SITUATIONAL ANALYSIS

A. Environment 1. Economic conditions and trends The Philippine economy has been in decline for a long time, however, these days it is on its way to growth. Tourism and foreign investment are contributing to the growth of the countrys economy. It has a promising growth of economy because it is recently identified by the Forbes Magazine as Philippines as a growing country which foreign investors are attracted to have business in the Philippines with countries like Taiwan, China, Japan, and other neighboring countries. In addition, Davao City is one of the most anticipated city that has a big growth rate and incoming investors as of 2013 by the Sunstar Newspaper. Currently, there is an inflation increase of 2% in provided by Inquirer Newspaper as of 10/13/2013. It is expected the cost will also increase and prices will increase for fares, gasoline, and other necessities. The Mindanao area has the least rate of prices compared to the Luzon and Visayas. 2. Cultural and social values and trends Philippines are a haven for festivals, celebrations, and gatherings for foreigners and local enthusiasts. Especially for Mindanao area, where natives are found like Bagobos, Lumad, etc where foreigners and visitors are attracted to witness what is not accustomed to their lifestyle. Not only for foreigners, Filipinos also love to travel. Most are anticipating having a break in their everyday life and having some recreational activities. The Mindanao Area especially the Davao City has an increasing growth rate of population particularly the Koreans (cited by Sunstar Newspaper) and is expected that the tourism has large increase in the Mindanao area which will be good for bus travel business.

A vast majority of the Philippine public are conditioned to travel through bus lines since their annual income demands less expenses. And since Bus lines are the cheapest way for commuting long distances, the general Filipino public will be obliged to travel through bus lines. 3. Political and legal issues There are agreements to be heard and kept within the transportation service industry with regards to fare agreements with substitute products. So K2 V2 is obliged to come into agreements with them. And as long as compliance with licensing and registrations of K2 V2s personnel and equipment are in accordance with the law, there shall be no legal issues that will threaten the welfare of the new bus line. Unfortunately, fortuitous events like storm, the recent attacks of rebels in Zamboanga area and bombings are alarming the security of the local and foreign citizens that have a big effect regaring the tourism of the country. 4. Summary of environmental opportunities and threats OPPORTUNITES -Philippines is a place for festivals and A celebrations special occasion etc is a like Kadayawan, for bus

Christmas,

boom

transportation business due to the heavy traffic of visitors and local citizens to celebrate these occasions. -the need for recreational activities is a This is a need for human beings and must people have a tendency to go places to travel for the purpose of self-refreshment from work, stress, and other reasons. -mindanao has the least rate of prices People love cheap prices and low

expenditures and obviously they will afford the most cheapest bus transportation -FIlipinos love to travel Bus transportation businesses has the

opportunity to capture possible customers who love to travel THREATS -recent attacks of rebels in Zamboanga Due to this events, local citizens and and bombings visitors are affected by the security of their welfare and this will affect the traveling businesses since there will be reduction of income due to the recent activities that happen. continues growth rate of investors Although this is a positive view of growth rate of the country, there is a possibility of new entrants of competitors to have a bus transportation businesses will be visible in the near future.

5. Implications for strategy development Market Development The opportunity to gain preference in the bus line industry implies that there is potential for industry dominance. If K2 V2 will be able to penetrate the market with useful strategy that is unique and will set them apart from competitors, the company can capitalize the market in the environment it is in. It is a good idea to create a tour bus business since Philippines is a haven for festivals and people love to travel for recreational activites, transporation vehicles are a need for this business. In addition, busses are one of the dominant transportation that are preferred by the people. Mindanao has also the least rate of fare expense compared to the other parts of Philippine Islands. B. Industry 1. Classification and definition of the industry

Bus Transportation Services Industry is a sector of the transportation industry. Major types of bus service include school, urban, interurban and rural, charter, and paratransit (transportation of people with disabilities). K2 V2 will be an interurban and rural bus transportation service. 2. Analysis of the existing competitors Since we are situated in Davao city area, we will focus on the bus transportation companies who caters Tour busses to their customers. Below is the list of established and known existing competitors and their summarized information.

Yellow Bus Line Inc.

