Easycar.com Case Study

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TOPIC: Case Study on Case Study of Easycar.com Assignment

There is a clear segmentation of the rental car industry that has focused on the need of the business traveler over the leisure or vacation traveler as the former often can expense car rental costs, even if they include additional fees. This reliance on the business traveler has allowed significant process inefficiencies to become engrained into the rental car industry. As a result, car rental companies globally are often criticized for the lack of focus on pricing consistency, clarity and how all of these factors relate to the customer experience (Garrow, Ferguson, Keskinocak, Swann, 2006). The paradox of how wide and varied a car rental company's selection can be vs. how much a company needs to focus on customer experiences to be successful is central to the problem of how to manage car rental services processes (Fink, Reiners, 2006). The confusion over pricing and the often-opportunistic approaches companies take in defining are more attributable to a lack of customer focus mindset and less on logistics or operational complexity (Thompson, Strickland, Gamble, 2007). Arguably, the logistics, operations and pricing strategies, systems and approaches car rental companies use are much more precisely tuned for inward convenience and less about how to make the customer have an excellent experience (Fink, Reiners, 2006). What appears to be a highly inefficient series of processes is actually very efficient. The upfront charges and costs and the many add-on costs are meant as profit accelerators more than a signal of process inefficiency. Despite the often exceptionally high prices from additional charges, many car rental companies who primarily serve the business traveler find that this segment of customer will not push back. This segment, which represents between 35% to 55% of total rentals, requires a reliability and availability, selection, service and a superior customer experience over price. The business traveler continues to be at the center of competitive strategies on the part of the majority of car rental companies as well. Strategies companies have relied on for enabling greater levels of customer loyalty include delivering outstanding and highly focused, responsive service, which seeks to deliver memorable customer experiences (Rao, Smith, 2006). The more challenging the global economy gets, the greater the reliance on customer service as a primary differentiator across car rental companies serving the business traveler. As recessions reduce the number of companies who are sending their employees on the road, each experience a business traveler has is critical for the long-term value of a car rental company's reputation. Because of this fact, many car rental companies are doing exactly the opposite of what easyCar.com is; they are concentrating on customer service over and above just price or availability. This strategy of concentrating on exceptional service over cost is one of the most differentiating factors between car rental companies globally (Lorenzo, Foley, Dipp, Lane, Le, 2010).

easyCar.com has taken a very contrarian view however and found a niche in the more price-sensitive tourist and leisure segment, which is between 45% to 65% of the total market. The start-up has also concentrated on price elasticity in the leisure market, even though the demand curve is essentially flat. When demand curves in industries with a high number of substitutes is relatively flat, price reductions have little net effect on demand (Berry, Shankar, Parish, Cadwallader, Dotzel, 2006).

Turning the Low Price Leader Position into a Unique Value Proposition

easyCar.com however is not so much relying on low-end pricing for its economic impact on the industry specifically to drive demand. It is relying on the low price leader position as a market positioning strategy relative to competitors and attempting to force comparison-shopping relative to alternatives (Lawrence, Solis, 2005). This is why Stelios sees easyCar.com as a viable competitor against public transportation, appoint discussed in a later question of this analysis (Kirsner, 2002). While easyCar.com will not find its place as a suitable substitute for public transportation, the direction is a viable one in the industry as is evidenced by Southwest Airlines (Garrow, Ferguson, Keskinocak, Swann, 2006). Southwest took the low price value proposition and created a market position as being cheaper to fly to another city hundreds of miles away vs. driving (Garrow, Ferguson, Keskinocak, Swann, 2006). This unique value proposition is supported by the operations and costing structure scalability of Southwest Airlines, yet does not apply well to casual or short-term auto rentals.

