Business level strategy: pestle analysis – swot (Go ahead group)

 Business level strategy: pestle analysis – swot (Go ahead group)

 Content:

1. Executive summary……………………………………………………………………..3
2. Introduction…………………………………………………………………………….4
3. External environment analysis………………………………………………………….4

3.1 PESTEL analysis……………………………………………………………………4

3.1.1 Political……………………………………………………………………………4

3.1.2 Economic…………………………………………………………………………5

3.1.3 Social……………………………………………………………………………..5

3.1.4 Technological…………………………………………………………………….5

3.1.5 Environmental……………………………………………………………………6

3.1.6 Legal……………………………………………………………………………..6

3.2 Porter’s 5 forces……………………………………………………………………6

3.2.1 Bargaining power of buyers………………………………………………………6

3.2.2 Bargaining power of suppliers……………………………………………………7

3.2.3 Potential entrants…………………………………………………………………7

3.2.4 Threat of substitutes……………………………………………………………..8

3.2.5 Demand or competitive rivalry…………………………………………………..8

4. Internal business environment………………………………………………………………8

                 4.1 Resources………………………………………………………………………….8

4.3  Competitiveness…………………………………………………………………..9

                  4.3 Brand value……………………………………………………………………….9

5. Strategic position……………………………………………………………………………10

                  5.1 SWOT analysis…………………………………………………………………..10

6. Conclusion………………………………………………………………………………….12

7. Recommendations…………………………………………………………………………..13

8. Reference……………………………………………………………………………………14

9. Appendix……………………………………………………………………………………16

1. 1.      Executive summary:

Intend of this paper is to evaluate the strategic direction and position of Go Ahead Plc and to make recommendation for its future. In this regard, paper highlights the complete environmental audit of the company. Reduction in demand for the product and service and economic downturn are some factors that drive company to make improvements in specific areas. Moreover, introduction of new and advanced technologies, reduction in total energy consumption and societal pressure make the competition tough for company. Additionally, strategic capabilities of Go Ahead Plc were examined in order to exhibit that they can come out as doorstep capabilities in the future. Thus, external environment was scrutinized by taking PESTEL analysis into consideration. Similarly, competition was analyzed with the support of porter’s five forces model. This analysis inspected suppliers and customers’ bargaining power against the company and the level of competition. Afterward, internal business environment was examined by analyzing resource, competitiveness and brand value of the company in the market. This demonstrated company’s strategic and strong position in the market place. Additionally, SWOT analysis framework assisted recognizing company’s strong and weak points, opportunities for future and threats which it can avert. Company should attempt to slim down the total number of its employees and develop multi tasking abilities so that maximum utilization can be achieved.

1. 2.      Introduction:

The company Go-Ahead Plc is an international transport group which is headquartered in Newcastle upon Tyne. Company is listed on the London stock exchange and comes under the constituent of FTSE 250 index. Go-Ahead group operates passenger rail services and buses in the UK and school buses in the US. Moreover, it is one of the growing providers of the United Kingdom’ passenger rail and bus services to mainly urban markets. Company employs more than around 22,000 people and completes a journey of more than 1 billion passengers annually (Go-Ahead 2013). Company has basically four key segments which include:

• Go-Ahead North America allotment comprises of about 50% investment in school bus operation of the US.
• Deregulated bus division encompasses London bus operations outside London
• Govia, rail operation, 65% is owned by Go-Ahead and Keolis S.A owns remaining 35% and comprises of three other rail franchises including London Midland, Southern and Southern eastern.
• Synchronized bus division encompasses London bus operations under London transport control (Thomson Reuters 2013).

Furthermore, Go-Ahead core operations are placed in populated regions, predominantly enveloping the South East of England. Go-Ahead group operate more than around 3600 buses and 1.7 million people travel on company’s buses every day. Apart from that, rail operation of Go-Ahead Plc is near about 30% of journeys of all passengers. Go-Ahead group was the first large transport group of the UK which was made officially verified with the Carbon Trust Standard in their work gratitude to dampen carbon emissions. Following their continuity, company acquired several companies like Hendingham and district omnibuses ltd, Anglian bus ltd, HC chambers & son ltd and carousel buses limited (Morning Star 2012).

