Bus Company JMB: Fare Increase Causes

EXECUTIVE SUMMARY

This report is about primary and secondary research that was carried out on the bus company JMB.

Increase in fares within the company JMB. Looking at the reasons for the increase in fares and the economic implications of this and the advantages that the improvements that the company has been able to make due to the increase in fares and the external factors that have also determined the price increase.

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The impact this has had on the passengers and exactly what they think about the increase and how it has affected their daily life commuting back and forth to their destinations and to find out what effect this has had on demand for this service.

Evaluating the impact this has had on the company and its employees and how this has effected employee motivation within the company and what external factors have affected the company.

Looking at the government subsidies that are available to the bus companies and what rules they have in place for a transport company to receive this grant.

1.1 REASONS FOR PRICE INCREASE

Investigations have found that when the company first started operating they used an introductory price so customer would use the services, so customer would be able to see what a reliable and flexible bus service they provided.

As there was only one other bus competitor running in that area First Buses that only run services to and from Glasgow but didn't have the direct routes that JMB were providing and the reliability that the service would run every 15 minutes from Lanark to Hamilton and returning which made the demand for their service greater than the other bus service run by First Buses.

This would be known as price elasticity where the price of fares had risen but demand for the bus services stays the same as there is no direct competitive competition to stop them from implementing there 40% fare increase as they seem to have the biggest percentage of market share in this area.

Other reasons for the increase is so they can could run a reliable service for customers in the Lanark to Hamilton route which allowed them to employ more staff to make the company run efficiently as possible.

The company spoke of the expansion that is being planned which would allow more child friendly buses to be available for buggy and pram access, wider bus aisles and ramps that can be moved up and down for easy manoeuvring for wheelchairs and prams. School contract service available which would be run on a large scale to help build up their customer base and the company would be able to operate services to a lot of schools within south and north Lanarkshire.

Due to the expansion of the company had decided to run bus services in other areas to expand their space in the travel network so that this would bring in more revenue for the company although the company would not allow any revenue figures to be published and management were very specific on this.

Luxury coaches have also been introduced that are available for coach trips, private functions and other outings which brings in a great deal of revenue which could lead to further expansion within the Travel network.

Revenue figures or any other figures relating to the company was not available. It was seen the actual number of passengers on the gov.scot website published these figures over the past three years seen in (appendix 1) has increased which would allow JMB to consider branching into other areas in Scotland as demand for bus services is on the rise and would enable them to expand their market share in the travel network, which would allow customer to have a preference on who they would want to travel with every day.

1.2 External Factors

External factors affecting this price increase is due to the price increase this year because The Scottish Governments flagship concessionary travel scheme for the over 60s and disabled people has run out of money to fund this

"The Confederation of Passenger Transport UK which is representing 1000 bus and coach firms said fare hikes and cuts in services were on the cards as members could no longer afford the losses" (Herald, 2016) which means that the bus companies are going to have to make their contribution towards the concessionary fares for the over 60s and disabled customers.

1.2.1 Congestion

Congestion on the roads is a big factor as drivers are not able to reach punctuality targets which could mean

1. Higher operating costs and higher fares
2. Higher in Vehicle times
3. Deteriorating reliability and being punctual to fit with scheduled time tables

1.3 Conclusion

Investigations found that the company started with an introductory price of £2.50 for return tickets from Lanark to Hamilton but in order the company to flourish and extend their market share in the travel industry they had to increase their fares to £3.50, although the company is flourishing it did need to overcome external factors concerning concessionary fares for over 60s and disabled customers as they now pay into this scheme which also triggered the price increase.

Studies also showed that congestion is on the roads is a huge issue on the price increase as this causes higher operating which results in higher fares and cause problems with the service being provided which would cause the company to lose revenue.

2.0 IMPACT ON PASSENGERS

A Social Media Survey was carried out with 30 customers in the Lanark to Hamilton area to find out what they felt about the increase in fares and if they still used the services provided by JMB due to increase in price.

It was found that a large percentage of customer that used the bus service were not impressed by the increase in fares but still used the services regardless as it was their only reliable means of transport to travel back and forward to their desired destination as mostly every customer commented that rail services are not reliable in these areas so they used the bus services as more of a necessity, where as a small percentage said they used the bus services because it was reliable and friendly. (Appendix 2) illustrates these results.

Customer stated that the service that JMB provided was very reliable and the staff were always friendly and on hand to helpful, while other customer said that they pay this amount for fares as it was the only bus service available to them to commute back and forth to work on a day to day basis where as other people used this service for leisure use.

