Setting aside arguments concerning the validity of claims that the Gulf-based airlines are government subsidised and that they provide unfair competition, this instinct is a threat to Lufthansa because it implies that its mindset is not yet completely right. See related report: Lufthansa ends codesharing with Turkish Airlines. 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. Moreover, Lufthansa's protectionist instinct as a response to competition may have short term delaying value - but if it is intended as a serious strategy, it is high risk. Porter started with the quintessential question Why are some companies more profitable than others? Take advantage of our great value fares with low cost flights to Los Angeles International Airport (LAX) direct from London Heathrow or from WebAir carriers with the lowest costs have the most significant competitive advantage because airline customers value low prices above all other carrier selection factors. WebThe main strategic choice of Lufthansa Group is to keep the cost saving, reducing intermediaries, controlling the air ticketing fees, leasing regional airlines. Our Software Directory features more than 1000 software reviews across all categories. Often price drivers are customer expectations that customers are willing to pay more for. Efforts are also being made to turn fixed into variable costs, in order to minimise the effects of inflation-related cost increases, seasonality and slumps in demand. The largest shareholders of the company often include financial institutions and investment funds, while individuals can own a smaller portion of the company through personal share ownership. WebIn terms of competitive advantage, Lufthansa is the quintessential legacy carrier, providing excellent service while also emphasizing safety (Oqubay and Tesfachew, 2019) 1. By focusing on continuous improvement and leveraging cutting-edge technologies, the airline has successfully adapted to the ever-changing demands of modern-day passengers. According to data from OAG for the week of 6-Apr-2015, the Lufthansa group's seat capacity in the continent is 54% more than that of Air France-KLM and 33% more than IAG's. Lufthansa has developed a strong position in its use of joint venture agreements with United Airlines, Air Canada and All Nippon Airways. 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. Despite the challenges faced in the industry, Lufthansa focuses on continuous improvement and adaptation to retain its position as a leading global airline. Channels: Lufthansa uses multiple channels to reach customers, such as direct sales through its website and app, travel agencies, and online travel booking platforms. Strong image associated with German Engineering 4. can be threats. With Eurowings, the Lufthansa Group has an innovative and competitive offering in point-to-point traffic, which addresses both price-sensitive and service-oriented customers with low-cost basic fares and additional service options that can be booked flexibly. Economies of scale will thus be realised consistently and flight operations with competitive structures and a good operating performance will be scaled up. However, as noted above, Germanwings is not sufficiently low cost and its pilots are covered by the same collective wage agreement as the mainline pilots. In addition, the aim is to cut structural costs continuously in order to mitigate or fully compensate for the effects of inflation-related increases. The brand names and other brand information used in the SWOT Analysis section are properties of their respective companies. Historically, Lufthansa management has favoured a more conservative approach to its balance sheet than most other airlines. In addition, the introduction of a travel ID which recognises customers at every point of contact, no matter which airline they are flying on, will make it possible to match services and offerings with the personal needs of Lufthansa Group Airlines passengers. Increased international competition affects market share ofLufthansa, 2. The article below lists the Lufthansa SWOT, competitors and includes its target market, segmentation, positioning & USP. M. E. Porter, Competitive Strategy(New York: Free Press, 1980) It means that we are committed to creating added value for our customers, employees and investors and to meeting our responsibilities toward the environment and society. Services, business models and organisational structures are to be continuously aligned with the complex and dynamic market environment. According to Michael Porter Competitive Advantage is a relative term and has to be understood in the context of rivalry within an industry. 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. Credentialed Project Management Professional (PMP), Agile The next significant benefit is arguably how the airlines share their frequent flyer rewards. For example the finance and planning at Lufthansa Deutsche are managed at corporate level while quality management, accounting and legal issues are managed at business unit level. Lufthansa is one of the leading IT service provider for aviation industry, maintenance, meal services etc 3. 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. In todays highly competitive market, the companys ability to adapt, innovate, and successfully execute its business model has been nothing short of remarkable. 