Report on American Airlines Inc

The case is about American Airlines Inc. and its predatory pricing strategy. In the case study, the Supreme Court's decision about the illegal pricing strategy of American Airlines Inc. is discussed. According to this case, the Dallas market had three small carriers including Western Pacific, SunJet International, and Vanguard in the late 1900s. American Airlines Company offered low prices to increase its services on mid-western cities routes. Information presented in the case study shows that American Airline Inc. had selected price cut strategy and lower its fares to $80. Later on, after covering a huge market share and influencing the competitors business they again scaled back their prices to $147. On this attempt, the court announced their strategy an illegal strategy to deal with customers and competitor companies. Furthermore, the US senate also issues guidelines for airline companies to prevent large carriers from the elimination of startups. The case study also covers the examples of the retro case between General Motors and Ford Motors Company. According to the presented information, Ford Company developed a price cut strategy in 1910 when they introduced Model T. Competitor companies Oldsmobile and Buick captured the major portion of market share with their innovative and attractive vehicles. Although to address the requirement of increased competition and to deal with the poor market response towards Model T,  Ford Company decided to cut prices by 20%. Conclusively, a case study is all about the price cut strategy and its outcomes. Summarizing the information presented in the case study we can say that price cut strategy provided financial benefits to the Ford Motors Company and American Airlines Inc.          

The predatory strategy is a pricing strategy to deal with competitive forces. Organizations working in highly competitive markets try to win maximum market shares by increasing sales of their product. In the presence of competitor’s alternative products and substitute it is difficult to boost up product sales immediately. Thus, to deal with competitive forces companies cut prices and attract their proposed customer market towards offered products at a cheap rate. Under this strategy, companies decrease prices at the level where competitors cannot compete them. Thus they create a monopoly with very low price. The predatory strategy draws a negative impact on the businesses of competitor companies and the overall industry. In the result of this strategy, such companies get a monopoly in the industry and later causes problems new entrants by creating barriers and building customer equity. Because of monopoly they also set high prices which causes problems for customers (Ferrell & Hartline, 2007).

Predatory pricing strategy should be considered as an illegal pricing strategy as it generates negative consequences and impact. Predatory pricing promotes monopoly which attempts to drive competitor companies out of the selected segments of the market. Predatory pricing strategy influence the fair pricing system in the market which is also a major reason to conclude predatory pricing strategy as an illegal pricing strategy. Moreover, it is also going toward the violation of antitrust law. Antitrust law is developed to make markets highly vulnerable and defensive against monopoly. Considering these reasons, predatory pricing strategy should be an illegal strategy.       

Yes, being a policymaker I would suggest to protect consumer rights by controlling monopoly system from all industries and markets. Monopoly can be eliminated by reducing entry barriers in an industry and market as removal of barriers will encourage new competitor companies to come up with more innovative solutions and quality products to attract customer rather than just reducing prices. Moreover, I would also suggest control on predatory pricing strategy in all markets to reduce chances of monopoly and protection of consumer rights. Quality products should be offered to consumers at reasonable and fair prices (Pettinger, 2017).