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Corporate strategy case study - Essay Example

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The Eurotunnel is Group is composed of Eurotunnelplc and EurotunnelSA. The Group, which was formed in 1986, manages the channel tunnel between the UK and France. It operates the car tunnel and earns revenue on other trains passing through the tunnel. Even though the Channel tunnel is not older than 1994, its story dates back to long ago in history…
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Corporate strategy case study
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Download file to see previous pages In those days, cross-Channel travel was not dominated by the leisure business as it is today. It was used for military action and primarily for trade.
Even at that time, around 100 years ago there was no dearth of proposals. Many people especially the French suggested highly sophisticated and technical ideas for the new link. However, because this was before invention of railways these tunnels were not surprisingly road tunnels.
The Treaty of Canterbury which set the original ambitious objectives for the Tunnel stated that the Tunnel should "greatly improve communications between the United Kingdom and France and give fresh impetus to relations between the two countries, contribute to the development of relations and exchanges between the Member states of the European Communities and more generally between European States."2
2007 marked the completion of 13 years of an epic tale that has continued to shock, delight and confuse many. This is the story of the Euro tunnel which was a dream come true for many and many knew back then that it would be history in the making.
The company is currently on a route to restructuring and revitalisation of the Eurotunnel. 2004 saw the company sink in its profits and revenues. Richard Shirrefs, chief executive of Eurotunnel, said that the cross-channel rail industry was working on a "failed business model" and that you can't have a 25bn infrastructure which is not generating enough traffic - this is a big structural problem'
The Eurotunnel has disappointed its shareholders and owners. The debt crises have been alarming and the fact that the Eurotunnel has not been able to generate traffic is also hard on shareholders. Since debts amount to over 6 billion pounds it is difficult to see what the future of the company will look like. 4
Industry and Competitor Analysis
The Eurotunnel is part of the Cross Channel Rail Industry. This industry is currently plagued with a lot of problems. One of these is overcapitalisation. There is a pound 10 billion Eurotunnel investment and pound 15 billion public investment. Secondly it has also been under utilised. It is suffering from under utilisation of expensive infrastructure and financial losses. The high access charge paid by vehicles using the Eurotunnel is limiting traffic. It is a highly fragmented channel because of a possibility of rail; ferry or air travels on this route and in conflict. Competition is set to soar by 2010.
However, great opportunities abound this new invention. This is because it has been found that people prefer travelling by rail than plane across the channel. On the other hand there is a huge global opportunity for the cross channel rail industry as people find this medium increasingly convenient and fast.
Current Strategy
It was observed that the Eurotunnel has lost 25% of volume since 2000 and approximately 5 points of decline in market share. Secondly, the company has lost share even in the truck market with a fall in revenue as well as average yield per truck. Initially the Eurotunnel believed in premium pricing and established that if it keeps prices above its competition it will create a premium image and will thereby able to reap profits accordingly. This backfired. The competitors' low pricing strategy ...Download file to see next pagesRead More
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