Public Transportation in the UK - Essay Example

1 Introduction Management Information System is increasingly gaining strategic importance in every sphere of business as argued by John Ward and Joe Peppard (2003)i. This is because of the fact that the increasing demand for efficient operation of business and competition in the market, the need for effective ways of business can be identified through analysing the information held by the organization about the market they are targeting (Frances Brassington and Stephen Pettit, 2003ii). This makes it clear that the information and information technology especially which was a technical support element to accomplish desktop data entry in the late 1990s has evolved into a strategic element for increasing the revenue through identifying new business development opportunities as well as providing efficient quality of service to the customers a company is serving. Public transportation in the UK serves more than 75% of the total commuters’ transportation in the UK as argued by Simon Taylor (2003)iii. Railways in the public transportation especially accounts for over 50% of the total market share in the public transport as identified by Simon Taylor (2003). This makes it clear that the rail transport market in the UK public transport industry not only forms an integral part of the public transportation but also contributes to the Gross Domestic Product. Alongside, the railway industry is also facing stiff competition from other forms of public transport like the road and air transport that is increasingly cost effective in the UK as argued by Simon Taylor (2003). From the aforementioned it is clear that the railway industry in the UK not only needs to address the competition through the effective use of information technology and managing the information for strategic advantage but also accomplish financial operational excellence ass argued by Helen Knight (2005)iv. The fact that the finance especially the billing and ticketing section of the railway industry is the gateway of income to the industry’s overall operations as argued by Helen Knight (2005) makes it clear that the efficient information management in the form of financial information management system is essential. In this report a critical analysis on the implementation of a Financial Information System in the Railway ticketing system from an information strategy perspective is presented to the reader. The essay presents a critical analysis on the macro and micro business environment for the railway business in the UK through PEST and SWOT Analyses respectively. This is followed by the overview of the financial information system proposed and its benefits to overcome the identified issues in the aforementioned analyses. A value chain analysis is presented prior to concluding the essay. 2.0: Industry overview The railway industry as argued by Simon Taylor not only accounts for a major segment of the public transport and revenue in the public transport business, but also plays a vital role in the day-to-day life of the general public making it clear that the efficiency in the information management in this industry will have a potential influence upon the effectiveness of many other business sectors in the UK. The billing or ticketing, is the first point of contact to the customers with the railway business and irrespective of any operator in the UK network rail, the ticketing system is an imperative element. The competition in the industry has apparently increased the different ways of ticketing and the flexibility in the ticket processing as well as pricing including online or Internet-based ticket reservation system as argued by Simon Taylor (2003). The income generated through the ticketing system is described as the spine for the railway industry itself by Rajiv Prabhakar (2004)v. This is naturally because of the fact that not only the industry generated revenue but also churns valuable information related to the trend in purchasing of tickets and their relationship with the growth in business and generating profit. The aforementioned makes it clear that the financial information held by the railway industry can help achieve a better level of strategic positioning of the company through effective pricing and promotion. In the next section a PEST analysis is presented to the reader in order to identify the external factors affecting the railway business. 3.0: PEST Analysis Richard Lynch (2003)vi says that the macro environment analysis is the essential element in the success of the business. This is mainly because of the fact that the external factors influencing the business can not only affect the revenue generating capacity but also the corporate identity of the business itself. Alongside, the arguments of Gerry Johnson and Kevan Scholes (2003)vii that the macro environment analysis will provide the organization an insight on the elements other than the business competitors affecting the growth further justifies the aforementioned. In the railway industry especially, the increase in the demand for timely and quick transportation at affordable price is the driving factor that requires the need for analysing the external factors affecting the business. Political Factors: Gerry Johnson and Kevan Scholes (2003) argue that the influence of politics is predominant over every business sector not only in the form of public welfare and customer protection but also in various inherent and implied forms of policies and regulations. Ownership: Dominic Fenn (2004)viii argues that ‘for many years, public debate about the British railway system focused on the issue of ownership: should the network be operated in the public sector or in the private sector?’ This makes it clear that the ownership is a major element that influences the ticketing system in the railway business and especially the costs and operating policies differing with operators, the issue is still a key element that influences the growth of the railway industry. Furthermore, the political debate on the ownership is further focused on focusing on the extent to which, in practice, the private sector should be involved in the running of key public services. The enforcement of the competition law in the international business markets and the presence of the major players like Virgin in the international stock markets, the need for conformance to Sarbanes Oxley Act (Section 404A) is elemental to the pricing and financial excellence in the railway industry. Since the government retains an involvement in the railway matter especially those directly affecting the customers directly like the ticketing and dynamic pricing which is essential for increasing the market share, it is evident that the ownership issues in the railway is a critical element that affects the implementation of the Financial information system to accomplish dynamic pricing. This is naturally because of the need to stabilise the competition as well as to protect the consumer interests in the market. Regulation: the presence of the Strategic Rail Authority and its power in the railway industry is a critical element that affects the growth and implementation of the financial information system in the industry. This is because of the fact that ‘the SRA looks after matters related to train operations, especially in so far as they affect the railways’ customers, making it a ‘one-stop shop for all customer-facing functions’, (Dominic Fenn, 2004). This justifies that the approval of the SRA and above all the support in terms of establishing effective leadership and operation effectiveness from a strategic point of view is essential for the success of the financial information system proposed. Since the SRA also sponsors the Rail Passengers’ Council and Committees, the customer perspective to the financial information system and above all the access to such information, which can be segmented as sensitive, and access restricted under data protection act, it is clear that the SRA has a direct influence and control over the railway industry. Alongside, the Office of the Rail Regulator (ORR) has an influence of equal magnitude from the perspective of monopoly elimination and fair-trading in the railway business. The role of the ORR being, ‘the regulation of the monopoly elements of the railway industry — particularly the activities of Network Rail’ justifies the aforementioned statement. Government Financial Support to the Private Sector: The Network Rail: the company providing the railway infrastructure, is a company limited by guarantee as it has no shareholders but is defined as being in the private sector for the purposes of National Accounts as argued by Dominic Fenn (2005). This makes it clear that the lack of financial support from the government which is expected to increase over £20 billion in 2005 (Dominic Fenn, 2005) will lead to a catastrophe in the railway industry due to overwhelming debts to the railway regulator, which will apparently affect the network operators. On the other hand the public/private partnerships in the railway industry with regards to the funding for the infrastructure as well as partnership with the network operators makes it clear that the political elements play a vital role in the effective use of information for dynamic pricing in the ticketing. The private finance initiative for instance, is a critical element that affects the efficiency and performance of the railway industry having a direct impact on the pricing of the tickets to the customers in the target market. Economic Factors: Customer and National Income: It was identified that the economy has a direct impact on the volume of transport, both passenger and freight, whilst a relationship is a complex issue as identified by Dominic Fenn (2005). This is obviously because of the fact that the ‘changes in the level of gross domestic product (GDP) are not necessarily reflected in the changes in demand for rail transport, making it clear that the economic factors of the end customers have a direct influence whilst the national income has negligible. The aforementioned justifies that the economic factors are predominantly local to the revenue generation and the strategic importance to the factor is from a customer perspective only. Passenger Services: In the case of passenger transport, economic activity is supported by the existence of public transport services that enable workers to travel between their homes and their places of work. This makes that the level of unemployment is the significant factor influencing the number of journeys to work taken by the customer or public transport users in the UK. Since travel to work is not a discretionary factor, the work related factor has no further impact whilst the travel for pleasure and holiday are critical elements that are influenced by the economic activity of the passengers in the UK general public. Furthermore, the increasing demand for efficient and cost effective transportation among the passengers is the key macro-economic element that influences the railway industry. This makes it clear that the efficient ticket management system and dynamic pricing proposed in this essay is essential to address the aforementioned. Although the rail transport is particularly important in London, where other forms of transport have a more limited role than elsewhere in the country, the places where the rail services exist, there is competition from other forms of public transport mainly the buses on the road. This makes it clear that the railway industry’s share in the market can be increased through the increase in the micro economic elements like competitive pricing to appeal to the macro economic activity of alternative public transport. Freight Services: Helen Knight (2005) argues that the commercial part of the railways that generates a considerable segment of the revenue demonstrates a clear link between the level of economic in the public and the volume of freight transport. Both export or import of goods is likely to lead to an increase in the volume of freight transported, although this increase may not be proportionate to the rise in GDP as argued by Dominic Fenn (2005). This makes it clear that the if there are improvements in transport efficiency or growth in the share of national income taken by consumer services, there can be a direct impact on the railway income generated. Since the dynamic pricing can be deployed for both the passenger service as well as the freight services, it is clear that the economic factors due to the freight transport have a say in the strategic information management in the railway industry. Social Factors: Safety: Britain has suffered a number of serious rail accidents in the past few years: Southall (1997), Ladbroke Grove (1999), Hatfield (2000), Selby (2001) and Potters Bar (2002). The aforementioned makes it clear that the safety is a critical element in the railway industry and every effort should be deployed in order to