Download - Dsb Case Mcgill - Final
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Lara Ballantyne Jaylen Gadhia Rachel Kirby Sami Zubair
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Agenda Current Situation
Objectives
Distance
Satisfaction
Brand
Finance & Implementation
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
Current Situation
50% of revenues came from online sales channels
East-West routes = 38% of revenue and 35% of passenger kms
32% of Danes are motivated to use the train system, however rarely do
POLITICAL ECONOMIC REPUTATIONAL
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
What Matters Most
Alterna(ves Increase Rail
Travel Maximize Sa(sfac(on
Financial Impact
Strengthen Brand Image
ST & LT Benets
Increase Fleet
Commercialize Sta(ons
Improve Technology
Market the Brand
Alter Interior of Trains
Focus on On-Board Ameni(es
Enter Alterna(ve Transport Markets
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
The DSB Strategy
Improve DSBs brand
image
Introduce a message-heavy marketing campaign emphasizing benefits of railway travel and DSB
Better reputation
amongst the Danes
STRATEGY IMPACT OBJECTIVE
Increase passenger kilometers travelled
Facilitate commercialization of surrounding train station areas with improved Park & Ride facilities and station refurbishment with added amenities
Capture new customer segments
Maximize customer
satisfaction
Deploy a comprehensive digital strategy focused on greater integration, communication and satisfaction
Continue improving on punctuality
Facilitate an improved
experience for customers
D (Distance)
S (Satisfaction)
B (Brand)
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
The Opportunity By implementing the DSB Strategy, Danish State Railways will be able to increase the
amount of passenger kilometres in Denmark by over 7.5%, focus on improving the customer
experience and remain profitable, realizing an NPV of between 3.4B 4.9B DKK by 2018, all
while satisfying the triple bottom line of economic, political and reputational gain.
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
Increasing Passenger KMs D
(Distance)
How do we successfully convert passenger cars to train riders?
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
Commercialize Stations Increase
passenger kilometers travelled
Facilitate commercialization of surrounding train station areas with improved Park & Rides and station refurbishment along the East-West line
Capture new customer segment
D (Distance)
Work the exis,ng infrastructure of the train sta,ons along the East-West line to make them as much des,na,ons as they are departure points
Allow for greater penetra,on of the
passenger cars and bike markets by oering more substan,al free parking
facili,es 1 2 3
Implement WiFi and pop-up cafes into 20 train sta,ons
along the East-West line as an added incen,ve to use the train
as travel method of choice during the next 3 years
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
Focusing on Satisfaction
Drivers of Customer Satisfaction
The #1 priority of DSB moving forward
Improved satisfaction will help drive growth
Opportunity for improvement and innovation 1. Continue working with
BaneDanmark to reduce maintenance in peak hours
2. Discontinue waiting for late passengers
1. Commit to full-fledged digital strategy utilizing Rejseplanen and Rejsekortet
Punctuality & Frequency
Traffic Information
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
A Digital App-roach Rejseplanen
DSBs most opportunistic asset
Hugely popular amongst users
Add an account feature to gain better insights into customers
DSB can leverage further to greatly increase customer satisfaction
Up to 60% of seats available for reservation online
Cost of 6 DKK/trip Easily adaptable to
customer wants, needs & feedback
Weight and phone based tracking to determine capacity, shown in real-time
5 additional hires to design & manage all communication systems
Integration of Rejsekort, Rejseplan and Wifi data tracking will reveal many insights
Can be used to provide a more complete and satisfying experience as well as operational efficiencies
Seat Reservation Reliable in Real-Time Rich Data Collection
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Current Situation Objectives Distance
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The Benefits of Digital Customer DSB
1 A seamless public transport experience
2 Greater transparency and availability of more information
3 Ability to chose to travel in greater comfort
1 Capitalize on both consumer and industry trends by further leveraging current capabilities
2 Provide higher customer satisfaction accuracy, reliability and convenience
3 Ability to improve operations through rich customer and operational data collection
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Current Situation Objectives Distance
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Brand Image Image better among
regular customers than occasional users
Customer satisfaction (contrary to image) is high compared with
European counterparts
TARGETING LIGHT & NON-USERS
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
Repositioning
WAITING TIME
SLOW
DELAYS
EFFICIENCY
ENVIRO-FRIENDLY
PLUS TIME
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Current Situation Objectives Distance
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#BuyTime Campaign 250,000 hours per day
wasted in trac
+,me is greatest benet over compe,ng modes
With DSB, customers can buy ,me
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
#BuyTime Campaign
Baresso bathrooms located in larger ci,es outside
capital region
Mo,vated/ light users
High trac highways connec,ng outside ci,es
with capital region
Mo,vated/unmo,vated light users
WHAT?
WHERE?
WHO?
