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Essay: Iarnród Éireann – Irish Rail

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  • Subject area(s): Marketing essays
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  • Published: 1 October 2022*
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1. INTRODUCTION, MISSION STATEMENT & OBJECTIVES

Introduction: This marketing plan aims to analyze Iarnród Éireann – Irish Rail and its position in the Irish transport market. Irish Rail is the operator of Ireland’s national railway network. Established in 1987, it provides DART (Dublin Area Rapid Transit), commuter and freight services in addition to that of their intercity services. For the purpose of this assignment, this strategic plan will focus solely on the InterCity Network (ICN) that Irish Rail provide and bypass that of the dart and freight services. Irish Rail want to provide the best service they can to customers in a way that is sustainable to the environment and central to the community. While the ICN links Ireland geographically, it primarily connects people: the students travelling at weekends to and from college; the Grandparents travelling excitedly to see their first grandchild; or the business person taking an early train to seal that all important deal. The intercity railway provides the physical capability for social and economic connectivity. The market in which Irish Rail’s ICN operates is that of the Irish intercity transport market. This is a highly competitive market with significant rivalry between the various transport providers – both public and private, such as Bus Eireann which is also owned by Irish Rail’s parent company CIE, GoBus, Air Coach, private coaches, taxis and cars.

Mission statement and objectives for the company:

Role or contribution of the unit: The role of the service is to provide safe, reliable transport to customers from one area in Ireland, to another. Intercity rail passenger services operate between Dublin and Belfast, Sligo, Ballina, Westport, Galway, Limerick, Ennis, Tralee, Cork, Waterford and Rosslare Europort and Iarnród Éireann jointly operates the Dublin to Belfast Enterprise service with Northern Ireland Railways (Irishrail.ie, 2019). The ICN comprises about a third of Irish Rail as a whole and contributes as such.

Definition of the business: Based on an extensive but relatively immutable infrastructure, developed many years ago, Irish Rail provides public transport between different cities in Ireland. InterCity services are long-distance routes which mainly radiate from Dublin to stations in the main cities around the country. Effectively, their business model is one in which customers pay to be transported from city to city reliably and with certainty, quickly and in reasonable comfort. It appeals to a number of different market segments [see section 2] and Irish Rail promises to deliver punctuality, reliability, cleanliness, information, and much more (Irishrail.ie, 2019).

Distinctive competence: As Porter stated; “a company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or do both” (Porter, 1996). While the points of parity that Irish Rail have are simply being transported from area A to area B in a punctual and safe manner, the points of difference are a significant advantage over their competitors. Irish Rail’s ICN has distinct competence in the areas of quality, comfort, luxury, security and reliability. Points of difference include the provision of onboard Wifi, ergonomic electronically adjustable seats, power points, tables, toilet facilities and air conditioning (Irishrail.ie, 2019), as well as onboard catering facilities. Trains offer the possibility of working while travelling and provide safety advantages over cars as multiple long-distance journeys can be completed in a single day without tiredness and without the risk of falling asleep at the wheel.

Indications for future direction / objectives: Irish Rail’s vision for the future is to continue to improve their services and grow their business to finally return Iarnród Éireann to profitability (Irishrail.ie, 2019. An important objective for Irish Rail is that of providing a low carbon transport alternative. Climate action is an imperative and currently transport has a major impact on climate change and global warming, being responsible for one fifth of all CO2 emissions. With cars and lorries together being responsible for over 80% of the overall emissions from the transport sector, Irish Rail provides more environmentally friendly transport alternatives. Trains are more energy efficient and have a better ratio of CO2 emissions when compared to other transport options. Irish Rail is now considering electrification of the ICN (to match the DART service) in order to secure their status as the best environmental option as electricity is increasingly being produced in a renewable and sustainable way.

3 years ago 2 years ago Last year

Revenue €233.9m €244.5m €264.8m

Deficit €7.7m €2.9m €1.1m

Journeys 39.7m 42.8m 45.5m

Summary of business performance

Currently, Irish Rail is still trying to recover from the significant loses that they accumulated during the recession. Irish Rail’s cost structure is one of high fixed costs. Costs of maintaining and updating the company’s rolling stock are significant and are almost independent of the number of passenger journeys. With such a cost structure, a focus on cost control is important but increasing passenger journeys and revenue is a priority. Irish Rail has been reducing its deficit year on year, as a result of significant increases in passenger numbers while managing to invest in new and necessary infrastructure (Irish Rail, 2017), to keep up with the market demand.

