Page 16 - CIMA May 18 - MCS Day 1 Suggested Solution

CIMA MAY 2018 – MANAGEMENT CASE STUDY

economy and economic conditions globally has a major impact on the profitability of
the public transport industry. This will be of particular concern for MENTA given its
multinational coverage and continued aspirations to expand overseas. The most
relevant aspect is the purchasing power of the customers falling during economic
downturns on which the industry is heavily dependent which may lead to increased
revenue as customer may not be able to afford cars

 social influences will be a concern for MENTA and will include social, cultural or
demographic factors. The industry is affected by the changing socio cultural trends and
people’s preferences and MENTA have to adapt to these forces. For example, car
ownership has increased dramatically since the inception of MENTA in 1950. For
example in 2016 there were 37.3 million licenced vehicles in the UK of which some 30.6
million were for cars. This is made even more complicated as specific styles/models are
preferred in certain cultures e.g. the recent growth in SUV’s in the UK. Age distribution
in the various populations is also an important factor that public transport companies
have to keep in mind while targeting the consumers, e.g. concessions for the aging
and/or disabled population in the UK where some 9% of adults were reported to have a
mobility difficulty in 2015 and new evidence suggesting that fewer young people, are
now owning cars. Social trends re location of housing also keep changing continuously
affecting the popularity of routes and therefore models of buses. There is an
inextricable link between changes in social habits, investment spend on vehicles,
popularity of bus routes and therefore profitability. This clearly results in the need for
more detailed analysis to forecast future sales and the resultant need to participate in
the rise of “big data” to predict shifts in consumer behaviour and service preference.

 technological influences – technology and innovation have become important
determinants of market share in the public transport industry. The more innovative the
company, the greater the potential effect on its market share with driverless buses
moving from science fiction to science fact in the coming years. In the recent years
technological innovation has remained a major basis of differentiation for the
consumers because the customers’ focus shifted towards fuel efficient vehicles and the
need to reduce road congestion, demonstrating that technology remains one of the
most important factors affecting the sales and profitability of the industry. Similarly the
effect of social media on marketing is very relevant with online forums growing in
importance as consumers seek advice, reviews and price comparisons before using a
service.

 ecological/environmental influences – laws related to environment friendliness and
carbon emissions are growing more stringent world‐wide with all the major players in
the industry having to focus upon low emission vehicles. The vehicles which are low on
emissions and fuel consumption may receive tax subsidies and are favoured by
governments. From a legal perspective, pollution tests have grown stricter and the
vehicles passing these tests only are allowed in certain markets including EU and UK
(e.g. VAG). Environment friendliness has become an important test for the industry in
the 21st century as governments have started focusing heavily on pollution control,
necessitating a more frequent asset replacement policy than in previous years. In
addition the control of waste on the external environment in terms of pollution and
sustainability includes the public transportation companies which are of increasing
relevance to MENTA due to disposal of oil and tyres during servicing. From an ethical
perspective there is also considerable concern as to the treatment and payment of
workers, particularly given the move to low wage economies such as Asia, fair

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