 Good morning class, we ended the last class with almost all the inputs that is required for you to understand the second dimension that we are handling in this course namely strategy. Now, till now we have been able to cover almost all the popular strategic models and also understand some key terminologies that the corporate world use when they are handling the issue of strategy, competitive advantage and the broader issues that make them successful in this global market place. I also assured that I will be sharing a particular case study for you to better understand the finer elements and the nuances of the strategy when it comes to the implementation of a chosen model. Now, but before I do that by now you would be able to appreciate the fact that there are of course different models, but we have handled some of the most often used ones, the strategic models are namely the potter's generic strategy which concentrated on three major dimensions. One from a cost perspective that you will be a cost leader, organizations would like to be a cost leader because it finds that the value that is generated by being a cost leader is the amount of incremental profitability that the organization can make or can pass on the benefits of cost leadership to the end customer by probably giving prices that are competitive than what is available in the market. The second one was about focus where potter's view was that there needs to be a focused approach in which organizations have to build their strategic models, cannot have a multi-dimensional approach without any clarity. And the third thing is to also try to develop something that differentiates organizations from the rest. So, the third piece was the differentiation where you need to do the same things differently. So potter's generic strategy the three corner pieces of the generic strategy was cost leadership to maintain focus or to be able to produce differentiation that was the potter's view. The other view that we saw was also the CK Prahalad's view on core competency that organizations will definitely have something that is intrinsic in them that they find themselves to be very strong in that intrinsic value which he calls as the core competence of the organization. And the capacity of organizations to build on that core competency and to ensure that core competency is able to manifest in itself in different applications, business applications that could be within the industry in which the organization is operating or it could transcend across various industries. But the essence of the strategic model is that the organization is trying to build on what it considers its core competence. So that was one view of how to build a strategic model that is the CK Prahalad's view. The other view that we saw was also a blue ocean strategy which made organizations to just think out of the box to see whether they can go and charter in uncontested market space where other organizations have not tested the viability of the business option and in doing so it makes the existing competition totally irrelevant. So that was one view we saw a lot of examples on how organizations were successfully able to do this blue ocean strategic thinking where they just moved into new market spaces and in the process they made the competition irrelevant and still they were able to and they were able to build success stories out of that. Another model that we also saw was the Ansoff's grid which tried to develop a mix between market and product. Remember we were talking about existing markets new markets versus existing products new products and there were four options market penetration which had to do with using the existing product for the existing market. Remember we used this grid where we had the product the market old market old product new product new market and if you are in an existing market an existing product which means the old market and the same old product then you are just trying to penetrate the market further so that could be a market penetration strategy or you could develop the market expand the market by using the same product so you could do a market development whereby you try to get into new markets using the same product. The third alternative that was available was also product development where for existing markets you could develop new products product development and this was market development and this was market penetration and the fourth option that you had was diversification where you try to come out with new products in new markets so this was also one of the strategic models that we had in mind so broadly we were able to appreciate that there were four popularly used strategic options models and the fifth one that I call the gut feel you know some organizations some entrepreneurs feel that you know this entire conceptualization from the drawing board to the market space was just based on a gut feel but if you do a deep analysis I do not have anything against gut feel but then if you try to do a deeper analysis you will find that you will be able to somehow force fit even organizations successful organizations that were successful based on gut feel could also find themselves adopting to a strategic model which would probably fall into one of these four models that we already discussed. So it is possible to force fit even organizations that just think that it is a gut feel that makes them successful. Now having said that I just would like to present a case for today's discussion now before doing that I would like to broadly tell you the domain in which this case discussion is going to happen now the industry the broad industry domain will be the travel and tourism industry and this is where the case discussion is going to dwell around and now by travel I mean the air travel the bus the train even cabs and by tourism I would include the hospitality industry which is the hotels package tours then you have the customized tours. So this is the broad industry in which we will try to get this case started and very specifically I would be discussing our specific interest would be within this industry the inter city or the inter state bus transportation as well as the bus transport itself. Now this is going to be our focus point for the class discussion. Now before I get into the case facts we would like to understand how the bus industry the current bus transportation industry is characterized and from a timing perspective from a time frame perspective the class has to move five to six years back probably to 2005 2006 and we are going to look at the case from that time horizon. So at that point of time the year 2005 or 2006 we would like to understand how the bus transportation industry was characterized. Now let's begin with the supply side characterization of the bus transportation industry by supply side I mean the bus operators. Now how were the bus operators the bus operators who commute passengers travelers from one city to the other city from one state to the other state. We know that at that point of time it was highly fragmented you had private and government transportation it started with predominantly government transportation but slowly also