Managing Its Complexity on a Global Level, Essay Example

Strategic marketing decisions are made through the process of goal formulization and through the process of attempts to specify functional areas of goal setting of strategic process planning as stated by Anderson (2008). “Where would you like to go from here?” “That depends on how you want to get there said that the cat to Alice.” The obvious wisdom of strategic planning comes from the planning mode and with that said is the major link between goal planning and of what the organization wants to achieve, the operating process and the various functional plans and means it uses to get there. (Hoffer and Schendel 1978, p. 13). “It would be most useful to assess the current status of the state of knowledge of the planning of the goals of the corporate structure and the way the business wants to lead to access the strategic marketing plan.” This would access the general rubric of the plan for the company’s success and the drivers of the global environment to come. (Anderson, 2008). German based airline company Lufthansa has plans of rising to the top and how might they reach their goals? This will be discussed in this research case study.

German based airline company is thinking of a long-term based plan which encompasses tapping into the Chinese market says the company executives. “”We will boost our flight capacity to China by 50 per cent from now to 2007, because of the new market-opening deal between China and Germany,” Thierry Antinori, executive vice president marketing & Sales of Lufthansa, told China Daily in an interview recently. “I’d better not give our opponents any clue about our good ideas,” Antinori said. It appears they are trying to mimic the same philosophy that the Dubai Emirates powerhouse airline used to bring themselves to the top in 2007.

The company has used a very comprehensive and successful trading plan to move into the international market arena. A key to having a successful international business plan is having a successful trading plan. There are certain rules that an international investing company must follow in order to be successful. The keys to being a successful global trader are: (1) Think as a value investor would think (2) Use basic charts when designing your trade plan (3) “Be a contrarian” (4) When investing make sure to expect the unexpected (5) Make sure you understand that stop loss equals insurance (6) “Parabolic rises always end up crashing” (7) Concentrate on your choices of investments (Levi  2010).

In short term trading it is wise to look for reversals and to identify simple analysis or trends. Trading is difficult and complicated to do so in order to make it work, it is easier to follow the simple principles and concepts to make trading work. Price is normally the best indicator for trading. (McPhee  2010). “Essentially, your mental ability to manage losses and profits, the good times and the bad, your capacity for risk management, and the self-discipline necessary to avoid becoming too greedy are all subsumed beneath the heading of ‘trading psychology’, along with many other similar skills and abilities.” (Develop your Trading Plan 2009). We need to remove our emotions from our trading decisions in order to be a successful trader. Some important factors to consider when deciding what trading plan is right for you and the company you are managing or the company you own are your commitment level to trading, your computer skills, the environment that the business is set and the tolerance level that the business manager and trading personnel are comfortable at risking. The risk level is perhaps the most important when considering what and when to trade globally speaking. A person’s mental agility, comfort level with risks, comfort level with trading, confidence with themselves and other self-esteem factors all determine trading comfort levels and trading success globally. “People tend to overcomplicate things and this can make trading more difficult especially with the various software packages out there. A trader must possess counter intuitive notions to make trading easy and smooth.” (Develop your Trading Plan 2009). Your trading mindset or psychology, your trading plan and your trading method are all important in having future success in international trading. You must question yourself the following:

• “What circumstances will deem you to trade?
• How much money will you commit to the trade?
• What circumstances will make you ‘close’ the trade?” (Develop your Trading Plan 2009).

You should keep your trading plan simple and do not overwhelm yourself. Keep your trading plan suited towards your own personality so that it will work with you.

In order to critically evaluate the trends in the international market in which Lufthansa operates we must consider the corporate sustainability model (CSM) as an essential tool for “a useable way of meeting financial, strategic operational, ecological and social goals of an international organization.” (Yilmaz 2008, 1). This new tool is considered essential with relation to assessing risk management and corporate sustainability. All new companies and developing companies such as Lufthansa has to be prepared for taking risks and further prepared for any risks that may be mitigated against current insurance companies. Lane states, “There should be a balance between risk and reward (2007)”. Enterprise Risk Management (ERM) is a business wide tool used to help an international company achieve its success rate by decreasing risk through “informing management of strategic goals, optimizing the costs of risk management, invigorating opportunity seeking behavior by creating sustainable cost competitive edges and making sure the risks are drawn out so they can be assessed properly in advance.” (Yilmaz 2008, 205).

The elements and objectives of their corporate strategy are to increase their visibility and increase sales by increasing their marketing strategies. The market structure of Lufthansa is built upon the geographic spread of the products offered, the customer segmentation and the competitive positioning of key global players including other airline company international competitors. Lufthansa, a global company has recently opened its geographic areas of servicing passengers to and from Germany to Los Angeles, CA, San Francisco, CA, to Tokyo, Japan, to Madrid, Spain, to Prague, Czech Republic and to Durban, South Africa, to London and other wonders of the world. This new addition of geographic referencing areas has made the airline industry even more powerful in terms of servicing areas.

