ENTERPRISE RENT A CAR
Enterprise Rent a Car
The automotive industry is faced with dynamic changes due to the newinnovations that keep on streaming in the market. The changes are notonly steered by the arising innovations but also the federalregulations that aim at reducing the gas emission from theautomobiles (Reginald et al, 2003). The ever changing innovations andthe federal regulations pose as a challenge to all car rentalenterprices including the Heartz car rental in US and National carrental service in UK. For such a car rental enterprise to maintaintheir competitive edge it would be necessary to incorporate astrategic plan that meets their short term and long term needs(Peyton et al, 2003). Poor planning can lead to inefficiencies indelivering services thereby affecting the profitability of thecompany. As it was highlighted in the previous chapter, poor planningincapacitates the enterprise’s ability to offer guaranteed rentalsthus failing to satisfactorily meet the needs of the customers. Thissection will look into two main challenges namely, strategic planningand customer satisfaction.
Research on effective planning:
There are various theories that attempt to explain the concept ofplanning. First, the philosophical synthesis theory looks into thesocial, economical and ethical environment facing the variousorganizations (Olsen, 2013). For planning to be effective, it mustincorporate all the factors that are determined by social,environmental, economic and ethical factors. Similarly, therationalism theory emphasizes that by studying human behavior andutility the organization’s can be able to formulate theirobjectives and goals (Bryson, 2011). Lastly, the organizationaldevelopment theory mainly focuses on the means to effectorganizational change. Change is a broad concept with variousdeterminants including innovations, management decisions, employeeturnover and the general organizational environment.
Strategic planning therefore, aims at identifying the possibleweaknesses and threats thereby designing measures to ensure a securefuture (Kevin et al 2007). It gains its substance in theconsideration of the decisions that are made based on the informationavailable in the present time and the consequential effects of suchdecisions. Strategic planning is therefore a continuous process thatinvolves frequent re-evaluation of the previous decisions as a resultof changes encountered within the organization and the changes causedby the external environment (Simerson, 2011). Strategic planning isimportant to a company like Enterprise Rent a car as it will orientthe company to the community needs and customer specifications. Theenterprise should be able to identify the changing consumer needs andincorporate them in their strategic plan. Similarly, the enterprisewill be able to observe the minimum standards when planning for anexpansion. The minimum standards are used to guarantee the requiredlevel of quality performance. In the current times of massivetechnological advancements which are likely to blur the vision of anenterprise, strategic planning comes in handy in defining the futureof such enterprise.
Research on customer satisfaction:
Whereas there are various definitions of customer satisfaction, itis generally the ability of the product/ service to meet thecustomers’ expectations. Several theories have been postulated inattempt to understand customer satisfaction. The theories include butnot limited to the value precept theory and the contrast theory. Thecontrast theory posits that a person who receives a lower value thathe/ she expected from a product/ service is likely to exaggerate thedisparity such that the product appears to be of lower value than itis in reality(Hill et al 1999). On the other hand, the value- precepttheory stipulate that “satisfaction is an emotional responsethat is triggered by a cognitive Customer Satisfaction: ConceptualIssues evaluative process in which the perceptions of an offer arecompared to one`s values, needs, wants or desires” (Westbrook &Reilly, 1983). Enterprise rent a car will therefore been regarded tohave met their customers’ needs if the customers’ expectationsare met by the service provided. Meeting the customers’ needs havea positive impact on their business whereas failure to meet thecustomer needs will make them lose customers to their competitors.
In order to meet their enterprise’s goal which is to be the besttransportation service provider in the world, exceed and maintaintheir customers’ expectations of service, quality, and value, theenterprise should work towards reducing the expectation gap. Thismay call for liaison with other car hire companies whereby if acustomer requires a certain new model car and the enterprise has theold model, they can establish an arrangement with other hiringcompanies with the same model. Those other companies can also referclients requiring an older model that is available in the enterprise.This arrangement will facilitate guaranteed customer satisfaction andstrong business relationship with other car rental organizationswhile keeping the cost of acquiring new vehicles in check (Rea,1998).
