunExpress, a 50/50 joint venture company co-owned by Turkish Airlines. In future, even more customers of the Lufthansa Groups Passenger Airlines will have on-board Wi-Fi, thus enabling them to make use of new service options in the expanded in-flight entertainment system in addition to surfing and communication. The flipside to its strong European presence is that it is more vulnerable to the growing presence of the Gulf carriers, and of their European partners, in Lufthansa's hinterland. Starting in 1988, European governments deregulated the European airline industry in preparation for a single European market. The Lufthansa group operates more direct seats from Europe to Asia Pacific than any other airline group. Factoring in short haul traffic that is connecting into these JV destination countries, around half of its capacity by ASKs is covered by JVs. WebAir carriers with the lowest costs have the most significant competitive advantage because airline customers value low prices above all other carrier selection factors. These include significantly shorter advance booking periods than before the coronavirus pandemic, a significant increase in the take-up of sustainable products and data-based optimisation of aircraft maintenance. WebYou should make a list of factors that have significant impact on the organization and factors that drive growth in the industry. Uncertain fuel prices and growing concerns about environmental regulations have put pressure on airlines to invest heavily in fuel-efficient aircraft and adopt sustainable practices. In order to secure and build on their successful positioning, Aviation Services are permanently adapting their business models to changing market conditions and competitive environments. competitive advantage Lufthansa AirPlus stays competitive with paperless workflows Arista, The Network Stalwart (NYSE:ANET) | Seeking Alpha The productivity of aircraft and crews is to be boosted by reducing the number of aircraft types in the long-haul fleet and permanent optimisation of operating processes and the route network. WebThe main strategic choice of Lufthansa Group is to keep the cost saving, reducing intermediaries, controlling the air ticketing fees, leasing regional airlines. For example, the complexity was reduced by simplifying the base and AOC structure including by ending the flight operations of SunExpress Deutschland and passenger flight operations at Germanwings. In conclusion, Lufthansas business model is centered around providing a global network of routes and high-quality service to various customer segments. As noted above, Lufthansa is increasing its presence in the LCC segment of the market with Eurowings. Being the largest member of Star Alliance Lufthansa have scope to acquire some smaller players 2. WebIn order to contribute to the achievement of these goals, the Lufthansa Group focuses on those SDGs for which, based on its business model, it can strengthen positive effects or For example customers are willing to pay more for flawless uniform experience in Apple products even though Apple products are not the cutting edge products. 2. With Star Alliance Gold status you can enjoy more lounges than any other alliance and bring a guest along with you. Organizational restructuring of Lufthansa Competitive Advantage Its loyalty program will be upgraded with a wider choice of exclusive travel experiences and partner networks for Miles & More status customers and further dedicated offerings for customers who only fly a few times each year. Firm infrastructure support activities at Lufthansa Deutsche consists activities such as legal services, general management, planning, quality management and finance and accounting. Moreover, it has owned Eurowings for as long as it has owned Germanwings, but has apparently only recently woken up to its potential for improving cost efficiency. At the same time, large German companies serve as a benchmark. However, penetration of the European short/medium haul market from Germany excluding Frankfurt and Munich by LCCs other than Germanwings was around 27% in 2014, according to CAPA research published in a previous report. Procurement activities at Lufthansa Deutsche include activities that are undertaken to purchase inputs that are used by Lufthansa Deutsches value chain. The global distribution strength of Lufthansa Group Airlines is also exploited. A full rift would mean new strategies for each. In doing so, it aspires to set standards in terms of customer-friendliness and sustainability. Lufthansa Deutsche under takes these activities to distribute the finished products to channel partners and final buyers. Kotler & Armstrong (2017) "Principles of Marketing Management Management", Published by Pearson Publications. The Onboarding Process That Makes New Hires Fall In Love With Your Company, Communication Styles: Definition, Importance & More, 10 Fun Ice Breaker Games Your Employees Will Enjoy, Asynchronous Discussion: Advantages & Disadvantages, What Is Remote Communication: The Ultimate Guide, The 8 virtual company holiday party ideas, Featured30 Online Business Ideas for Small Entrepreneurs, FeaturedIntrapreneurship: Comprehensive Guide, Instagram Money Scams To Watch Out For 2023. These activities have provided more stable levels of profit through the cycle than the more volatile flying businesses. Flights to Los Angeles from Europe | Air New Zealand Europe In connection with its positioning as an airline group, the Lufthansa Group not only assesses the attractiveness of the individual market