Lufthansa Airline Company has the mindset that customer segmentation is one of the largest keys to promoting a healthy and effective marketing strategy. Why? The company feels this way because all customers are unique and cannot be generalized and grouped into one segment. Each customer can be grouped into a segment of diversified customers unique to their individual needs. When the airline meets the demands for these needs unique to each segment they meet the cultural needs for a variety of the geographic region of international flyers, hence the rate of flyers will increase and the ticket purchases will increase. The idea is to increase a return on your investment. “Market segmentation focuses on a subset of prospects which are potential customers that possess the greatest potential of becoming customers or becoming returning customers and generating income for the airline company-in this case Lufthansa Airline Company.” (Market Segmentation Strategies 2008).

Segmentation can be accomplished by offering a variety of products to meet different customer needs, taking designs already implemented and re-designing them to adapt to meet new customer demands, conducting research to keep up with competitor’s advantages to supersede their offerings, identify your most profitable and least profitable customers and try to cater to the most profitable customers and make adequate motions lure in new customers. Find new and innovative ways to change your positioning to set your company apart from the competitors. Try to establish a niche with your airline company that other companies do not have.

When a business has a competitive positioning or edge over its competitors it can surpass its competitors and surpass the expected revenue for the company. A competitive edge cannot be sustained indefinitely or can only be sustained as long as a company keeps its value creating process unduplicated by a competitor. There are five forces that keep a company a key competitor of global positioning in the airline industry.

There are innate risks and uncertainties that lie when a company Lufthansa like  goes beyond its domestic borders. They will be discussed in this portion of the case study with hopes to minimize them. The airline company most likely will face the obstacles of strategic marketing challenges as it aims to improve its global competitive position amongst other competitive carriers. The major challenges Lufthansa Airline will face in the immediate future will be the high costs of fuel as related to the high costs of oil and the continued high impact of low cost carriers that seem to infiltrate the domestic airlines. There is an influx of ‘business class’ specials only that have recently infiltrated the airline industry and are affecting the business class carriers. Recommendations for Lufthansa to guard against these temporary issues or setbacks is to run a conservative marketing program for the present time to ensure they have a positive revenue to cover temporary setbacks such as the rising cost of oil prices or the disadvantages of the stock market such as subprime mortgages bringing their own demise, prima facie.  The temporary setbacks for discounted business class promotions can be combated by advertising the same offers for international flights without loss to the company. They will make up in volume by gaining more flights if they offer the same as competitor companies because business flights are more expensive by nature. Their product/service and geographic service offering are pretty much up to par with the competitive companies thus there seems to be no adjustment other than to keep abreast with the special amenities offered to on board flight amenities such as television on international flights, free meals included, one free bag checked in on international flights, etc. The key is to ensure the customer they are receiving great service and that the other companies are not offering more. The customers want to feel the airline company they are choosing is providing them with a special touch and they will pay the same price or perhaps a few dollars more for a special or uniqueness. If the customers want a quick domestic flight then perhaps they will choose the cheapest flight and with that there will be some additional charges such as a meal charge and there may be a baggage charge, depending on the airline company. If Lufthansa can prevent charging for baggage on short domestic flights they might find that would be a key advantage to attracting domestic customers because most carriers have already converted to charging per baggage.

It is extremely important for an international airline company as Lufthansa to manage its assets and build its brands globally for its continued success throughout the years. Virgin Atlantic keeps track of some of its assets through a logistics program called Enterprise Mobility. The purpose of the project is to monitor critical high aviation, as part of a pilot track program moving through London’s Heathrow Airport. This RFID point of track service monitors high value carriers that can be repaired and saves dollars by having a hub at Heathrow and Gatwick to service these planes on the spot and have them back in the air in short notice. Lufthansa Airline Company might consider a same program at a main hub in the United States and in London which are main hubs of contact of where their planes might need servicing. They can set up a WLAN infrastructure similar to Virgin Airlines that signals back to their main headquarters when a main carrier is in need of servicing, then it can land, workers on the ground can repair the carrier then send it back into the air immediately. This avenue will ensure the planes are working globally at their maximum peak and effectiveness to serve the entire world with minimal downtime.

Their global brand will be built because the brand will be marketed both in London and the United States because it will be seen both in the states and in the United Kingdom and throughout Europe as the planes will be servicing adjoining European countries. Lufthansa can advertise in the various magazines such as Sky Mall and make their way into minds of the United States customers. It would be helpful for them to develop their own products that share their own aircraft. They currently run solo but if they were to join with a United States airline company it might be beneficial for them in terms of marketing their products and gaining some air space customers in the U.S. Though the U.S. market is very weak, they may be able to make a merger with one of the larger U.S. airline companies for a very inexpensive price at the current economic condition, making this a wise economic/marketing move for Lufthansa. A prime example of this would be the merger of Sprint PCS with Nextel. Nextel was a stronger communications company and Sprint PCS was near negative in assets, but Sprint has a larger customer database and Nextel had a better customer service history. Together they joined and made a very wise business move and made both companies very lucrative and profitable and changed the customer service history to a somewhat positive history for both companies.