Comparative company analysis:
Everyone is likely to need car rental services whether it is due tocar breakdown, moving on vacation or being sent by a company on anassignment. Enterprise and Hertz are two of the top companies in theUS that provides customers with a range of car hire services.Enterprise has a range of vehicles available for hire ranging fromsalon cars to commercial vehicles. The terms for hiring a car inenterprise are flexible allowing for vacation use, emergencies oreven daily, hourly and regular usage with discounts for long termcarpool options. It also has a car share option and the vehicles arelocated in designated locations. They have also incorporatedeco-friendly car options. A customer will only be required to obtaina card a card from one of the company stations and return it afteruse. On the other hand, Hertz has a user friendly website where acustomer can place an order to rent a car online. Much as they do notoffer commercial vehicles, they have a wider range of salon vehiclesthan enterprise which includes hybrids, electronic vehicles, luxury,convertible cars and other standard vehicles and cars for disabledclients. Their customer service is more reliable due to thepossibility of live chats on the website coupled with assistance onthe road options.
Strategic planning and customer satisfaction are important conceptsin the car rental business. Therefore, understanding the customerneeds and establishing a plan that would respond to their needs willgive an enterprise a competitive edge (Cochlan, 2003). Anotherapproach to customer satisfaction is establishing a symbioticrelationship between the two companies where each company wouldbenefit from customer referrals from the other. For example, Hertzcan refer clients for heavy commercial vehicles to Enterprise whileon the other hand Enterprise can refer clients for convertible,luxurious and disabled person’s vehicles to Hertz. This will reducethe cost of purchasing new cars that would have been incurred if thecompany was to meet all the customer needs individually.
SECTION I: CURRENT COMPANY OPERATIONS
The financial stability of Enterprise rent a car has risen over theyears from $1 Billion in 1985 to $17.8 Billion in 2014. Thisincrease was facilitated by the acquisition of 1.5million cars andtrucks and the committed service from the 83,000 employees all overthe world coupled with the enterprise philosophy of placing highervalue on long term impact of the current investments rather than theshort term gains. The growth has been facilitated by ploughing backof profits to assist in daily operations and expand the marketcoverage in order to meet the travelling needs of the enterprisecustomers (Enterprise, 2015). The merging between the Alamo andNational car rental improved the Enterprise operations and increasedprofitability. Later in 2014, the Enterprise established proactivepartnerships with Aqua Hospitality and Aston hotels & Resorts toallow a variety of choice for their guests.
Labor relations issue:
Despite featuring in the Diversity Employers magazine as the largestcollege recruiters in the year 2000, Enterprise was faced with alabor relations issue for firing workers who attempted to unionize.Workers at Boston intended to force the management of the Enterpriseto solve the pending complaints of poor working environs, poor wagesand long working hours experienced by the workers (Cant et al, 2010). Workers therefore sought the US labor organization to institute aboycott on renting a car from Enterprise until they resolve theproblems raised by their employees.
Legal and ethical issues:
The Enterprise Holding is committed to business ethics that calls forthe highest standards of integrity in their day to day businessoperations. The enterprise takes the responsibility to actingappropriately and maintaining highly ethical work environment.However, in 2004 Enterprise was reported to be renting out vehiclesthat were on call due to safety concerns. The manufactures and thenew car dealers are prohibited by law to sell cars that are on safetyrecall. Despite other competitors such as Hertz supporting theagreement that prohibits car companies from renting out or sellingcars under safety recalls, Enterprise was proved to be renting outsuch cars to an extent that one of the cars that was earlier detectedfor a detective steering caused an accident that killed two of itsclients. Such practices should be prohibited as they pose threats tothe safety of the people that innocently rent cars from the company(Parson & Maclaran, 2009).
