Monday, 7 February 2011

BUS WARS: Chapter 4: Price Wars

A price war is a phonomium that occurs in an oligopolistic market. In oligpopistic markets only a few firms dominate the market and according to game theory this leads to businesses to battle directly with one other. Unlike in a free market were firms struggle to influence the market each other (price taker), in a oligpoplistic market each firm has a direct impact on one another, if one business lowers its prices it can attract people to them and thus cut the revenue of their rivals.
A bus war is a brutal for of price war. In terms of the example above if one bus company lowers its prices to go from the city center to a village and another bus company that runs the same route does not then bus users are likely to switch from one bus service to another. A bus war is far more amplified than a price war as the businesses are pinned to a certain route pitched directly against each other.

In the mid 2000s Stagecoach's quest to increase its market share organically rather than taking over firms it created deadly bus wars across the country one such brutal war of economics was in the city of Preston. Preston was targeted by Stagecoach and the creation of Preston Citi was the 'army' they committed. Preston Citi was a re-branding to take Preston Buses advantage in identity with the city it would also give Preston Citi more freedom to compete with Preston Bus. In key areas across Preston, Preston Citi bus were launched in direct competition with Preston Bus. Preston Bus responded like wise.
Soon Preston Bus and Preston Citi Bus were running simultaneous in direct competition, both lowering their prices against each other. Preston Bus lowering its prices to force out Preston Citi and Preston Citi lowering its prices to drive out Preston Bus.
One of the critical battle grounds was Ashton, were bus tickets into Preston Centre were as low as 40p at one point, a stark contrasts to other routes were Preston Citi was charging well over £1.
It was not just price competition, Preston Citi also launched loyalty schemes such as day riders and mega riders which proved successful in capturing control of the market.
Price competition for Preston Bus was not stustationable, making losses per customers and looking market share they were in deep trouble. While Preston bus struggled, Preston Citi could make losses and be sustained by profits across the Stagecoach empire. Preston bus was making a anual turnover of around £11 million but compared to Stagecoaches £1.2 Billion. Preston Bus was owned by its employees with no where to go for funding or help. Preston bus was soon facing yearly loses and it Stagecoach now moved in for the kill...


  1. i think we should teach bus drivers how to drive busses

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