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. If the strategy dictates cutting cost to be profitable then Lufthansa Deutsche should focus on areas that are not adding value to customers' expectations, and costs that are there because of operational inefficiencies. Top ten airline groups ranked by seats from Europe to Asia Pacific 6-Apr-2015 to 12-Apr-2014. For instance, the Lufthansa Group offers its employees an extensive range of opportunities for their professional and personal development, thus contributing to employee satisfaction and safeguarding jobs. Has a strong workforce of over 100,000+ employees, 6. The content on MBA Skool has been created for educational & academic purpose only. Its growing use of lower cost platforms in both short haul and long haul point to point markets is also welcome, but Lufthansa faces an ongoing challenge in taking its pilots with it on this course of action. Austrian Airlines and Brussels Airlines connect their home markets with Europe and the world. Lufthansa, a prominent airline company, faces considerable competition from various other airlines in the global market. Human resource management affects competitive advantage in any firm, but in some industries it is defining factor. This includes their membership in the Star Alliance, which expands their global presence and offers joint loyalty programs and shared lounge access. Outbound logistics activities include distribution network, wholesalers and retailers order fulfillment, processing, warehousing, and scheduling. Finding the Best Free Online Meeting Software. Thats an amazing evolution for a carrier that was exclusively focused on leisure-destinations for so many years. He answered the question in two parts How companies benefit or limited by the structure of their industry, and second a firms relative position within that industry. 5. 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 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. What are the key value-creating activities at each step in the chain? Moreover, although its capacity in Western Europe is much bigger than in Eastern/Central Europe, the Lufthansa group has a better balance between the two halves of Europe than the other two groups. Weaknesses: One of Lufthansas significant weaknesses is its dependency on the cyclical nature of the aviation industry, which makes it vulnerable to market fluctuations and economic downturns. According to Lufthansa, industrial action by its pilots lowered the group's operating profit by EUR232 million in 2014 (this includes the impact of strikes by security personnel). Artificial intelligence has long been a big part of The focus here is, in particular, on areas which are highly relevant for customers, which influence repeat purchases and which thus ensure value generation for the Lufthansa Group. 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. This means that it has lower levels of debt and a strong cash balance. This section covers SWOT Analysis, Competitors, Segmentation, Target Market, Positioning & USP of more than 2500 brands from over 20 industry sectors. Overall, these measures will enable the Lufthansa Group to offer its customers a unique product experience and thus significantly differentiate itself from the competition. WebFlights to Los Angeles from Europe. The Lufthansa group (including its minority stake in Brussels Airlines) has five hubs: Frankfurt, Munich, Zurich, Vienna and Brussels. Our immersive learning methodology from case study discussions to simulations tools help MBA and EMBA professionals to - gain new insight, deepen their knowledge of the Global Business field, competitive advantage, steps to value chain analysis,industry analysis,primary activities, support activities, inbound outbound logitics,marketing & services, and more. While codeshare agreements do exist outside of alliances, the highest density will be found within alliance members. Market share growth of Lufthansarestricted due to pressure from competition. Mercadolibre: Business Model, SWOT Analysis & Competitor, Urban Outfitters: Business Model, SWOT Analysis & Competitors. WebUsing analytics as competitive advantage Lufthansa Airways has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. It thus aims to forge long-term relationships with them. Key Activities: Lufthansas key activities include network planning and management, fleet management, route optimization, passenger processing, cargo transportation, catering services, and operations management. Lufthansa, as an airline company, has a mission statement that emphasizes on providing exceptional customer experiences, connecting people and cultures across the globe, and ensuring safe and reliable transportation services. How do I use the string ascii_letters in Python? Lufthansa aims to increase the proportion of its revenues generated outside its core hub-based flying operations from 30% today to 40% by 2020 (this includes revenues from its growing point to point flying operations). This will operate under the full service Lufthansa brand and so will not be a wholly new vehicle, but it is a further example of creating options for growth. The automation of customer services is also being further expanded. For