SWOT Strengths Star Alliance, most comprehensive and competitive network in the airline industry Brand and reputation

on Strong technical orientation (dominated by engineers) Dedicated staff including, the CEO was a role model High level of communication dialogue and network establishing a monitoring and controlling system to monitor progress. Staff commitment Good negotiation skill (specially with government) Entrepreneurial skills Opportunities Reunification of Germany Relaxation in regulations in Europe Operational synergies

Threats War (Gulf war and possible future war conflicts) Threat of sticks and disagreement with the labor union Airlines were more confronted with time bass competition, price competition and a need for transparency of product and services At the end of 20 century the economic structure of the airline industry was changing from competition between airlines to competition between networks Fall in the air traffic due to recession plus sever market slump in Europe The deregulations triggered intensive price competition Diversified management team The management evolved to be sharp consciousness for week signals Establishing the business school, for executive managers

Weaknesses High level of bureaucracy Formal rules driven and inflexible The management did no see the problems i.e. crises coming The old structural solution (five department) turned out to be inefficient showing symptoms such high involvement of top management in operational problems, slow decision processes lack of accountability, low transparency, insufficient market proximity

The specialization within the Star Alliance (planned extension of joint procurement could cause serious economic problems for some of Lufthansa subsidiaries. Lufthansa did not have established CRM

7Ss

Leadership: Authentic communication, emotional involvement from the CEO Managers were informing staff regarding the new strategy (communication) Staff 55000 employees Mostly technical staff (qualified, educated employees) Committed staff Style Specific combination of conciseness orientation and persistence Structure: Diversified structure, covering a lot of areas The old structure was inefficient and the new restructuring process ended with independent small units as follows LH cargo, AG (air freight), LH technique (technical maintenance services, LH systems GMBH (IT services), these joined existing subsidiaries city line (domestic flights) condor (charter flights and LCG sky chiefs (catering) The group management board directed the activities through 3 central functions -Chairmans office -Finance -Human Resources management functions Which meant implementing the idea of decentralization Systems In 1998 the star alliance formed a focus management team to lead the alliance on day to day basses until then the alliance activities were coordinated by a set of comities and project teams, the presidents of the airlines decided to bundle responsibilities for strategic issues Sustainable Competitive Advantage The Business School of Lufthansa Program 15 Economies of scale by owning diversified subsidiaries