As porters five forces suggests see (appendix 3) customers have no other means of getting to their destination as there is no competitive choice in this area.

JMB can put prices up as this is their only means of getting to their desired destination because they're very little choice customers cannot change to another bus company and it seems that now there is not any new entrants in this area in the travel industry.

This would suggest that customer that use the JMB services are more than happy to pay the fares as it is there only means of getting to and from their destination with the minimum of time and fuss and because this is a reliable, friendly and well known Travel provider. Although if there was any other means of transport in this area they would consider using it.

2.1 Other factors that determine if customers are receiving good service

(1) Public transport needs to be clean and tidy at during operations as it could be a danger to the public health if Health and Safety rules are not adhered to.

(2) Making sure that customers perceptions of the service meet their expectations to make sure that the customers completely satisfied with the service being provided.

(3) Making sure that bus stops are accessible for customers as you don't want customer having to walk a long distance to the nearest bus stop, the perceived distance that is accessible is a 10 to15 minute walk away from the customers' residency or location that the customer might be in at that time.

2.2 Conclusions

Conclusions raised were that customer will pay the fare because the train services are not available in this area as it is a necessity to use them but if any other services were to be provided in this area they would probably consider trying a different bus service to commute also other factors such as cleanliness, accessibility and reliability are the key elements that customer look for in a transport services.

3.0 IMPACT ON THE COMPANY

A Swot analysis was carried out on JMB to see what its strengths, weaknesses opportunities and threats were to the company.

It was found that JMB had a lot of strengths as they were a well- known company with a well-known service provided to the public. JMB also have an advantage over their competitors as the journey routes that they operate are different from their competitors as they over a varied selection of bus routes and over a friendly helpful service to their customer.

In the two years' the company has been operating they have managed to secure different school contracts and have run a luxury coach service for the public for functions and other private events.

The introduction of the Alexander Dennis Enviro 200 bus that was introduced in 2016 is this is fuel efficient and has great manoeuvrability that gives customers a luxury driving experience which makes them miles ahead of their competitors.

The weaknesses that they have are being able to keep their services running smoothly day to day basis to keep their customers happy as customers are their customers are everything to the company.

Being able to keep their fares to a minimum so that customers are not paying too much for the customers will not be able to afford their fares.

Opportunities that the company has is they will be able to expand into new areas with the business such as providing services for different areas out with south and north Lanarkshire for example rural areas as they don't have a lot of transport operating in these areas by offering competitive prices so they can phase out their competitors.

Threats that may affect them are If new competitors were to run a new bus service in their areas which would affect their business over a better price and service for the public. If the government cut funding that would enable them to run a reliable transport service.

3.1 Employee Motivation

As staff are important to JMBs business morale is a big issue in their business because happy workers mean happy customers. Maslow motivational theory as executed in this company as Maslow talks about the five stages of hierarchy of needs these stages include see (appendix 4) for illustration.

JMB has implemented this theory because they have provided their staff with good working conditions and a satisfactory salary for all. JMB have also employed more driver to deal with the demand for their bus services and has enough staff to delegate to different journeys and on different services everyday which allows their workers to get the time off for holidays or appointment or any other time they may need off without the minimum of fuss.

The company also has good safety elements implemented as the drivers have direct contact with the depot in Wishaw in case there is any emergencies such as buses breaking down or if there was a medical issue with customer or a customer attacking another commuting on the bus or worst case scenario attacking one of the company bus drivers.

Staff that work for the company also have works night out on a regular basis where they can bring their partner along to join in and they also have a Christmas party every year at different venues across Scotland.

Mostly all the job vacancies within the company are all internal which means if people have the right credentials to apply for jobs they are urged to do so they are promoted for a job well done as one of the staff in the company was recently promoted to inspector for his outstanding contribution and commitment as a bus driver.

3.2 External factors affecting the business

3.2.1 CO2 Emissions

A PESTLE analysis was done on the issue of CO2 emissions which outlined Political, Economic, Sociological, Technological, Legal and Environmental impact on the need to reduce CO2 emissions

Political

The government have set out clear guidelines for these CO2 emissions to be cut which could affect the company as these guidelines put in place need to be adhered to.