Technology employed by the organization:
Over the years, the company has had issues in the storage of data asit was relying on paperwork to document the rental agreements,invoicing and customer statements. The volume of paperwork to bemaintained in the stores increased with time as the operations of theenterprise increased causing the enterprise to incur heavy costs onfile storage space and security of such storage places (USDA, 2008).Labor intensive processes cost the company in printing anddistribution of invoices to its customers all over the world(Kossoaski, 2007). Similarly, retrieval of data needed forregulatory, legal and insurance purposes from such numerous fileswould take hours, days or months. The Enterprise therefore,contracted Xerox Company to establish software that would facilitatedocument management in terms of reduction of paper work and storageof vital information in a manner that will be easy to retrieve. Thesoftware also provided for a digital imaging option for the rentalagreements and provided storage for the digital agreements of upto100,000 agreements per day. The digitized documents could then beviewed via a web browser in minutes instead of hours. There was alsoa reduction in misfiled or lost contracts in all the enterprisebranches.
In marketing, good marketing involves segmenting a potential marketand identifying a potential customer (Porter, 1980). Jack Taylor, whowas previously a sales person, recognized that there was untappedneed for car rentals. Most of the companies offering car rentalservices concentrated more on the travelers in the airports and thosein for leisure. Taylor recognized that the people with temporary needof cars also require leasing services and therefore concentrated inthis segment. The major marketing issue was setting up the price.Taylor knew that he has to set a price that is below all hiscompetitors in order to gain a competitive advantage. In order tokeep their prices down, they had to cut costs. One way which enabledthe Enterprise to keep their prices down is the fact that they onlysold their car after they have served a 15months term unlike othercompanies that sold their cars after serving a 6 months term.Similarly, they acquired office space outside the town centers inorder to take advantage of cheaper rates (Halil, 2005). The suburbanstore fronts are less expensive and they are accessible to the targetmarkets.
Another market approach used by the Enterprise is product promotion.The mass media advertising was considerably expensive for theenterprise. The Enterprise therefore used promotions in the garagesand auto repair shops while maintaining good relationships with theinsurance adjusters, this enabled them to get numerous referrals fromthese sectors (Schall, 2003). Lastly, Enterprise rent a car placeemphasis on the customer service. First by coming up with a tagline,‘we will pick you up’ and practicing it despite the challengesfaced in scheduling employees. Promotions are based on the employeecustomer satisfaction ratings. High customer satisfaction willincrease the possibility of coming back thus increasing the companyprofits. Employees at Enterprise get to enjoy a compensation that istied to company’s profits thereby keeping them motivated.
Industry environmental factors
So far enterprise has maintained a competitive edge as the largestcar rental service provider in the world measured in terms ofrevenue. This has been facilitated by their excellent customer careand favorable prices. In order to maintain its relevance in themarket, Enterprise need to keep updating to the ever changingtechnologies that change the customer’s mobility needs (Rooma etal, 2007). The current technological changes in the social media andtelecommunication platforms places the customer in control and inorder to maintain customer loyalty, enterprise need to invest inthese avenues. Other competitors like Hertz have already embracedthese changes by allowing online checking in into their system andlive chats with their customers. Similarly, they need to adopt carsthat have low carbon emissions in order to be in line with thecurrent environmental regulations. The current regressive car rentaltaxes also threaten the viability of the industry in future as thetax burden is passed to the consumer in terms of increased prices(Mohsin & Ryar, 2005). Efforts to negotiate for a tax waivershould be instigated to ensure that the company only pays relevanttaxes to build or improve the transportation infrastructure.
SECTION II- CORPORATE & BUSINESS STRATEGIES
Company’s Mission and Goals
Enterprise was founded on a simple mission that placed emphasis ontaking excellent customer service and employee relations. Its maingoal was to be the best in the provision of excellent customerservice. Its mission is based on their motto which is, “taking careof the customer and employee relations, and the success will follow.”This is an attribute that Taylor learnt in his previous career in theUS Navy. Enterprise goal is effected by establishing new ways ofproviding transportation solutions to individuals and businesses witha main focus on the customer service (Lee et al, 2000).
