Lufthansa Going Global, but How to Manage Complexity? Adel Donnych Jason Myat-Hsu Yusuke
Company History <ul><li>1926 : Created by Weimar government </li></ul><ul><li>1931 : Had established most comprehensive ai...
History <ul><li>1966 : Resumed service behind the Iron Curtain under partner company names </li></ul><ul><li>1990 : The re...
Relative Current Situations <ul><li>Operates more than 500 aircraft from hubs in Frankfurt, Munich, and Zurich </li></ul><...
Lufthansa <ul><li>Acquisition and Restructuring Strategies </li></ul><ul><ul><li>Restructuring focused on corporate strate...
Lufthansa <ul><li>International Strategies </li></ul><ul><ul><li>Industry changes, deregulation and the economic pressures...
Lufthansa <ul><li>International Strategies </li></ul><ul><ul><li>Formed Lufthansa Regional a regional airline to compete w...
Lufthansa <ul><li>Cooperative Strategies </li></ul><ul><ul><li>The Star Alliance was a global strategy requiring efficient...
Lufthansa <ul><li>Organizational Structure and Control </li></ul><ul><ul><li>Organizational structure was accomplish by re...
Lufthansa <ul><li>Miscellaneous </li></ul><ul><ul><li>Integration of personnel across globe, employee training programs, d...
Lufthansa Lufthansa Key Strategic Issues
Lufthansa:  External Analysis <ul><li>Lufthansa competes in the international airline industry  </li></ul><ul><li>Its busi...
Lufthansa Lufthansa Defining the Industry <ul><li>Low Low Profit High Growth </li></ul><ul><li>Industry Price Movements   ...
Lufthansa Lufthansa General Environment <ul><ul><li>Global </li></ul></ul><ul><ul><li>Demographics </li></ul></ul><ul><ul>...
Lufthansa Lufthansa Demographic <ul><li>Each of Lufthansa's customer segments has different profitability and different se...
Lufthansa Lufthansa The Good, The Bad and The Ugly <ul><li>Platinum customers : Most Profitable customer, who are typicall...
Lufthansa Lufthansa  Global Outlook <ul><li>Looking at the Airlines from a global standpoint  Lufthansa facilitates econom...
Lufthansa Lufthansa  SocioCultural <ul><li>In the work Place </li></ul><ul><li>Now Approximately one-third of the workforc...
Lufthansa Lufthansa  IT <ul><li>Customer to Business interfacing  </li></ul><ul><li>Got Rid of legacy  </li></ul><ul><li>T...
Lufthansa Lufthansa  Mobile Business Model <ul><li>Conformation-SMS with the flight information </li></ul><ul><li>Convenie...
Lufthansa Lufthansa  Political/Legal <ul><li>In 1978 Deregulation   </li></ul><ul><li>Allowed foreigners to own 25% of an ...
Lufthansa Lufthansa  Economic <ul><li>Economic forces can have an effect on Lufthansa daily business operations.  </li></u...
Lufthansa Lufthansa  Risk Management <ul><li>Terrorist attack Plane crash </li></ul><ul><li>Swine Flu </li></ul><ul><li>Oi...
Lufthansa Lufthansa  Hedging <ul><ul><li>Airlines  % of Hedged Oil  Level of Savings  </li></ul></ul><ul><ul><li>British A...
Lufthansa Lufthansa  How does hedging work? <ul><li>If an Airline does not hedge it can severely impact their profitabilit...
Lufthansa Lufthansa  Most Important Force is Economic <ul><li>Market  vicissitudes  </li></ul><ul><li>Traveler’s psycholog...
Lufthansa <ul><li>Competitive Rivalry – Extremely High </li></ul><ul><ul><li>So many competitors </li></ul></ul><ul><ul><l...
Lufthansa <ul><li>Supplier Power – High </li></ul><ul><ul><li>Mainly dominated by Boeing and Airbus </li></ul></ul><ul><ul...
Lufthansa <ul><li>Competitive Rivalry – Extremely High </li></ul><ul><li>Buyer/Supplier Power – High </li></ul><ul><li>Una...
