Indian bus service industry was extremely unorganized till lately before redBus surfaced and got the industry by its throat and brought sort of revolution never dreamed for this unorganized industry. This was primarily because the information flow and supply in this industry was very difficult and there was a whole lot of mismatch. The bus solution industry was highly fragmented with small players energetic regionally. All these were small small realtors competing against one another. Due to insufficient any major player there was very little competition for redBus and therefore it could make a marketspace for itself through entering the bus solution industry online. By the time redBus came into the horizon there were settled titles both in air travel and railway solution booking industry who were working online. But even for these people it was an enormous task to enter bus ticketing industry because of the sheer complexity present in the industry and emulating the online model for bus ticketing industry was identified to be almost impossible even by these major players in e-commerce. This review deals with how a disruptive model can change the scenario of the complete industry. redBus which at the time of its inception was confined in a small smooth of 2 rooms is now a 400 million company with over 400 employees and offices across India. Presently it is the only major player concentrating completely on bus ticketing industry with a market show of over 70%. Within this research, I've tried to analyze the bus ticketing industry and how redBus identified the opportunities present in this segment and created a value chain which not only offered them a distinct product but also at competitive cost. It really is a perfect exemplory case of Blue Sea strategy where entry of redBus modified the entire landscaping of the industry. It revolutionized the way the people buy bus tickets in India. One of the unique bus ticketing system of its kind in the whole world, rivals have leaped in the forex market but none has received success like redBus. This research further covers how redBus has suffered its competitive advantages and what exactly are the challenges and progress opportunities going forward.
CHAPTER-1 Release: Blue Ocean Strategy
As the writers of the booklet Blue Sea Strategy, W. Kim Chan and Renee Mauborgne say: Although the term blue ocean is new, their presence is not. They have been an integral part of business transformation in former as well as in present. If we look back in the past say a hundred years ago, How many of today's industries were then known? The solution will be most today's market sectors were unfamiliar in their current form. Many companies such as automobiles, aviation, healthcare, and management consulting were undiscovered or were just starting to emerge. Now enables go through the industries 3 ages again. Again, multibillion-dollar sectors like mutual cash, computers, cell phones, smart phones, gas based vitality crops, discount retail, biotechnology, nanotechnology, share parcel delivery, caffeine bars, video gaming, home videos, and CD player and many other such companies were all non-existent in a functional or popular way.
Similarly, lets convert the clock forward somewhat and make an effort to look into the future. Let us say after 30 years or say 50 years just how many of the now unfamiliar market sectors will emerge and can exist. If record is any indication of what to come in future, the response will there be will be many such companies that we cant even think of right now that will emerge.
This is the reality; industries are active. They never remain the same over an extended period of time. They change continuously and advance. The participants, the procedure, the market and the businesses everything changes. Procedures improve, markets advance and increase, and non-customers become customers. Background tells us that people have huge potential to improve the existing market sectors and recreate them and not only that it educates us that people underestimate our capacity to create new ones. To have an idea of how active things can get, the 50-year old Standard Industrial Classification (SIC) system, which was released by the U. S. Census, was substituted by the North America Industry Classification Standard (NAICS) system in 1997. For the reason that the amount of industry industries that SIC covered were half the number of sectors that truly been around in 1997. The old SIC system covered only 10 industry industries. The brand new NAICS system doubled it to twenty areas to represent the emergence of new-age business. For example earlier the service sector included all that is now fragmented into different specialized industries like IT, healthcare, communal assistance, etc. Considering that these systems are created to ensure stableness, continuity and for keeping requirements, such a substitution shows the importance of growth of Blue Ocean industries.
Yet the dominating emphasis of strategists has been on competitive strategies also called red ocean strategies. Part of the explanation because of this is the fact that its root base in armed service strategy heavily influence corporate and business strategy. Strategy is about fighting different competition above the same region of land that is frequent and not infinite. Unlike fights though, the annals of industry tells us that the world of market is unlimited and there is a place for everyone; rather, blue oceans have been always in existence. They have continually been created. To believe and restrict oneself to red ocean is therefore to accept the constraints that are associated with war-limited piece of land and the necessity to fight and defeat an opposition to succeed-and to reject the initial strength of the business enterprise world: the capacity to build new market world that is uncontested.
Blue Sea v/s Competitive Strategy (Red Sea)
Blue Sea emphasises the value of value creativity that can completely negate your competition replacing 'competitive edge' with 'value creativity' as the firm's main aim thus highlighting the value of creating demand and exploiting untapped maket alternatively than risking competition.
There is a controversy in the academia and research groups concerning which strategy is way better suited but all evidences are as case studies on different companies which is not enough to define anybody of both strategies as a specific winner. Rather both strategies co-exist and should co-exist just because a firm on the foundation of Blue Sea strategy may in the end have to face competition with respect to the imitability of the business enterprise model and then before they have significantly more value development to identify themselves but still stay cost competitive, they must likewise have a competitive strategy to ensure they don't fall season behind of competition.
Research results of research workers like Andrew Burke Andres van Stel and Roy Thurik suggest that the idea that blue sea makes competition irrelevant may well not be true.
When combined, the two give a more alternative and sensible depiction of financial performance. Thus, in true to life the any strategy must be implemented after evaluating the business enterprise and market circumstances appropriately as these define the degree of scope for success of either Blue Ocean or competitive strategy. Furthermore, what emphasis and mixture should be given to either form of strategy across brief and long-term time horizons is clear in most progressive companies competing in short term red oceans while significant time and resources are devoted to the long-term goal of producing technology that creates consumer demand and new marketplaces.
