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REDBUS: THE NEXT

STEP FOR GROWTH


Situation Analysis

WAC-1
Himanshu Agrawal (P16002)
P16himanshu@iimangpur.ac.in

Submission Date: 1st


Dec2016
Submitted By:

Situation Analysis
redBus has done greatly since their inception in 2006. Company have grown
exponentially and have grown 1000 times in size in a span of 6 years only. Now
they need to evaluate their current business model and make a decision on the
future business model.

Objective
Objective of redBus is to provide a simple online bus ticket booking platform with
transparency to their customers and suppliers both.
redBus has a target of achieving annual revenue of US$1 billion by FY2015.

Analysis of redBus
Online booking industry have been growing at a rate of 50% per year and is
expected to continue the same in coming years. There is a fierce competition in
industry and lot of chances of new entrants coming in the market as the growth
prospects are huge. This is a highly unorganized market in the semi urban and
rural areas. redBus will always has the advantage of first mover and can always
attract customers with the new service offerings. Customer satisfaction has been
superb till now.
They have opportunity of backward integration with
procurement of buses and horizontal integration of air travel bookings, hotel
bookings etc. They also have tremendous opportunity of global expansion.

Dilemma of Mr. Phanindra


redBus have done very well since their inception and want to continue the same
momentum in coming times. Mr. Phanindra has four options in front of him and
he is not able to decide which option will be best suited to achieve their target by
FY2015.

Vertical Integration Launch their own private buses (backward


integration)

PROs
1. Supplier bargaining will be reduced.
2. It will result in cost savings.
3. 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
1. Huge capital requirement for
buying buses.
2. It can cause a divergence from their
core business.
3. They will have to hire new team to
manage this vertical and the overhead
costs will increase.

Go global

PROs
1. As redBus already have a platform
which is quite extensive, same can be
used for international service also.
2. No major competitors at present.

CONs
1. Present team has no experience in
working in a global market, also team
strength is low for expansion.
2. Need to study the socio-economic

3. Enormous opportunities in Asia


region, these can be looked to sustain
in long term.

Increase the portfolio of service offerings

PROs
1. Exponential growth of online
bookings market.
2. It will increase the revenue
generation as the transaction involved
are high value (air travel, hotel
bookings etc.)
3. Consumer traffic will increase and it
can help in broadening of their
customer base.
4. Strong technology platform and
infrastructure to integrate these addon values.

trends in global market, consumer


behaviour.
3. They have to spend a lot of money
on market research and marketing of
their brand.

CONs
1. Huge competition in online booking
industry.
2. Profit margins are very low.

3. Not the core competency of the


company.
4. It will divert them from their core
business model.

Focus on the core business

PROs
1.
Exponential
growth
of
bus
transportation
with
25%
annual
growth rate.
2. Lot of untapped market to capture,
they will always have the first mover
advantage.
3. High internet adoption rate and
increasing GDP growth rates.

Number of word: 599

CONs
1. Marketing expenditure needs to be
increased to increase awareness and
credibility.
2. Need to increase team-size to
manage more bus operators .
3. Need to add value added service to
retain customers which can increase
the operating costs.