Innovations

PT Financing by the beneficiaries of the system

Code

PTC.5

Title

PT Financing by the beneficiaries of the system

Case study/reference

Cooperative Business Model

The International Cooperative Alliance defines a cooperative (also known as co-operative, co-op, or coop) as "an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise".[1] Cooperatives may include:

non-profit community organizations

businesses owned and managed by the people who use their services (a consumer cooperative)

organisations managed by the people who work there (worker cooperatives)

organisations managed by the people to whom they provide accommodation (housing cooperatives)

hybrids such as worker cooperatives that are also consumer cooperatives or credit unions

multi-stakeholder cooperatives such as those that bring together civil society and local actors to deliver community needs

second- and third-tier cooperatives whose members are other cooperatives

Research published by the Worldwatch Institute found that in 2012 approximately one billion people in 96 countries had become members of at least one cooperative.[2] The turnover of the largest three hundred cooperatives in the world reached $2.2 trillion – which, if they were to be a country, it would make them the seventh largest.[3][need quotation to verify]

One dictionary defines a cooperative as "a jointly owned enterprise engaging in the production or distribution of goods or the supplying of services, operated by its members for their mutual benefit, typically organized by consumers or farmers".[4] Cooperative businesses are typically more economically resilient than many other forms of enterprise, with twice the number of co-operatives (80%) surviving their first five years compared with other business ownership models (41%).[5] Cooperatives frequently have social goals which they aim to accomplish by investing a proportion of trading profits back into their communities. As an example of this, in 2013, retail co-operatives in the UK invested 6.9% of their pre-tax profits in the communities in which they trade as compared with 2.4% for other rival supermarkets.[6]

Shared Service Model

Shared services is the provision of a service by one part of an organization or group, where that service had previously been found, in more than one part of the organization or group. Thus the funding and resourcing of the service is shared and the providing department effectively becomes an internal service provider. The key here is the idea of 'sharing' within an organization or group. This sharing needs to fundamentally include shared accountability of results by the unit from where the work is migrated to the provider. The provider on the other hand needs to ensure that the agreed results are delivered based on defined measures (KPIs, cost, quality etc.).

https://en.wikipedia.org/wiki/Cooperative

https://en.wikipedia.org/wiki/Shared_services

Recommendations for the design

The design of a cooperative business model would have to fit in with the regulatory framework at each site. Competition and Monopoly Issues may need to be addressed. Legal advice should be sought and full feasibility study carried out to establish the benefits, risks etc. associated with concept at each site.

The role for each stakeholder, voting and investment requirements would need to be agreed.

Quality control standards, training, investment, fares, strategies would all need to be agreed.

Cost benefit analysis required before making any long-term decisions

Recommendations for the implementation

The following issues should be considered before making recommendations:

Findings from feasibility study
Results from cost benefit analysis
SWOT results
Agree organisational structure
Agree Business Plan
Agree Time Plan
Agree Marketing Strategy
Agree Investment Strategy
Vision statement

The success of any new venture is dependent on buy in from stakeholders and informing customers of changes. People need to trust the motives for change.

Brief description

The fare paid by the PT user is not considering who really benefits of the system. PT financing could be organized in a way that every beneficiary (e.g. businesses, commuters, inhabitants, etc.) takes up its share to finance the PT system. As such, this concept could provide the means to cover the finance gap of PT systems through support offered by the beneficiaries of these systems, until their operation and expansion becomes cost-covering.

Full description

Throughout the world Transport Authorities and Operators are facing greater challenges regarding sustainable financing of services and infrastructure. Is the current business model still valid in the 21st century? Could a new approach be adopted where demand generators had to contribute towards the cost of transport provision? Using a shared contribution model could development of improved services become easier and more sustainable long-term?

Cooperative business models have been used successfully in other sectors agriculture, food, retail and banking. This allows all stakeholders to become equal partners and invest in a non-profit making business model where all monies generated are invested in the services provided.

CIPTEC score

2.8