Figure 1: Red Sea v/s Blue Ocean Strategy
Source: www. blueoceanstrategy. corporatestrategy. com
Blue Sea and White Space
The term white space has been found in business parlance to mean uncharted place or an underserved market. But as Mark W. Johnson perfectly writes in "Seizing the White Space" the term is the number of potential activities not identified or dealt with by the business's current business design, that is, the opportunities outside its key and beyond its adjacencies that want a different business model to exploit. White space is a subjective valuation: one company's white space may be another company's primary.
What matters is the fact that it represents activities that rest way outside a firm's regular way of working and presents a series of unique and perplexing problems to that group. It's an area where, relatively speaking, assumptions are high and knowledge is low, the opposite of conditions in the company's primary space.
The chance to seize a bit of white space presents a tantalizing opportunity. Success here may bring the transformational growth that so many business market leaders seek. Yet understandably, a play for the white space feels risky, and often the volumes don't may actually add up. The marketplace seems too international, or core capabilities won't apply. Some professionals, having made one unsuccessful foray, just won't associated risk faltering again.
Figure 2: White Space
Source: Seizing the White Space, Draw W. Johnson
Blue Sea Strategy and Applied Concepts
The Strategy Canvas
The strategy canvas is the central diagnostic and action platform for building a compelling blue ocean strategy. The horizontal axis captures the range of factors that the industry competes on and invests in, as the vertical axis catches the offering level that customers get across these entire key competing factors.
There are two purposes that are served here:
It captures the existing condition of play in known market space, which allows users to clearly see the factors that the industry competes on and where the competition currently invests.
Then, it propels users to action by reorienting concentrate from opponents to alternatives and from customers to non-customers of the industry.
The value curve is the basic component of the strategy canvas. It is a visual depiction of your company's relative performance across its industry's factors of competition. A solid value curve has concentration, divergence and a powerful tagline.
Figure 3: The Strategy Canvas
Four Action Framework
This framework can also be known as the Eliminate-Reduce-Raise-Create Grid. To reconstruct buyer value elements in crafting a new value curve, we use the Four Actions Construction. As shown in the diagram, to break the trade-off between differentiation and low priced and to create a fresh value curve, the construction poses four key questions to challenge an industry's strategic logic and business model.
Which of the factors that the industry will take for granted should be eliminated?
Which factors should be reduced well below the industry's standard?
Which factors should be raised well above the industry's standard?
Which factors should be created that the industry hasn't offered?
Figure 4: Four Actions Framework
By seeking the first two questions professionals gain perception into how to drop their cost framework vis- -vis challengers. Seldom do they systematically set out to eliminate and reduce their investments in factors an industry competes on. The consequence is mounting cost buildings and sophisticated business models. The other questions provide insights into how to lift buyer value and create new demand. Collectively, they allow exploring how to reconstruct buyer value elements across solution industries to offer buyers an totally new experience, while together keeping your cost structure low. Eliminating and creating are vital as they drive companies to go beyond value maximization exercises with existing factors of competition. They quick companies to change the factors themselves, hence making the existing rules of competition irrelevant.
Plan-Do-Check-Act (PDCA)
The PDCA Circuit is a checklist of the four periods, which must go through to get from `problem-faced' to `problem solved'.
This concept originated by Walter Shewhart, the pioneering statistician who developed statistical process control in the Bell Laboratories in the US through the 1930's. It was taken up and promoted very effectively from the 1950s on by the famous Quality Management power, W. Edwards Deming. Therefore, PDCA circuit is also commonly known as `the Shewhart Routine' and 'the Deming wheel'.
This circuit diagram can be applied in team conferences to adopt stock of what level improvement initiatives are at, and choose the correct tools to see each level through to successful completion.
Here is what we do in each level:
Plan to boost procedures first by finding out what things 're going incorrect (that is identify the problems faced), and produce ideas for handling these problems.
Do changes made to solve the problems on a tiny level first. This minimizes disruption to boring activity while assessment whether the changes will work or not.
Check whether the small level changes are achieving the desired result or not. Also, continuously Check nominated key activities (irrespective of any experimentation taking place) to know very well what the quality of the output is at all times to recognize any new problems.
Act to use changes on a more substantial scale whether it's successful on small range. Also Work to involve other folks (other departments, suppliers, or customers) affected by the changes and whose co-operation is needed to put into practice them on a larger scale.
If the test was not successful, skip the Act stage and get back to the Plan level to create some new ideas for dealing with the problem and feel the circuit again. Plan-Do-Check-Act describes the overall levels of improvement activity, but how is each level carried out? That's where other specific quality management, or constant improvement, tools and techniques come into play. The diagram below lists the tools and techniques that can be used to complete each stage of the PDCA Cycle.
Figure 5: PDCA Cycle
VRIO Framework
VRIO is an acronym for Value, Rarity, Imitability and Company. This is also a 4 questions framework where one asks in regards to a resource or capability to ascertain its competitive potential: the question of Value, the question of Rarity, the question of Imitability (Simplicity/Difficulty to Imitate), and the question of Firm (potential to exploit the source or potential).
The Question of Value: "Is the firm able to exploit a chance or neutralize an external hazard with the source/capability?"
