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Group Presentation

KPMG Case Study


Dated: 16.01.2008

Bus Company _Business


Group:
Oksana
Strategy Redefined
Zahoor
Amr
Ashwin
Solomon
Mykal
Stephney
“Better Buses & Coaches”
Overview
• Long established family business
• Operating in small town
• Lines of business: buses, school coaches,
luxury coaches
• Loyal local customer base
• Generating small profits for many years
• Increased competition due to investment
in new technology
• £1m in reserve
• Revenue of over £2m & profit of £226k
250000
luxury, 27997
200000 school, 22974

150000
better buses and
coaches (now)
100000 buses, 175876
luxury
school
50000
buses
0
1
luxury 27997
school 22974
buses 175876
Identification
Of Problems

• Low level of profitability


• Increased competition
• Unchanged fares
• Inefficient timetables
• Staffing policies
• Old technology
Market analysis
Political & Legal Social & Environmental
•Deregulation •Increasing demand for Leisure
•“White paper”1998 & Tourism
• European Union •Aging population
regulations •Car usage increase
•Health & Safety •Ethical values and climate
legislation change awareness

Economic Technological
•Increase in fuel cost •Need for innovation &
and interest rate development ( Info & ticketing)
•Decrease in rate of
unemployment
Market analysis cont.

S W
• Experience •Profitability
• Customers loyalty
• Goodwill •Aged fleet
• Available funds •Resource
• Product portfolio management

O T
•New route •Direct competition
•Low fares •Indirect competition
•Rise in fuel cost •Increased overheads
cost
•Expansion of business
opportunities •Loosing contract
Strategies
• Breaking operation into 3 Business units
• Increase company’s efficiency
• Utilise coaches for another173 days
• Increase customer base
• Negotiate with the council
• Build on the existing brand
• Flexible fare structure
• Operational innovation
Buses routes
Route (A-B-A)
Bus No. 1 2 3 4 5 6 1 2

A Depart 6:00 6:15 6:30 6:45 7:00 7:15 7:30 7:45


B Arrive 6:40 6:55 7:10 7:25 7:40 7:55 8:10 8:25
B Depart 6:45 7:00 7:15 7:30 7:45 8:00 8:15 8:30
A Arrive 7:25 7:40 7:55 8:10 8:25 8:40 8:55 9:10

•Minimize the stoppage time for the buses at point B


•Eliminate bus No. 7
•Maintaining the same schedule
•Sell two of buses
•Profit increased from £227,405 to £486,241
Buses routes
Bus No. 1 1 1 1 1 1 1 1
A Depart 6:00 6:55 7:50 8:45 9:40 10:35 11:30 12:25
A-C-D-A 6:50 7:45 8:40 9:35 10:30 11:25 12:20 13:15

Bus No. 2 2 2 2 2 2 2 2
A Depart 6:00 6:55 7:50 8:45 9:40 10:35 11:30 12:25
A-D-C-A 6:50 7:45 8:40 9:35 10:30 11:25 12:20 13:15

•Total trip length 12.14mile, total B

trip time 50min


•2 buses operating in opposite 10m

directions
5.64m
D
C
•55min between each bus 120°
3m
•Lease one bus 3.5
•Increase in number of customers A m

•Increase the fare to £1.10 5.64=√((3.5)²+(3)²-2(3)(3.5)Cos120°)

•From a loss of £51,529 to a profit of Graph


£111,318
School Coaches
• Buy 3 new coaches and sell the
existing 4 coaches of 12 years old
• Negotiate with council regarding the
fare as the new coaches have better
safety measures
• Hire employees on part time bases
• Profit increases from £22,974 to
£87,525
Luxury Coaches
• Accept the offer and buy 1 coach
separate for it.
• Have only 2 drivers and when ever
needed hire a part time driver.
• Profit increases from £27,997 to
£90,828 in the 1st year and £103,072 in
the 2nd year.
Profit and Loss
calculation

NOW BUSES SCHOOL LUXURY TOTAL


REVENUE 1,645,193 217,100 250,000 2,112,293
EXPENSES 1,469,317 194,126 222,003 1,885,446
PROFIT (LOSS) 175,876 22,974 27,997 226,847
PROFIT CONTRIBUTION % 77.53 10.13 12.34
1ST YEAR BUSES SCHOOL LUXURY TOTAL
REVENUE 1,813,930 217,100 392,500 2,423,530
EXPENSES 1,216,371 129,575 301,672 1,647,618
PROFIT (LOSS) 597,559 87,525 90,828 775,912
PROFIT CONTRIBUTION % 77.01 11.28 11.71
GROWTH % 239.76 280.97 224.42 242.04
2ND YEAR BUSES SCHOOL LUXURY TOTAL
REVENUE 1,982,306 217,100 407,500 2,606,906
EXPENSES 1,226,389 130,151 304,428 1,670,888

PROFIT(LOSS) 745,997 86,949 103,072 936,018


PROFIT CONTRIBUTION % 79.69 9.29 11.01
GROWTH % 26.50 -0.66 13.48 21.91
Summary
Reserve
summary1

Quantity Debit Credit


balance 1,000,000
buy luxury coaches 1 200,000 800,000
sell 6 year old buses 4 80,000 880,000
sell school coach 4 144,000 1,024,000
buy school coach 3 360,000 664,000
reserve 664,000
60% of year 1 profit 465,548 1,129,548
sell buses 4 80,000 1,209,548
buy new buses 4 499,200 710,348
reserve(1year) 710,348
60% of year 2 profit 561,611 1,271,959
sell luxury coaches 2 240,000 1,511,959
sell buses 4 80,000 1,591,959
buy luxury coach 1 216,320 1,375,639
buy buses 5 648,960 726,679
reserve(2 year) 726,679
Conclusion
• Improved profitability
• Operational efficiency
• Increased customer base
• Enhanced competitive advantage
Profit

1000000
900000
800000
700000
600000
500000 936018
775912
400000
300000
200000
226847
100000
0
1 2 3
References

1. 20 Years Public Transport Strategy (2003) Available at:


http://www.centro.org.uk/upload/CorpInfo/CORP23.pdf.
(Accessed :6 December 2007).
2. Clark, R. (2000). “Can public transport ever be customer-
led”. Logistics and transport focus. 2(9), pp.25-29.
3. FirstGroup profits rise with fuel prices.(2007) Available
at: http://business.scotsman.com/transport. (Accessed:
8 December 2007).
4. Huggins, P. (2000). “Improving passenger Interchange”.
Logistics and transport focus. 2(6), pp.32-36.
5. Taylor, M. (2002). ”Bus drivers and stations down but
now out”. Logistics and transport focus. 4(3), pp.32-37.