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Transcript of Channel Tunnel Case
Managing Change - Prof. Dr. Josef MittmannFachhochschule DortmundUniversity of Applied Sciences and Arts
Case Study The Channel Tunnel
May 26th, 2008
Mingyi SuElvin Bayramov
Christoph J. SzczecinaHenrique A. Lima de Faria
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
• Historical Context• Engineering• Organizational Transitions• Financial Developments
• Case Study: Answers
Content
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Historical Context
1802 Albert Mathieu put forward a cross-Channel tunnel proposal.
1880 A railway tunnel by Watkin, the chairman of the South
Eastern Railway
1883 The work stopped after an injunction had been served against
Watkin
1887 Watkin became `Channel Tunnel` Company
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Historical Context
1914 -18
WW I
During World War I the 1800 m. tunnel was used for military
purposes
January 1974 A UK–France government backed scheme that started in 1974
was cancelled.
February 1986 The Treaty of Canterbury was signed allowing the project to
proceed.
June 1988 First tunnelling commenced in France.
December 1988 UK TBM commenced operation.
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
December 1990 The service tunnel broke through under the Channel.
May 1994 The tunnel was formally opened by the Queen and President
Mitterrand.
Mid 1994 Freight and passenger services commenced operation.
November 1996 A fire in a lorry shuttle severely damaged the tunnel
November 2007 High Speed 1, linking London to the tunnel, was opened.
Historical Context
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Attempts and Proposals• In the 1830s Frenchman Aimé Thomé de Gamond
• In 1865, a deputation led by George Ward Hunt,
• In 1881, British railway entrepreneur Sir William Watkin and French Suez Canal contractor Alexandre Lavalley . Work started at both sides.
• On the English side a 2.13-metre (6.99 ft) diameter Beumont-English boring machine dug a 1,893-metre (6,211 ft), on the French side a similar machine dug 1,669 metres (5,476 ft) from Sangatte
The Beumont - English boring machine
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Attempts and ProposalsAs a result of meeting between the leaders of two countries FOUR submissions were proposed by promoters, in 1985:
1. A rail proposal based on the 1975 scheme presented by Channel Tunnel Group/France–Manche (CTG/F–M),
2. Eurobridge – a 4.5 km span suspension bridge with roadway in an enclosed tube
3. Euroroute – a 21 km tunnel between artificial islands approached by bridges, and
4. Channel Expressway – large diameter road tunnels with mid-channel ventilation towers
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Geology
• Strait of Dover
• The closest distance 33 KM
• One of most important Straits in all over the world
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Geology
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Geology
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Tunneling
• The second undersea Tunnel in the world (Seikan Tunnel in Japan) • The major risk for underwater tunnels
•major water inflow • Folkestone, Kent in England and Coquelles France• Long 50.5 Kilometers
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Tunneling
EuroRoute: a bridge/ Tunnel scheme. Road tunnel and Rail tunnel. Cost: $11 -14 Billion
Channel Tunnel/France-Manche: Double rail tunnel , Cost: $5.5 Billion
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Tunneling
Channel Expressway: twin very large bored tunnel, two-line express way and train track. Cost: $2.9 Billion
Eurobridge: a bridge for motorway and a Railtunnel. Cost $11.5 Billion
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Tunneling
7.6-metre (25 ft) diameter rail
tunnels
4.8-metre (16 ft) diameter
service tunnel
A tunnels: Passenger Trains, and Freight and shuttle Trains
B tunnel: service tunnel
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Engineering
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Railway design and rolling stock
• Locomotives ( Brush – British
company and ABB - Swiss/Swedish
Company
• The passenger railcars
(Bombardier – Canadian company)
• Railcars for carrying freight vehicles
(Breda and Fiat – Italian company)
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Engineering
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Problems in Engineer Sector
• Problem of machine, increased 7% cost (1988)• Machines shut down on British side (1988)• Enhanced safety features (1989)• Problem on the passenger railcar (1991) • Air cooling system (1991) • Delay delivery of the systems acceptance
certificates and rolling stock
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
“The project was not properly designed in advance by Eurotunnel, and they
developed a habit in the early days of asking for the best of everything, whether
or not it was needed".
