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Redbus.in Managing Organizations

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CONTENTS

RedBus.in- The Making of a Success..............................................................................................................................3

Growth Trajectory of RedBus.in....................................................................................................................................3

The Environment of Operations....................................................................................................................................4

RedBus contributes to a change in the landscape.....................................................................................................4

Environment creates strategy....................................................................................................................................5

Revenue Generation Model: Where does the money come from?..............................................................................6

Structure Follows Strategy: The Evolution of Structure during the journey.................................................................7

Start-Up:.....................................................................................................................................................................7

Scaling Up:..................................................................................................................................................................7

High Market Penetration:..........................................................................................................................................9

Impact of Technology...................................................................................................................................................10

Transition to Cloud...................................................................................................................................................10

Seller Distribution Network.....................................................................................................................................12

Mobile Applications.................................................................................................................................................12

Culture..........................................................................................................................................................................13

Adaptability Culture.................................................................................................................................................13

Clan Culture.............................................................................................................................................................14

Future Growth Strategy...............................................................................................................................................18

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RedBus.in- The Making of a SuccessNecessity is the mother of all inventions seems so true for some of our times’ greatest business

enterprises as well. The adage makes better sense when we walk through the story behind the

start-up called redBus.in. What started out as an idea that was born out of a sour experience has

now been shaped into one of the fastest growing start-ups in India. RedBus was started in 2006

when one of the co-founders (Phanindra Sama) had a tough time getting a bus ticket to go back to

his home town during Diwali.

What came out of that idea was the need to aggregate and make available information for all

possible bus options on a web platform that customers could access to make informed decisions1.

Right from the idea to the name, the company has displayed an inclination towards thinking out of

the box. Phanindra Sama, in an interview to Movers & Shakers (Frost & Sulllivan) says this about

the strategy behind the name of the company “We wanted to associate our brand name with a

color as it would help us in marketing. Just about the same time, Mr. Richard Branson's

autobiography 'losing my virginity' was released and we were really inspired by his story. I can

say that, it is his story, brand and logo color, which influenced us to zero in on red immediately”

The organisation, which reportedly started its operations from a bungalow in Bangalore has since

then grown to service over 10 million tickets across 24 cities of India, helping more than 800 bus

operators manage their inventories to maximise profits.

In fact, redBus™ is India's largest bus ticketing company, reaching out to consumers via multiple

channels - web, mobile, phone booking, partnerships and retail outlets. It manages over 10,000+

bus schedules every day from the largest bus operator partnerships spanning the entire country. It,

today, has built a robust distribution of over 75000 outlets! redBus was ranked amongst Forbes top

5 start-ups to watch out for in 20102.

Growth Trajectory of RedBus.inAmerican actor and comedian Bob Hopes once said “A bank is a place that will lend you money if

you can prove that you don't need it.”

RedBus, through a display of solid investor backing translating into repeated capital infusion, has

proved decisively that the business fundamentals of the company are extremely strong with solid

revenue growth plans in place. To stress on that bit a little more, let us take a quick walk through

some of the major landmarks in the path that redBus has treaded thus far.

August 2006:

a. RedBus.in incorporated by 3 founders and 2 hired employees.

b. Investment of Rs. 500,000 and secured series A seed funding3

End of FY 2007-08:

a. Turnover of 5 Crores.

b. Had about 25 employees and enlisted 50 bus operators.

1 As given in www.redBus.in2 From http://www.helionvc.com/spotlight23.htm3 Information provided by www.dealcurry.com

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End of FY 2008-09:

a. Turnover of 30 crore.

b. Had secured series B funding3

End of FY 2009-10:

a. Turnover of 46 crore.

b. 230 employees and serving 10 locations

End of FY 2010-11:

a. Turnover of 116 crore.

b. Over 250 employees

End of FY 2011-12:

a. Secured series C funding3

b. Turnover of 340 crore.

c. 470 employees, 10 offices, services in 24 cities.

d. Had enrolled over 800 private operators and 2 government operators.

As of date:

a. Over 10,000,000 tickets sold.

b. Growing at 250% per annum.

c. Largest player in the Bus Ticket Industry.

