Introduction
Greyhound Lines, Inc., headquartered in Dallas, Texas is the only nationwide provider of scheduled intercity transportation in the United States. As seen on Greyhound’s web site in 2001 they had more then twenty five million passengers aboard their bus lines and consolidated revenue was $1,022.4 million. Greyhound’s fleet consists of more then 2,300 buses which arrive and depart from one hundred and twelve company-operated terminals and approximately one thousand seven hundred agency-operated terminals. In 2001, the number of employees nationwide on payroll was twelve thousand and of that amount, approximately thirty six percent are drivers.
Greyhound bus lines operate a vigorous schedule of twenty-four hours a day, seven days a week. All buses are equipped with air conditioning, restrooms, tinted windows and reclining seats and since its inception in 1914, Greyhound has also expanded into other lines of services which include food, package express services and charter services.
In 1998, Greyhound Lines, Inc. showed a profit of 35.2 million dollars which was much to celebrate considering that a profit hasn’t been seen since 1993. However, in 1999 there is a net loss of 16.3 million dollars. This Greyhound Lines, Inc. case study will address many key issues that must be examined in order to put Greyhound back on track, and the recommendations that will follow will try to help Greyhound stay on the road to recovery.
Summary of Business & Case
Americans hit the road most often during the traditional Thanksgiving and Christmas holidays and the summer vacation months, so successful travel firms have adapted their operations to take advantage of these seasonal highs and lows.
Greyhound Lines, Inc., experiences large seasonal fluctuations in both passenger volumes and incoming customer service calls. In response to these broad swings in travel volume, Greyhound has shown how a travel industry leader applies advanced technology to maximize efficiency, call center productivity and passenger satisfaction.
Established in 1914, Greyhound got its start by transporting miners between the villages of Hibbing and Alice, Minnesota. Today, Greyhound Lines, Inc. delivers efficient and dependable service to over 2,600 destinations in the United States. The fleet consists of approximately 2,400 buses, which allows Greyhound to offer18,000 daily departures from various terminals (David, 2001, p. 176).
To maintain its unique leadership position, the company employs more than 11,000 people, including 850 customer service representatives who respond to incoming Greyhound customer calls. Greyhound customers can call a nationwide toll-free telephone number to receive fare and scheduling information or to make reservations and purchase tickets. Because travelers nationwide depend on Greyhound, the company's call center representatives must be available 24-hours-a-day, seven-days-a-week to provide scheduling and passenger ticketing services.
The course of the company has not been smooth as it seems in the figures of their balance sheets. The company has had several changes in its management style and in its approach in maintaining a customer base as well as in an acceptable margin to operate. The main concern for Greyhound is that most Americans have changed their pattern of travel to a more comfortable and faster means than a bus. The market for the potential travelers in buses is reducing as there is little glamour in riding a bus and passing through terminals.
The future of Greyhound is debatable but it has not lost its image or its core customers. With some research and development in supplying customers with a better product, hopefully this will lead to greater market penetration. However, this will remain one of the biggest challenges of Greyhound.
Internal Analysis
Management
Craig Lentzsch, the current President and Chief Executive Officer of Greyhound Lines, Inc., has done a great job bringing the management team together. Lentzsch’s 21years as a veteran of the bus transportation industry has been of great benefit to Greyhound. His leadership has brought the company out of a tight spot, and Greyhound began to show a turn-around in 1998, even though the company was in debt prior to that year. Moreover, Craig Lentzch’s “back-to-basics” approach has pointed the company in new areas and has capitalized on previously untapped revenues such as package delivery, an idea the previous management team thought was not worth the effort. Through the merger with Laidlaw Inc. the company now has some financial strength. Lentzch’s leadership has done well for the company by limiting costs, reducing the age of the fleet, adding new stations, decreasing high employee turnover and producing a profit.
Finance
Greyhound initially was not a financially sound company but since 1998, and under good leadership, it is capable of turning a profit and being successful. After five years of negative earnings the company had its first full-year profit realized in 1998, unfortunately the company ended 1999 with a -$16.3 million and increased long-term debts (David, 2001, p.180). When Greyhound made plans to merge with Laidlaw Inc. some people thought it was a bad move for the company. However, strategically the merger with Laidlaw Inc. holds many advantages for Greyhound, primarily because it now has access to financial markets and Laidlaw’s financial strengths gives the company a needed boost.
