LUFTHANSA

Lufthansa

Lufthansa

International Strategy

Due to increased local competition, there is a need for Lufthansa to go global. However, in Europe, Lufthansa has created “Lufthansa Regional” to cater to its domestic market (http://www.lufthansa.com/). With availability of substitutes such as high speed trains, it is essential for Lufthansa to capture demand through shorter travelling time, customisation and higher quality standards, thus adopting a multi-domestic strategy. Out of Europe, there are no substitutes for air travel. All airline industries are competing on an equal basis and there is higher standardisation of providing commodity-like products across different markets; thus a global strategy is adopted. Therefore, we see that Lufthansa is seeking to achieve both global efficiency and local responsiveness and has chosen a transnational strategy.

Means Lufthansa Used To Expand Internationally

The type of means that has been chosen by Lufthansa involves four phases, where the first three results to a global strategy and the final phase is a strategy monitoring system. The first phase is project definition and mobilisation, wherein the company reviews its project definition, builds up a common understanding, and prepares all players for the forthcoming project. The second phase is strategic plan formulation, where the company analyses its internal and external environment, develops its vision and mission statements, and formulates corporate goals and objectives. Its findings are then summarised in the corporate strategic plan, while the implementation plan outlines ways of realizing the future global strategy. The next phase is the strategic planning and implementation, where the company translates the strategic plan into departmental plans, designs organisational structures in line with corporate strategy, and defines resource requirements. In addition, a departmental communication plan is drawn up, outlining ways of publicizing the corporate strategy and securing employee buy-in. These three phases build Lufthansa's global strategy, and are responsible for the company's aviation success.

In line with this, Lufthansa has made major efforts to improve their international competitiveness, which include a series of sustained cost reduction, restructuring measures, and a focus on the core business of passenger airlines. In addition, the company's focus is on growth efforts in sustaining increase in company value, through using the Cash-Value-Added (CVA) concept, which brought financial improvement and sustenance to the company. Another crucial strategy for the company's profitable growth is by creating their own financial strategy, which aims high for a high level of financial flexibility and a solid corporate credit-worthiness, such that it is the only European airline with an “Investment Grade” ranking from the rating agencies Moody's and Standard & Poor's. Its minimum liquidity is its essential point, having reserves of 2 billion Euros in order to secure funds requirement against cyclical fluctuations and volatile financial markets. In sustaining and strengthening Lufthansa's capital structure, the company is creating a solid basis for its long-term growth, to maintain its course in a difficult environment, and to be able to react appropriately to any change. Their overall strategy shows its desire to further improve and innovate to be able to efficiently and effectively render service to its ...