Economic

In 2010 there was an initiative put in place for all bus services called carbon reduction commitment which meant that bus companies had to buy carbon credits which would permit JMB to generate specific qualities of carbon emissions. In 2010 the company had to put in place a budget and set out very clear plans to measure how much CO2 emissions will be produced going forward. Which could affect the company as if they were to produce more emissions than stated in their plan then this could be an expense for the company which means it may lead to an increase in fares for customers.

Sociological

If the company does not abide by the guide lines, then the public could lose all expectations of the company at what it stands for.

Technological

The company may have to get another system built into the buses so they can monitor the CO2 emissions so they know what is being used every day.

Legal

If the company do not commit to the initiative to reduce emission they may find themselves with a hefty fine or worst case scenario they could lose grant which means they wouldn't be able to operate their business to its full potential.

Environmental

CO2 emissions are dangerous to the environment and the planet and is one of the biggest problems causing greenhouse gas that is destroying our planet today.

3.3 Steps JMB are taking to comply with the emissions initiative

As CO2 emissions are a short and long term problem for JMB and have put in place a plan to reduce these emissions by 2020 from 25% to 20% and the introduction of the envir0 200 bus which would give them a clearer advantage over the competition.

3.4 Conclusion

Although a SWOT was performed the results were positive on the company as the company has grown from strength to strength over the last 2 years as it is now able to provide transport to other areas in the North and South Lanarkshire area which has created more jobs for the population of North and South Lanarkshire which has made them able to strengthen the economy by creating jobs such as bus drivers, school escorts and other depot staff.

The way the company is fair to their staff and give them the motivation to perform their jobs daily to a high standard that benefits their customers.

Other aspects JMB are how user friendly the buses are to the environment because of fuel emission that could be a danger to the environment and could have legal implications if this was not rectified and the guidelines for emissions set by the government followed in the best interests of the company.

4.0 GOVERNMENT SUBSIDES

Government subsidies are the main source of funding for JMB Travels business as they receive a (BSOG) Bus Services Operators Grant Scheme this is a discretionary grant paid under section 38 of The Transport Scotland Act 2001 which is regulated by the (DFT) Department for Transport to get this you need to adhere to certain terms and conditions.

These conditions include the company needs to maintain adequate records of the mileage and distances that the bus service runs on a day to day basis.

Checks are also performed by Transport Scotland to see that all the necessary requirements under the Transport Scotland Act have been fulfilled.

DFT provide these grants to keep customers fares to a minimum and the distances the bus services to travel.

This (BSOG) is applied for every year and consists of 4 quarterly payments that are paid directly into the company bank account.

JMB also receive money from the government for their school contracts which has a great impact on their business and brings in a great deal of revenue.

4.1 Reforms to the (BSOG)

Reforming the (BSOG) will create better incentives for local authorities and bus operators to work with one another to provide a better service for commuters and help with keeping the environment safe to provide value.

Investing in fuel efficient buses to improve services for customers and to minimise regulatory burdens and reduce the cost of administration.

Although these reforms to this policy are in place it will impact in different ways as no measure will completely deliver the objectives highlighted in this reform. Even though the objectives highlighted in this reform will ensure improvement in the value from the bus subsidy that's paid to the company every year.

4.2 Conclusion

Investigations show that government subsidies are the main source of funding and keeping to the terms and conditions set for the public transport sector are followed then they will be able to continue receiving this grant and can provide the best service expected of them by their customers.

Reforms that have been put in place by (BSOG) are going to benefit the operation of the service because as well as providing a good service to customers they will be able to see that JMB cares about what happens to our planet.

APPENDIX

Appendix 1

Appendix 2

Appendix 3 Porters 5 Forces   

BIBLIOGRAPHY

http://www.heraldscotland.com/news/13052185.Bus_fares_going_up_to_pay_for_free_OAP_travel/

http://www.transport.gov.scot/report/j415388-05.htm

Arline, Katherine (2015) Porters five forces analysing the competition. Available at: http://www.businessnewsdaily.com/5446-porters-five-forces.html (Accessed: 19 January 2017).

Boddy, D. and Paton, R. (2002) Management: An introduction. New York: Prentice Hall Europe.

begg, prof david (2016) Congestion. Available at: http://www.greenerjourneys.com/.../2016/.../Prof-David-Begg-The-Impact-of- (Accessed: 20 January 2017).

abstracts.aetransport.org/paper/download/id/3735

http://businesscasestudies.co.uk/first-group/managing-external-influences

http://www.businessballs.com/maslow.htm

https://www.gov.uk/government/uploads/.../impact-assessment.pdf

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