For Stagecoach Bus Company - Business Plan Example

Business Plan for Stagecoach Bus Company Table of Contents Executive Summary 3 Stagecoach Bus Company 4 Vision, Mission and Strategic Analysis 4 Marketing 6 Operations and Delivery 7 Management and Personnel 7 Financial Performance and Benchmarking 8 Funding 8 References 10 Appendices 11 Appendix 1: SWOT Analysis 11 Appendix 2: PESTEL Analysis 12 Appendix 3: Three-year profit forecast for Stagecoach UK Bus (Extracted from Group Results) 13 Appendix 4: Risk Matrix 14 Executive Summary Stagecoach UK Bus is a member of the Stagecoach Group, a leading consortium of rail and bus businesses in the UK and North America. The UK Bus division is a leading company in the UK bus market with a market share of 16%. Today the company boasts over 8,100 buses and coaches and more than 23,000 employees. Over the years, the company has largely depended on retained profits to fund growth. However, the company has experienced exponential growth in demand for its services. The growing demand has mainly been the result of good customer service. The company must now look for external sources of finance if it is to match the demand. Part of the strategy of the company for growth is to harness the motoring segment of the UK market. The idea is to get them to leave their cars at home and catch a Stagecoach bus or coach to work and back home. In order to achieve this aim, the company has been investing in luxury vehicles over the last four years. Meanwhile, the company has digitized many of its processes such as ticketing and obtaining bus schedules, with the aim of introducing convenience. The company has in place a robust management structure and has consistently posted better financial results than any other division of the group. Business Plan for Stagecoach Bus Company Stagecoach Bus Company Stagecoach UK Bus is a member of the Stagecoach Group of companies and is among the leading bus operators in the UK(Stagecoach Bus UK, n.d.). We provide local and express bus services throughout the country. In addition, under the Megabus.com we run an elaborate network of intercity operations. Currently, we operate a fleet of more than 8,100 buses and coaches. Two million people travel on our buses every day to access jobs and services. For the last four years, we have invested approximately 300 million pounds in new vehicles. Our new buses are designed with the elderly, people with disabilities and families with young children in mind and meet stringent emission standards. Our customers are our priority. To this end, we invest in recruiting and training our employees to offer the best customer experiences. Stagecoach UK Bus is a major employer, providing over 23, 000 people with jobs. We work hard to make our services better and more reliable and offer private car users an acceptable alternative, thereby reducing congestion in our cities. Vision, Mission and Strategic Analysis Our vision is to be the preferred bus operator in the UK for both private car owners and non-car owners alike. Our mission is to provide exceptional customer experience. Our values are respect for people, innovation, teamwork, sustainability and result-orientation. Sustainability is core to our operations, especially in the face of climate change(Stagecoach Group, n.d.). We are aware that our business impacts the environment in a significant way. As a result, we are making every effort to reduce our carbon emissions. Such efforts include acquiring only the vehicles that meet stringent emission standards. At the same time, we strive to continually improve the quality of our services to make them attractive to private car owners. We believe that by getting more car owners to leave their cars at home and commute to work and back home by bus, significantly less carbon will be emitted into the atmosphere. In line with the objective of attracting the motoring segment of the UK market, Stagecoach UK Bus has invested heavily in state-of-the-art vehicles over the past four years. We believe that that these vehicles enhance customer comfort, the beginning point of attracting private automobile owners. As noted earlier, in the last four years alone, the company has invested more than 300 million pounds in luxury buses and coaches. Besides comfort, the new vehicles are also designed to render them more accessible to elderly passengers and those with physical disabilities. In the coming financial year 2015/16, the company plans to introduce 470 new vehicles, many of which will have free Wi-fi(Stagecoach Bus, 2015) at a cost of more than 80 million pounds. The investment is consistent with the companys policy of reinvesting profits to enhance services to local communities. However, given the growing demand for the companys services, internal resources alone are not sufficient to fund the growth. As a result, the purpose of this plan is to secure funds from the commercial banks. Stagecoach Bus commands 16% of the UK bus market, making it the second-largest bus company in the UK after FirstGroup. Other large operators include Arriva, Go-Ahead and National Express. Together, these