The Question of Rarity: "Is control of the learning resource/capability in the hands of a member of family few?"
The Question of Imitability: "Could it be difficult to imitate, and will there be significant cost disadvantage to a company trying to obtain, develop, or duplicate the tool/capability?"
The Question of Company: "Is the firm arranged, ready, and in a position to exploit the source of information/capability?"
The VRIO construction, in a wider scope, is part of the much larger proper scheme of a company. The basic strategic process that any company goes through commences with a vision statement, and proceeds on through targets, internal & external analysis, strategic selections (both business-level and corporate-level), and proper implementation. The organization will hope that this process ends up with a competitive edge in the marketplace they operate in. VRIO falls into the internal analysis step of the procedures, but can be used as a platform in evaluating just about all resources and functions of a company, regardless of what phase of the proper model it comes under.
CHAPTER-2 LITERATURE REVIEW
Paper 1:
"Blue Sea Strategy versus Competitive Strategy: Theory and Proof. " Burke, Andrew, Andr truck Stel, and Roy Thurik. ERIM Record Series Research in general management (May 2009)
Theme: Empirical research of blue sea strategy versus competitive strategies based on data constructed from 655 retail retailers through 41 shop types in the retail industry in Holland.
Summary: This newspaper addresses the argument surrounding Red Sea (competitive strategy) v/s Blue Ocean (New Market) strategy. The creators remember that Blue Ocean seeks to emphasise the value of value development that can completely negate the competition replacing 'competitive advantage' with 'value invention' as the firm's primary goal thus highlighting the importance of creating demand and exploiting untapped maket somewhat than risking competition. This brings about increased profitability on the market.
There is a argument in the academia and research groups as to which strategy is way better suited but all evidences are as circumstance studies on different companies which is insufficient to define anybody of both strategies as a clear winner. Rather the two strategies co-exist and really should co-exist just because a firm on the building blocks of Blue Sea strategy may eventually have to face competition with respect to the imitability of the business enterprise model and then before they have significantly more value advancement to identify themselves but still remain cost competitive, they must also have a competitive strategy to ensure they don't fall season behind of competition.
Research brings about this paper claim that the idea that blue ocean makes competition irrelevant may well not be true. To test the superiority of either tools the creators looks at both strategies from both permanent and short-term perspectives and put together a theoretical model which suggests that each market will experience new distributors arriving to share the profits that is there on the offering in the industry. Thus the composition of the pie chart of market show will continuously exhibit different set of players with some fading off while others entering the marketplace but only until the saturation point is reached where everyone will break even. Considering the industry an its players over the time frame this way will give us a knowledge about if the new market strategy or the competitive strategy is more feasible for the industry. If companies be successful over an extended time frame by creating value development (new market strategy) as the new companies entered, both the industry income as well as the firm's earnings will grow progressively therefore will the number of suppliers in the strategy. Alternatively, if the profitability of the blue ocean firm went down with increasing number of vendors on the market, it would be an indication of the dominance of the businesses that implemented competitive strategy in the firms that implemented new market (blue ocean) strategy. After learning the entire data from 1982-2000 of 655 retail retailers over 41 shop types in the Dutch retail industry and after examining and inspecting the idea the creators concluded for 1 / 2 the shop types, the organization profits were straight proportional to the amount of firms while the blue sea strategy was dominating over a long-term with volume of vendors and organization profitability increasing/falling together over-all shop types in the complete period under consideration. The creators also concluded that in a nutshell term Red Sea strategies were at the job.
The study shows that the two strategies co-exist and cross each other throughout the industry life and there is absolutely no particular choice that any manager prefers.
Paper 2:
"Synthesizing a Blue Sea. " Master Thesis. Vester, Daniel. Aalto University, 2012.
Theme: Applicability of New Market strategy frameworks and techniques in the electric musical tools industry for innovating services.
Summary: In this particular paper, the writer targets showing how value invention could be used in case there is an electronic musical instrument company to add value to their product and create new market space. To clarify this, he choses to compare the traditional strategies like competitive strategy, Porter's 5 forces strategy to the blue sea strategy. Blue sea strategy is eventually determined for the process of product development of ArturiaMiniBrute, an analogue synthesizer reason being
1) Its attention on making new uncontested market space and at the same time targeting less expensive and product differentiation as well; and
2) The efficiency with that your analytical tools and frameworks in a Blue Sea strategy could be blended into the product development process and usability of the device thus developed.
Blue ocean strategy tools like the Strategy Canvas, Four Action Platform, Buyer Power Map and Three Tiers of Noncustomers are applied after quantitative analysis of sales figures in the digital musical instrument industry for determining Arturia's closest competition in a variety of synthesizer markets and design the technique for ArturiaMiniBrute.
The author's observations and interpretations show that the Blue Sea Strategy techniques and frameworks can certainly help electronic musical instrument firms add value to their musical instruments/products/offerings and create new market space. Eventually, the author advocates that companies should shift focus from technological top features of the drum to the psychological appeal of the drum, and urges that companies should get out of the traditional mindset, challenge established guidelines of the industry through the elimination of factors that contain been ignored rather than given due importance but which may be of great value to the customer.
Paper 3:
"The Impact of Blue Sea Strategy in Low-cost Transportation. " tverkov, Hana, Michal ervinka, and Vlasta Humlov. In 2012 International Convention on Traffic and Travelling Anatomist. Belgrade, November 29-30, 2012.