Lufthansa <ul><ul><li>American Airlines </li></ul></ul><ul><ul><li>British Airways </li></ul></ul><ul><ul><li>Cathay Pacif...
Lufthansa Oneworld SWOT Strengths : Focus on quality Complementary global network None of its members declared bankrupt Op...
Lufthansa SkyTeam SWOT Strengths : 2 nd  biggest alliance Market share in the North America Opportunities : Vietnam Airlin...
Lufthansa:  Internal Analysis <ul><li>Fleet - owns and operates about 350 aircrafts </li></ul><ul><li>Transportation to an...
Lufthansa Lufthansa  Core Competencies <ul><li>Maintenance, Repair and Overhaul (MRO) </li></ul><ul><li>Logistics </li></u...
Lufthansa Lufthansa  Who is the Customer <ul><li>Corporate </li></ul><ul><li>Individuals </li></ul><ul><li>Government </li...
Economical Situational Analysis Lufthansa
Return on Assets Lufthansa
Comparison Data Lufthansa
Cash Vs. Capital Expenditure Ratio Lufthansa
Research & Development <ul><li>MOZAIC -  Measurement of  </li></ul><ul><ul><li>ozone, water vapor, carbon  </li></ul></ul>...
SWOT Analysis:  Lufthansa Lufthansa Strengths Opportunities Weaknesses Threats
Strengths:  Lufthansa <ul><li>Global Operations </li></ul><ul><li>Largest Star Alliance Member </li></ul><ul><li>Refocusin...
Weaknesses:  Lufthansa <ul><li>Largest Star Alliance Member </li></ul><ul><li>Development of low cost airline structure  <...
Opportunities:  Lufthansa <ul><li>Encourage Growth of Star Alliance </li></ul><ul><li>Increase Ownership Stakes in Differe...
Threats:  Lufthansa <ul><li>Other Alliances </li></ul><ul><li>Low Cost Providers </li></ul><ul><li>Alternative Travel Opti...
Strategic Alternative 1 <ul><li>Status quo keeping the cost saving, leasing regional airlines and reducing intermediaries,...
Strategic Alternative 2 <ul><li>Focus on customer segmentation using IT CRM implemented on a detailed level </li></ul><ul>...
Strategic Alternative 3 <ul><li>Attempt to acquire stakes in other airlines within anti-trust government regulations in EU...
Recommended Actions <ul><li>Focus on customer segmentation through newly developed IT systems while attempting to acquire ...
Reasoning <ul><li>Hedges company stability given global and current economic situation </li></ul><ul><li>Prepare to gain e...
Reasoning <ul><li>Continue to use their strong IT Division to develop innovative technologies </li></ul><ul><li>Use their ...
<ul><li>Thank you! </li></ul><ul><li>Closing questions or comments? </li></ul>Lufthansa Case analysis Lufthansa
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Lufthansa Case Study

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Case study on Lufthansa Airways and Star Alliance

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  • キ Fleet – about 350 aircrafts According to Lufthansa’s website, most of their aircraft are noted for quiet and low air-pollutant operation. キ Transportation – owns and operates shuttle services to transport passengers to and from airports worldwide キ Lounges - At more than 60 airport destinations, lounges are already in place, and Lufthansa is investing more than 150 million euros in new lounges and upgrades. キ Catering services – Operating under Lufthansa Service Holding corporation, they are The world’s largest airline caterer and provider of inflight service solutions. Revenue from their catering services in 2008 was over 230 billion Euros.
  • 2002, and 2003 – Lufthansa suffered from a two-year traffic decline due to the 9/11 attack in 2001. 2008 – up until 2007 the ROA is looking good, but it dropped below 4% due to the economy downturn. Lufthansa also purchased 19% of JetBlue’s share in late 2007.