The company has also taken a few initiatives to cut costs and improve profits by finding new unexplored markets to increase revenues such as offering express package delivery. Considering that the buses are already transporting passengers, revenues derived from transporting packages are mostly profit. At one point revenue produced from delivery of packages amounted to 15% of Greyhound’s total revenue, estimated at approximately $90 million annually (www.greyhound.com). The company is also generating revenue by selling advertising inside and on the sides of their buses. Greyhound has great potential to be successful, however it will need some time to prove that these good ideas are worth the investment.
Marketing
Along with the “back-to-basics” strategy the company is also regaining rider ship with its, “take the bus and leave the driving to us” campaign (David, 2001, p.184). This slogan along with its icon running dog is one of North America’s most recognized symbols, which can be credited with restoring Greyhound’s recognition and popularity as well as enticing passengers.
Information Systems
In late July 1993, Greyhound created both the telephone information service and TRIPS. The TRIPS system proved to be a costly investment for the company and two months later the system was discontinued. One of the first decisions by the new management team in 1994, was not to reinvest in the TRIPS system, instead they decided to fully dismantle the airline-style reservation system, and replace it with a more customer focused one. The new system used a “basic” philosophy; customers would simply walk up to the counter, pay for a ticket and catch the bus. This simple basic system began filling seats and buses again.
Service
Greyhound now offers a variety of services. Greyhound Lines not only provides an extensive route network for passenger travel, but also provides services for business and group travel. Greyhound has three lines of services: intercity bus transportation, Greyhound Package Express and Greyhound Travel services. Greyhound Food service is offered at certain locations. Moreover, its charter group provides affordable and reliable charter motor-coach transportation for groups of 20 or more people nationwide. Furthermore, Greyhound Lines' commercial services group offers a valuable service to businesses that need to provide transportation for employees traveling to training facilities, for companies repositioning their mobile workforce, or for incentive travel programs. Additionally this venture has proven lucrative for group trips to casinos and ski resorts. The company has reopened many stations and several hundred stops of which many provide food services for travelers.
External Analysis
Economic Forces
The slow economy has meant tightening of the belt for many people, which translates into fewer cross-country pleasure travelers. The decline of this type of customer may hurt Greyhound Lines, Inc. On the other hand, more people may consider taking a bus rather than a plane because it is often more convenient and less expensive.
Social, Cultural, Demographic, & Environmental Forces
One major difficulty the new leadership at Greyhound will have to overcome is the general stigma against “taking the bus”. This mode of transportation is often considered an option mainly for low-income travelers. If travelers are able to look beyond their biases they may discover that travel by bus is economical and pleasurable.
Another force moving against Greyhound’s success is increasing car ownership. Many American families own at least one vehicle, and vacations and trips can be made under their own transportation power.
On the up side, Greyhound’s alliance with Laidlaw, Inc. will perhaps overcome some of these mental images as people recognize the same name that faithfully carries their children to school every day.
Greyhound’s customer base is the rapidly growing market of low- to middle-income passengers from diverse ethnic backgrounds. The average household income for Greyhound passengers is $27,000, and about 20% of passengers make more than $50,000 per year (Greyhound.com). Because of low operating costs, Greyhound can afford to offer extremely economical ticket prices. Also, the company offers the only means of regularly scheduled intercity transportation in many key markets, as well as having the flexibility to provide additional capacity during peak travel periods. Most passengers have to travel to visit family and friends and enjoy taking advantage of ticket prices that haven’t seen significant change since the 1980’s. “The company transports over 20 million passengers in the United States, Canada, and Mexico” (David, 2001, p.176). About 75 percent of customers buy tickets with cash before the bus leaves the station. Many passengers that travel by bus do so because they feel it is more economical.
Political, Legal, & Governmental Forces
One governmental issue that may prove a boon to Greyhound is the Amtrak situation. Congress has mandated that Amtrak be operating profitably by 2003 or they will lose governmental subsidies. That could prove a fatal blow to the train industry, but mean increased business for the bus industry.
A political decision in Mexico may also increase Greyhound’s rider ship. Charging a refundable entry deposit to cross the border into Mexico may prove more than some travelers can afford. Instead of driving their own vehicle, they can take the bus and avoid having to make such an investment.
Technological Forces
Greyhound’s disastrous flirt with technological advances in 1993 left a bitter taste for employees and customers alike. In late 1994, the new CEO, Craig Lentzch, did away with the ineffective and overloaded TRIPS program and went “back to the basics”. Instead of demanding that customers reserve seats weeks in advance, Greyhound went back to the classic model of “show up and get on a bus”. Considering the company’s demographic rider ship and target market, this was a good move.
