AN ISRAELI BUS COMPANY The Egged Bus Cooperative is th - PDF document

The Case Study EGGED – AN ISRAELI BUS COMPANY The Egged Bus Cooperative is the largest bus company in Israel, and the world's second largest (second only to London Buses ). A cooperative owned by its member s, Egged employs more than 6,191 workers and has more than 3,500 buses running on 1,050 regular lines. Egged's bus routes reach every settlement, kibbutz and city in Israel. Egged is also running internal - city bus network in most Israeli cities a nd towns. Egged was created in 1933 by a merger of four smaller bus cooperatives. In 1951 Egged merged with the northern Shahar bus company and the southern Drom Yehuda bus company, creating a cross - country public transportation network. The name Egged (li t. Union ) was given to the cooperative by the Israeli poet Chaim Nachman Bialik. After the Six Day War Egged merged with the Hamekasher bus company of Jerusalem. During the wars of 1956, 1967 and 1973, Egged buses and drivers helped to reinforce the logist ics system of the IDF and drove soldiers and food to the battlefields. Soldiers still ride free to date on the Egged lines. While that may seem comforting to some, there are problems which are associated with the area in which Egged delivers their service. Since March, 2001, suicide bombers have blown themselves up inside or alongside 20 Egged buses. On average, that is an attack on buses, drivers and passengers every 6 months (although some have come in clusters). The attacks have killed 143 passengers and two Egged drivers. Egged officials say that the goal of the terrorists is to take a once reliable object – mass transportation , and turn it into an object of u ncertainty. “Buses are the easiest target with the highest number of possible victims,” said Ar ik Feldman, chairman of Egged. “But we live with it. That’s our harsh reality, and if a bus blows up, it doesn’t stop us from running public transportation. It give us more courage to continue so no one can prevent us from living here.” The company operates more than 70% of the public bus service in Israel. Everyday, the buses carry more than 1 million Israeli and Arab - Israeli residents. That includes school children, professionals and soldiers. The bombings have curtailed about 10% of Eg ged ridership in the last three years, however, the company has not had one driver resign due to the bombings, nor have they surrendered a single route, despite some of the routes yielding the majority of the attacks. With the latest governmental change to the Hamas for the Palestinians, new challenges have arrived on the scene for the bus company. What would be one country’s nightmare, Egged management confronts the situation as ordinary and with purpose. Lior Brantz, one of Egged’s veteran drivers, resp onded this way: “After a bombing, we act as if nothing happened. Our mentality is that we don’t like to look inside ourselves and think about it. We’re not like that.” Management views their continued operations as a matter of pride, ingenuity and circums tances which are beyond their control. An example is Route 835, which runs along the Wadi Ara Road, from Afula to Tel Aviv and back. The route has been a target of 6 bombs in the last two years. Reuven Rot h child, a veteran driver of Egged for 18 years, say s a prayer and straps two small boxes containing Torah scrolls on his bus before each daily journey. It’s his way of fear management. His daily routine, like other drivers, consists of a walk through for any packages which may have been left, or may be h arboring a bomb. One driver prevented such a disaster when he removed a bomb, which was hidden inside a watermelon. They also count on their passengers as being their eyes and ears, in case they spot something suspicious or hear of some damaging talk. The belief is that the responsibil ity rests with everyone who utilizes the services of Egged. Egged places all this into perspective: It is safer riding the busses than driving a car – during the same period, more than 1,000 people have died in car accidents, seven times the number from bus attacks. CFO Opher Linchefski has organized an 8 year plan to restructure the company. They will first un - wind the cooperative ownership struc ture now in place. Of the 6,191 employees, about 191 have bought into the coopera tive and have a say in company operations. Linchefski feels the need to centralize the operation is essential to future success. The company has 31 operational branches, including 4 intersection terminals. The company is managed by a “secretariat” of 5 mem bers who head the operations. The company has two divisions: Operations and the Head Office. Within the company are 5 departments: Finance, Traffic, Marketing, Maintenance and Human Resources and Research & Development. To fend off the government’s openi ng routes to more competition, Egged is moving into new businesses, including van service and light rail. The company has three subsidiaries, Egged Taavura, Egged Tours and Egged Holdings. The Ministry has imposed high emission standards on public transpo rtation, forcing companies to become more eco - friendly. In early 2009, Egged secured 185 buses, of which the majority contain the EURO - 5, low emission engines. Sixty percent of the fleet is now made up of new, 40 seat capacity sulfur - emission reduced diese l busses, cushioned seats and air - conditioning . Linchefski hopes to build