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Cubic Transportation Systems .pdf

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Strategic Audit: Cubic Transportation Systems

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Cubic Transportation Systems, Inc. (CTS) is a highly advanced company that designs
and produces automated fare collection systems for mass transit administries. The company
deliver integrated fare collection systems that comprises of access control, revenue control,
fare payment, vending of cards, communications of data, and information management. In
addition to this, the card and commercial services are also offered by the company, for
instance hosting of central systems and functions, financial settlement, card making,
distribution and marketing. The speciality of the company is its buses, trains and ferries
ticketing and payment systems by using smartcards and mobile phones (Smartphones). In this
manner, it is apparent that company offers wide range of services that involves customer
support, software support and operations services. Although, the company has wide global
reach, but is striving to capture the market of Middle East and North Africa to tap these
emerging markets and gain high revenues (Cubic Transportation Systems 2013).
External Environment Analysis
PEST Analysis
 Cubic transportation Systems has to depend majorly on the federal, state and local
government in order to get subsidies in capital ventures. At the same time, the
company will have to depend on the government regulations of the country regarding
procurement or up gradation of any systems in North Africa and Middle East
(Opurum 2012).
 The procurements in the both the countries go through a rigorous and lengthy
competitive bid process, where companies bidding low prices will get significant

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 The standard lifecycle for fair collection in rail is 12 to 15 years and for buses it is 7
to 10 years (Multisystems, Inc, et al. 2002).
 The trend of regional automated ticketing systems is growing in both countries.
 In addition, there is a rising trend for other systems as well for increasing the
convenience of the smart card to provide higher value and incentives to final
customers (Acumen Building Enterprise, Inc, et al. 2006).
 The economic opportunities for novel and innovative systems and support are high in
mass transit in both Middle East and North Africa. Countries are increasingly
choosing to outsource the ongoing functions and commercialization of ticketing
 The growing market presents vital opportunities for CTS to set up enduring
relationships and increment its profits in the long run (Opurum 2012).
 The demand for public transit is growing at a heavy rate in North Africa and Middle
East due to heavy tourist arrival and growing business concern in these countries.
 This has generated high demand for ticketing systems and other automated services in
these aspiring markets (Middleton 2003).
 The alterations in the cultural perspectives with respect to automated fare collection
systems are another significant factor (Multisystems, Inc, et al. 2002).
 The current technological advancements around the globe have made it pertinent for
the company to provide highly advanced products and services to customers in newly
emerging markets and get their constant attention.

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 It










technologies are allowing interoperability of numerous modes of transportation in a
sole networked system and also interoperability of numerous operators in a single
networked arrangement (Middleton 2003).
Porter’s Five Forces Analysis
Threat of New Entrants: The threat of new entrants is high in the new emerging
because of the fact that these markets are new emerging one due to which companies will
make efforts to tap the novel opportunities available to them for increasing revenues and
profit margins. However, it is considerable that these markets also present significant
challenges for companies, and thus, Cubic Transportation has an advantage because of its
innovative and quality products and services. In addition, the strict government regulations
and competitive bidding process for public transit makes the threat moderate (Ensign 2013).
Rivalry amongst Competitors: The intensity of competition is high for the company in
both countries. It is considerable that automated fare industry involves high cost of exit. The
major foreign competitors of the company are Thales, Scheidt & Bachmann and ACS.
However, it is prominent to mention that Cubic is one of the many companies that offer
automated fare collection solutions and systems for public transit operators around the world.
Additionally, number of local companies in the European, Middle East, and Asian markets
also act as competitors for the company that strives for large national tenders. Moreover, fare
collection organisations, computer service companies, telecommunications, and other such
are also competitors (Cubic Transportation Systems 2013).
Bargaining Power of Consumers: The bargaining of customers is high in the industry
as the public transport companies can adopt any company who bids in the most competitive
manner and charge low price for offering their prices. The switching cost for customers is

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high in the industry and public transports are usually controlled by a single authority due to
which the bargaining power is high (Ali 2009).
Bargaining power of Suppliers: The automated fare collection industry is a niche
market that upholds by a number of suppliers. It is vital that the long life expectation of the
solutions and ability of few companies to soppy products have created severe competition to
get supplying contracts (Cubic Transportation Systems 2013).
Threat of Substitute Products: The threats of substitute products is also there for the
company in the new markets as these markets are still relying on traditional ticketing systems
for public transit, which somehow is challenging for the company. The lack of understanding
of automated systems and level of complexity can play big role for substitute products
(Acumen Building Enterprise, Inc, et al. 2006).
Internal Environment Analysis
Resources: Cubic transportation is the leading company that delivers built in revenue
management systems and solutions for the mass transit industry. The company has enormous
amount of tangible and intangible resources that will aid it while entering into new markets.
The high financial stability, innovative engineers, dedicated employees, technologically
advanced machines and highly automated business processes are some of the prominent
tangible resources of the company. In addition to this, the brand name which company has
collected in some of the major international markets like Canada, Europe, UK and Australia,
loyal customer base and the more than 400 projects, which it provides in 40 prime markets,
are its enormous intangible resources (Cubic Transportation Systems 2013).
Capabilities: The highly exceptional resources of Cubic have made it capable of
offering innovative and advanced customer assistance, software assistance and operation
services, The company is capable of delivering fare payment infrastructure in Middle East
and North Africa comprising of gates, smart card readers, ticketing machines and central
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solutions for dealing and reporting any form of data and revenues (Cubic Transportation
Systems 2013).
Core Competencies: The comprehensive and extensive customer services that Cubic
Transportation provides to customers are it major core competencies that aids in overcoming
competitors from the market. The company is a specialist in its fare infrastructure and
revenue management functions and upholding. The experienced operation’s employees of the










