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Lufthansa Going Global. Company Analysis

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Lufthansa Going Global. Company Analysis
Table of Contents
  1. Introduction
  2. Main body
  3. Conclusion
  4. Reference

Introduction

Lufthansa is one of the largest airlines in Europe based on the total number of passengers carried. The airline is also the flag carrier of Germany. It is the fifth largest airline in the world with 18 local destinations and 183 international ones in 78 nations across America, Asia, Africa, and Europe. Lufthansa has partnered with other airlines and this has increased its destination to around 410. The airline consists of over 530 aircrafts; its main operations are based in Cologne where it has a registered office (Lufthansa group, 2009, p. 8). Lufthansa is among the airlines that founded what was at the time considered the biggest alliance in the airline industry, star alliance. The essay seeks to explore the management of Lufthansa Company in terms of its international strategies, cooperative strategies, organizational structure, challenges and leadership actions. Further, the essay shall examine the type of international strategy that the company has chosen and its international expansion strategy.

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Lufthansa has established four- phase process in order to achieve its goal of expanding internationally. The outcome of the first three phases is the company’s global strategy and the fourth one is a monitoring and evaluation strategy. The first phase entails mobilization and product description. At the point, an airline is often required to assess the definition of a project and then ensure that the various stakeholders are prepared in readiness for the expected project. The second stage involves the strategic plan establishment whereby the company scrutinizes its internal and external situations, builds its mission and vision statements. Thanks to the already established mission and vision of Lufthansa, the company is now best placed to formulate sound and effective corporate objectives. A corporate implementation and strategic plan is then used to define the intended global strategic approach by the company. During the third phase, Lufthansa is expected to execute strategic planning at the departmental level. At this stage the company also develops the organizational structure which is in line with the corporate strategy. The definition of the required resources is also made at this point. Further the departmental communication plan is also verified. This communication plan spells out ways in which the corporate plan is to be publicized. The three phases establishes the Lufthansa global strategy which greatly contributes to the aviation success. Together with the set global strategies the company has made significant efforts to boost its international competitiveness. This is achieved through a sequence of sustained price reduction, restructuring measures and focusing on the key business of traveler’s airline. The company also focuses on increasing the company value by applying the Cash Value Added (CVA) concept which results to financial improvement. This encourages both local and international travelers to use the airline hence improve the business activities of the company. Operations of the company are also made known internationally due to the wide publicity (Idanan, 2006, p. 28).

Main body

Lufthansa has an objective of strengthening its position in order to be a leading European best carrier rendering services in an international network. To be able to serve all key traffic flows within and without Europe. In order to realize this, the company operations are based on three elements.

To start with, Lufthansa is in the process of embracing organic growth by way of expanding both its long and short flight networks. As a result, cost effectiveness of the airline operations has becomes a central focal pint for the company. In this case, some of the hubs by the company that are already realizing the fruits of cost effectiveness include those in Frankfurt, Munich, Vienna, and Brussels. Besides, Lufthansa has also entered into a working partnership with bmi, AUA, SWISS, and Brussels airlines. Various flights that the company operates are operational in over 254 destinations, serving 101 countries. Secondly the company is increasing its cooperation with partners with star alliance playing a major a fundamental role in opening of new markets. The alliance has improved its marketing levels in Egypt, North Africa and Middle East. Future plans to strengthen the alliance position in the world are underway with the coming up of admittance of other continental airlines such as TAM, Aegean, Brussels and India. Finally the company actively takes part in the continuous consolidation of airline business around Europe by obtaining stakes in Brussels airlines or other carriers which make economic and strategic sense (Lufthansa investment group, 2009, p.15).

Other measures which have been laid down by the company to aid the achievement of its goals include, launching of a program whereby bookings could be done electronically; the company believed that this would save time and allow the company’s cargo department to make a lot of sales without necessarily having to expand its sales force. This also allowed the sales team to spend substantial time establishing better customer relationships, networking with high value clients and discovering more opportunities for growth. The company has a key element which advocates for provision of space to allow reflection and dialogue when problems arise. This is to ensure that even when there are crisis within the company the operation of the company continues. Establishing networks of change and creating a conducive environment for emotional mobilization and consideration in order to reflect on the actions and come up with solutions. The company relies on people to find solutions to various problems, since the solution found are implemented by the people working in the company (Tiana, 2009, p.21).

