business strategy for a bus company/project by kpmg
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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.
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