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Business Case study economics, marketing

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Introduction

Case Study Page 143- Anatomy of a Budget flight - Mr Halil (a) I) Price discrimination is when certain people pay different prices for a product. It occurs when businesses charge a different price for the same good or service. Easyjet airlines charge a cheaper flight for all those who book early. I.e. A seat normally sold for �20 could be sold for �140 for late bookers. This idea has only just recently become popular over the past 5 years many people tried to book last minute for cheaper flights. Some airlines still charge cheaper fares to 'fill in seats' and would charge a very small mark up in the seat to make minimum levels of profit last minute. ii) Full cost pricing is when a business may attempt to take indirect cost that can be attributable to a particular product on deciding the price. Easyjet uses different prices for different destinations as some flights across different destinations may have a different price towards others. For example, Easyjet charges �20- �140 for a flight from Luton to Nice which is 700 miles, but a flight from Luton to Istanbul is �80- �200, which is 1600 miles. This may be because of an increased intake of fuel and time of air attendants and pilots. (b) One pricing method Easyjet may use is costplus pricing. This involves setting a price by calculating the average cost of flights and adding a mark up for profit. ...read more.

Middle

(d) BA is the largest airline and flag carrier in the UK has competitors such as Ryannair and Easyjet, there are many ways in which they could respond, especially as BA is a very big airline company known to have a respectable reputation. One responsive method used by many companies is competition based pricing. The first competition pricing strategy BA could use is going rate pricing. This is normally used if BA are reluctant to start a price war and are worried of the risk of falling revenue. This is a good method to use as in 1998 BA started a price war with Richard Branson Virgin Atlantic airlines in which both companies cut their prices dramatically. Branson claimed 'We will never be beaten by BA on price and will always offer better quality' this price war allegedly cost BA millions. This is why going rate pricing may be a good option for BA considering past experiences. The strategy allows the business to examine competitor's price and choose a price in line with them. However it is usually the company with strong brand identity that normally succeeds, BA does have a strong brand identity. Consequently it does not take into account consumer wishes and may not always be the best price set. The other competition based pricing is destroyer pricing. This involves cutting prices, sometimes very vastly, for a period of time set by directors of BA plc. ...read more.

Conclusion

Thus using costplus pricing in adding a mark up. Easyjet is a business which is considered as one of the more dominant within its market because it offers a service that is popular through many aspects such as the TV show on ITV known as 'Airline' and advertising. As a result, it has the power to set the price in which your competitors will attempt to follow. In conclusion, over the past decade airline travel has rose in the UK from 4 million in 1958 to 224 million in 2006. many airline companies are aware of this and are incorporating effective customer relations. One way is must do this is to have effective price strategies in place to allow the shareholders and directors of companies to be happy along with the 20 million passengers of Easyjet to be happy. I believe the pricing strategies by Easyjet are proving successful and many people see Easyjet as a low cost budget airline. Easyjets price discrimination strategy is the most successful in my eyes. In 2005 every champions league game Easyjet charged premium prices for destinations in Greece and Barcelona made an estimated 3 million pound profit. Easyjet charge premium prices at peak times and holiday periods which customers have known this trend for the last decade in travelling. It has now become second nature for customers of price discrimination. I believe Easyjet will make good levels of profit in the next couple of years because of its effective pricing strategies. Anil Vekaria 12.10 ...read more.

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