The Environment of Operations

RedBus contributes to a change in the landscape

RedBus came into being in a highly unorganised, heavily fragmented business environment which

lacked a national level binding professional association. Though the complexity of RedBus’

operating environment has not been very high, the company faced high uncertainty right from the

beginning because of the fact that it has played the more prominent role of a market creator. In the

absence of clearly defined rules of engagement between the operators and agents, the fickleness of

their association with RedBus itself has been an important contributor to the uncertainty.

To sum it up, the environment of RedBus mainly comprises of the following three pre-eminent

players. Described is the trio and their characteristics that affect RedBus’ environment.

a. Bus Operators:

i. Highly Fragmented sector

ii. Highly Region, state specific business models

iii. Run under varying levels of regulations

iv. Varying levels of inventory utilisation

b. Agents:

i. High competition, low margins- hence distributed nature of the association

ii. No binding network and hence very loosely coupled with peers

iii. Lack of well defined processes and control mechanisms

iv. Challenges in managing cash flows from and to multiple operators and

customers

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c. Customers:

i. Paucity of credible service providers has created trust issues

ii. Customers have viable alternatives like railways etc, bus travel is generally

the last option and is very seasonal in nature.

iii. Poor comfort, services to customers have driven customers away.

iv. Skepticism about online payments hinders e-commerce based options

The overbearing challenge faced by the company, therefore was to play the role of an integrator

in the fragmented market to serve its ultimate goal of ensuring that “Everyone travelling in a bus

should have a ticket issued by redbus”.

It is also apt to mention here that redBus, by playing the market creator’s role has not only added

tremendous value to its own top-line but has also positively impacted the very environment in

which it operates. Experts like Forbes India have commented that redBus has had a Knock-on

effect on key players like agents, bus operators and even bus makers like Volvo by pushing up

their sales and making bus travel a lot more lucrative proposition both for the traveler and the

providers of services in the space.

In fact, it would shortly become evident that the company has astutely managed its environment

and has since its inception devised strategies followed by roll out of innovative products to capture

this large, unexplored market.

Environment creates strategy

RedBus has displayed commendable dexterity in effectively devising and regularly revisiting their

business strategy, by repeatedly creating products with high value propositions to extremely

focussed business groups.

By being mindful of the demands of the volatile environment, RedBus has been found to be

largely successful at isolating the environmental uncertainty from their business operations.

At the outset, the business strategy was aimed at filling the void in inventory management

capabilities in the unorganised bus operator’s market by providing a reliable product to help

operators manage their inventories efficiently. Thus was born their much acclaimed first market

proposition: a Software as a Service (SaaS) named Bus Operators System Software (BOSS™).

Today, BOSS™ is a market leader in its space with the largest number of bus operators using it

across the country4.

Some time into the business and they realised that true volumes were not coming through the SaaS

and that they needed a modification in strategy. The company understood that revenues wouldn’t

come from one leg of the trio alone and decided to create value in a space that appealed to at least

two key players. This is when redBus ventured into the space of marketing tickets for third party

bus operators through their online market place, using a Live Integration System (LIS) platform,

effectively setting foot onto the much fancied Business to Customer (B2C) market. The LIS based

B2C model essentially generates revenues by acting as a common platform for interaction between

bus operators, managing their inventories through BOSSTM or any other SaaS, and the end

4 Again, from http://www.helionvc.com/spotlight23.htm

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traveller looking for a vacant seat on a particular route and indifferent to the operator running the

bus (limited to the amenities provided by each group of operators). This business model caught the

attention of the average bus traveller and went viral, as the company began earning the big bucks.

Important to note here is the fact that the services of redBus didn’t end with the transfer of tickets

alone, but the company was determined to create more value for the end traveller by maintaining

contact with the customer up to the point of boarding the bus. Eventual innovations made the

service even more popular among the masses. One such innovation was the company enabling

ticket less travel on the basis of confirmation SMS sent post payment during ticket booking,

further delivering freedom to the customer. Having assiduously pursued market making for over 6

years, the company claims that they “have probably about 60 per cent of market share”5 . Thus,

with a saturating B2C market, the future growth of the company clearly lied in devising a new

business strategy or by entering a new market, where they could once again play the role of

Market Creator.

