Debrief

European companies are feeling the pressure from new discount competitors, whose business models utilize advances in technology to provide cheaper, more efficient products. According to the Globe and Mail article, this is most prevalent in the airline industry, where companies – Ryanair and easyJet for routes within Europe, WestJet and Southwest for those in North America – are quickly eroding the market power of the “high-cost, debt-ridden” incumbents, such as British Airways.

My Opinion

Honestly, I am not surprised by this turn of events in the European markets as they reflect the evolution and modernization of society. A parallel Clayton 
Christensen’s theory of “Disruptive Innovation“, British Airways (BA) has established itself as a leader in its industry. Created in 1974, BA was among the first into the commercial airline industry in Europe, a relatively new and innovative concept at that time.  Because of their market power, BA did not feel the need to innovate and sustain their advantage. This was characterized by their decision to not integrate the growing desire for lower cost fares into their business model, instead keeping fares above the industry equilibrium so as to maximize profits. This laziness allowed lower-cost companies, such as Ryanair and WestJet, to come in and displace the established firm, providing a cheaper alternative to the expensive BA. Ryanair and other’s lower fares are a direct result of having lower maintenance and overhead costs for their airplanes by way of innovation. This allowed the airline industry to be available to a greater number of people, perfectly illustrating Christensen’s timeline of a disruptive innovation. After all this, I am not at all surprised that Europe’s traditional powerhouses are slowly fading away into non-existence. All these years, instead of trying to sustain their innovation, they fed off their innovation’s market power. Now, their sins are catching up to them, and, as told by Mr. Christensen, the process of disruptive innovation is running its natural course.

Reguly, Eric. “European Businesses Feeling the Pinch from Discount Competitors.” The Globe and Mail. The Globe and Mail, 9 Nov. 2014. Web. 10 Nov. 2014.

Disruptive Innovation Explained. Perf. Clayton Christensen. Harvard Business Review, 2012. Youtube.

Babbage, Joanne. “British Airways’ Rapid Descent.” BBC News. BBC, 11 Sept. 2009. Web. 10 Nov. 2014.

Digital image. Eco News RSS. Eco News, 14 May 2013. Web. 10 Nov. 2014.

Ryanair Logo. Digital image. Amazigh TV. Amazigh TV, 10 Oct. 2014. Web. 10 Nov. 2014.

British Airlines Profits/Losses. Digital image. BBC Co. United Kingdom. BBC News, 9 Nov. 2009. Web. 10 Nov. 2014.