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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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