Thus, in August, 2012 the company, after devising a clearly defined road map for the company,

entered the Business to Business (B2B) model. They extended their engagement to the third player

in the trio- the bus agents. The technological platform essential to create this additional revenue

stream was developed by the in-house product development team of redBus.in and emerged in the

form of a critically acclaimed Global Distribution System (GDS) named Seat SellerTM. The

popularity of this product can be gauged from the fact that Seat SellerTM has even been adopted

by many of the travel websites who compete with Redbus on bus ticketing, like Yatra.com and

Expedia.co.in 6.

RedBus claims that its strategy shall remain concentrated on bus ticketing and that with the help of

the existing and perhaps new business platforms, they have the potential to grow 10x and become

a 3000-4000 crore revenue company7.

Revenue Generation Model: Where does the money come from?RedBus has a fairly similar revenue generation model over the three business models that it

practices. It claims a certain percentage of the cost of each ticket sold using technology licensed

out by it. While in the case of revenue generation purely through licensing BOSSTM Redbus

charges 1 percent of every ticket sold by an operator, for licensing out Seat SellerTM it charges

anywhere from 1-5 percent from travel agents6.

However, when it comes to their present cash cow i.e. revenue generation through the B2C model,

the company charges about 10% of the cost of every ticket sold. The company sells tickets under

the B2C model through three main channels:

a. Online sale of tickets, completed by payment online.

b. Sale of tickets through call centre, payment by debit/credit card.

5 http://techcircle.vccircle.com/500/redbus-is-profitable-online-bus-ticketing-as-a-standalone-biz-is-sustainable-phanindra-sama 6 http://forbesindia.com/printcontent/323827 http://techcircle.vccircle.com/500/redbus-is-profitable-online-bus-ticketing-as-a-standalone-biz-is-sustainable-phanindra-sama

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c. Sale of ticket by field agents, home delivery of tickets.

The point (c) is interestingly a mechanism to hedge against the risk of migration of the potential,

“online payment averse”, redBus customer, by giving her the option to pay the due amount to a

real person after being handed over a real RedBus ticket. More reason to suggest that Environment

Drives Strategy!

Having talked about strategy of the organisation, here on, through our report, we shall endeavour

to portray RedBus’ development of a dynamic structure designed to both tackle the inherent

environmental uncertainties as well as align its strategy with its long term vision in a way which

has created tremendous value for its customers and promoters alike, all this with critical support

from the timely introduction of state-of-the-art technology into the processes and control

mechanisms.

Structure Follows Strategy: The Evolution of Structure during the journeyA company’s strategy sets forth a plan of how it will reach it’s goals.  The strategy is a roadmap

that describes the core initiatives and decisions that will propel it forward in pursuit of it’s vision.

The strategy is ultimately implemented by a team; it is critical that the team be organized in

manner that allows the strategy to be implemented in an efficient and effective manner.  In other

words, the strategy needs to drive the structure.8

Since its inception, RedBus has shown an excellent dynamism in implementing this critical

business axiom. It has shown its readiness to embrace change, empowered the middle line and

more importantly still created the culture that has fuelled constant innovation clearly metrifying

into high growth. To help in analysis we have broken down the operational history of redBus into

three broad periods: Start-Up, Scaling Up and High Market Penetration.

Start-Up:

To begin with, the organisational structure looked and felt like

most start-ups do- Horizontal hierarchy, not much

differentiation, great deal of interaction between the very few

members on the team, very low formalisation and thus was

clearly an organic organization. The Mintzberg structure for

the company would look like the figure shown here corresponding to the Simple Structure.

Scaling Up:

With the realization that the company was scaling up and was beginning to spread across different

geographies within the country, the need for increasing the complexity of structure was also felt.

Specialists were inducted into the team gradually and a functional structure was formed, aimed at

implementing the strategy of the company to capture maximum market share in the bus ticket

space by inducting the maximum number of bus operators into their network. They realised that

product innovation and cutting edge product development would be the key in luring more bus

operators to join hands with the company and hence A CPO was hired to concentrate on new

product development. During the same time a CTO was hired who would look after optimising the

8 http://daviddewolf.com/2011/09/align-your-organization-with-your-strategy/

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engineering and technology requirement of the organisation and thus it’s clients as it was growing

at a breakneck pace. Some-time during 2010 a CFO was hired to manage the funding and finances

of the now 30 crore company. Call centre operations were also started, based out of Bangalore,

during those middle years and most of the business development was done from their head office

in Bangalore. Quite importantly, it was during this time that the company migrated to using Cloud

Computing as a technology option for supporting all its needs as a technology provider. However,

interestingly so, the HR functions of the company were outsourced, probably because of the non-

core nature of the activities and to reap the cost benefits of the absence of a large cost potential

cost centre.

