Eurotunnel versus the Ferries

This case considers the competitive strategy of the Channel Tunnel just prior to the time it opened for business in 1994. Focusing specifically on the tunnel's Le Shuttle service for freight and passenger traffic, the case gives students an opportunity to explore whether Le Shuttle should follow a premium pricing strategy relative to the cross-channel ferries, match the ferries' prices, or undercut the ferries' prices. Following a section on the history of the tunnel's construction, the case provides an in-depth discussion of the cross-channel ferry business and the Le Shuttle services. The case concludes by posing the question: What pricing strategy should Le Shuttle follow? The case can be used in a managerial economics course to illustrate the key drivers of price competition in a differentiated products industry: differences in marginal cost, vertical differentiation among competitors, and the degree of horizontal differentiation in the market. The case can also be used in a competitive strategy class to illustrate the sources and sustainability of competitive advantage.