Enterprise has maintained its competitive edge through its growthstrategies that focus on market development, product development anddiversification. Jack Taylor started the car renting business in 1957with only seven cars. Currently the company has over 7,000 rentaloffices in United States, Canada, UK, Ireland and Germany. Hebelieved in the slogan, “Take care of your customers andemployees and the profits will follow.” Enterpriseincorporated product development services by establishing a thrivingbusiness in an already existing market thereby reducing risk (Reimer&Kuehn, 2005). Enterprise has developed its product through the ‘pickup’ slogan which has led to a strong brand identity. Theorganization has also expanded its scope from car rental to sellingof used car and acquisition of other diversified businesses.
Is the Business line related or a portfolio of investment?
Enterprise has engaged in various business acquisitions some of whichare related to its core business and others unrelated. The mergingwith Alamo and the National was within its core business of carrentals. However, Enterprise purchased other diversified companiessuch as Keefe Coffee Company in 1974 and Mexican Inn Chilli productsin 1977 (Flamholtz, 1996). Therefore, Enterprise has invested inrelated business lines such as the Alamo and the National while atthe same time making a portfolio of investments in different fields.
The diversification strategy adopted by Enterprise was successfulonly to some extent. The acquisition of Mexican Inn Chilli productsdid not succeed as the Enterprise has little knowledge on itsoperations. The major challenge was the buy –back concept where theunsold products could be returned to the enterprise thereby making noprofits (Barbara & Claes, 2003). However, merging with the Alamoand the National resulted to a big success, driving the company intoa leading service provider in the category of car rentals and usedcar sales.
Generic competitive strategies.
Enterprise has employed various competitive strategies in pursuingits business. The use of product differentiation strategy enabledEnterprise to gain a competitive edge from its competitors. Tayloridentified an opportunity that the existing car rental companiesconcentrated their operations in the airports for the travelers andpeople on vacation. He differentiated his services by focusing on theindividuals who needed to use cars temporarily when their vehicleswere under repair or waiting for the insurance compensation(Delahaye, 2000). Similarly, Enterprise used a low cost strategy inorder to be able to offer its services at a competitive price. Byreducing the operational cost such as the cost of renting officespace and the cost of advertising, Enterprise controlled their costsand was therefore able to offer competitive prices to their customers(Bilsen et al, 2008). A continued and consistent focus on thecustomer satisfaction and employee relations has contributed to theEnterprise rapid growth in the industry.
It is evident in this chapter that the Company’s strategies shouldbe evaluated from time to time in order to meet the prevailing marketconditions. Failure to adapt to the changing technology and thecustomer’s needs can reduce an organization’s relevance in themarket or even push it out of the business (Yoo & Park,2007). Itis also evident that the fact that a company has succeeded in onesector is not a guarantee that it will succeed in all other sectors.Enterprise has succeeded in the car rental business but failed in thepackaged goods industry.
SWOT analysis is a strategic approach of identifying the company’sStrength, Weaknesses, Opportunities and Threats. It involves thespecification of the objectives of a business venture and identifyingthe internal and external factors that may hinder or enhance theachievement of the objective (Cole & Kelly, 2011). Enterprise hasmore strengths than weaknesses.
SECTION 1- Internal weaknesses and Strengths
The Strengths are demonstrated by their strong product developmentstrategies, excellent customer service, designated pick up pointsfrom different geographical locations and international marketdevelopment. The competitive strength of an organization is highlydependent on the management competence in enhancing efficientutilization of human and physical resources which leads to thesuccess of a business enterprise (Edvardsson& Gustafsson, 2000).The major elements of the management processes include planning,organizing, controlling, staffing, leading/ directing andcommunicating.