The hierarchy diagram below tries to show the organisational structure during that period

of time.

Broadly put, these changes introduced the following characteristics to the organisational design of

redBus:

a. Creation of new departments, leading to specialisation and efficiency.

b. Creation of a dedicated operating core (in the Mintzberg model) in the form of call centres,

business development staff and technical support staff.

c. Creating of a certain degree of centralization with all major functions being tied to the

corporate office and reporting to CEO.

High Market Penetration:

April 2011 was a watershed point on the organisational timeline of redBus.in, with the company

stepping on the gas towards high innovation in the area of organisational design. Recall that we

had listed regionalism as one of the key causes of uncertainty and complexity of environment of

the business. The company realised that it was this aspect of the environment that was

stonewalling its efforts in establishing its footprints further away from south India.

CEO

CFO

HEAD, OPERATIONS

OPERATION TEAM

HEAD FINANCE

FINANCE TEAM

CALL CENTERS BUSINESS DEVELOPERS CPO

PRODUCT HEAD

CTO

ENGINEERING TEAM

HR (OUTSOURCED)

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This is when the organisation underwent a restructuring with the end result being a mix of hybrid,

matrix and geographic structure. The geographic nature of structure was a result of incorporation

of a regional design in the hierarchy with highly autonomous regional offices, headed by a

regional director was created. The regional director was given full authority to operate in his

region with the CEO only having a guidance role. More importantly, business development and

overlooking call centre operations were transferred to the domain of the regional director as well.

Along with the more obvious measures taken, the company essentially also underwent a heavy

dose of decentralisation with an empowered middle line taking over the operations from the

CEO’s office, giving the CEO the freedom to devote his time to strategising and fund-raising.

Interestingly the third, and by far the largest, round of fund infusion by venture capitalists also

happened in 2011-12.

The hierarchy diagram below tries to show the evolved organisational structure currently

operational at redBus.in:

Conspicuously still, the HR functions continue to be outsourced by redBus, though the company

appears to be pondering over having an in-house HR department shortly.

Broadly put, this wave of restructuring introduced the following characteristics to the

organisational design:

a. Creation of an autonomous regional structure, enabling the organisation to deal with the

regionalised market in a far more nuanced manner.

b. A small techno-structure (in the Mintzberg model) was created within the product

development team who were responsible for tracking the market, analysing customer

preferences and helping the company design better products.

c. Strengthening of the middle-line, empowering the middle managers to conduct business

operations freely.

CEO

CFO

HEAD, OPERATIONS

OPERATION TEAM

HEAD FINANCE

CORPORATE FINANCE

REGIONAL DIRECTORS

REGIONAL FINANCE TEAM CALL CENTERS BUSINESS

DEVELOPERS

CPO

PRODUCT HEAD

CTO

ENGINEERING TEAM

HR (OUTSOURCED)

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d. Creating of a certain degree of decentralization with many major functions being delegated

to the regional offices, overlooked by the regional directors.

Analysts suggest that most of the online (ticket booking) action is limited to Tier I cities, while

Tier II and Tier III towns, with their limited internet penetration, are still to be tapped.9 Thus

clearly, redBus has responded to the market forces astutely and the creation of the regional

structure may prove to be a master stroke, in light of the future of volume growth dependent on

tier-2 and tier-3 cities and the expected surge in internet connectivity in these cities especially with

the advent of new age technologies like 4G crowding the metros.

Impact of Technology

For a growing start-up in internet domain, role of technology in shaping business and hence the

trajectory of growth can’t be underplayed. Redbus, fundamentally a technology driven company

highly leveraged Information Technology (IT) to propel its business and come up with innovative

solutions to tap the unorganized bus travel sector. The report already has detailed descriptions of

trademarks products that company offers to serve B2C and B2B segments. In this section, we

cover the impact technology had in propelling Redbus in next phase of growth which made it the

leader in online bus travel industry.

Transition to Cloud

Redbus, with an e-commerce B2C solution was growing very fast. As a result, near zero downtime

and ability to handle peak traffic were becoming a must for redbus to attract more customers.

