Easycar.com Inspected in the Detail - Case Study Example

HERE YOUR HERE HERE Case Study Analysis: Easycar.com Characteristics of industry This particular market structure is essentially an oligopoly, in which are there only a handful of very large competitors and where competitive strategies are mimicked in an effort to seize market share. In this market structure, there are significant cost barriers to entry and thus competition is reduced leaving major players to strive for dominant market positions. The market serves two types of consumers, tourists and business consumers who represent the majority of revenue production, nearly 50/50. The somewhat homogenous nature of the industry, this being streamlined to provide similar services, requires companies to differentiate their products and services in order to gain competitive advantage. For example, EasyCar partnered with Mercedes, thus offering luxury vehicles, as a means to separate itself from competition and give itself a distinct, differentiated market presence. The tangible structure of this industry determines how service delivery is performed. Fleet volumes and locations dictate the amount of consumers that it can service in a specific period of time, which is either limited or advantageous depending on fleet volumes. For example, EasyCar can service only 10 percent of the volume that Hertz can achieve due to the high disparity between fleet volumes with these two companies. Further, the choice of location for EasyCar and other competitors determines how service can be delivered as some locations have more population volume and thus more customers to be able to service effectively. The online element of e-commerce also dictates how services are provided with a focus on convenience. Operational issues By minimizing actual facilities, EasyCar.com can spend this capital on other improvements rather than taking on the high operational costs of facility ownership. By providing online convenience and through capital reservation, EasyCar maintains significant advantages even over larger competition. This gives them tremendous pricing advantages over larger competition such as Avis Europe and Hertz who maintain many facilities that require capital investment. EasyCar also avoids high-priced promotional advertising as a means to reserve capital and thus provide lower costs. Use of posters, promotional merchandise and cheap guerrilla marketing (the orange suits) are methods of spreading the brand without absorbing high costs. Where Hertz and other companies utilize television advertising that requires significant production and ad-space costs, EasyCar maintains advantages by reducing its marketing costs in a variety of different ways. Only 1.43 million pounds were spent on advertising in 2002. Further, by offering one hour rentals, they are able to promote a lower price than other companies that will rent by the day with a higher price tag. By having the customer take care of cleaning the vehicle after rental, it removed the labour costs associated with having in-house staff perform these tasks. Having customers fuel the vehicles rather than having staff perform this time-consuming task also gives the business more price flexibility with more payroll advantages. Staying away from facilities management near major airports was another advantage to providing lower pricing policies. This was an effort to reduce the high costs of leasing a facility near major centres of consumer traffic. By keeping facilities small, it too saved on costs that could be passed back to the customer. EasyCar quality assessment Assessing quality returns a mixed result. EasyCar attempts to promote convenience to customers by offering differentiated services and online convenience. By giving them more rental time options, it satisfies the needs of customers related to price-consciousness and also to satisfy their tangible rental needs. These are excellent markers of service quality related to providing options that understand the genuine needs of travellers. However, the fees associated with rental are significant for minor contractual infractions, such as cleaning fees and the fees associated with the 100 km limits on daily travel (which is only about 60 miles). Travellers who use rental cars are going to be more likely to want to explore the local region where they have accommodations and will therefore exceed the 100km limits. Having such a low mileage restriction does not seem like a quality strategy especially when tourists make up approximately 50 percent of their entire revenue production. This is supported by the different negative consumer attitudes associated with perceptions of hidden fees, leading them to put more transparency on their booking website associated with additional fees. However, such additional fee restrictions reduce their service quality. The 30 minute processing time for customers is also a service quality reduction. EasyCar should establish a better system of verifying customers to avoid these wait times as this usually leads to disgruntled customers. The extensive risk management activities of photocopying identification and scanning contracts are not quality business practices related to customer satisfaction. Competitive viability EasyCar is definitely a viable competitor to taxis, trains and buses. These systems operate on specific timelines and therefore can only service customers according to scheduling. EasyCar provides real-time rental options so that there is no waiting for trains and buses and, at the same time, taxi fees continue to grow each year. Taxis are point-of-service delivery systems that require additional service procurement if the client decides to leave that location and travel to another. EasyCar provides convenience in relation to time management for