Characteristics of the Car Rental Industry - Case Study Example

EasyCar.com Characteristics of the Car rental industry: Any business will have particular target customer segments. The rental car industry was targeted mainly at the business segment and the travel or leisure segment of people. Each segment was concerned about different features of the service. The business segment for instance was concerned about the quality of the service, the convenience factor and the flexibility that rental cars offered. Tourists or the leisure segment was obviously more concerned with the cost of the service. In Western Europe, the rental car industry comprised of a few large players who dominated the market. Avis, Europcar and Hertz were very prominent across Europe. However, each region had a prominent domestic player in the market as well and these attracted about half of the crowd for the simple reason of familiarity. These top firms were aware of their place in the market and the reason for their being there. They targeted both business and leisure segments and offered them the services they required most by offering a wide range of vehicles. This meant that the leisure or tourist class could opt to use a lower end vehicle and save on cost and the business segment could choose the best and optimize their experience. The rental car scenario also comprised of a few smaller players who operated out of a few locations only and focused mainly on the tourist crowd, and brokers who did not own a fleet of vehicles of their own but had tie ups with various players in the market and earned via commission from them. It can be said that the car rental industry was at the time very stable in Western Europe. Service delivery was monotonous and there was huge scope for revolution to occur in the segment. EasyCar: Operating to maintain low cost Reducing the operating costs is a key strategy to survive and succeed in any industrial sector, with the rental car industry being no exception to it. EasyCar undertook various measures to keep their operating costs down. EasyCar’s mission was to provide rental cars at low prices so that these could prove to be competition for public modes of transport as well as even owning one’s own vehicles. They followed many simple strategies such as keeping only one type of vehicle at one venue. This worked out well for them as maintenance charges would be uniform. Even when they decided to use different vehicles, they always ensured that there was only one class of vehicles at one location. The reason for choosing to introduce a different class of vehicles was that newer vehicles were costing them lower to maintain on a daily basis and so they could charge the customer lesser. EasyCar always built their facilities near bus or train stations where the cost of the lease was relatively low and there was a constant inflow of tourists. They rarely chose to be near airports and when they did they would be present at just off the airport sites so as to keep their lease costs low. And to make up for this, they also kept their stations open 24 hours unlike their competition that was usually only open from 7 am to 11 pm. EasyCar did not spend on glamorizing the work place. In most of their places, the office space was simple, small and all the physical facilities were kept to the bare minimum. They usually leased out a ready garage and employee space was created within it, in small cubicles that housed computers and other paraphernalia that they would require. They were always ready with a van that held equipment that they would need to instantly set up office at a newly rented garage space. All that was necessary was to add the new location to the EasyCar website. The EasyCar Quality: EasyCar began their services by introducing only Mercedes A-class vehicles for their rental services. The reason behind this was that they wanted to provide the customer with good quality cars. Providing quality services has to be the foremost motive for any organization, and EasyCar to fulfill motive introduced that particular brand of car. Their entire fleet in the beginning consisted only of these vehicles and everyone is fully aware of the class and amazing type of service that these cars are capable of providing. Even when EasyCar decided to expand their fleet and bring in new cars, they never compromised on quality. This move was only made to bring down the operating cost and therefore reduce the cost of the service for the consumer. The focus of EasyCars was on keeping the consumer happy and satisfied. They wanted car rentals to become an option over public transport and even vehicle ownership! For this, they focused on maintaining the quality of their services and keeping their costs as low as possible. Some of their offices such as the ones near airports ran for 24 hours. Also, booking cars with them was extremely simple, via their website. EasyCar ensured that the vehicles they gave out to the customers were clean and hygienic both on the inside and the outside. They had a simple policy that the car be returned the same way. They gave their customers directions to petrol stations, car washes and such. They also mentioned clearly on their website all the terms, conditions and fees that came along with renting a car from them. Consumers were not conned. They were also given the option to purchase insurance from them. Based on all of this, it can be said that EasyCar provided their customers with quality service that would ensure return. EasyCar: The option over public transport and vehicle ownership Stelios aimed for EasyCar to be a viable option over various forms of public transport such as buses, trains and taxis as well as over people’s personal vehicles. in case of EasyCar being a viable option over public transport, it makes sense only for people who are able and willing to drive a car. However, there are many people who prefer to take public forms of transport when they do not want to drive. Even vehicle owners at times use the public transport when it is inconvenient for them to drive, or say find a parking space for their vehicle. In such scenarios, EasyCar will definitely not e a viable option for transport over public transportation. However, for people who do not really travel much, and require a mode of transport sometimes and are willing to drive, EasyCar will be a very good option. It gives them the flexibility to book the car for