Changing Business Models and Employee Representation in the Airline Industry: A Comparison of British Airways and Deutsche Lufthansa
| Published date | 01 July 2015 |
| Author | Knut Lange,Ayse Saka‐Helmhout,Florian Becker‐Ritterspach,Mike Geppert |
| DOI | http://doi.org/10.1111/1467-8551.12096 |
| Date | 01 July 2015 |
British Journal of Management, Vol. 26, 388–407 (2015)
DOI: 10.1111/1467-8551.12096
Changing Business Models and Employee
Representation in the Airline Industry:
A Comparison of British Airways and
Deutsche Lufthansa
Knut Lange, Mike Geppert,1Ayse Saka-Helmhout2
and Florian Becker-Ritterspach3
Royal Holloway, University of London, School of Management, Egham, Surrey TW20 0EX, UK, 1Friedrich
Schiller University of Jena, Facultyof Economics and Business Administration, 07743 Jena, Germany and
University of Turku, Turku School of Economics, 20014 Turku, Finland, 2Radboud University, Nijmegen
School of Management, PO Box 9108, 6500 HK, Nijmegen, The Netherlands, and 3University of Applied
Sciences Berlin (HTW), Faculty of Business and Law,10318 Berlin, Ger many
Corresponding author email: Knut.Lange@royalholloway.ac.uk
In recent years, the notion of business models has gained momentum in management re-
search. Scholars have discussed several barriers to changing business models in estab-
lished firms. However, the national institutions of market economies have not yet been
discussed as barriers, even though they can constrain the latitude of action of a firm’s
management. Based on interviews and a longitudinal content analysis, we analyse the
extent to which full service carriers in two countries (British Airways in the UK and
Deutsche Lufthansa in Germany) have adopted elements of a low cost model over time.
Furthermore, we investigate how this process has been influenced by the dierences in
each national institutional context. We particularly focus on the role of the rights of
employee representatives in changes in business models. Our results show that British
Airways has moved its business model more in the direction of low cost carriers than
Deutsche Lufthansa, although the business model of the former airline still diers sig-
nificantly from that of a typical low cost carrier. We identify national institutions that
potentially strengthen the position of employee representatives as a factor that can influ-
ence, and also act as a barrier to, business model change.
Introduction
In recent years, the notion of business models
has gained momentum in management research
(Baden-Fuller et al., 2010; Zott, Amit and Massa,
2011). In this debate, scholars have also discussed
barriers to changing the business model of exist-
The authors gratefully acknowledge the comments of
three anonymous reviewers, St´
ephanie Dameron (Asso-
ciate Editor), Carolin Decker, Juan Santal´
oandLuis
Diestre.
ing firms. Several barriers have been identified,
such as cognitive lock-ins (Chesbroughand Rosen-
bloom, 2002). The institutional environment of
market economies in which firms operate has not
yet been discussed as a barrier and so is identi-
fied as a research gap in the debate on business
models (Zott and Amit, 2013). Whereas the in-
stitutional framework of market economies such
as the UK provides a high degree of flexibility to
firms, the framework of market economies such
as Germany provides a substantially lower degree
© 2015 British Academy of Management. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4
2DQ, UK and 350 Main Street, Malden, MA, 02148, USA.
Changing Business Models 389
of flexibility (Crossland and Hambrick, 2011; Hall
and Soskice, 2001). We investigate how business
model changes in firms in the UK and Germany
are aected by the influence of employee represen-
tation. This employee representation has been dis-
cussed in recent work on strategic management as
a potential constraint on strategic choice, which
accounts for the dierential in flexibility provided
to firms in both the aforementioned countries (Fiss
and Zajac, 2004).
We selected the aviation industry because it is
a globalized industry in which established com-
panies from dierent countries face similar chal-
lenges, particularly the challenge presented by
low cost carriers (LCCs). Since the mid-1990s,
the European aviation industry has undergone a
massive transformation. The traditional business
model of full service carriers (FSCs) has been
challenged by LCCs. Hence, FSCs face strong
pressures to reconsider their traditional business
models based purely on dierentiation and move
them, at least to some extent, in the direction of
the LCC model (Bamber et al., 2009; Delfmann
et al., 2005).
In this paper we analyse whether, and the ex-
tent to which, two FSCs in two dierent countries
(British Airways (BA) in the UK and Deutsche
Lufthansa (LH) in Germany) have adopted el-
ements of the LCC model, and the extent to
which this process has been influenced by em-
ployee representation. There have been no sys-
tematic comparisons of the strategic reactions of
FSCs, which are embedded in dierent institu-
tional frameworks, to the low cost pressure ex-
erted by LCCs in the aviation industry. Hence, we
propose a systematic comparison of two leading
FSCs and their strategic responses to the emer-
gence of LCCs, originating from contrasting mar-
ket economies, the UK and Germany. Our analy-
sis focuses on the followingtwo questions: To what
extent have the selected FSCs, embedded in insti-
tutional frameworks that dier in their degree of
flexibility, changed their business model in reac-
tion to the low cost pressure exerted by LCCs? To
what extent have exogenous institutional factors,
including the employee representation regime, af-
fected business model changes?
The paper is structured as follows. First, we dis-
tinguish between strategy and the business model
concept and discuss recent work on strategic man-
agement which has considered the eect of institu-
tions on strategic choice. Second, we outline our
methodological approach. Third, we present the
findings of our two case studies.Finally, we discuss
the theoretical implications of our findings.
Theoretical background
Strategy and the recent debate on business models
The adoption of low cost practices has been de-
scribed in several management publications as a
strategy based on the choice to compete on price
(Barrett, 2004; Collis, 1991). Porter’s typology
of cost leadership and dierentiation strategy is
based in part directly on the example of low cost
airlines such as Southwest Airlines (Porter, 1996).
However, in recent years, a debate on business
models has emerged (Bock et al., 2012; Miozzo
et al., 2012; Patzelt, Zu Knyphausen-Aufsess and
Nikol, 2008). Low cost practices in the airline in-
dustry have also been described as a new business
model (Alamdari and Fagan, 2005; Hunter, 2006).
In the followingwe conceptualize the dierence be-
tween the concepts of strategy and business model
and outline why, for the analysis of the reactionsof
FSCs towards the emergenceof LCCs, the applica-
tion of the business model concept is more appro-
priate.
We refer to Zott and Amit (2008) and their
distinction between product market strategy and
business model. They understand product market
strategy ‘as a way in which a firm chooses to po-
sition itself against competitors in its addressable
market spaces’ (Zott and Amit, 2008, p. 3). They
define a business model as ‘a template that depicts
the way the firm conducts its business’ (Zott and
Amit, 2013, p. 404) and as ‘a structural template
of how a focal firm transacts with customers,part-
ners, and vendors; that is, how it chooses to con-
nect with factor and product markets’ (Zott and
Amit, 2008, p. 5). The strategyand business model
concept dier regarding the unit of analysis: while
the unit of analysis of strategy is the firm, the busi-
ness model’s unit of analysis is the focal firm and
its exchange partners. An important implication
of their distinction between the two concepts is
that firms may pursue the same strategy with dif-
ferent business models. Qatar Airways and Emi-
rates, for instance, both pursue a dierentiation
strategy but dier in terms of how they transact
with exchange partners to deliver the products(i.e.
high-service flights in certain markets) needed for
this strategy: while Qatar joined a global airline
© 2015 British Academy of Management.
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