effectively overcome such issues in order to increase the market share and reliability among customers. Although the aforementioned does not have a direct impact on the pricing, the fact that the overall growth of the rail industry is predominantly dependant upon the safety of the passengers during the journey makes this an imperative element of discussion in this paper. Environmental Factors: Dominic Fenn (2005) says that, ‘The view is often expressed that rail transport is far more environmentally friendly than road transport’. The research by the Railway Forum concludes that ‘the costs of environmental damage, accidents and congestion per passenger kilometre travelled are three to ten times higher for road than for rail’ and that ‘a double-track railway can carry up to ten times the number of people per hour [as] a two-lane road’. From the aforementioned it is clear that the social factors pertaining to the environmental safety and pollution hazards are lesser than in the case of road transport. Disability Legislation: The UK railway system is difficult or impossible to use for many disabled and elderly people making it a potential threat for losing customers in that segment of the UK public transport market. Recent legislation Section 46 of Disability Discrimination Act 1995, in particular, gives the Secretary of State powers to make regulations ‘to ensure that all new trains, trams and other track based systems are accessible to disabled people, including wheelchair users’ (Dominic Fenn, 2005). This makes it clear that any strategic move in terms of information management and ticketing should address the disability issues effectively in order to increase the market share in the market. Amongst the factors discussed in this section on social factors, this is the only imperative factor having direct influence on the pricing and ticketing strategy. Technological Factors: With respect to the information strategy and the strategic deployment of the financial information system focused in this essay, the major technological element in this case is the increasing growth of the electronic commerce and the need for a strong method to address the growing demand for an effective method of ticketing and pricing in the industry. Apart from the aforementioned, the technological factors like the signalling and warning systems installed on the tracks are less relevant to the topic under discussion and hence not elaborated here. 4.0: SWOT Analysis The SWOT analysis as argued by Gerry Johnson and Kevan Scholes (2003) is a critical element to accomplish the microenvironment analysis. The micro analysis being the critical element to the implementation of any new information system or business improvement, it is essential for critically analysing it in the light of the information system and the strategic advantages that can be nurtured to overcome the threats and weaknesses that will be discussed in this section. Strengths: Government Financial Support: Although the railways industry depends upon the government as a major source of finance for operational purposes which when deprived is an issue, has a fetched a strong position for the industry in terms of expansion and development. This is because; the government’s approval for a specific project or business process improvement can be accomplished with the finance support from the concerned authorities. This makes if clear that even though the government interference in the business process is not healthy for the operations, the support from the government is strength for accomplishing improvements. In the case of the financial information system discussed in this essay, the approval of the government will provide the strength and support to accomplish the development of the system. Information efficiency: Since the information held by the industry on the ticketing and purchasing behaviour of the company is enormous and dates back to decades, an effective method in the ticketing process and a profitable pricing strategy can be derived efficiently. Weaknesses: Dispersed operations: The dispersed nature of the business operations where the involvement of many private parties is involved hinders the effective implementation of the financial information system as the major weakness is the lack of streamlined approach to the business process as argued by Dominic Fenn (2005). This further justifies that the efficiency of the proposed financial information system is dependant upon the co-operation of the private operators and the Nonexistent access to financing for local businesses: The fact that the access to the financial information is limited with the interference of the private parties and the policies involved, has reduced the efficiency in the use of information itself. Since this paper is focused upon the entire railway industry rather than a specific operator, the microanalysis itself appears to be focused on the macro environment. Alongside, the ticketing being a process applied across the board involving all the operators in the industry, it is hence essential to have access to the information related to the financing for the local business’ logistics. This justifies that the nonexistent access to financing and related information is a weakness to the success of the railway industry. Electronic Commerce and Road Transport: The increasing use of electronic commerce by the National Express and other competitors in the public transport industry has weakened the position of the railway industry without an effective method to manage the financial information for dynamic pricing. Opportunities: Market Potential: Since it was established that except the working community in the UK, the commuting is independent of the national income making it clear that the travel for leisure and other purposes except work during peak hours is a potential market segment that can be targeted by the railway industry. The fact that the volume of transport or the number of people transported by a train is more as well as fast to the destination creates new opportunities to the industry. Technological developments: The developments in the fuel efficient methods of transportation in the railway industry is the key opportunity that the industry can rely upon for success in the public transport market as argued by Dominic Fenn (2005). This is not only because of the fact that the developments in the use of technology in the engineering is accelerating the growth but also the use of information technology