Because of the dominance of the business travel segment in the auto rental industry, easyCar.com faces formidable challenges in growing into this market, despite the price and convenience factors they mention as core to their unique value proposition. It is very contrary to the business traveler experience to require customers to wash their own rental cars and make sure the fuel light is not on. These two requirements alone are way outside the requirements of the comfort zone of most experienced renters. Yet making customers part of the service value chain is trimming a significant amount of costs out of the total operational costs of running a location and the entire company, and this is unusual in the global car rental industry (Kirsner, 2002). Not surprisingly, easyCar.com is getting pushback from regulators for their unorthodox and often nonconformist approaches to doing business, especially throughout Europe (Lawrence, Solis, 2005)

Analyzing the Global Car Rental Industry using the Five Forces Model

Porter's Five Forces Model provides insights into the structure, direction and dynamics of industries whether they are regional or global in scope (Porter, 2008). The Five Forces Model also provides useful analysis that can be used in defining the future strategy of easyCar.com as well. The following sections define the Porter Five Forces Model for the global auto industry, defining each component or factor and analyzing them from the standpoint of the auto rental industry and when applicable, how the factors will influence the operation and growth of easyCar.com.

Constructing the Five Forces Model for the Global Care Rental Industry

When constructing the Five Forces Model based on easyCar.com, it is very important to focus on the dominant economic features as defined in the case study and research completed as part of this analysis. Of these factors, the scope of competitive rivalry, number of buyers, supply/demand conditions, economies of scale and learning/experience curve effects all contribute to an imbalanced Five Forces Model for the car rental industry in general and for easyCar.com specifically. This imbalance actually works in favor of low cost providers including easyCar.com as they are competing not only with more expensive car rental providers, but also with substitute forms of transportation to an extent. A case in point is how easyCar.com relies on their website to drive the majority if not all bookings and reservations. It is important to note that well over 90% of easyCar.com bookings are managed online, while competitors average just around 10%. This quick learning of how e-commerce works has been attributed to the lessons learned from easyJet and the more complex logistics and operations systems of running an airline vs. A car rental company (Clark, Yuk, 2010). Stelios has been praised in the media for making the operational move from airlines to car rentals, including recognition of his expertise in operations and logistics (Kirsner, 2002). easyCar.com however continues to suffer from a reputation of being difficult to appreciate from a customer experience standpoint, a point of contention with new-hires in key marketing and management roles (Bold, 2003).

Assessing the Threat of New Entry & Buyer Power, the Two Most Potent Forces

The most powerful forces during the time of the case study affecting car rental companies during the case study were the threat of new entry and the potential for buyer power to re-order the market. Rivalries that easyCar.com have started will continue in the global rental car market, transforming the fragmented industry into one that is eventually consolidated through mergers and acquisitions. Buyer Power is the most potent force in the Five Forces Model as the easyCar.com business model has shown. What easyCar.com's market growth in the case study specifically shows is that when changes to a service value chain take into account unmet needs of consumers, rapid and profitable growth can happen (Maniak, Midler, 2008). Supplier Power is relatively stagnant and unchanging as easyCar.com initially begins only with the Mercedes brand and in January 2003 adds the Ford Focus, Renault Clio, Toyota Yaris, and the Smart Car. There is also the threat of substitution, mostly from mass transit. The independence and scheduling of easyCar.com, which has become part of their website scheduling system, counters any potential substitution threats. easyCar.com has been able to accomplish this by concentrating on key success factors that are based on convenience and cost over customer experience. Technology-related key success factors include the reliance on the website as the primary means for booking and scheduling cars, the use of advanced planning and scheduling applications including inventory allocation software applications that give easyCar.com greater control and speed in meeting customer's requirements. The distribution-related key success factors that easyCar.com to… [END OF PREVIEW] . . . READ MORE

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Easycar.com.  (2010, August 31).  Retrieved September 18, 2021, from https://www.essaytown.com/subjects/paper/case-study-easycarcom/2046

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"Easycar.com."  Essaytown.com.  August 31, 2010.  Accessed September 18, 2021.