Railway Transportation- Challenges Faced, Business Development for Future Business Opportunities - Case Study Example

Railway Transportation One train operating company in UK excluding operators with services that operate in Scotland C2C. This franchise operates in the London, Tilbury and Southend. The franchise parent company is National Express Group. Franchising of the railway system in UK ensure that the contract is awarded to an operator that can operate most efficiently.C2C is classified as South East operator and is amongst the best train service in the UK. 2 Situational analysis of selected train operating company, market position and key competitors in the railway business 5C’s The Company.Prism group was acquired by National Express in 2000, this was later renamed to C2C in 2003. Competitors In 2014 c2c beat 3 competitors in the Essex Thameside rail service to extend its services for a further 15 years. Other competitors include Southend franchise owned by Govia. Customers include commuters that operate within the North London areas. The franchise maximizes on consumer satisfaction by having enhanced compensation systems to customers when delays occur. Under the new 2014 franchise, the firm aims to pay to customer 3p for every minute after 2 minutes that the train delays. The company is also offering 40% discount to passengers who book online in advance for their off-peak travel. Collaborators include national express group the owners for C2C, who bring in financial backing as they are also to further spread the investment risk via their main group the National Express Group. Climate; more maintenance of the railways is needed especially during the winter snowing season. Strengths; the franchise is owned National Express which is Britain’s largest train operator and is also a bus company. This gives the franchise advantages like synchronizing rail and bus services by having train stations where there are bus stations. National express revenues for 2013 was up to £ 1.89 Billion. The franchise also acquired a 15 year extension on the Essex Thameside franchise up to 2029 which started in November 2014. This offers c2c enough time to strategize their business and increase their market share. C2c also offers free Wi-Fi, discounted fares and new ways to buy tickets which are aimed to increase customer traffic flow. C2C owners, National express have also committed to building more than 25,000 additional seats per week for the morning commute to ease congestion during peak hours. Weaknesses. C2C faces complaints of congested trains, and poor and unreliable service especially during peak hours. Opportunities.c2c offers the web application c2c live where consumers can get more information on issues like arrival times and booking, paying for parking fees, . The TOC is also offering C2C smart cards via which consumers can make payments. Threats; includes the high cost of maintaining the railway system. The challenges the franchise faces includes operational costs like; staff costs, leasing charges and maintenance costs, catering, park management fees, British transport police charges, IT, legal and professional costs and Franchise premium. All this add up to an average of cost per kilometer for the franchise operation. Under the new franchise agreement which began on November 2014, c2c will pay around £ 1.5bn over the next 15 years. 3 Challenges faced in area of Train punctualityC2C has an annual train punctuality of 96.63% which is at the top of the national average. It also ranks high on customer satisfaction at 93% passenger satisfaction. Availability C2C trains are available for clients throughout the day. There is high demand for the trains during peak hours of morning and evening. Reliability and maintenance; C2C effected a new four star EFQM status quality system in 2012. This has increased the firm’s potential for bidding and also improved efficiency in operations. The firm has also implemented smart technologies at Barkingstations. Key performance indicators; C2C has continued to improve passenger volume and yield in 2012 and 2013. In each of this years, the train franchise carried over 2 million passengers each year. Revenue; C2C continues to exhibit good revenue growth Passenger journeys; c2c continued to improve passenger journeys which is in line with National Express objective of increasing passenger ridership. Public performance measure; The franchise continued to have amongst the most favorable ratings in public satisfaction which improved the chances of the firm extending their franchise due to their efficient services. 4 Overview chart of TOC management structure Julian Drury is the managing director at c2c. C2C is owned by National Express. Therefore the Board of directors at National Express are responsible for steering the strategic growth plans at c2c. Dean Finch is the chief executive at National Express. National Express directors and chairman National Express CEO C2C board of directors , chairperson and CEO Departmental Heads 5 Discuss company structure and identify which department is responsible for the KPI’s above 6 Review literature and identify best practice where they exist Percentage of increase in customers. In the last 14 years c2c has increased its number of customers by 42% from 26 million to 37 million a year, which is almost an average increase of 0.8 million passengers a year and 2,140 passengers a day. C2c offers better station services at rating of 81% compared to London and South East companies at 71%. It offers train services at rating of 88% compared to other London and the South East companies at 77%. 7 construct network diagram and identify critical path for the TOCs project plan 1 and give a brief description for what is required for each activity Activities include; i. Making/ procuring the 25,000 seats per week to ease congestion in peak hours ( allocated time is 1 week, average of 3,600 seats a day, this projected time may be overestimated and this may take up to 2 weeks to achieve the target) ii) Expanding parking space for commuter vehicles. (may take up to 3 years to complete) iii) Purchase of new fleet of trains (may take up to 1 year for a given moderate quantity, 17 new seats with 4,800 seats) iv)Wi-fi installation (may take up to half an year) Wifi installation (6months) Procuring 25,000 seats a week (2 weeks) Expanding commuter parking space (3 years) Purchase of new train fleet ( 1 year) If there are sufficient resources the activity of purchase of new train fleet may be done at the same time as expanding the commuter parking area. 8 Conduct break even analysis and estimate the profit and loss with and without the new project for the income and the costs associated with this business. Remembering to make estimate of the effect of completing the business on variable costs of running the trains including a reasonable projection for the future. In the franchise bid, the TOC usually specifies the revenue they expect to generate and the subsidy they expect to receive. In 2012 – 2013 year, C2c generated revenues of £ 138m. The costs to be paid include the franchise fee that ranges at 1.5bn for the 15 years average of £100 m per year.This means that on average the business will be able to break even in each year especially because the projections for revenue are expected to increase while those for the franchise fee remain constant. 9 Present business case for investment in the NEW project using results from investigation Investment in the expansion of c2c’s business is viable and is actually necessary to meet the demands of a budding cosmopolitan UK region. The business opportunity also offers a good return for the investors at National Express. 10 Discuss sustainable business development for future business opportunities. The financial backing from National Express make c2c very financially stable and able to undertake the transformation to increase its customer base and increase efficiency in the next 15 years. The firm has already been in the Thameside franchise for the past 14 years and in these years it has familiarized with the challenges to anticipate such as the gradual increase in commuters over the years, complaints due to delays and cancellation and this gives the franchise enough confidence to forge ahead with a sure step. It has also dealt with issues of procuring new trains, expanding parking spaces for commuters, CCTV coverage and security and offering cheap and competitive train fares.The firm is also committed to reducing adverse environmental impact and to introduce trains that are more energy efficient. The vehicles serving the Thame links line is expected to increase to 364 by 2024. Recommendations Since C2C is going into a new 15 year term, and it plans to make huge capital commitments to improve efficiency, the financial controller has to ensure projects are carried out at stipulated times and funds are sources for promptly to avoid cash flow problems. References Akiko Maeda, M. N ,2014, c2c awarded 15 year Essex Thameside rail franchies ... World Bank, New York. Osborne, Alistair., 2000, National Express buys Prism for £ 166m ….The Daily Telegraph, London Prichard, Rob., 2007, Old C2C timetable back on Monday.Southend. Echo. London Routledge, Paul., 2008, c2c switches to renewable energy source.. Greater London Authority Read More