Strategic Management

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Essential Information & Tools
for
Current Strategic Potential

Zürich, November 29‘2012

Introduction,

The strategic potential of an enterprise (SPE) depends on the ability of an enterprise to take into account and properly assess both the internal and external conditions of its activities (Ginevicius et al. 2010). This means to know the strategic potential of an organisation, in other words ‘what it can do’, one has to analyse how different environments can be more or less rich in opportunities or hostile and how organisational capabilities ( resources and competences) can enable or constrain strategies. This essay will examine which information & tools are necessary to assess the current strategic potential of Lufthansa. A globally leading aviation group focusing on the core competencies of its five business areas: Passenger Airline Group, Logistics, MRO, Catering and IT Services. The ability to analyse and evaluate the external conditions (environment) & internal conditions (capabilities) is a complex phenomenon and dependent of an organisation’s activities and usage of appropriate tools. The essay will argue that for an organisation like Lufthansa with global presence and complex operations, to assess external environment PESTEL whereas for diagnosing strategic capabilities Value chain & Value network are the most appropriate tools.Due to the reason that Lufthansa is an internationally operating organisation it faces international challenges. These international challenges govern as well the internal organisation as the external environment. The external environment has huge impacts on the Lufthansa. To conduct external environment analysis of Lufthansa it is essential to have information about the company, its financials, operations, global network, Strategy statement, Markets & customer segment research studies, information about alliances & partnerships, Flight Schedules/Routes, Environmental challenges / studies ( e.g. Noise pollution, energy consumption controls related information), Fleet information (type & aging of fleets), Competitor comparison reports, Legislation and regulations ( e.g. preferential airport rights if any) and Customer satisfaction studies. When it comes to select the tools for external environment analysis, there are quite few tools / technique available but two major / widely used tool / techniques are PESTEL & Porter’s Five forces. However use of PESTEL provides a wide overview & reveal threats and opportunities presented e.g. by technological changes (i.e. fuel efficient engines, airframes, internet) or shift in market demographic, legal issues such as restriction on mergers, political such as security controls etc. PESTEL analysis helps to uncover issues likely to have major impact upon the future of the industry, regions or markets. The identification of the key drivers in macro environment changes help focus on what is most important and can be used to construct scenarios of alternative possible future. PESTLE-analysis tries to make the future more comprehensible and predictable though we have to take into account that future is something which cannot be forecasted, as unpredictable events might occur.Porter’s five forces framework which helps identify the attractiveness of an industry in terms of five competitive forces is another option to analyse external environment. However to be used carefully as not necessarily complete even at the industrial level for example, * Defining the “right” industry, most industries can be analysed at different levels e.g. different markets and even different segments within them e.g. airline industry has different geographical markets (Europe, Middle East, China etc.) with different segments (leisure, business freight). The competitive forces are different for each of these markets so must be analysed separately * Converging industries, definition of industry is too difficult because...
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