In its attempt to expand it flying operations internationally Lufthansa has faced a number of challenges. One of the challenges faced by the company is hijacking, this can be attributed to the failure of political institutions, deteriorating security systems and economic crisis experienced in many regions of the world. Hijacking acts as a threat to the airline company as well as the passengers. In relation to hijacking terrorism is also a challenge faced by the airline, bombing of planes which pose danger to travelers has been reported. Financial problem is another problem faced by Lufthansa, high cost of oil makes the cost of running airline business very high. International flights consume more fuels as compared to local ones, these flights also require security escort which increases the cost further. Marketing of the company internationally also requires a lot of funds, comfort of passengers is paramount seats and other plane facilities must be classic in order to attract international travelers. The company also faces stiff competition fro other airlines hence it has to continuously improve on it global strategies. The company is required to offer the best customer services in a sustainable way in order to survive a highly competitive business field. Apart from its excellent services Lufthansa Company has to improve on is brand in order to cope with the competition amongst other airline companies. The brand of a company acts as its trademark as it not only refers to it products and services but also the overall image that the customer have in mind about a particular company. Another challenge is the use of high technological equipments in order to serve the customers adequately. The company is required to install these machines which are expensive to purchase and requires technical knowledge for operation. The company is faced by uncertainty of whether they would international travelers to use their airlines from particular regions. Once a plane taking international flights sets for the flight the crew is not certain that the flight will be successful without any problem. Cases of hijacking and terrorism are likely to occur during the flight (Lufthansa investment group, 2009, p.19).

The organizational structure of Lufthansa is headed by board of directors who oversees the implementation of the corporate strategy geared towards achievements of the company’s goals. The company often considers re-alignment and strengthening of the board members by equipping them with the right skills that enables them to handle future responsibilities and challenges. This is a rational step necessitated by the development of the company in the recent years and expansion of the company’s network to international boundaries. The step enables to strengthen the foundations which the autonomous companies can establish in nearness to customers in their own market. The organizational structure advocates for transparency, sustainability and quality of the company in order to attract customers from all regions of the world. This also improves the management principles of the business. The executive board of Lufthansa company comprises of different divisions each headed by one or two individuals. The first division comprises of corporate strategy, airline improvement, corporate fleet, international relations, networking, government affairs and auditing. This division is headed by the chairman and CEO, they oversees all the activities that pertains to this division. The second division is the passenger airlines, deals with the needs of the customer using the particular airline. It ensures that the comfort of the customers is adequately met; the division is headed by the deputy chairman. The third division covers the group airline; it covers the airlines which are not included in the Lufthansa airline. The division is led by the group labor director. The finance and aviation activities division handles the financial issues of the group airline business unit (Lufthansa group, 2009, p. 18).

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Changes are continuously made to ensure that Lufthansa airline maintains its autonomy over the group airline network. Expansion of the IT and purchasing division to new human resource and finance division took place with the aim of improving customer’s services. The company also believes in people to come up with solutions to its problems. Solutions drawn are implemented by people in the company so the implementation process would be easier if the people are involved in deriving the solutions. The company runs a down top structure of leadership whereby it take time to listen to people before making a decision, the opinions of the public is highly valued ( Tiana, 2009, p.4).

The operations of the business should uphold the value of the customers as they are a key resource in the business. Conducts f the leaders should promote customer willingness to use the services offered by the particular company. Lufthansa Company should set standards for best customer services by HONCircle and first class terminal. The company should consider individual qualifications before appointing any person into any leadership position. An organizational structure that clearly states the role of each individual should b adopted to avoid overlapping responsibilities. Though this might be part of the organization culture, the structure should e flexible in order to allow any amendments when need be. The organization culture should promote the company’s corporate goals and objectives. The company should be on the look out in order to identify any growth opportunities and make active use of the opportunities. This would promote entrepreneurship through expansion so as to tap new markets. Good cooperation with the partner in order to be able to get swift market, partners complement each other and reduce investment and risk cost for each partner. The organizational structure should be clear with responsibilities of every leader clearly spelt. The vision and mission should be clearly states in a simple language that is easy for every stakeholder to understand. Daily running of the company’s activities should be carried out in a simple way, stakeholders should not feel foreign in the company rather they should be part and parcel of the company (Lufthansa investment group, 2009, p.19).

Conclusion

The global strategy of Lufthansa Company has greatly contributed to the success of the airline. To achieve this success, Lufthansa had to embark on the implementation of a global strategic plan that was completed in four stages. An effective execution of three of the four phases has seen Lufthansa realize efficiency in its operations while the final phase has helped the company to immensely improve its global system of strategic monitoring. However, the company should continue improving and innovating in order to maintain high level of operation and services rendered to the consumers.

Reference

Idanan, J. (2006). Fundamental of management Lufthansa group. Web.

Lufthansa group. (2009). Leading European network carrier. Web.

Lufthansa investment relations. (2009).Lufthansa grows actively and creates value. Web.

Tiana, W. (2009). Lufthansa. Web.

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