Background In 2002 the management team of Deutsche Lufthansa AG was considering the upcoming threat from low-cost airlines in the context of an increasingly complex and competitive strategic environment. Finally, the decision was taken to respond to the innovation by opening an own low-cost carrier, Germanwings in late 2002. But over time the business model of Germanwings was modified repeatedly. The case series covers Lufthansa’s considerations regarding various options to respond to the competitive challenges brought up by the emerging low-cost airlines such as easyJet or Ryanair in 2002, the foundation of Germanwings in late 2002 and some early successes until 2005, and some more recent changes in the Germanwings business model in the following five years until end of 2010. @ Key Points Read carefully the case study provided on Deutsche Lufthansa AG. Assume you are in May 2002 and have just been hired as a consultant, to advice Deutsche Lufthansa AGs Board of Directors on a strategy for the next 5 years (2003 2007). Prepare a report with your own views, addressing the following key points: 1. Strategic analysis Engage on a careful assessment of the current situation of Deutsche Lufthansa AG, identifying the challenges posed by various aggressive LCCs and how best to leverage Deutsche Lufthansas critical success factors. 2. Strategic choices and reflections Prepare two alternative choices highlighting the pros, cons, risks and expected outcomes. Recommend your preferred option, highlighting the key points. Justify why such option should be taken. Reflect upon the three learning objectives of this case (see the next session) 3. Plan of Action Prepare a 5-year strategic plan of action (from 2003 to 2007) with clear targets/objectives, deadlines, focus-areas, priorities, initiatives and key performance indicators (KPIs). @Learning Objectives The purpose of the Deutsche Lufthansa AG case is to develop a better understanding of possible responses (strategies) to disruptive business models. It reflects upon the case of Lufthansa, who for many years, was considered to have mastered the ability to manage two alternative business models, the full-service model of the mother company and the low-cost model through its subsidiary Germanwings that was launched by the end 2002. The following three learning objectives are addressed in particular: 2. What strategic choices can be adopted to structure the relationship between the two businesses exploiting the different models? 3. How can a company engage on a strategy capable to manage two radically different business models? Length In terms of effort, I expect a maximum of a 3,500-word written report (7 to 8 pages). The 3,500-word report includes headings and the body text. References, annexes, tables, charts and other additional elements should be counted in addition to that. Penalties can be applied for those exceeding the 3,500-word limit! @Assignment Format The assignment should be written on a business report style format, rather than following a typical academic essay format. I expect to find, above all, good strategic thinking and recommendations based on sound/logical business arguments as well as the contents delivered in the classes. I also expect to find evidence on the use of references or bibliography. Because this module is focused on management practices, I expect students to use tables, charts, diagrams and other visual elements to support their views and analyses, since this is common practice in all business environments. @Writing the Assignment The assignment should follow a certain structure, containing, at least, five important parts: 1. Introduction 2. Objectives 3. Addressing the Key Points 4. Conclusions 5. References or Bibliography
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