as long as they require and it is dependable. Another set of people that Stelios wants to target is vehicle owners. At EasyCar they want the rental car to be an option over even vehicle ownership. This does not seem to be a very viable option since owning a vehicle might work out more economical for the consumer, not to mention more dependable as they do not need to book it in advance. EasyCar’s operational design however, has been made in a way to try and incorporate all of the above and induce people from all walks of life to rent a car. They are spreading the message that renting a vehicle can be cost effective and convenient. Their prices are low, and booking a vehicle with them is extremely simple. People can book online as well as call a number and have a car waiting ready for them almost immediately. While this may not break into the vehicle ownership segment, EasyCar may just overtake the demand for public transport! Operational Implications In the last year, EasyCab faced many challenges and had to make changes in order to meet them. For instance, the Office of Fair Trading (OFT), insisted that EasyCar had to give customers a 7 day period after making a booking in which they could cancel their booking and avail a full refund. This rule was set for all agencies that sold to the consumers from a distance, that is, internet or phone, except for accommodation, transport, catering and leisure agencies. The OFT did not pronounce EasyCar as a transport provider since they only gave out cars on hire, not drivers. Since the consumers still had to drive the car, they were only getting a car, not transportation. Thus, the OFT forced EasyCar to give consumers a ‘window’ of seven days, during that period, the customers have the option of changing their mind and cancel a booking. This would prove to be a major operational hazard for EasyCar, as it will lead to both short term and long term problems. With consumers booking and cancelling their bookings, it would mean they would not run to their full capacity. They would lose out on a lot of early bookings where consumers could book in advance and avail lower tariffs. When customers had the option to cancel their booking, it would lead to fall in the confirmed bookings of the place and also, their services would not run full. There would be continuous bookings and cancellations which would lead to a major chaos in the booking centre and utter confusion in the database. Also, people would lose the book-early-pay-less scheme and would easily switch to another operator who was providing them the same services at the same price. The operational scenario would be crazy with such implications. EasyCab would have to figure out a way in which to keep their customers. This seven day window period only seemed to spell doom for EasyCar. EasyCar: Legal Implications EasyCar faced legal implications when the OFT ruled that they had to give the customers a seven day window in which customers could cancel a booking a avail full refund. This would lead to a lot of problems for EasyCar as the company would not be booked to their capacity and thus, the prices of the vehicles would go up. It would also lead to losses for the agency. When the management at EasyCar realized that a lot of their cars were not being returned on time, they knew they had to take drastic measures to ensure their property was returned to them. These vehicles were expensive and owned by EasyCar. Most of the vehicles on their fleet were high end cars such as the Mercedes A-class vehicles. So, in an attempt to get back the missing cars and to scare the customers from doing such things, they began posting the photographs of the culprits who had not returned the car for more than 15 days after the stipulated date, on their website. This created a big ruckus in the media and the legal department also viewed it critically, since it violated the privacy of the customers. Another factor that the legal department was worried about was that EasyCar was managing a very vast database of customers. It was possible to post the wrong picture for the wrong name and this would lead to many legal problems. Thus, if a genuine person’s photo is publicized, it could be violation of his/her privacy and importantly it could create bad name for him/her, leading to costly lawsuits. The company was not doing very well in the eyes of the media, and such bad attention would not go very well with the company name. In terms of legal implications, this does not seem to very serious as EasyCar as mentioned in their terms very well that the photographs are taken both openly and with the consent of the customers. So, they cannot face problems in this regard. Will EasyCar be able to realize its goals? As a service provider, EasyCar brought about revolution in the way consumers perceive car rentals. When people were doubtful about choosing to rent a car because of the high prices, they brought cars for rent at the lowest possible prices. In doing this, they did not even compromise on the quality of the car, but brought in the same fleet of vehicles in all their stations. even when they decided to introduce new vehicles, it was for the purpose of reducing the operating and maintenance costs, and thus the cost for the consumer. Another thing that EasyCar did was to make it really easy to book an EasyCar, by way of a website and dedicated phone lines. Most of their bookings were made on the website since it was simple and quick. Their operation was also very simple and effective. They believed in providing a service to the consumer and they did just that. They did not waste time on frivolities and focused on bringing to the consumer what he needed. They worked hard, had some of their places running 24 hours and saved costs by leasing out ready garages. They were even prepared to set up shop within a few hours. EasyCar revolutionized the way the consumer looked at renting cars. They now want to be a viable option for people to choose over public transportation and owning their own vehicles. Seeing the way that EasyCar has been progressing all this while, there is no doubt that they will be able to achieve this dream of theirs. Even with something as complex as wanting to replace owning vehicles, it is possible. And when we know that Stelios is now going to spending a lot more time with EasyCar, we can be assure that EasyCar will in fact achieve all of its dreams. Read More