the diverse customer. For the ostentatious buyer, having deals with Mercedes provides psychographic positioning related to the upscale purchaser that appreciates flashy purchases. The options for luxury-based travel at EasyCar is much superior to the taxi, bus and train systems which are not always clean and do not offer any sense of consumer privacy whatsoever. The fleet design in operations, alone, competes successfully with the less-inviting public and taxi systems. Establishing a system where the business can monitor and control one hour rentals also competes successfully with buses, taxis and trains that typically provide this instant service for a one-time procurement. Other competition that does not provide this gives EasyCar a competitive edge against taxi and public services by setting up a model of operations that can sustain one hour rentals. The only way that EasyCar does not compete is that public systems are either free or very low cost and even the one hour rental prices do not compete with these systems in terms of pricing, except for taxis which are notoriously high cost for one-time use. Operational implications Changing advertising focus to include television advertising will increase the operational budget by 1.6 million, thus reducing their cash flow for other investments. This can take away resources that could be used for expansion or more fleet procurement to service more customers. Additionally, the usage of luxury vehicles increases the procurement costs for the fleet (i.e. Mercedes) when instead the business could continue utilizing smaller cars that are more gas-efficient and less cost to the budget traveller or businessperson. For a business that wants to compete on price, they continue to take on loans that require interest repayments that again take away from cash flow availability. Procurement of high cost automobiles adds more operational costs in terms of maintenance and general purchase prices. Having customers perform the duties of cleaning and gassing the vehicle, though quality for the operational budget, have potential negative implications in terms of word-of-mouth advertising. Customers who are charged additional fees or have to worry about the inconvenience of performing these tasks might spread negative post-purchase evaluation to other consumers who will not select EasyCar based on these assessments. The one hour rental is intended to make a fast and convenient service for customers and this operational change could actually backfire in terms of establishing brand loyalty or future brand equity. Legal challenges The changes imposed by the Office of Fair Trading (OFT) are significant as it forces changes on the EasyCar operational model. Giving customers a large span of time by which to cancel their booking impacts accounting practices, scheduling, and other factors related to keeping adequate records to ensure rapid and convenient service. OFT rulings favour the consumer standpoint and could impact profitability for last-minute cancellations. After a client arrives at a destination, as one example, they might suddenly find a better incentive value with a local rental car agency and then cancel their booking. This could lead to serious loss of revenue. Posting pictures of individuals who did not return cars also seems to violate privacy laws and non-defamation laws that are of particular legal concern. Even though the company is attempting to send a message of zero tolerance through this, they face potential libel suits from people who have their picture posted in public view. These pictures are put online, which further makes late customers more visible to multiple demographics that are simply browsing the website. Even though it acts as discouragement for people who would keep cars over the contract period, there are too many legal loopholes that could cost considerable amounts if EasyCar faced disgruntled customers in the courtroom. The policy of posting pictures in this fashion should really be eliminated as part of risk management. Likelihood of goal attainment In terms of price competition and the ability to outperform competition with low cost service offerings, they are likely to stay a leader since they are able to keep their operational costs low through minimal facility development. Being a smaller competitor gives them significant cost advantages in relation to labour and fleet management that can help them build revenues for convenience and the budget-minded traveller. Additional promotions on television, when launched, will definitely give them more market visibility even if the costs are increased. Promotional materials, if targeted properly in key markets, will give EasyCar a well-established brand name that is recognizable by many consumer audiences. Heavier promotion is usually a success factor for a global market business. EasyCar also seems to have a very good credit record, if this small organisation was able to procure a £27 million loan from a consortium of banking institutions. This is necessary if the business wants to procure capital for expansion and other fleet improving philosophies. A quality credit record gives the business advantages especially if they are timely on accounts payable and are able to create worthwhile business plans for international lenders. This will help the company achieve its long-term goals simply in terms of capital procurement. Stelios has also learned from his past mistakes and would not model them again in EasyCar, such as with the Internet Café business. Having a quality management team that understands how to properly plan and strategize, even if learned through experience of failure, give EasyCar more hope for achieving its long-term goals. Human capital is one of the most fundamental strengths a business can have. Read More