Enterprise rent a car has demonstrated great strengths in theirleading, controlling and communicating channels over the years.Enterprise acknowledges the importance of proper leadership indriving the company’s success. Enterprise engage leaders at alllevels to plan and organize people and resources, set and implementthe budgets and control the operations and services(Tsiakkiros,2002). The dire need of leadership qualities in the company isevident during the recruitment exercises. Enterprise embracesdemocratic style of management where everyone has an opportunity tocontribute to decision making of the company. It also encouragesautonomy among the various branches where branch managers areencouraged to make decisions pertaining to the operations of theirbranches (Zoller, 2007). This facilitates quick response to thecustomers changing needs. Enterprise adopted an open door policy inorder to enhance flexible leadership and effective communicationbetween the employees and the managers. Enterprise values team workand open communication at all levels.
Enterprise also depicts a major strength in staffing. It hasbenefited from the grand recruitment of graduates who are justjoining workforce thereby enjoying the benefits of not only cheaplabor but also the acquisition of young and enthusiastic team ofworker (Robinson, 2003). Despite the past uprising against thecompany by the labor unions, Enterprise designed its recruitmentstrategies that enable it to attract the most qualified personnel inthe market. They have developed strategies that motivate their staffconsequently contributing to low employee turnover. The fact that theemployees are entitled to a share of profits at the end of the yearmakes them own the processes and operate the business as if it istheir own (Bell, 2002). This has promoted high levels of commitmentand dedication from the employees in serving the customers. Also,promotions are based on customer ratings.
However, there have been notable weaknesses in the planning elementof management process where the company is seen to be dragging inefforts to catch up with its competitors for Car rentals. Many times,the enterprise would fail to provide the customer with the required vehicle specifications or when they avail the car specified, thecustomer does not show up to pick the car. Also, poor planning led tofailure of eco- friendly cars project since they did not dosufficient market research to establish that the customers wouldsuffer from fuel deficiency as there were only few fueling stationsoffering eco-friendly services (Uvalic, 2003). On the other hand,enterprise has failed to recognize the changing demand of customerswho prefer newer car models in place of the Enterprise older carmodels. In addition, enterprise has placed age restrictions oncertain cars. Such restrictions can make them lose customers to theircompetitors (Dale, 1965). Unlike their competitors, they havelimited range of salon cars which may inhibit their ability toachieve customer satisfactions by not meeting the specifications ofthe car needed by the customer. The competitors offer luxurious carsand cars that can be used by persons with physical disabilities.Their major weakness lies on strategic planning as they do not deviseplans to meet the ever changing consumer demands.
Section II- External opportunities and threats
Similarly, there is a great opportunity of expanding by increasingthe number of cars available for lease to the public. In addition,the enterprise can offer fuel efficient and eco-friendly cars in themarket. This will be facilitated by expansion of the WeCar service toother countries since they are only offered in the US and UK.Enterprise can also enjoy the swapping of cars from one region toanother or from one office to another as their demand changes (James,et al, 2003). They can also engage in the sale of Automated Rentalmanagement software to their competitors.
Further, the external threats that the Enterprise is likely to faceinclude competition from Hertz which is more popular in the airportsections and National Car rental services which is more common in UKthan the enterprise. This is further emphasized by the Porter’sfive forces model. Michael E. Porter established a framework thatexplains how the competition forces shape the organizations strategy(Porter, 1980). In order to come up with an appropriate strategy,managers should recognize other competitive forces beyond theexisting competitors such as the suppliers, customers, potentialentrants and substitute products. By recognizing the five forces thatdrive the markets, Enterprise should be able to understand thechanging customer needs, new suppliers with better car and businessmanagement technologies and the possibility of substitute to its oldcars by new model cars in the competitive market.
Other threats may occur due to macroeconomic forces such aspolitical, legal forces, technological, economic down turn, terrorismthreat or social forces (Sirakaya& Ekinsi, 2004). If the Federalgovernment designs policies that may not favor the Enterpriseoperations, it can force the Enterprise out of business. Suchpolicies may include curtailing the leasing of old cars or imposinghigh taxes on old car rentals. In the past the Enterprise hasexperience unexpected challenges thereby testing its resilience. Inthe late 1990, in the rise of economic down turn, the companysurvived in the market due to its product differentiation (Oneil,2003). Its market is based on business from the neighboring locationsunlike other stakeholders in the car rental industry whose marketsare based on travelers. Similarly, the terrorist’s attacks in 2001caused the customers to abandon their cars and the Enterprise wasforced to engage extra employees and tow trucks to get their carsback. Enterprise should put in place alternative course of action inorder to maintain its market sustainability.
