Hertz Car Rental Company Problems and Strategies - Research Paper Example

The will first provide a brief introduction on Hertz Corporation to provide readers an insight about operations of this largest car rental company. This paper will throw light over the internal managerial and organizational structure of Hertz Car Rental Company operational in USA. The author will address various management issues such as whether Hertz is simple or complex organization, its core competences, whether it is centralized or decentralized, the complexity of integrating mechanisms, level of formalization, socialization across Hertz, and finally the implemented model of organisational structure. Having discussed the above, the writer will provide a conclusion to analysis on Hertz Car Rental Company followed by pertinent recommendations for the improvement of currently implemented system. It is worthwhile to mention that Hertz Corporation is a subsidiary of Hertz Global Holdings, Inc. headquartered in USA. The company has established Hertz as the world’s largest general use car rental brand because of premium quality rental services offered to potential passengers worldwide. The company facilitates its consumers through an efficient and sound online booking and reservation system as well as has been operating from more than 9,700 locations. The Hertz Corporation has expanded its business operations across 145 countries worldwide, while the main markets are USA and all major European economies. (Internet: Hertz.com) Answer 1: The Hertz Car Rental Company is a highly differentiated organization because it focuses heavily on brand recognition and awareness. Indeed, the company has also introduced new company logo, commercials, advertisements, employee uniforms, a fleet of modern and technologically advanced fuel efficient cars and ‘remodeled rental locations’ to meet new workplace standards and growing consumer demands (Hein, 2009). The Hertz is a global corporation operational in 145 countries, and thus has several business divisions. The company has already involved in business of car rental followed by other businesses such as Equipment, Truck and Van rental and Car Sales business unit. Indeed, the rental business units offer services directly to passengers that need vehicles for traveling and loading purposes. However, the Car Sales Unit is indulged in disposing off old used vehicles from company’s existing fleet of automobiles so that the old ones could be replaced by new ones. This business strategy is actually implemented to retain old customers and to attract new passengers / travelers who trust on Hertz because of safety, quality and reliability. The major departments in the corporation are Sales, Human Resources, Finance, Process Improvement and Project Management, Marketing, Administration, Information Technology and Vehicle Maintenance. The workers in such departments are trained in a way they could communicate, coordinate and collaborate to successfully implement business policies formulated and assigned by strategic planners at Parent and Subsidiary companies. The organization could not be called as absolutely complex in nature; however, complexity is observed at Hertz Corporation because of team building, task forces and work groups. Indeed, the company is operational in nearly 145 nations; hence there is dire need to maintain discipline, control, decorum and stability across all major divisions worldwide. Employees are empowered because of delegation, open experimentation and participation in decision – making and problem solving process, yet they have to seek permissions and approvals before finalizing their decisions. Hence, the organization does have teams and task forces but it could not be called as 100% complex. For instance, the strategy should be endorsed because Hertz is highly productive, efficient, effective, result- and performance- oriented in nature where both employees and customers are valued and respected. Also, the organization is not simple because the strategic planners have adopted organic model of organizational structure. The company has various divisions such as European, American, Australian, Asian, Middle East etc., in which a certain number of countries are divided because of geographical location. (Annual Report, 2006) Answer 2: Indeed, Hertz Car Rental Company has many core competences provide the corporation a competitive edge over rivals in the same industry. They are as under: Fleet: The first and foremost core competence of Hertz Corporation is that it constantly upgrades its fleet through induction of new modernized vehicles that not only reduces fuel expenses but also reduces maintenance and repair costs of the company. This short – term investment obviously benefits in the long run as it enables company to provide comfortable, sumptuous, better designed and secure vehicles to all traveler and passenger groups. In this way, not only brand recognition, market goodwill and reputation of Hertz enhance but also the monetary gains in terms of profitability are maximized. (Annual Report, 2006) Internal Management and Performance Appraisal: The company has an excellent internal management structure that permits employees to actively communicate, coordinate, experiment and participate in company’s business operations for timely accomplishment of defined goals and targets. Indeed, workers and organizational personnel are highly valued and rewarded if they showcase optimal performance and emerge as responsible employee in the company. In other words, Hertz strongly convict in the statement of a wise person who said that happy and well - satisfied employees put extra efforts to meet or exceed business targets by making their customers happy and satisfied. The top performers are offered extrinsic rewards in the form of remunerations, accommodation, promotion, pay increase, bonuses etc. (Annual Report, 2006) Acquisition of Dollar Thrifty Group: Since Hertz Car Rental Company usually targets leisure and business travelers, the acquisition of Dollar Thrifty Automotive Group would enable the company to entice budget conscious segment of acquired rival firm. In addition, the share of the company in domestic airport business will increase to a considerable 38%, while the number of locations will also increase from 8,000 to a colossal amount of nearly 10,000 locations across the USA and globe. Hertz will obviously benefit financially from increase in customer reach (greater target market), greatest amount of stores and better profitability in extremely challenging business environment. For instance, this will help in