Enterprise Rent-A-Car Strategy Essay
Enterprise Rent-A-Car Strategy
Enterprise Rent-A-Car is one of the largest car rental companies in North America. It specializes in providing customers temporary or a replacement vehicle.
Jack Taylor founded the company in 1957 where he started Enterprise Rent-A-Car as an Executive Leasing Company with only seven cars. The company began leasing cars for longer periods. Later on executive leasing launched itself as a short-term rental operation with 17 cars plus a car sales division. That’s when the company changed its name from Executive Leasing to Enterprise Leasing. Established in St. Louis, Missouri, their number of rental units began rising and by the mid 70’s the number of rentals hit 5,000. Enterprise also started offering fuel, maintenance and insurance products.
In the 90’s, Enterprise expanded its operations into the UK and Canada. In 2004, Enterprise started its Month or More service to both business and retail consumers with rental vehicles. Then in 2007, Enterprise expanded into Puerto Rico and the Caribbean. In addition, Enterprise purchased Vanguard Car Rental; National Car Rental and Alamo Rent a Car businesses from Cereberus Capital Management. In 2008, Enterprise and the St. Louis Car Sharing Cooperative launched WeCar which is an environmentally friendly car sharing program.
Enterprise now operates more than 713,000 vehicles including more than 120 different makes and models. It also has more than 8,000 rental offices and operates 230 on-site airport locations throughout the United States, Canada, UK, Germany and Ireland.
1. The strategy Enterprise is using and its components
Enterprise’s strategy is to achieve and fulfill its mission by Jack Taylor’s philosophy: “Take care of your customers and employees first, and profits will follow” Key elements of Enterprise’s strategy involve long-term loyalty, motivation & promotion. Enterprise employees try to build long-term relationships with customers by over delivering on their promise. Motivation acts as a key component of Enterprise’s strategy. Enterprise motivates its employees to provide exceptional customer service by developing, providing opportunities for growth and giving incentives for their achievements. Enterprise promotes managers from within, which creates a hardworking & motivated work force. Their business motto is to hire smart, motivated individuals and give them the tools to run a business by delivering customer service. Delivering exceptional customer service results in repeat customers, which results in growth at each of the local branches. Following business growth, Enterprise’s strategy is to open more branches and create new opportunities for its current employees. Overall, Enterprise’s strategy is to satisfy its customers and motivate its employees to achieve long-term profitability
Product and Market Strategies
Enterprise has a management plan that separates them from others providing them with a significant competitive advantage. Enterprise made a decision to sustain a decentralized, professional, and entrepreneurial approach to management. Decision powers are given at the branch level where the employees are also offered unique training programs. Management trainees and interns start at the bottom learning the different aspects of the business and also experiencing different management styles. After working as a management trainee or intern, an individual has the opportunity to be promoted. Promotions are based off of performance and not on seniority.
Process is Management Assistant > Assistant Manager (Begin to train, supervise and mentor employees) >Branch mangers >Area manager
Enterprise international operations are located in: Canada, UK, Ireland, Germany and Puerto Rico. In addition, the company has more than 900 international car rental branches. The Canadian operation of the company operates a fleet of more than 55,000 vehicles in 500 locations (80 airport locations). European operations for the company are located in the UK, Germany and Ireland.
Analyzing the above strategies, Enterprise appears to be adopting a growth strategy. Their strategy entails introducing new locations, adding new features to existing products.
Analyzing the Industry
Porters Competitive Forces
There are many factors that drive competition within the car rental industry. Price competition may not be the only factor; as companies are focused on implementing a value system and long term profitability. In addition, most companies are gradually lessening their focus on their airline operations and focusing on leisure rentals.
Threat of potential entrants is low since the established car rental companies have continued to increase their market share. Plus, their competition is fierce within the car rental industry. Alternatives to Business Car Rental include video conferencing, virtual teams, collaborative software, personal cars and public transport. Supplier power within the rental car industry is low. Suppliers do not have a significant influence in supplying cars as there are many.