Problems in Engineer Sector
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Project Start
October 1985:
• Highly centralized • Nationally based twin structure • Each general director keeps control of
almost all activities on his channel side
Transmanche-Link
Translink JV
Balfour Beatty Construction
Costain Tarmac Construction
Taylor Woodrow
Wimpey
Transmanche Construction GIE
Bouygues
Lyonnaise des Eaux-Dumes
Societe Auxiliare d’entreprises
Spie Batignolles
TML Consortium(Transmanche-Link)
October 1985
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Project Start
Transmanche-Link
Translink JV
Balfour Beatty Construction
Costain Tarmac Construction
Taylor Woodrow
Wimpey
Transmanche Construction GIE
Bouygues
Lyonnaise des Eaux-Dumes
Societe Auxiliare d’entreprises
Spie Batignolles
TML Consortium(Transmanche-Link)
October 1985
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Tunneling Phase
February 1988:
• Evolutionary decentralization • Five Directorates:
– Construction France– Construction UK– Common Services– Engineering– Transportation Systems
Chairman
Chief Executive
General DirectorUK
General DirectorFrance
ConstructionDirector
Project CommonServices
Tunnel
Terminal
Isle of Grain
Administration/FinanceDirector
CommercialDirector
Project ServicesDirector
Human Relations & External RelationsDirector
Quality AssuranceDirector
EngineeringDirector
EngineeringGroup
Transportation SystemsDirector
Transportation SystemsGroup
ConstructionDirector
Tunnel
Terminal
TML Consortium(Transmanche-Link)
February 1988
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Tunneling PhaseChairman
Chief Executive
General DirectorUK
General DirectorFrance
ConstructionDirector
Project CommonServices
Tunnel
Terminal
Isle of Grain
Administration/FinanceDirector
CommercialDirector
Project ServicesDirector
Human Relations & External RelationsDirector
Quality AssuranceDirector
EngineeringDirector
EngineeringGroup
Transportation SystemsDirector
Transportation SystemsGroup
ConstructionDirector
Tunnel
Terminal
TML Consortium(Transmanche-Link)
February 1988
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Fitting Out Phase
December 1989:
• Unified management structure • Devolving civil responsibilities to
Construction Groups• Disbanding Engineering Directorate• Operations grouped under
Construction Managing Director• Introduction of Technical Advisor to
Board
Chairman
Chief Executive
InternalAudit
Director
QualityAssurance
Director
CommecialDirector
TechnicalAdvisor to TML
Board
FinanceDirector
Construction ManagingDirector
LegalDirector
AdministrationDirector
Transportation & Engineering Man
Director
UK DirectorConstruction
France DirectorConstruction
ConstructionGroup UK
Building / CivilDesign
Tunnels
PrecastFactory
M & ESupervision
ConstructionGroup France
Building / CivilDesign
Tunnels
PrecastFactory
M & ESupervision
Transportation Systems &Engineering Group
Transport SystemDesign
Rolling StockDesign
Rolling StockProcurement
Transport SystemsContracts
Commisioning
Transport SystemProcurement
TML Consortium(Transmanche-Link)
December 1989
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Fitting Out Phase
Early 1991:
• Coordination problems between Transportation System & Engineering Group and Construction Group
• Devolvement of all M&E responsibilities to Construction Groups
Chairman
Chief Executive
InternalAudit
Director
QualityAssurance
Director
CommecialDirector
TechnicalAdvisor to TML
Board
FinanceDirector
Construction ManagingDirector
LegalDirector
AdministrationDirector
Transportation & Engineering Man
Director
UK DirectorConstruction
France DirectorConstruction
ConstructionGroup UK
Building / CivilDesign
Tunnels
PrecastFactory
M & ESupervision
ConstructionGroup France
Building / CivilDesign
Tunnels
PrecastFactory
M & ESupervision
Transportation Systems &Engineering Group
Transport SystemDesign
Rolling StockDesign
Rolling StockProcurement
Transport SystemsContracts
Commisioning
Transport SystemProcurement
TML Consortium(Transmanche-Link)
December 1989
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Chairman
Chief Executive
InternalAudit
Director
QualityAssurance
Director
CommecialDirector
TechnicalAdvisor to TML
Board
FinanceDirector
Construction ManagingDirector
LegalDirector