From: http://www.southcotabatonews.com/2012/11/yellowbus-executive-class-bus.html

Yellow Bus Line, Inc. the top utility bus line operating in South Cotabato and other parts of South Central Mindanao now has EXECUTIVE CLASS buses equipped with free WiFi services and a toilet!

According to a YBL personnel, Yellow Bus Line has two (2) units of Executive Class buses(A-001 & A002) both are servicing for the meantime the Koronadal (Marbel) - General Santos City route and vice versa while waiting for its yellow plates to be issued, these Executive Class buses are still using the private green plates.

The new YBL Executive Class buses are 42seaters with two video monitors for film showing and comfy seats all equipped with seat belts and

footrests. Light snacks and bottled drinking water are also available for a fee on board.

Aside from the free WiFi services which enables commuters to stay connected to their loved ones and friends, there are also CCTV cameras installed inside the new YBL Executive Class buses which enables the driver to see his passengers while driving.

Bus fare is P 14.00 more than the Premier Class aircon bus or P 97.00 (one-way) for a less than an hour of travel from Koronadal- Gensan and vice versa. Worth it for those looking for a first class service.

Davao Metro Shuttle

From: http://www.davaometroshuttle.com/about-us/history/

Davao Metro Shuttle Bus Company started as a taxi company in September of 1995 with forty (40) units of Kia taxi and sixty (60) units of Lancer taxi. It was then a partnership of Mr. Rey T. Uy and Mr. Reynaldo Alba. In the early part of 1996, the partnership decided to purchase the nineteen (19) nissan Airconditioned Davao Metro Shuttle minibuses from Mike Ang. The route of these buses was Davao-Digos with its terminal located in Acasia Street, at the heart of Davao City. In September of 1996, the partnership was able to add thirty (30) brand new 58-seater Regular Airconditioned buses.

Ten (10) of these were addition to Davao-Digos route and the other twenty (20) for the newly opened route Davao-Tagum. Vallacar Transit Corporation From:

(owner of Rural Transit Mindanao http://busesofmindanao.blogspot.com/p/rtmibei.html Inc. and Bachelor Express Inc.) Starting its roots in 1968 as the family business of Mr Ricardo Yanson and his wife Olivia Villaflores Yanson. They started with one jeepney unit and evolving to a jeepney assembly business. In the 1970's, there was a large influx of Ford Fiera's in the market. The jeepney assembly became a small bus line plying the Bacolod City - Valladolid - La Carlota (VALLACAR) route named the CERES LINER. In 1981 they ventured into Mindanao, buying out Cagayan de Oro based bus companies Fortune Express and Bachelor Express in 1985. Fortune Express changed its name to Rural Transit Mindanao Incorporated while Bachelor Express retained its name as part of the contract conditions. In 2005 they bought out Lilian Express Incorporated and Mary May Express. They pioneered travel through the Western Nautical Highway in 2007.

The industry rivalry is high since the bus transportation industry has high exit barrier due to the high fixed cost of the operating expenses of the busses. The bus transportation is also growing since the population of tourism in the Mindanao area is rapidly increasing. 3. Analysis of the potential new entrants

Since most of transportation comes from known company busses like the mentioned existing competitors, there is hardly known new entrants since other means of transportation are covered by substitutes (which are listed below) . The threat of new entrants is low since the capital requirement to start a bus transportation business is high. Our busses are also differentiated compared to traditional busses because we have more facilities to offer for our customers like C.R., etc.

4. Analysis of the Substitute products Van This is a common transportation which is the most known substitute for busses to local citizens. Vans can be hired to travel like busses. The only limitation is that vans has limited number of capacity to hold people unlike the busses. Jeepney This substitute is also common for

transportation like the van. The only difference is the convenience it gives to its passengers because jeepney is an open door where there is no air-conditioning for refreshment in hot season. Private car A dominant substitute where people

always perceived that a car is the most convenient transportation to use because it is free of charge.

There is a high threat of substitute

because there are many substitute products

available and Customer can easily find the product or service that are offered at the same or less price

5. Analysis of the suppliers

Equipment parts and gasoline are one of the suppliers for bus transportation business. These external sources have low power since the switching cost to another supplier for gasoline is low and the equipment for spare parts can be supplied to another supplier.

