Strategic Leadership Actions

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June 19, 2010
BUS 499
Lufthansa Case
Professor Sliben

1. Describe the type of international strategy the company has chosen.

The type of international strategy 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 mobilization, 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 analyzes its internal and external environment, develops its vision and mission statements, and formulates corporate goals and objectives. Its findings are then summarized 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 organizational 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 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 consumers. Also, Lufthansa’s strategies have been effective in making sure the financial needs of the company, which is the airline’s primary goal. It has productively gained financial success through the implementation of its strategies, and contributed to the establishment of the company’s superior reputation in the market.

2. Explain what means the company has used to expand internationally.

Lufthansa has used a massive European and global expansion strategy since the 1980’s is proved not to be viable due to the first Iraq war and reduced international air traffic.

3. Identify and describe the elements and objectives of Lufthansa's cooperative strategy.

4. Describe the uncertainties and challenges related to operating beyond the company's national boundaries.
Competing in the international market will expose Lufthansa to greater cyclical risk as the company is no longer insulated within its national boundaries. Lufthansa has to address the political, economical and social impact of foreign markets that influence its demand. This challenges Lufthansa to develop flexible production capabilities that can respond to fluctuations in demand. Uncertainties will also arise from...
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