Assignment 2

Red Bus: The Next Step For Growth

A Report submitted to
Prof. XYZ

Under fulfilling the requirement of

Managerial Communications- I

By
Anonymouis
Date of Submission: 13-09-2020
Letter of Transmittal:

XYZ
Consultant

Date: 13-09-2012

Phanindra Sama, Charan Padmaraju, and Pasupunuri

Partners, redBus

Dear Phanindra Sama, Charan Padmaraju, and Pasupunuri

This report contains analysis and approach for an appropriate course of action for
redBus next step for growth. A thorough analysis of the existing market scenario with
competitor analysis was done to understand what should be the best option to
achieve the target growth of redBus by 2015.
I hope you find this report satisfactory and it helps you take the necessary steps for
the same.

Sincerely,
XYZ
Consultant

Executive summary:
redBus has brought a significant change in bus travel booking by using technology
and the internet to help its customers to book bus tickets in real-time. It has
successfully changed the structurally unattractive, fragmented, and non-transparent
market for private bus travel ticket booking and solved the issues of bus operators
and travelers by reducing the dependency on travel agents. This report examines the
evolution and performance of redBus for the past years and an analysis to determine
the changes which could be made in the business model to consider the next growth
step for redBus and achieve the targets set for 2015.
Situation Analysis:
For many years, the ticket bookings for bus transportation services in India was
made by a manual ticket booking process. The Bus operators and the passengers
were utterly dependent on Travel agents for booking their bus tickets throughout the
country. The overall industry was known to be a fragmented supply chain that
involved the bus operators in relying on travel agents to fill up their bus seats. Also,
the travelers had to depend on travel agents to find the available seats and book
them at unknown prices. There was no transparency in this whole ticket booking
system until 2006 when redBus introduced a platform for online ticket booking for the
bus travel in India. This online bus ticket booking system solved the fundamental
problem for both the bus operators as well as the travelers and benefitted them with
the ease of booking tickets in real-time. Now, almost after six years, when the
company is looking to expand and grow the company, there are four options which
should be considered to choose the best one for the growth of redBus. The company
is targeting to reach a revenue of 7,347 crore rupees by 2015 from the 2012 revenue
of 2,534 crore rupees. To achieve this target, redBus can consider one of the four
options:
1. Extend the value chain by operating chartered buses of redBus
2. Expand our services with similar business models in other countries.
3. Diversify in other services such as bookings for air travel, hotels, cabs, tour
packages, etc.
4. Focus on improving the existing bus booking system.

Problem Statement:
Considering the four options for choosing the best choice for the next step for the
growth of redBus, the company would require to alter the things which it is already
doing. To choose the ideal option where the target is to almost triple the revenue in
2015 as compared to 2012. A thorough analysis has been done by using SWOT
analysis.

Criteria for Evaluation:

The SWOT analysis will help to determine what are the aspects which need to be the
focus on while expanding and potentially growing into a new market.
Strength: The strengths of redBus are that it has already brought a considerable
change in how the bus ticket booking used to work by introducing the online ticket
booking platform. The experience which redBus has gained from 2006 to 2012 will
help it to invest in new and diverse projects by modifying the existing revenue stream
and increase the RoS- Return on Sales and other metrics. The current customers
are also very loyal to redBus due to its quality service and the product which it
provides. The three different products that redBus offers are BOSS, the online
platform, and the seat seller. The Boss can be used to attract more bus operators as
it allows the operators to update their inventory of available seats in real-time. The
online platform helps the customers to book bus tickets without depending on
agents. Also, the Seat seller is available to B2B customers such as MakeMyTrip and
Expedia through which they can provide bus ticket booking for their customers in
real-time. These features or products can be leveraged by redBus to compete with
other global competitors while they try to expand in other countries.
Weakness: The working of redBus or it's business model is at risk when it goes for
expanding in international markets. Even though the company has copyrights and
patents, the business model can be easily replicated by other competitors in global
markets. A thorough market analysis is necessary as the company has no prior
experience in providing services in other countries. redBus could also find issues
with getting fundings to expand in international markets, and this must be taken care
of to avoid any setbacks before expanding.
Opportunities: The online travel industry had seen massive growth from 6250
thousand crores in 2007 to 37890 thousand crores in 2011. By 2012, the overall bus
industry has also grown at a rate of 25% per annum with market size of nearly 183
thousand crores and annual sales of 22 crores tickets. This growth shows that the
online travel booking market has grown effectively in just four years. With the
company's existing offerings of services, redBus can look into expanding its business
into new markets.
Threats: The expansion of redBus services can face a lot of competition from
existing competitors and also from new emerging competitions both in domestic as
well as global markets. To compete with these competitors, redBus might have to
rethink its pricing strategies and business model.

Evaluation of Options:
Considering the above SWOT analysis of redBus, it is now easy to understand the
existing challenges and choose among the available four options for the next best
step for the growth of redBus. The options available are as follows:
1. Extend the value chain by operating chartered buses of redBus
2. Expand our services with similar business models in other countries.
3. Diversify in other services such as bookings for air travel, hotels, cabs, tour
packages, etc.
4. Focus on improving the existing bus booking system.
Recommendation:
While evaluating the available options with the help of SWOT analysis, the most
feasible and the next best approach for the growth of redBus would be to expand its
services in other countries. redBus has proven experience in the domestic market in
India. It has successfully provided its services to both the bus operators, customers
booking tickets, and also businesses such as MakeMyTrip and Expedia. With this
experience, redBus can enter and look for its expansion in global markets and
achieve its target of 7,347 crore rupees by 2015.

Extending the value chain by operating chartered buses of redBus is not advisable
as the bus operators who are the customers will become the competitors which they
may not like and affect the relations of redBus with these bus operators.
redBus Diversifying in other services such as bookings for air travel, hotels, cabs,
tour packages, etc. is again not advisable as there are already a lot of well-
established competitors like GoIbibo, MakeMyTrip, etc. It would be time-consuming
to get into the other services which these competitors are providing, and the target
for 2015 might not be achieved.
If redBus focuses only on improving the existing bus booking system. The revenue
generated would be insufficient to meet the target for 2015.

Action Plan:
The next best step for the growth of redBus is to expand the services of redBus to
other countries. For this, thorough research considering the demographics, Income,
and already existing services in bus ticket booking should be done to understand the
target country's market.