Industry Recognition leading to a strong brand image
Large fleet of vehicles
Large scale of operations
Robust financial performance within the company
Top performer in Customer Service
Concentration of assets
Maintenance and cost of repairs
No one-way rentals
Very capital intensive operations
Growing global car rental market
Increasing use of the internet
Bigger presence at airports
High labor costs
Rising Interest rates
Increasing fuel prices
Taxes & Duty
Keen competition, political issues with specific corporations and high taxes due to the state
Economies of Scale
Mergers and strategic alliances
Environmentally safe cars
Diversification between competitors
Fashions and Taste
Consumer taste differentiation
Online Car Rental Reservation Systems
Overall Market Attractiveness
The overall market attractiveness for the car rental industry is fairly attractive
Consumers will continue to travel and need rental vehicles for insurance replacement rentals and car sharing
With low air travel numbers in recent years, the car rental industry has had a slight decline. Consumers will start to travel as the economy begins to recover from recession. On the flip side, non-airport locations are continuing to grow in revenue from people taking local vacations and insurance customers (Appendix 1 indicates revenue for Enterprise went up during recession). Small car rental companies would need to focus on niche markets or risk bankruptcy.
As shown in the analysis above, there are multiple political issues including legislation, taxes and duty and company cars. Some consumers would get frustrated with the high taxes E.g. Fuel Tax, Environment Tax and Airport Tax. Economic factors shown above include: Excess capacity, economies of scale, diversification and mergers and strategic alliances. Social factors are when consumers tend to have different tastes on vehicles which will cause them to prefer different makes and models. Technological factors such as E-Commerce, safety and plant efficiency plan is an important part as well.
The overall market attractiveness is high as consumers will continue to travel in out of the country and would need to rent vehicles.
There are four main types of consumers: leisure, business, sharing and leasing. These consumers all have a different perspective on the business and what they went to purchase. Leisure consumers may be interested in purchasing an affordable, economical car whereas a business traveler would opt for the luxury model.
2. The actions management has taken to implement strategy, including key policies and procedures, support systems and management approaches The management of Enterprise Rent-a-Car has taken many actions to implement their strategy. From hiring educated, competitive, social employees, giving them sense of ownership, encouraging them to be entrepreneurial, and giving its managers autonomy in operating their locations. To supporting corporate innovation in order to identify best practices and apply this knowledge throughout the company, as they did with their world famous slogan”We’ll pick you up”. Development of things such as the Enterprise Rent-a-Car Cultural Compass, to help guide their service oriented employees in interacting with the customer, each other, and the local community. Employees who followed the values of the cultural compass were recognized for their work and encouraged with the Jack Taylor Founding Values Award and a grant for a local non-profit cause.
Enterprise Rent-a-Car developed the Enterprise Service Quality Index (ESQi), which provides a score for each branch based on their customer service satisfaction, in order to increase customer satisfaction, and managers were held publicly accountable for their scores. Enterprise used compensation and career advancement incentives along with the ESQi to encourage and promote employees, only if their location’s ESQi score was at or above the corporate average would they be eligible for promotion. Enterprise Rent-a-Car, also used the Automated Rental Management System (ARMS), a system which linked all of Enterprises locations together in order to automatically update and also send vehicle status reports to insurance companies, and in 2006 partnered with FIX AUTO Network to provide more efficient ways of sending collision repair and rental status reports to be monitored by insurance companies. Although Enterprise Rent-a-Car encouraged autonomy amongst its manager, and its employees to be entrepreneurial, it still administered some corporate control over individual locations to ensure consistency and to implement and accomplish its goals. Enterprises actions in all 6 of its market segments:
1. Off-Airport Market- Provided great customer service with great prices, which appealed to leisure travelers and value minded business travelers.
2. On-Airport Market- Offered prices at airports that were on average 20% below the industry average.
3. After-Market/ Used Auto Sales- Established a haggle free buying policy, selling cars below the Kelley Blue Book listed retail value. Also all of Enterprise’s used cars passed a 109-point inspection by an ASE-certified technician and had a 7-day repurchase agreement.