  • Lufthansa’s cash revenue dropped very low in 2001
  • Lufthansa Case Study

    1. 1. Lufthansa Going Global, but How to Manage Complexity? Adel Donnych Jason Myat-Hsu Yusuke
    2. 2. Company History <ul><li>1926 : Created by Weimar government </li></ul><ul><li>1931 : Had established most comprehensive air route network in Europe </li></ul><ul><li>1935 : Expanded to the USSR and China </li></ul><ul><li>Early 1940’s : Led coup against Nazi leadership </li></ul><ul><li>1954 : Allies allowed the recapitalization of Duetsche Lufthansa </li></ul>Lufthansa
    3. 3. History <ul><li>1966 : Resumed service behind the Iron Curtain under partner company names </li></ul><ul><li>1990 : The reunification of Germany </li></ul><ul><li>1991 : Lufthansa operates in the red for the first time since 1973 </li></ul><ul><li>Mid 1990’s : Formed Star Alliance </li></ul><ul><li>Early 2000’s : Began to sell of diversified business components </li></ul>Lufthansa
    4. 4. Relative Current Situations <ul><li>Operates more than 500 aircraft from hubs in Frankfurt, Munich, and Zurich </li></ul><ul><li>Services approximately 250 destinations </li></ul><ul><li>Acquired full ownership of SWISS </li></ul><ul><li>Acquiring significant stakes in other airlines </li></ul>Lufthansa
    5. 5. Lufthansa <ul><li>Acquisition and Restructuring Strategies </li></ul><ul><ul><li>Restructuring focused on corporate strategy to unite 6 business segments under one strategy that reinforced the core business- Passenger travel. </li></ul></ul><ul><ul><li>5 current segments: Passage, Logistics, MRO, IT, Catering & Tourism and a services group offering Insurance, Flight training and Business Travel management. </li></ul></ul><ul><ul><li>Acquisition strategy focused on expansion in Europe and Globally. Geopolitical events made this strategy economically unviable. </li></ul></ul><ul><ul><li>Current strategy focuses on equity stakes in other companies. </li></ul></ul>Lufthansa Key Strategic Issues
    6. 6. Lufthansa <ul><li>International Strategies </li></ul><ul><ul><li>Industry changes, deregulation and the economic pressures of sustaining a profitable business, Lufthansa formed The Star Alliance with other airlines to provide a seamless network of intercontinental connections. </li></ul></ul><ul><ul><li>Mergers and acquisitions were costly and ran into governmental regulations and limitations. The alliance would provide the needed “expansion” sought by Lufthansa with limited regulatory hurdles and reduced investments. </li></ul></ul><ul><ul><li>Emphasis is on maintaining a Global strategy that offers the customers a similar level of service throughout the network. </li></ul></ul>Lufthansa Key Strategic Issues
    7. 7. Lufthansa <ul><li>International Strategies </li></ul><ul><ul><li>Formed Lufthansa Regional a regional airline to compete with the low cost carriers that sprung up as a result of deregulation. </li></ul></ul><ul><ul><li>Lufthansa Regional was a regionalized part of the International strategy adding to the economies of scale and to the Lufthansa’s market size. </li></ul></ul><ul><ul><li>Recently acquired 100% stake in Austrian Airlines. </li></ul></ul>Lufthansa Key Strategic Issues
    8. 8. Lufthansa <ul><li>Cooperative Strategies </li></ul><ul><ul><li>The Star Alliance was a global strategy requiring efficient operations across the network. Coordination and cooperation were vital to its success. </li></ul></ul><ul><ul><li>As a cross border strategic alliance the goal was to increase market share and profits. </li></ul></ul><ul><ul><li>Limitations in domestic growth and foreign government policies made the alliance an attractive strategy. </li></ul></ul>Lufthansa Key Strategic Issues