five “large operators” control 69% of the local bus market (Competition Commission , 2011)The company boasts a fleet of over 8,100 vehicles that together ferry more than two million passengers across the UK in a day. Thus, the company enjoys a competitive position. A detailed SWOT analysis of the company is provided in the Appendix 1. Appendix 2 presents the PESTEL analysis that examines the company’s external environment in greater detail. Marketing For the greater part of the UK populace, the decision whether ornot to ride in a bus is determined by a number of factors. These include the level of income, life stage, the distance to the nearest bus stop and access to a car(Competition Commission, 2011). Bus companies like Stagecoach have no control over many of these factors. However, increasingly more commuters may use multiple modes of travel to complete a journey. For instance, a private motorist may park their car several blocks from their office then ride in a bus to their office. However, the car remains a competitive constraint to bus operators. As Stagecoach Bus has no control over the forces that drive commuters to use their buses, the company has resorted to indirect means of influencing demand for their services. For instance, for four years running, the company has been investing in luxury buses. The rationale is to try to appeal to the car owner by providing them with an acceptable level of comfort, even though it may not match the level of comfort they are used to. The new buses are also designed to appeal to other market segments such as families with little children and the elderly. In addition, in our efforts to appeal to the driving class, we have tried to introduce convenience in our ticketing system. This have been achieved through online ticketing where a customer can buy their ticket from our website. The customer can also find scheduled bus times from our website. We believe that the middle class especially values convenience. By tapping into the middle market, we will not only grow our profits but also actualize our sustainability value. 80% of all traffic in the UK is affected by congestion(Stagecoach Group, n.d.). The longer cars stay on the roads, the more carbon they emit into the atmosphere. By getting more commuters onto the bus, we reduce congestion, hence pollution. Operations and Delivery We have major operations in the following cities: London, Manchester, Liverpool, Newcastle, Cambridge, Oxford, Hull and Sheffield. We also provide inter-urban services that link smaller locations. Megabus.com is our budget service in the UK and several countries in continental Europe. Oxford Tube, Europes most frequent express service, operates in and around London. We also provide contracted transport services to schools on behalf of local authorities. In total, we operate in a hundred major towns and cities. Our extensive network and the wide range of services gives us the upper hand in the UK bus market. Moreover, the wide network enables us to provide better services to our customers. We provide our services on a commercial basis in a deregulated market. To a large extent, deregulation has given rise to the malpractice of market segregation along geographic areas. This phenomenon entails operators delimiting geographic areas as their own and barring other operators from operating in those areas(Competition Commission, 2011). In the event that an operator enters the territory of another, the operator whose territory is “invaded” retaliates by forcing their way into the invader’s territory. From the viewpoint of operators, the practice is good as it prevents cut throat competitions. For aspiring new entrants, the practice makes it extremely difficult to enter the UK bus market. As a policy, Stagecoach neither engages in nor advocates territorial market segregation(Competition Commission, 2011). Management and Personnel Each regional operating company’s management is independent of the overall management of the Stagecoach UK Bus(Stagecoach Group, n.d.). Each regional company is headed by a Managing Director, who reports directly to the UK Bus Division Managing Director. The decentralized management system renders decision-making more efficient and speedy. Also, as the operating conditions vary from one region to the next, decentralization makes it possible for managers to make day-to-day decisions suited to their regional needs without interference by the head office. However, major decisions such as investment decisions are made by the head office in consultation with the regional offices. Currently, our company employees more than 23,000 people. Because we value customer satisfaction, all our employees receive regular training in customer care. Customer service is a vitalelement of our organizational culture. As such, we believe in equipping every employee, not just those in the customer care department, with the necessary skills to handle customers of all tempers. Financial Performance and Benchmarking Stagecoach Group has a centralized system of reporting financial results in which all of the groups operations results are reported