However, Redbus had a physical data centre which constrained the capacity of developers to

upgrade quickly, maintain high levels of serve time without purchasing new hardware and lead to

loss in productivity. "The procurement of new servers, upgrading existing servers and most of the

developer's time went into circumventing scaling issues which were not adding values to our core

business. That's when we decided to try out the cloud," says Charan Padmaraju, co-founder and

CTO of Redbus. Realizing the same, the team decided to move the entire infrastructure to AWS

cloud to solve the problems of elasticity, scalability and monitoring. As a result of this move,

redbus was able to offer multiple versions of its cloud based SaaS model to operators without

compromising on availability devote more of developer’s time on business applications and scale

on-demand. Because of this move in 2008, Redbus essentially reaped following benefits :

i. Business differentiation.

Cloud based solutions enabled Redbus to deploy new applications at ease, on-demand and without

worrying about scalability and operation issues. Transporting full stack on Amazon cloud made

them the first big player in online bus travel to be 100% cloud-centric. This not only beefed up

their ability to serve high volumes of traffic without affecting their business but offer multi-tude of

new services to bus operators without server downtime.

9 http://www.inventuscap.com/news.php?p=story&s=RedBus_staggering_growth2012

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ii. Competitive advantage

Innovation is the key when it comes to sustaining in a fast-paced and dynamic industry. Impact of

transition to cloud for all its infrastructure and development needs enabled Redbus to iterate faster,

focus on core business solutions and hence provide array of solutions in less time. This is best

summarized in words of padmaraju himself “The use of cloud technology has given us the

competitive edge that helps us to innovate quickly,”.10 .

iii. Scalability

AWS cloud platform is inherently scalable and elastic. With the concept of elastic IPs and

amazon’s built in services for tighter integration, fail-over and redundancy building becomes

easier. Achieving scalability meant that Redbus didn’t have to worry about consumer traffic as it

was well-suited to handle spikes in traffic due to availability across time zones and increased

reliability.

iv. Cost Benefit

When operating in a high volume low-transaction market, cost efficiency needs to be a core

competency. And Redbus essentially Cloud based operatons gave them exactly that. AWS’s on-

demand availability of new machines and tiered pricing model meant that Redbus had to pay on a

use-basis. Due to this, they were able to achieve cost benefits of more than 30 percent. This

proved to be a major impact that technology had on day-to-day business of the company.

Seller Distribution Network

i. Bank Tie ups.

In order to better leverage its fast growing seller distribution network and to create a structured

and seamless way of interaction with the selling agents, Redbus created a control system. It tied up

with banks like ICICI Ltd. to create a system in which selling agents had to deposit money against

10 http://www.cio.in/case-study/taking-their-infra-cloud-helped-redbus-use-it-create-real-business-value

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a pre-generated cash code. This cash code was unique to each selling agent and streamlined the

whole process of money collection. Selling agents had to deposit money against this cash code in

partner banks and the whole collection process was automatically taken care of.

ii. Efficient Cash Collection and Remittal

Impact of Technology in RedBus’s business began to take forward seat. By integrating the whole

feedback loop above with company’s main financial applications, cash collection and remittal for

agents became relatively easy. They could track when and where the tickets were sold by the

selling agents, what was overdue and what needed to be remitted back to agents. Over a period of

time, they employed same mechanisms and automations for e-commerce B2C model.

iii. Auditing

RedBus was dealing with lots of tickets being sold through its ticket distribution network i.e

selling agents. Hence, it was only obvious that they had to have an auditing mechanism in place to

match the tickets being sold and cash being collected. These were all the measures they took after

they begin to experience growth in their operator network. Need for auditing paved its way to yet

another suite of applications hosted over cloud which used to gather all the information and find

out discrepancies.

Mobile Applications

The mobile phone market in India is growing at an alarming pace and more and more customers

are switching to mobile for their daily information consumption needs. Recognizing the scope of

mobile penetration in India, Redbus decided to foray into mobile space as well to extend the

convenience to the end-customer. This was a decisive step as India has the world's second-largest

mobile phone user base with over 929.37 million users. It has the world's third-largest Internet

user-base with over 137 million users as of June 2012.

i. iPhone and Android apps

Redbus started off with delivering ticket booking sevice on mobile phones by partnering with

ngpay. Ngpay is a gateway for online payments which is very secure and reliable. Customers

could download the mobile application by redbus and book tickets on the go. This addition makes

redBus, to bring value proposition as one of the early stage bus tickets company to provide such a

feature in the Indian market. Mayank Bidawatka, redBus Head-Marketing, said, “We have been

setting benchmarks in innovative features in this industry, and this one is another feather in our

cap. This mobile application will take booking bus tickets to another level11”. As the intitiative

tasted successs, Redbus offered this service across all platforms like Android and iOS to capture

the growing smart-phone segment in India and rightly so.

