|Type of paper:||Critical thinking|
|Categories:||Business Airline industry|
Airlines in the aviation industry have to adjust to the demands of the intense competition on a global scale (Olivia Lowenberg, 2016). Airlines have developed digital marketing capabilities, and the market has grown hybrid models between low cost and premium carriers. Lufthansa Group is not immune to the current trends in the airline's industry. The importance of gaining a competitive advantage over other companies is the primary focus of Lufthansa Group. Through the formulation of goals and strategies, the aviation group is capable of making the necessary progress in trying to meet the ever-increasing needs of travelers (Judge, 2016). A SWOT analysis has been carried out to help in evaluating the internal and external environment of the organization. This study analyses the crucial success factors that Lufthansa Group has to consider to achieve success in the current competitive environment. The porter's generic model which identifies the strategies used by the organization, its past and present situation and the nature of competition has been used to analyze the Lufthansa Group (Hernandez & Wiggins, 2014). Ideally, the goals of a team had to be explicitly focused and outlined to ensure sustainability and survivability of organizations. The aspect of leadership and how it contributes to overall organizational performances is one that has been taken into consideration. Leaders play a big part in the formulation of strategies, changing corporate culture and focusing company objectives (Baird & J, 1994). This aspect and the above mentioned are shown in the case study analysis of Lufthansa on its strategic recommendations.
1.0 Organization and Industry Overview
Deutsche Lufthansa AG is the most significant airline in Germany, and the combination of its subsidies makes it the largest carrier in Europe concerning the passengers and fleet size. As an aviation company, the segments of the business as of 2016 include maintenance, logistics, catering, and repair and overhaul services (MRO). The Lufthansa Group has over 550 equity investments and subsidiaries. These segments have leading positions in the markets which they represent. The Lufthansa group recorded EUR 31.7 billion in revenues. The end of 2016 marked the increase in the number of employees globally to 124, 306 (Lange & Becker-Ritterspach, 2015). The Group has the supervisory and management structures which are usual for organizations in Germany. The Executive Board assists with the responsibility of managing the team and providing definitions to its direction regarding strategy (Boehmer & Metcalf, 2016). The supervisory board helps with the appointing, advising and supervising the Executive Board. It is important to note that Deutsche Lufthansa AG is the most significant and single operating company in the Lufthansa Group. Individual business segments are operated as different Group companies apart from the Lufthansa Passenger Airlines (Industry Overview, 2018). Notably, these sections have their operating responsibility and profit and are under frequent monitoring by their supervisory boards. The efficient leadership system within the organization is probably the reason why the company has experienced significant turnover in profits and revenues. Its corporate strategy is one that promotes corporate social responsibility (CSR) and ensures that the company continues being relevant in the current competitiveness industry.
1.2 Corporate Strategy
The objective of the Lufthansa Group is to be the first choice in aviation for clients, shareholders, employees, and partners (Oyebade, 2018). Therefore, the Lufthansa Group aims at growing and continuing to play significant roles in transforming the worldwide aviation market. The planned structure of the Group supports this founded on three main pillars of Premium hub airlines, Eurowings group, and aviation services. Given that the aviation market is dynamic and experiences frequent changes, the Lufthansa Group has the chance of using the three pillars in positioning itself successfully as a leading organization in aviation (Hartman & Boscoianu, 2015). The objective is safeguarding the position into the future and expansion of profitability levels. For Lufthansa to realize its goal, it introduced the strategic agenda called the "7to1-Our Way" in 2004. This strategic plan involves seven action fields they are applicable across the Groups and in personal business segments. The development of the Group is pushed by the fields of action of "Value-based steering," "Culture and leadership," and constantly improving efficiency." Projects restricted to segments are governed and overseen by the fields of action of "innovation and digitization," "New concepts for growth" and "customer centricity and quality focus." The field of action of "Effective and lean organization" is tailored for ensuring the accomplishment of appropriate governance and optimal structure for the whole Lufthansa Group. Additionally, these segments in different situations have applied cost-cutting programs and individual effects that are implemented together with the activities which are in the strategic plan of "7to1-Our Way Forward".