segments, it also determines whether it is the best owner for the respective company on the basis of existing or potential synergies. Increased international competition affects market share ofLufthansa, 2. The airlines form the core of the Lufthansa Group, with their comprehensive networks in their home markets of Germany, Austria, Switzerland, Belgium and northern Italy. MBA Skool is a Knowledge Resource for Management Students, Aspirants & Professionals. The goal is to consistently act upon opportunities arising due to trends and market changes. It is also true that progress has been made with the centralisation of certain administrative, financial and procurement functions. Three large Gulf carriers, Emirates, Etihad Airways and Qatar Airways, as well as Turkish Airlines, now stand to compete with Lufthansa on the traditionally profitable long-haul segment. To remain successful, the company must remain adaptable, capitalize on emerging opportunities, and stay ahead of its rivals. The Lufthansa Group actively used the coronavirus crisis to accelerate its process of transformation and establish a good starting position in order to succeed in the future market environment. It thus aims to forge long-term relationships with them. Shareholder value, measured by stock price, is not a good barometer to analyze value chain. Statistics & Facts About Technology Addiction, Learn Everything About Retention Marketing, 30 Online Business Ideas for Small Entrepreneurs, Meeting Opening Reflections To Enhance Business Productivity. Passengers are thus able to benefit from the wide feeder network and the established ground processes of Lufthansa Group Network Airlines. By contrast, Lufthansa continues to be vocal about what it sees as unfair competition from Gulf-based airlines. If he can persuade all labour groups of the need to accept and act upon this as a matter of urgency, Lufthansa may still have an opportunity to re-establish its competitiveness. Lufthansa, a leading global airline, can be analyzed using the Business Model Canvas framework, which consists of nine building blocks that illustrate the companys value proposition, infrastructure, customer segments, and financial aspects. WebLufthansa enter the American market by the joining of Continental Airlines to the Star Alliance. Strengths and Competitive Advantages First Mover Advantage in Hyperscale and Cloud Deployments Microsoft ( MSFT ) and Meta Platforms ( META ) Through the coordination of schedules and pricing, this allows it to offer a wide range of destinations and frequencies. Growing LCC competition remains a threat to the Lufthansa group, particularly as competitors such as easyJet and Ryanair are now targeting the high yield business travellers that are vital to legacy airline profitability. A brand's opportunities can lie in geographic expansion, product improvements, better communication etc. The Gulf carriers' network of secondary European cities is also taking Europe-Asia traffic that used to connect through Frankfurt. Lufthansa Group: International Growth Strategy | Free Essay The content on MBA Skool has been created for educational & academic purpose only. Global Aircraft Engine MRO key players include GE, Rolls-Royce, MTU Maintenance, Lufthansa Technik, Pratt and Whitney, etc. This process began in 2013 and has now been completed. https://www.twitter.com/Aviation_Pros Through all these efforts, the company aims to surpass customer expectations and contribute to the growth and development of a world connected by air travel. Don't miss out! However, adjusting 2013 for the change in depreciation policy implemented in 2014, its margin would have been fallen by 0.7ppts year on year, the result of a damaging pilot strike and weak pricing. Artificial intelligence has long been a big part of Additionally, growing competition from global airlines and the rise of low-cost carriers present pricing and operational challenges to Lufthansa. Lufthansa made a strategic decision to transfer point to point European routes that do not touch its hubs at Frankfurt and Munich to Germanwings. Lufthansa SWOT: new low cost platforms are smarter strategy Within this long-term strategic framework, the Lufthansa Group has tactical areas of focus in line with specific internal and external requirements. Lufthansa Cargo is increasingly participating in international eCommerce shipments through the use of the pure freight version of the medium-haul aircraft A321. In an environment where each organization is striving to become a learning organization, Human Resources Management is key to the success of any organization. In order to exploit opportunities in the long-distance leisure travel market, the range of long-haul connections from the hubs in Frankfurt and Munich targeting private travellers is being expanded. Below are the top 13 competitors of Lufthansa: Hence this concludes the Lufthansa SWOT analysis. Assessing feasibility of the new initiative in Germany 4. Lufthansa's JV agreements cover the USA (its biggest international destination country by ASK), Japan (number three international destination) and Canada (number seven) and account for 37% of its international ASKs. An instinct to complain about new competitive business models as unfair (see below) suggests that it is not yet sufficiently focused on putting its own house in order, but the establishment of its new lower cost vehicles has at least given it some options in fighting this competition. Let us start the Lufthansa SWOT Analysis: For Lufthansa, SWOT analysis can help the brand