example in the consulting companies HR is the main source of competitive advantage. Strengths and Competitive Advantages First Mover Advantage in Hyperscale and Cloud Deployments Microsoft ( MSFT ) and Meta Platforms ( META ) The Lufthansa Group is one of the biggest airlines worldwide and a leading European airline group. Monitoring the contract ensures that the probability of opportunistic behavior occurring between the partners are minimized. Some of its main competitors include Air France-KLM, British Airways, American Airlines, Delta Air Lines, and United Airlines. Feel free to connect with us if you need business research. HRM support activities include Recruiting, Hiring, Selection, People Planning, Training & Development, Skill Assessment and Compensation at both business unit level and corporate level. Starting in 1988, European governments deregulated the European airline industry in preparation for a single European market. Thus significantly impacting the ability of Lufthansa Deutschemark to build sustainable competitive advantage 3. Assigns your browser to a session on the server. What Is SEO Positioning, And Why Should You Start Using It? These trends are: shifting customer behavior on both retail and business sides, changing dynamics within direct and indirect sales channels, and the rise of digital technologies. The passenger airline business is supplemented by Aviation Services that have synergies with the airlines. These include airline catering (LSG SkyChefs) and MRO (Lufthansa Technik), both of which are the biggest in the world in their respective fields. O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975). Moreover, it withdrew from codeshare agreements with Turkish Airlines in 2013 (although the use of SunExpress to operate the new long haul Eurowings-branded routes suggests an improvement in its relationship with Turkish). Group strategy - Annual Report 2022/ page 18, Data, facts and highlights on corporate responsibility within the Lufthansa Group. Opportunities: The expansion of long-haul and low-cost services in emerging markets offers a great opportunity for Lufthansa to tap into the increasing passenger traffic and economic growth. Key Resources: Lufthansa relies on different resources such as a large and modern fleet, skilled workforce, partnerships (e.g., Star Alliance), an extensive route network, and established brand reputation. Given that air traffic growth rates are typically higher in the east of the continent, this ought to position Lufthansa well to capture more of this growth than its Big Three rivals. Some important factors in a brand's strengths include its financial position, experienced workforce, product uniqueness & intangible assets like brand value. The threats in the SWOT Analysis of Lufthansa are as mentioned: 1. This cookie is associated with Akamai. 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. Although there may be some short term strategic value in seeking regulatory protection against new strong competitors, Lufthansa's preoccupation with protectionist measures both diverts resources and ingrains a backward looking culture. 8. 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 Through Compensaid and Squake, the Lufthansa Group offers passengers with the Groups own airlines and also those travelling with other airlines the option of reducing CO2 emissions by purchasing sustainable fuels (SAF) or offsetting them through high-quality climate protection projects. Responsibility is the foundation of business activities in the Lufthansa Group. Following the sale of LSG groups European business in 2020, the disposal of the LSG groups remaining international business and AirPlus will be taken forward. Customers and their individual needs and wishes are at the heart of things. Service activities of Lufthansa Deutsche can include part supply, training, post sales maintenance, installation services, and product forward and backend alignment of software. 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. Source: CAPA analysis of airline company traffic and financial statements and press releases. You seem to have JavaScript disabled in your browser. 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. To achieve our ambitious 2. For instance, the digital customer portal enables customers to access all relevant information and resolve issues quickly and easily thanks to new, interactive self-service options. Lufthansa, apart from passenger airlines, has a strong presence in cargo and logistics as well. If Lufthansa Deutsche have a real competitive advantage, it means that compared to its rivals Lufthansa Deutsche is - operating at lower costs, commanding a premium price, or doing both. In conclusion, Lufthansas business model is centered around providing a global network of routes and high-quality service to various customer segments. First of all, following the end of the coronavirus pandemic the company will once again flawlessly deliver on its promise as a premium provider, at every point of contact throughout the travel chain. The Lufthansa Group is a global aviation group with a total of more than 580 subsidiaries and equity investments. WebTo serve as a basis for sustainable competitive advantage, resources must be -- valuable -- meaning that they must be a source of greater