    9. 9. Lufthansa <ul><li>Organizational Structure and Control </li></ul><ul><ul><li>Organizational structure was accomplish by restructuring into 6 business segments. </li></ul></ul><ul><ul><li>Goal was to avoid duplication of functions among the business segments and resulted in a more focused corporate strategy. </li></ul></ul><ul><ul><li>Main controls: cost cutting, removal of intermediaries in tickets sales, “wetleases” for regional airline. </li></ul></ul><ul><ul><li>Maintain strong financial discipline, high credit rating, low debt service. Currently it owns 70% of the air fleet debt free. </li></ul></ul>Lufthansa Key Strategic Issues
    10. 10. Lufthansa <ul><li>Miscellaneous </li></ul><ul><ul><li>Integration of personnel across globe, employee training programs, diversity, safe place to work. </li></ul></ul><ul><ul><li>Increased CRM strategy customer centric focused services and products. </li></ul></ul>Lufthansa Key Strategic Issues
    11. 11. Lufthansa Lufthansa Key Strategic Issues
    12. 12. Lufthansa: External Analysis <ul><li>Lufthansa competes in the international airline industry </li></ul><ul><li>Its business segments include passenger business, logistics, repair and overhaul, catering, leisure travel and IT services. </li></ul>Lufthansa Industry Definition
    13. 13. Lufthansa Lufthansa Defining the Industry <ul><li>Low Low Profit High Growth </li></ul><ul><li>Industry Price Movements </li></ul><ul><li>The elasticity of demand, the economy, IT, socio-cultural, political/legal, demographics, from the general environment has claimed massive movements in this industry and Lufthansa core business units. </li></ul><ul><ul><li>Passenger Transportation </li></ul></ul><ul><ul><li>Maintenance Repair and Overhaul (MRO) </li></ul></ul><ul><ul><li>IT </li></ul></ul><ul><ul><li>Logistics (Cargo) </li></ul></ul><ul><ul><li>Catering (Passenger Food Service) </li></ul></ul><ul><li>Lufthansa will continue to do what it does best: focusing on the customers by providing the best customer service, ramping up their IT, and reducing cost; in addition, conservative risk management practices. </li></ul>
    14. 14. Lufthansa Lufthansa General Environment <ul><ul><li>Global </li></ul></ul><ul><ul><li>Demographics </li></ul></ul><ul><ul><li>Sociocultural </li></ul></ul><ul><ul><li>Economic </li></ul></ul><ul><ul><li>IT </li></ul></ul><ul><ul><li>Political/Legal </li></ul></ul>
    15. 15. Lufthansa Lufthansa Demographic <ul><li>Each of Lufthansa's customer segments has different profitability and different service level requirements and expectations. </li></ul><ul><li>Each service offerings are tailored differently to each of the segments. </li></ul><ul><li>Differentiating customers by demographic factors but by more business related attributes such as their purchase history or profitability. </li></ul>
    16. 16. Lufthansa Lufthansa The Good, The Bad and The Ugly <ul><li>Platinum customers : Most Profitable customer, who are typically heavy users of the product, who are not overlay price sensitive and whose commitment to the enterprise is high. </li></ul><ul><li>Gold Customers : The profitability level is lower and the commitment is not as high as the platinum members, even though they are heavy users. </li></ul><ul><li>Iron Customers : These customers provide the volume needed to utilize the firm’s capacity but whose spending levels, loyalty and profitability are not so substantial enough. </li></ul><ul><li>Lead Customers : Customers that cost the company Money. The company must minimize the customer segment, either by trying to upgrade customers or by disassociating from them. </li></ul>
    17. 17. Lufthansa Lufthansa Global Outlook <ul><li>Looking at the Airlines from a global standpoint Lufthansa facilitates economic growth, world trade, international investment and tourism; and is therefore central to the globalization taking place in many other industries. </li></ul>