Print Billboards
Throughout Denmark routes, with greater emphasis on Jutland
Mo,vated/unmo,vated light users, mo,vated non-users
Train Wrapping
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
Social Media & Website
- Hashtags - Tie all plaTorms together - Encourage followers to share how
bought ,me could help them in their daily lives develops dialogues
- Targe,ng specic people with specic products
- Press conference & report addressing company changes and concerns rela,ng to punctuality - No wai,ng for late passengers - Construc,on on East-West line &
crea,on of accommoda,ons - Any unexpected delays
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
6000
6200
6400
6600
6800
7000
7200
7400
7600
2013 2014E 2015E 2016E 2017E 2018E Passen
ger K
m(s) in De
nmark (M
illions)
U(liza(on Increase of DSB Plan 2013-2018
Passenger Million KM (without)
Passenger Million KM (with) Pessimis,c
Passenger Million KM (with) Op,mis,c
Financial Impact
4% CAGR
3% CAGR
1.5% CAGR
0
100
200
300
400
500
600
700
800
2013 2014E 2015E 2016E 2017E 2018E
Net In
come (M
illions)
Net Income Impact of DSB Plan 2013-2018
NI (without)
NI (with) Pessimis,c
NI (with) Op,mis,c
19.5% CAGR
16.5% CAGR
1.5% CAGR
1 2 3 WACC = 7.5% 0.3% - 0.7% converted car commuters Additional 13K
commuters from parking initiative
Assumptions:
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
Overall Impact of DSB 1
Enhanced Top-Line Growth
2
Positive NPV
3
Exceed Desired Passenger Growth
DKK1.2B DKK 1.9B
DKK 3.4 B DKK 4.9B
7100-7500 M KM 9% - 12.5%
10% - 15%
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
Implementation
2016 2017 2018
Begin enhancing Rejseplanen interface
Add 8 additional park & go + leisure train
stations
Evaluate strategic efforts and adjust accordingly
Add final 8 park & go + leisure train stations
2015
Launch updated Rejseplanen with
new features
Simultaneously open first 4
enhanced stations
Evaluate data and feedback from Rejseplanen
services and adjust
Launch #BuyTime marketing campaign
Begin enhancing parking and leisure facilities in 4 stations
#BuyTime campaign
ends
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Key Takeaways
Increase passenger KMs by 9% - 12.5%
Realize an NPV of 3.4B 4.9B
DKK and increased
revenues of 10%-15%
Regain the trust of the Danes by
increasing reliability and satisfaction
Poli(cal Economic Reputa(onal
By implementing the DSB Strategy, The Danish System Railway can
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QUESTIONS Presentation: 3. Current Situation 4. What Matters Most 5. The DSB Strategy 6. The Opportunity 7. Increasing Passenger KMs 8. Commercialize Stations 9. Focusing on Satisfaction 10. A Digital App-roach 11. The Benefits of Digital 12. Brand Image 13. Repositioning 14. BuyTime Campaign 15. BuyTime Campaign 2 16. Social Media & Website 17. Financial Impact 18. Overall Impact of DSB 19. Implementation 20. Key Takeaways
GOAL: Increase amount of passenger kilometres, improve customer experience & remain profitable
Finances: 24. Revenue Assumptions 25. Capital Structure 26. Cost Assumptions 27. DCF 28. Financial Comparison Risks: 29. Risks & Mitigation Strategies 30. Baresso Contingency 31. Station Coffee Shop Trains: 32. ST Alternative to WiFi 33. Bikes and the Issue of Space 23. LT Plan
34. Construction on East-West Line 35. Coffee Machines Marketing: 36. Locations for Billboard 37. Billboards 38. Earth Week 42. Segmentation & Targeting 43. Motivated Light User 44. Unmotivated Light User 45. Unmotivated Non-User 46. Travel Purpose Other Strategies: 39. Why Parking? 40. Rejected Alternatives 41. Commercialization Locations
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LT Plan (10 Years) Replace current trains with newer, more efficient, self-operating
trains Expand frequency of trains and train routes based on user data Increase amenities offered on-board Explore entry into alternative transport methods Simplify product portfolio for tickets
Potential 4 classifications include: Youth Student Adult Senior
Only differentiate prices based on peak vs. non-peak hours Eg. Monday Friday 7:00am 6:00pm = peak Everything else = non-peak
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Growth 6% Tax Rate 22% Debt 8,480 M DKK, TS 1,865 M DKK Rf 2%, MRP 4.8%
Unlevered Beta 0.94 Green Field Premium 1% , ru=7.5%
Capital Structure
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Revenue Assumptions Op(mis(c Pessimis(c
Marke,ng 0.66% 0.33% Park & Ride 13,100 new spots, doubling the parking
Seat Reserva,ons 6 DKK per, 60% available, 50% get booked
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Cost Assumptions
Billboard 16,250 DKK (Copenhagen)
9,850 DKK (Outside Copenhagen)
Wrapping 98,550 DKK x 200 19.7M DKK Indoor Ads 2x12x2x490x52 DKK 1.2M DKK IT PlaTorm 525k x5 2.6M DKK Parking 26K DKK x 13,000 DKK 344M DKK
Caf 1.3M DKK per store, 20 years Avg. Rent 3050 DKK/sq meter x 36 (we get a third)
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(DKK millions) 2013 2014E 2015E 2016E 2017E 2018ERevenuesRevenue Base 12,340 12,525 12,713 13,295 13,930 14,581 Add-OnsMarketing Campaign 184 186 189 Parking & Caf 38 76 77 Seat Reservation Platform 164 167 169 Total Revenue 12,340 12,525 13,098 13,724 14,366 14,581
