Rail Sector Pricing Adapts to New Business Environment - Essay Example

Case Study Submitted by: XXXX XXXXX Number: XXXXXXX XXXXX XXXXXXX XXXXXX XX – XX – 2009 Number of Words: XXXX Case 1: Rail Sector pricing adapts to new business environment 1. Should Governments intervene to regulate rail fares? With the rail sector prices rising and the overall economy being faced every public related service need to be rightly tracked by the governments to ensure that the public receives fair deals from the companies. In the case of the rail sector of the UK, it has been noted that the British rail in the early 1960s, operated on social objectives. However over the years this sector as well has moved into operating via the business objective. Considering this case in terms of the SWOT, it is clear that the strengths of the intervention of the government in the case will mainly be that customers will enjoy fair prices and the operations will be well designed, in terms of the prices. Considering the weaknesses of the intervention of the government, it is seen that the political conditions of the country have a strong impact on the operations of the railways in UK. Hence with the intervention of the government there are high chances for the country to face issues in terms of the regularity and efficiency of the trains. The biggest opportunities that the railways face with the intervention of the government is the fact that higher levels of funds will be available for them to operate and thereby the technology used as well as the services provided can be improved to a great extent. Considering the threats that might be faced by the company y, it is clear that the companies will not be able to compete within the industry and chances are that the British Railways might loose out on a major chunk of its customers due to limitation of the government intervention. Hence in terms of the public benefit it is better for the government to intervene in the operations. However if considering this from the view point of the companies then it would be best for the government not to interfere in the operations. 2. Evaluate the financial benefits to rail operations of offering reduced fares to students. Every decision made by a company has a number of affects on the financial position. Similarly considering the British railway on a SWOT basis and the possible effects on the financials of the company if they offer reduced fares to the students it has been understood as discussed below. Firstly, the major strength of this action is that a higher number of people would travel in the trains. Since the student population is high, it will prove to be very beneficial for the company as it would be working on economies of scale. However considering the possible weaknesses it has been noted that the reduced prices for the students would means that much of the profits being reduced. Hence if the number of remain the same and the prices are reduced the company will still loose out on the extra financial benefits and profits. However the introduction of this offer for the students will prove to be an opportunity for the company as it will allow the possibility to collect customer information and create a strong database (Jobber, 2004). This can be financially beneficial for the company in any possible future projects or promotions. However the company will be faced with one strong threat of the public misusing the offer. This is possible if the general public misuse the offer by pretending to be students or providing the company with fake or incorrect proof of being students. However the organisation earns a lot from the offer and this offer can prove to be very beneficial for the company. Hence the benefits are much higher than the negative aspects and prove to be very useful to the company. 3. Are train fares to expensive? The current fares for the rail in the UK are reaching exorbitant levels. The cost of the railways tickets has been becoming a very big issue for almost every sector. It has been noted that the main reason for the hike in prices is the fact that the British rail is now becoming more of a business than being a social service. Considering the prices that are currently prevalent in the UK, in terms of the railway services, it is clear that the prices are very high. This is strength for the company as it will allow for higher levels of profits and will allow the company to earn higher revenues. However considering this as weaknesses as well as the higher the levels of the prices the higher is the option that people might choose a different mode of transportation. It has clearly been noted that the prices have been rising and taking into account the current economic condition across the country, it is now that the public look for cheaper and easier options for transport without being too harsh on the pockets. Hence it is safe to say that with the recession and the number of people loosing jobs across the country, the rail fares are very high and people need cheaper solutions for travel. Case 2: Shell chooses franchisees to put the service back into service stations 1. What business is Shell in, with respect to its filling stations? Shell is into the business of petroleum. This is a much undifferentiated business and the ability for the business to create a competitive advantage with the help of the product is very low. Considering the sector that the company deals within, it has been seen that Shell has a number of strengths and opportunities. The strength of the company is that the product that is sold by them is one which is a necessity than a luxury. Also it is essential to understand that the product is a convenient product rather than a loyalty product. Also the opportunity is to expand the stations to provide other features like the car wash facilities and also manned garages. However the only weaknesses and threats that the company face is that there is no scope of being innovative in terms of the primary product and also the high level of competition that the company faces. Hence the business that Shell deals with is one which can be expanded and improved by providing other products like the car wash which will prove to be very beneficial for the company to create a better image for the company. It is clear from the case and from the discussion above that the filling stations of the company is one which is more of a convenience product and hence the company requires to ensure that the prices and the facilities provided do not be as high as those of luxury products. Also the entire operations need to be set down based on this fact and it will be possible for the company to earn high levels of profits. 2. Discuss the relative merits of franchising and direct management for service stations owned by Shell Shell has been faced with a number of issues and a number of problems with the franchising options. A company which deals with high volumes of monies on a daily basis requires a management which is strong and secure. There have been cases in the past where the company has been faced with a financial issue of the franchise misusing the customer’s credit cards by identity theft. The company has had a case where a franchise copied the credit card details of the customers and used the credit cards in different countries and caused the Shell a huge number of losses and a bad brand image (Leyden, 2006). The merits of franchising are that it would lead to high reach and a wider market when compared to that of a direct management. Also there are high chances to bring about innovative ideas for the fuelling stations. However with the stations being held by Shell directly, the company earns higher amounts of profits and the safety will be much higher in terms of the financial situation. There will also be lesser chance for any kind of fraud to take place within the company managed stations. 3. How and in what ways can services help differentiate a commodity product such as petrol? Differentiation of a commodity like petrol is relatively very difficult to any other product. The strength of dealing in a commodity like petrol is the fact that fuel will never go out of business and it has a very large market as well (BBC News, 2006). However considering the weakness of the product, it is clear that it is difficult if not impossible to differentiate the product. Shell has an opportunity to use its brand image to differentiate the product and create a market presence for them self (Sturgeon, 2006). Also with the number of years that the business has been running it is also possible for them to use the image and gain a higher percentage of the market. The threat however is the fact that the government also have a number of fuel stations in operations. This would mean that the company has a high chance of losing its customers to both government run stations as well as the competitors stations like that of Tesco, which provide fuel at lesser rates. Thus in order to differentiate the product like petrol it is up to the company to build brand names which can be used to sell petrol. For instance, in the case of Shell with the introduction of the Formula Shell although it was a failure for the company it still left a branding image for the company. Bibliography BBC News, 2006, ‘Petrol firm suspends chip-and-pin’, 6th May 2006, Accessed on 24th June 2009, Retrieved from http://news.bbc.co.uk/2/hi/uk_news/england/4980190.stm Jobber, D., 2004, Principles and Practice of Marketing, 4th Edition, McGraw – Hill, Berkshire Leyden, J., 2006, ‘Shell suspends Chip and PIN after £1m fraud’, 8th May 2006, Accessed on 24th June 2009, Retrieved from http://www.theregister.co.uk/2006/05/08/shell_suspends_chippin/ Sturgeon, W., 2006, Shell’s £ 1 m Chip and Pin Fraud ‘an inside job’, 8 May 2006, Accessed on 24 June 2009, Available at http://www.silicon.com/research/specialreports/idmanagement/0,3800011361,39158743,00.htm Read More