    18. 18. Lufthansa Lufthansa SocioCultural <ul><li>In the work Place </li></ul><ul><li>Now Approximately one-third of the workforce is non German. </li></ul><ul><li>Continuous education and training is on Lufthansa top priority list not only for employees but also for managers. </li></ul><ul><li>“ Lufthansa School of Business” </li></ul><ul><li>CSR </li></ul><ul><li>Lufthansa environmental activities engage a wide range of social and environmental projects from supporting children in need (via the help alliance) to protecting endangered animals and recycling or introducing fuel efficiency initiatives. </li></ul>
    19. 19. Lufthansa Lufthansa IT <ul><li>Customer to Business interfacing </li></ul><ul><li>Got Rid of legacy </li></ul><ul><li>This Helped Lufthansa </li></ul><ul><li>Reduction in maintenance cost </li></ul><ul><li>Improved site usability and functionality </li></ul><ul><li>More flexible booking process </li></ul><ul><li>Customer Relationship Management </li></ul>
    20. 20. Lufthansa Lufthansa Mobile Business Model <ul><li>Conformation-SMS with the flight information </li></ul><ul><li>Convenient check-in on cell phone </li></ul><ul><li>Alerts you when Flight gets canceled </li></ul>
    21. 21. Lufthansa Lufthansa Political/Legal <ul><li>In 1978 Deregulation </li></ul><ul><li>Allowed foreigners to own 25% of an airline </li></ul><ul><li>EU non-European ownership limited to 49% </li></ul><ul><li>ASIA, it is not illegal to own an airline </li></ul><ul><li>Government Taxes has imposed taxes heavily </li></ul><ul><li>Government Fines </li></ul><ul><li>Government Funding </li></ul>
    22. 22. Lufthansa Lufthansa Economic <ul><li>Economic forces can have an effect on Lufthansa daily business operations. </li></ul><ul><ul><li>Lufthansa/Consumer Fear Index </li></ul></ul><ul><ul><ul><li>Wars Systemic </li></ul></ul></ul><ul><ul><ul><li>Terrorist attack Systemic </li></ul></ul></ul><ul><ul><ul><li>Plane crash Not Systemic </li></ul></ul></ul><ul><ul><ul><li>Banking industry Systemic </li></ul></ul></ul><ul><ul><ul><li>Swine Flu Not Systemic </li></ul></ul></ul><ul><ul><ul><li>Unemployment Rate Systemic </li></ul></ul></ul><ul><ul><ul><li>Oil Not Systemic </li></ul></ul></ul>
    23. 23. Lufthansa Lufthansa Risk Management <ul><li>Terrorist attack Plane crash </li></ul><ul><li>Swine Flu </li></ul><ul><li>Oil </li></ul>
    24. 24. Lufthansa Lufthansa Hedging <ul><ul><li>Airlines % of Hedged Oil Level of Savings </li></ul></ul><ul><ul><li>British Air 46% 5.3% </li></ul></ul><ul><ul><li>Southwest 80% 7.5% </li></ul></ul><ul><ul><li>Delta 0% (Paid Spot price) </li></ul></ul>
    25. 25. Lufthansa Lufthansa How does hedging work? <ul><li>If an Airline does not hedge it can severely impact their profitability </li></ul><ul><li>June Spot Price 70/barrel of OIL (locked in) </li></ul><ul><li>August Spot Price Forecasted by Lufthansa85/Barrel </li></ul><ul><li>(actual 80) </li></ul><ul><li>Lufthansa Can buy Oil at 70 vs. 80 </li></ul>
    26. 26. Lufthansa Lufthansa Most Important Force is Economic <ul><li>Market vicissitudes </li></ul><ul><li>Traveler’s psychologies </li></ul><ul><li>Ongoing Airline expense </li></ul>
    27. 27. Lufthansa <ul><li>Competitive Rivalry – Extremely High </li></ul><ul><ul><li>So many competitors </li></ul></ul><ul><ul><li>Saturated market </li></ul></ul><ul><ul><li>High exit barriers </li></ul></ul><ul><ul><li>Difficult to differentiate </li></ul></ul><ul><li>Threat of New Entrants – Low/Moderate </li></ul><ul><ul><li>Economic barriers </li></ul></ul><ul><ul><li>Brand recognition of existing companies </li></ul></ul><ul><ul><li>Economies of scale </li></ul></ul><ul><ul><li>Low cost carriers </li></ul></ul>Lufthansa Porters Five Forces Model
