Case Analysis for Lufthansa

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Lufthansa Case Analysis 1. What is the main strategic goal of the alliance? A brief SWOT analysis might be useful. The main strategic goal of the alliance is to expand their airline network and increase efficiency through “code-sharing.” Following is a SWOT analysis which will better reveal the goal of the alliance. Strengths: * Members could help each other (ex: Lufthansa saved Air Canada from bankruptcy) * Expanding geographic network worldwide (more destinations, more countries, more passengers) * Strong market share combined by 18 members, biggest of the global airline alliances * Code-sharing lead higher utilization of planes and infrastructure, economies of scale in purchasing and sales * Increase flexibilities for airline companies and their customers by providing coordinated flight schedules, common lounges, baggage handling * Alliance help individual members increase profit (ex: Lufthansa’ net operating profit increase €500 million per year) * Effective substitute for mergers in responding to globalization (ex: some mergers are still legally prevented) * Firm alliance help the members compete with other individual competitors companies of other global airline alliances Weaknesses: * Too complex to manage (lack the hierarchical conflict resolution mechanisms) * Less diversity among individual companies * Too much involvement and risks in the affairs of the other members creates (individual members could endanger the whole alliance) * Alliance initiatives run counter to the interests of the individual divisions * Time-consuming negotiation and consensus-building process * Higher depreciation of airplanes * Different IT systems, different managing styles Opportunities: * Possible deregulation change (policies may go far enough to allow for major mergers) * Expand market to keep business
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