AdministrationDirector
Transportation & Engineering Man
Director
UK DirectorConstruction
France DirectorConstruction
ConstructionGroup UK
Building / CivilDesign
Tunnels
PrecastFactory
M & ESupervision
ConstructionGroup France
Building / CivilDesign
Tunnels
PrecastFactory
M & ESupervision
Transportation Systems &Engineering Group
Transport SystemDesign
Rolling StockDesign
Rolling StockProcurement
Transport SystemsContracts
Commisioning
Transport SystemProcurement
TML Consortium(Transmanche-Link)
December 1989
Fitting Out Phase
Christoph, Elvin, Henrique, Mingyi
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Commissioning Phase
March 1993:
• All operational aspects subordinated to Managing Director Operations
• Abolishing of Construction, Transportation and Engineering Groups
• Introduction of Tests On Completion Director and Commercial Directors: Dispute Resolution and Transport Systems
Chairman
Chief Executive
InternalAudit
Director
QualityAssurance
Director
CommecialDirector
TechnicalAdvisor to TML
Board
FinanceDirector
Head of LegalAffairs
Corporate & External Affairs
Director
Commercial Director: Dispute
Resolution
ExecutiveDirector
Managing Director
Operations
Commercial Director: Transport
Systems
CommissioningDirector
Fixed EquipmentCentral Director
Rolling StockDirector
UK OperationsDirector
French OperationsDirector
Tests on Completion
Director
TML Consortium(Transmanche-Link)
March 1993
French Operations
UK Operations
UK Operations
French Operations
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Chairman
Chief Executive
InternalAudit
Director
QualityAssuranceDirector
CommecialDirector
TechnicalAdvisor to TML
Board
FinanceDirector
Head of LegalAffairs
Corporate & External Affairs
Director
Commercial Director: Dispute
Resolution
ExecutiveDirector
Managing Director
Operations
Commercial Director: Transport
Systems
CommissioningDirector
Fixed EquipmentCentral Director
Rolling StockDirector
UK OperationsDirector
French OperationsDirector
Tests on Completion
Director
TML Consortium(Transmanche-Link)
March 1993
French Operations
UK Operations
UK Operations
French Operations
Commissioning Phase
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Financial Arrangements
Two different projects
Chunnel – the railway connecting France to England
Eurostar – the only high speed rail for the area
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
• Costs about $80 to drive from London to Paris ($35 gas and $45 tolls)
• Eurostar is not cheaper, but much faster
• Flight tickets are more expensive, but faster then the Eurostar
• TransManche Link (Cross Channel Link) - TML – 5 banks and the 10 construction
companies
Financial Arrangements – Chunnel
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
£10,153 billion 2007 cost of constructionCost overrun around 80%
Financial Arrangements – Chunnel
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Financial Arrangements – Eurostar
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Projected budget - £3,5 billion
1996 – TML raised only £250 million
1987 – extra £800 million (US stock crash)
1989 - £1,2 billion lawsuit by TML against Eurotunnel
1989 – change on door cost £35 million
Until 1994 Eurotunnel raised £6,8 billion and planned extra £800 million
Full project cost around £10,153 billion
Financial Arrangements – Chunnel
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Financial ArrangementsFinancial Arrangements – Eurostar
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
1995 – Suspend interest payments (£1,5 million a day)1996 – fire causes more loss
1997 – debt restructure, £8,7 billion generates loss of equity of Eurotunnel
1999 – feasibility study proved that the project was still not profitable
Financial Arrangements – Chunnel
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
• Eurostar investment - £15,6 million • Loss in 2003 - £1,33 billion• Loss in 2004 - £570 million
Financial Arrangements – Eurostar
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Thank you very much for your attention
Any Questions left?
Serdecznie dziękujemy
Muito Obrigado
Mного ви благодаря Muchas Gracias
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
References1. ``THE CHANNEL FIXED LINK : LE PROJET DU SIÈCLE`` - Graham M.