    28. 28. Lufthansa <ul><li>Supplier Power – High </li></ul><ul><ul><li>Mainly dominated by Boeing and Airbus </li></ul></ul><ul><ul><li>Suppliers’ goods are critical to buyers’ success </li></ul></ul><ul><li>Buyer Power – High </li></ul><ul><ul><li>Low switching cost </li></ul></ul><ul><ul><li>Low differentiation </li></ul></ul><ul><li>Availability of Substitutes – Low </li></ul><ul><ul><li>Road, rail, and ship </li></ul></ul><ul><ul><li>Internet </li></ul></ul>Lufthansa Five Forces Analysis
    29. 29. Lufthansa <ul><li>Competitive Rivalry – Extremely High </li></ul><ul><li>Buyer/Supplier Power – High </li></ul><ul><li>Unattractive </li></ul><ul><li>Low profit potential </li></ul>Lufthansa Five Forces Analysis
    30. 30. Lufthansa <ul><ul><li>American Airlines </li></ul></ul><ul><ul><li>British Airways </li></ul></ul><ul><ul><li>Cathay Pacific </li></ul></ul><ul><ul><li>Finnair </li></ul></ul><ul><ul><li>Iberia </li></ul></ul><ul><ul><li>JAL </li></ul></ul><ul><ul><li>LAN </li></ul></ul><ul><ul><li>Malév </li></ul></ul><ul><ul><li>Quantas </li></ul></ul><ul><ul><li>Royal Jordanian </li></ul></ul>Lufthansa Competitor Analysis <ul><ul><li>Aeroflot </li></ul></ul><ul><ul><li>AeroMexico </li></ul></ul><ul><ul><li>Air France </li></ul></ul><ul><ul><li>Alitalia </li></ul></ul><ul><ul><li>China Southern </li></ul></ul><ul><ul><li>Continental Airlines </li></ul></ul><ul><ul><li>Czech Airlines </li></ul></ul><ul><ul><li>Delta </li></ul></ul><ul><ul><li>KLM </li></ul></ul><ul><ul><li>Korean Air </li></ul></ul><ul><ul><li>Northwest Airlines </li></ul></ul>
    31. 31. Lufthansa Oneworld SWOT Strengths : Focus on quality Complementary global network None of its members declared bankrupt Opportunities : Anti-trust immunity JAL’s presence Expecting growth Mexicana joining in 2009 Weaknesses : Smaller than the other two Can’t compete in equal terms North America Threats : Economy Member’s bankruptcy Member may leave for other alliances
    32. 32. Lufthansa SkyTeam SWOT Strengths : 2 nd biggest alliance Market share in the North America Opportunities : Vietnam Airlines joining in 2010 Growth in Asia Weaknesses : Oceania and Middle East Lost $19.5 billion in 10 years Threats : Economy No Japanese Airlines Loss of Continental Airlines
    33. 33. Lufthansa: Internal Analysis <ul><li>Fleet - owns and operates about 350 aircrafts </li></ul><ul><li>Transportation to and from airports </li></ul><ul><li>Lounges at more than 60 airport destinations </li></ul><ul><li>Catering services </li></ul>Tangible and Intangible Resources Lufthansa
    34. 34. Lufthansa Lufthansa Core Competencies <ul><li>Maintenance, Repair and Overhaul (MRO) </li></ul><ul><li>Logistics </li></ul><ul><li>IT Services </li></ul>
    35. 35. Lufthansa Lufthansa Who is the Customer <ul><li>Corporate </li></ul><ul><li>Individuals </li></ul><ul><li>Government </li></ul><ul><li>Travel Agencies </li></ul>
    36. 36. Economical Situational Analysis Lufthansa
    37. 37. Return on Assets Lufthansa
    38. 38. Comparison Data Lufthansa
    39. 39. Cash Vs. Capital Expenditure Ratio Lufthansa
    40. 40. Research & Development <ul><li>MOZAIC - Measurement of </li></ul><ul><ul><li>ozone, water vapor, carbon </li></ul></ul><ul><ul><li>monoxide and nitrogen oxides </li></ul></ul><ul><ul><li>aboard Airbus in-service aircraft </li></ul></ul><ul><li>CARABIC – Civil Aircraft </li></ul><ul><li>for the regular Investigation of </li></ul><ul><li>the Atmosphere </li></ul><ul><li>IAGOS - aims to create a </li></ul><ul><li>measuring infrastructure that records </li></ul><ul><li>atmospheric trace substances. </li></ul>Lufthansa
    41. 41. SWOT Analysis: Lufthansa Lufthansa Strengths Opportunities Weaknesses Threats
    42. 42. Strengths: Lufthansa <ul><li>Global Operations </li></ul><ul><li>Largest Star Alliance Member </li></ul><ul><li>Refocusing of Diversification and establishment of “Divisions” </li></ul><ul><li>Lease planes </li></ul><ul><li>IT Division </li></ul><ul><li>Strategic ability to predict future trends </li></ul>Lufthansa
