Bus Company _Business Strategy Redefined

Group Presentation

KPMG Case StudyDated: 16.01.2008

Group:

Oksana

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

buses, 175876

school, 22974

luxury, 27997

0

50000

100000

150000

200000

250000

better buses and

coaches (now)luxury

school

buses

luxury 27997

school 22974

buses 175876

1

Identification

• Low level of profitability

• Increased competition

• Unchanged fares

• Inefficient timetables

• Staffing policies

• Old technology

Of Problems

Market analysis

Political & Legal

•Deregulation

•“White paper”1998

• European Union regulations

•Health & Safety legislation

Social & Environmental

•Increasing demand for Leisure & Tourism

•Aging population

•Car usage increase

•Ethical values and climate change awareness

Economic

•Increase in fuel cost and interest rate

•Decrease in rate of unemployment

Technological

•Need for innovation & development ( Info & ticketing)

Market analysis cont.

S• Experience• Customers loyalty• Goodwill• Available funds• Product portfolio

W•Profitability

•Aged fleet

•Resource management

O•New route

•Low fares

•Rise in fuel cost

•Expansion of business opportunities

T•Direct competition

•Indirect competition

•Increased overheads cost

•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)

•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

9:108:558:408:258:107:557:407:25A Arrive

8:308:158:007:457:307:157:006:45B Depart

8:258:107:557:407:257:106:556:40B Arrive

7:457:307:157:006:456:306:156:00A Depart

21654321Bus No.

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 trip time 50min•2 buses operating in opposite directions•55min between each bus•Lease one bus•Increase in number of customers•Increase the fare to £1.10•From a loss of £51,529 to a profit of £111,318

A

B

DC

3m3.5

m

5.64m

10m

120°

5.64=√((3.5)²+(3)²-2(3)(3.5)Cos120°)

Graph

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

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

calculation

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

ReserveSummary

summary1

Conclusion

• Improved profitability

• Operational efficiency

• Increased customer base

• Enhanced competitive advantage

226847

775912

936018

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

1000000

1 2 3

Profit

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.