the private bus transportation industry started growing a lot but it was very very highly fragmented so much to say that amongst the private if you look at the private bus operators amongst the private bus operators 65% of the bus travel were provided by bus operators whose fleet size was less than 25 and 25% of the travel was served by bus operators whose fleet size was less than 75 and the remaining 10% could be is those big ones whose fleet size was greater than 75. Now these are the ones that you currently see the big bus operators like the KPN or the Sharma transport so these are all the big ones catering to 10% of the total traveling population and of course on the other side you had the government bus transportation the government bus service and they had a different characterization predominantly low price as a result of which the service level the comfort was also not comparable to the private bus operators and they catered to a different market composition but even at that point of time there was a slow response to the competition that even the government transportation services got from these private bus operators and of course there is competition the government bus operators also looked at that competition as something from which it could learn as a result of which even the government transportation services started adopting to certain best practices though their reaction was very slow they were making some progress that is about the bus operators. Now about the process if you look at the ticket booking at that point of time the entire booking process was manual where the bus operators you know you sometimes they used to have their own office in major cities or they would have some agents in smaller cities or for a passenger we do not deal with agents or we might not even deal with the own offices we even get our own travel agents doing the tickets on our behalf and they themselves would be you know interacting with the own offices of the bus operators or through the agents themselves or in some cases the bus operators themselves will own some of the smaller city bus operators agent offices also but of course that comes under the category of agents in smaller cities and the entire booking process was manual so if you need to I will explain how the process happened but for now we need to understand that the entire bus ticketing was manual and another thing that characterized the bus travel at that point of time was the information asymmetry and I will spend more time on this because this is the key to the case discussion that because of this manual booking there was no symmetry in the information that was available from the bus operators point of view from the travelers point of view by information I meant the vacancy position the routes the price the seating arrangement and all sorts of such information that is very very critical both from the operators point of view as well as the travelers point of view and another important thing that was happening at that point of time was a major socio economic change that was happening in our country the economic change of course was driven by the amount of liberalization industry growth so we find we found that there are a lot of IT companies manufacturing companies opening up software development centers in major cities manufacturing locations in major cities and towns where it was competitive for them to start their manufacturing process as a result of which there was a migration of workforce from the rural area or the tier 3 tier 2 cities towns to some of the major cities so there was migration as a result of which it necessitated a lot of travel both for personal visiting home and getting back to work or even for official purpose where even the working people prefer to choose bus as a medium of transportation so the economic changes that happened to the landscape was also an important thing that was happening at that point of time which kind of changed the way in which transportation and more specifically the bus transportation industry was operating another thing that was also happening was a social change because of the internet penetration there was a huge explosion in terms of the communication industry communication was getting high tech as a result of which the internet penetration growth was also increasing year on year from 2000 let us say as a result of which the e-commerce as an accepted paradigm we would see we would we were able to see a growth in trade as well as personal conception on the digital space so the e-commerce industry the fundamental for which the fundamental for the e-commerce industry was the rate at which the support infrastructure namely the communication the telephone lines and the internet ecosystem was built that was also finding itself to be growing in a very progressive pace between 2001 to 2005 6 so this in effect was the characterization of the industry from the perspective of a bus operator and a traveler of course there are other changes but I am restricting only from the perspective of the bus operators and the bus travelers now with this in mind let us understand what was the challenges what were the challenges that the operators as well as the passengers faced in that existing model challenges for operators as well as passengers now to understand that we will first understand how this entire booking process happened at that point of time so let us say we had a passenger one passenger two passenger three all of them and then you had a bus operator one bus operator two bus operator three bus operator three and so on as many bus operators as there are in this industry now what linked the passengers to the bus operators was either the agent or the bus operators own branch office so you had the agent branch office agent branch office and so on now there was transaction between the passenger and the bus operator through the agent so the agent was the intermediary or the branch office of the bus operators were also the intermediary but the way in which the transaction happened was the biggest issue that was to be a great challenge for the operators and the passengers now those were the growing pains that the industry started experiencing now either it had to be through a phone or you had to manually go and visit the agent's office or the branch office and again information was retrieved from the bus operators either through phone very very remotely through manual but at times if they are very close by then even manual is possible so what happened is now suppose a particular passenger one had to purchase a ticket to reach a particular destination so he had to depend on the branch office or through agent let's assume that there was no branch office in the place in which the passenger wanted to book his ticket and it was through an agent so you had to contact a particular agent and he checks with the bus operators the routes on the availability of the ticket and this is the experience of many of the passengers and when this agent is engaged with handling a particular passenger in his office suppose more number of passengers want that particular ticket they have to necessarily wait before this agent finishes