Communications, pricing, distribution and high levels of service has helped to deliver and distribute high levels of service in which has put Lufthansa Company at the top of their global ambition. Further the delivery of superior customer value added to Lufthansa high value and demand. Their strategic partnerships and new relationships in the supply chain added to the value they could give to their customers. Market research and superior sales functions enabled Emirates to stay at the top of the competition.

The growth to the equity markets, globalization of the trade industry, data processing and software capability influenced Lufthansa’s ability to stay at the top of the airline industry. They focused on giving superior customer service to domestic and international customers. Through the use of the internet they were able to supply quick and inexpensive flights to many customers including existing customers and to establish a new customer base both locally and internationally.

Lufthansa, a German based airline company, was able to understand their customers’ needs and optimize customer demands and procedures to meet these demands and needs. They formulated plans or propositions to anticipate new needs and created differential advantages for the company. They further understood the importance of delivering superior service to customers through having superior knowledge, skills and a superior marketing scheme. They prepared a marketing orientation and possessed a strong commitment to innovation. They identified the unique value that they could deliver to customers. They identified the value disciplines, the value-driven operating models and the value proposition which were necessary to move ahead of the competitor airlines. Their disciplines were operator excellence, product leadership, customer intimacy and brand leadership. They keyed in on the current economic cycle, the technological breakthroughs, the changes in governmental policies, the shifts in customer values, the shifts with distribution networks, the new constraints of the market and the new opportunities available to the business market.

Lufthansa believed in autonomy and entrepreneurship as a means to get ahead, closeness to the customer as a means to rise to the top of the airline industry, productivity through the people and hands on value driven success. They further believed effectiveness is more important than efficiency. Speed and decisiveness are equally important in a top producing business as is the importance for an organization to adapt to its environment.

There are political or legal issues and implications, the economic environment, the socio-economic environment, and the technological environment to consider when marketing an airline company such as Lufthansa. There are German foreign trade regulations, employment law and monopolies legislation which support political and legal issues within a business. Interest rates, credit, money supply, disposable income, money distribution, inflation, unemployment and energy all affect the marketing issues within an airline business industry. Population growth, age mix, income distribution, life style changes, education levels, household patterns and social mobility are all encased in the effects of a business world. The pace of technological changes, how government chooses to invest in technology and the rate at which they invest, research and development budgets, telecommunication changes, satellite communications and electronic commerce play a large part in the effects of technology on marketing within airline company business and their effects thereof.

The bargaining power of buyers and suppliers as well as the rivalry between existing competitors create barriers of entry into the industry which affect the marketing prices and availability. There are potential competitors, direct competitors, incipient competitors and indirect competitors. There are family customers and business customers which bring business to the airline industry. Market areas are distinguished by primary, secondary and tertiary market segments. Development of markets is determined by existent, latent and incipient. Consumer based variables with marketing are demographic, behavior and psychographic.

A fast growth attitude is one filled with innovation, skill, judgment, experience and a dash of enterprise strategy and arrogance. Growth attitude does not encompass any complacency or entail any lack of discipline. Entrepreneurial leadership is filled with the ability to adapt to a changing environment that rolls with the punches and can fill in the gaps at the change of the wind. The business has the ability of empowering its employees to act as leaders, not followers through inspiration and developing a win-win attitude.

Managers shape the ways employees achieve organizational objectives and goals and further motivate employees continued success. Managers foster an employee’s continued success with a company. They further give direction, control inventory and perform duties to ensure the continued growth of the company. They ensure products and services are delivered in an effective and efficient manner so that the customer is happy. They are constantly seeking innovative ways to improve the net assets and growth of the company.

“The power and influence of others have been an increasing result of transformative forces shaping our current era.” (Slaughter, 2008, 14). “China’s staggering growth and its burgeoning demands for resources and markets are redrawing the economic map throughout Africa, Asia, and the Americas, establishing new alignments, part-nerships, and engagements.” (Slaughter, 2008, 14). The rule of law with international trade and business has been through economic incentives and mobilizing domestic business into other areas of the country. Those who cannot or will not comply or stay abreast with the changing world will perish.

References

Slaughtger, A. Strategic Leadership (2008) Retrieved June 13, 2010 from, http://www.cnas.org/files/documents/publications/SlaughterDaalderJentleson_StrategicLeadership_July08.pdf

China Daily (2004) Lufthansa plots strategy for more market share Retrieved June 13, 2006 from, http://english.peopledaily.com.cn/200411/29/eng20041129_165466.html

Yilmaz, K., 2008. The Corporate Sustainability Model for Airline Businesses European Journal of Scientific Research, [Online] 22(3), Available at: http://www.eurojournals.com/ejsr.htm [Accessed 11 May 2010].

Anonymous. 2008. Market Segmentation Strategies [Online] (May 2008) Available at: http://www.marketsegmentation.com/benefits_of_segmentation.html [Accessed: 11 May 2010].

Thomson Learning Use with Strategio Marketing Decisions in Global Markets New York: Thompson Learning, 2004.