Assignment 2: redBus: The next step for Growth

A report submitted to
Prof. Danesh Gojer
In partial fulfillment of the requirements of the course
Written Analysis and Communication- I

By
Anurag Bajpai
Section B
Roll No. 166018
On
31-07-2016

Letter of transmittal

To,
Mr. Phanindra Sama
CEO, redBus
Date: Sep 8, 2012
From,
Mr. Anurag Bajpai
Consultant, XYZ
Subject: Report on the future growth prospects of redBus.
Dear Mr. Sama,
A report has been enclosed with recommendation and the complete market analysis as per our
discussion regarding the next step redBus should take while considering the future growth
prospects of the company.
Please call me, if you have any queries.
Yours Sincerely,
Anurag Bajpai

Summary
Situation analysis
redBus has shown splendid success in the non-transparent and fragmented market of bus
travel industry by enabling a technology platform to bridge the demand and supply disparity
in the bus travel industry.
redBus had shown magnificent growth and expected a profit of US$0.18 million in 2012. Its
revenue had increased from US$ 7847 in 2007 to US$ 6.45 million in 2012. During 2011,
redBus had more than 65% market share in online bus booking system. Now, redBus want to
achieve annual revenues of US$ 1 billion by fiscal year 2015.
Statement of the problem
What course of action should redBus take to make annual revenues of US$1 billion by fiscal
year 2015?
Options
1. Vertical Integration- operate its own buses
2. Expand the businesss operations and services globally
3. Diversify the business by providing services like online bookings for air travel, hotels,
cabs and package tours
4. Maintain the focus on the core business
Criteria of evaluation
Criteria of evaluation in accordance to their priority are
1.
2.
3.
4.

Financial impact
Market competition
Maintain the high service level
Risk involvement

Evaluation of options
Option 4 has satisfied all the aforementioned criteria. While option 1 and 2 has involved high
financial risk. Option 2 and 3 has high market competition and also involve improbability of
maintaining the high service level.
Recommendation
By evaluating the different criteria, it can be seen that the core business of redBus has vast
opportunity of growth and involve less market competition and lower risk. So, while taken
into consideration the main focus of redBus was on achieving the annual revenues of US$ 1
billion, it would be recommended to maintain the focus on the core business (Option 4).
SITUATION ANALYSIS

The fragmented network and manual ticket booking system had led to revenue loss for bus
operator and ticket unavailability issue for bus travelers. These bus operators and bus
travelers both were dependent on the travel agents to fill their seats and to get the tickets
respectively. The ticket booking process became a cyclic process where traveler would go to
travel agent then travel agent will ask to bus operator for the ticket then travel agent would
report back to bus traveler.
redBus has shown splendid success in the non-transparent and fragmented market of bus
travel industry by enabling a technology platform to bridge the demand and supply disparity
in the bus travel industry. redBus marketed itself as a bus-ticketing company that served bus
operator by providing an online application plug-in called BOSS (Bus Operators Software
System) to display their real-time inventory, and served bus travelers by providing multiple
ticket booking system like the company web site, call centers and other online travel agents
(OTAs) who used redBuss Seat seller application on their websites. The main focus of
redBus was to provide transparency in the booking process and to provide special services to
both travelers and operators (exhibit 1).
redBus had shown magnificent growth and expected a profit of US$0.18 million in 2012. Its
revenue had increased from US$ 7847 in 2007 to US$ 6.45 million in 2012. During 2011,
redBus had more than 65% market share in online bus booking system. Now, redBus want to
achieve annual revenues of US$ 1 billion by fiscal year 2015.
PROBLEM STATEMENT
What course of action should redBus take to make annual revenues of US$1 billion by fiscal
year 2015?
OPTIONS
1. Vertical Integration- operate its own buses
2. Expand the businesss operations and services globally
3. Diversify the business by providing services like online bookings for air travel, hotels,
cabs and package tours
4. Maintain the focus on the core business

