Redbus: The Next Step for Growth Case Analysis

Hayley Bingham

redBus: The Next Step for Growth Case Analysis

Due: March 7, 2017

Overview

Until 2006, bus transportation in India was run by a manual ticket booking process where travel agents were booking all the travel throughout the country.  The bus system was relying on these travel agents to fill their buses for them while the customers were reliant on the travel agents to find them seats and booking them.  This all changed in 2006 when a company called redBus entered the industry with an online ticket booking process.  The customer was now able to book their tickets through the booking website or by simply calling into the call center.  This disrupted the market and caused the travel industry in India to change for the better.  The technology not only benefited the customer but also the bus operators who would know how many people they were transporting up to the moment.  Almost six years later the company is looking to scale and grow the company.  By 2015 the company is looking to reach a revenue of one billion dollars versus the three hundred and forty-five million they made in 2012 (Exhibit 4).  To do this they are going to have to make one of the four changes:

1. Integrate vertically and launch its own private buses
2. Go global and extend their ticket-booking operating outside of India
3. Start adding other service offerings such as bookings for air, travel, hotel, etc,
4. Start to focus on tapping into other parts of the travel booking business

None of these things would be easy to do and all of them require the company to alter the way that they are doing things.

To decide which option would be ideal for scaling and growing the company to almost triple their revenue, I will be using two of the frameworks that we have discussed in class: SWOT analysis and Porter’s Five Forces analysis.

SWOT

The SWOT analysis will help redBus determine what they need to focus on as they plan to expand and potentially grow into a new market.  It allows the company to analyze internally and externally at the same time.

The strengths of redBus are that they have three different product offerings: BOSS, the online platform, and Seat Seller.  They can appeal to everyone in the industry through these three offerings.  BOSS appeals to the bus operators who have an online presence.  The bus operators are able to upload the inventory of their seats in real-time to the redBus server.  This helps the customer to know exactly how many seats are left on a bus at any time. Secondly, the online platform allows the customer to book their own bus ticket without having to go through a travel agent and they can feel like they are in control.  Lastly, Seat Seller is available to the big customers such as MakeMyTrip and Expedia, so that they can offer bus travel booking services to their customers.  

The weaknesses of redBus are that they are going to be easy to imitate by other companies.  This could be something to consider when they think about expanding into other countries.  They are going to have to look at the market and feel out whether they would able to enter the market without having to take a huge hit before turning a profit.  This could be a deal breaker for redBus and they should use caution when breaking into other markets.  Another weakness that the company could encounter would be that they lack the funds to expand into other markets.  Finding the funding to do these kinds of things can be rough and we know that when they started out they were able to get funding from Seedfund, Inventus Capital Partners, and Helion Capital Partners.  The question would be whether they could get that funding again to grow into new markets.

As far as opportunities go, redBus has an abundance of them.  There is huge opportunity to expand into other traveling markets in India and other countries.  “The online travel industry has grown from 62.5 billion in 2007 to 378.9 billion in 2011(pg 9).”  This statistic shows how the market for online travel booking has grown in just four short years.  At the end of the day, they have come up with a way to make the customer, bus company, and even other competitors happy with their three offerings.   To break into this market of offering bookings for air, travel, hotels, cabs and package tours would be worth looking into.