Enterprise Rent-a-Car Essay
SWOT With Enterprise, the customer always comes first. This is a major strength that the company has capitalized on in order to separate itself from the competition. Their “We’ll pick you up!” slogan is the primary focus of the company’s customer service aspect. After the customers, the focus is on employees. Good customer service comes from only the best employees and Enterprise wants all of their employees to be happy with their jobs. By offering a sense of ownership and incentives to advance within the company, Enterprise employees are often very satisfied with their positions.
Enterprise is the largest car rental company with the largest fleet and the most rental locations. Because of this, they are easily accessible all over the country. Their main market focus is the home/city market segment and they are the industry leader in this segment with the most market share. In order to stay on top, Enterprise has kept up with technology and has formed many long-term alliances with insurance agents and car repair shops to produce referrals.
Shifting to the weaknesses of the company finds Enterprise falling short in a couple of areas. Enterprise does not have the largest market share in the entire car rental industry. The company has established itself in the home/city market and has not entered the largest segment of the industry””airport rentals. As a result, they have low awareness in the industry. Another drawback is the lack of a frequent customer program. Most major car rental companies have these repeat-buyer clubs as they attract repeat business and create more customer awareness. Within the company, Enterprise is also having problems recruiting good employees. Because awareness of the company is low and the image of working for a car rental company isn’t that glamorous, college graduates often overlook employment opportunities with Enterprise.
The biggest foreseeable opportunity for the company to take advantage of is the airport market segment. This is the largest market segment of the car rental industry and it’s been left untouched by Enterprise. Next would be the under 25 yr. old segment. Rental car companies often leave out possible customers in this segment by either not renting to them or adding large fees to the normal rental rates. Enterprise on the other hand, does rent to the under 25 segment and charges a small fee or no fee at all.
The leisure rental market is another segment that Enterprise can expand into. This market is largely made up of people that want to rent more expensive cars (SUV’s and convertibles) for the weekend. Another opportunity for the company is to expand its system of alliances with businesses and schools/universities. More incentives can be offered to this segment in hopes of opening up more business opportunities.
Enterprise will have to watch out for threats in the industry to keep its competitive position. One of the threats is the opportunity for other car rental companies to enter the home/city segment, which is the stronghold of Enterprise. In order to be competitive in the future, Enterprise must keep up with technological advancements such as Internet applications.
Alternatives There are three broad alternatives that Enterprise can choose to implement if they want to meet their profit and growth expectations for the future. Enterprise could do nothing, target the vastly untapped 25 and younger market, or move into other segments of the overall rent-a-car market. These three alternatives could be used alone or in combination.
One option for Enterprise is to do nothing.
The next option for Enterprise is to target the vastly untapped 25 and younger market. This market is an exceptional opportunity for Enterprise because they are one of the only car rental companies that rents to drivers under the age of 25. To target this group takes commitment and creativity. First and foremost Enterprise needs to come up with more creative ads targeting this segment. Another angle for Enterprise would be to get its name onto college campuses across the country. They could do this by giving presentations at various Universities’ or having a creative national contest for college students. Finally to fully reach and keep the under 25 market, Enterprise must keep up with technology. This segment is the most computer savvy of all age groups and to fully target this market Enterprise must be the industry leader in technological innovations.
The Final option for Enterprise is to move into other segments of the overall rent-a-car market. Enterprise dominates the replacement rental segment of overall rent-a-car market. The replacement rental segment only accounts for twenty-seven percent of the total market. Therefore, there is a huge market consisting of the business and leisure/discretionary markets that enterprise has currently not entered.
Criteria In implementing these alternatives there must be a way to measure the action to see if they are working. The advertising we propose is more of local nature than national. We believe that the National advertising campaign should still be done, but a local one should be done also to compliment the National campaign. The local campaigns should be in the form of newspaper ads and radio ads. The local branch should monitor and select the media. Then the revenue generated from the ad should be four times the cost to run the ad. Once this 4to1 ratio is not met, its time to change the ad or find another media. The Enterprise company culture is such that each individual branch is responsible for its sales and service. To stay in the parameters of this culture each branch should be responsible for its own advertising also.
In measuring the college presentations and the creative contests, Enterprise should monitor the number of resumes that they receive. If the presentations and/or contests do not generate a sizable amount of resumes, then the programs must be reevaluated. Moving into the other segments of the overall rent-a-car market can be measured by profits. Once an airport branch becomes profitable, then Enterprise should start looking at other airports for expansion. In the leisure/discretionary market, track how many weekend rentals and luxury rentals that are being used by each branch.
Evaluation of Alternatives 1. Marketing to the 25 yr. and younger segment Our first alternative is to develop a marketing campaign to the 25-year and younger market segment. Targeting this segment will benefit Enterprise by developing a significant growth in increased awareness not only locally, but also nationally. Increased awareness for the local/city segment will greatly help their all ready prosperous market niche. The recruitment of high quality employees and building superior brand awareness will enable Enterprise to stand above its competitors.
Targeting the 25-year and younger segment, Enterprise will develop a younger clientele and will have a wider range of employees to select from. This can be accomplished by setting up presentations at respected universities around the United States and promoting incentive contests with rewards. Other benefits will include increased profit potential and being a step ahead of its competitors with technology. Technological advancements in the Internet and World Wide Web could add convenience for customers with the creation of an on-line reservation system.
