Case study on

REDBUS
The Next Step for Growth

By: Ankit Singh (19) Balraj Naik(28) Madhav Joshi(46) Priyanka Thakur(60) Sybil Fernandes(91)
RedBus

– RedBus has been a pioneer in integrating fragmented Bus Industry by using a

Online Platform.
– It created an ecosystem that connected the 800+ Bus operator, 40,000+ OTAs
& 10+ millions customers and enjoys 65+ % market share in Indian Online bus-
ticket booking industry.
– It was handling a transaction volume of 19000+ bus services everyday across
20+ states including 2 RTCs
– Redbus has achieved a growth rate of 1000 times by FY2012 from its launch in
FY2006.
 VRIO Analysis

To know the core competency of redbus

And to decide whether to go global or expand the business
 VRIO analysis of RedBus as of year 2012
Competitive
Resources Value Rare Imitation Organization Advantage
Access to Cheap Yes No Can be imitated by competitors Not been totally Not significant in
Capital exploited creating
competitive
advantage
Track Record of Yes Yes Can't be imitated by competitors Yes Providing Strong
Leadership Team Competitive
(The Indus Advantage
Entrepreneurs(TiE))
Alignment of Yes No Each of the firm has its own strategy Yes, company has Still lots of
Activities with organizational skills potential to build
Redbus Corporate to extract the on it
Strategy maximum out of it.
Financial Resources Yes No Financial instruments and market Company has Temporary
Venture capitalist liquidity are available to all the nearest sustainable Competitive
(Seed fund, Helion competitors financial position Advantage
etc.. )
Resources Value Rare Imitation Organization Competitive Advantage
Brand Yes No Can be imitated by Yes, the firm has positioned Temporary Competitive
Positioning in competitors but it its brands based on Advantage
Comparison to will require big consumer behavior
the marketing budget
Competitors
Local Presence Yes, as it connects Yes Can be imitated by Yes Providing Strong
19000+ bus services competitors Competitive Advantage
across 20+ states.

Customer It has a customer Yes, firm has Has been tried by Company is leveraging the Provide medium term
Network and centric model and invested to build competitors but customer loyalty to good competitive advantage
Loyalty therefore it is highly a strong customer none of them are effect
valuable. loyalty as successful
Sales Force Yes No Can be imitated Still there is lot of Can provide sustainable
and Channel by competitors potential to utilize the competitive advantage.
Management excellent sales force Potential is certainly
there.
Conclusion after doing VRIO
analysis
– Based on VRIO Analysis, we have found that the competencies of Redbus are
1. Leadership Team
2. Local Presence

Redbus should remain in Bus travel booking business because they have a
competitive advantage.
Whether Redbus should own private buses.
An option for vertical integration
5 Force analysis in the year 2012 to know the feasibility of entering as bus operating
transport services.
Type of Force
Threat of new entrants
Bargaining power of suppliers
Bargaining power of buyers
Threat of substitute products and
services
Power Implication on RedBus
Low Market share(65+ % in online bus industry) of RedBus will be
less affected.
Low 800+ Bus operators will extract lower price from the RedBus.
High Buyers usually tend to drive price down thus limiting the
potential of the Bus Redbus to earn sustainable profits.
High Redbus has to either continuously invest into R&D or it risks
losing out to disruptors in the industry.

Rivalry among existing competitors High Difficult for Redbus to earn sustainable profits due to increase
in competitors.
Overall implication on RedBus
Overall 5 force impact is High which is not favouring RedBus to own private buses.
Bus Fleet Requirements for Private Bus Operators

Population Range (million) >4

No. of Bus per (million) 50.00
Region India
Internet Users (million) 137.00
No of Buses Required 1,713.00
Cost per Volvo Bus (Rs Crore) 0.85
Capital Required for 1713 Buses (Rs Crore) 1,456.05
Profit Volvo Bus (Rs per Km ) 7.40
Capacity Utilisation 0.70
Capacity Utilisation Minimum Run Kms 500.00
Annual Profit (Rs Crore) 161.94
Payback Period (years) 8.991378854

In spite of requirements for Private Operator, Payback Period is long and capital required to buy Buses
are high. It also disrupts their Business Model.
 Whether RedBus must go global?
Distance Singapore & Malaysia USA
Cultural Distance 1.Singapore has about 3,48,119 ethnic Indian residents, 1.Mostly English and Spanish speaking
who form 9.2% of the population(Mostly Tamil) and 7% country.
in Malaysia.