the particular passengers and finishes handling that particular passengers requirement now the challenge the major challenge was that there was an over dependence on the role of the agents because of this manual effort that is required to purchase a ticket so either they had to visit the agent's place or they could call the agent and get their ticketing done and there are so many passengers queuing up and they had to wait before each passengers each passenger finishes his particular task and suppose this agent is not able to really provide the required service and if the passenger feels that there is another agent that can help him he contacts another agent and of course it is impossible to call all the agents as a result of which the passenger also loses some options that were available but he was not able to exercise because he was not able to here she was not able to really handle all the options now this is from a passengers perspective that he was not able to exercise and all the options because it is impossible for him to exhaust all the available options and from a bus operators perspective because of this challenge at times invariably actually more often than not we have found that buses complained during the peak season also very rarely but it does happen and of course during the non peak seasons that their vacancy position is very alarming and the vacancy position would have been better if there was a mechanism by which a passenger is able to exhaust all the possible options now because that the passengers were not able to exhaust all the possible options there was vacancy in the buses as a result of which there was loss of revenue the another important challenge that both the bus operators as well as the passengers felt was the lack of transparency from the agents office because at times you know you know certain people who know some of the agents and they block seats for the VIPs or frequent travelers so at times you are not a frequent traveler but you have a very genuine reason to travel there might be seats available but because of the lack of transparency you know you do not get a seat that actually is available and when you actually want to travel you are denied a seat despite it being available for you to travel so there were these big challenges in that particular time frame that you had to depend dependence on agents I am just trying to highlight some of the major challenge and you can expand them later then passenger options restricted as a result of which revenue loss to bus operators and a major challenge was transparency lack of transparency which could also result to the revenue loss for the bus operators now these were the major challenges and remember when we were discussing about the SWAT analysis we were talking about how challenges we could see whether we can get some opportunities and use these challenges to provide a business solution now this is where the present case study becomes very relevant now what was happening in the ecosystem at that point of time that made the founders of a particular organization that we are going to discuss sees this opportunity they found that the online business booming not only the online business the entire online industry was maturing and a substantial part of it was driven by travel related business especially in India so there was an opportunity to create an organized mechanism an opportunity to create an organized mechanism in this bus transportation industry which was infested with a disorganized architecture information asymmetry there was no connect whatsoever between the passenger and the bus operator so the opportunity that the founders of this organization seized was to see how we could synergize very coherently the online business ecosystem and the need for an organized mechanism that is they felt that they could do this by using technology using technology and aggregating the industry the bus transportation industry to give an organized mechanism to provide an organized mechanism to provide an organized mechanism or in other words they wanted to bring all the passengers the bus operators everybody into a common transaction medium you could call that an exchange just like the stock market they wanted to bring all the passengers and the bus operators into a common transaction medium and in the process make the reservation the bus reservation a real time process make it a real time process as a result of which it becomes very transparent and since it is real time and since it is organized there is a lot of options available for the passengers not necessarily online but driven by an online solution for those who wanted to do offline booking telephone was there for those who did not have even internet connectivity they could use this telephone or and connect to the call centers so the organization found that there was this huge opportunity that it could encash by providing a synergy that could address the major challenges that the bus transportation industry was facing and this synergy rests on the creation of a technology that could aggregate the bus operators their seat position all the information that the bus operators could provide and provide this information to all the passengers who need this information as a result of which the entire bus ticketing process became very transparent and became independent of the agents involved so this organization that I am talking about is called the red bus I am sure many of you have used red bus in your ticketing process to undertake your travel I am sharing some of the insights that I got about this organization the case facts the different data from a case that was developed actually by the Richard Ivy business school university of western Ontario they did develop a case on this red bus as a case study discussion for its MBA students so back to this red bus so this is the organization the company the firm the online service provider this was the one that was founded and launched in 2006 by one gentleman by name from Indershamma who found in a very difficult position when he himself wanted to book a ticket to reach home on a festive occasion found it very difficult to get his own travel ticket and then came this idea of red bus to him and red bus was launched as a format independent bus ticketing company with a centralized inventory database providing online as well as offline bookings with a good distribution network so this is how they positioned red bus and the key words was it was format independent meaning that it could be for any type of bus operators it could be an AC bus non AC bus it could be a sleeper semi sleeper berth so all types of buses could be aggregated together and that it was a bus ticketing company it was only trying to provide a mechanism by which the entire ticketing process could be smoothened made better it was not in the business of running buses it was not in the business of opening agents office for bus operators and selling tickets it was it found itself a different model and established a different exchange that brought together passengers as well as the bus operators and how do they do that they build a centralized inventory database this