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)
2.1 Customer power
The concept that shall serve in this analysis as the fundamental strategic framework for environment analysis is Michael Porter’s concept of Competitive Advantage from 1985. Porter defines competitive advantage of a firm by either providing a higher customer value for a similar price, or by offering the same value as competitors for a lower price (Porter, 1985, pp. 12-15).
Customer power and substitutes are highly interdependent factors in Porter’s framework. Therefore, both factors are analyzed in one sub-section (Porter, 1985, pp. 5-11). Because of the characteristics of long-distance passenger rail transportation a special focus lies on switching costs, the number of customers and their attitudes.
In 2011 Paha et al. analyzed switching costs in the field of long-distance passenger rail transport for the first time. The researchers collected almost 700 data sets of customers on-board trains. They selected the two routes Cologne-Brussels with on-track competition between Deutsche Bahn and Thalys and Cologne-Amsterdam in single operation of Deutsche Bahn. The study’s major findings are summarized in the gallery.
The concept that shall serve in this analysis as the fundamental strategic framework for environment analysis is Michael Porter’s concept of Competitive Advantage from 1985. Porter defines competitive advantage of a firm by either providing a higher customer value for a similar price, or by offering the same value as competitors for a lower price (Porter, 1985, pp. 12-15).
Customer power and substitutes are highly interdependent factors in Porter’s framework. Therefore, both factors are analyzed in one sub-section (Porter, 1985, pp. 5-11). Because of the characteristics of long-distance passenger rail transportation a special focus lies on switching costs, the number of customers and their attitudes.
In 2011 Paha et al. analyzed switching costs in the field of long-distance passenger rail transport for the first time. The researchers collected almost 700 data sets of customers on-board trains. They selected the two routes Cologne-Brussels with on-track competition between Deutsche Bahn and Thalys and Cologne-Amsterdam in single operation of Deutsche Bahn. The study’s major findings are summarized in the gallery.
The second major issue in the field of customer power arises from the number of people a company is offering services to and gaining revenues from. The broader the customer base the better for the company because switching decisions of some individuals do in such setup have a small impact on a company’s overall revenues. Hereby, a lesson learned that arises from the airline industry is that companies should not purely focus on business travelers. In a company decisions on traveling patterns are generally made by only a few key deciders (Shaw, 2007, p. 103). Consequently, a small group of people and their decisions can have a huge impact on a train operator’s revenues when those deciders aim for a switch of transport provider or even transport mode. In times of financial crisis airlines were confronted with intense profit losses because most of their business clients were forced to adjust their traveling behaviors on request of their companies (Shaw, 2007, p. 103).
