The American Based Car Rental Industr - Case Study Example

Individual Written Analysis of the Case Enterprise-Rent-A-Car INTRODUCTION The America based car rental industry was established on 20th August 1916 by Josiah Ellis Saunders “Joe”, who was an entrepreneur from Omaha, Nebraska. Initially, he started with one vehicle which was a model of Ford by renting it for ten cents each mile. Later on, Jack Taylor founded the company and named it as Enterprise Rent –A-Car. He was a successful sales manager for Cadillac dealership that used to lease cars. At the initial stage, the main reason for the firm’s success was that the firm invested on the local rental market instead of airports. Enterprise also started developing its relationship with top insurance companies which helped in expanding its business. Moreover, in the year 1980, Jack stepped out from the top post and promoted his son Andy as the president of Enterprise which led to a frequent growth of revenue in the company. In the year 2010, Enterprise became the seventh largest private company in the United States with annual revenue more than 12 million US Dollars. The main reason for success of Enterprise was that the company stressed on providing the best customer service and which created the brand value for the company. Moreover, the company trained its managers in such a way that determined and reduced the demotivating aspects i.e. absence of feedback, misinterpreting the significance of a given task and lack of concern for inefficient performance. In addition, the company divided its market into two segments that involved the local market and the airport market which accounted for revenue of 20 million US Dollars and contributed to the success of the Enterprise (Busse and Swinkels 1-15). Thesis Statement. The study intends identify the key assets, competitive advantages along with activities of Enterprise. Besides, the key challenges as well as opportunities linked to the firm’s business model and practices will also be ascertained and subsequent recommendations will be provided. ENTERPRISE MEETING THE CUSTOMER REQUIREMENTS Enterprise had expended more than 10 million US Dollars to research on the satisfaction of the customers and their valuable experience. It has been revealed that Enterprise focused on the three main aspects which included the approach and effectiveness of the employees, the transaction speed and the hygiene factor of the car. Thus, if these three aspects were attained successfully than the customers’ would be satisfied. It was observed that over 70% customers were essentially satisfied and developed the intention of using the services of Enterprise again. Enterprise also used Enterprise Service Quality Index (ESQi) which was an effective tool for the company to provide maximum satisfaction to the customers. Moreover, ESQi helped in linking the aspirations and careers of the employees with exclusive service to all the customers (Busse and Swinkels 1-15). ASSETS DEVELOPED BY THE ENTERPRISE THAT ENABLED PROFITABILITY AND CUSTOMER SERVICE In the year 2010, Enterprise provided employment to 68,000 graduates of college or university. Enterprise recruited individuals who were oriented towards the goal, had required skills to solve certain problems, decent communication skills, skills for providing customer service, strong ethics for work and were flexible. Enterprise did not recruit the brightest students. They were focused towards more active type of individuals. The offices of the Enterprise were not positioned in a primary retail space, this was a key strategy adopted by it. Moreover, Enterprise did not incur much of expenses on advertising and promotion as compared to the other car rental companies (Busse and Swinkels 1-15). The human resource department of Enterprise recruited more graduates from the university as compared to the other car rental companies. In the year 2011, the company hired around 8500 graduates from various colleges. They recruited individuals who were more oriented towards goal achievement and had a good problem solving capability, which can be termed as a key strength of Enterprise. These graduates were provided the opportunity to create a successful career along with good payment. However, the trainees had to spend their time waiting for the renters, had to clean and wash the cars, pick up the clients and had to do a lot of paperwork. These aspects could be deemed as a demotivating factor or weakness allied with human resource strategy of enterprise. Enterprise used an unusual way of compensating the employees as they used the performance based compensation for the assistants to the Chief Executive Officer (CEO). The company used an array of metrics that included both scores of the customer service and the profitability of the branch (Busse and Swinkels 1-15). Hertz and Avis are regarded as two of the major competitors of Enterprise. Contextually, it can be stated that it would not be possible for Hertz and Avis to replicate the success of the Enterprise due to many reasons. These reasons include that Hertz and Avis incurred a lot of its expenses on national advertising and promotion of its products and services but Enterprise