The Avis Budget Group in the Business of Vehicle Rental Services - Term Paper Example

? Term Paper (14 pt Times New Roman) BA 301 Final Term Paper Section Number (e.g., Section 002) Table of Contents Table of Contents 3 EXECUTIVE SUMMARY 4 POSITION 6 MISSION 7 The mission of the company is to provide exemplary leadership in services and support to the workforce of the company. This ensures growth and customer satisfaction. The company targets to achieve quality in the business and services of Avis and Budget for the long term sustainable competitive advantage. 7 VALUES 7 The Avis Budget Group is a company which is driven by the values that organization delivers. The company values aligned employees with visions or mission to achieve the targets of being an industry leader. 7 The aim of the Avis Budget Group is to become the number one company in the vehicle rental industry. This aim is being worked through by commitment. The brands of the company uniquely drive company towards growth. The company follows the ideology of creating value for all the customers. The company maintains integrity while making all the major decisions. The channel of communication in the organization is open and the employee’s exhibit teamwork while performing all the business practices. The Avis Budget Group is situated across the globe so it operates in a diverse environment with a diverse work force. The company analyzes its strengths and weaknesses and takes responsibility of all the challenges which arise and the decision which the company makes. It also works responsibly for the interests of the shareholders. 7 STAKEHOLDERS 8 Stakeholders are all those parties that are directly influenced by the operations of the company (Harrison, Bosse, and Phillips, 58 – 74). Managing stakeholders is important for the success of the firm (Bosse, Phillips, and Harrison, 447- 456). The stakeholders of the Avis group include car dealers and other suppliers, operators, tourists and tour operators, businesses requiring Avis’ service for transportation, diverse workforce, shareholders, governments and industry participants of the rental cars in countries where Avis and Budget is providing services. 8 SENSE 8 UNCOVER 11 SOLVE 14 ACHIEVE 20 EXECUTIVE SUMMARY The Avis budget group is a well known name in the business of the vehicle rental services. It is a leading global service provider with operations spread on more than 10,000 locations. The company has its operations in 175 countries around the globe. The strategy of the company is to spread the business in all areas where the rental transport services are used. This is in places where tourism and business trips are made very commonly. The company operates in North America, Europe, Middle East, Africa and Latin America region. Most of the offices which are located in North America, Europe and Australia are company owned or either rented to the independent contractors who operate as the entrepreneurs for their outlets and share profits with the company. The current issues that the ABG is facing are with the strategic operations of the company which has been outsourced to the contractors who operate independently. The customers are also not satisfied with the services of the company because the services which they get from various outlets are not the same. The customer representatives of the outlets are also not aligned at providing proper services to the customers. This is because they are not motivated and don’t understand the core values which the company wishes to deliver to the customers. This report is highlighting the issues which the company is facing presently and offers recommendations for the company to overcome those issues and challenges. The company despite of the failing customer services is profitable. Therefore, suggestions are made that section of profits must be allocated to the improvement of the services of the outlets. The Avis Group must develop strengthen relationship with the contractors so that the issues of the operators can be resolved and it can pursue towards excellence with the passage of time. A plan for the improvement of the operations of the outlet run and managed by the contractors has been discussed in this report. This will improve the company performance and will provide the company with the desired valued outcomes in addition to business financial success. The company is already a profitable business and if it continues with its operations by taking the contractors in confidence then the profitability of the company will improve substantially. The recommendation given in this report is of a plan by which the company can initiate a revised relationship with the contractors to move side by side on the roads of success. This goal can be ensured by providing maximum customer satisfaction to the customers. POSITION The Avis Budget Group is a renowned name in the industry of vehicle rental services. It is amongst one of the leading global providers of the vehicles rental services. The company has more than 10,000 locations from where it provides rental cars to the customers. The company operates in 175 countries around the globe. Through its brand Zipcar, the biggest car sharing network entertains over more than 790,000 