REDBUS: THE NEXT STEP FOR GROWTH

A Report submitted to
Dr. Diti Vyas
Adani Institute of Infrastructure Management, Ahmedabad

December 21, 2020

In partial fulfilment of the requirement of the course

Written analysis and communication

By
Paresh Aglave
20200124
 Letter of Transmittal

To,

Mr. Phanindra Sama

CEO, Redbus

Date: 30/08/2012

Subject: Evaluation of the situation of Redbus along with recommendation and plan of action.

Dear Mr. Phanindra Sama

As requested, рleаse find the evаluаtiоn оf the сurrent sсenаriо оf the соmраny. I hаve
inсluded роssible орtiоns аlоng with the сriteriа оn whiсh I hаve evаluаted them. I hаve
аrrived аt а reсоmmendаtiоn bаsed оn this evаluаtiоn аnd аlsо fоrmulаted а рlаn оf
асtiоn tо gо fоrwаrd with thаt reсоmmendаtiоn.

Paresh Aglave

20200124

PGDM IM Batch 2020-22

 One Page Summary
Situation analysis:

Redbus created topmost position in bus-ticket booking sector. The demand for bus transport, as a
results of these changes, has additionally been growing at steady rate. This increase in demand
will attract larger players within the online travel business, which poses a threat to the corporate
or Redbus may use its complete to venture into different on-line travel businesses. The key in
selecting its future course of action would be the values and philosophies of the corporate that
are instrumental in shaping its flight as yet.

Hence the problem for Company is “What decision Redbus should take for its future growth
strategy and to achieve US$1 Billion Revenue by 2015”

The choices:

1. Expand into the global market.

2. Vertical Integration, launch own buses.
3. Offer more services than its current services.
4. Continue with its current core business model.

Evaluation criteria:

1. Transparency and Customer service.

2. Relation with bus operator.
3. Profit and Revenues.
4. Investment.
5. Competitors.

Recommendation:

From this evaluation it is recommended that Redbus should continue with core business.
Situation Analysis

Redbus has created a niche position in the online bus-ticket booking industry and also created a
wide network of bus operations in the nation, customers, bus routes, and ticket booking database.
In the bus ticket booking industry, Redbus has a 65% market share and want to earn $1billion
annual revenues by 2015. It is possible due to increasing growth rate of 45% in the travel
industry and increased users of the internet.

Demand for inter-city and inter-state bus transport is increasing due to the expansion of
manufacturing and services (Exhibit 1). Just 10% of a private operator has more than 75 buses
and 65% of operators has less than 20 buses. B2B and B2C are the segments in which Redbus
operates, while B2C contributes 80% of its revenue. BOSS, Online website (www.redbus.in) and
seat seller are the platforms provided to bus operator, Consumers and OTA’s.

Competitors like MakeMyTrip, Yatra and Goibibo can be attracted in this industry and they are
bigger and experienced than Redbus. The bigger segment in online bus ticket booking are
middle-class segment having age between 20 to 40 years. First, the reliable customer service has
created good rapport among consumers. The biggest asset of the company is relation with the bus
operator. In the Indian travel industry Redbus is the most capital-efficient company.

Problem Statement

What decision Redbus should take for its future growth strategy and to achieve US$1 Billion
Revenue by 2015?
Options

1. Expand into the global market.

Redbus operates in Indian only and has the opportunity to provide the services globally.
2. Vertical Integration, launch own buses.
Launching their own buses will help in ease the operating of buses.
3. Offer more services than its current services.
Redbus can upgrade the services of booking airline and railway tickets online.
4. Continue with its current core business model.
As it is the market leader in bus ticket booking industry and bus transportation industry is
growing.

Criteria for Evaluation

1. Transparency and Customer service.

Redbus customer service is the key to beat so many regional player in online bus ticket
industry.
2. Relation with bus operator.
Impact on relationships with its existing bus operators, because the company will lose
business if bus operator stops using Redbus’s platform.
3. Profit and Revenues.
Redbus’s goal is to achieve revenue of US$1 billion by FY 2015, for this the Profit and
revenue are important criteria.
4. Investment.
Company needs to think carefully as it has invested on infrastructure, technological
platform and on call centers. Operating costs in terms of monthly salary and taxes.
5. Competitors.
The online travel market is growing at faster rate and due to this growth large number of
players entering into the market.
Evaluation of options

Option 1: Expand into the global Market.

The market will be entirely new and it wouldn’t be able to ensure high quality customer service.
Expanding in the global market will not affect its relationships with the bus operator. It will
require spending lot of money on market research and marketing the brand. There are no major
competitors. The present team has no working experience in a global market, also team strength
is low for expansion.

Option 2: Vertical Integration, launch own buses.

Redbus will be able to ensure transparency and customer service, using its website for ticket
booking. Running their own buses will affect the existing bus operators business. Also to operate
this buses new staff will require this will increase the expense. We may have to hire new team to
manage this vertical and the overall costs will increase, reducing the profit. It can cause
divergence from core business. Huge investment will be require to buy the buses.

Option 3: Offer more services than it’s current.

As customer service and transparency will not be affected as well as the relationship with bus
operators. There has been an exponential growth of the online booking market. It will increase in
revenue generation as the transaction involved are high value. Profit margins are very low and it
will divert from core business. There is huge competition in online booking, the competitors like
MakeMyTrip, Yatra and Goibibo are the OTA’s which offers multiple online services.

Option 4: Continue with current core business model.

Since it will be in same business model, it will be able to deliver better customer service,
maintain its relationships with the bus operators and maintain high capital efficiency. There has
been an exponential growth of bus transportation with 25% annual growth rate. Online travel
market contributes 80% of online commerce market (Exhibit 2). A lot of untapped market to
capture and will always have the advantage of being market leader. Need to recruit new team to
manage more bus operators. Need to add value added service to retain customers which can
increase the operating cost. Already Redbus has its infrastructure and technology, so the
minimum investment would be required.

Recommendation:

In accordance with evaluation, the company should go with Option 4, i.e. continue with the same
business model. To achieve a goal of US$1 billion more focus should be required on short term
strategy.

Action Plan:

Find more profitable routes by using company’s data mining software to suggest to its current
bus operators. Get in touch with more bus operator to sell the BOSS software to get more bus-
seat inventory. Open more new call centers in Tier-II cities to handle traveler’s queries. Increase
penetration and get more customers to book tickets via the Redbus website. Winning the
confidence of traveler is more important. Attract the new travelers and increase customer base.
Introduce the new marketing strategy form informative pages on social sites displaying its
services and range. Attract new bus operators by explaining them advantages they will get.

Word Count: 953

Exhibits:

100%

85%
80% 75%

60% 55% 55%

45% 45%
40%

25%
20% 15%

0%
Urban Intra-district & Inter-district Intrastate
Operations Rural Services Services Operations

Private Operators State Transports

Exhibit 1: Private Bus Operators (Market Share) (Demand Projection for buses)

400 378.9

300
252.58

200
149.53
105
100 86.3
62.5 63.4
47.35
35.3

0
Dec. 07 Dec.08 Dec.09 Dec. 10 Dec. 11

Online Travel Industry Online Non-Travel Industry

Exhibit 2: Online commerce market size (INR billion) in India