centralized inventory database by inventory it contained information on the bus routes the bus the different bus service providers bus operators their routes the seed the availability position all this information on a real time basis as a result of which passengers could either book the tickets online through this central inventory database the red bus website or offline that they just had to call a red bus office or call their call centers which are using this red bus website I am going to explain how this entire thing happened so both the online as well as the offline option was available for passengers through available distribution network and they were able to provide both the B to B and B to C of course B to C was their main line business they provide this business to the consumers B to C means business to consumer they provide this business service to the consumers in this case the passengers as well as B to B in this case could be the bus operators as well as the online travel agents like the Yatra those types of travel agents for whom they gave a totally different service about which I will be talking a little later so what did red bus do how did they change the way in which the the way in which the entire bus transportation industry was behaving now for the bus operators it provided an application software that they called as boss the bus operators software system they call boss is the bus operators software system they sold it to the bus operators now each of the bus operator will have the software system at their workplace and they are connected to the centralized database which is a cloud database of red bus and what they do when connected to that is that they update all the information they update online the entire seat inventory by seat inventory it captures all the information like the availability of seats bus route price everything that is required for ticketing and for offline that is the non online bus operators those bus operators who could not afford this operation software they were able to connect over the phone and then provide inventory details inventory details over phone from offline bus operators and this get captured by the bus operators forward into the center inventory database by red bus own people and as I said the information meant the seats the routes the prices the seating type the bus design all that was captured on a real time basis this is one major change that it made the second thing that it made when you make change on the bus operators side there is a similar major change that you do for the travelers or the passengers that they built a very robust website red bus dot in so they provided a website an online service called red bus dot in so passengers who have internet connectivity just get logged on to this website which provides the information that it retrieves from the inventory database and the information to the inventory database is feed it from boss or fed into the database through phone telephonic updates that are collected by red bus employees from those bus operators operated on offline mode but in essence this website is the front end for the travelers and for those who do not have internet they can call the red bus call centers or red bus had their franchise on the bus operators outlets so you could go to the nearest franchise outlet and they will help you they go to the red bus website and get the ticketing process done the third thing that they also did was also for the OTAs these online travel agents you know there are some passengers who buy ad tickets book hotels book cabs through these OTAs now you see these make my trip likewise at that point of time the major OTAs that point of time was Expedia Yatra dot com so these were their OTAs to which red bus also gave a separate application called a seat seller a seat seller application and that was loaded in the OTAs website as an additional module in their online portal so that they themselves the OTAs themselves as part of their tour package could boot bus tickets using the seat seller application so this was this is what red bus did to change the way in which the bus ticketing was operational now if I try to capture this in a particular model as to give you an understanding how the presence system that red bus designed looks it would be like this so the central piece for this entire business model was the technology platform where you had all the database then you had the red bus website then you had call centers you had bus operator 1 2 3 up to N then you have passenger 1 passenger 2 N number of passengers and on the other side you also have the offline travel agents and the OTAs the online travel agents and you gave them the applications application plugins and this was through bus and for offline you could also capture through phone and put it in the central database and for the passengers they could get the information online from the technology platform or they could call them over the phone and get the ticketing done through call centers or they could in person visit the franchise outlets who will in turn get connected to the technology platform and get the ticketing done so in essence what used to be in the previous case if you look a few slides back it was very disorganized there was no connect between the passenger and the bus operator and everything had to run based on the agent's expertise assuming that the agent is transparent which he or she is not it was such a disorganized mechanism as a result of which passengers suffered the bus operators suffered due to huge revenue losses to an existing system that red bus implemented existing system of red bus where it brought together the entire stakeholders into the of the bus transportation industry together the centerpiece is the technology platform that it built and it is that technology platform that had the entire inventory database this is the information warehouse for this business model and that database it captured from the bus operators by selling them the boss application so that they could on a real time basis feed the information and for those who could not afford who chose to remain offline that information was captured through phone and again fed into the central inventory database and the information is ready to be consumed on the other hand by the passengers who wanted to buy tickets and they did not have to rely on these agents who could directly get into the website of red bus check availability pricing affordability by the tickets and make the travel or for those who do not have internet they could make a phone call get into the call center of red bus which again gets into this system and does the ticketing or they could go to the red buses franchised outlets or to the distribution centers and get the ticketing process done so this entire way in which the bus transportation industry changed was something that transformed the bus travel experience which in the olden days was just restricted to the time that you spent inside the bus during the travel which red bus transformed today the bus travel experience has started even before you undertake the travel the moment you log into the website you begin to feel the