Section III- Evaluation of SWOT Analysis
Despite the above weaknesses and threats, Enterprise is a strongcompetitor in the market and is continuously growing its fleet sizeand the workforce without compromising its key strategy which iscustomer service excellence (Akca, 2006). However, it needs to keepcheck of its competitors ensuring that it keeps upgrading its cars tomatch the competitors market. Enterprise should also ensure that alltheir offices are complying with the federal regulations and otherregulations such as the legal provisions, ethical standards and thelabor laws (Christen, 1997). This will help them avoid laborrelations issues that led the public to boycott from obtaining theirservices. Such boycott may not only lead to loss of profits but it isalso detrimental to the Company image and brand identity.
SUMMARY, RECOMMENDATIONS AND CONCLUSIONS
As discussed earlier in Chapter 2, the main cause of ineffectivenessin Enterprise is due to poor planning. While the Enterprise hassucceeded over the years, poor strategic planning may limit theenterprise competitive ability and consumer satisfaction (Peterson,1994). This paper researched the possibility that the Enterpriseholding is experiencing challenges in effecting timely planning whichmay result into loss of customers to its competitors. The researchhas also identified two well established competitors in the market.The Hertz car rental is well established in the airport sectors andhas kept pace with technological changes thereby meeting the changingconsumers’ needs for car rentals. On the other hand, the Nationalcar rental services are well established in UK. The currentstrategic plan in Enterprise has failed to capture new opportunitiesdue to changes in technology and consumer preferences therebyignoring the threats from the competitors. Although the company isranked as the largest in the field of car rental services, failure toachieve the strategic planning function to address its weaknesses maycompromise is competitive advantage in future ( David et al, 2008).
Enterprise rent a car has major strengths in the car rental market.In order to maintain the competitive edge even in the future,Enterprise should consider introducing new cars in order to keep pacewith their competitors. The recent introduction of WeCar divisionshould be promoted to public to increase awareness of its existence.The Wecar was devised to offer fuel- efficient vehicles and carpooling to get from one place to the other. Such incentives shouldaim at expanding the WeCar service to other regions where Enterprisehas established business. Similarly, Enterprise should introduce carswapping from one region to the other based on the changing consumerdemands to ensure that there are no idle vehicles where in otherregions customers can have unmet needs. This will facilitateguaranteed car rental. On the other hand, they should introduce a ‘NoShow fee’ to charge customers who have made reservations but do notappear to pick their cars (Singh, 2010). This will reduce theinefficiencies caused by the no shows.
In addition, Enterprise should direct some resources to the researchand development sectors. This will enable them to study andunderstand the changing consumer needs and keep pace with the changesin technologies and legal provisions (Riston, 2008). By financingresearch, Enterprise will be able to study the competitors market,making sure that they are a step ahead in the competition. Enterprisewill also identify opportunities granted by their competitors andinvest in them. For example, they can establish a rental managementdepartment which will concentrate in selling their automated rentalmanagement systems to other companies in the car renting industry.
The field of transport has many untapped opportunities and it is thediscovery of these opportunities ahead of the competitors will enablethe Enterprise to maintain its position in the market. EnterpriseRent a car should make use of the research and development channel toidentify the next sustainable alternative. This may involve matchingtheir key developments with the federal policies. For example, theinnovation of eco- friendly Bio- fuels is in line with the federalenvironmental concern. Proper research and strategy implementationwould result to becoming a market leader in the supply of suchbio-fuels. Such inventions will not only guarantee survivability andincreased profits but also job security for the organizationsemployees and continued customer service which is a huge aspect inthe Enterprise’s mission.
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