After five years of vast losses, especially for the IATA Carrier, which are all scheduled airlines, 2007 will be a successful year for the airline industry, with a forecasted profit of $8.5 billion.
The early 21st century marked the industry with high losses and consolidation. Due to the reason that the industry sector highly depends on the external environment: the terrorist attacks of September 11th 2001, magnified by the weak economic conditions in many major countries and more recently the Iraq War and SARS epidemic, have made the last five years unhappy ones, especially for most of the schedules airlines. In addition to that, the liberalisation of the European aviation market enabled low cost airlines to reshape the competitive environment and to make significant impacts in the world’s domestic passenger markets, which have previously been largely controlled by full service carriers.
The overall market situation is dominated by increasing pressure on cost and productiveness. The global market trend forces a high company concentration that strengthens market positions.
Lufthansa - Germany’s national carrier was faced, like all other national carriers with the above-mentioned problems and had to find its way out of the crisis.
The central question of this report is: With which tools did Lufthansa solve these problems? And are these tools sufficient to be competitive for future developments? This report paper is dealing with the developments in airline business illustrated with the example of Germany’s national carrier, the Lufthansa AG, and the enormous company restructuring toward an ideal global player in a highly competitive environment.
By analysing the internal and external influences, pressuring the company to adapt, the need of change by Lufthansa will be made more comprehensible.
The learning organisation and the role of creativity have become more important during the last decades, especially in fast changing environments like the airline industry where Lufthansa operates. This will be a special regard in chapter four.
In the last section of the report a critical analysis will be made on the effectiveness of the organisation’s response, and some areas of improvement will be mentioned.
Table of Contents
1 Introduction
2 Procedure
3 Analysis of Lufthansa’s Business Environment
3.1 External factor influencing the organisation
3.1.1 The demand for passenger air services
3.1.2 Liberalisation of European air transport
3.1.3 Competitive Environment and Globalisation
3.2 Internal factor influencing the organisation
3.2.1 Organisational structure
3.2.2 Human relation policies
3.2.3 Skills and performance of the employees
4 The learning organisation – organisation as brains
4.1 Definition of the term learning organisation
4.2 Define the term of creativity within an organisation
5 The impact of the learning organisation and the role of creativity on Lufthansa’s Policy and Decision Making Process
5.1 The learning organisation towards the external environment
5.2 Learning organisation towards innovation
5.3 Learning organisation towards customer expectations
5.4 Learning organisation towards personnel
6 Evaluation of the Effectiveness of Company’s response
6.1 Effectiveness of Lufthansa’s response
7 Areas for Improvement in the Company’s response
7.1 Staff Satisfaction Measurement
7.2 Future Markets
7.3 Reliability
8 Conclusion
Research Objectives and Themes
This report investigates the strategic transformation of Lufthansa AG as it navigates a highly competitive and volatile airline industry. The primary research question centers on identifying the management tools and organizational strategies—specifically the implementation of a "learning organization" framework and the promotion of corporate creativity—that Lufthansa employs to maintain global competitiveness and overcome significant external market pressures.
- Analysis of external market influences, including deregulation and low-cost carrier competition.
- Evaluation of internal restructuring, organizational hierarchy, and human resource development.
- Application of the "learning organization" concept to decision-making and innovation processes.
- Critique of strategic responses to global crises (e.g., SARS, post-9/11 downturns).
- Recommendations for future market growth and improved staff satisfaction metrics.
Excerpt from the Book
3.1.1 The demand for passenger air services
The air journey is a part of a variety of other products or services. The demand of passenger air services is a derivate demand. It is dependent on the demand for other products or other activities. The demand as well depends on external crisis, beginning with the terrorist attacks on September 11 in 2001, 2002 Bali, SARS and the second Iraq War. Lufthansa responded with cost reductions in operation, retrenchments, and the introduction of a new distribution channel, the new Lufthansa homepage.