Winch, November 19982. http://www.wikipedia.org3. http://www.itc.nl/~ingeokri/newsletter/summer98/newpage1.html4. „The channel tunnel“ – Lieutenant Coloned, Leslie Allen Veditz, USA Air
forece
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
1. In what ways did factors from the external environments influence the client, and shape the
establishment and behavior of the project coalition?
France and Britain have been in need of affordable means of transportation since the 18th century, but politics have always been on the way of the Eurotunnel. It is not possible to talk about his case and not talk about change management. The entire project was full of surprises like the US stock market crash in 87 got the company $1,5 billion over the night; investor pressure for a fixed price in order to reduce their risk; ICG interferences (the safety issue regarding the door and the reduction of the maximum speed of the freight trains to 130km/h); hitting bad ground during excavation generated difficulties between the managers (external help was used to conciliate the parts).
Case Study - Questions
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
2. Describe governance of the project coalition. In your opinion, how appropriate was the choice of
the three different incentive structures in motivating TML and its supply chain?
55 years of concession, no regulation of the fares charged and a commitment not to support any other link with public funds or guarantees for the life of the concession were the way that the Franco-English government found to promote the channel tunnel project. They had to draw the attention from independent investors, and it worked, TML decided to undertake the project even though the project had to be entirely financed with private funds without any government guarantees.
Case Study - Questions
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2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
3. Conduct a stakeholder analysis of who benefited from the fixed link’s construction.
Governments UK & France: The Channel Tunnel promotes the trading connection between the countries and improves living conditions by cheaper and faster transport for both sides. The construction as well the tunnel operation improves employment in the respective regions.
Citizens of Europe: Better living conditions, Employment, Improved regional economy
Logistic Companies: Promoted trading connection
Channel Operators: Business interest
TML & Contractors: Business interest
Case Study - Questions
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
4. How and why did the organization design of TML change over the life cycle of the project.
1988: The initial nationally based twin structure of TML evolutionary decentralized into five Directorates as soon as the project went on site.
1989: After completion of the tunneling phase a unified management structure appeared. Operations responsibilities were grouped under Construction Managing Director. Disbanding Engineering Directorate and devolving civil responsibilities to Construction Groups. Due to difficulties within UK senior management a technical advisor to TML board was introduced.
1991: Cultural problems between “office” and “site” arose. Transportation System & Engineering Group was responsible for design of mechanical and electrical installations while M&E departments within Construction Groups were responsible for supervision. This led to coordination problems and devolvement of all M&E responsibilities to Construction Groups.
1992: With beginning of the commissioning stage Construction and Transportation Systems & Engineering Groups were abolished and operational aspects were subordinate to a single Director of Operations.
Case Study - Questions
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
5. What lessons can be learned from this account for the management of future large infrastructure projects?
Case Study - Questions
• Try to avoid the large international construction project, if the involved countries are without a common state interest. In this kind project, politic elements will be the most important critical reason, which will prevent or terminate the project, even in one country.
• Must have sufficient government support, if it is possible, government should be involved in the project as one of shareholders. Furthermore, must keep a close communication with government.
• Before starting the project, all shareholders should have a common interest and detailed understanding about the project.
• Must have a long term plan (long term project), aborative R & D, advance design and an effective organization structure, in order to avoid changes and reduce loss during implementing project.
• Coordinate the partners, subcontractors and investors. And build up a effective communication system
• Risk, change management
• Eliminate unnecessary changes
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2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
6. On what basis can the project be considered a success?
As we know, the Eurotunnel was constructed in order to have a cheaper and faster transport connection between UK and France and finally improve the living standards of European people. For such a great advantage of it, the project can be considered as a success.
Case Study - Questions
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1. Historical Context
2. Engineering
3. Organizational Transitions
4. Financial Developments
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
7. On what basis can the project be considered a failure?
The project can be considered a failure if we take into consideration the following aspects: it lost 6 months revenues due to delay in opening; its service were disrupted by technical problems; this had an impact on the market and damaged customer’s confidence; it encouraged the ferries to compete vigorously and prices fell well below expectations.
Case Study - Questions