Theme: Applicability of blue sea strategy theory to Ryanair (air transfer industry)
Summary: This newspaper illustrates how blue sea strategy can be essential and also have an important affect in the low cost aviation sector. The writers chose to review the low-cost air transfer industry in europe. They report that the marketplace is highly competitive and the local players fight amidst themselves on the bottom of cost competitiveness. The authors show that a cordial relationship between regional airports and any carrier company can permit budget airlines to provide recognized value for airline passengers at a low cost to the companies. The creators also advises using the truth of Ryanair that infrastructure improvement for non-core activities at small international airports might be necessary to facilitate such associations between budget airlines and small regional airports.
CHAPTER-3 EXAMPLES OF BLUE OCEAN STRATEGY
Air Asia
One of the major improvements that the airline has experienced has been the evolution of the budget airlines. For example, emergence of Air Asia in Malaysia is a classic example.
Air Asia have avoided the competitive strategy or the red Sea (competition against Malaysia Airline and other airlines like Tiger Air, Jet Air and other regional airlines) by considering factors that are essential to customers but easily taken for granted by almost all of the other airlines. Using the Four Actions Platform proposed by W. Chan Kim and Renee Mauborgne, Air Asia have guaranteed they make Malaysia Flight, Tiger Air, Plane air and local players irrelevant by putting into action many important proper moves described below.
STRATEGY
Eliminate:
1) OTC booking
2) Seating Course booking arrangement
3) Free breakfast/lunch/dinner on the plane
Reduce:
1) Range of attendants providing on the plane
2) "Luxury" facilities delivered
3) Quality of the seats
Raise:
1) Increased air travel hours for their aircrafts: regularity of flight
2) Chosen key endpoints/destinations catered frequently
Create:
1) Choosing system became online
2) Travel system: point-to-point
Through these strategic steps, Air Asia has had the opportunity to focus on factors that really matter for the clients like better booking channel, point-to-point travel system, etc. that makes customers' lives simpler and adds value to them. This is a perfect example of Value Development, as not only does indeed this help Air Asia improve the value to the customers but at the same time reduces cost for Air Asia significantly - Value Innovation. This also allows Air Asia towards customers who weren't traditionally target thus creating a new market space and focusing on non-customers in the traditional air travel industry.
Current Airline Customers:
1) Corporates and business fraternity in Malaysia or ASEAN region.
2) Those those who can afford to buy expensive airline tickets from airlines like Malaysia Flight and other local players.
Non-Customers:
1) Officers from the federal government and other federal staff
2) Those people who cannot afford to buy expensive tickets such as students or recent graduates or lower middle class and rural people.
With effective execution of Blue Ocean strategy, Air Asia has furthered widened their gamut and has ventured into other businesses like they started out Tune Hotel and Tune Money. The model is again towards creating Blue Ocean market space.
Crocs Inc.
Company Snapshot
Crocs Inc. is one of the major players in sneaker industry who've been very successful. It designs, fabricates and markets bright-colored, comfy-branded boots and accessories for any segments men, women and children.
Blue Ocean Strategic Move
Crocs Inc. with its distinctive compact clogs created a blue sea market space in the footwear industry. These kinds of shoes offered customers a perfect combo of comfort and fashion at an affordable price point. Crocs shoes have mass charm because not only are they top quality but also in a way they are relaxing, they will vary from traditional flip flops and everyday shoes and put in a fun element as well as they come in several dazzling colors which provide a funky look. Coupled with their new crocodile company logo on their shoes it also offers them a daring look. Crocs have been a run-away success also because they offer customer what they never even considered, they gratify their customers with the addition of value to their customers' usage by giving features like light-weight, waterproof, ergonomic comfort and anti-microbial and anti-skid.
Success
Founded in 2002 as a fresh type of sail boat shoemaker initially, the business has grown into a global sensation in everyday shoes or boots industry with sales throughout the world in over 90 countries and getting 1 billion US us dollars in 2011.
Figure 6: Crocs Four Actions to create Value Innovation
Source: Frontier Strategy, LLC
Nintendo's Wii
The video game business has an enormous market and is a multi-billion dollars industry. Training video consoles, which form a huge portion of this market, were very lately in the past managed by two major players: PlayStations (PS1&2 and soon PS3) from Sony and Xbox (Xbox and Xbox360) from Microsoft. Nintendo, however, a faraway third player created ripples on the market space using its introduction of the Wii. That is an especially interesting case study from a strategy point of view since it's an excellent exemplory case of the so-called blue ocean strategy. The visual below demonstrates Nintendo's Wii strategy by using the strategy canvas which is quite clear.
Figure 7: The Strategy Canvas of Nintendo Wii
On presenting a closer look to these graphic, one will notice that Nintendo is contending on a totally different strategic panorama as the traits are completely in another way concentrated for Nintendo in comparison to Sony and Microsoft. The Wii isn't only affordable for general public, it does not have any Hard Disk, no Dvd movie, no Dolby 5. 1, vulnerable connectivity and comparatively low processor quickness, but enthralls the user by its innovative motion control keep. The stick was created such that it integrates the motions of a player straight into the console of the video game, The user gets an software where he gets a live feel of himself participating in in the display screen. With this feature Nintendo not only acquired the prevailing customers in the video game world but also brought in a totally new set of customers to the business.