1.3 Corporate Social Responsibility in Lufthansa Group
Responsible and sustainable entrepreneurial practices are an essential part of the corporate strategy of Lufthansa. The organization is dedicated towards the creation of added value for its clients, investors, and employees and meeting its responsibilities concerning the society and the environment (Lange & Becker-Ritterspach, 2015). These reasons have made the company continue improving on its methods of safeguarding the environment and the climate, maintenance of fair and responsible relations with workers and engaging in social concerns. The air transport industry and the international economy function in situations that change on a daily basis and are defined by global challenges and megatrends in the long term. These include the growth of the population, development of megacities, mobility demands in the face of globalization, political transition and climatic changes. Lufthansa Group counters these challenges with a detailed agenda on sustainability which includes economic sustainability, corporate governance and compliance and social responsibility (Bohlman & Terry, 2017). Other factors involved are climate and environmental responsibility, corporate citizenship and product responsibility. Also, the Group is committed to the sustainability goals of the United Nations. Lufthansa is the first signatory of the UN Global Compact in the aviation industry ranks and operates in global activities. The membership with the Global impact explains why it is bound to the guidelines provided in the Sustainable Development Goals (SDGs). Lufthansa is committed to the climatic goals, appropriate use of resources, improving working conditions, promoting female employees in work areas and compliance with the ecological and social compatibility of digitization and innovation projects. Furthermore, the group focuses on improving education and enabling through its charitable organization and different alliances.
1.4 Company Overview
The objective of Lufthansa Group is to become the first choice for clients, shareholders, partners and employees as identified before (Lange & Becker-Ritterspach, 2015). The three pillars which help in the realization of this goal are benefiting from economies of scale and mutual synergies across the segments of the business. The production of new business models and products in connection with the digitalization of the aviation value chain leads to the formation of crucial Group Strategy aspects across different business segments. The quality strategy helps in the optimization of costs and expansion of premium positioning of network airlines. This approach aims at improving the experience of travel, optimization of the flee and route network and the overall reduction of costs (Trompenaars, 1996). Lufthansa Group will open up new potential revenue for airlines and improvement of the function at the different points of contact. The Group continues to make investments in its fleet as a measure of ensuring that it remains to provide leading quality products. Network airlines have mainly grown and have replaced older aircraft with current models having the higher efficiency of fuel and higher seating capacities. Strategic partnerships and corporations assist in supplementing flight plans that guarantee added value to clients (Massy-Beresford & Flottau, 2017). Currently, the Lufthansa Group's airlines have joint commercial ventures with partners considered as the most attractive. There is continuity in general cutting of costs mostly in areas which do not affect the perception of quality by a customer. These include pooling network airline's organizational structure and systemic harmonization of system landscape and commercial management.
The presence of the Eurowings provides the Lufthansa Group with the competitive and innovative offering in point-to-point traffic that handles service oriented and price-sensitive clients. In addition to the competitive and efficient costs of Eurowings, its concept bases on the company's scalable structure that includes the integration of new partners with varied models of cooperation. The Eurowings Group applies different platforms for production, and there was the addition of more modern platforms in 2017. There are anticipated saving on costs in the coming years through the consolidation of various platforms. The key drivers of reduction in costs in the future include the standardization and streamlining of processes. The decrease of the expenses helps in ensuring that the company's success and sustained development in the highly competitive market is guaranteed. The objective is to provide profitability through partnerships, acquisitions, and organic growth. The presence of the aviation services organizations ensures that the Lufthansa Group exploits the opportunities for an increase to secure its leading positioning in different markets. The diversification of aviation services and portfolio of airlines is a crucial advantage of the group as it enables the exploitation of synergies within the organization. Aviation services deal with quality and customer focus, and clients of Lufth...
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