Achieving a competitive advantage through risk management
An Alstom case study

Page 1: Introduction

Returning publicly owned enterprises to the private sector is a process known as privatisation. The effects of privatisation are highly significant as organisations, which have previously enjoyed monopoly control of their industry, have to respond to customer needs, market forces and competitive pressures. Privatisation of the railway industry created the opportunity for organisations seeking...
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Page 2: The challenge

Linking London with the West Midlands, North West England and Scotland, the WCML has traditionally been Britain’s busiest business route. In spite of this pivotal role to Britain’s transport infrastructure, it has suffered from under-investment for more than 20 years.In 1966, electrification of the route between London and Liverpool/Manchester created Britain’s first high speed...
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Page 3: Risk and return

In the newly-formed private sector, bidding for contracts to provide rolling stock and railway services depends on risk and reward. Although ALSTOM has a large market share and considerable experience in the industry, each tender it makes varies according to train specifications, maintenance agreements, provision of spares and financing. This therefore places more emphasis on managers to assess...
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Page 4: Managing risk

ALSTOM’s role is to build and maintain trains until the end of the period of Virgin’s franchise in 2012. It is also hoped that they can continue to maintain the trains after the franchise. The financiers of the Northern Line project did not take out asset risk. However, the financiers for the WCML project, representing banks and other financial institutions, are taking releasing risk...
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Page 5: Joint venture

The West Coast Main Line project to build and maintain trains is a joint venture between ALSTOM and Fiat Ferroviaria. The mission is to provide Virgin, every day and on time, with a set of new, reliable trains to meet the timetabled need. To achieve this mission, the partnership takes responsibility for five key areasincluding: a new fleet of high speed tilting trains a delivery...
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Page 6: Conclusion

This case study highlights some of the changes that have taken place since railway privatisation and its effect on organisations providing services within the railway industry. The West Coast Main Line modernisation emphasises the capability of organisations in the railway industry to respond to this challenge to source the finance and manage the risk through large investment contracts so that...
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