2.There are estimated to be 2,60,00 Hindus in Singapore 2.Three quarters of the US population are
and unlike Malaysia and Indonesia there is no religious Christians.
restrictions on freedoms of Hindus.
Does not match
Match
Administrative 1.On the democracy index Singapore is ranking 66 out of 1.On the democracy index USA ranks 25th .
distance 167 countries and Malaysia ranks 52nd .(India ranks 41)

2.Was ruled by Britain until the 1960’s.

Match 2.Has colonial ties with Britain that goes way
back to 16th century.
Match
Distance Singapore & Malaysia USA
3.Geographical 1.The population of Singapore 53 lakhs and Malaysia The population of USA is 31.4 crores.
Distance has 32 lakhs.(Where as India 126.3 Crores)-Red bus
has less people to cater to
2.Transport mode in USA is mostly by automobile
2.The transport mode of Singapore is similar to that of and airplane.
Indian as they majorly use Rail,buses and taxis.
No match
Match
4.Economic 1.GDP ranking of Singapore and Malaysia is 36 and 1.GDP ranking of USA is 14.
Distance 35.(Nominal)

2.Singapore ranked number 2nd & Malaysia ranked 2.USA ranked number 7 in global competitive
25th in global competitive index in 2012. Index.

(India ranked 59th)-India’s has been low due to lack of

ICT, Insufficient Transport and electricity.
No match No match
– Based on the CAGE analysis we can say that Singapore and Malaysian market matches to the Indian market.

– If planning to go Global they should expand to Singapore or Malaysia.

Should they Increase the portfolio of
Service offerings?
 Introduction of add on service for RedBus
will lead to Service development.
Market
Existing New

Existing Market Penetration Market Development

Services

Ansoff’s Matix
New
Services Service Development
Unrelated Diversification
 Test for success of diversification
– 1.Attractiveness Test:
– The industry has grown from INR62.5 billion in 2007 to INR378.9 billion in 2011.
– Growth of Online Travel Industry at the annual rate of 50%.
– Increase in the internet audience in India to about 137 million as of 2012.
– By 2012 overall bus travel industry in India was growing at a rate of 25 % per annum
– Customer segment in tier I and II cities ,in the age group 20-40 were internet savvy and had access to credit card.
Median Age of Indians are 29 year.
2.Cost of Entry Test:
The cost of Online Booking for Air Travel, Hotel and Package Tours will not take away the future profits of Redbus because
1. Package Tours: Due to its 800+ Operators Network connecting 20 States
2. Air- Travel:
– 10% RedBus customers buying airline ticket using its website will give 10 times the revenue as compared to the revenues of
Online Bus Tickets.
– There are only 5-6 airlines in the domestic market. So creating a platform will not be difficult.
– Not Viable because the target audience changes and also it has to move from cost effective sector .
3. Rail Travel: Railway ticket can be offered by partnering with Indian Railways .

3.Cost of Entry Test:

Since the business(Package Tours and Rail Travel online ticket booking) can be brought to a single platform with low
capital Expenditure they should be more profitable than only Bus online booking industry.
Build,Borrow or Buy

Based on the analysis

1.Build:
– Brownfield Expansion: Can build on package tours and hotel Industry as they have
they have the platform by which they can extend the services.
– Greenfield expansion :In Malaysia and Singapore as there is market potential for
online bus ticket booking.

2.Borrow:
Joint Venture with the Indian railways so that they can create a platform for booking
train tickets so that the traffic in train ticket booking also can be controlled.
Thank you