did not spend much of its revenue on advertising. Hertz and Avis were mainly focused on the airport market but Enterprise was focused on both local market and the airport market which approximately generated revenue of 20 million US Dollars. In the year 2010, Hertz was the best airport car rental company in the US trailed by Avis. However, Enterprise was mostly focused on the local market which started providing its services in the airport location after the customers demanded for it. Local market which is also called the home city market was dominated by the Enterprise as it had 6,000 branches which were spread among 50 states. However, Hertz and Avis were still developing their existence in the local market which provides a clear understanding that the success of Enterprise was not comparable with Hertz and Avis. Moreover, Hertz accounted for 10% share in the business of insurance replacement whereas Enterprise covered a majority of share in the business of insurance replacement. In addition, Enterprise was successful as its share holdings in the car rental market was more than double the proportions of Hertz and Avis (Busse and Swinkels 1-15). ENTERPRISE’S FUTURE PROFITABILITY It has been revealed that in the year 2010, Zipcar was the top most provider of car sharing in the US which comprised of 5, 00,000 employees and over 8,000 car sharing vehicles. Zipcar started competing against companies that were profiting in the market which included companies such as Uhaul and Ucarshare. Zipcar also competed against non-profit making companies such as Chicago iGo and San Francisco’s City CarShare. Although Zipcar had a steady growth in their revenue which witnessed a growth of 42% in the year 2010 that amounted to more than 186 million US Dollars but along with the revenue growth they also suffered a huge loss that increased from 4.7 million US Dollars to 14.1 million US Dollars. Therefore, it can be considered that as Zipcar suffered a huge a loss, in the market it was very hard for it to affect the profitability of Enterprise in the future perspective. Moreover, the competitors of Enterprise were entering into the business of car sharing wherein Hertz introduced its services such as Hertz car sharing initiative and Hertz on Demand. Hertz also announced its dealership with several universities and cities and provided facilities of free membership for in-car GPS and one way rentals. However, these strategies would not affect the profitability prospect of Enterprise in the future as the company in the year 2005 introduced rental cars on an hourly basis and provided the service of virtual cars to the customers individually. In the year 2007, Enterprise introduced a business-to-business (B2B) initiative for car sharing and linked with a separate brand which was named as WeCar. At the late phase of 2010, WeCar announced its dealership with dozens of colleges and corporate campuses along with several municipalities in more than seventeen states. Thus, it can be ascertained that the strategy adopted by Enterprise was far more lucrative as compared to ZipCar, Hertz and Avis which ensures that the competitors of Enterprise would not be able to hamper the present and future profitability prospects of its business (Busse and Swinkels 1-15). CONCLUSION Enterprise Rent-A-Car was founded by Jack Taylor. The company’s primary investment was in the local market and it expanded the business by getting associated with topmost insurance companies. Enterprise became the seventh biggest private firm for rental cars in the US. Enterprise was primarily focused on providing good services to the customers, which led to its success. Moreover, Enterprise did not spend much of its revenue on advertising which was an uncommon strategy as compared to the other competitors. In addition, Hertz and Avis based their business functions on the airport market but Enterprise based its business both in local and airport market. Furthermore, Enterprise succeeded in the market as its share holdings on rental cars was twofold the size of its competitors. RECOMMENDATIONS It can be recommended that Enterprise should introduce new motivating factors of team work for its employees. Enterprise should develop a culture of motivated workforce so that they can deliver the finest service to its customers. Customer satisfaction should be given the topmost priority in order to enhance the reputation of the organization. Moreover, the company should encourage its employees to explore their ideas which would be beneficial for the company to implement these valuable ideas. Everyone in the company should be treated equally by considering all the employees as a part of the Enterprise family which would motivate the employees to give their best to the job and enhance their performance. Management process of Enterprise should be organized to ensure effective communication along with efficient training and feedback. Good performance should be rewarded and recognized and the employees should be paid on a timely basis to meet the employee requirements. Work Cited Busse, Meghan, and Jeroen Swinkels. ‘Enterprise Rent –A-Car.’ Kellogg School of Management. (2012): 1-15. Print. Read More