We can again think of the Four Activities Framework in all of the above mentioned descriptions of features. I am going to describe here with a couple of those features:
Reduction in cost through removal of some features like HARD DISK DRIVE, Disc, Dolby 5. 1 and low processor chip speed
A raise popular by creation of action stay: strong value development for new gamers/customers.
These 2 features disregard the traditional opinion in competitive strategy of either going for cost management or product differentiation rather than all together for both. In other words, through this example we see that while Sony and Microsoft are struggling in the same old bloody Red Sea of existent market, Nintendo created a fresh market space for itself in the form of Wii and is now cruising calmly in this Blue Ocean that it created for itself.
CHAPTER-4 BOS: A RESEARCH STUDY on redBus
Story of redBus
One fine nighttime a power engineer in Bangalore organized to go to Hyderabad to celebrate Diwali with his family but the answer he received from the real estate agents when he come to at bus stands was that tickets were sold out and he could find out about the availableness from various other agents. Although the individual received frustrated but an appalling question was making rounds in his thoughts; why weren't there other solutions to get bus seat tickets booked somewhat than moving from one agent to another? He questioned why can't bus tickets be booked online like airlines and railway seat tickets? The person was Phanindra Sama and his annoyance lead way to a revolution in Indian bus industry and redBus was born.
Phani discussed the theory with his friends (Sudhakar Pasupunuri and Charan Padmaraju) plus they started working on the idea. Primarily they decided to develop an IT based inventory system for bus providers however the idea was dismissed by the operators and agents as the duty appeared huge to them. Meanwhile they came in touch with the Bangalore section of TIE (The Indus Business people) which accepted their venture and mentored the team and led them with various tasks regarding market surveys and market research. The Tie up mentorship allowed redBus to get business capitalist thinking about them and a VC called Seedfund funded them with $500000. This is one way redBus was created on 18th August 2006, India's first online bus ticketing website, an idea which was used for airline and railway arranging but no person had came to the realization that it could be feasible enough for the bus travel also. Show 1 provides company details.
Exhibit 1
The Team
Major Milestones
Exhibit 2
Company Details
Bus Ticket Industry- Introduction in India
The Indian bus travel industry was highly fragmented with a large volume of small providers and agencies having hardly any orientation towards technology. A lot of the operators were local players having small fleets of ten buses where few were long path players having 100 or even more fleets of buses. Display 2 gives the details of the industry composition.
Long path buses were known as agreement carriages and their tickets were to be bought beforehand whereas brief haul buses known as level providers and their seat tickets were sold in the coach itself. The scheduling system was agent influenced in which each agent got deal with three of four providers and seat tickets were allocated to them on the basis of quota system by the operators. Each agent used to sell its quota of tickets and all the unsold seat tickets were informed to the operator before some predetermined time of bus departure. No centralized inventory was preserved by either the real estate agents or by providers which led to a whole lot of inefficiencies in the machine as much customers never got tickets because the agencies they approached sold off their quota of tickets resulting in many potential clients not getting any seat tickets and buses working below their capacities as providers never knew that few people never acquired the tickets.
Another major concern that made industry unreliable was that during festivity season, real estate agents use to hike the ticket rates to make more money and each agent used to ask for in different ways for the same trainer ticket which created a whole lot of scepticism in the customer mindset. With all the introduction of the fantastic quadrilateral project in the first part of last decade the condition of roads increased and many luxury coaches made inroad on the market which fascinated more customers to the industry however the operational inefficiencies never allowed customers, operators and agents to fully exploit the marketplace potential.
After 2008: E-ticketing in India was finding up, around 40 % of airfare ticket sales and 30 % of railway solution sales originated from online systems, though for the bus industry the change possessed just started. Bus business was a $2. 5 billion unorganized sector with development of 35-40% p. a. and with the upsurge in urbanization, the income levels growing, the roads getting better and buses were becoming a popular method of travel.
With increased travel on streets, the consumers were looking for convenient ways to book the seat tickets and e-ticketing starting to get popular for highway travel. This is a huge untapped market and professional players experienced to go in seeing how big is the industry. Redbus saw it as an opportunity and required the first mover benefit and started organizing the industry. Later other players like Ticketvala. com and Indiabusticket. com and others also began to make their existence felt. Currently, the online route constitutes 23% of the full total seat tickets sales.
Exhibit 2
The Fragmented Character of Market
Market Profile (Geographic)
Industry Research: Five Pushes that form industry Competition
Threat to new access is low, as a solid network with bus providers and access to distribution is required. Although entry deterring polices and product differentiation are low and proprietary technology are not relevant, however, industry experience and economies of size are important factors.
Bargaining power of suppliers has greatly reduced as the industry is totally transformed. There's a huge suppliers' availability that too fragmented, with less brand power and relatively reduced risk of ahead integration. Infact, proper impact of inputs is very less and therefore the moving over costs of clients (agents and online arranging sites) are incredibly low.
Customers have high bargaining power as clients are price hypersensitive in this industry. Companies make an effort to offer more worth by providing differentiated services. Since purchasers have many alternatives of suppliers and options with low switching costs, this industry is transforming into more customer centered industry.
Threat of substitutes is modest. Customers can book their seat tickets offline, through agencies or immediately through bus providers with negligible turning costs and high availability of substitutes. Low relative price performance, and the indegent services provided by the substitutes has reduced the threat of substitutes.
