Network Rail has a key objective to Earn and Retain a Mandate

Using PESTLE/Porter’s 5 Forces / Scenario Modelling or any other relevant identify the key strategic Macro challenges the Company faces.

Using Financial Analysis / Marketing Mix / Core Competencies / Balanced Scorecard or any other relevant tools, scan Network Rail’s Internal / Micro Environment to inentify the key Micro challenges the Company faces.

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Pull your conclusions regarding parts 1 and 2 together in the form of a SWOT analysis. You could also identify what options an ANSOFF matrix for Network Rail would suggest are the most viable.

Given your analysis, what do you conclude about the relevance of the Key Objectives above (to earn and retain a mandate etc.) and

What should be the strategy of Network Rail in the coming 2-5 years? And what would be the vital few measures which would help to track progress toward achieving your suggested strategy.

Introduction

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I have been employed in the UK Rail industry for over 30 years, and am currently based at Saltley Delivery Unit in Central Birmingham. My role is Infrastructure Maintenance Engineer, which gives me overall responsibility for all of the maintenance carried out by Netwrok Rail on its main infrastructure, which is the tracks and Signalling system connected to them. My geographic area of responsibility runs from London Marylebone, through Banbury and Birmingham Snow Hill and onto Droitwich Spa. I have 300+ staff reporting to me through a team of Engineers (3) and Section Managers (9), working out of two main depots, Saltley And Banbury, with smaller depots at Stourbridge, Whitacre, Leamington, Aylesbury, High Wycombe and London Marylebone.

Background

Network rail has been in existence since October 2002 when they took over the running of Britain’s Rail infrastructure from Railtrack. They currently employ over 35,000 people in various aspects of this work, from day to day maintenance to major renewal projects. In

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Using PESTLE/Porter’s 5 Forces / Scenario Modelling or any other relevant identify the key strategic Macro challenges the Company faces

When you analyse the macro-environment, identification of the factors that might affect a number of vital aspects that will influence the supply and demand and costs of the company is critically important. (Kotter and Schlesinger, 1991; Johnson and Scholes, 1993)

Various checklists are in use as ways of cataloguing the vast number of possible issues that might affect different industries. A PESTLE analysis is one of that is merely a framework that categorises environmental influences as political, economic, social, technological, legal and environmental. PESTLE examines the likely impact of each of these factors on the industry. The results are then used to take investigate and enable opportunities and to be aware of and to make contingency plans for threats when building business strategy (Byars, 1991; Cooper, 2000).

In a recent study (1998), Kotler claims that PESTLE is a strategic tool that can be useful to help understand market growth and decline alongside business position, in order to decide on potential and future direction

The use of PESTLE analysis reveals that the major external influences upon Network Rail are:

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POLITICAL : The recent change in Government could still have a far reaching effect upon Britain’s rail industry, the recent Comprehensive Spending Review has made sure that the industry must change and in a big way.

ECONOMIC : The current economic climate of the United Kingdom is such that a lot of passengers will be thinking of alternative ways to travel, low cost coach and bus services will have their appeal increased, albeit the long term prospects for rail travel are good, given the current lobby against road transport by the green parties. In order to remain an attractive alternative, the rail industry must compete economically with road transport.

SOCIAL : The major social concept in the UK Government’s Sustainable Development Strategy (DEFRA, 2005) is noted as: “ensuring a strong, healthy and just society”, but this can be split into six main aspects:

• Accommodating the diverse needs of the population both now and in the future;

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• promoting personal well-being;

• encouraging social cohesion and inclusion;

• maintaining equal opportunities for everyone;

• promoting good governance; and

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• engaging the creativity, energy and diversity of the people of Great Britain.

The Rail industry has a major part to play in the satisfaction of these social

goals. Increasingly the industry will be judged on delivering the services, and even more so on the way they are delivered. The UK Railways run alongside houses belonging to a vast array of the population, and it must be seen to engage correctly with all of its lineside neighbours. The industry must also be seen to be an employer that values it’s workforce and treats them correspondingly. Safety of the travelling public is a major social factor in the business, both those travelling by train and the road user that use any of the hundred of level crossings on the network each day. The key causes of accidents on the railway infrastructure are trespass and the misuse of level crossings.

TECHNOLOGICAL : The incredible speed of technology advances has a big effect on any transport industry. The likes of faster and more reliable broadband connections will increase the amount of work done by teleconferences and reduce travel to meetings. Faster and more efficient trains will effect upon the nature of Network Rails infrastructure, and compel the company to look at new ways to maintain the infrastructure, and new forms of powering the trains.

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LEGAL : Legally Network Rail is governed by many bodies with an influence, including The Office Of Rail Regulators, The Health & Safety Executive, UK Government, Environment Agency.

ENVIRONMENTAL : Network Rail has a responsibility to maintain it’s infrastructure and the huge number of wildlife habitats alongside the railway. The company also has to become as “green” as possible, ensuring timber that they use is from sustainable sources, and that all depots and offices are committed to reduce their carbon footprint as much as is possible.