value, in terms of relative costs and benefits, than similar resources in competing firms Strategic alliances and acquisitions with other airlines or companies in related sectors can offer the benefit of network expansion and cost reduction. There are a host of historical and cultural reasons why integration within the Lufthansa group (and within other large European airline groups) has been slower. WebWith Eurowings, the Lufthansa Group has an innovative and competitive offering in point-to-point traffic, which addresses both price-sensitive and service-oriented customers with low-cost basic fares and additional service options that can be booked Factoring in short haul traffic that is connecting into these JV destination countries, around half of its capacity by ASKs is covered by JVs. Deutsche Lufthansa AG: A Competitive History case study is a Harvard Business School (HBR) case study written by Matthias Hild. Purchased inputs may include - raw materials, supplies, machinery, laboratory equipment, office equipment, and buildings. All rights reserved. SEO Marketing: Importance, Definition And How To Do It, The Importance Of SEO In Advertising Strategies, What Is Local SEO: Definition And Importance. In an environment where each organization is striving to become a learning organization, Human Resources Management is key to the success of any organization. Also, the high operating costs, a complex organizational structure, and unionized workforce add to their challenges related to efficiency, flexibility and employee management. Unit costs (cost per available seat kilometre, USc) and average sector length for Lufthansa Group and selected other European airlines 2013*, *Nearest financial year to calendar 2013. In conclusion, Lufthansas business model showcases a dynamic, innovative, and customer-centric approach that has enabled the company to maintain its competitive edge in the global aviation industry. The central importance of sustainability for the Lufthansa Group is reflected in the fact that it is represented at the Executive Board level. As a result of the coronavirus crisis and the war in Ukraine especially, the aviation sector is characterised by a dynamic market and competitive environment. 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. This can be done by focusing on cost leadership, maintain low debt rating and have a good financial investment stand. As the name explains, Support Activities of Lufthansa Deutsche are the one that supports the firms Primary Activities. Boasting a modern and efficient fleet of aircraft, the company has been successful in maintaining high standards of safety and reliability. FeaturedMeeting Opening Reflections To Enhance Business Productivity, Starbucks: Business Model, SWOT Analysis & Competitors, Biomedical Engineer Salary And Job Description, How To Have Structured Meetings Every Day. Here the aim is to replace disposable plastic and aluminium products with environmentally friendly products wherever possible. Scrum Be Used To Improve Business Processes? In two business models network airlines and point-to-point airlines they serve the relevant customers and market segments with dedicated brands and differentiated service promises, connecting Europe with the world. Below are the Strengths in the SWOT Analysis of Lufthansa : 1. All its capacity growth will be on the long haul network, where unit revenue was weakest in 2014. Making a Airline sector specific business decision 5. As per the Value Chain model there are broadly two generic categories of activities Primary Activities and Supporting Activities. As with LCC competition on short haul, competition in long haul markets from the Big Three Gulf carriers (Emirates, Qatar Airways and Etihad) and Lufthansa's Star Alliance partner Turkish Airlines is not going to go away. Value Chain is developed by management guru Michael E. Porter and it was a major breakthrough in business world for analyzing a firms relative cost and value. Lufthansa is alone among Europe's Big Three legacy airline groups in not embracing Gulf competitors in some form (IAG codeshares with Qatar Airways, which it also brought into oneworld and which now also owns 10% of IAG: Air France-KLM codeshares with Etihad). The Lufthansa Group also actively supports the measurement by relevant international ESG ratings, such as MSCI, Sustainalytics, CDP and ecovadis, to ensure transparency about activities and progress at all times. Lufthansa serves over 200 international destinations in nearly 80 countries, 7. Lufthansa, a German airline company, primarily generates its revenue through various aspects of the aviation industry, including operating passenger and cargo flights, providing aircraft maintenance and repair services, and offering other related services like catering and information technology solutions. It symbolizes Lufthansa's heritage and role in air transportation. Lufthansa is one of the largest & founding member of Star Alliance 2. For example, the use of sustainable travel solutions will be rewarded with additional miles or other benefits. What is the frequent flyer program offered by Lufthansa? Now we want to lead it into a sustainable future. 