However, Greyhound is not a company to stay in the dark ages. Their web site is highly developed and offers a lot of information, as well as the option to reserve tickets online or via a toll-free telephone number. There are tips on how to get the best fares, and discounts for companion fares, senior travelers, students, and children. The site is also available in Spanish.
Competitive Forces
Greyhound faces competition from a number of sources. First are the obvious – the municipal transportation systems (including buses and metro organizations), the airplanes, and the trains. Aside from these established passenger carriers, Greyhound must compete with the average car owner. The company has their work laid out for them as they look for ways to convince Americans, Canadians, and Mexicans that taking the bus is better than taking your own car.
SWOT Analysis
Strengths
- “The only nationwide provider of scheduled intercity bus transportation...in the United States” (David, 2001, p. 176).
- Greyhound transports over 20 million passengers in the United States, Canada and
Mexico on a yearly basis. (David, 2001, p. 176)
- Merger with Laidlaw provides additional market penetration.
- Greyhound’s capacity-flexible system meant that customers were guaranteed a seat on a bus because even with overbooking a bus would always be available.
- Greyhound’s pricing strategy change meant a more affordable ticket price for their primary customer.
- Increased market penetration into rural areas where other forms of transportation no longer provide services.
- The buying of several hundred new buses and relocation of terminals to better city areas, could increase Greyhound’s customer base and demographics.
- The selling of advertisement space on buses allowed for additional revenue.
- CEO, Craig Lentzch has industry and Greyhound experience. (David, 2001, p. 182).
Weaknesses
- Greyhound’s ignorance in understanding their customer.
- Lack of planning, more calls received than the system could handle, inadequate training and low employee morale caused the TRIPS system to back-up as well as increased customer frustration.
- Huge payroll increases for executives during a time of budget reductions.
Opportunities
- To decrease employee turnover to a reasonable level in order to provide consistency to the process and for customers.
- For Greyhound to offer more employee incentives and promotable opportunities by treating employees as entrepreneurs and challenging them to find new markets to penetrate.
- Other strategic alliances must be considered so that the future of Greyhound will remain bright.
- To promote Greyhound as a viable option for transportation for people from all walks of life, income levels, and ethnicity.
- Increase intercountry routes between the United States, Mexico and Canada.
- Greyhound needs to increase demographic groups in order to find new potential customers. - Greyhound must compete on a national level with other transportation forms such as air, train and car, in order to enjoy continued growth.
- As the Asian and Mexican populations continue to grow in the United States, it will be very important for Greyhound to maintain a diverse workforce in order to best meet the needs of these customers.
- Address image problems by increasing customer’s perception that bus riding is for anyone with marketing campaigns targeting the professional workers traveling intercity.
- To increase customer base by offering bus tours to major cities by partnering with a national travel agency.
Threats
- Future of bus industry remains uncertain.
- Greyhound has experienced, “decades of declining bus travel” (David, 2001, p. 177).
- Greyhound union employees could strike again, as they did in the early 1990s causing a disruption of service and lost revenues.
- If Greyhound fails to increase market share and customer base, the threat of a takeover or filing bankruptcy, always looms.
- Development of more efficient and less pricey automobiles may decrease Greyhound’s customer base even further.
- Train and air travel offering discounts could price Greyhound out of the market for leisure travel.
Recommendations
Investigating new partnerships to increase revenues with diversified interests, while preparing for trends of the future, should be some goals Greyhound should attempt. The benefits of these partnerships will yield a greater increase in their customer base and profits. A partnership with a national travel agency will provide various vacation packages supporting tours, lodging, and accommodations. Arrangements and partnerships in areas such as Las Vegas, New York, Orlando, Los Angeles, Boston, and Denver, could benefit both the city and Greyhound as a result of the stimulation of income in the city from tourists and travelers.
Greyhound collects advertising fees from businesses wishing to be advertised within Greyhound developed maps. Advertising in certain city locations such as Boston, New York, Las Vegas, and Los Angeles, will allow tourists to view traits of the city. Therefore, advertising with Greyhound is promoted within their personally developed maps of city locations at a small cost to tourists.
Employees
Treat employees with the same respect and courtesy that Greyhound is renowned for treating its customers with. Support the common goals of the institutions of higher education by offering tuition reimbursement, and ways for employees to better educate themselves. Reward employees whose entrepreneurial mindset allows opportunities for Greyhound to increase their market share and customer base.