members. The group is recognized as one of the top notch companies for the business. Avis Budget Group aims to deliver a sense of loyalty for the customers so that the profit generation of the company increases. Avis Budget Group has shown a growth in the revenue of about 25% for the year 2012 as compared to that of the previous year. The EBITDA of the company increased by 38%, this was the highest recorded level in the history of the company (Bloomberg). The company focused on increasing the business areas where the usage of the rental vehicles was more on the week days. This increased the total cars rented by 26% (Market Watch a) The company operates in North America, Europe, Middle East, Africa and Latin America region. Most of the offices which are located in North America, Europe and Australia are company owned or either rented. These operate by acquiring license all around the globe (Market Watch b). The company takes pride in the heritage of the business and the work force of the company is aligned to the company goals and the management’s objective for the fulfillment of those goals (Reuters). VISION The company is destined to become a leader in the industry. It wishes to create a customer focused relation that offer products according to the need of the customer. The company values the customers and the employees it has for making goal accomplishable & possible and strives for growth with the support of innovation and efficiency to make Avis group a strong brand name across the globe. MISSION The mission of the company is to provide exemplary leadership in services and support to the workforce of the company. This ensures growth and customer satisfaction. The company targets to achieve quality in the business and services of Avis and Budget for the long term sustainable competitive advantage. VALUES The Avis Budget Group is a company which is driven by the values that organization delivers. The company values aligned employees with visions or mission to achieve the targets of being an industry leader. The aim of the Avis Budget Group is to become the number one company in the vehicle rental industry. This aim is being worked through by commitment. The brands of the company uniquely drive company towards growth. The company follows the ideology of creating value for all the customers. The company maintains integrity while making all the major decisions. The channel of communication in the organization is open and the employee’s exhibit teamwork while performing all the business practices. The Avis Budget Group is situated across the globe so it operates in a diverse environment with a diverse work force. The company analyzes its strengths and weaknesses and takes responsibility of all the challenges which arise and the decision which the company makes. It also works responsibly for the interests of the shareholders. STAKEHOLDERS Stakeholders are all those parties that are directly influenced by the operations of the company (Harrison, Bosse, and Phillips, 58 – 74). Managing stakeholders is important for the success of the firm (Bosse, Phillips, and Harrison, 447- 456). The stakeholders of the Avis group include car dealers and other suppliers, operators, tourists and tour operators, businesses requiring Avis’ service for transportation, diverse workforce, shareholders, governments and industry participants of the rental cars in countries where Avis and Budget is providing services. SENSE The problems which Avis Budget Group is facing are not different to that of any other large company. The employees of the company are not aligned to the goals which the strategic management wishes to achieve. Avis Budget Group is also facing problems with retaining customers. The customers are suffering with issues in experiencing the quality of the company in different locations. This is problematic because this harms the satisfaction level of the customers. According to a poll about the quality of cars and the services from Avis Budget Group most of the people were dissatisfied. On a satisfaction rating scale about 84% of the customers were most dissatisfied. About 10% of the customers were dissatisfied, 3% rated the services to be average and only 3 percent of the customers were highly satisfied. This shows a big problem for the ABG. ABG cannot operate if it loses its customers. In a service industry it is very important that the company focuses on the customer satisfaction. ABG is stable in the market and generates a lot of returns must note that losing customers’ value that can cause significant harm to company value. The various branches of ABG are not providing the level of services which have been promised. This is because the company has not been able to set the standards for the performance of the employees. ABG is charging unfair charges if the customers shop by using a credit card. The sum of money that is charged by the hidden clauses mentioned in small writing often irritates the customers when they come to know about it. The operations of ABG and the overall profits which the company is earning are very high. But still the dissatisfaction of the customers is a big concern for everyone who is responsible for the management of the company (Sparks) The customers who