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. Elon Musk's persistence. See related report: Germanwings has preserved Lufthansa's market share, but still has too many legacy issues for a LCC. As Mr Spohr emphasised at the publication of Lufthansa's 2014 financial results, "sticking to uneconomical structures is not an option for our future". It is also true that progress has been made with the centralisation of certain administrative, financial and procurement functions. A significant portion of the workforce is highly trained, and this leads to We consider Lufthansa group's strengths, weaknesses, opportunities and threats in the context of these, and other, issues. Dialogue with the Companys stakeholders is also a component of sustainable corporate governance. The expansion of Eurowings on both short haul and long haul should not only provide the group with more cost competitive operations in point to point markets, but should also increase Lufthansa's bargaining power with labour groups over the reform of labour practices and terms in its mainline operations (although its mainline pilots object to this, as noted above). Additionally, low-cost carriers such as Ryanair, easyJet, and Eurowings also compete with Lufthansa by offering budget-friendly alternatives to travelers. In its international strategic alliance strategy, Lufthansa has adopted a cooperative strategy form of strategic alliance which is non-equity in nature. Our newsletter is packed with essential growth strategies for your business. Global top five manufacturers hold a share over 50percent. Lufthansa expects a significantly improved result in 2015, when ASK growth will be 3%, although it expects unit revenue to fall. The aim is to continue strengthening the role of the airlines in the portfolio of business segments over the long term. Published by HBR Publications. Past incidents and accidents often affect the brand image, 2. Their nationwide presence in their home markets enables them to offer an attractive range of flights and route networks. Lufthansa is to be made more competitive in relation to other European airlines and prepared for a worldwide trade war. Lufthansa has a strong brand presence owing to sponsorship and marketing efforts by the company, 8. Mailgun vs Sendgrid: Which one is better? Revenue Streams: Lufthansa generates revenue through ticket sales (business, economy, and first-class), cargo transportation, ancillary services (baggage fees, onboard sales), and loyalty programs. Key Partnerships: Lufthansa engages in partnerships with other airlines, airports, suppliers, and service providers. Web1- The Lufthansa Group will focus even more sharply on customer orientation in all of its operating segments. You can even identify the source of firm's competitive advantage based on PESTEL analysis and Organization's Core Competencies. These cookies are needed for a smooth operation of our website. Lufthansa is one of the leading brands in the airlines sector. Some factors like increased competitor activity, changing government policies, alternate products or services etc. Moreover, the Eurowings brand will move into long haul markets, operated by SunExpress, a 50/50 joint venture company co-owned by Turkish Airlines. Growth or market share is also not a very reliable goal as often firms end up pursuing market share at the cost of profitability. It strives to follow its mission statement: the Lufthansa Group connects people, cultures and economies in a sustainable way. The Lufthansa Group has contributed to the progress of the aviation industry. Shareholder value, measured by stock price, is not a good barometer to analyze value chain. For example, Lufthansa's India network provides important fee Quizzes test your expertise in business and Skill tests evaluate your management traits. Lufthansa now plans to expand its use of Eurowings, whose pilots operate outside the collective agreement and whose unit cost is some 20% lower than that of Germanwings (according to Lufthansa). It therefore builds continuously on its environmental commitment, is dedicated to many social issues and treats its employees and partners in the value chain responsibly and fairly. How To Handle Conflict In A Business Meeting? 1. The airlines within the Lufthansa group occupy positions across a range of market segments, both in terms of product/service offer and national geographies. Lufthansa says that its SCORE cost savings programme contributed EUR2.5 billion to the group's bottom line between 2012 and 2014. Additionally, its extensive global network and Star Alliance partnership increase access to various routes and destinations. The Lufthansa Group also includes sustainability aspects as a key factor in the design of its products and services. It has more than four times IAG's seat capacity in Eastern/Central Europe and a little under four times Air France-KLM's. In order to fully exploit potential synergies between the sub-areas and to minimise the need for coordination, the organisational structure and governance processes of the Lufthansa Group are being continuously developed and adjusted in line with current requirements. It can include material handling, warehousing of physical products, as well as architecture to receive and store customer information for digital media company. The Lufthansa brand includes premium and economy cabins, long haul and short haul and offers a full range of services.