Porters Five Forces

The Porter’s Five Forces model is a simple tool that can be utilised to help strategic understanding where power lies in a business situation. The tool can also be used to understand both the strength of a company’s current competitive position, alongside the strength of a position the company may be looking to move into. The Five forces framework focuses on business concerns rather than public policy but it can also emphasise extended competition for value rather than just competition among existing rivals. The ease of its use has inspired numerous companies as well as business schools to adopt it. (Wheelen and Hunger, 1998).

If you have clear understanding of where your power currently lies, you are able to take advantage of a situation of strength or act to improve a situation of weakness.

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Porters 5 Forces for Network Rail:

Supplier Power: For Network rail, it supplier power can be said to be relatively high, there is a very strict approvals process to go through before any item can be introduced into the infrastructure. This process can be time consuming and expensive for new suppliers and so those that already have this approval have a large amount of power to wield. There are also very few suppliers that provide the dedicated technology that is used to provide modern signalling systems which again will provide a great deal of supplier power.

Buyer Power: Buyer power with regard to Network Rail would be classed as low. The company is operating in somewhat of a monopoly, giving buyers very little flexibility to shop elsewhere for similar services. Network rail is therefore in a very strong position when it comes to dictating terms.

Competitive Rivalry: Other than companies providing engineering expertise with renewal of rail infrastructure, there are few firms who could provide the day to day expertise that Network Rail has in the safe running of the railway network in Great Britain. The number of staff employed by Network Rail (18,000+) would also be a barrier to the threat of substitution by smaller firms, not willing to take on the huge responsibility that employing this number of dedicated staff would present.

Threat of Substitution: The threat of substitution may be classed as medium as there may be alternatives to a rail system within GB. Other than Road Transport, there is very little realistic direct competition for the services that Network Rail provide. Road transport does present a certain amount of competitive rivalry to Network Rail, but there would be few that would be able to compete direct with leading the GB Rail network. Obviously this puts Network Rail in a position of great strength.

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Threat of New Entry: The cost and time elements required for companies to be set up to provide effective competition to Network Rail would be barriers that would prevent this happening. For this reason the threat of New Entry is low.

Using Financial Analysis / Marketing Mix / Core Competencies / Balanced Scorecard or any other relevant tools, scan Network Rail’s Internal / Micro Environment to inentify the key Micro challenges the Company faces.

Using FiMO as discussed during the BES module of the Network Rail business leaders programme to scan the Internal or Macro Environment shows the following results:

FINANCE : Network Rails strengths are based around it’s huge asset base and its growing asset value. Network Rail also owns a massive property portfolio that can be used for diversification. The major weaknesses of Network Rail are based around possible Governmet spending cuts, the Recent Comprehensive spending review and Lord McNulty’s value for money report.

MARKET : Strengths – Currently the business is well thought of by relevant bodies including the Office Of The Rail Regulator, OFT and HSE (BES 2010)

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Prime locations for retail developments, Achieving Control Period 4 (CP4) targets to date. Weaknesses – Internal financial process that makes it almost impossible to trade with other parts of the same company.

OPERATIONS – Strengths include an enviable safety record, both for it’s own workforce and for the travelling public. Delivery of it’s own promise “The Timetable is our Promise. When we Promise a train can run, it will run – safely, punctually and reliably. And we Promise that more trains are able to run next year.” Network Rail (2010)

Weaknesses -. The industry is perceived as difficult to work with, by others within the industry.

As part of the BES course a RECoiL exercise for Network Rail as a company was completed, the scores have been reproduced below.

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Network Rail

Resources

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Experiences

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Controls and Systems

6

Ideas & Innovation

7

Leadership

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This would seem to highlight issues within two main sectors, those being Controls & Systems and Leadership.

Controls and Systems

There is a school of thought that its processes are far too bureaucratic and that any change can only be effected over a long period of time. This may well have a bearing on the apparent issues with leadership

Leadership

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There seems to be a large number of long serving railwaymen in supervisory and management positions. This has the effect of creating a resistance to change. There seems to be a feeling that the processes and procedures inflicted corporately are so rigid that they prevent innovation because of amount of bureaucracy in place.

Pull your conclusions regarding parts 1 and 2 together in the form of a SWOT analysis. You could also identify what options an ANSOFF matrix for Network Rail would suggest are the most viable.

According to Barney (1995), a SWOT analysis is a framework that points to the relevance of external and internal forces to give an understanding of the

sources of competitive advantage. SWOT analysis will help decide if the main problems facing a company revolve around a need to change its strategy, a need to improve its current strategy and the implementation of it, or both of the above.

The tool helps look at the company’s current performance (Strengths and

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Weaknesses) and its future (Opportunities and Threats) by accounting

for the factors that exist in the external environment. The framework is a powerful and at times highly successful technique that can be applied to individuals, groups, teams, or organisations (David, 1997).

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