on their National Production Plant, established in 1999 to aid in the maintenance and reconditioning of buses, from engines and gear boxes, to electronics and tires. The company is spending a larger amount annually on research and development to assist in many areas of efficiency, including a recycling system for washing the buses, where 95% of the water is reused, allowing for energy and water savings. The company also complies with higher than required noise standards for their fleet. Egged provides special discount rates to youth and seniors, as well as a network of informational booths, which provide assistance to more than 270,000 travelers, monthly. They are also working on a p ilot program designed to assist the disabled in their travel needs and are cooperating with the Ministry of Transportation on an assessment of the benefits to the communities which the company serves. In 2002, Egged participated in the Clean up the World c ampaign, by providing 12 buses for transportation of volunteers to help in cleaning efforts at a number of locations. Egged contributes to the Jewish National Fund and provides buses to attend the celebration of Tu B Shavat, Jerusalem’s equivalent of Arbor Day, replenishing the forests. Egged officials share that w or k force will continue to be reduced by attrition and Linchefski hopes to maintain market share and increase d revenue, along with morale and c ustomer service through various methods. In a countr y where unemployment is high, (above 10%), Egged drivers are satisfied and believe to be compensated well and Linchefski looks to make that a continued part of their program. In addition, Linchefski has added sustainable development, environmental practice s, social responsibility, mobility and adaptive management a part of the new structure. This all signals a commitment to long term viability. Egged is also looking into bombing detection equipment and other defensive mechanisms to make their company less vulnerable. They also are looking at bus design to better protect riders and drivers. All of this will take time and money, and the patience of their customers and drivers. They have also installed a dedicated security force (450 people) on buses and at te rminals a s a show of force to deter bombings. The guards are between the ages of 22 and 31, and receive intense physical training, including hand to hand combat skills. The c ompany uses Qwest Central as it s database operation. The system monitors daily activity and distributes the tickets for all the bus schedules. Data is refreshed within 2 hours, compared to their previous 8 hour turnaround time. That makes a difference between starting the date with outdated information or having everything up to date . The system also handles the Travel Information, a system that provides information to customers and drivers. Inside the bus, precautions are taken, including the warning: “Vigilance prevents disaster!” Egged is looking to Qwest for help in their human resource department, to create efficiencies that will insure a stronger, long term workforce. The company feels it must be poised to predict future transportation needs, and be proactive in legislative matters for their industry. Egged’s design is with a f uture vision and an integration of those components which they hope will lend to their continued success. Egged Results Overview – Egged is the largest bus company in Isreal . They transport all types of passengers to every settlement, Kibbutz and city. Egged r uns into a problem of how they are going to reconstruct their company . We are studying this case because of organization, planning , and as well as ethics in the business. Strengths Service Largest bus company Cooperative Trend Greater Edge of competition Updated New features Still growing Constant updates Experienced company Monopoly Loyal drivers Over Look the bombings Pride Subsidiaries Research Provided to all ages and disabled Charitable Provides Employees benefits Security Force Simplicity Eco - friendly Greatest Strength – The largest bus company and i t is safer to ride a bus rather than a drive a car. They really do not have to worry about other types of completion since they have already bought out their other competition. Also with all the carjacking that happen it is a plus to ride the bus so your c ar does not get jacked or bombed. Weakness Struggle to keep up older company No code of ethics safety of passengers Over look bombings Cheaper to drive your car people do not like change Not all eco - friendly busses Pricey unemployment vulnerable change in order to be safe CFO is making changes to whole company software not fast enough company is in a place of war rely of people for security no middle class discounts costly business to run Greatest Weakness – The CFO is making changes to the way the company is being run along with their software program is still a bit slow. Yes the CFO might have great things to improve the company but does this really help the company when only one person is trying to make a c hange in the cooperative, when everyone has a say in what happens in the company. Opportunities Growing Need Deals Popularity Experienced company Support Soldiers New Business Loyalty Do the best to keep customer safe Restruc ture Job Opportunities Discounted rates Bombing happens – something to grow on Each driver does their own thing More people die driving cars than riding busses Partner up with other