Abstract
Megabus has steadily grown to be one of the largest intercity transport sectors in North America. Stagecoach Group, with a fleet of close to 2500 vehicles and more than 5000 employees, has overseen the rapid expansion of Megabus. As a late entrant into the market, the company has the advantages of creating services that are tailored to its target market. It has also embraced social media platform which is popular among the youth that forms the largest proportion of its clients. However, Megabus faces stiff competition in the industry. It also has to content with low-profit margins due to the stiff competition. The success of the Megabus is anchored on the financial strength of the parent group (Stagecoach Group) that allow it to offer superior services at low prices. Megabus is my most convenient mode of intercity transit as a student commuting regularly Chicago and Columbus because it offers the lowest prices.
Megabus is one of the biggest players in the medium-distance intercity transport sector in North America. It is owned by Stagecoach Group that is based in the UK. The company has experienced exponential growth since its entry into the market. Currently, the company offers its services to approximately 130 destinations in the North American region; ferrying about 10 million customers annually. The operations of Megabus are in 130 cities in this region, spread out in 48 states of America and two Canadian provinces (Stagecoach Group, 2015).
Advantages and disadvantages
As a late entrant into the industry, one of the biggest advantages that the company has is the ability to come up with competitive packages that appeal to the target market. The industry was highly concentrated with a few players. Due to limited competition, they charged high prices. Given the financial ability of Stagecoach Group, Megabus was able to offer very cheap tickets as a market penetration strategy. Consequently, it allowed the company to expand rapidly and increase its market share in the industry. Therefore, Megabus introduced price competition in the industry. There is a need to identify new marketing strategies to sustain its existing clients and expand its market share further (Woldeamanuel, 2012).
Another advantage that Megabus is the goodwill, it enjoys and brand visibility. The company has adopted an aggressive marketing strategy. It has embraced social media to keep in touch with existing and potential clients. Therefore, the company appeals to the youth. Coincidentally, the younger generation makes up the majority of customers who use buses and coaches for intercity travels. The result here has been that the company’s largest share of revenue coming from people aged 18-34 (Austen, 2011).
A disadvantage that Megabus faces as a late entry into the industry is opposition from existing players in the industry. Megabus has often been accused by its competitors of violating weight limits. The concerns are often pointed towards the double-decker coaches that carry double the number of travelers compared to ordinary coaches. Consequently, it has resulted in legal suits that create legal costs and litigation-based risks. Despite the assurances that were given by Stagecoach Group management that Megabus follows all the set rules and regulations, the allegations keep arising (Perry, 2011).
Another disadvantage is the low-profit margins in the industry. Data on other industry players reveals that these companies make little or no profits at all. This is because of the high operational costs and competition from other transport modes. Given that the customers have different options, the companies are forced to offer low prices in a bid to attract clients and remain relevant (Woldeamanuel, 2012).
Analyzing Megabus’s resources and capabilities
A factor that has contributed to the success of Megabus in North America is the resources and capabilities that the parent company, Stagecoach Group processes. Stagecoach Group is one of the largest players in transport business not only in America but also in Europe. The implication here is that Megabus, in its entry into the North American market was backed by the expertise and financial muscle that allowed it to effectively compete with the players within that market. It can be argued that a company with relatively lower financial power and not backed by such a big parent group would not have achieved the success seen in Megabus. The resources available for Megabus can be seen when the data on North America Stagecoach Group is analysed. In 2015, the company had a total turnover of $686 million, with close to 5000 employees and a fleet of close to 2500 vehicles (Stagecoach Group, 2015). This proves that Megabus has the right amount of resources to spur exponential growth.
The competence of Megabus can be seen through the marketing strategies that the firm has employed. The company has discovered the power of social media and has therefore concentrated on marketing their products on this platform. Besides, the company has focused on the young people as its major targets in marketing. All this has positively impacted on the business, posting more than 300,000 fans in the major social media platforms and having a large percentage of the company’s total revenue being from customers aged between 18 and 24 (Perry, 2011).
The interplay of financial strength and expertise in the industry has been complemented by the positive trends in the American mode of travelling. Over the years, intercity bus service has become the most preferred mode of travel. Since 2010, players in the curbside service sector have posted an annual growth of 6% in terms of mileage, with other modes of transport such as air and train posting growths of 3% and 0.5% respectively (Woldeamanuel, 2012).
As a college student regularly commuting between Chicago and Columbus, Megabus remains the travelling mode of choice. Having a car is convenient, but not practical due to the related costs such as gas and parking costs. Using the train is another option. However, it is expensive. Despite the fact that trains have better accommodations and facilities, the cost aspects make the option undesirable. This is in addition to the unpredictability of trains due to cases of power outage.
It all boils down to the contest between Greyhound and Megabus. My past experiences in the former have not been excellent given the regular problems in ticketing and pricing. Therefore, Megabus is the best option given its pricing and service quality. To an average spender like me, Megabus is the best mode of transit since one can accomplish intercity travels with tickets as cheap as $1 (Perry, 2011). Other incentives in Megacoach include the variety of bonuses available, facilities such as WI-FI and the power outlets.
References
Austen, B. (2011). The Megabus Effect. Retrieved March 28, 2016, from bloomberg.com: http://www.bloomberg.com/news/articles/2011-04-07/the-megabus-effect
Perry, M. J. (2011). The Megabus Effect: A Great Success Story of Low-Cost, Convenient, Market-Based Bus Travel Without Government Subsidies or Tax Breaks. Retrieved March 28, 2016, from aei.org: http://www.aei.org/publication/the-megabus-effect-a-great-success-story-of-low-cost-convenient-market-based-bus-travel-without-government-subsidies-or-tax-breaks/
Stagecoach Group. (2015). Revitalising the transportation market in North America.
Woldeamanuel, M. (2012). "Evaluating the competitiveness of intercity buses in terms of sustainability indicators.". Journal of Public Transportation15.3 , 77-96.
