I P Sudhir Kumar (PGP/16/002) Arvind Ratan (PGP/16/008) Hemant Raj Singh (PGP/16/021) Jayanta Dutta Banik (PGP/16/062) Sumit Guri (PGP/16/233) Swasti Katwal (PGP/16/353) Case (C18) Red Bus: The Next Step for Growth Q1: Using the information provided in the case and also by using the information available from other sources, evaluate the business model of Redbus? What What are its key characteristics?
Answer: There is 50 % + 20 % (Customers +OTAs ) revenue from online sources, so switching between services for these type of customers is very easy. There is the presence of strong competition since the model is quite imitable with low entry Bar riers present in the industry. The overall model of it w as scalable and can easily be modified. Fixed investments required for the business set up was also low and apart from that the market had huge potential. The business of Redbus runs on selling convenience and experience, if customers feel comfortable using it, they will make repeat purchases or else will switch for other service. They were also using the Franchise Model where big travel ag ents directly deal with the customers, Re dBus update inventory of Bus operators and take payments through gatew ays. The competitive advantage functions on good network. Buyer side and supplier side both are g reatly influenced by network effects and this model minimizes the transaction cost, gets agents out of the value chain, increase capacity c apacity utilization, better forecasting for Bus operators.
Q2: What are the different options for growth available to Redbus? What do you think should be the next step for growth?
Answer: The options for growth available for Redbus are as follows: 1. Vertical Integration 2. Go Global 3. Increase the portfolio of Service operators 4. Focus on the core Every option has its own pros and cons attached w ith it and after evaluating all of them we have reached to the decision that “Increasing Portfolio of Service Offerings” is the best option available for Redbus in the current scenario. The online travel market is growing at a rate of 50% looking at the socioeconomic indicators, technological advancements and customer growing preference towards online ticket booking, this growth rate w ill sustain for long and moreover the customers who are currently shifting from offline booking to online booking has greatly increased in numbers. Redbus c an explore the markets of train ticket booking since I ndian railway is the largest source of commutation in I ndia and
customers daily face lot of hustle on I ndian Railway servers during normal as well as tatkal bookings. Redbus can use this business opportunity to work with Indian Railways and can get the train travel offers which would be able to help reach a vast sphere of travelers in their bucket. Other opportunity lies in the bookings of Air travel. Lots of available customers have shown their interest in Redbus being providing Air tickets. And as per the Redbus stats of they are able to make 10% of their customers to book Air tickets with them they would be able to make 10 times more profit as compared to revenues from online sales of a similar number of online bus tickets. Though this will out hem in direct competition with the bigger players and they would need more man power in the form of ground staff, management and also technical people who can make the website up and running. This would not be in anyway deviating them from their core business instead it would give them a better market penetration with wide portfolio in the market and along with that they will be able to establish themselves as the India’s best travel site.
This can be further leveraged to extend its services in other
spheres like hotel booking and travel & tour plans e tc.