use the rental car services are highly dissatisfied with the company. This is because the company also charges the customers with unfair charges of insurance etc. with the hidden or un-highlighted terms. A customer of Avis complained that the initial contract of the hire agreement consisted of insurance terms which forced the customer to pay high amount of $205 for a car that he used only for three days. Numerous such cases have been reported and hence the customer satisfaction is reducing (Avis budget group). In 2010 the Avis Budget Group was defending itself against the lawsuits which were filed against it for violating the Fair Labor Standards Act for misclassifying the managerial staff. The agency staff working for Avis challenged the company for misclassifying them outside of the employment arena. The company has designed the agency operator model which exploits the independent contractor as an employee. This is a planned move by the company to spread the brands across the globe cutting the cost paying benefits to the employees along with overtime. This also saved the company from paying the additional taxes. This act of ABG de-motivated the employees because Avis Group is benefiting from this but the contractors hired by the company fail to establish the rights of the employees. A de-motivated workforce never aligns to the goals of the company and so happened with ABG. Avis Budget Group stressed that its proposal to the agency operators to become the entrepreneurs of respective business. The company at all times has right to the site location and the authorized operator to manage the business on the company’s behalf. This act of the company retains most of the benefits with company the business. The model which the company has prescribed just emphasizes that the contractor will have significant power as entrepreneur but actually the company retains all the rights to itself. The profit percentage which is offered by ABG to the contractors is not sufficient to bear the expenses of an efficient workforce. ABG on other instances also held the rights to implement the rates of the reservation charges. This makes the company profitable but the independent contractors suffer losses. Therefore, in the case of Avis Budget Group the major problem is the workforce of the organization. The company has not given its workforce the rights which could motivate them to work in liaison with the strategic goals. The entrepreneurial staff and the workforce of the Avis Budget Group are both not motivated and fail to associate themselves with the goals of the company. The amount of profit which the contractors get after all the hard work is 12% of the returns. Out of this amount operators are responsible to pay the wages of the staff hired and the maintenance of the cars. This amount is insufficient for the contractors. This in the end fails to motivate the workforce. A de-motivated workforce can never produce the desired results. Therefore, the major issues which were observed by Avis Budget Group are 1. The customers were not satisfied by the services of the company in different regions. Such as customer service agents or the employees of the company were not cooperative in responding to the queries or issues which the customers were facing. Similarly, the quality of the cars which were rented by the customers at some places was not up to the mark (the cars had maintenance issues and were faulty).The. 2. The operating contractors which were given control of the particular outlets were also not satisfied with the dealing mechanism of ABG. Such as only 12% sharing in profit and contribution not mentioned anywhere in the annual reports of the company. UNCOVER (People, Equipment Process, 15) The fishbone diagram is the process which helps form the critical components of the business. After forming a structure of the organization the company speculates the areas which need to be improved or resulting of the inefficiencies of that particular segment of the organization. The biggest mistake which Avis Budget Group has made is by not recognizing the operators of the company in the annual reports. The agencies or the operators which are running the business in several regions of the world has been completely neglected and are not mentioned in the annual reports. ABG debates that the contractors have only been hired to operate the business functions on the site which is owned by the company. These actions of the company can be considered as discriminating for the company operators because despite they play an important role for the company. The dissatisfaction of the employees is leading to dissatisfaction of the customers. According to a review of the complaints from the customers it was noted that most of the issues which the customers were facing were among follows: Most of the customers were dissatisfied because the quality of the cars which they had rented was not up to the par level. The cars had mechanical issues in them which was quiet troublesome for the customers. If car faces any problem in way the customer was not offered any sort of services ABG. Customers reported to wait for several hours for help or the towing service to arrive on the location. A customer faced issue with the