11 http://www.indiaprwire.com/pressrelease/travel/200805159554.htm

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ii. Real time ticket availability

Because of its foray into mobile applications to serve the growing customer base there, Redbus

had now solved an important problem. Customers, who previously couldn’t book tickets in

advance due to irregularities and non-adherence in bus travel market could monitor the availability

of tickets in advance and book them on-the-go. This greatly faciliated the whole booking process

and increased sales for Redbus from the mobile market segment.

In nutshell, Redbus played technology to its greatest advantage and bought lot of industry-first

innovative features which let it take the lead in the unorganized online bus travel industry in India.

Culture

Culture at RedBus can be best represented in the company’s own motto “Learn, Implement, Grow

- and have fun” . As a growing start-up, Redbus faces a lot of challenges and unsolved problems

on a daily basis. By imbibing a culture of learning and encouraging people to come forward with

their mistakes, it has developed a culture of self-empowerment and trust. With an employee base

of roughly 600 spread across cities, the culture at company can be best described as an

intersection of adaptability and clan culture. This culture has been cultivated over the years and

has helped Redbus stay a small growing company while crossing a magnificent 1 crore bus tickets

in sale. We studied the culture and dissected the various features of its emerging culture as

follows :

Adaptability Culture

i. Focus on Customers

RedBus has remained a customer-cetric company from its inception and has continued to be that

way. This aspect of its culture clearly distinguishes it from other players in the market. Pahni’s

vision has rightly been imbibed amongst the employees in terms of seeing customer convenience

as the end result of their work. Even though the company had grown rapidly and was able to raise

a lot of capital, the founders kept constant focus on low costs. They decided very early that the

company would have a distinct culture, which would be built on the principle of low cost

operations, professional integrity and better customer service.12

ii. Rapid adaptation to environmental changes

Bus Travel industry in India is a highly unorganized market and is very dynamic in nature when it

comes to needs of customers, changing heuristics to size the market, tapping the operator

network etc. By being very adaptable and responsive to environmental changes, Redbus has

allowed itself to respond to this changes in a very innovative manner by dishing out trademark

12 http://ajc.sagepub.com/content/8/2/171.full.pdf+html

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products like BOSS, Seat-Seller etc. in due course of time. Transition to Cloud at the right time is

an example too.

iii. Transparency in operation

RedBus, as a company has maintained transparency in its operations which has been possible due

to inclusive leadership of Phani. Employees are aware of major happenings in the company and

are never at shock when it comes to public announcements or internal happenings. This has given

employees a sense of ownership and responsibility. They treat the company as their own and

work together for collective growth. Though the company had not come out with a formal code of

ethics, but the founders believed that to be a successful organization, it needed to portray

transparency, integrity and honesty to elicit trust. This focus on transparency and honesty helped

them in building a strong relationship with various stakeholders including Venture Capital firms,

bus operators, employees and others.12

iv. Innovation

One of the major aspects of the companu’s culture has been innovation. This has righly been

reflected at numerous instances in this report and otherwise. It has been a market leader in adding

innovative feathers to its hat from being the first big entrant in the e-travel industry to establishing

and channelizing one of the largest bus operator networks in India.

Clan Culture

i. Close knit team

Redbus, being a growing start-up still maintains an air of closeness among its employees. Ability

to work together closely in teams and drive product development and operations is what makes

Redbus tick.

ii. Employee Satisfaction

By following a very open and learning-based culture, Redbus essentially takes care of the desires

of its employees. From giving them competitive perks to performance based bonuses and great

career options, Redbus has made sure that employees are satisfied with their work and are able to

contribution to the growing success of the company.

iii. Empowers employees

One of the fundamental aspects of Redbus’s culture is employee empowerment. Be it encouraging

them to come up with new ideas to solve business problems, accepting their mistakes on the day

job to identifying right talent among them to lead initiatives, self-empowerment and leadership is

given due emphasis and is encouraged. This is one of the main reasons that most of their products

are made in-house as employee collaboration is high and sense of responsibility powers that.

iv. Encourages Intrapreneurship

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An exemplary leader always understands the power of new ideas and ability to change lives. Phani

and his team share the same story. They encourage new ideas to take root and if in synergy with

the business plans of the company are given due importance and nurturing. This leads to a culture

where everyone thinks and acts like an entrepreneur striving hard to make the best use of the

resources at hand.