1. External environment analysis

3.1  PESTEL analysis:

3.1.1        Political: Political environment of a country directly affect the company’s business. In case of Go-Ahead group, changes in local authority can lead to changes in policies. Moreover, positive or negative attitude of the country’s government towards public transport depends upon economic scenario and hence make impact on the business. However, diminishing level of government’s interference assists in terms of financing and funding for future projects and related expansions. Government of the UK and US is offering subsidies for purchasing fusion buses.

3.1.2        Economic: Consistent economic downturn has been noticed in the UK, over a few years ago. It affects the demand and reduces it for bus and rail services. On the other hand, areas that may have growth in future have been focused by continuously evaluation of the products’ customization and changing market. Company’s overall volume is driven by maximizing the profits. Cost becomes one of the most considerable factors which can be controlled by optimum utilization of resources. Similarly, fuel contributes majorly to the company’s cost. If inflation rises continuously, this could have various effects upon the company:

• Unemployment may increase
• Costs of fuel may also increase
• Confidence of customers may have chances to fall
• Interest rates may rise
• Customers may face increasing prices and drop journeys
• Suppliers would also face constant rising prices and hence drop confidence (Richardson 2005).

3.1.3        Social: Social factors are related to the people affecting and affected by the business. People have thriving competition to own their private cars which reduce the possibility of business for the company Go-Ahead. Apart from that, societal pressure is also noticed with regards to avoid use of public transport. Nevertheless, society is fully assisted to travel by cheap means. More than 22,000 employees are employees by the company amongst the society only. Company also provides pension schemes and insurance coverage to its employees and passengers.

3.1.4        Technological: Companies are coming up with new advanced technology buses with full-furnished facilities for their customers as well as reduce carbon emissions and contribute to the environment. Latest buses are bought in order to provide safety and security to the passengers. Technological benefits like comfortable zone for disabled persons are also available in the buses. Real time waiting information is secured at the bus stops so that customer’s friendly environment can be achieved.

3.1.5        Environmental: Business related to buses and rail can make great level of contribution to the environment. Analysis exhibits that, energy consumption is reduced on site by around 4.5%. People are encouraged to use buses and trains more than their own private vehicles in order to reduce carbon emissions. Thus, driving energy further scheme has also been launched in 2010 in order to secure the environment. Company is having devoted energy managers that assist diminishing company’s energy consumption. It was noticed out that per passenger carbon emission has been reduced to 0.88n Kgs.

3.1.6        Legal: Legal factors affecting the company’s business are related to law, rules and regulations operated in a particular country. Therefore, a government policy regarding fuel price hike places positive effect on public transportation framework. Other than this, new policy such as insertion of around 9 billion pounds into rail industry supports Go-Ahead organization to have a close conversation with the government to help general help of both the economy and the company (Go-Ahead 2006).

3.2  Porter’s 5 forces:

Porter’s model of 5 forces describes bargaining power of supplier and the customers, entry of potential competitors, threat of substitutes and demand. This section explores each force in detail.

3.2.1        Bargaining power of buyers: Market forces decide the price of the products. Buyers are the millions of passengers who travel in public transport throughout the country. So, public transport is highly competitive market where customers want the good quality service at the lowest price. The company works on volume in order to assure the criteria. Thus, for maximizing the level of customer satisfaction, Go Ahead smart cards are offered to the customers for their ease as well as new perceptible maps is also being introduced at stations.

3.2.2        Bargaining power of suppliers: It is very important to have good relationships with manufacturers of network rail and bus. Most of the suppliers are small and medium enterprises. Therefore, giving orders to local manufacturers assists in overall economic growth and company gets the best price for its services. In addition, having good relations also helps in mutual success for all involved in the supply process.

3.2.3        Potential entrants: Power of a company gets affected by the people’s capability to enter the similar market. Accordingly, loss of business to existing competitors and new entrants is a big challenge for the organization. Company maintains good relations with the customers and attempts to maintain the high standard established and work for further improvement in order to minimize the threat. The company also works closely with the stakeholders for future development.

3.2.4        Threat of substitutes: It is affected by the customer’s capability to identify a different way of doing what company does. Thus, substitutes for Go-Ahead group Plc are First Group Plc, National express group Plc and Stage coach Group Plc. The company attempts to elevate their bar of customer service and satisfaction year on year in order to outperform them. The last survey conducted demonstrates 85% of customer satisfaction across the board compared to 84% as national average (House of Commons 2006).