jointly. The practice is the most widely accepted the world over as it promotes integrity in financial management. For the 2013/14 financial year, the Group generated total revenue of 2.930 billion pounds compared to 2.804 billion for the period ended 30 April 2013(Stagecoach Group, 2014). Profit before taxation for the last financial year was 158 million pounds up from 154.3 million pounds for the 2012/13 financial year. Stagecoach Bus (Regions) accounted for 61.9% of the profit while London Bus operations accounted for 10.0% of the profit. UK Bus led the UK bus market in both financial performance and customer satisfaction. Funding Over the years, Stagecoach UK Bus has mainly relied on retained profits to fund growth. Conversely, in the light of rising demand for the company’s services, fueled by favourable ratings in customer service, it has become clear that the company can longer depend on internal resources alone to fund growth; the company must now look outward for funds for growth. We believe that our financial position is strong even though a changing business environment has forced us to review downwards our profit forecast for the current financial year. However, we expect to recover in the next financial year. Appendices 3 and 4 show our three-year profit forecast and business risk matrix, respectively. References Competition Commission , 2011. Local bus services market investigation, London : Competition Commission. Stagecoach Bus UK, n.d. About Us. [Online] Available at: http://www.stagecoachbus.com/aboutus.aspx [Accessed 22 March 2015]. Stagecoach Bus, 2015. Stagecoach invests more than £80m in new buses and coaches. [Online] Available at: http://www.stagecoachbus.com/pressreleasesdetails.aspx?Id=2050 [Accessed 22 March 2015]. Stagecoach Group, 2014. Stagecoach Annual Group Report and Financial Statements 2014, London: Stagecoach Group. Stagecoach Group, n.d. Revolution in the Way We Travel: Stagecoach Group Plc Sustainability Strategy, London: Stagecoach Group. Stagecoach Group, n.d. UK Bus. [Online] Available at: http://www.stagecoach.com/about/our-companies/uk-bus.aspx [Accessed 22 March 2015]. Appendices Appendix 1: SWOT Analysis Strengths Well-recognized brand Significant market share Strong partnerships with bus manufacturers and local authorities Large asset base (entire Group) Automation of processes such as buying tickets Good financial performance Weaknesses Poor performance by other operations in the Group Slow major decision-making due decentralization and the need to consult Opportunities (for growth) Employ customer service to effect modal shift Expand Megabus.com scope of operation More partnerships in London and the regions Increasing environmental awareness – the shift toward cleaner (or greener) vehicles such as Stagecoach’s buses Difficult market entry for new operators Threats Competition – Arriva, FirstGroup and National Express Competition from other modes – car, train The malpractice of territorial market segregation by some competitors Appendix 2: PESTEL Analysis P Political E Economic S Social T Technological E Environmental L Legal Changes to the tax regime are expected to affect profits in coming years. The growing trend for local authorities to outsource school transport services to private firms is likely to boost the company’s contracted transport portfolio and increase profits. The UK’s recovery from the 2008 global economic recession has been slow, although this year the economy is expected to grow at a modest 2.9%. The growth is expected to be accompanied by an increase in leisure travel. The significant growth of the aging population and young families has increasing the demand for buses and coaches that meet the needs of the two groups. The emergence and spread of e-ticketing is expected to continue to impact the UK bus market in coming years. The UK consumer of today is more environmentally conscious than their counterpart a few decades ago, hence the demand for greener vehicles. Also, the more environmentally conscious consumers are more likely to reduce travel by car in favour of the bus. In the face increasing government action on climate change mitigation, Stagecoach Bus will have to comply with more stringent environmental regulations. Appendix 3: Three-year profit forecast for Stagecoach UK Bus (Extracted from Group Results) Financial Year Profit in million pounds 2013/14 (Restated) 113.6 2014/2015 110.0 2015/16 115.5 2016/17 120.3 Appendix 4: Risk Matrix Managerial Risks Business Environment Risks Financial Risks Slow head office decision-making due to decentralized management system Lack of a clear vision Conflict of interest by some managers Poor delegation Lack of sense of cohesion among regional companies Growing competition from other bus operators and alternative modes of travel Slow recovery from 2008 economic recession Changes in the political and regulatory frameworks Indiscipline among players due to deregulation Rapid rate of technological changes Rising operating costs Fluctuating interest rates Changing product life cycle hence demand Weak internal audit Rigid business model Read More