4. California Vanpool Services- Prices varied according to van size, round-trip distance, and equipment included.
5. Rent-a-Truck- Provided great customer service, customized billing, and 24-hour roadside assistance.
6. International Operations-Enterprise hired locally, bought cars locally, and focused on off airport markets such as providing corporate travel cars, replacement cars, and fleet management.
Our assessment of culture and the role it plays in the success of Enterprise
Enterprise Rent-a-car culture is based on their core values and what the company lives by. Jack Taylor did not talk about founding values when he started up his business back in 1957 — he and his team just lived by them. They set the example through a personal commitment to the company and its customers. Those values have served as the foundation for their growth and success for more than five decades. And today, this simple, yet powerful set of beliefs is more critical than ever to their continued success; its how they hold themselves accountable everyday. When Jack Taylor founded Enterprise, he clearly articulated his business philosophy. “Take care of your customers and your employees, and profit will take care of itself.” “Treat customers the way you would want to be treated as a customer.” “Repeat customers are the quickest way to build a solid base of business.” “Never promise what you can’t deliver; deliver more than you promise.” “After dealing with us, we want customers to say, ‘This is the best place I’ve ever done business.’”
Enterprise has remained true to these basic principles. Taylor’s philosophy is also reflected in a tool called the Enterprise Cultural Compass, shown below:
The company developed the compass to guide service-oriented employees in conducting business and in interactions with each customer, each other, and their local communities. The compass was also intended to aid employees in focusing on key areas through the organization. To help promote the values depicted in the compass, Enterprise developed an award named the Jack Taylor Founding Values Award, which provided winners with a grant from the Enterprise Rent-a-car Foundation that could be used for qualified non-profit causes in the winners’ local communities. Employees were expected to adhere to these principles in all of their business dealings. A failure to do so could result in disciplinary action or dismissal.
Enterprise Rent-a-car’s Cultural Compass Priorities
Operations – Enterprise evaluate the performance of their operating groups based in large part on how their operations maintain a balance between customer satisfaction, employee development, fleet growth and profitability. They know that keeping a healthy equilibrium among these critical factors is essential to steady, long-term growth. Diversity – Enterprise takes pride in understanding and embracing their differences in ways that drive innovation, connect them completely to their communities and make their company a place that is welcoming to all. A diverse supply chain allows their company to foster growth and opportunities for historically underutilized suppliers, while also mirroring the communities in which they operate. Work/Life Balance – Enterprise is providing an atmosphere that challenges all employees to do their best work helps them achieve successful careers and supports them in their efforts to maintain a healthy work-life balance. Sustaining their strong workplace reputation is critical to their ability to attract and retain the best people.
Helping their employees achieve higher satisfaction and engagement can drive lower absenteeism, higher productivity, better retention and other outcomes that contribute to their overall success. Business Practices – Enterprise takes pride in exemplifying the highest moral standards. They know that they are held accountable by their actions and their reputation, they adhere to the strictest accounting rules and the highest ethical standards, and those standards apply to every single individual. Enterprise takes pride in holding themselves accountable for such high standards because they know that they are only as strong as their reputation that each of them maintains in the minds of customers, potential customers and employees.
Community Relations and Philanthropy – Enterprise is a local company that just happens to have a presence in thousands of neighbourhoods across five countries. They actively support thousands of organizations and donate millions of dollars each year to a variety of causes. They know that business can’t be a one-way street; good will makes good sense. Government Relations – Enterprise acknowledges that it is only with the support of key community stakeholders that they can continue to grow their business and strengthen their reputation as a responsible corporate citizen and valued member of the community. They must build and strengthen these invaluable strategic partnerships on a national, regional, and local scale.
Enterprise values high standards and regard for customers and employees, one can clearly see why they have been winning so many awards for customer satisfaction as well as setting themselves as one of the best employers to work for in Canada. Their culture is based on the their mission, values and high standards for customer satisfaction and employee relations. They base their company on how their founder lived by and they believe their actions are what set them apart from other companies. All of these combined are what play a key role in the success of their company. Having such immaculate standards for themselves is what is helping them be this successful with so much competition. Their customers know that they “will not promise more than they can deliver and they will always deliver more than they promise.”