infrastructure are core competencies that offer incomparable convenience and flexibility to

Moreover, the company has got performance of high standards and control in

technology and innovation that acts as it core competencies in this highly competitive market
(Cubic Transportation Systems 2013).
Research of the Automated Fare Collection (AFC) Industry
It is significant to state that Automated Fare Industry is experiencing a rise these days
in public transit because of the growing preference of people for technology advanced
services that are more of flexible and convenience. Automated Fare collection not only
reduced the manual process of ticketing and fare collection, but also make it highly effective
to collect revenues from customers through an integrated ticketing systems and at the same
time keeping it confidential and safe. Ticketing vending machines, fare gate, ticket terminals
and other services are now much common in different countries with respect to public transit.
In addition to this, computers are also using computers at depot and stations for data
communications (Middleton 2003).
It can be stated that because of the fast pace of expansion of the rail transit
construction, the demand level for AFC is going high and high. It is worth considering that
with the hastening of subway and speedy rail investment and manufacturing in Middle East
and North Africa, AFC systems market in these countries will also develop along with the
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rapid growth of these countries. Automated Fare Collections Industry is booming because
such systems augment the efficiency of public transit by ensuring that passengers get a
legitimate ticket when they enter public buses, ferries, and trains, and consequently they pay
the appropriate fare for their journey (Opurum 2012).
Meanwhile, automated fare collection systems are also advancing in new markets
because they make the process ticket accounting and ticket selling automated, and at the same
time, delivers comprehensive information on system usage that brings down the deception by
staff and travellers in public transit. Nowadays, the automated fare collection machines also
uses smart cards that travellers can utilise for boarding in public transits in major cities.
Moreover, a wide network of gates, transaction machines, and validators upholds systems.
This not only facilitates passengers to purchase and renew their fare tickets or cards, but also
permits public transit authorities make the boarding and money collecting process more
speedy (Multisystems, Inc, et al. 2002).
Strategic Responses of Cubic Transportation Systems (Recommended strategy for new
In light of the research conducted of the automated fare collection industry and the
global environment of in ticketing, it can be stated that it is appropriate for the company to
espouse of the differentiation strategy and in this context, the company should made its
offerings distinctive from competitors offerings so that public transit authorities will
approach the company and its innovative products and services (Berry 2004).
For tapping the market of North Africa and Middle East, the recommended strategy
for Cubic is that it should integrate basis for low-cost smart tickets in order to offer a
complete smart card-based payment system to customers. This is because f the fact that smart
tickets systems and vending machines are gaining high popularity due to their convenience
and high accuracy (Hanson, et al. 2011). The company should offer a complete package of
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card-enabled parking systems, as well that can be integrated in the regional systems. It is
considerable that growing traffic of tourists and business people in Middle East and North
Africa has made it necessary for public transit authorities to introduce such systems and this
strategy of company will it in serving new markets in the best manner (Davidson 2006).
As a strategic response to the current and future issues, which the global business
environment in ticketing is facing, it is vital for Cubic Transportation Systems to conduct
feasibility studies and identify the best potential entry method in these new markets. The
company should made efforts to identify the probability of Strategic Alliances, Joint Ventures
and Acquisitions in these new markets so that it will espouse on the most feasible step and
makes it entry more successful. As a business level strategy the company should strive for
higher customer service through customer focussed systems and lower risk offerings by
making them innovative and advanced (Hamel and Prahalad 1994).
The Key Risks Associated for Cubic if it Started a Venture in the Middle East and
North Africa
Key Risks in Middle East: The legal framework of countries in this region will be a
risk for the company as the legal policies in the countries of Middle East are stern and there is
more social and political risk for companies starting new venture. The company will have to
face high cultural differences that exist between Middle East and other foreign countries,
which will be a risk for it as it has to amend it strategies accordingly as per the business
environment and cultural needs of the country (Abdallah 2001). The taxation policy and the
structure of the country is more oriented towards the growth and development of domestic
countries due to which it will be difficult for a foreign company to survive in the region. It is
considerable the automated fare collection systems will be new in the region and some
customers will have no idea and this poses high risk of customer ignorance and unawareness
about the utility of such systems (Ali 2009).
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