Competitive rivalry is definitely high in this industry. In offline scheduling as customers are price sensitive and have option to choose from many brokers available, rivalry is still is high. The amount of players is about equal in proportions and electricity, with low product differentiation and slow industry expansion. Rivalry in Online portion has increased with redBus capturing almost 70% of the marketplace, with some competitors like makemytrip. com and travelyaari. com hoping hard to permeate in this market. There's a very high rivalry between online v/s offline mediums as online industry growing very fast with better features and services, there are multiple arranging possibilities, customers are less faithful, switching costs are little and the competitive rivalry also offers price as determinant of competition. Exhibit 3 gives competitive details.
Exhibit 3
redBus and Competition
redBus - a snapshot about how it works
redBus acts an user interface between bus providers and travelers. By logging into its website people can reserve their tickets at their own convenience. redBus in addition has started booking seat tickets on cellphone and payment on delivery system. In a way it has substituted the typical real estate agents who used to market bus seat tickets in small numerous counters in bus stand or near neighborhood. By giving an enormous depository of seat tickets from all bus operators it gives a good choice to book seat tickets well beforehand with transparency. The ticket pricing has also been continued fixed margin basis in order to give maximum surplus to the customers. They have tangled up with all major bus operators and bring inventory of these bus seat tickets to be sold. The real estate agents have different login system and can buy tickets from redBus at smaller rate and then sell it to their customers. Any tickets unsold are went back back to bus Operator before four hours of bus departure so that the tickets can be sold at that moment by bus providers or other brokers.
redBus- THE INITIAL Value Chain
redBus. in - The founders came up with the thought of creating a simple site dedicated and then booking of bus tickets. The website is simple and user friendly with ease of surfing around. Both customers and real estate agents have their different login systems. Due to its simple content and minimal huge applications, the browsing speed is great as compared to its rivals and an efficiency to low bandwidth internet surfers. The website is done hosted from Singapore ensuring there is minimal downtime of the machines as optical connection from Singapore to India is simpler compared to western world coast. The website has many features and filters thus assisting a user to choose the right bus he/she desires. After entering the departure, destination and travel date, the search engine gives a plethora of options to choose from. For easy navigation various filter systems have been provided on bus type, sleeper or non sleeper, departing items, amenities, departure time appearance time, fares etc. (Show 4) Furthermore, it's the only website which gives user ratings of the several bus providers which assists with quality and opinions monitoring system. The photos and videos of the bus are also available in the website which helps a person to make an informed decision.
Exhibit 4
redBus website and its features
Competitor website and its own features-
Competitor Website and its features-
Competitor website and its features
BOSS (Bus Operating Software System) -Since redBus was pioneer in this field, they recognized, one of the primary challenges they are facing is not a real-time updation of the seat tickets inventory. There were many instances tickets were available but the customers cannot be served as there was mismatch on the awareness of real inventory. redBus developed software for Bus operators where they could upgrade the solution inventory online and therefore helped redBus and bus providers both to control inventory well. This software makes additional earnings for bus providers and redBus. In addition, it serves as an entrance hurdle for new entrants.
SEEZ - This software has been developed by redBus team for the good thing about travel companies. redBus could not afford to neglect agents who have been the backbone of the industry. In order to preserve in this business redBus had to develop good relations with brokers in addition to bus providers. rebus started the concept of agent login where providers can purchase the seat tickets from redBus instead of buying from bus operator. Although agents lose some part of commission payment here but redBus provides them a chance to gain access to complete inventory of tickets which they were unable to take action before redBus. These were operating using their own allotted quota by providers and did not have flexibility to market more tickets. Brokers who get documented to redBus need to just pay Rs. 4000 as security first deposit when compared with previous system in which they had to pay Rs. 50, 000 to bus operator. This great decrease in fees has enticed small brokers also who were recently excluded from the worthiness string. Each bus operator has a credit which is deposited in redBus accounts that they choose the seat tickets and keep recharging it as per their sales.
Operations
Offices - For producing relationships with local bus providers and market penetration, redBus has gone with the model of opening small office buildings in every major locations in southern India which happens to be the main concentrate portion of redBus. Setting exemplory case of low cost management, redBus office buildings are found in mediocre commercial locations with very simple office design no elaborate appeal. The furniture and rooms are simple and simply serve their goal. Currently they may have offices in ten places mainly in southern and american India that they are now planning to expand to North and east India also.
Call middle - Since internet penetration is low in India (Exhibit 5), to be able to touch more market in this section, redBus has exposed call centers in their office buildings where seat tickets are booked on cellphone. Currently 30% of the total seat tickets are booked on mobile phone. After experiencing fast progress in this model, redBus is now planning to give more raises to this strategy. As performing of call middle is an expensive proposition so rivals are currently averse to look at this model.
Exhibit 5
Major Users of internet across countries (in thousands and thousands)
Customer Opinions to Bus Providers - After completion of bus journey customers are wanted to give detailed opinions about the bus service e. g. punctuality, personnel behavior, atmosphere, amenities etc. redBus will take these feedbacks very very seriously and perhaps full money is refunded to the client and in turn a penalty is imposed on bus operators. Since only redBus gets the system for user score of buses, this serves as a reviews mechanism to bus providers to boost their services or fee premium if they're above prospects.
