Harvard Case - Lilium: Preparing for Takeoff
"Lilium: Preparing for Takeoff" Harvard business case study is written by Navid Mojir, Vincent Dessain, Mette Fuglsang Hjortshoej, Emer Moloney. It deals with the challenges in the field of Marketing. The case study is 32 page(s) long and it was first published on : Feb 15, 2022
At Fern Fort University, we recommend that Lilium focus on a phased approach to market entry, prioritizing a targeted launch in a select few European countries with favorable regulatory environments and strong demand for sustainable, efficient air travel. This strategy emphasizes building a strong brand, establishing a robust customer base, and refining operational processes before expanding globally.
2. Background
Lilium is a German start-up developing an all-electric vertical take-off and landing (eVTOL) aircraft. The company aims to disrupt the air travel industry by offering a sustainable, fast, and affordable alternative to traditional air travel. The case study highlights Lilium's ambitious plans to launch its service in 2025, facing challenges in securing regulatory approvals, building a manufacturing infrastructure, and developing a compelling marketing strategy.
The main protagonists are Daniel Wiegand, Lilium's CEO, and his team, tasked with navigating the complex challenges of bringing this innovative technology to market.
3. Analysis of the Case Study
Strategic Analysis:
SWOT Analysis:
- Strengths: Innovative technology, strong team with aerospace expertise, potential for significant market disruption, environmentally friendly approach.
- Weaknesses: Lack of operational experience, reliance on regulatory approvals, high capital requirements, potential for technical challenges.
- Opportunities: Growing demand for sustainable transportation, potential for partnerships with airlines and airports, expanding into new markets.
- Threats: Competition from established players, regulatory hurdles, technological advancements by competitors, economic downturn.
PESTEL Analysis:
- Political: Favorable regulatory environment in some countries, potential for government support for sustainable transportation.
- Economic: Growing demand for air travel, potential for economic downturn impacting demand.
- Social: Increasing awareness of environmental impact of air travel, demand for more sustainable options.
- Technological: Rapid advancements in battery technology, potential for disruption from other eVTOL companies.
- Environmental: Opportunity to contribute to reducing carbon emissions, potential for environmental regulations impacting operations.
- Legal: Complex regulatory framework for aviation, potential for legal challenges.
Marketing Analysis:
- Market Segmentation: Targeting affluent, environmentally conscious consumers, business travelers seeking faster and more convenient travel options, and urban dwellers seeking alternative forms of transportation.
- Brand Positioning: Positioning Lilium as a premium, sustainable, and innovative air travel solution, emphasizing speed, convenience, and environmental responsibility.
- Consumer Behavior Analysis: Understanding consumer preferences for sustainable travel, willingness to pay a premium for convenience, and perceived safety of eVTOL technology.
Competitive Analysis:
- Direct Competitors: Other eVTOL developers like Joby Aviation, Volocopter, and Vertical Aerospace.
- Indirect Competitors: Traditional airlines, high-speed rail, and ride-sharing services.
4. Recommendations
Phase 1: Targeted Launch in Europe:
- Market Selection: Focus on countries with favorable regulatory environments, strong demand for sustainable travel, and existing infrastructure for air travel (e.g., Germany, Switzerland, Austria).
- Product Launch: Introduce a limited number of routes with high-demand potential, targeting specific customer segments (e.g., business travelers, tourists).
- Pricing Strategy: Initially, adopt a premium pricing strategy to reflect the innovative nature of the service and recoup development costs.
- Marketing Strategy: Emphasize the unique value proposition of Lilium's service, focusing on speed, convenience, sustainability, and safety.
Phase 2: Expansion and Growth:
- Global Expansion: Gradually expand into new markets with favorable regulatory environments and high demand potential.
- Product Development: Introduce new routes and destinations, explore potential for cargo transportation, and leverage data analytics to optimize flight paths and pricing.
- Partnership Development: Collaborate with airlines, airports, and other stakeholders to integrate Lilium's service into existing transportation networks.
- Marketing Strategy: Leverage brand equity built in Phase 1, expand into new channels and target markets, and develop targeted marketing campaigns.
