Assignment 2

redBus: The Next Step for Growth

A report submitted to

Prof. PREETA VYAS

In partial fulfillment of the requirements of the course

Written Analysis and Communication - I

By

JEETESH VARSHNEY

Section C

Roll No. 188118

On

28-07-2018
 Letter of Transmittal

To,
Mr. Phanindra Sama,
CEO, redBus

Date: 27 August 2012

Subject: Formulate a strategic direction and action plan for the year 2015 and further growth
and scalability.
Dear Sir,
As requested I have prepared a report which contains detail analysis of the options available
to redBus for future growth and scalability. Based on the analysis, I have evaluated those
keeping in mind the criteria mentioned in the report. For each option, I have listed the PROs
and CONs which will give you a detailed view of the options. I have also recommended an
option along with its action plan.

Yours Sincerely,
Jeetesh Varshney
Consultant
 One-page report summary

Situation Analysis: redBus overturns the way of booking of bus tickets and make it more
transparent and efficient. It bridges the gap between bus operators and travellers. After being
grown in many folds since its inception in 2006 till 2012, it is further looking for the new
opportunities of growth with the help of its strengths which it developed it due course.
Problem Statement: Which well suited course of action should redBus take for its future
growth and scalability and to full fill its plan to achieve a turnover of US$1 billion by 2015?
Options:
1. Vertical Integration
2. Go Global
3. Increase in Services Portfolio.
4. Concentrate on the Core Business.

Criteria:
1. Growth in Revenue and Profits
2. Retaining focus on Core Business
3. Additional Expansion Opportunities

Evaluation of Options:
1. Considering Vertical Integration as the best possible option:
- redBus already have a strong analytics and data mining abilities. They can use this
to find the most profitable routes and can launch their services on these routes.
- Huge Capital requirement for buying buses.
- It can cause a divergence from their core business.
2. Considering Go Global as the best possible option:
- As the redBus already have a platform which is quite extensive, same can be used
for international services also.
- They have to spend a lot of money on market research and marketing of their
brand.
3. Considering Increase in Services Portfolio as the best possible option:
- Exponential growth of online bookings market.
- Huge competition in online booking industry and profit margins are low.
- Not the core competency of the company and will divert them from their core
business model.
4. Considering Concentrate on the Core Business as the best possible option:
- Exponential growth of bus transportation with 25% annual growth rate.
- Lot of untapped market to capture, they will always have the first mover
advantage.
- Need to increase team size to manage more bus operators and travellers.

Recommendation: redBus should finalise Concentrate on the Core Business as the best
possible option as it fulfilled the top two criterions of high revenue growth and keeping the
focus on Core Business and competencies.
-

Main Report

Situation Analysis:
Before the coming of redBus in the market in 2006, overall bus travel industry was described
as divided production network, which included a huge number of bus transport administrators
depending on travel agents to top off their bus seats and travellers were additionally reliant on
them for finding the accessible seats and booking them. There has been a lack of transparency
in addition to mismatch in demand supply, delay in payments and tedious booking process.
After the advent the redBus the whole bus travel industry got transformed as it introduced a
technology platform that upset the current method for booking totally. The booking system
get more transparent as bus operators and travellers get a real-time interface to communicate
between themselves. In addition to this, benefits like more penetration, increase in the
number of routes and buses as more bus manufacturers start expanding.
redBus utilizes a decentralized authoritative structure and entrepreneurial culture that offer
adaptability and strengthening for their young, enthusiastic and dynamic representatives to
share their thoughts. It works in both the business to business (B2B) and business to customer
(B2C) fragments and has the one of a kind favourable position of working on a negative
working capital income because of the advance cash from booking exchanges
redBus has established a niche position in bus ticket booking industry as it enjoyed a market
share of the overall industry of 65% (approx.) in online bus ticket booking amid 2011. The
main drivers of this growth are early mover advantage, efficient online and offline business
model, large network of bus operators and high levels of customer satisfaction. Despite all
these, redBus faces continuous threats from online travel agents (OTAs), travel agents and
local or regional players.
The redBus needs to look out for new opportunities like vertical integration with procurement
of buses, horizontal integration into airline, hotels etc booking, global expansion into
overseas markets.

Problem Statement:
Which well suited course of action should redBus take for its future growth and scalability
and to full fill its plan to achieve a turnover of US$1 billion by 2015?
Options:
1. Vertical Integration – Launch its own Private Buses (backward integration).
2. Go Global – Long Term Strategy.
3. Increase in Services Portfolio.
4. Concentrate on the Core Business.
Criteria:
1. Growth in Revenue and Profits
- Most important criteria as the company is aiming to achieve a turnover of US$1
billion by 2015.
2. Retaining focus on Core Business
- Having the first mover advantage, redBus keep focusing on what they are good at.
3. Additional Expansion Opportunities
- To grow further redBus should also explore other additional expansion
opportunities to attract more customers and to increase revenue.

Evaluation of Options:
1. Considering Vertical Integration as the best possible option:
 PROs
- Supplier bargaining will be reduced and will result in cost savings.
- redBus already have a strong analytics and data mining abilities. They
can use this to find the most profitable routes and can launch their
services on these routes.
 CONs
- Huge Capital requirement for buying buses.
- It can cause a divergence from their core business.
- They will have to hire new team to manage this vertical and the
overhead costs will increase.

2. Considering Go Global as the best possible option:

 PROs
- As the redBus already have a platform which is quite extensive, same
can be used for international services also.
- No major competitors at present.
- Enormous opportunities in Asia region, these can be looked to sustain
in long term.
 CONs
- Present team has no experience in working in a global market.
- Need to study the socio-economic trends in global market, consumer
behaviour.
- They must spend a lot of money on market research and marketing of
their brand.
3. Considering Increase in Services Portfolio as the best possible option:
 PROs
- Exponential growth of online bookings market.
- It will increase the revenue generation as the transaction involved are
high and enhance the customer base.
- Strong technology platform and infrastructure to integrate these add-on
values.
 CONs
- Huge competition in online booking industry and profit margins are
low
 - Not the core competency of the company and will divert them from
their core business model.

4. Considering Concentrate on the Core Business as the best possible option:

 PROs
- Exponential growth of bus transportation with 25% annual growth rate.
- Lot of untapped market to capture, they will always have the first
mover advantage.
- Considerable increase in internet penetration and mobile users
- Has the large network of bus operators and high levels of customer
satisfaction, not much of major investments required for further
expansion.
 Cons
- Marketing expenditure needs to be increased to increase awareness and
credibility.
- Need to increase team size to manage more bus operators and
travellers.

Recommendation:
redBus should finalise Concentrate on the Core Business as the best possible option as it
fulfilled the top two criterions of high revenue growth and keeping the focus on Core
Business and competencies.
Action Plan:
1. Attract new travellers and increase customer base.
 redBus starts focusing on marketing efforts to generate nation-wide awareness
which help them to capture the untapped market.
 Conduct low cost marketing campaigns like
i. Digital marketing using YouTube, forming informative pages on
Facebook and other social media sites to display its services and range.
ii. Offline marketing using creative billboards and hoardings.
2. Increase Customer Retention by Increasing Customer Satisfaction
 Bus Lounges for the redBus travellers to relieve them from extreme weather.
It will also improve visibility of redBus helping in increasing its awareness
 Launch Loyalty Programs to retain the existing travellers.
3. Increase network by attracting new bus operators
 Penetrate the market by expanding its network of bus operators
 Attract the remaining operators by showcasing them the advantages they will
avail and explain them the benefits by showcasing the results of their partner
operators.

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