!Context
Cranfield case-study for the [Developing Deliverable Strategies] course.
!Question
"The Biddiford Tram Company may provide scope to reduce costs. But concentrate on revenue generation. How can revenue be increased?"
!Summary
The full case study is five pages long, plus appendices. Here are notes of salient points:
* Tram system is currently loss-making
* 1996 figures:
|Passenger-journeys
| 396,024 | Revenue | 792,048 | Variable Costs | Basic Pay|187,082 | |
| | Fuel|114,176 | |||||
| |less subsidy|59,404|466,329 | Fixed costs | 330,540 | Net revenue | (4,821)| * Current flat fare $2 / single journey. Equal fare at all times for all passengers mandated by public owners. * Manning rules fixed at high level in public ownership - could operate with OPO if allowed. * Trams run 7/7 days in 32 week season, with limited service in early and late weeks. * Most employees seasonal. * Training new drivers only takes 2-3 hours * Drivers work 40 hours basic plus up to 6hrs/wk overtime * Porters, ticket collectors, cleaners 35hr week of which 4 is overtime * Peak demand is in 8 weeks in middle of season (weeks 17-24) * Summer visitors becoming more affluent, cost of tram ride insignificant * In peak period average tram occupancy = 18/20 * Old Orchard Bay has bars, restaurants, dancing - last tram time forces passengers to end their evening early. * Locals more price-sensitive and in early and late weeks tram occupancy averages 9/20. * MBO just accepted for $60k (financed at 6% over 25 yrs) * Current subsidy of $0.15 per passenger-journey ceases on transfer to private ownership * 2 year requirement to keep average single fare over the season at $2, after that can rise at inflation. * Expect to need to raise pay by inflation of 2% * 25 minute ride to Old Orchard Bay is considered a major attraction * Only mechanised route to Old Orchard Bay - alternative is to drive then half mile of steep steps * Total visitors have fallen slightly (5% in 20 years) but tram remains monopoly transport to Old Orchard Bay * In that 20years real price of tram fare has risen 20% and off-peak passenger numbers have fallen 40% * Capacity constraint of 8 trams / hour !Related Blog Posts ["Developing Deliverable Strategies - Trams Study 1" http://www.synesthesia.co.uk/blog/archives/2005/04/25/developing-deliverable-strategies-trams-study-1/] ["Developing Deliverable Strategies - Trams Study 2" http://www.synesthesia.co.uk/blog/archives/2005/05/05/trams-study-2/] |