Cancellations & Refunds - As cancellation and refunds is major task for just about any e-commerce business, redBus came with the idea of redeemable coupon by which customer is assured of payment when he/she cancels the solution. Repayment is refunded to customer within 10 days if indeed they exercise that option. In this manner redBus reduced the refund time of customers and it can help in better customer retention.
Marketing
Word of Oral cavity promotion - In former redBus has put in very less on advertisements or marketing. They developed good network with various IT businesses and office buildings in the city where almost all their tickets were sold.
Online marketing - As the company is in expansion mode, they have finally began advertising through Google ads, communal networking sites which is very effective since it targets frequent internet users, while their opponents count more on costly printing and television media.
Radio & Direct Mailers - Carrying on with low cost advertisements that happen to be centered on the regional demands redBus has started airing brief radio advertisements during office traveling hours.
Indirect campaign through agents - Because they also engage with agents for retailing tickets, the ticket prints take the name of redBus. This raises awareness of redBus in agent dominated market and helps them appeal to more immediate customers.
Service
Home Delivery - Indian customers are generally wary of writing credit-based card information online and as the credit card and internet penetration is still very low, it makes online payment difficult constraint to expand. Considering this, redBus started out cash on delivery of tele-booked seat tickets which has paved a good market for the coffee lover.
Helpers at pick up points- One of the problems that customers face, at boarding tips is that there is no clear information about the appearance of the bus which makes customers restless and tensed. redBus has deputed in your free time helpers on the boarding items to aid customers in boarding buses and upgrade them with information.
Helpline-Unlike competition redBus now offers a dedicated helpline to customers and dive complete information about the position of scheduling, bus arrival, cancellations etc.
M-ticket & Text based ticket - For better interface and service redBus has launched mobile WAP applications to book tickets. They also have added the choice of sms centered tickets in lieu of the printouts adding convenience to the clients.
Distribution
Direct to customers - Their main circulation channel is immediate selling to customer through direct connection with their own website redBus. in this channel accounts for 60% sales. Exhibit 6 gives information on different programs and their associated features and costs.
Exhibit 6
Data for each route of sales of redBus
Agents - They have tangled up with 3000 providers in south India who give more visibility to redBus. In the areas which do not have access to internet, these agents give redBus an possibility to grow.
Partners - Furthermore to real estate agents, redBus also markets tickets to other online portels like travelyaari, MakeMy trip etc which increases its revenue growth.
Human Resource
Lean staff - A couple of no receptionist or secretary in virtually any redBus office. They follow simple mantra of do your own job. The personnel is lean and the culture in company is to reduce costs. Most of the personnel is young- in their twenties or thirties - with high interest and dedication for hard-work.
Native audio system in call centers - Within their call centers, redBus has hired many native sound system who come at lower incomes when compared with English speakers. This plan not only helps them in reducing cost but also makes them more customers concentrated.
Competitive Advantage
The five causes framework explained previously was totally changed and only Redbus by one disruptive development, which involved both- an ground breaking product and an impressive value system. If we look at the entire invention from the canvas of Blue ocean strategies, it appears that the company's strategy suits the platform perfectly.
Four Action Framework Work:
Eliminate: Redbus eradicated information asymmetry that was prevalent on the market, it changed just how seat tickets were booked. Customers now plan their travel in a more prepared and coordinated way. The price deceptiveness and last minute mad rush for tickets is reduced.
Reduce: The widespread inefficiencies in the reservation system regarding operators and customers were reduced by the ground breaking Booking software BOSS-introduced by Redbus. It helped both providers and brokers to allocate the bus seating and plan their inventory.
Raise: Redbus has included Call centers and Helpline in their value chain which raised the customer service bars on the market and helped both customers and providers in making the bus service a joyful experience. Home delivery of tickets also enriched the customer experience. The recent facility center of redBus exposed in Mumbai for passenger recreation while they wait for the bus has also raised the bars of customer support on the market.
Create: redBus first time pioneered a opinions structured system which permits customers to raise their tone of voice about any upsetting experience of bus quest and also help the providers in increasing their services. This has changed just how providers used to understand the power of people. The display of service shifted the energy of the game in the hands of people which in ways has reduced the company vitality and helped redBus consolidate their position further.
The Strategy Canvas:
In the situation of Indian highway transport industry there can be seven principal factors.
Ease of scheduling solution: In the traditional market place, dominated by the operators and agencies it was very difficult for the passengers to book their seat tickets as the surety to getting tickets was almost impossible. Moreover passengers acquired to move from one agent to another to book their ticket. Redbus has improved the booking situation where seat selection and reserving solution became a one click affair.
Efficiency for Providers/Consumers: Earlier system was filled with inefficiencies with buses working below capacity even though customer still had desire to visit but could not get tickets. This is because of the quota system of allocation to real estate agents and information asymmetries between providers, operators and customers.
Transparency of Prices: When the marketplace place was unorganized and chaos prevailed, real estate agents used to charge their commissions at their will and the situation became more chaotic whenever any happening approached when ticket price were hiked by as much as 50%-60%. redBus improved the scenario with clearly described on its website and this allowed customers to avail seat tickets at consistent prices.
Value Added Services: The original bus scheduling was without any services to the clients except the bus journey, redBus unveiled Call Centre, Bus Helpline, Mentor Facility information at their website, and it enabled SMS based choosing and m-tickets which eliminated the need of paper tickets.
Travel Quality: While using intro of bus reviews system and display of trainer facilities the quality of travel has advanced a whole lot than it was at the traditional system.
