Harvard Case - Delhi Metro Airport Express Line: Making it Viable
"Delhi Metro Airport Express Line: Making it Viable" Harvard business case study is written by Sunil Ashra, Narain Gupta, Shiv S. Tripathi, Sharat Sharma. It deals with the challenges in the field of Strategy. The case study is 7 page(s) long and it was first published on : Sep 18, 2019
At Fern Fort University, we recommend a multi-pronged approach for the Delhi Metro Airport Express Line to achieve long-term viability. This strategy focuses on enhancing revenue streams, optimizing operations, and leveraging strategic partnerships to create a sustainable and profitable business model.
2. Background
The Delhi Metro Airport Express Line, a high-speed rail link connecting New Delhi Railway Station to Indira Gandhi International Airport, faced financial challenges despite its high ridership. The case study highlights the initial optimistic projections that failed to materialize, resulting in significant losses for the Delhi Metro Rail Corporation (DMRC).The main protagonists are the DMRC, responsible for the line's operation and maintenance, and the Delhi Airport Metro Express Private Limited (DAMEPL), the private consortium that built and operated the line.
3. Analysis of the Case Study
To analyze the situation, we employ a combination of frameworks:
a) Porter's Five Forces:
- Threat of New Entrants: High, due to the potential for other private operators to enter the market.
- Bargaining Power of Buyers: Moderate, as passengers have limited alternatives for airport travel.
- Bargaining Power of Suppliers: Low, as DMRC has significant control over infrastructure and operations.
- Threat of Substitutes: Moderate, with options like taxis, buses, and private cars available.
- Competitive Rivalry: Low, as the Airport Express Line is a unique service with limited direct competition.
b) SWOT Analysis:
- Strengths: High-speed service, direct connection to airport, modern infrastructure, strong brand recognition.
- Weaknesses: High operational costs, limited revenue streams, dependence on airport traffic, inflexible pricing.
- Opportunities: Expanding service hours, introducing new revenue streams like advertising, partnering with airlines and hotels, leveraging technology for improved customer experience.
- Threats: Economic downturn impacting travel demand, competition from other transportation modes, political instability, and potential operational disruptions.
c) Value Chain Analysis:
- Inbound Logistics: DMRC's efficient procurement and maintenance processes are a strength.
- Operations: High-speed operation and efficient train management contribute to the value proposition.
- Outbound Logistics: Limited options for connecting passengers to their final destinations require improvement.
- Marketing & Sales: The line's marketing efforts need to be more targeted and engaging.
- Service: Customer service and information provision are crucial for a positive experience.
d) Business Model Innovation:
- Value Proposition: Currently focused on speed and convenience, but needs to be expanded to cater to diverse customer needs.
- Customer Segments: Targeting business travelers, tourists, and local commuters requires tailored offerings.
- Channels: Leveraging online platforms, mobile apps, and airport partnerships for ticket sales and information dissemination.
- Customer Relationships: Building loyalty programs and personalized communication to enhance customer experience.
- Revenue Streams: Expanding beyond fares to include advertising, retail concessions, and partnerships.
4. Recommendations
To address the challenges and achieve long-term viability, the following recommendations are proposed:
a) Revenue Diversification:
- Strategic Partnerships: Collaborate with airlines, hotels, and travel agencies to offer bundled packages and loyalty programs.
- Advertising & Retail: Utilize station space for advertising and introduce retail concessions to generate additional revenue.
- Premium Services: Offer premium seating, Wi-Fi, and other amenities to attract high-paying passengers.
- Event Ticketing: Partner with event organizers and offer discounted fares for concerts, exhibitions, and sporting events.
b) Operational Optimization:
- Cost Reduction: Implement measures to reduce operational costs, including energy efficiency, optimized maintenance schedules, and employee training.
- Service Enhancement: Improve customer service, introduce real-time information systems, and enhance station facilities.
- Flexible Pricing: Implement dynamic pricing based on demand, time of day, and passenger type.
- Marketing & Promotion: Develop targeted marketing campaigns to attract new customer segments and promote the line's value proposition.
c) Strategic Alliances:
- Public-Private Partnerships: Explore partnerships with government agencies to leverage resources and create a more sustainable model.
- Technology Integration: Invest in technology and analytics to optimize operations, enhance customer experience, and improve efficiency.
- International Collaboration: Learn from successful airport rail systems globally and adapt best practices.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations align with DMRC's core competencies in infrastructure development and operations, while strengthening its commitment to providing efficient and reliable transportation.
- External Customers and Internal Clients: The recommendations focus on enhancing customer experience and creating value for both passengers and stakeholders.
- Competitors: The recommendations aim to differentiate the Airport Express Line from other transportation options and create a competitive advantage.
- Attractiveness: The recommendations are expected to increase revenue, reduce costs, and improve overall profitability, making the line more attractive to investors and stakeholders.
6. Conclusion
The Delhi Metro Airport Express Line has the potential to be a profitable and sustainable enterprise. By implementing the recommended strategies, DMRC can overcome its financial challenges, enhance its competitive position, and contribute significantly to the development of Delhi's transportation infrastructure.
7. Discussion
Alternatives:
- Selling the line to a private operator: This could alleviate financial burden but could compromise DMRC's control and impact its long-term vision.
- Subsidizing the line: This would require significant government funding and could be politically challenging.
Risks:
- Economic downturn: A decline in travel demand could negatively impact revenue.
- Competition: New transportation options could emerge, impacting market share.
- Operational disruptions: Unexpected events could lead to service disruptions and loss of revenue.
Assumptions:
- Government support: Continued government support for the line's operations and development.
- Passenger demand: Continued growth in passenger demand, particularly from business travelers and tourists.
- Successful implementation: Effective implementation of the recommended strategies with minimal delays and unexpected challenges.
8. Next Steps
- Develop a detailed implementation plan: Outline specific actions, timelines, and resource allocation for each recommendation.
- Secure necessary funding: Identify funding sources and secure financial commitments for the implementation.
- Engage stakeholders: Communicate the strategy and its benefits to all stakeholders, including government agencies, airlines, hotels, and passengers.
- Monitor and evaluate progress: Regularly track performance indicators and adjust strategies as needed to ensure successful implementation and achieve long-term viability.
By taking these steps, the Delhi Metro Airport Express Line can become a model for sustainable and profitable public transportation in India and beyond.
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Case Description
In 2014, the Delhi Metro Rail Corporation (DMRC) had just taken over operations of the Delhi Airport Metro (DAM), which connected the Indira Gandhi International Airport to the New Delhi railway station. However, high capital expenditures, excess operational expenditures, and low ridership meant that the concessionaire, which had been operating since 2011 on a public-private partnership model, was continuously reporting losses and therefore decided to quit the project in June 2013. When project operations were transferred to the DMRC, the metro's overall capacity utilization was a very low 5 per cent and the line had few riders and operational losses. The DMRC's director of operations had the challenging task of making the DAM operationally viable. There were several available options. Should he consider rationalizing the fares; increasing ridership by connecting the Delhi Metro Airport Express Line to passenger hubs; improving the amenities or attractions at the metro stations; or offering hassle-free travel for different groups of customers?
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