registration of the car which was rented. Due to this the customer had to face a lot of problems with the traffic authorities. The representatives of the company who were responsible for answering to the distressed customers or assisting them did not show due attitude to the customers. This was most irritating for the customer. For any company which provides its customers with services it is very important to have direct interaction between the company and the customers. This should be provided to all including pleasant ones and also to the customer of complaining nature. To overcome these issues the company can take actions to improve the quality of the services which are provided to the customer. This can be done by changing the policies of allotting only 12% of the profit to the contractors to manage the operations. To have an efficient workforce proper remuneration is very important. If the contractors will have sufficient funds to run the company then they would be able to spend on the maintenance of the cars. Skilled and competent workforce can also be hired by the company to ensure that the customers are dealt properly.. Therefore, along with payment deals with contractors the issues of undermining the role of contractors is also main problem in the employee policy of the company. The company is portraying itself as a business which is attracting the entrepreneurs to establish the businesses but is actually hiring employees at a cheap rate. The operating staff of the company is not even valued enough by the company that their name be added in the annual report of the company. These factors are enough to de-motivate the staff towards the company. To deal with the challenges which the company is facing, it must restructure the remuneration and the profit distribution schedule of the company. If the profits which the businesses are generating are reinvested on the business to improve the quality of the cars which are rented and if the staffs are remunerated according to the services they deliver to the customers then the motivation level of the employees will increase subsequently due to increasing competition amongst the employees. The company can also change the employment structure which it is currently offering to the contractors. Avis Budget can hire the same contractors on a fixed wage rate. They can also take notice of the outlets which are incurring losses. The company can also take the responsibility of the management of the outlets which have the most number of complaints from the customers. The company can start a 24 hour help line for logging the complaints of the customers. This will show that the company is concerned about the services which it is delivering and is looking forward towards the improvement of those services. A calling service to assist those customers who are facing any trouble with the car they rented will add significant value to the business. Also the feedback from the customers regarding the services and the satisfaction level that was derived from the facilities of the services can be taken through well structured questionnaires or feedback forms. This will help the company in analyzing the progress which it has done regarding the deliverance of proper customer services. If the company is considerate of the results which it is getting from the steps it has taken for the improvement of the business then the management can introduce new incentive plans to motivate the employees. If the employees are motivated to work then their productivity will increase. Other incentives can be offered to the employees bringing out of box solutions and ideas for the betterment of the company. If a comparative analysis is done than the plan to increase the profit share of the contractors is a better option. If the second plan is accepted than the contractors might not agree to the terms of the company and it will also disrupt the system which has been established over the years. The management of the Avis Budget Group is also satisfied with the current plan. The company considers it to be very effective and wants this system of dealing with the contractors to continue. The company is of the view that this plan is self sufficient of dealing with the contractors because. Since all the contractors are locals of the areas where the outlets are being operated and so understand the requirements of the customers in local areas better. SOLVE The company must look forward at distributing the profits which the outlets of the company generate on the outlets itself so that the expenses of operations can be well managed by the contracted employees. The current strategy of the company is weakening the business structure. This is because the company is increasing the profits which it is generating from the rental outlets. This profit collection by ABG is making it very hard for the independent contractors to deal efficiently with the management issues and the maintenance of the cars of that outlet. If this happens for a long time and the customer satisfaction level keeps on going down the company will start suffering huge loses. To end these problems before loses are incurred by the business the measures prescribed above must be taken. This option is most suited