and Customer Relationship Marketing strategies deployed by leading operators like Virgin who strive to promote rail transportation. This opportunity can be nurtured and well utilised through an efficient management system for the finance in the railway industry. From the aforementioned it is clear that the opportunities for development in the UK public transportation industry is vast and when utilised effectively, there is vast scope for growth in the market. Threats: Competition: The threats faced by the railway industry is mainly the competition from other forms of public transport especially the domestic airlines as argued by Dominic Fenn (2003). The increase in the effective pricing strategies of the players like BMI Baby has increased the need for an effective method of pricing as well as to retain the market share in the UK public transport market. Financial Issues: The lack of support from the government will result in the insolvency of the railway industry making it clear that the lack of government support financially is a major threat to the existence of the business itself. The threat of loosing ample support from government is superseded by the failure of the industry to face the increasing demand for competitive pricing of the tickets against its competing industries. This is mainly because of the increasing number of schemes like £1 ticket to London in the National Express, etc that are more attractive to the customers than the pricing strategy deployed by the industry currently. From the aforementioned it is clear that the railway industry although has considerable strength in the market, also possesses major weaknesses in the ticketing and pricing strategies making it clear that the company should address the information management system for financial information with a new perspective. 5.0: Financial Information System Proposed The financial information system proposed in this case is aimed to deliver the following 1. To accomplish the integrated information management of the financial information related to ticketing and billing in the target market. By doing so the industry has control over the entire railway network thus increasing the effectiveness of the business in the market. The centralised approach is an update to the existing information management and ticketing system, which in itself provides an overall access to the customers but limits the access to ticketing related information to accomplish effective pricing strategies. 2. Through monitoring the trends of the purchasing by the clients and the period in advance for purchase by the clients, which is a critical element for the effectiveness in the industry with regards to pricing, the railway business can accomplish the process of dynamic pricing whereby the industry can change the prices of its tickets depending upon the demand in the target market quickly and efficiently. 3. The dynamic pricing mentioned above provides the ability for the market to quickly respond to the demand in the market thus making it clear that the efficiency of the industry can be increased through dynamic pricing. Alongside, the deployment of the centralised financial information management system will eliminate the limitations associated with the access to information between operators thus increasing the ability to effectively integrate the business process across the UK railway network. 6.0: Value Chain Analysis The value chain analysis for the proposed financial information system mainly comprises of tow elements that should be described apart from the typical elements of the value chain. 1. Information streamlining: This is accomplished as a value addition to the information both on the sales through internet and otherwise making it clear that the information technology utilised is not only a support activity but also serves as a primary activity in the internal logistics and service sections of the system. This also provides the flexibility for the railway industry to increase the efficiency in the process ticketing and billing its freight customers where the invoicing is the appropriate term for the purpose of billing to the services provided. 2. Further to the aforementioned, another critical element that should be mentioned is the infrastructure versatility where the network rail that owns the network and the rail operators are integrated through the information management system to accomplish growth in the market. The value chain for the railway industry for the proposed financial information system is presented below in fig 1. From the aforementioned it is clear that the financial information system does not alter the overall value chain but actually increases the efficiency in the primary activities of the value chain thus justifying the implementation of the financial information system. Furthermore, the fact that the value chain reflects upon the overall process of the business in a given industry as argued by Gerry Johnson and Kevan Scholes (2003) justifies the arguments in the precious sections that the information management system focusing on the ticketing and dynamic pricing will help accomplish efficient primary activity processing in the target market. 6.0: Conclusion From the arguments presented in this essay it is clear that the efficiency in the railway industry is a critical element that is being affected by various macro economic factors. The PEST analysis also revealed that the railway industry possesses certain strengths like the mass transportation, geographical area covered, etc that can be used for the benefit of the business process itself. The SWOT analysis revealed that the efficiency in the target market can be increased through the efficient use of live finance information dynamically in order to fix the price for a certain journey between two given stations as argued by Dominic Fenn (2005). The review on the financial information system and the value chain also confirmed that the deployment of the system would not alter the system drastically but actually increase the operational efficiency of the system thus increasing the effectiveness of the system. Thus to conclude this report it is clear that the implementation of the Financial information system will help accomplish operational efficiency and increase in the performance of the railway network as a whole. The use of the dynamic ticketing will increase the competitive pricing strategies whilst enabling efficiency in competition in the target market. Read More