6. Analysis of the buyers Our buyers are people who travel; they have less bargaining power since tour bus is a need for people who travels in local places. Tour bus is a demand for most travelers due to its convenience. Many customers are chasing too many busses and substitute vehicles. Our product is also affordable to all people.

7. Summary of the industry opportunities and threats OPPORTUNITES Market development is possible Since the threat of new entrants is low. It is possible to start a tour bus business due to the low visibility of new entrants coming up. Less operational cost It is identified that there is a low power of suppliers. Because of this, suppliers may need to lower their prices to capture transportation business clients. It is also easy to find the cheaper parts and gas to lessen expenses. Continuous demand of buyers to bus There is a less bargaining power of buyers transportation company because of the need of transportation services. THREATS Pure competition less target market Since industry rivalry is high, the target market will be divided to its competitors and our K2V2 will not enjoy monopolizing and economies of scale in the bus industry.

dominance

Rapid growth of substitute leads to pirating High threat of substitute greatly affects the repeat customers profit of the company and its loyal customers.

8. Implications of the strategy developments Product Development Since there is an unstoppable growth of substitutes and pure competition in bus transport industry, it is a best idea to upgrade our bus which will be differentiated to traditional busses. Our K2V2 bus have special facilities like C.R., built-in MP3 player for every sit with headphones, WiFi, and a Flat screen T.V. that can play DVD movies. Our prices will also be affordable to the mass public. Our customers will enjoy this benefits and we know that people choose the more convenient and satisfying transportation vehicle. This can help lessen the impact of the growth rate of market share of the substitutes and the existing competitors. C. Organization 1. Objectives and Constraints

Objectives

Constraints

To be the leading bus transportation in -low brand recognition to the public since terms of tour bus category in the Mindanao we are starting up area. -fierce pure competition in existing competitors and growing substitutes Provide customers the best facilities and -limited number of buses since we will start services that they can enjoy which are only at 5 buses in our start up. available on ours. Offer the most affordable prices for every -breakeven is a long reach for maximizing

category of customers while maximizing profit since the bus industry has a huge profit and minimizing cost. amount of capital to start -External control of inflation and deflation of prices which will affect the operational cost and other expenses Enriching repeat customers and loyal ones -Low brand recognition needed to have heavy promotional efforts to make our company known to the public -creating trust on our brand is hard since we are still starting up so investors and business partners still dont have trust to our product

2. Management Philosophy Biyahe mo to We believe that the passengers who will book are buses are not just customers to avail in the bus but let them feel them that they own the bus and travel to their hearts content. It is our duty and desire that the passengers will experience the fun journey of feeling the breeze and love of the sake of traveling towards their destination. 3. Organizational Structure

Engineering head - Ken Hager

Financial Manager Vincent Musne

Marketing/ Sales Manager - Von Nazareno

Human Resource Kevin Pedroso

5. Organizational Culture We practice Filipino tradition style where the culture is inherited in our buses through the service and design of the bus. We like to experience our dear passengers especially the foreigners to have a taste of Filipino culture to promote patriotism. 6. Summary of the firms strengths and weaknesses
STRENGTHS

Patronizing nationalism

Visitors

especially

foreigners

love

to

experience new culture because that is the reason why they travel towards the

Philippines. Patronizing the culture of the Philippines through our buses will increase the public relations of the country to other foreign lands. Differentiated for hire Our busses are exclusive for booking and passengers will enjoy the benefit of nonstop ride unlike traditional busses that are needed to stop to load passengers.
WEAKNESSES

Low brand recognition and market share Since are buses are differentiated and we towards the bus transportation industry are start up, our existence to the public is not really known and the trust of the prospects and possible business partners will be low. Funds are not enough Since we are only limited to funds, we are also limited to provide more buses for hire and other services to render to customers. Promotional mixes and media are limited As we are financially limited, our

promotional efforts are also limited which

will vary to our funds.

7. Implications for strategy development Internet Marketing It is cited that we are financially limited so the best way to promote our busses is the internet marketing where we will bombard the social networking sites. It is known that these sites like Facebook, twitter, Instagram, etc are the most cheapest and used medium to connect with people due to its massive users online. In addition, it is a social networking site where people interact with each other and this will provide us a chance for viral marketing. This way, we can advertise our busses and they can see the needed information about us. We also didnt need to spend a coin just to put up a Facebook or Twitter page.