On the other side of the spectrum, some risks could be associated with the targeting 25 and younger segment. These risks will be associated with larger costs in advertising, marketing, and recruitment. Time and energy will also be contributed since a long-term commitment is required. Also, consumers might question the security of on-line reservations.
2. Moving into new market segments Our second alternative is to move into and gain a share of new market segments. These new markets are the airport segment and the leisure/discretionary segment. The airport segment is the largest in the rental car market, due to the immense amounts of business corporations renting out cars for their representatives. Enterprise can distinctly take control of this market segment and more profits and revenues can be attained. With sharing or controlling this market segment, awareness will expand among these business travelers and discounts and incentives can be introduced to incorporate repeat business. For the leisure/discretionary segment, Enterprise can introduce more luxury vehicles that will appeal to the distinctive traveler. The benefits of moving into the new markets are considerable.
Some negative issues can affect Enterprise by moving into new market segments. One is that it is very expensive. There could be numerous costs resulted by missed judged opportunities or mistakes rendered by managers at these airport locations. Secondly, it is very risky trying to penetrate an all ready saturated market, such as the airport segment. Spending money, time, and energy into a new market segment where Enterprise does not have a firm hold can be financially costly and damaging to Enterprises image.
Recommendation Our recommendation, as the Base One Consulting firm, to Enterprise Rent-A-Car, begins with a slow penetration of the business segment (airport rentals) of the car rental market. By entering this segment of the market, Enterprise can penetrate a market in which it formally had no presence in. Also, with the business segment being the largest segment of the car rental industry, there is huge profit potential. We would recommend starting the segment penetration with only the larger airports to limit the cost and risks associated with entering this new segment. Within two years enterprise should evaluate their progress in this segment.
If it proves to be profitable, Enterprise should continue to expand into smaller airports across the country, and have a national presence, in the estimated 150 airports within five years. This will be necessary to maintain the present growth rate of 25% for the company since the home-city market is only growing at about 10 to 15% per year. However, to remain consistent with the companies “decentralized” operations, we feel that the business segment of the industry should be run and managed as a completely separate region, no matter where it is located. This will prevent the loss of focus on Enterprise’s primary market segment, the replacement market, with particular emphasis on neighborhood locations.
The second part of our recommendation for Enterprise Rent-A-Car involves increasing advertising targeted towards the under 25-year-old market. Allowing time for budgeting and the creative process, the advertising campaign should be implemented immediately. This can prove to be very valuable because some other firms will not rent a vehicle to anyone under the age of 25. Similarly, a great opportunity to develop brand loyalty lies in this segment. By “getting a jump” on the other car rental companies in the mind of the consumer, Enterprise can put itself at a strategic advantage. Enterprise has already begun to do this somewhat, with a lower charge than other companies, for the under 25 years old rentals. However, we recommend using a national advertising campaign to not only increase the awareness of renting to younger customers, but also to increase awareness of the company as a whole.
This in turn, will help ease the difficulty of penetrating other segments. Furthermore, a localized campaign, managed by each region, should be implemented to increase awareness, catering to local trends and needs, once again, keeping consistent with the companies “decentralized” operations format. Included in this local advertisement campaign, an emphasis should be placed on the company itself and its job opportunities, highlighting to the younger audience the promotion from within process and profit-sharing opportunities.
Another aspect of the local advertising campaign should focus on employee recruitment. We recommend some type of contest involving a cash reward to generate interest in becoming employed by the company. For example, we suggest implementing a contest rewarding the best creative taped interview or resume with a $10,000 cash reward and an employed position. This contest will generate interest and provide Enterprise with a database of potential employees. Ultimately it will broaden the pool from which Enterprise is able to choose its employees from. This is very important for the future of the company.
Lastly, we recommend that Enterprise continue to keep up with, or ahead of, technology. This continues the emphasis on the younger audience and top-notch employees. Advanced tracking systems, such as the one Enterprise currently utilizes, and convenience are key factors in the future success of the company. Advancements in the area of the Internet and computers is crucial to the sustained growth of this company, especially in the travel segment of the market.
Enterprise must consider the financial aspect of the recommendation by Base One Consulting. If approximately 15 airports location were opened and used to judge the profitability of this segment, and an estimated 125 cars at each location (based on Exhibit 1), with the cost averaging about $20,000 per vehicle, Enterprise would be looking at an initial investment of about $37.5 million. However, the company’s revenue is estimated at about $2.61 billion per year from the replacement market. The profit potential can only be estimated since airport rates very widely. Since the overall car rental market generates an estimated $14.62 billion per year, and the business rentals account for about 40 percent of that figure, there is potential to penetrate an over $5.5 billion dollar market (Figures from Exhibit 2).
In comparison, the costs to implement an aggressive advertising campaign, both nationally and locally, must be estimated from past advertising figures (Exhibit 2). Since Enterprise spent an estimated $22 million in advertising last year, and a more aggressive campaign will be implemented, we can estimate an advertising budget of about $55 million. This should cover all of the national and local advertisements. Although the advertising budget will more than double, it would only account for about 2.1% of the company’s budget. This is less than the industry average of 2.8% of revenue. Overall, by implementing the recommended strategy, Enterprise would be looking at expenditures of about $92 million. Although this is almost 40% of the company’s revenue for one year, many of the funds will come from long-term loans and other sources. Also, the revenues that will be realized by implementing the recommendation must be considered.