to the current need of the business. Investing in outlets will provide employees motivated alignment to the goals leading to better services for customers. Other options are again requiring cost to be incurred and situations are reflective of company’s reluctance for it. Therefore, single investment will meet all the challenges. The suggestion has been made with technical assessment done using Weighted Matrix. Mentioned below is the weighted matrix with alternatives assessment along and comments: ALTERNATIVES ASSESSMENT WEIGHTED DECISION MATRIX WEIGHT 24 HOUR HELPLINE NET RESULT STRENGTHENING WORKFORCE NET RESULT CUSTOMER SATISFACTION NET RESULT Recommendations Strategy cost 0.05 2 0.1 8 0.4 4 0.2 Impact o sales 0.2 6 1.2 6 1.2 3 0.6 Positive Impact on Brand Image 0.35 5 1.75 7 2.45 8 2.8 Implementation Effectiveness 0.4 6 2.4 6 2.4 6 2.4 Net Result 1 5.45   6.45 6 One of the tools to identify the most suitable option is the weighted decision matrix. It helps in weighing the importance of the decision which is to be made. The criteria on the basis of which the decision was made were the following The cost required to be incurred for the desired solution: The importance of the cost required to be incurred to achieve the desired solution is 0.05. It has given high weight as company has been very considerate in deploying resources. The effect on sales after the implementation of the cost: The basic goal of any business unit is to maximize the sales and increase the profits. The importance scale which has been selected is 0.2. Comparatively low weight is for the reason that company is already gaining significant sales despite problems. The solution’s effect on the image of the company Avis Budget Group:The image of the company is very important and is constantly deteriorating. A strong brand image can help maximize the customer base. For this a net weight of 0.35 has been prescribed. Implementation Effectiveness The importance level selected is 0.4 as solution to the problem is entirely dependent on it. COMMENTS The highest score has been gained by strengthening the workforce. This is very important because if the workforce of the organization will be motivated then the profits of the company will also automatically increase. All the issues which the company is currently facing regarding deteriorating customer satisfaction will decrease. If the staff of the company is motivated then the results of the company will also be flourishing. BUILD To deal with the challenges which the company is facing in managing the current staff it must analyze the problems carefully. After the analysis of the problems it must implementation is more critical step.. The company must increase the percentage allotted to the contractors from the profit which is generated. The profit partnership with the contractors must be increased from 12% to 20%. The company will see that by increasing the margin of the profits will improve the quality of the services which it gets from the employees. The staff will be satisfied and the outcome which is derived from the rental car service outlet will also increase. With the increased cost by 8% (i.e. from 12% to 20%) the company can gain multitude of benefits. . After all the dissatisfactions from the customers regarding the services they were getting, the company is still making profits. On increasing the percentage profits of the contractors and offering incentive benefits on the increased sales to them, ABG can increase customers’ satisfaction by satisfying its internal customers (employees) as well. This will also ultimately translate into sales and hence return of investment is significantly higher. This is also ethically important as company is retaining most of the profits with itself and putting and undue pressure on contractors. This approach remains in conflicting interest of shareholders as dissatisfied customers and contractors’ revolt can any time cause company a backlash. Given below feasibility analysis provides comprehensive assessment with respect to external environmental factors: FEASIBILITY ANALYSIS ECONOMIC Avis Budget Group is a profitable company and has the potential to implement the plan. The group despite of the complaints from the customers is profitable. It can easily sustain the costs to implement the changes ORGANIZATIONAL Avis Budget Group must monitor the outlets which are showing losses. A taskforce must be formed for this action. Organization wide acceptability is mandatory. LEGAL The solution which has been prescribed is 100% legal. There are no conditions in the law which may prove to be a barrier for the company in the implementation of the plan. TECHNOLOGICAL Avis Budget Group is a modern company. The business operations of the company are profitable. The company does not have any sort of technological barrier which may stop it from implementing the solutions which have been prescribed. The company requires motivating the workforce and designing the payment structures which will make the business easily operational in the areas where the customer satisfaction which is achieved is low. ETHICAL SCREENING Ethics are the set of moral values which varies from individual to the individual. They help an individual in determining