great names Complaints make business better New Features Expansion Greatest Opportunities – The greatest opportunity for Egged is that they can only make their company better. Improving the way they transport people, making their company safer for the environment, and protecting the people as they ride are all things t hat Egged is doing to improve their company. With this type of company the only thing that can happen is that they can grow and improve their service. This all has to be done though through a shared value of the people who bought into the company. Threats Political Pressure Cooperative People scamming the company Bombers Lawsuits To many people have a say Eco - Friendly Change is costly Area of Service Easiest target for bombers CFO cannot organize a plan by himself – members must have say Losing Cus tomers to rivals Complaints Regulations Demand for service is too big for their supply Greatest Threats – CFO is trying to make all these improvements to the company but is not getting any help from the rest of for cooperation. These are type o f changes that the Board of Directors should be making along with their members. The CFO might have some very good plans in order to improve the business but it is a one person decision. Questions 1. What business is the company in? Public Transportation 2. Wha t value does the business provide to the customer? Produces public Transportation to ever settlement. 3. What is the most important issue facing the business? Becoming more eco - friendly and government rules, along with the reconstruction. 4. What is the apparen t problem? Reconstruction is not done correctly. 5. On first reading what do you think the company should do? Keep working hard to improve their company like the way they are doing. Spend more money on security along with improvements on the Quest Central. 6. What are the possible problems with your suggested recommendations? This is all very costly. Improving a company takes lots of time, preparation, and money. 7. What are the characteristics of the industry in which the company is in? Upbeat, Service, Loyal, a nd dedicated to doing better. They also have little competition. 8. How does the company compare with other similar companies? The company compares greatly. They are a large company and are pretty much a monopoly. Recommendations A good recommendation woul d be for this company to hire people for their human resource department rather than have Quest do the work for them. In a country where unemployment is so low this will help create job opportunities for people. Having Quest come in and work for the human resource department would be a bad thing. They do not know the company and what they all do, they are just another outsource. Whereas if you had someone who knows the company they will do a better job and help the business grow like it should. A better r ecommendation would be they need to improve their technology for their database operation. This type of improvement might be a bit costly but well worth it in the end. The way they can do this would be to have a better turnaround rate. Customers like the n ewest information when trying to find the right bus to get on. Having faster server technology might help this situation out along with more personnel. Having better/faster type o f system in your business is something they must have in order to have a succ essful business. The best recommendation I have for this company is to have the whole cooperation vote on the 8 year reconstruction plan that the CFO is proposing. The plan that this Financial Officer has proposed might be a good plan but this is just on e person making this change in a cooperation not all the member that have a say. Instead of just implementing these changes the cooperation could hold a company meeting to go over the plan and have people discusses what they like , do not like , make changes , and then vote on it. Since this company is a cooperation it is important for have the board of directors and people who have bought into the company have a say in what happens to the future of the company. They all need to have a shared value in bet terin g their company. Having a successful company relies in the structure of the company and the how the staff works along with the way the whole system is ran. These three things and more play a role in having a successful business. Morgan Schwartzenberger Egged Results Overview – Egged is the largest bus company in Isreal . They transport all types of passengers to every settlement, Kibbutz and city. Egged r uns into a problem of how they are going to reconstruct their company . We are studying this case because of organization, planning , and as well as ethics in the business. Strengths Service Largest bus company Cooperative Trend Greater Edge of competition Updated New features Still growing Constant updates Experienced company Monopoly Loyal drivers Over Look the bombings Pride Subsidiaries Research Provided to all ages and disabled Charitable Provides Employees benefits Security Force Simplicity Eco - friendly Greatest Strength – The largest bus company and i t is safer to ride a bus rather than a drive a car. They really do not have to worry about other types of completion since they have already bought out their other competition. Also with all the carjacking that happen it is a plus to ride the bus so your c ar does not get jacked or bombed. Weakness Struggle to keep up