Calculator Allowed: No



Transcription of this question: 4.Pacific BlueIn 2007, the low cost airline Pacific Blue entered the New Zealand market with an initial Offer to sell70000 tickets at low prices on flights between Auckland, Christchurch and Wellington. Almost halfOf the $29 tickets were booked online within hours. Chief executive Brett Godfrey expressedhis surprise: “It almost caused our website to crash”Air New Zealand and QANTAS, the established market leaders were quick to respond to thenew competitor by cutting prices to $49. A director Of Air New Zealand doubted whetherPacific Blue could sustain these prices as part Of its long-run strategy to enter the New Zealandmarket She also questioned whether the company could satisfy demand with only 2 planes for11 scheduled flights per day between Auckland and Wellington, the most popular route By contrast,Air New Zealand uses 7 planes on the same route. A QANTAS director has commented thatPacific Blue could face significant capacity utilization problems.Brett Godfrey accepted that Pacific Blue might run at a loss initially, but he was also confidentabout penetration pricing: “we have done this before in Australia and we have money in the bankto survive and hope to Offer more routes, subject to government approval and the support Of theNew Zealand public.”Air New Zealand and QANTAS promised to remain competitive.[Source adapted from rhe Age, 4 September 20071(a)(b)(c)(d)Define the following terms:(i) capacity utilization(ii) penetration pricingExplain two capacity utilization issues that Pacific Blue may face.Examine two problems that Pacific Blue could face when using penetrationpr1C1ng_Evaluate two potential opportunities and two potential threats whichPacific Blue could face when entering into a new international market[2 marks][2 marks][6 marks][6 marks][9 marks]

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