Swot Analysis of Network Rail

SWOT Analysis Strengths: Network Rail took over ownership by buying Railtrack plc, which was in railway administration, from the Railtrack Group plc for ? 500 million in 2002. Railtrack had become subject to broad-based and persistent criticism, notably over cost escalations and delays with the West Coast Main Line modernisation and the circumstances surrounding accidents at Southall (1997), Ladbroke Grove (1999) and Hatfield (2000). After these incidents Railtrack’s cost spiralled out of control, to remedy this situation which would ultimately lend to the company collapsing and being purchased by the government. By purchasing Railtrack when the company was being heavily criticised and by renaming it Network Rail it was seen as a favourable action because Railrack was in such a bad state it could only improve by being taken over. Network Rail are currently investing ? 800 million into the railway tracks every to improve and maintain the tracks, in 2006 alone the company spent ? billion on engineering projects improving stations, track and the efficiency of the railway industry. The company has also used this money to acquire state-of-the-art technology and invest large amounts of money in machinery such as ballast cleaners, the high-output train and track-relaying train. Spending this amount of money on the railway shows current and potential passengers that the company is very dedicated to maintaining and improving the railway and the services they provide. Weaknesses: During the Christmas period of 2007 Network Rail planned maintenance to take place whilst passenger levels would be low with the expectation of the work being complete by New Years Eve. However this maintenance work got delayed and passengers were advised to check travelling schedules before attempting the go to their destination. The delays lasted for a total of 3 days and the service resumed to normal on 2nd January 2008. These delays heavily affected passengers as well as operating companies such as Virgin trains as 50,000 people had booked tickets to travel on 31st January. By not informing the operating companies of the maintenance work they had planned for the holiday period they have damaged their relationship with the operating companies. They have also damaged their relationship with passengers as the delays hindered them from getting to spend the holiday period with their families. The derailments which occurred at Grayrigg, Potters Bar and Epsom have affected the reputation of Network Rail as they have accepted responsibility for the incidents. As a result of this the Rail Accident Investigation Branch (RAIB) are currently conducting an investigation in to the incident and criminal charges may be brought. In the eyes of the public these incidents may bring back memories of the accidents at Southall, Ladbroke Grove and Hatfield and the public may begin to question the maintenance work which is being carried out on the railways. Network Rail announced at the beginning of 2008 that they would be raising train ticket fares. The regulated fares which included season tickets increased by an average of 4. % and many unregulated fares were set to rise by much more. The increase in ticket prices did not go down well with consumer groups who said the rises were unjustified, but train operators claimed the rises were needed to improve the railway and its services. Opportunities: Network Rail has the opportunity to transform Britain’s railway. They are trying to do this with their current projects such as: †¢Providing faste r journeys between London, Manchester and Glasgow – Investing into the UK’s busiest railway line, the West Coast. In the last two years the London-Manchester journey time has come down by over 30 minutes. Vital work continues in 2008 to reduce the bottleneck at Trent Valley and to improve capacity through Rugby and Nuneaton. †¢Improving communications between train drivers and signallers – Investing ? 1. 2 billion in building a nationwide system which enables train drivers and signallers to communicate securely at all times. This is an important safety improvement for the railway. Upgrading London’s transport network – Plans to upgrade the Thameslink route – A vital north-south artery through London – are progressing and the company plans to build world class stations in the UK’s capital. †¢Changing the face of Scotland's railway – Plans to re-introduce the railway line between Airdrie and Bathgate. This is in addition to the redevelopment of Edinburgh Waverley station which is already underway Network Rail is also planning to have a lar ge programme of investment for the London 2012 Olympic Games. By raising the fares on train tickets Network rail have the potential to have an increased net profit at the end of 2008. If the company figures show more profit than the previous this means the company has more money to invest into the railways. Threats: The threats that Network Rail face are fines from the Office of Rail Regulation (ORR) for the delays to train services over the Christmas period. Network Rail have already incurred 2 fines from the ORR ? 2. 4m during Christmas in 2006 following signalling problems at Portsmouth and a record ? 4m for engineering overrunning during the New Year of 2008. By not meeting the standards of the ORR Network Rail will continue to incur fines, by having to pay fines costing millions of pounds they are losing money which they could use to invest back into the railways. Another threat which Network Rail faces is the threat of passengers deciding to travel by car and also companies wanting to use Lorries to transport goods (road haulage). Road ha ulage is the use of heavy goods vehicle’s to transport products and materials from place to place. This could happen if railway lines get congested or routes are closed due to maintenance work or lack of use. PESTLE Analysis Political: Network Rail has to follow the rules of the Office of Rail Regulation (ORR). If they do not adhere to the rules and regulations of the ORR, they could face a fine which could result in the company paying millions of pounds. With England being part of the European Union (EU) Network Rail can buy and sell materials from any country in the EU because the has lowered the trade barriers. Economic The railways can be used to transport goods all over the country. Some of the benefits of using a train to transport goods are: †¢Faster than lorries/trucks †¢Trains have multiple carriages so a number of goods can be delivered at once †¢It’s cheaper than using lorries/trucks As well as being part of the EU, Britain can trade materials with countries outside of the EU. Being able trade goods with a number of countries allows Network Rail to negotiate better deals on goods. The inflated price of fuel and the introduction of the low emission zone may increase the demand for railway industry. As the inflation arise the costs of living increases therefore the price of using the railway must be at the price that the country can afford. Often delays to the passengers and delivering goods may costs the individuals and businesses, which may impact on the UK economy. Social With Network Rail increasing the prices of train tickets at the beginning of the year consumers were not happy with the unjustified price increase, however operators said that the price increase would mean that more money would be spent on the trains, railways and other services. The railway system is a system that will always be needed in England because the trains reduce journey times and some trains produce lower emission fumes than cars. Having fast trains means passengers can get from place to place within 3 hours. Since network Rail has been investing money over the last 2 year the journey time from London to Manchester as decreased by over 30 minutes Technological Network Rail have used large sums of money to purchase state of the art echnology to help improve the communication between train drivers and signallers to communicate securely at all times, which is very an important part of railway safety. They have also invested money in machinery such as ballast cleaner, the high-output train and track-relaying train. Spending large sums of money to improve communication and improve the railway shows that Network Rail are trying to the railways and other components up to date. Legal Network Rail need to follow the rules and regulations of transport or rai lway acts which have been set by the government. The modern railway statutes are: †¢Railways Act 1993 †¢Competition Act 1998 (insofar as it confers competition powers on the Office of Rail Regulation) †¢Transport Act 2000 †¢Railways and Transport Safety Act 2003 †¢Railways Act 2005 The company is accountable to a body of Members through its corporate constitution, to its commercial train operator customers through its contracts with them (the contracts are subject to regulatory oversight), and to the public interest through the statutory powers of the Office of Rail Regulation. The Office of Rail Regulation in turn operates within the overall transport policy set by the UK Department for Transport Environmental Being a company which is governed Network Rail need to be seen as acting environmentally friendly. In an article written by The Times Newspaper (2007) the title for the article reads â€Å"Rail industry admits that it’s often greener for families to travel by car†. This statement means that travelling by car is less harm to the environment then travelling by train. Network Rail has a social responsibility to keep pollution emissions low as the government is currently working towards reducing the carbon emissions in the UK to slow down global warming. â€Å"Modern diesel-powered trains are so polluting that a family of three or more would be responsible for at least double the carbon dioxide emissions on many routes when travelling by rail compared with driving in a typical medium-sized car. † Source: http://travel. timesonline. co. uk/tol/life_and_style/travel/article2067255. ece