older company No code of ethics safety of passengers Over look bombings Cheaper to drive your car people do not like change Not all eco - friendly busses Pricey unemployment vulnerable change in order to be safe CFO is making changes to whole company software not fast enough company is in a place of war rely of people for security no middle class discounts costly business to run Greatest Weakness – The CFO is making changes to the way the company is being run along with their software program is still a bit slow. Yes the CFO might have great things to improve the company but does this really help the company when only one person is trying to make a c hange in the cooperative, when everyone has a say in what happens in the company. Opportunities Growing Need Deals Popularity Experienced company Support Soldiers New Business Loyalty Do the best to keep customer safe Restruc ture Job Opportunities Discounted rates Bombing happens – something to grow on Each driver does their own thing More people die driving cars than riding busses Partner up with other great names Complaints make business better New Features Expansion Greatest Opportunities – The greatest opportunity for Egged is that they can only make their company better. Improving the way they transport people, making their company safer for the environment, and protecting the people as they ride are all things t hat Egged is doing to improve their company. With this type of company the only thing that can happen is that they can grow and improve their service. This all has to be done though through a shared value of the people who bought into the company. Threats Political Pressure Cooperative People scamming the company Bombers Lawsuits To many people have a say Eco - Friendly Change is costly Area of Service Easiest target for bombers CFO cannot organize a plan by himself – members must have say Losing Cus tomers to rivals Complaints Regulations Demand for service is too big for their supply Greatest Threats – CFO is trying to make all these improvements to the company but is not getting any help from the rest of for cooperation. These are type o f changes that the Board of Directors should be making along with their members. The CFO might have some very good plans in order to improve the business but it is a one person decision. Questions 9. What business is the company in? Public Transportation 10. Wha t value does the business provide to the customer? Produces public Transportation to ever settlement. 11. What is the most important issue facing the business? Becoming more eco - friendly and government rules, along with the reconstruction. 12. What is the apparen t problem? Reconstruction is not done correctly. 13. On first reading what do you think the company should do? Keep working hard to improve their company like the way they are doing. Spend more money on security along with improvements on the Quest Central. 14. What are the possible problems with your suggested recommendations? This is all very costly. Improving a company takes lots of time, preparation, and money. 15. What are the characteristics of the industry in which the company is in? Upbeat, Service, Loyal, a nd dedicated to doing better. They also have little competition. 16. How does the company compare with other similar companies? The company compares greatly. They are a large company and are pretty much a monopoly. Recommendations A good recommendation woul d be for this company to hire people for their human resource department rather than have Quest do the work for them. In a country where unemployment is so low this will help create job opportunities for people. Having Quest come in and work for the human resource department would be a bad thing. They do not know the company and what they all do, they are just another outsource. Whereas if you had someone who knows the company they will do a better job and help the business grow like it should. A better r ecommendation would be they need to improve their technology for their database operation. This type of improvement might be a bit costly but well worth it in the end. The way they can do this would be to have a better turnaround rate. Customers like the n ewest information when trying to find the right bus to get on. Having faster server technology might help this situation out along with more personnel. Having better/faster type o f system in your business is something they must have in order to have a succ essful business. The best recommendation I have for this company is to have the whole cooperation vote on the 8 year reconstruction plan that the CFO is proposing. The plan that this Financial Officer has proposed might be a good plan but this is just on e person making this change in a cooperation not all the member that have a say. Instead of just implementing these changes the cooperation could hold a company meeting to go over the plan and have people discusses what they like , do not like , make changes , and then vote on it. Since this company is a cooperation it is important for have the board of directors and people who have bought into the company have a say in what happens to the future of the company. They all need to have a shared value in bet terin g their company. Having a successful company relies in the structure of the company and the how the staff works along with the way the whole system is ran. These three things and more play a role in having a successful business.