Strategic Management and Lufthansa

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Going Global, but How to Manage Complexity

Chrissy L. Cash

Professor Barry Adkins

Senior Seminar in Business

September 5, 2010

Describe the type of international strategy the company has chosen.

This international business strategy is considered a combination of multi –domestic and global strategies (Hitt, 2009). A transnational strategy offers the benefits inherent in both global and multi-domestic strategies. Under this strategy each business component of Lufthansa can successfully implement independent innovation. The firm has focused on constructing a shared dream and individual commitment through an integrated network that includes its alliances, partnerships and five business segments. Although this strategy requires global coordination and flexibility, all segments are decentralized and operate in a sovereign form with the assurance to support Lufthansa’s strategic development goals.

Explain what means the company has used to expand internationally.

Lufthansa created a strategic alliance with Star Alliance which serves a global airline network. Lufthansa remained optimistic as this was a common thread with the rest of the airline industry, and they responded to globalization fittingly. Competition, along with snail-like recovery of international travelers, the ever expanding increase in gas prices gave off the continuous tension to shrink pricing in order to remain aggressive, as far as competition, has taken a toll on the complete industry over the last decade.

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

It is a common understanding that it is moderately unfeasible to stay alive in a global network if not part of an alliance. This cooperative strategy serves as a mechanism for the Aviation Group to enter the market swiftly, and with greater impact with the support of the alliance. The airline industry has historically been a standard –cycle market, the same is true with this alliance thus allowing for savings and benefits to extend across its members (Hitt, 2009). Lufthansa’s elements and objectives are a continued, profitable, growth. This principle of sustainability to strategic decisions regarding financial stability, value-based management, business development, expansion, competitive advantage, and value to customers all encompass the viable recognition of a cooperative strategy in many of the areas. Lufthansa is involved with a number of cooperative arrangements that allow Lufthansa to serve their customers better than their competitor and keep their customers within a certain network. Lufthansa’s strategy for these actions has had results as a collaborative advantage by combining resources and capabilities with their alliances and partners to offer their customers access to more flights, better service, numerous destinations, better connecting flights, and many other wants and needs within the realm of the company. The joint venture with Star Alliance has created a lawfully autonomous company that shares some of their assets and capabilities to develop competitive advantage in the passenger airline market internationally. Star Alliance members like Continental Airlines, United Airlines, and Air Canada have allowed Lufthansa to strengthen its network in the transatlantic traffic.

Describe the uncertainties and challenges related to operating beyond the company's national boundaries.

Of course there are risks in operating beyond the company’s boundaries. This is something that is known by any company that works as an alliance or works internationally. This can make the expansions difficult to manage or even put into practice. Lufthansa faces the challenges/risks for not performing for the markets that they have entered. Unlike some other businesses in today’s economy, the economy recovery in the airline industry is still uncertain and may lead to continued downturn in demand in the air traffic sector. Also,...
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