Phase 3: Scalability and Sustainability:
- Manufacturing Expansion: Scale up production to meet growing demand, optimize manufacturing processes for efficiency and cost reduction.
- Technology Advancement: Continuously invest in research and development to improve aircraft performance, reduce operating costs, and enhance safety features.
- Sustainability Initiatives: Implement sustainable practices throughout the business, from manufacturing to operations, and promote the environmental benefits of Lilium's service.
5. Basis of Recommendations
- Core Competencies and Mission: The recommendations align with Lilium's core competencies in aerospace technology and its mission to revolutionize air travel with sustainable solutions.
- External Customers and Internal Clients: The recommendations prioritize customer satisfaction by offering a premium, convenient, and environmentally friendly service, while also considering the needs of internal stakeholders.
- Competitors: The recommendations address the competitive landscape by focusing on a targeted market entry strategy, emphasizing differentiation through innovation and sustainability, and fostering strategic partnerships.
- Attractiveness: The phased approach to market entry minimizes financial risk by starting with a smaller, controlled launch, allowing for learning and adaptation before expanding globally.
6. Conclusion
Lilium has the potential to revolutionize the air travel industry with its innovative eVTOL technology. By adopting a phased approach to market entry, focusing on a targeted launch in Europe, and prioritizing brand building, customer satisfaction, and operational efficiency, Lilium can establish itself as a leading player in the rapidly evolving sustainable transportation market.
7. Discussion
Alternatives:
- Immediate global launch: This strategy would be more risky, requiring significant upfront investment and potentially leading to operational challenges.
- Focusing solely on business travelers: This strategy would limit market potential and could lead to dependence on a single customer segment.
Risks:
- Regulatory delays: Obtaining necessary approvals for commercial operations could be time-consuming and costly.
- Technological challenges: Unforeseen technical issues could delay or hinder product development.
- Competition: The emergence of strong competitors could erode market share and impact profitability.
Key Assumptions:
- Favorable regulatory environment: The recommendations assume that regulatory approvals will be granted in a timely manner.
- Strong demand for sustainable travel: The recommendations assume that consumers are willing to pay a premium for sustainable air travel options.
- Technological advancements: The recommendations assume that Lilium will be able to continuously improve its technology and stay ahead of competitors.
8. Next Steps
- Phase 1 (2023-2025):
- Secure regulatory approvals: Work with authorities in target countries to obtain necessary permits and certifications.
- Develop pilot production line: Establish a manufacturing facility to build initial aircraft for testing and demonstration purposes.
- Refine marketing strategy: Develop targeted marketing campaigns and build brand awareness in selected markets.
- Phase 2 (2025-2028):
- Launch commercial operations: Begin offering service on selected routes in Europe.
- Expand into new markets: Identify and secure regulatory approvals for expansion into additional countries.
- Develop strategic partnerships: Collaborate with airlines, airports, and other stakeholders to integrate Lilium's service into existing transportation networks.
- Phase 3 (2028-2030):
- Scale up production: Increase manufacturing capacity to meet growing demand.
- Develop new products and services: Explore potential for cargo transportation, expand into new markets, and enhance the customer experience.
- Invest in sustainability initiatives: Implement sustainable practices throughout the business and promote the environmental benefits of Lilium's service.
By following this roadmap, Lilium can successfully navigate the challenges of bringing its innovative technology to market, establish itself as a leader in the sustainable transportation sector, and achieve its ambitious growth goals.
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Case Description
Lilium is a German company focused on developing electric vertical takeoff and landing vehicles (eVTOLs) that can be used to offer air taxi services. The company went public in September 2021 through a special purpose acquisition company (SPAC) deal, raising more than $800 million. While Daniel Wiegand (the co-founder and CEO) is confident about the design of the company's latest seven-seater aircraft, he is still struggling with the business model. Lilium has three main options. First, it can offer air mobility services to passengers, i.e., become a full-service B2C company. Second, it can become an original equipment manufacturer (OEM), selling its jets to other companies that offer mobility services (B2B option). Third, Lilium can choose a hybrid option, offering air mobility to end-users in certain markets while selling its jets to other air mobility service providers.
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