travelling experience checking various bus operators their seat design you get a look at the view of the bus the seating arrangement and also all sorts of combinations and the experience of travel you begin to feel even before you undertake to make the travel and red bus was very clear in segmenting its customers it handled them in five clear segments the private bus operators and they were able to build a network of around 800 private bus operators and they provided them a cloud based bus and of course they gave an alternate model for the offline this was their first customer segment the biggest of course was the in terms of volume was the passengers to whom red bus gave an internet option a call center option a telephonic option or even a distribution network where they could go and visit then the online travel agents as I said Expedia the aathra types where red bus gave the seat seller application and it also started very slowly to provide the sort of service even to state government bus agencies or bus departments whatever you call it because that itself is a big bus operator network every state government owns a fleet of buses so to say that that could be definitely a separate customer segment you have so many states each of them having their own transportation department as a result of which that was a clear separate customer segment for red bus another important not in terms of the business volume but in terms of the way in which the industry could be further characterized through a positive influence was through the bus manufacturers who primarily could rely on some data analytic tools that red bus develop because if you look at the present model that red bus built it is a data aggregator based on the bookings this bus manufacturers would know which are all the routes that are always high traffic which are all the type of seats that passengers prefer they know that if a particular passenger decides not to buy a particular seat and chooses a different bus operator because that particular seat design was available that bus manufacturers know that there is a demand for certain types of buses amongst the passenger amongst the passengers who use bus predominantly as a mode of transportation a variety of such you know data analysis can be done which will be an important critical feed to the bus manufacturers who themselves could take decisions for their own businesses now the customer value proposition that red bus was trying to deliver to each of these customers is very very important because what red bus tried to do was to disrupt the existing way of bus transportation and put in place something that is very very new and unless there is a very strong perception that this new model is going to deliver value it is very difficult for red bus to succeed so the customer value proposition that it gave you can you can see that from two perspectives but there is one unifying value that it gave to both the bus transporters the bus operators as well as the passengers was the the ecosystem that it built based on trust and transparency so this is in my view the key value proposition that red bus was delivering and this is true for both the bus operators as well as for the passengers that it built an ecosystem of trust and transparency and if you look at more specifically for bus operators the value proposition the potential to increase revenue that is a huge value proposition because they are into this business to make money and the propensity that this solution offered to increase in revenue was huge because the booking was real time the inventory was real time there is no way that you have passengers who need the seat but are not able to book them now this has really transformed the way in which business was done as a result of which there is increase in revenue for bus operators then there is timely payment of ticket sales because remember the red bus actually collects the money on behalf of the bus operators there is a timely payment so that is a value we do not have to rely on agents to get back the money there is no postponement delay then there is standardized commission the bus operators pay and this provided equal visibility to all bus operators gone are the days where agents prefer a set of bus operators and try to discard a few and they choose them as a lost option now in this case the key value proposition again it could be good for some bad for others but overall the equal visibility that it is able to provide to all the bus operators is also a value proposition then the data analytics as I said before is not only for the bus manufacturers even for the bus operators themselves they know which routes are profitable and if they find that more number of passengers require they could add more to the fleet serving that particular route so it is a very very critical value that bus operators can derive because of this new solution then you had online rating of bus operators so that they could improve their services and sometimes the relationship building between red bus and bus operators itself is an intrinsic value that this new model gave to the bus operators at times it could report ground you know field level feedback to the bus operators and help them in improving their efficiency and from the bus travelers perspective the key value proposition there might be some commonalities but the biggest one was as I said before the transparency and the ease at which they are able to get that tickets the reliability because if the system says there is no ticket you don't have to check with other agents it is a clear no so as a result of which you know passengers can begin to exercise other possible options it is real-time access it is real-time access it provided even the the route map pickup points delivery modes tickets could be delivered in the nearest delivery center or home delivery seat preference so it was kind of an all-in-one that the bus travelers were able to get from this service and for OTAs the major value proposition it was it was delivering was it was providing an access to the bus traveling tourists it provided an access to the bus traveling tourists so these were the major value proposition that red bus was able to give to the critical stakeholders the bus operators the bus travelers and the OTAs now what we need to see from here is the key success factors that made red bus successful and after it came into business after a substantial period of time they are at some crossroads to take a decision as to how they need to take this organization forward and that is where the strategy part comes into play first to understand what the key success factors were and after having made this reasonable success from here let us say after 6 years 7 years from 2005 6 where is red bus going to go what are the options that it has that it has to exercise to make sure that this success is further built into a sustainable competitive advantage as a result of which this organization red bus is able to meet the business objectives that it has in mind so for that part we will meet next class and see how from a strategic perspective red bus is able to take decision on its future course of action thank you