Even when airlines wish to differentiate their products, competitive and economic forces and the fact that they are flying similar or identical aircrafts mean that they often end up offering very similar products. The consequences of the homogeneous nature of the airline are twofold. On the one hand it pushes airlines into making costly efforts to try to differentiate their services from those of their competitors. One the other hand it makes the emergence of entirely new airlines or the incursion of new airlines on existing routes relatively easy. The dichotomy between the heterogeneity of the various products and the homogeneity of the air service themselves is a constant challenge in airline planning. Lufthansa tried by launching the “Future European Operations“ programme in 2002 to solve this dichotomy. The airline reorganised its regional markets and offered their passengers greater comfort in a completely revamped Business Class with fast broadband Internet connectivity in the aircraft cabin to clearly differentiate itself from major competitors.
Summary of Chapters
1 Introduction: Provides an overview of the airline industry's recent economic challenges and the necessity for consolidation and strategic adaptation.
2 Procedure: Explains the analytical approach used to examine Lufthansa's internal and external environment and its transition toward a global player.
3 Analysis of Lufthansa’s Business Environment: Details the factors impacting the company, categorizing them into external market forces and internal organizational structures.
4 The learning organisation – organisation as brains: Defines the theoretical framework of a "learning organization" and the crucial role of creativity in modern problem-solving.
5 The impact of the learning organisation and the role of creativity on Lufthansa’s Policy and Decision Making Process: Demonstrates how Lufthansa applies these concepts to handle external competition, innovation, and personnel management.
6 Evaluation of the Effectiveness of Company’s response: Critically reviews the results of the company's implemented strategies, citing financial and operational performance metrics.
7 Areas for Improvement in the Company’s response: Proposes specific strategic adjustments regarding employee feedback, market expansion, and corporate reliability.
8 Conclusion: Summarizes the study’s findings, affirming that Lufthansa’s focus on being a learning organization has successfully bolstered its competitive standing.
Keywords
Lufthansa, Airline Industry, Learning Organization, Strategic Management, Business Environment, Market Consolidation, Star Alliance, Innovation, Passenger Transport, Corporate Creativity, Cost Reduction, Global Competition, Human Resource Policy, BRIC Markets, Customer Loyalty.
Frequently Asked Questions
What is the core subject of this assignment?
The report examines the corporate development and strategic transformation of Lufthansa AG, focusing on how the airline adapted to competitive pressures and external economic crises.
What are the primary themes discussed in the work?
The core themes include the adaptation to low-cost airline competition, the formation of strategic global alliances, the internal restructuring of the Lufthansa Group, and the practical application of the "learning organization" model.
What is the main objective of this study?
The goal is to determine which management tools and strategies Lufthansa utilized to overcome economic volatility and maintain its position as a leading global airline.
Which scientific methods are utilized?
The study employs environmental analysis tools such as PESTLE and Porter’s Five Forces, alongside a SWOT analysis, to evaluate Lufthansa's internal and external strategic positioning.
What topics are covered in the main section?
The main section covers the analysis of Lufthansa’s business environment, the definition of a learning organization, the impact of these strategies on decision-making, and an evaluation of the company's tactical responses.
Which keywords best describe this research?
Key terms include Lufthansa, Learning Organization, Strategic Management, Market Consolidation, Global Competition, and Corporate Creativity.
How did Lufthansa differentiate its service from competitors?
Lufthansa implemented programs like "betterFly" and upgraded its Business Class with broadband connectivity, while also leveraging its "Miles and More" frequent flyer program to drive customer loyalty.
What role does the Star Alliance play in Lufthansa’s strategy?
Star Alliance serves as a critical strategic tool for Lufthansa, allowing for joint scheduling, shared ground facilities, and expanded network access, which together reduce costs and increase revenue.
What does the author suggest for future improvements?
The author recommends that Lufthansa implement anonymous staff satisfaction surveys, diversify its market reach beyond Asia into regions like South America, and improve its environmental credibility by prioritizing fuel-efficient aircraft.
- Quote paper
- Martin Albers (Author), 2007, Lufthansa in its competitive environment, Munich, GRIN Verlag, https://www.grin.com/document/91735
