Assoc Prof Lau Geok Theng and Mr Ben Sim (NUS student)
In September 2014, Mr Woon Chio Chong, Executive Vice President, Bus Development of SBS Transit, was wondering what changes to the organisation, strategies and operations of SBS Transit should be made to improve its profitability and pole position in the public bus transportation business in Singapore. This was following the announcement by the Singapore Government in May 2014 that public bus transportation was shifting from a privatised to a government contracting model. The bus service industry was defined by its yearly profits, service standards and safety records. Previously, the concern of profitability by bus operators resulted in neglect of routes and offerings deemed as unprofitable. The privatised model was dominated by two basic bus operators, SBS Transit and SMRT Buses. SBS Transit had a market share of 75% before the change in model and operated 5 different bus services. Formed in 1973, it evolved from a bus company to a multi-modular transport operator, retaining bus operations as a subsidiary. Both companies kept each other in check by acting as the benchmark for the other’s performance, in the areas of service quality, reliability and punctuality. However, profits had been steadily declining with rising costs of fuel prices and labour expenses.
The government contracting model would see ownership of buses and bus infrastructure being transferred to the government, while operators vie for the rights to ply various bus routes through competitive bidding. This would lower the barrier of entry to the market and attract more bus operators into the market, increasing competition for SBS. While the initial phase of the new model would guarantee the incumbent operators an 80% of bus services, more bus services will be tendered out over time. More stringent bus arrival timings have come in place in recent years, under the Bus Service Reliability Framework, placing pressure on bus services to ensure high service standards. In the face of future competition and increased demands from the government, Mr Woon would thus have to position SBS to best tackle the challenges ahead.
: Case for NUS International Case Competition