Culture at RedBus has been one of the key reasons Redbus has been able to move so fast and

adapt to dynamic and fast-changing environment. Be it innovation, close-knit team or self-

empowerement, these facets in one way or other have nurtured a culture which is paving the way

for success for the company and will continue to do so in the long run.

Industry Analysis and Business Strategy

Online bus travel industry in India is growing at a tremendous pace due to increased penetration of

internet and mobile phone usage. In order to study the changing dynamics of the industry and the

positioning of Redbus as an industry leader, we decided to do an industry analysis by using

Porter’s Five Forces.

Clan Adaptability

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1. Threat of entrants:

Bus travel industry in India to a large extent remains an unorganized and fragmented sector.

Redbus has been trying to solve this problem in an efficient manner since 2006. Due to the success

it has tasted and the potential of the industry in general to accomodate more players, the industry

has seen lot of new entrants. One of the main driving factors have been :

i. Company growing at 2.5x for last 3 yrs

The rapid growth of Redbus in the last 3 years was too glaring to be missed and competition

started making its entry. However, Redbus’ founders did not see this as a threat as there was a

huge untapped market and the entry of professional players would only organize the market

further. Morever, bus inventory management and operational capabilities of redbus are their core

competencies which is difficult for newer players to inculcate.

ii. Invites competition from other e-commerce players

Redbus faces competition from Ticketvala.com and Indiabusticket.com and a few other players in

the existing online travel market like MakemyTrip etc.. But they have not been able to replicate

the business model of the redbus in entirety largely due to the large customer traction that Redbus

enjoys and effective partnership with bus operators.

As stated by Phani, ‘The competition may have been able to imitate our business model, but they

couldn’t copy our DNA.’

2. Power of Customers:

Threat of New

Entrants

Threat of Substitut

es

Power of Customer

s

Power of Suppliers

Competition among

Rivals

Company growing at 2.5x for last 3 yrsInvites competition from other e-commerce players

Demand for better services, pushing up costs. Eg. COD More ground staff required, may create control problems

New entrants indulging in price wars. Eg. Travelyaari ,TicketgooseLocal competition very high- unorganised sector, govt sector etc

Improved Rail services eg. better Jan Shatabdi services.Private taxi services, introduced in the organized sector. Eg. Ola cabs inter-city taxi services.

Total business model hinges on Bus Operators.Increasing competition may reduce margins.

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Since online bus travel has primarily remained a B2C segment with technology backed companies

making the foray into the market, power of customers can’t be underestimated. Some of the

factors that can be identified concerning power of customers are as under:

i. Demand for better services

Redbus enjoys a fairly large customer traction and revenue from online sales through its e-

commerce platform still forms a major chunk of its total revenue. Given that Rebus is a customer-

centric company, customer demands need to be taken into account. These include better services,

fairer prices, innovative payment mechanisms like COD etc. to please the end customer. Redbus

has been able to take care of these demands reasonably well which explains its positioning in the

market.

ii. Ground staff required

In order to provide an effective 360 degree solution and to solve last-mile problems related to

customer convenience, company may have to employ more staff at the ground level to deal with

local bus operators and necessitate smooth operations. This is also required for better brand

positioning and trust with end consumers.

3. Competition among rivals

If we talk about online or offline bus travel market, RedBus doesn’t face a stiff competition. It

drives more than 70% share of online web traffic and is a huge player when it comes to

distribution partners. Other players in the same segment namely Ticketvala, Travelyaari ,

ticketgoose etc. are far behind in traction. Moreover the competitors seem to have focused their

models on providing bus inventory management softwares to bus operators where redbus has

decided to have minimal presence. Other players are trying every tactic in the book to get a

fraction of the remaining pie in the online segment of ~30%. This is leading to price wars and

aggressive marketing.

