Key Success Factors in the Global Auto Rental Industry
Pursuing increasingly higher levels of inventory optimization and logistics performance will continue to reduce operations costs for low-cost car rental providers globally (Fink, Reiners, 2006). Operational efficiency that can reduce the cost per hour rental can be so significant it offsets the costs of gasoline over time as well.
Second, for any company to succeed in the global auto rental market, the focus on how to continually improve and growth the effectiveness of online ordering systems (Reinhardt, 2002) and the continual focus on innovating the customer-facing purchase or rental process (Maniak, Midler, 2008) are critical. While Stelios repeatedly throughout the case discounts the need for managing customer experience, it is a critical aspect of any growth strategy the company has over time (Rao, Smith, 2006). The company will never reach its goals without at least a focus on the process of delivering exceptional customer references as well.
The pricing strategies relied on in the industry need much greater clarity and transparency, from the most expensive and customer experience-centric providers to the lowest-end providers including easyCar.com. Despite what Stelios says about easyCar.com customers looking for price above all else, customer experience is still critical for the creation of long-term loyalty. Customers do not separate or hold pricing away from customer experience; they are linked from the memory of the rental alone.
Finally, the key success factor of how the industry manages operations and logistics, fulfillment and replenishment process workflows will need constant focus and improvement if it is to remain profitable. In conjunction with this focus on operations, there needs to be a corresponding focus on how effectively contract management and compliance management can also be integrated into the overall operations of a rental care company if it is to scale globally (Hall, 2007). The companies who will dominate the car rental industry over time are those that will take these critical business process areas and create sustainable differentiation at the brand, pricing and even the experience level, despite what the founders of easyCars.com believe.
2. easyCar obviously competes on the basis of low price. What does the company do in operations to support this strategy? (5 Marks) (450 words)
During the timeframe of the case study the easyCar.com business model and strategy is working well. There are several factors contributing to this initial success the company is experiencing. First, their approach to optimizing rental car yield (Fink, Reiners, 2006) while at the same time standardizing the fleet of initial rentals on the Mercedes A Series sedans. Standardization as a means to gaining operating efficiencies has proven to be an accelerator of operational excellence in the airline industry (Berry, Shankar, Parish, Cadwallader, Dotzel, 2006) proven by the standardization of Southwest Airlines on the Boeing 737. Secondly, easyCar.com enjoys a significant cost advantage over its competitors by obtaining nearly all of its reservations online. This is in comparison to 10% of bookings from competitors coming from their respective websites. With the Cost per reservation being so much lower and reduced through automation easyCar.com has the potential to generate greater operating income and more liquidity to invest in future expansion. Third, easyCar.com is taking a regional and conservative approach to expansion, aligning their expansion strategies to cities and countries already learned about from expansion by easyJet into these regions. Fourth, easyCar.com continues to invest in their website and its integration to pricing and operations systems (Tiger Telematics, 2003), a decision which turns into the competitive advantage of scalability for them in the future as expansion continues. Fifth, the time and cost of replenishment and restocking of vehicles is shared with customers through fee incentives. This is considered to be completely out of the comfort zone of renters, yet easyCar.com continues to test the low price points leisure travelers require. The company gives renters at the beginning of the rental period car washes and gas stations in the area to help with this process. Sixth, the company also relies on advanced inventory optimization software and integrated IT systems to define the best possible pricing by time of day, by location. While in the case study Stelios sees this as an operational advantage, it in fact needs to be transformed into a positive customer experience (Rao, Smith, 2006). The pricing of the rentals quickly became secondary to inventory turns and optimization....
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Works Cited Europe's hybrid and electric passenger vehicles. (2009, July 27). The Auto Channel. Retrieved August 5, 2009 at http://www.theautochannel.com/news/2009/07/28/472014.html Honda's cumulative world-wide hybrid sales pass 300,000 in January 2009. (2009, February 19). Green Car Congress. Retrieved August 5, 2009 at http://www.greencarcongress.com/2009/02/hondas-cumulati.html Kanter, James. (2009, March 26) Coke Tests a Hybrid Truck in Europe. Retrieved August 5, 2009 at http://greeninc.blogs.nytimes.com/2009/03/26/coke-tests-a-hybrid-truck-in-europe/ McCurry, Justin. (2009, July 19). Toyota picks UK to make new Auris hybrid car. The Guardian. Retrieved August
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