Assumptions: I have made the following assumptions in order to complete my planning:

1. Brexit will not impact Irish Rail’s services to the North of Ireland with issues such as border control on the Belfast to Dublin train. If a hard border is decided upon in the coming weeks, I am assuming that Irish Rail can put passport/visa checkers on the train at the station before and after the border and it will not interfere with journey times.

2. Brexit will impact the tourist segment in the next three years with a significant impact on tourist numbers, as a large portion of Ireland’s frequent visitors are British.

3. The cost of supplies will remain stable for the duration of this strategic plan with no barriers for Irish Rail in the importing of raw materials, rolling stock and diesel.

4. Irish companies will be taxed on carbon in the coming years. Carbon costs are higher for a bus and a car, than a train per passenger, and therefore, one might expect that if the carbon tax increases hugely, the cost of transport will also increase. The cost of trains will also go up, but by less per passenger than by any other current form of transport offered. If carbon tax is levied on individuals also through the purchase of petrol, this may drive consumers toward Irish Rail and away from cars.

5. That government policy in relation to rail is that it is a common good and they will continue to support them. 30% of Irish Rail’s revenue came from the government.

2. MARKET OVERVIEW

Many aspects of the various transport markets in Ireland are growing. The number of passengers carried by public transport, the amount of freight being moved by road, sea or air, the number of people moving through our airports and the number of kilometres driven on Irish roads are all on a growth trajectory. This is expected to continue as a clear correlation between transport demand and wider economic activity remains evident (Department of Transport, Tourism and Sport, 2018).

Forces affecting industry profitability: The five forces model reveals whether an industry is significantly competitive or truly attractive (Porter, 2008). Awareness of the five forces can help a company understand the structure of its industry and stake out a position that is more profitable and less vulnerable to attack (Appendix 1). While each of the individual forces is significant in assessing the attractiveness of an industry, for the specific marketing plan for Irish Rail, I have chosen to focus on ‘the bargaining power of suppliers’, ‘the threat of new entrants’ and ‘the threat of substitutes products or services’ for the purposes of the strategic marketing plan for Irish Rail’s ICN.

According to Porter (2008), powerful suppliers may constrain your profits if they charge higher prices. The bargaining power of suppliers in the Irish transport market is extremely high. Not only is the rolling stock Irish Rail use high cost, it is also unique and made to measure for the Irish railway network only. As a result, Irish Rail have limited opportunities for substitutes if their suppliers up the prices. Their biggest variable cost is diesel, an input for which they have great need and almost no bargaining power. A further significant cost for the company is that of wages. Traditionally adversarial labour relations have been challenging and Irish Rail have encountered industrial action and have failed to contain wage costs over the past few years.

Aspiring entrants, armed with new capacity and hungry for market share, can ratchet up the investment required for incumbent companies to stay in the game. Irish Rail have many challengers now that the Irish transport market is open to competition. Not only are Irish Rail competing with Bus Éireann and a multitude of private bus companies, they are now competing in certain sectors with potential substitution by Skype, Facetime and virtual meetings. Remote working prevents the need to travel and virtual offices allow for meetings to take place, no matter the location of the various participants. This has the potential to diminish one of ICN’s most significant and most profitable customer segments – those that need to travel for work. In addition to this, with the introduction of car sharing and companies like Go Car, people who do not own a car (and might therefore have depended on the train) can rent one for a weekend or for a few days to fit their travel. These substitute offerings can lure customers away (Porter, 2008). This is where Irish Rail need to push their points of difference and ensure that they cannot be eroded. Strong, favorable and unique brand associations are essential as points-of-difference that can serve as sources of brand equity to drive the differential effects (Keller, 2009).

Michael Porter’s five competitive forces model has been a most influential model within business schools but has perhaps had less appeal to the practising manager outside of a college environment (Grundy, 2006). While this model has been accepted worldwide for its ability to allow understanding of the competitiveness and the attractiveness of an industry in terms of profitability, there are limitations to the model, as there are to most. For example, Porter’s five forces cannot take into consideration the importance and threat of regulatory change in the transport market in Ireland. The opening of the bus market hugely impacted Irish Rail (RTE.ie, 2019), as will any governmental decisions on carbon taxes, or on the public service obligations for unprofitable transport routes and policies on free travel.

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