AVIATION MANAGMENT

Aviation Management

Aviation Management

Lufthansa

Introduction

The evolutionary patterns of strategy and structure are identified in this report as well as how strategic leadership and German culture contributed to the turnaround. Furthermore, this paper will analyse the airline industry in terms of Porters five forces and will also take an extensive look at Lufthansa's current situation by means of a SWOT and TOWS analysis. Additionally, Lufthansa's business-level and corporate-level strategy will be identified and the Star Alliance, the world's most important airline alliance, will be discussed in detail.

Lufthansa - A company overview

The Lufthansa Aviation Group is considered to be one of the world's leading air transport corporations. It includes a number of independent group and affiliated companies with business segments in passenger airlines, logistics, aircraft maintenance, catering, tourism and IT services. Lufthansa's headquarter is located in Cologne, Germany and its operational centre for passenger and cargo services is situated in Frankfurt (Key data on environmental care and sustainability at Lufthansa 2002/2003).

In terms of traffic performance, Lufthansa is in third position in worldwide passenger transport. For many years the company has also been the market leader in international cargo traffic. In 2002, Lufthansa's 368 aircrafts operated on routes to 327 destinations, carrying 50.9 million passengers and 1.63 million tons of airfreight. Lufthansa was also one of the founding members of the Star Alliance in 1997, when 16 partners joined into the world's largest airline alliance (Key data on environmental care and sustainability at Lufthansa 2002/2003).

Pestle Analysis

Structural analysis of an industry is a useful way of determining a company's long-term profitability. Comprehending the dynamics of the competitive forces in an industry can give an insight whether an industry is attractive and whether there are any chances for returns on capital. Michael Porter, a professor at Harvard Business School, created a framework for understanding the structure of an industry. According to Porter, the five competitive forces that can have an impact on an industry are threat of new entrants, bargaining power of suppliers, bargaining powers of buyers, competitive rivalry, as well as the threat of substitutes (Analysis of industries 2003).

The threat of new entrants offers the possibility that new firms are going to enter the industry, which will consequently lead to a reduction of industry returns by generally passing more value to consumers in terms of lower prices and also increasing the cost of competition. Factors like economies of scale, capital requirements, product differentiation, access to distribution channels, switching costs as well as brand value determine the threat of entry (Analysis of industries 2003).

Factors that are connected with the bargaining power of suppliers include the threat of forward integration as well as the concentration of suppliers in the industry. Supplier power decreases the ability for competitors in the industry to earn higher profits (Wheelen & Hunger 2000, p. 64).

Highly competitive industries are generally less profitable as the cost of competition is high or customers are receiving the benefits of lower prices. Competitive rivalry is affected by industry growth, brand identity, fixed costs, as well as barriers to ...