Written Analysis and Communication

redBus: The Next Step For Growth

A Situational Analysis

Submitted By:
Vikram Khanna
P16027
IIM Nagpur
redBus, founded in the year 2006 is a bus ticket booking service having its presence in around 20 states
and having a daily transaction volume of more than 19000. Its B2C customer base mainly includes
people in the age group of 20-40. Apart from this, it also has B2B relations with OTAs to whom it sells its
Seat-Seller plugin and BOSS application. Riding on its explosive growth rate in the recent years, it is
pondering over the possibilities of expanding its business. Some of the options which are available at its
disposal can be summarized as follows:

1) Vertical Integration: This one involves launching its own private buses in the market on different
routes.
Advantages
Around 65 percent of the private bus transportation is served by operators having a fleet of less
than 20 buses. The demand for buses is growing at a rapid pace and this will help bridging the
gap between demand and supply. The analytical data it has with it can be used to choose profit
making sectors and with no third party involved, can decide on its own pricing strategy.
Risks
RedBus will be a new player in the market. With no experience in that sector, it can face
challenges as people will prefer established brand over it. Also a large capital investment will be
required when it is still running with a negative working capital.

2) Going Global: Having already established its roots in India, RedBus can explore some
opportunities in different countries.
Advantages
Internet penetration in other countries such as China, Japan and South Korea is much higher
compared to India thereby having more user base connected to technology which is the USP of
RedBus. Turnover can be significantly higher as there are so many bus service providers.
Disadvantages
The geographies and cultures are complex in different countries and so are the requirements. A
thorough study needs to be done before venturing into offshore business. Also cities in other
countries are well connected through air. Operating costs too will be higher.

3) Increase the portfolio of Service Offerings: This option envisages redBus to venture into
offering other booking services like hotels and air tickets.
Advantages
RedBus has done quite well in the last few years and it is always expected for a growing
company to diversify its business. With a 99 % increase in the number of different visitors it is
poised to do well if it offers a complete holiday package to its visitors. With different segment of
people flocking to the website it can also think of hosting advertisements thereby earning more
revenues.
Disadvantages
This will bring it into direct competition with established players like MakeMyTrip, Yatra and
IRCTC which it being in its nascent stage will not be a great idea. It will also affect its B2B
 business as many of these companies are its customers. Fostering a tie up with hotels and flight
operators can be costly especially when it books a profit of only 10 million Rupees a year.

4) Focus on the core: Continuing with their forte, which is bus ticket booking service.
Advantages
RedBus has been a pioneer in this business and brought technology to the forefront bringing
relief to the regular bus travelers. With online travel industry growing to 378 Billion Rupees and
still going strong, it is prudent to keep tapping this sector. Also it can collaborate with State
Road Transport Corporations who have greater connectivity within the State having 75% market
share.
Disadvantages
Stagnancy can result in competitors bringing some other disruptive technology. With a growing
economy people can switch to other services.

Total number of words used in the Report: 599