4. Our recommendations for the management
1. Enterprise can potentially decide to analyze the need of a strategic alliance or potential merge with one of its competitors. A potential alliance will allow Enterprise to continue to conduct business as usual but will allow them to have a bigger competitive advantage among its main competitors. A merge between Enterprise, a medium to large company in the industry will allow Enterprise to meet its current challenges. This will allow them to match up with its current competition which has recently acquired companies in the auto rental industry and has become the second and third largest auto rental company in the industry. Such a merge will stop the recent increase of the Dollar Thrifty Automotive Group and Budget Rental Group. As well, a merge will allow enterprise to increase its market share with its main competitor in the airport segment of the industry, Hertz. The previously discussed merge will allow Enterprise to grow substantially as a company, it has huge market shares in the off-airport market, however, lately they have focused on developing their on-airport market, which has lead Enterprise to gain some market share in that segment, Hertz has begun to take notice and challenged Enterprise in the off-airport market.
Since Enterprise already has a huge lead in the off-airport market it might be hard for Hertz to catch up to Enterprise but they can surely bother Enterprise. By merging with a company it will allow Enterprise to meet those challenges head on, they can have enough off-airport outlets to crush the potential growth of Hertz as well gain on-airport outlets, which can lead to gaining and taking away market share from Hertz. 2. Enterprise should strengthen relationship with insurance companies it deals with. They can strengthen that relationship by offering those companies special deals for their customers. They can offer cheaper pricing for the rental of their cars in case of an accident. By cutting down their profit margin, Enterprise can increase the loyalty of the current insurance company they have partnered with. As well such attractive pricing can pursued with current insurance companies that have decided to go with Hertz to reconsider and analyze the potential of Enterprise as a company who they will use for their customers that are in need of a car. By doing this they will defeat the potential growth of Hertz in the insurance segment of the markets.
3. Enterprise should invest some money in their technology department. Investing money in the development of technology, Enterprise can have a head start in the need for their customers and develop an app to make it easier for them to either rent a car, find a retail location or book an appointment for an Enterprise employee to pick them up for a car rental delivery or a rental return. By developing an app they will be getting ahead of its main competitors and will increase their customer service. Customer satisfaction will increase since it is the company’s core culture and business model. Entering the app market will increase the positive perception currently and new customers have of the customer service that is offered by Enterprise. Enterprise will have entered a market, which had not yet been tapped into. They will increase their presence in the hospitality part of the market by delivering an easier way for its consumers to gain access to their services.
4. Enterprise should develop or adopt a rewards system that other companies are using in order to stay competitive. Their competitors, such as National and Budget are currently using rewards program like air miles. Enterprise should adopt this reward system as well; it will be beneficial for the company to do so. First of all, as previously discussed, it will allow them to stay competitive, it will allow Enterprise to tape into a specific niche in the market where it targets customers who are in that air miles program already or are attracted by the fact that they want to be part of a reward program, where they receive things in return for using a product. By taping into this specific niche there could be substantial profit growth since not many companies are offering such programs. Enterprise already has a huge off-airport market share. A program, such as air miles will only strengthen their position in the off-airport market; as well it can increase their growth in the on-airport market.
Enterprise should also continue emphasizing growth within the company and focus on implementing one of the following strategies:
Although Enterprise already has advertisements on television they could focus on a different approach instead of just using the motto, “We’ll pick you up” such as focusing the commercials on the weekend special deals.
Enterprise could introduce newer models and expand on their luxury car selection. Market Development- Enterprise could continue their global expansion and increase airport locations.
Enterprise could establish a service called “Rent-A-Bike” We think that Enterprise should step outside of their comfort zone and implement a diversification strategy. We believe creating “Enterprise Rent-A-Bike” will gain interest in consumers and also expand on annual revenue for the company.