the actions like what is right or wrong, fair or unfair, moral or immoral etc. For the sustainable business growth, business must asses all the measures for growth in clear reflection of ethical conduct. The solutions which the company plans to implement in order to overcome the discrepancies of the system and to deal with the challenges should be established on the ethical grounds along with cost and benefit analysis. The decisions must not be such that it may break the ethical barrier In addition to the external environment assessment, cost and benefit assessment of the recommendation has also been developed as follow: TANGIBLE INTANGIBLE COST Increased profit rates for the contractor A-24 hour helpline to solve the queries and the problems which the customers may or may not be facing Bargaining power of operators will increase significantly BENEFIT More customers willing to use the services. Less customer and employee turnover More satisfied users worldwide Expansion in the future The brand image of the product will improve The customers would be more satisfied increasing brand loyalty The internal staff of the company will; be motivated. Hence, the over weighing of ethical benefit to ethical costs also supports the decision ACHIEVE To achieve the prescribed goals mentioned in the recommendation for the improvement of the performance of the outlets that are spread across the globe the Avis group must design comprehensive procedure implemented stepwise. The steps which the company must take are mention below: 1. First Phase: Firstly the company must analyze the performance of groups with dissatisfactory results. The complaints of the customers must be thoroughly reviewed. This would require company time period of around month. 2. First Phase: The Avis group must invite all the contractors for a meeting to discuss the performance of the businesses once the company has done its homework on matter.. 3. Second Phase: The contractors must be taken in confidence by the company and the issues which the individual contractors are facing must be resolved. 4. This will make the contractors of the view that their participation is of prime importance for the company. Concluding this phase with offering the contractors new terms of the contract. 5. This will also increase the motivation level of the workforce. After performing these actions Avis Group will also monitor the outlets which are most were complaining about their services. If the problem persists then the company may intervene with the help of a specific taskforce assigned with the sole objective of improving the business functions to increase the customer satisfaction. In later phases when issues with contractors are resolved then improving services with competition amongst the employees and the contractors of different outlets. The company can prescribe incentive and appraisal plans for the employees. This will motivate the contractors to push the employees towards working effectively. Offering incentives is the best way to get the employees of a company towards performing as per their potential.. . The in depth working relationship with the contractors will create a sense of ownership in them for being valued by the company. This will strengthen the bond between the employees and the strategic management of the company. Delivering ownership and empowering the workforce to make their own decision has always been one of the biggest motivating factors. Minimized communication barriers with the employees makes goals of those companies achievable. This implementation shall not be one time practice instead must be constantly practiced. A team can be formed specifically for this purpose by the strategic management of the company. Hence, company can be solve the problems of contractors and customers in goods time without calling for disastrous backlash Works cited Avis budget group. Our Stakeholders. Apr. 2010 May 23, 2013. Bloomberg. Avis Budget Group Inc. 2013. May 23, 2013. http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=CAR Bosse, Douglas A., Robert A. Phillips, and Jeffrey S. Harrison. "Stakeholders, reciprocity, and firm performance." Strategic Management Journal 30.4 (2009): 447-456. Harrison, Jeffrey S., Douglas A. Bosse, and Robert A. Phillips. "Managing for stakeholders, stakeholder utility functions, and competitive advantage."Strategic Management Journal 31.1 (2010): 58-74. Market Watch a. Avis Budget Group Reports Record 2012 Results. Feb. 2013 May 23, 2013. Market Watch b. Avis Budget Group Launches Partnership With Spirit Airlines. Feb. 2013 May 23, 2013. http://www.marketwatch.com/story/avis-budget-group-launches-partnership-with-spirit-airlines-2013-05-08 People, Equipment Process. "Fish-Bone Diagram." Dear Colleagues: 15. Reuters. “Zipcar Bought By Avis-Budget: Rental Car Chain Acquires Car-Sharing Service For $500 Million”. Huffingtonpost, Feb. 2013 May 23, 2013. http://www.huffingtonpost.com/2013/01/02/zipcar-bought_n_2395229.html Sparks, Janet. Avis Budget Pesky Misclassification Problem. Blue Maumau, Dec. 2012 May 23, 2013. Stockhouse. Avis Budget Group Recognized as a 'Best for Vets' Employer. May 2013. May 23, 2013. http://www.stockhouse.com/news/usreleasesdetail.aspx?n=8846502 Read More