Money Refund: In the traditional booking system whenever a passenger terminated a ticket he/she used to get his refund immediately, in case there is redBus as the scheduling is performed online, limits of the repayment gateway became a bit hurdle for an instantaneous refund. To overcome this hurdle they presented the refund coupons, but for the travellers who still insist on the cash refund a wait of 15 times is inescapable.
Ticket Price: According to our research there continues to be a whole lot of debate on the prices priced by redBus and by brokers. In the majority of the cases the costs were similar but sometimes Redbus appears to charge reduced price. (Show 7)
As per our analysis of Value Chain and the Blue Ocean Strategy construction, redBus has gained a significant competitive advantage as compared to the agent model and the other online e-ticket portals.
As redBus looks forward to the first mover advantages, Mr Praveen Mutyala, South India Director Redbus says that "Were three years before all our competition available". Redbus has gained a substantial presence in many parts of India with more powerful existence in Southern and European India. Many new initiatives have been taken by redBus to bolster their competitive advantage and the same has been achieved for their unique value chain which makes them affordable as well as impressive. Another major reason redBus gained such a significant advantage is because they single minded give attention to the Road Move and that too only in buses. They modified a New Game Across the Board Strategy and have revolutionized the marketplace (Exhibit 8 & 9). As per Mr. Mutyala "We will continue to target only in the section in which we could, as there is a great deal of potential in the forex market and we've significant knowledge of the same. "
Exhibit 7: Comparison of ticket prices redBus vs. other agencies/channels
Bus solution agency
Hyderabad- Bangalore
(VRL journeys)
Hyderabad- Chennai
(Kesineni Trips)
Hyderabad- Vizag
(Orange Trips)
redBus. in
Rs 600
Rs 900
Rs 900
Makemytrip. com
Rs. 600 ( Cash-back Rs20)
Rs 900 ( cash-back Rs20)
Rs 900 (cash return Rs 20)
Bus Operator
Rs. 590
Rs 880
Rs 890
Local agent at Bus Stand
Rs 610
Rs 920
Rs 915
Exhibit 8: redBus Growth
Exhibit 9: Bus demand
Competitive sustenance (VRIO platform)
As per our examination of redBus, it was found that they may have excellent capacities of sustaining their competitive benefit which is explained below by VRIO platform.
Value: Redbus has gained significant resources and features that are valuable for them to create and support this competitive edge. The tangible sources of redBus are its website and software licenses whereas the intangible resources are the extensive network and reputation they enjoy with bus providers and the brand value they have created in the thoughts of customers. The capabilities of redBus are their unique comments from customers system and customer centered services.
Rareness: There exists significant rareness to their resource and capability as there is no other competing company which has any of these resources as of now as none of them has developed the sort of relationships that Redbus has developed with the operators and real estate agents and none of them of the other company will there be in the Indian market which is centering only on the Road Transport.
Imitability: Resources and Capabilities of Redbus are significantly unique and are extremely difficult to imitate as the network of Redbus with providers and agents was developed by personal conferences by Redbus employees and in the disintegrated unprofessional market it'll be very hard for the competition to conquer this or even to churn the Redbus operators and providers. The reviews system of Redbus is very difficult to imitate as it requires a very cordial and strong relationship with the providers and none of the opponents is having this type of clout and marriage with the operators and real estate agents.
Organization: The organizational culture and value string of redBus has been designed in such way which it allows it to leverage on all these resources and features. Lots of the activities of Redbus are aimed towards bettering its customer service while keeping the operating costs at the lowest in order to do new and better things without placing additional pressure on the cost composition. Mr Phanindra Sama the CEO and cofounder of redBus himself travel by the buses with lower scores so that a proper opinions and rating review system can be achieved and bus operators can be forced to improve on a single.
CHAPTER-5 CONCLUSION
Conclusion: Future obstacles and opportunities
At this aspect when redBus has significantly gained competitive gain and is famished for future progress certain challenges lay before redBus which it must get over. The growing competition in online booking websites through makemytrip. com, travelyaari. com etc. has definitely caused a way to obtain be anxious to redBus. Since customers are price delicate these websites are actually trying to draw in customers giving them cash back offer. Which means only way redBus can beat this is through product differentiation and by giving better service to customers. These competitors provide variety of services along with solution booking which entice more customer traffic. redBus has didn't enter into airline or railway solution booking to keep up its unique capability of bus ticket scheduling and practice an approach of centered differentiation. Another task is based on the geographical development as redBus is predominantly in South India and has less presence in remaining country. Although they have opened up their office in some of the north metropolitan areas, it is taking them time and energy to encourage the bus operators on the benefits associated with partnering with redBus and while local agents are thinking about them a risk to their business. Also many bus providers remain small players and they do not have usage of internet therefore redBus is not capable of handling their inventory in real time and is also facing problem here. In words of Mr. Mutyala "redBus is becoming such a brand that in case a end user experience is bad with the bus solution booked through us, sometimes they relate it as mistake of redBus. Therefore redBus is educating the customers by providing detailed reviews opportunities. " As internet and visa or mastercard penetration is still low in India a major area of expansion which redBus is currently focusing is scheduling through call centre and repayment on delivery which is adding revenue at an easy pace. Acknowledging all these challenges it will be interesting to see what procedures will be adopted by redBus and will it maintain its market share and profitability in the foreseeable future.
