You know what it's like, you wait ages for one strategy article on buses and suddenly... well, one comes along.
In this article we're going to look at Brighton and Hove Buses, a company founded in the UK way back in 1884 and one that started as a horse carriage company.
These days there are a lot less horses and a lot more buses - operating over 75 across the city and becoming one of the leading UK bus businesses, including some zero-emission vehicles.
PESTLE Analysis for a Bus Company
For the PESTLE analysis, the political, economic, environmental and legal factors create potential problems for the bus company however, socio-cultural and technological creates potential benefits. The main factors are:
- The political climate is causing uncertainty for businesses through the UK. Transports infrastructure fuel supplies and EU drivers are likely to be affected by subjects like Brexit. Brighton and Hove Buses currently rely on foreign suppliers and the tariffs on importation is likely to increase which is likely to affect the company’s profits.
- 26% of Britain’s greenhouse gas emissions now come from transport and lifestyles are changing rapidly. There is more awareness and importance surrounding the environment and climate change. This has created backlash for the transportation industry and there isgreater pressure to become more environmentally friendly to maintain brand reputation.
- The introduction of 5G technology provides interesting opportunities for the transport industry. Vehicles will be enhanced through communication with other vehicles and surrounding infrastructure faster than ever before which could become a massive benefit around efficiency and service reliability.
Looking at the wider PESTLE...
- Brexit: Transport Infrastructure fuel supplies and EU drivers will be impacted
- The UK transportation industry will rely on foreign suppliers which will lead to higher tariff prices for fuel imports
- Change in future government will change laws and economic developments for transportation, at a local level the political party of Brighton and Hove is left centric.
- Larger trade barriers with higher costs – affecting the profit margins.
- Interest rates have been raised by the Bank of England from 0.5% to 0.75%
- Corporation tax to decrease by 2% to 17% in 2020
- Decrease in sales due to less disposable income and higher interest costs for businesses
- Better conditions for business investment and growth due to lower corporation tax payments
- Less footfall to high streets meaning a decrease in sales and overall profit.
- Ageing population
- Lifestyles are changing rapidly with focus on environment and climate change
- Working from home options more obtainable - less commute
- Smartphones enabling quick alternatives to buses (e.g. Uber)
- 5G allowing vehicles to exchange data with operation centre and each other for reliability and efficiency
- New technology will enable faster operations such as notifications of RTA or roadworks
- GB Domestic Rules’
- Public Service Vehicle Accessibility Regulations - transportation businesses must comply with driver’s hours, rest periods and break allocations.
- Must have accessible vehicles for disabled people
- Health & safety laws
- Large contributor to greenhouse gases
- Awareness of climate change and pressure to change
- Potential brand damage if company does not respond
- New city focuses on Ultra-Low Emissions Zone is costly to respond to as a bus company
- Likely to decrease the overall profit margin as it’s an expensive law to comply to
Five Forces for a Bus Company
For the Porters 5 Forces analysis, Brighton and Hove Buses face a low industry rivalry but high amount of threat from customers.
There are a low number of firms operating within the market and there is already differentiation in the market such as The Big Lemon Buses. B&H Buses quickly adapted to the growth of the market leaving no room for any competition and have prevalent brand loyalties with 81% satisfied with B&H Bus service. There are easier and longer-term opportunities in other markets. This is positive for the company as they’re not having to undercut their competitors on price.
B&H Buses have a high threat from customers as 75.7% of the company’s income comes from passenger fares and their customers purchase their bus tickets in high volume e.g. monthly, quarterly and yearly bus savers. The company also face a high threat from substitution and that is why it is crucial for B&H Buses to provide high standards and ensure customer satisfaction and retention to continue to be the market dominator.
Let's take a look in more detail...
Industry Rivalry: Low
- Differentiation already exists e.g. The Big Lemon.
- Low number of firms in the market
- Businesses quickly adapt to the growth of the market leaving no room for their competitors
- There are easier and longer-term opportunities in other markets
- Prevalent brand loyalties with 81% satisfied with their service.
- Low industry rivalry has a positive impact for B&H Buses
- Increases profit potential for B&H Buses e.g. from not undercutting on price to compete
Threat from New Entry: Low
- High startup costs e.g. vehicles, maintenance, insurance, design, signwriting etc.
- High brand loyalty to existing competition – 49.22 million passenger journeys on B&H Buses last year
- Competitions economies of scale, leading to higher switching costs if another firm enters the market
- Governmental environmental policies to adhere to e.g. PSVAR Act
- Provides B&H Buses with the ability to remain as market leader
- Positive impact as it allows B&H Buses to focus on other areas of business
Threat from Substitutes: High
- Substitute service performance and qualities are equal/superior to B&H Buses e.g. Uber and Taxis will offer a better and quicker service than a bus can provide
- Substitute services prices are lower or equal e.g. Brighton Bike Share
- B&H Buses may struggle to maintain their customer base
- Must ensure that they are different and superior
Threat from Suppliers: Low
- Threat of forward integration is low
- Buyer purchases product supplies in volume e.g. B&H Buses recently purchased 30 new electric buses
- Products are undifferentiated – can be purchased from a variety of suppliers e.g. Arriva Bus and Coach and Partline Automotive
- B&H Buses employ vehicle engineer specialists to ensure they get the correct products and the most for their money.
- Makes the industry less competitive
- Increases profit potential for B&H Buses
Threat from Customers: High
- Substitutes are available e.g. Uber, Taxis, and Brighton Bike Share
- 75.7% of B&H Buses income comes from passenger fares
- Buyers purchase their bus tickets in high volume – e.g. monthly, quarterly and yearly bus savers
- Negative impact for the company
- Important for the company to provide high standards
- Important to ensure customer satisfaction and retention
SWOT for a Bus Company
- Market dominator
- Existing customer base
- Copyrights and patents
- Strong distribution network
- Superior products
- Weak reputation
- Lack of distribution uniqueness
- Lack of relationships with their customers
- No cost advantages
- Corporation tax decrease
- Customer lifestyle changes e.g. environmentally friendly
- Ageing population
- Introduction of 5G technology
- Increasing interest rates
- Change in UK laws
- Environmental developments
- Changes in existing and new customers
Strengths -> Opportunities
- Introduce 5G technology zero-emission buses to the existing fleet, to remain as the market dominator and adapt to lifestyle changes
Weaknesses -> Opportunities
- Use 5G technology to improve distribution uniqueness and implement environmentally friendly to help improve the weak reputation
Strengths -> Threats
- Use market domination and strong distribution network to counter substitution competition and retain customers through changes.
Weaknesses -> Threats
Restructure the brands image to improve reputation and distribution uniqueness alongside meeting the needs of customer to prevent changes and choosing substitutes.
Example Strategic Objectives for a Bus Company
There's a lot happening for any bus company to factor when they are looking at their strategic objectives for growth. A few example objectives they may consider are:
- Decrease carbon footprint by introducing more zero-emission buses
- Improve the reliability by 10% for all 76 bus routes journey times
- Increase number of passengers by 10%
Hope you've enjoyed this journey through the various stops of a strategic analysis! With so many factors from technology to climate, from brand to changes in workforce, there's a lot for any bus company to consider... but many opportunities ahead too. 🚏
If you'd like to conduct any of your own analysis you can sign up to Lucidity today.