CostBase Cost 9,558 9,701 10,145 10,630 11,127 11,294 Add-OnsMarketing campaign 28 8 8 Application & Seat Reservation Implementation 3 3 3 3
Operating Cost 9,558 9,701 10,176 10,641 11,138 11,297
EBITDA 2,782 2,824 2,923 3,083 3,228 3,285 EBITDA Margin 0 0 0 0 0 0
Depreciation 1,892 1,920 1,949 1,979 2,009 2,039
EBIT 890 903 973 1,104 1,219 1,245
Interest Expense 504 504 504 504 504 504
Income before taxes 386 399 469 600 715 741 Taxes 97 100 103 132 157 163 Net Income 289 300 366 468 558 578
CAPEX 1,720 1,746 1,846 1,947 1,974 2,003 Change in NWC 150 151 152 153 154 155 FCF 716.20 728 710 741 832 852
Value of the Firm (Post Project) 13,405 NOW
Value of the Firm (Pre-Project) 10,002 Value of the Project 3,402
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(DKK millions) 2013 2014E 2015E 2016E 2017E 2018ERevenuesRevenue (without) 12,340 12,525 12,713 12,904 13,097 13,294 Revenue (with) 12,340 12,525 13,098 13,724 14,366 14,581
1.50% 1.50% 1.50% 1.50% 1.50%1.50% 4.58% 4.78% 4.68% 1.50%
EBITDA (without) 2782 2824 2866 2909 2953 2997EBITDA (with) 2,782 2,824 2,923 3,083 3,228 3,285
EBIT (without) 890 903 917 931 945 959 EBIT (with) 890 903 973 1104 1219 1245
NI (without) 289 293 298 302 307 311NI (with) Pessimistic 289 300 366 468 558 578NI (with) Optimistic 289 300 398 533 657 680
1.50% 1.50% 1.50% 1.50% 1.50%3.64% 22.16% 27.88% 19.16% 3.71% CAGR
Change 4.57% 1.5%Change 58.04% 16.5%Change 70.66% 19.5%
Passenger Million KM (without) 6246 6340 6435 6531 6629 6729Passenger Million KM (with) Pessimistic 6246 6340 6562 6809 7060 7166Passenger Million KM (with) Optimistic 6246 6340 6669 7024 7385 7496
1.50% 1.50% 1.50% 1.50% 1.50%1.50% 3.51% 3.76% 3.68% 1.50%
Change 4.57% 1.5%Change 9.20% 3.0%Change 12.40% 4.0%
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Risks & Mitigation Strategies Risk Mi(ga(on
Partnership with Riccos Partnership with another coee company
Park & Ride doesnt drive more train commuters
Can always sell the land; would be careful not to over acquire
Danish government prevents seat reserva,on surcharge
Provide the service for free
Everyone takes to the reserva,on app Peoples expecta,ons are clear and we now have another revenue driver
Marke,ng campaign has lille impact Can cut costs quickly
Signicant delays deter from campaign message
Hold a press release to reach out to consumers directly
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
Baresso Contingency
33 restaurants in Denmark 5 million visitors every year Focus on those outside
capital region
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
Station Coffee Shop Riccos 10 cafes in Denmark
9 in Copenhagen 1 in Aarhus
One of top 10 coffee shops in Copenhagen (Official City Website)
Offering: opportunity for expansion
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Too costly and beyond DSBs immediate control
Requires significant investment of up to 400M DKK that could be better spent
ST Alternative to WiFi
Mimic the Swiss and instead adopt repeater technology onboard trains travelling to more remote areas
Easier to implement, more cost effective, and more reliable for passengers
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Bikes and the Issue of Space Therefore, in the interest of space
and sea,ng available, we believe the train layout should remain as it is in order to maximize exis,ng space on
trains
Though a popular method of transport for Danes, bike storage on trains at a larger scale capacity than what DSB
already has would be an inecient use of space (i.e. bike valet)
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Current Situation Objectives Distance
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Construction on East-West Line TRANSPARENCY
Openness regarding 30-minutes delay times (and potential further delays) in press release
Accurate, real-time updates with DSB App
ACCOMODATION
Provide customers with cafes at stops along East-West line
Improved experience and satisfaction by providing customers with ability to sit and work
Free car and bike parking
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- Coffee stations and vending machines
- Increased on-board customer satisfaction
- Self-serve eliminates employee pay, open 24 hours
- Mobile phone & card payment options
- Begin with 3 coffee machines,1 snack machine, 1 water cooler on 50 trains
Coffee Machines
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24 billboards concentrated around Zealand
Others in high trafficked areas of Jutland & Funen
Locations for Billboard
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Billboards
- 74% of regional commuters into metropolitan Copenhagen come from Zealand
- 26% from Scania - Targeted highways
- E47 - E20 - E65
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Earth Week
TRIALABILITY Wednesday, APRIL 22
FREE TRANSPORT ON OFF-PEAK
HOURS
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Cars / Capita 607 480 21% less cars
Inhabitants in suburb /
parking spot at the train sta,on
47 153 69% less parking spots
Why Parking?
