Managing external influences

We all make use of the services provided by transportation companies. For example, you will probably have caught the bus into town or travelled on a school bus or made an intercity journey by train. Some of you may have travelled on a super green energy-efficient tram or used a Park & Ride bus service.

FirstGroup plc (known as First) is the UK’s largest surface transportation company. It has revenues of over £5 billion a year. It employs over 137,000 staff throughout the UK and North America and moves more than 2.5 billion passengers a year.

• First is the largest UK rail operator carrying almost 275 million passengers every year. This is one quarter of the passenger network. First operates rail passenger services, which include regional, intercity and commuter services such as First Great Western, First TransPennine Express, First Capital Connect, First ScotRail and Hull Trains.
• First is Britain’s largest bus operator running more than one in five of all local bus services. A fleet of nearly 9,000 buses carries around three million passengers a day in more than 40 major towns and cities, such as Manchester, Leeds and Glasgow.
• The company also operates First GBRf, a rail freight business and the Croydon Tramlink network which carries almost 26 million passengers a year.
• In North America, First is the largest provider of student transportation carrying nearly 4 million students every day.

First is the leader in providing reliable, safe, innovative and sustainable transport services. Although First is a global business, it aims to be local in its approach. This means that local issues are dealt with by people that largely live and work in that location. This ensures a clearer understanding of what needs to happen and a more prompt response.

 External influences

Running a business would be simple if the directors and managers only had to think about what went on inside the business. They could concentrate on internal decisions, such as determining routes, timetables and operating buses. However, business planners have also to understand what goes on outside the business.

Businesses are able to identify external changes that may affect it by carrying out a PESTEL analysis. This is a business tool in which each of the letters in PESTEL describes a type of change that takes place in the external business environment.

Many of these external changes may be outside the control of the company, for example, new government legislation. Some changes may present a threat to the business, such as a competitor using new or improved technology.

Social changes may bring opportunities, for example, migrant workers bringing new skills to the employment market. Environmental impacts, such as those caused caused by carbon dioxide (CO2) emissions or the management of waste, are of particular concern to businesses like First.

Business strategy

A business must assess what external changes are likely and which it needs to react to or take advantage of. Business planners can then create strategies to help the business respond effectively. We use the term “business strategy” to refer to a plan for a group of related products. First”s strategy relates to its transportation plans and takes into account all of the PESTEL factors in its environment.

 Political and economic factors

Political

Transport services are at the heart of the UK economy – moving people to work, home and school, and goods to households and businesses. In the 1980s, the government started to privatise bus services in the UK. It believed that allowing private firms to compete to run bus services would keep prices low and ensure companies would try harder to give customers what they wanted. The result has been more efficient, innovative and sustainable bus services.

Government operates at two levels – national and local. First believes in providing local solutions, therefore it concentrates on working closely with local government. For example, it provides a service to local schools and plans bus routes that are convenient for elderly people.

A key government policy affecting all transport services relates to the reduction of CO2 emissions. The UK government has signed an international treaty the Kyoto Protocol. Countries which sign the agreement intend to reduce the emission of harmful gases. This can succeed only through partnership with business. A good example of this is the government initiative to encourage more children to use bus services rather than travelling to school by car. This will help to reduce carbon emissions. First is actively encouraging people to use the bus instead of their cars.

Climate Change Strategy

First has produced a Climate Change Strategy that shapes every action the company takes. This is part of First’s vision – to ‘Transform Travel’. It wants to change how people feel about public transport by delivering the highest levels of service and customer satisfaction. This involves recognising its responsibility to reduce CO2 emissions to as low a level as possible.

Tram, bus and rail travel create less pollution than other forms of transport, but there is still room to improve. Key elements of First’s Climate Change Strategy include:

• improving the fuel efficiency of its vehicles
• purchasing vehicles with greater fuel efficiency
• using alternative fuels, such as biodiesel
• operational improvements through driver training and new technology to monitor driver performance

First aims to reduce its CO2 emissions by 25% for its bus division and 20% for rail, both by 2020.

Economic

Businesses need to make money to continue to exist. They do this by listening to customers to ensure they keep their customers and attract new ones with good services that customers want and need.

Responding to demand

It is extremely important for businesses to respond to changes in demand from customers. For example, First has responded to increased demand in the Neath valley in Wales by working closely with the Neath Port Talbot Council to run improved services.

Another good example of responding to demand is in the provision of high quality Yellow School Bus transport. Market research showed that parents and students wanted safer buses, so First designed special pilot services with the student in mind, based on the lessons learned from its US operations. Drivers are trained to work with students. Each day students step onto the same bus, can take the same seat and are looked after by the same specially trained driver. Vehicle safety features include padded seating, integrated seat belts, additional escape hatches and CCTV. First is working with the government via a specially appointed Yellow School Bus commission to investigate the possibility of rolling out specialised yellow school bus services throughout the UK.