Generic railway strategies TOCs
train operator strategies
a research-oriented knowledge base for train operating companies (TOCs)
a research-oriented knowledge base for train operating companies (TOCs)
4.2 Strategy II: Modern value carrier
Similar to network-focused operators modern value carriers focus on numerous customer groups reaching from business travelers up to leisure passengers. Several services levels are offered to customers on-board in different customer segments. Early entering competitors such as RegioJet, NTV or HKX underline the practical relevance of this group.
What differentiates modern value carriers from network-focused operators is their cost structure. Most companies out of this strategic group tend to be new entrants that are able to structure its value chains as cost efficient as possible. Therefore, modern value carriers tend to offer lower fares to their customers than network-focused operators. Revenues will be generated by adjusting prices according to demand and by selling tickets via numerous distribution channels.
Modern value carriers’ second major differentiation factor is their freedom to operate only on attractive routes. As a result, their network density will be lower than those of network focused operators. In some cases, they only operate on one single line. They mostly operate in direct competition with network-focused operators and are hence requested to meet and to improve service quality. The market volumes of modern value carriers are limited because not all routes offer the potential for high value services and higher prices. Consequently, their expansion speed will be moderate. Partnering with operators that are using other modes of transport as well as with incumbents from third European countries are possible strategic options.
Strategic moves of modern value carriers focus on sustaining competitive differentiators towards network-focused operators, which is cost competitiveness to offer lower prices with a certain customer value. Therefore, a lean value chain is crucial for competition. Second, creating a high value brand needs to be achieved before market entry. Modern value carriers should focus on routes where network-focused operators are not operating with their latest, modern train sets. By that, a competitive edge for modern value carriers can be created and customer can be easily motivated to change providers.
Modern value carriers focus on efficient point-to-point transportation by addressing a broad customer base. They are to a certain extent copying the value creation of network-carriers with the major differentiation of lower prices. Their strategic orientation is presented in the following section.
Similar to network-focused operators modern value carriers focus on numerous customer groups reaching from business travelers up to leisure passengers. Several services levels are offered to customers on-board in different customer segments. Early entering competitors such as RegioJet, NTV or HKX underline the practical relevance of this group.
What differentiates modern value carriers from network-focused operators is their cost structure. Most companies out of this strategic group tend to be new entrants that are able to structure its value chains as cost efficient as possible. Therefore, modern value carriers tend to offer lower fares to their customers than network-focused operators. Revenues will be generated by adjusting prices according to demand and by selling tickets via numerous distribution channels.
Modern value carriers’ second major differentiation factor is their freedom to operate only on attractive routes. As a result, their network density will be lower than those of network focused operators. In some cases, they only operate on one single line. They mostly operate in direct competition with network-focused operators and are hence requested to meet and to improve service quality. The market volumes of modern value carriers are limited because not all routes offer the potential for high value services and higher prices. Consequently, their expansion speed will be moderate. Partnering with operators that are using other modes of transport as well as with incumbents from third European countries are possible strategic options.
Strategic moves of modern value carriers focus on sustaining competitive differentiators towards network-focused operators, which is cost competitiveness to offer lower prices with a certain customer value. Therefore, a lean value chain is crucial for competition. Second, creating a high value brand needs to be achieved before market entry. Modern value carriers should focus on routes where network-focused operators are not operating with their latest, modern train sets. By that, a competitive edge for modern value carriers can be created and customer can be easily motivated to change providers.