reducing stiff competition in the rental industry, which is already threatened from deep slump in demand amid economic recession and bleak employment prospects across the globe. (Stoller, 2010) Hertz is among the top three companies that lead US $20 – 23 billion rental industry. It has become extremely difficult for small rental agencies to compete with Hertz Corporation because of above mentioned core competences and attributes. Hertz enjoys extensive financial resources, which enables the company to survive even in most challenging business years of 2009 – 2010 in which company incurred losses, yet was able to acquire small rivals. For instance, the company will definitely lead the industry in upcoming years because of sound internal management and with endorsement and efforts of hardworking employed personnel. (Stoller, 2010) Answer 3: The strategic planners and top management of the organization seem to be well aware of new workplace requirements and challenges and thus they focus heavily to meet contemporary design challenges. Indeed, the planners have chosen vertical functional structure; however, they also focus on improving internal communication, participation, contribution, continuous learning and other Total Quality Management principles so that employees could come up with their best. The company has various departments and functional units in all subsidiaries established across different geographical regions and nations. Hertz Rental Company wants to make sure there is organizational peace, harmony and unity among workers as it leads to relationship building and goal accomplishment. The company has a decentralized structure as revealed from company’s organizational chart. The Chairman or President is at the top of hierarchy to whom CEO, directors and all divisional heads (European, Asia, American and Australian) are answerable for all business related decisions, policy formulation and implementation. Each divisional head controls its departmental heads, while all middle managers and executives work under supervision and authority of department heads. Hence, in this way, the structure is decentralized because employees at bottom tend to communicate and consult with middle management, which then forwards the information to top managerial level. In other words, information flows from top – to - bottom in hierarchy and vice versa. There has been greater focus on formalization because instructions are provided in written through intranet or communication networks to divisional heads and other employees. (Annual Report, 2006) Indeed, there is greater attention on mutual adjustment and consent across Hertz Corporation so that employees will communicate freely, share their ideas, concerns and opinions, provide recommendations and collaborate to meet mutual goals and objectives. The management also focuses heavily to enhance informal communication because it enables the employees to mingle with each other and to understand people from diverse backgrounds and experiences. Indeed, this also increases the probability of relationship building while reduces the chance of conflicts because of better communication at informal discussion sessions. (Annual Report, 2006) Answer 4: The analysis in last response enables me to conclude that Hertz Car Rental Company conforms more to the organic model of organizational structure instead of mechanistic model. There are various reasons that would support this conclusion drawn from above mentioned analysis. First, there is Joint Specialization and employees coordinate, collaborate and work with each other in the form of groups and teams. Decisions are taken with mutual consent because of participatory internal organizational culture at Hertz. Second, the company is decentralized because employees at the bottom (first line) of hierarchy consult with their bosses at middle management level, while middle managers discuss the issues with top managers. Similarly, the top management assigns and group tasks into departments where middle managers, accompanied with first – line managerial staff, pursue to achieve defined objectives and business targets. In this way, the information flows from top – to – bottom and bottom - to – top because of decentralization. Third, there is greater focus on open communication, participation, teamwork, mutual adjustments and internal socialization so that employees build healthy and cordial relationships to create a peaceful and discrimination free internal culture and environment. Obviously, inter – organizational conflicts (i-e among members) reduces productivity and efficiency that later leads to monetary losses. (Reigle, n.d) Answer 5: Concluding the above, it is worthwhile to point out the fact that Hertz Corporation has been using both vertical functional and divisional organizational structures to manage, administer and control business operations at around 9,000 locations in 145 countries. Indeed, the company could also adopt virtual structure approach so that it could manage employees in multiple nations worldwide through use of technology and IT resources. This, will also, save managerial costs of hiring and training executives. At the same time, the controlling activities may also become easier as the managers have to control a smaller team or work group. Another recommendation to strategic planners is that they could improve existing managerial structure by transforming it into horizontal rather using vertical approach. In this way, span of control will increase and operations could be administered much better as compared to management in current organizational structure. This will also improve communication, collaboration and mutual adjustment among employees that will certainly benefit Hertz Corporation as a whole. References: No author “Annual Sec 10 - K report 2006” Hertz.com, 2006 [Online] Available at https://images.hertz.com/pdfs/HTZ_2006_annual_report.pdf Stoller, Gary “Hertz to acquire rental car rival Dollar Thrifty in $1.2B deal” USA Today 2010 [Online] Available at http://www.usatoday.com/money/industries/travel/2010-04-26-hertz-dollar_N.htm No author “Hertz Global” The Official Board, February 27, 2009 [Online] Available at http://www.theofficialboard.com/org-chart/hertz-global-holdings Hein, Kenneth “Hertz Tries Harder” Brand Week October 17, 2009 [Online] Available at http://www.brandweek.com/bw/content_display/news-and-features/automotive-travel/e3iea9ebb170ad87d3099ae84505262a789 Reigle, R. “Measuring Organic and Mechanistic Cultures” All Business [Online] Available at http://www.allbusiness.com/human-resources/1064730-1.html Read More