Case Analysis Report for Lan Airlines by cuiliqing

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									Case Analysis Report for Lan Airlines



   1. The main actor is the Lan Airline and its CEO Cueto. Secondary, the case discusses the

       Airlines main competitors and alliance like American Airline and Lufthansa Cargo (and

       other South American Airlines).

   2. The main problem in the case study is whether Lan will be able to successfully

       implement three distinct business models (low-cost for domestic flights, full-service for

       international flights, and global cargo business) or not. Indirectly, perusing these three

       different business strategies in a mature business implies that this company needs to do a

       low-cost and a differentiation strategy. According to the textbook (p. 157) firms can

       simultaneously implement these two strategies if they learn how to manage the

       contradictions inherent in these two strategies (para. 4).

   3. Likely solutions:

       First, the airline could chose to only operate in one business e.g. cargo business and only

       fly one type of plane. This will decrease cost related to buying and maintaining planes.

       (Sell the other business sectors)

       Second, the company could hire external strategy consultants to help the company merge

       their essentially three different business strategies. The reason why I suggest external

       consultants is because the company may have a strong internal culture (because they have

       been operating for a long time) and it may be hard for the existing managers to

       objectively see and evaluate the current business situation in order to suggest ways to

       implement that new strategy.
   Third, the company could split up into three different/independent businesses each with

   their own business strategy. This way the company can manage cost and revenues

   independently and worst case get rid of the least profitable business. This help understand

   each business better.

4. This case can be connected to chapter 4 and 5. For domestic flight the company choses a

   low-cost business strategy. According to chapter 4 Lan has sources of cost advantages. It

   has already established a base of airplanes, which is a huge cost advantage (new entrance

   would have to observe this cost). In addition, the airlines has made connection with major

   airports and allied with other airplane companies. In addition, they experienced a

   learning-curve, which is the result of previous existence and operations in the airplane

   business. Over time they became very efficient in in handling ground turn-around times

   and staff training. All these are sources of cost leadership. For international flights,

   however, if the company wants to maintain competitive with other airlines (without

   dropping the cost), it needs to find a differentiation strategy. So, if the company could

   come up with a way to make its international flights more special/different, it may be able

   to attract more customers. Maybe, the company could do the same as McDonald’s

   (example in the book page156). They could try to find something that attracts a lot of

   customers (grow market share), than operate more planes (with that feature) on a high

   scale to reduce cost.

5. This case compare so the Wii case we studied in class. The industries are mature in both

   the video gaming industry and the airline industry, thus they are faced with similar

   problems. For instance, there are barriers to entry that limit the number of new entrance

   (this is good); however, the existing competitors are strong. While in the Wii case
Nintendo struggled to come up with a new product to stay in business (Wii), Lan needs to

come up with a new strategy to stay competitive. For instance, Lan could come up with

some customer feature that no other company has. Similarities in both cases are that the

firms could go out of business if they do not keep up with analyzing the consumer’s

needs and responding accordingly. While Nintendo was the first gaming company to

speak to a brought audience (the casual gamer), Lan needs to come up with an idea to

differentiate its airline (maybe even be the first one to make a move). This differentiation

could be something like combining all three business areas successfully into one. This in

return could offer customer value by reducing operating cost as well as the cost for plane

tickets.

								
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