The Fleet
Greyhound’s fleet is made up of a variety of buses to transport people from area to area. Greyhound should take advantage of the size of existing bus terminals to support car rentals for people to rent as they are traveling within a new city. Offering a fleet of vehicles would allow Greyhound to capture the interests of almost every individual. The company should take into consideration their current demographic customer, but also appeal to the people who want class, performance, style, and elegance. The fleet could consist of a variety of cars - BMWs, Jeeps, and Saabs.
Adding luxury buses to the fleet for the highly traveled routes over 300 miles could help attract upper-income travelers. These buses would be heavily furnished with television, radio, and computer connections and would hopefully encourage business people and others who need high-tech access, that riding the bus is a viable alternative. This plan should be rolled out only in markets where there is a high probability of capturing those customers that fit these profiles. For anyone who can’t survive away from their computer, each seat could offer a power strip and Internet connection. The power strip could also be used to charge a cell phone, or run any electronic gadget. The bus would of course have DVD, VCR, and TV capabilities. While the bus is in operation, food and drink would be readily available, and a mini bar can offer the chance to have a drink and unwind. Some customers may want to take advantage of a massage seat to ease the aches and pains of travel.
For the tourist that prefers these additional options there is comfort and safety in knowing that they will arrive safely at their destination.
For groups, like families, senior citizens and people on group trips being able to watch a movie, or a favorite TV show on the bus, is an added convenience.
Customer Service
The company should implement customer service queries; then follow up by contacting riders about their good/poor service, and reward customers who voice their opinions. • Include feedback by customers with answers to their questions. • Evaluate and react to customers seeking changes in service by providing satisfaction forms in order to better provide a service to the highest standards. • Provide advanced service by committing to a guaranteed service quality.
Greyhound could provide an enhanced service to its members by utilizing an ‘any means necessary’ approach to fulfill the member’s needs requested. It will provide the advanced services necessary for members on customer satisfaction, transportation, rates, reservations, Wide Area Network, and group discounts.
One service that may help improve Greyhound’s image is to provide a Greyhound community that is an online-formed group of people organized by similar interests, travel plans, and future ventures. Not only could customers book a trip, they can share bus-stories, travel tips, photos, and highlights from trips. Promoting a romanticized and exciting view of bus travel could help expand Greyhound’s market share.
Another target market for the Greyhound Community could be the men and women who require a higher standard of service. Guaranteed outstanding service and pricing, while being able to customize a bus to their own group’s individuality. By either choosing to be a Greyhound Community Member, or to have all the bells and whistles in the Preferred Service Membership, this person demands to have their own uniqueness recognized and acted upon.
Offering Discounts
Greyhound already offers a variety of discounts, including discounts for children, students, seniors, and groups. Continuing this money-saving service for customers will prove invaluable to the company, especially since many people are always on the lookout for a bargain. One of the important functions of Greyhound will be to reduce commodity transportation costs to its members, and to provide increased reliability for those that group discounts apply to. Businesses wishing to receive a group status could be eligible to choose the extra features, and technological advances to be put into the bus.
Another valuable idea may be to implement a points system program. Members would receive points for travel, of course, and would be offered the option for earning extra points by completing satisfaction surveys and submitting reviews or recommendations.
Conclusion
Today Greyhound Lines, Inc. is offering more then 20,000 daily departures in the forty-eight contiguous United States, Mexico and Canada. Greyhound’s web site reports that since 1994 the consolidated revenue has grown from $615 million to $1,022 million in 2001. With an increase of approximately $407 million in six years the company would seem to be on the right track. However Greyhound ended 1999 with a negative $16.3 million dollar loss. Which could be attributed to slight increases in every operating expense on their Income Statement from 1998 to 1999.
Greyhound Lines, Inc. merged with in Laidlaw Inc., in 1999 which gave much needed financial strength to Greyhound. Laidlaw’s web site reported in June 2001 Laidlaw voluntarily petitioned under chapter 11 to reorganize. Although Greyhound was not part of the filing, the financial stability that Laidlaw once gave Greyhound is no longer there. Greyhound is still financially suffering and still unable to recuperate sales from the leisure travel market and the shut down of a subsidiary.
In order for Greyhound Lines, Inc. to continue operations much change is needed. If they continue to offer deals and incentives then people may try taking the bus on their next trip and hopefully Greyhound can rid the current perception that people have about buses. Expanding the other services currently offered by Greyhound may also increase current revenues. As it stands now the future success of Greyhound does not look good.