WAC-1

REDBUS: THE NEXT STEP FOR

GROWTH
Situation Analysis

Submission Date: 1st Dec’2016

Submitted By:
Himanshu Agrawal (P16002)
P16himanshu@iimangpur.ac.in
Situation Analysis
redBus has done greatly since their inception in 2006. Company have grown exponentially and have
grown 1000 times in size in a span of 6 years only. Now they need to evaluate their current business
model and make a decision on the future business model.

Objective
Objective of redBus is to provide a simple online bus ticket booking platform with transparency to
their customers and suppliers both.

redBus has a target of achieving annual revenue of US$1 billion by FY2015.

Analysis of redBus
Online booking industry have been growing at a rate of 50% per year and is expected to continue the
same in coming years. There is a fierce competition in industry and lot of chances of new entrants
coming in the market as the growth prospects are huge. This is a highly unorganized market in the
semi urban and rural areas. redBus will always has the advantage of first mover and can always attract
customers with the new service offerings. Customer satisfaction has been superb till now. They have
opportunity of backward integration with procurement of buses and horizontal integration of air
travel bookings, hotel bookings etc. They also have tremendous opportunity of global expansion.

Dilemma of Mr. Phanindra

redBus have done very well since their inception and want to continue the same momentum in coming
times. Mr. Phanindra has four options in front of him and he is not able to decide which option will be
best suited to achieve their target by FY2015.

 Vertical Integration – Launch their own private buses (backward integration)

PROs CONs
1. Supplier bargaining will be reduced. 1. Huge capital requirement for buying buses.
2. It will result in cost savings. 2. It can cause a divergence from their core
business.
3. redBus already have a strong analytics and 3. They will have to hire new team to manage
data mining abilities. They can use this to find this vertical and the overhead costs will
the most profitable routes and can launch their increase.
services on these routes.

 Go global
PROs CONs
1. As redBus already have a platform which is 1. Present team has no experience in working in
quite extensive, same can be used for a global market, also team strength is low for
international service also. expansion.
2. No major competitors at present. 2. Need to study the socio-economic trends in
global market, consumer behaviour.
3. Enormous opportunities in Asia region, these 3. They have to spend a lot of money on market
can be looked to sustain in long term. research and marketing of their brand.
  Increase the portfolio of service offerings
PROs
1. Exponential growth of online bookings
market.
2. It will increase the revenue generation as the
transaction involved are high value (air travel,
hotel bookings etc.)
3. Consumer traffic will increase and it can help
in broadening of their customer base.
4. Strong technology platform and infrastructure
to integrate these add-on values.
 Focus on the core business
PROs
1. Exponential growth of bus transportation with
25% annual growth rate.
2. Lot of untapped market to capture, they will
always have the first mover advantage.
3. High internet adoption rate and increasing
GDP growth rates.
Number of word: 599
CONs
1. Huge competition in online booking industry.
2. Profit margins are very low.
3. Not the core competency of the company.
4. It will divert them from their core business
model.
CONs
1. Marketing expenditure needs to be increased
to increase awareness and credibility.
2. Need to increase team-size to manage more
bus operators .
3. Need to add value added service to retain
customers which can increase the operating
costs.