CRITERIA OF EVALUATION
1. Financial impact
3

2. Market competition
3. Maintain the high service level
4. Risk involvement
These criteria have been prioritized on the basis for the future growth prospects. Since,
redBus main focus was on achieving the annual revenues of US$ 1 billion, I have allocated
highest priority to financial impact. Second priority has been allocated to market competition
because it will be a challenging and complicated task to make your service stand out in a
saturated market. The progress of any business depends on its ability to maintain its brand
value. So, I have allocate higher priority to maintain the high service level than risk
involvement.
EVALUATION OF OPTIONS
1. Option 1: Vertical Integration- operate its own buses
Criteria 1: Financial impact
With the analytics and data mining abilities, redBus can identify the most economical
routes. So, it will be highly profitable to run its own buses on these routes.
Criteria 2: Market competition
There are thousands of bus operators, so it will create higher competition among the bus
operators.
Criteria 3: Maintain the high service level
Since, operating and managing the buses will be a new task for the redBus. So, new
managerial issue will arise in the company.
Criteria 4: Risk involvement
If redBus go with the target of atleast 50% of company owned buses, it will require a
huge investment.
2. Expand the businesss operations and services globally
Criteria 1: Financial impact
Because of the absence of online infrastructure of bus travel booking, there is a huge
market potential in foreign countries.
Criteria 2: Market competition
There are many local bus operators in global market.
Criteria 3: Maintain the high service level
4

Operating and managing the buses in global market wont cause any trouble in Indian
market.
Criteria 4: Risk involvement
redBus required huge investment and complex and careful analysis of country-specific
indicators like socio-economic trends, existing bus infrastructure, and internet penetration
rate
3. Diversify the business by providing services like online bookings for air travel, hotels,
cabs and package tours
Criteria 1: Financial impact
There are large number of competitors in these services. So, it with this option it is quite
difficult to achieve the annual revenues of US$ 1 billion.
Criteria 2: Market competition
There are local bus operators in global market but they dont have online infrastructure of
bus travel booking
Criteria 3: Maintain the high service level
Being a new player in aforementioned services a minute bad experience may have
adverse effect on customer loyalty and brand value of redBus.
Criteria 4: Risk involvement
Not the core competencies of the company and may cause distraction from the core
business.
4. Maintain the focus on the core business
Criteria 1: Financial impact
Since, there was a high rate of adoption of internet of internet and communication and
positive socio-economic trends, there are great opportunities to increase their market size
in bus transport industry which is approximately US$ 2.5 billion.
Criteria 2: Market competition
Low market completion in bus travel booking services.
Criteria 3: Maintain the high service level
redBus have already maintained high service level in the current service portfolio.
Criteria 4: Risk involvement
No specific risk involved except the narrow service portfolio.

RECOMMENDATION
By evaluating the different criteria, it can be seen that the core business of redBus has vast
opportunity of growth and involve less market competition and lower risk. So, while taken
into consideration the main focus of redBus was on achieving the annual revenues of US$ 1
billion, it would be recommended to maintain the focus on the core business (Option 4).

ACTION PLAN

redBus is still an adolescent and should follow step by step methodology to target the
majority of market share.
1. Targeting bus Operator: There are thousands of bus operator in the country but
redBus succeed to involve only 800+ bus operator into the business, which is very
less market share. So, it should increase its influential sphere among the bus operator.
2. Targeting bus traveler: redBus has market share of only 65% in online bus ticketbooking system. So, it should work on its marketing strategy to increase the market
share.
3. Internet awareness: To increase the market share, redBus should focus on higher
internet penetration. It can take help of television or print media advertisement where
it should demonstrate how to use redBus while using internet. redBus can also give
incentives like one GB internet pack for first time redBus user and other similar
incentives.
4. Call center and local Kiosk: Because of low internet penetration, redBus should focus
on its call center services and start kiosk services in major cities.
Word Count: 1088

Exhibit 1: The values provided by redBus

For Bus Operators
BOSS application
Website, offline call centers
Seat seller application for travel agents

For Bus Travelers

Transparency in the booking process
Reliability of services
Real-time access to the available tickets

on requested routes
Transparent pricing
Choice on the bus, seat number,
payment mode etc.