focus on building upon its strengths and opportunities while addressing its weaknesses as well as threats to improve its market position. Source: CAPA analysis of airline company traffic and financial statements and press releases. Moreover, Lufthansa is dedicated to embracing sustainability and working towards a greener future, continuously striving to reduce its environmental impact while maintaining economic success. In addition to that, the company faces stiff competition from low-cost carriers as well as from high-speed rail services within Europe, affecting its profitability. Learn how top companies The companies are not associated with MBA Skool in any way.Edit the brand or add a new one to SWOT Analysis section : Contribute. Lufthansa Corporate Strategy Pilot strikes have continued into 2015 as both parties struggle to resolve their differences, ostensibly over pilot retirement age and pension benefits, but also related to the increasing use by the group of lower cost vehicles avoiding the central collective labour agreement. Boasting a modern and efficient fleet of aircraft, the company has been successful in maintaining high standards of safety and reliability. Lufthansa expects a significantly improved result in 2015, when ASK growth will be 3%, although it expects unit revenue to fall. Like all other value chain activities procurement also employs technology for things such as procedures, vendor management, information system, and supply chain partner qualification rules and ongoing performance evaluation. Strategic alliances and acquisitions with other airlines or companies in related sectors can offer the benefit of network expansion and cost reduction. 5. Present vs Alternative Value Chain - You should design an alternative value chain and map out areas where improvements can be made. The article below lists the Lufthansa SWOT, competitors and includes its target market, segmentation, positioning & USP. The growing Eurowings subsidiary, with lower unit costs than Germanwings, aims to extend the group's presence in the budget segment, both short haul and long haul, with an emphasis on leisure routes. For example, Lufthansa's India network provides important feed through Frankfurt into its US network, but the more extensive India networks of Gulf based airlines is taking an increasing share of this traffic through their own hubs. In addition, intermodal traffic is being systematically further expanded in all of its home markets. These cookies are needed for a smooth operation of our website. As the name explains, Support Activities of Lufthansa Deutsche are the one that supports the firms Primary Activities. Exogenous sources of uncertainty, resource bottlenecks, evolving customer requirements and shifts in the value chain necessitate change, but also offer opportunities. Those have two functions: On the one hand they are providing basic functionality for this website. Passengers will experience a holistically linked range of physical products, such as seating and lounges, attentive service from employees both on board and on the ground and digital travel solutions. The objective of strategic alliance is to enable the firms share some of the capabilities and resources that they have thus developing a higher competitive advantage. Lufthansa's biggest hub, Frankfurt, remains minimally penetrated by LCCs. 6. Digital customer services also strengthen the ability of the Lufthansa Groups Passenger Airlines to fulfil their role as hosts on the ground and on board. Elon Musk's persistence. Comparing two or more alternative value chains can provide a good insight into bottlenecks within the industry. The Lufthansa Group aspires to lead the airline industry with high standards in this area too. Deutsche Lufthansa AG: A Competitive History case study is a Harvard Business School (HBR) case study written by Matthias Hild. Examples include ensuring stable, reliable flight operations, improvements to customer service, thanks to enhanced accessibility of company call centres, expanded digital service channels such as the chatbot and an upgraded catering offering. Air Canada remains determined to succeed | Business Chief The first benefit this brings is codeshare flights. Top ten airline groups ranked by seats from Europe to Asia Pacific 6-Apr-2015 to 12-Apr-2014. This can be done by focusing on cost leadership, maintain low debt rating and have a good financial investment stand. The Lufthansa Groups ambition is to serve its customers as an attentive host and a contact who is reachable at any time and to offer them a hassle-free and sustainable range of services. Lufthansa In contrast with the more proactive approach taken by the IAG group, this tends to preclude exploring partnership and other options that would prepare a platform for future expansion. Health Management and Occupational Safety, Financial strategy & value-based management, Corporate Governance Declaration, Section 289f HGB, Declaration of compliance, Section 161 AktG, Information on corporate governance practises, Board of Management and Supervisory Board procedures, Compensation of the Executive Board and Supervisory Board, Law on the equal participation of women and men in executive positions, Articles of Association and Rules of Procedure, Shares held by members of the Executive Board. At the same time, they combine a high-quality and attractive product which is attuned to the needs of their local markets with a low cost base which can hold its own against low-cost carriers at the bases in Vienna and Brussels.