Denmark Popula,on 5,600,000 less: Top Four ci,es -1,750,000
3,850,000 Half-Live in Secondary Ci,es 50%
1,925,000 Persons/Spot Now 153 Spots now 12,565 Goal (people/spot) 75 Goal 25,667 To build 13,101
13K commuter target:
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Rejected Alternatives Objec(ve Poten(al Impact Reason for
Elimina(on
Acquire a complementary transporta9on company
Secure an alterna,ve source of revenue to
compensate for poten,al lost revenue
from railway improvements
Expand reach and market share within the Danish transport
industry
No real prospects that would align with
DSBs vision and growth strategy
Partnership with a bike sharing company
Appeal to the biker por,on of the
transporta,on market to bike to the train
Increased number of consumers considering the train as a transport
op,on
Bike sharing has proven to be unpopular among the Danish people (i.e.
City Bike)
Shu?le service to/from train sta9on in remote areas
Get people who are further than 2 km from the nearest train sta,on without a need
for parking
Expanded reach to mo,vated non-users in more rural areas of
Denmark
Majority of people who would be out of range of a train sta,on would likely
already have access to a car
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Commercialization Locations
D (Distance)
Cafes, Wi, and addi9onal parking will become available at 20 sta9ons on the East-West line
An addi,onal 5 commercializa,on
loca,ons will be developed at Hobro, Arden, Skorping, Svenstrup, and Aalborg
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
Segmentation & Targeting
Image better among regular customers than
occasional users
TARGETING LIGHT & NON-USERS
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
DESCRIPTION HOW? WHY?
Older, married Larger ci,es
outside capital region
High income Enjoy relaxed
social surroundings
Billboards, print, trains
Subsequent social media
33% (largest) of DSB customers, 19% of Danes
Leads to greater opportunity for 1 ,cket promo
Increased mo,va,on
Motivated Light User
Mo(vated Light Users Image better among regular customers than
occasional users
TARGETING LIGHT & NON-USERS
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
DESCRIPTION HOW? WHY?
Older, married Larger ci,es
outside capital region
High income Enjoy relaxed
social surroundings
Billboards, print, trains
Subsequent social media
33% (largest) of DSB customers, 19% of Danes
Leads to greater opportunity for 1 ,cket promo
Increased mo,va,on
Unmotivated Light User
DESCRIPTION HOW? WHY?
Smaller ci,es away from nearest train sta,on
Take car/bus to work
Billboards, print, trains
Subsequent social media
Parking
13% of Danes Increased
mo,va,on (such that they will use trains)
Unmo(vated Light Users
DESCRIPTION HOW? WHY?
Smaller ci,es away from nearest train sta,on
Find public transport limi,ng
Love their car
Billboards, print, trains
Subsequent social media
App Parking
28% (second largest) of DSB customers, 16% of Danes
Leads to greater opportunity for 1 ,cket promo
Increased mo,va,on
Image better among regular customers than
occasional users
TARGETING LIGHT & NON-USERS
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
Unmo(vated Non-Users
DESCRIPTION HOW? WHY?
Older, married Larger ci,es
outside capital region
High income Enjoy relaxed
social surroundings
Billboards, print, trains
Subsequent social media
33% (largest) of DSB customers, 19% of Danes
Leads to greater opportunity for 1 ,cket promo
Increased mo,va,on
Unmotivated Non-User
DESCRIPTION HOW? WHY?
Smaller ci,es away from nearest train sta,on
Take car/bus to work
Billboards, print, trains
Subsequent social media
Parking
13% of Danes Increased
mo,va,on (such that they will use trains)
Image better among regular customers than
occasional users
TARGETING LIGHT & NON-USERS
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Current Situation Objectives Distance
Satisfaction Brand Financials & Implementation
Travel Purpose