(Solved Homework): This case explores some issues related to entering a new foreign market and describes the strategies that one UK firm

This case explores some issues related to entering a new foreign market and describes the strategies that one UK firm is using to find success in the North American market for medium-distance intercity transport. Read the Chapter 10 Closing Case “Enter the United States by Bus”. Write a short summary of the material (one or two well-crafted paragraphs please) and answer the case-ending questions. You may use outside research to help answer the questions.

1. As a late mover into the US intercity bus market, what advantages and disadvantages does Megabus have?

2. Does Megabus have any overwhelming resources and capabilities?

3. As a college student, among choices of private car, train, airplane, Greyhound, and Megabus between Chicago and Columbus, which one would you choose?

ENTER THE UNITED STATES BY BUS if you are a college student in the United States studying in the Midwest or the Northeast, you may have heard of (or may have taken a ride on) Megabus, lts website announces that it is the frst, w-cost, express bus service to offer city-to-city travel for as low $1 via the Internet. Currently serving 50 US cities from five hubs (Chicago, New York, Philadelphia, Pitts- Although Megabus is clearly a late mover in North America, it future looks bright. So what allows Megabus to turn a declining na tional trend of bus ridership around? At least four features stand out. First, tickets are super cheap, starting at $10), Megabus uses a yield management system, typically used by airlines, which offer burgh, and Washington, DC), Megabus early passengers dirt cheap deals and cording to Bloomberg Busines ate passengers higher prices. Al week, has fundamentally changed though only one or two passengers the way Americans per trip can get the $1 deal even the especially the young travel higher prices are very competitive. A generation ago, Greyhound n routes where it competes with Am- a national icon for intercity travel trak (the railway), Megabus costs Unfortunately, as Americans fell more about a tenth of Amtrak, All tickets in love with cars and the cost of air have to be booked online, This not fares dropped further, intercity bus only eliminates the expenses of main- taining ticket booths, but also attracts ridership steadily decreased. Further, a more educated demographic group as inner cities, where the bus depots Second, instead of using depots, (terminals) were situated, decayed Megabus follows the Chinatown buses bus travel had been associated with by using curbside stops (like regular the stigma of second-class citizenship city bus stops to board and disem- which would be the travel mode of bark passenger interestingly, dump last resort. In 1990, Greyhound filed ing the depot model not only saves a lot for Chapter 11 bankruptcy of money, but also makes Megabus more attractive, because passengers do not have to spend time in the Yet, the demand for medium-distance trips that are ideal for in- tercity bus does not go away. For some of the most travelled routes poorly maintained (and sometimes filthy and unsafe) bus depots (such as between Chicago and Detroit and between New York and Third, all Megabus coaches are equipped with wiFi and power DC.the distance is too far fora leisurely drive but too close tojustify outlets allowingthe time on board to be more productive wor more fun). These features, which are typically not available even when fiy expense (and increasingly the hassle) of air travel. While Grey hound has been in decline, sma entrepreneurial bus operators ing first class, have made travel by bus totally cool to the online- savvy, younger crowd. Among surveyed passengers,37% said that known as the Chinatown buses, emerged. They started by shut W-Fi and power outlets were central to their decision to travelby ng passengers (primarily recent Chinese immigrants between owns in New York and Boston, such niche operators quickly Finally, asgas prices skyrocket and environmental consciousness grabbed the attention of many college students. Despite four de rises, especially among Americas college students,bus travel offers cades of decline, overall us intercity bus ridership spiked in 2006 nbeatable green advantage. At eight cents per mile, abus is the year Megabus entered the market. an U four times more fuel efficient than a car US curbside carriers, ed by a brand new, no-frills entrant into the US Although Megabus is Megabus have already reduced fuel consumption by 11 million gal. market, it is backed by the full strengths ofthe second largest trans lons a year, equivalent to taking 24.000cars off the road while politi- portfirm in the UK stagecoach Group, which employs 18,000 peor cians like to talk about the bright future of high-speed rail and the ple there. Founded in 19ao nd headquartered in Perth, Scotland, jump start new Obama administration has budgeted $104 billion to tagecoach operates not only buses buutalso trains trams, and fer rail projects,nota single mile ofhigh-speedrailtrackshasbeenlaidas nesthroughout the UK moving 2.5 million passengers everyday. It of this writing. At the same time, Megabushasbeen charging ahead and carrying more than 7 million passengers since itsentry, while where member of the FTSE 250 the 250 largest firmsinthe UK quiring zero additional investment in infrastructur e Texas, Florida, Limilar to the Fortune 500 group in the usa Megabus is a brand of and California are some of the markets it may enter soon. Given the stagecoachs wholly owned US subsidiary, Coach USA. cost and political headache to build new high speed rail Bloomberg Stagecoach is not a strangerto international forays, having Pre Businessweek speculated The Megabus approach works so well, operated in Hong Kong Kenya, Malawi, New may scuttle plans for high-speed rail gal, and Sweden. However operations turned out to be these er and were For the sole internationalmarketit on is North America (Megabusentered Canada in 2008)

Expert Answer

 1) Megabus is a very late mover in US intercity bus market. There were few companies like Greyhound which tried and failed in the past. But Megabus has learned from the mistakes of Greyhound, the company, who filed for a bankruptcy in the mid 90’s. Greyhound lost its business due to poorly maintained bus terminals, high fares and unsafe conditions. But, megabus has learned from Greyhound’s mistakes, and tried not to repeat those mistakes. Hence, Megabus has started the bus services which had fare as low as $1, free wi-fi, power outlets, comfortable seating and stylish buses.

Megabus has been able to offer this low because, the first thing it did was to eliminate the purchase windows for ticket purchasing, and sold tickets online only, which resulted in eliminating expensive terminal operations. Instead it dropped off and picked up the passengers from the side-way stops like public bus operators. This was one of the biggest advantage and the biggest change it brought forth.

Few Disadvantages besides the above facts are that the raising gas prices may affect the travel and low fares might affect the revenues if adequate number of passengers do not take the rides.

2) Yes, Megabus has backing from UK. It is backed by second largest transportation firm in UK, “Stagecoach group”. This group employs more than 18,000 people, and is said to be one of the top 250 firms in UK.

The capabilities Megabus service has a capacity to eliminate almost 24,000 car emissions making the company spend less on fuel cost and decrease in the release of carbon dioxide.

3) As a college student, i would prefer Megabus because of the advantages it holds – Low fares helps me to save money on transport, free wi-fi helps me to study even while traveling, Outlet to power my device, can make number of friends during the travel, and lastly, have a consciously good feeling that am not a part of polluting the environment.

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