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REDBUS.

IN MANAGING ORGANIZATIONS

A Group Project | Group 13 Sec E


Amandeep Singh, Vishnupriya, Srikanth Prabhu, Vaibhav Bindroo,
Tamojit Tarit Roy
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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 Success


Necessity 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.in


American 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.in
2
From http://www.helionvc.com/spotlight23.htm
3
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
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iv. Challenges in managing cash flows from and to multiple operators and
customers
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 creators 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 operators 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 wouldnt
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,

4
Again, from http://www.helionvc.com/spotlight23.htm
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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
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 didnt 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 share5 . 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 Seller TM. 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.

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/32382
7
http://techcircle.vccircle.com/500/redbus-is-profitable-online-bus-ticketing-as-a-standalone-biz-is-sustainable-
phanindra-sama
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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.
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 journey


A companys strategy sets forth a plan of how it will reach its goals. The strategy is a roadmap
that describes the core initiatives and decisions that will propel it forward in pursuit of its
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.

8
http://daviddewolf.com/2011/09/align-your-organization-with-your-strategy/
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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
engineering and technology requirement of the organisation and thus its 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.

CEO

BUSINESS HR
CFO CALL CENTERS CPO CTO
DEVELOPERS (OUTSOURCED)

HEAD,
HEAD FINANCE PRODUCT HEAD ENGINEERING TEAM
OPERATIONS

OPERATION
FINANCE TEAM
TEAM

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.
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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.
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
CEOs 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:

CEO

REGIONAL HR
CFO CPO CTO
DIRECTORS (OUTSOURCED)

HEAD, REGIONAL BUSINESS


HEAD FINANCE CALL CENTERS PRODUCT HEAD ENGINEERING TEAM
OPERATIONS FINANCE TEAM DEVELOPERS

OPERATION CORPORATE
TEAM FINANCE

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:
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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.
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 cant 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 developers time on business applications and scale
on-demand. Because of this move in 2008, Redbus essentially reaped following benefits :

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

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
amazons built in services for tighter integration, fail-over and redundancy building becomes
easier. Achieving scalability meant that Redbus didnt 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. AWSs 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.

10
http://www.cio.in/case-study/taking-their-infra-cloud-helped-redbus-use-it-create-real-business-value
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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
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 RedBuss business began to take forward seat. By integrating the whole
feedback loop above with companys 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
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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.

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 couldnt 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 companys 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. Pahnis
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

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

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

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.

Clan Adaptability
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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
Porters Five Forces.

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.
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As stated by Phani, The competition may have been able to imitate our business model, but they
couldnt copy our DNA.

2. Power of Customers:

Since online bus travel has primarily remained a B2C segment with technology backed companies
making the foray into the market, power of customers cant 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 doesnt 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,
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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

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


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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
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
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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.

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