One interesting facet is that Redbus has minimal presence in North India where local players

continue to dominate the whole market. This comprises around 35% of the whole market with

more than 7k buses operating.

4. Threat of substitutes

Bus travel segment is getting organized as more and more players come in and roads keep getting

better. In fact, A/C buses have witnessed a rapid growth since 2008 and players like Volvo,

Mercedes and other manufacturers have estimated a growth rate of 40 per cent per annum for this

segment. Despite this, threat of substitutes exists which have been underlined below:

i. Improved Rail services

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When it comes to travel between two cities, Indian Railway Network has been a major player in

the industry. It is a perfect substitute for the bus travel with increasing number of trains running

between stations and providing better services and comfort like Jan Shatabdi, Rajhdhani etc.

ii. Private taxi services

Introduction of private taxi services in the organized sector also pose a threat to bus travel. This

largely caters to middle income groups and last-minute travel arrangement scheduling. An

example of this is Ola cabs inter-city taxi services.

5. Power of Suppliers:

Bus travel operators are the main operating entities in this market as they are the one in control of

the bus inventory. And this segment too is very fragmented consisting of players who own fleet of

more than 20 buses to players who own less than 5 buses. As a result, power of negotiation still

lies to suppliers when it comes to seat seliing and partnership. One good thing that Redbus has

done in this regard is to keep commissions constant even when it was selling more than 90% of

seats for big operators. This lead to increased trust and better partnerships. However, due to

increased competition in this market and computerization of inventory management, suppliers

may demand reduction in margins and decreased credit cycles.

Future Growth Strategy

Increase geographical footprint

The initial expansion strategy of redbus mainly focused on expanding to the major Indian cities,

particularly concentrated in the south. The focus more has been to get a bigger slice of the bus

ticketing pie. However it could look to increase the size of this pie by penetrating across tier-2

cities as well as spreading its reach across geographies, particularly Northern and North Eastern

regions. The expanded reach would serve two causes – a) It would widen its customer base b) It

would also widen its supplier network by looping in local players in the region thus giving

consumers more options and hence promoting a competitive environment leading to an efficient

and a cost effective service by operators.

Customer Behavioral Analytics

Redbus is currently the market leader in online bus ticket booking industry in India. The increase

penetration of internet usage in India especially in the tier 2 cities is also reflecting in the number

of hits that redbus’ online portal receives. Thus redbus is host to valuable user related information

that it stores in its databases. Specific data if collated in an appropriate way would end up being

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huge value adds to other players in the industry such as agents and operators. For example, trends

in unsuccessful user searches where the many users are not able to find bus connections between

two specific destinations could be a valuable piece of information for bus operators to ply buses in

these neglected routes.

Brand Marketing through Electronic and Print Media

Quite incredibly the growth trajectory that redbus has seen is primarily due to word of mouth!

Marketing and Advertising its brand is an unexplored territory as far as redbus is concerned.

However with its imminent plans to spread its reach in terms of operations, it makes commercial

sense for redbus to market its brand through electronic and print media. This would increase the

proportion of people switching over to online booking and hence would improve Redbus’ market

share.

Tap into Offline Distribution Model and Mobile Booking

Redbus could also look at collaborating with technology firms to increase penetration beyond its

traditional online portal based service. This could be aimed at particulary targeting rural areas

where internet penetration at individual households is low. It has already successfully tested this

model in collaboration with Comat Technologies in Karnataka through their Nemmadi telecentres.

This concept could be expanded further. Additionally focus could be given on mobile ticket

booking through user friendly smart phone apps as well as through call service.

Bus Lounges

As mentioned earlier, Redbus should definitely seek to market its brand for better penetration, one

novel way of doing it is by setting up bus lounges. Redbus could set up bus lounges/shelters at bus

boarding points and provide facilities such as internet, mobile charging, restrooms etc. and also

use this avenue to market its brand.

Become the de-facto ticket booking platform in govt. run bus sector

Redbus already has a couple of success stories in turning around loss making state bus

corporations in Goa (Kadamba Transport) and Rajasthan to profit making institutions. Synergies

like these could be identified in the other states and Redbus could take the lead in offering online

ticket booking service to state transport corporations, thus becoming the de-factor ticket booking

platform for Government run bus sector. This would boost its market share hugely.