    43. 43. Weaknesses: Lufthansa <ul><li>Largest Star Alliance Member </li></ul><ul><li>Development of low cost airline structure </li></ul>Lufthansa
    44. 44. Opportunities: Lufthansa <ul><li>Encourage Growth of Star Alliance </li></ul><ul><li>Increase Ownership Stakes in Different markets </li></ul><ul><li>Use IT Division to Develop Operational Stakeholder Relationships </li></ul><ul><li>Use Wet Leasing to Improve Regional Network </li></ul><ul><li>Expand presence in growing market </li></ul>Lufthansa
    45. 45. Threats: Lufthansa <ul><li>Other Alliances </li></ul><ul><li>Low Cost Providers </li></ul><ul><li>Alternative Travel Options for Short Distances </li></ul>Lufthansa
    46. 46. Strategic Alternative 1 <ul><li>Status quo keeping the cost saving, leasing regional airlines and reducing intermediaries, controlling air ticketing fees </li></ul><ul><ul><li>Cost leadership focus </li></ul></ul><ul><ul><li>Help maintain debt rating and good financial investment standing </li></ul></ul>Lufthansa Low-End Investment / Responsiveness / Action
    47. 47. Strategic Alternative 2 <ul><li>Focus on customer segmentation using IT CRM implemented on a detailed level </li></ul><ul><ul><li>Data mine CRM information to get higher level of profitability </li></ul></ul><ul><ul><li>Accounts for changing customer needs to maximize profit potential </li></ul></ul><ul><ul><li>Differentiate customers by new market divides: purchase history, profitability, expected lifetime worth as opposed to demographic, geographic, and economic means </li></ul></ul><ul><ul><li>Through implementation of new technologies, like mobile device check-in, they will be able to adjust service to a wider audience </li></ul></ul>Lufthansa Moderate Investment / Responsiveness / Action
    48. 48. Strategic Alternative 3 <ul><li>Attempt to acquire stakes in other airlines within anti-trust government regulations in EU and other countries </li></ul><ul><ul><li>Will diversify their holdings and increase profit potential </li></ul></ul><ul><ul><li>Increases the Star Alliances reach in servicing global air travel </li></ul></ul><ul><ul><li>Allows them to be prepared for a changing market </li></ul></ul><ul><ul><li>Must limit stakes in international acquisitions to not encourage government interaction </li></ul></ul><ul><ul><li>Improves air route network and increases flight availability to loyal Lufthansa customers </li></ul></ul><ul><ul><li>Allows increased presence in new, emerging, and current markets </li></ul></ul>Lufthansa High-End Investment / Responsiveness / Action
    49. 49. Recommended Actions <ul><li>Focus on customer segmentation through newly developed IT systems while attempting to acquire legal stakes in either competitor or partner airlines. </li></ul>Lufthansa Hybrid Strategy of Alternative 2 and 3
    50. 50. Reasoning <ul><li>Hedges company stability given global and current economic situation </li></ul><ul><li>Prepare to gain entrance to new markets given the possibility of relaxed antitrust laws </li></ul><ul><li>Allows focus on customers changing needs as they continually become more demanding </li></ul><ul><li>Encourages the use of technology to increase ease of access and use of services </li></ul>Lufthansa Why are they going to do it?
    51. 51. Reasoning <ul><li>Continue to use their strong IT Division to develop innovative technologies </li></ul><ul><li>Use their positive debt rating to encourage financial growth and the purchase of stakes in competing/partner airlines </li></ul><ul><li>Use their influence as the largest member of the Star Alliance to encourage some troubled members to allow partial ownership or acquisition </li></ul>Lufthansa How are they going to do it?
    52. 52. <ul><li>Thank you! </li></ul><ul><li>Closing questions or comments? </li></ul>Lufthansa Case analysis Lufthansa
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