3.2.5        Demand or competitive rivalry: In the UK alone more than 2.3 billion passengers use bus everyday for their movement every year. Hence, more than around 1.35 billion passengers’ journeys are completed every year. As a result, the scope for expansion is large and the market is also big for everyone to maintain and capture.

1. 4.      Internal business environment:

4.1  Resources: Go Ahead is one the largest transport group in the UK. It has near about 4,600 buses in operation with an average investment of 80.7m Pounds every year to augment the fleet. Company consists of around 23000 skilled employees that maintain the smooth running of the Go-Ahead Group Plc. Moreover, it has 5500 rail services running on every day basis. Company makes approximately 70,000 journeys every day with passengers using company’s smart card. Furthermore, group revenue of 2,432m Pounds with an operating profit of 110.2m Pounds is earned by the company as a whole. Consequently, there are around 4,590 no of buses with having 12,750 employees in the bus division. In sum, 10,150 number of employees in the rail division look after 1,320 trains (Skywalker & Vader 2013).

.2  Competitiveness: Go-Ahead Group Plc comprises of strong and developing bus division and has net profit of 70.2m Pounds. According to company’s analysis, 90% customer satisfaction in bus services and 84% customer satisfaction in rail services is more than national average. Apart from it, company has one of the best dividend policies, according to which, 81p per dividend share in 2012 proves company’s strong cash flow. This in turn reflects on the strong balance sheet of the company. Go-Ahead is an established name in the UK market, 30% of UK rail passengers travel are using its services. Company has been voted as 10^th best company in the world in the sustainability graph. It has also been ranked in the top 5% in a survey conducted by the Governments Carbon Reduction Department. Similarly, Go-Ahead Group achieved gold rating in business in community corporate responsibility index (Orange Business 2012).

4.3  Brand value: Go-Ahead Group has been into the transportation line for 25 years. It was founded in 1987 during the privatization of national bus company. From 1990-95, it entered the UK bus market and got hold of Oxford and Brighton Companies. In 1996, it entered the UK rail market with the Thames link franchise. Currently, it has 4.600 buses, over 1m passengers a day in the rail network and 1.8m passengers a day in the bus services. It is one of the most trusted and consistent public transport company with efficient customer satisfaction that is more than the national average in the public transport. Characteristically, the company works on four strategic principles; to run the company in a safe, socially and environmentally accountable manner; to offer first-class quality and passenger focused transport system; to focus on elevated density market places; to run the business with strong financial discipline in order to deliver effective share holder value.

(Source: Weldon 2006)

1. Strategic position

5.1  SWOT analysis:

Strengths and weaknesses are internal to the company while opportunities and threats are external (Tuckwell 2007).

1. 6.      Conclusion:

Thus, based on understanding the operations of the company Go-Ahead Group Plc, it can be concluded that the company is doing very well in the current economic scenario. However, the market does not seem to be positive but still the company is continuing well and growing its business effectively. The company has solid foundations and good working ethics there are still some changes or jerks that can be accomplished. Moreover, people are encouraged to use buses and trains more than their own private vehicles in order to reduce carbon emissions. Accordingly, it was noticed out that per passenger carbon emission has been reduced to 0.88n Kgs. For maximizing the level of customer satisfaction, Go Ahead smart cards are offered to the customers for their ease as well as new perceptible maps are also being introduced at stations. Additionally, giving orders to local manufacturers assists in overall economic growth and company gets the best price for its services.

Furthermore, company maintains good relations with the customers and attempts to maintain the high standard established and work for further improvement in order to minimize the threat. The company attempts to elevate their bar of customer service and satisfaction year on year in order to outperform them. Thus, around 1.35 billion passengers’ journeys are completed every year by Go-Ahead Group. Company has been voted as 10^th best company in the world in the sustainability graph. It has also been ranked in the top 5% in a survey conducted by the Governments Carbon Reduction Department and achieved gold rating in business in community corporate responsibility index as well.

1. 7.      Recommendations:

As Go-Ahead Group is growing its business, it should try to slim down the number of employees and develop multi tasking abilities in order to get maximum utilization because in today’s business context, cost cutting is critical but without disturbing the services. It should expand its bus network throughout the UK because there is big scope as company has good experience. Since the entire world is going green, company should take more initiatives in this department. The company should organize campaigns and change people mindset about the safety and reliability of public transport. At the end, company should start the high-end services in the UK in order to attract the privileged class and shape a niche in this market. 

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