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Business Model of Hertz Global Holdings Inc: A Strategic Analysis

Hertz Global Holdings Inc. (Hertz) operates primarily in the vehicle rental services industry. Founded in 1918 as Rent-a-Car Inc., it was later acquired and renamed after John D. Hertz. The corporate headquarters are located in Estero, Florida.

• Total Revenue (2023): $9.5 billion (Source: Hertz Global Holdings Inc. 2023 10-K Filing)
• Market Capitalization (as of Oct 26, 2024): Approximately $2.6 billion
• Key Financial Metrics (2023):
  • Net Loss: $348 million
  • Adjusted Corporate EBITDA: $1.3 billion
  • Total Assets: $23.8 billion
• Business Units/Divisions:
  • Americas: Vehicle rental operations in the United States, Canada, and Latin America.
  • International: Vehicle rental operations in Europe, Asia, Africa, the Middle East, Australia, and New Zealand.
• Geographic Footprint: Operates in approximately 160 countries through company-owned locations, franchisees, and licensees.
• Corporate Leadership: Gil West (CEO), Alexandra Brooks (CFO). The governance model includes a Board of Directors with independent members and various committees (Audit, Compensation, Nominating and Governance).
• Corporate Strategy: Hertz aims to provide mobility solutions through vehicle rentals, car sales, and related services. The stated mission is to be the leading global rental car company, providing exceptional customer service and innovative solutions.
• Recent Initiatives:
  • Fleet Electrification: Significant investment in electric vehicles (EVs), though recently scaled back due to high repair costs and lower resale values.
  • Restructuring: Emerged from bankruptcy in 2021 after financial difficulties exacerbated by the COVID-19 pandemic.
  • Divestitures: Sale of non-core assets to streamline operations.

Business Model Canvas - Corporate Level

The business model of Hertz revolves around providing vehicle rental services to a diverse range of customer segments globally. The value proposition centers on offering convenient and reliable transportation solutions, supported by a vast network and a recognizable brand. Key activities include fleet management, customer service, and maintaining a robust distribution network. Revenue streams are primarily generated from rental fees, ancillary services, and vehicle sales. The cost structure is dominated by fleet expenses, operational costs, and capital expenditures. Strategic partnerships with automakers, travel agencies, and technology providers are crucial. The company leverages its global scale and brand recognition to maintain a competitive advantage. However, recent challenges with EV investments and fluctuating market conditions necessitate a strategic reevaluation of the business model to ensure long-term sustainability and profitability.

1. Customer Segments

• Leisure Travelers: Individuals and families renting vehicles for vacation and recreational purposes. This segment is highly seasonal and sensitive to economic conditions.
• Business Travelers: Professionals requiring rental cars for business trips, meetings, and corporate events. This segment demands reliability, convenience, and premium services.
• Corporate Clients: Companies that contract with Hertz for employee travel needs, often involving negotiated rates and customized services.
• Government and Military: Government agencies and military personnel requiring vehicle rentals for official purposes, typically under specific contract terms.
• Insurance Replacement: Individuals needing temporary transportation while their vehicles are being repaired after accidents.
• Ride-Sharing Drivers: Drivers for ride-sharing platforms who rent vehicles through Hertz’s programs.
• Geographic Distribution: The customer base is diversified across North America, Europe, and other international markets, with varying concentrations depending on regional economic conditions and tourism patterns.
• Interdependencies: The leisure and business travel segments often overlap, particularly during peak seasons. Corporate clients may also utilize Hertz for leisure travel through employee discount programs.

2. Value Propositions

• Overarching Corporate Value Proposition: Providing convenient, reliable, and accessible vehicle rental solutions globally.
• Americas: Offers a wide range of vehicles, from economy cars to SUVs, with a focus on convenience and accessibility through numerous airport and off-airport locations.
• International: Provides similar services as the Americas, with adaptations to local market conditions and customer preferences, including a focus on fuel-efficient vehicles in Europe.
• Synergies: The global network enhances the value proposition by offering consistent service standards and a wide selection of vehicles across different regions.
• Brand Architecture: Hertz leverages its established brand reputation for reliability and quality, while also promoting specific brands like Hertz Gold Plus Rewards for loyalty benefits.
• Consistency vs. Differentiation: While maintaining consistent service standards, Hertz differentiates its value proposition through specialized services such as Hertz Adrenaline Collection for performance vehicles and Hertz Green Collection for environmentally friendly options.

3. Channels

• Primary Distribution Channels:
  • Hertz Website and Mobile App: Direct online booking platform.
  • Airport Rental Counters: Physical locations at airports for immediate rental needs.
  • Off-Airport Rental Locations: Convenient locations in urban areas and suburban neighborhoods.
  • Call Centers: Customer service and booking assistance via telephone.
  • Travel Agencies: Partnerships with travel agencies to offer Hertz rentals as part of travel packages.
• Owned vs. Partner Channel Strategies: Hertz utilizes a mix of owned channels (website, rental counters) and partner channels (travel agencies) to maximize reach and customer acquisition.
• Omnichannel Integration: Hertz aims to provide a seamless experience across all channels, allowing customers to book online, pick up at an airport, and manage their rentals through the mobile app.
• Cross-Selling Opportunities: Promoting ancillary services such as insurance, GPS navigation, and child seats through all channels.
• Global Distribution Network: A vast network of rental locations worldwide, supported by a sophisticated logistics and fleet management system.
• Channel Innovation: Investing in digital technologies to enhance the customer experience, such as self-service kiosks and mobile check-in.

4. Customer Relationships

• Relationship Management Approaches:
  • Transactional: For one-time renters, focusing on efficient service and competitive pricing.
  • Personal Assistance: Providing dedicated customer service representatives for corporate clients and loyalty program members.
  • Self-Service: Offering online and mobile tools for booking, managing rentals, and resolving issues.
• CRM Integration: Utilizing CRM systems to track customer interactions, preferences, and rental history, enabling personalized service and targeted marketing.
• Corporate vs. Divisional Responsibility: Corporate sets the overall customer service standards, while divisions are responsible for implementing these standards and addressing local customer needs.
• Relationship Leverage: Leveraging customer data to identify cross-selling opportunities and improve customer retention.
• Customer Lifetime Value Management: Focusing on building long-term relationships with high-value customers through loyalty programs and personalized offers.
• Loyalty Program Integration: Hertz Gold Plus Rewards program offers expedited service, exclusive discounts, and other benefits to frequent renters.

5. Revenue Streams

• Rental Fees: The primary source of revenue, generated from daily, weekly, and monthly vehicle rentals.
• Ancillary Services: Revenue from optional add-ons such as insurance, GPS navigation, child seats, and roadside assistance.
• Vehicle Sales: Revenue from selling used rental vehicles through Hertz Car Sales locations and online platforms.
• Late Fees: Charges for vehicles returned after the agreed-upon return time.
• Fuel Charges: Revenue from refueling vehicles that are returned with less fuel than when rented.
• Damage Waivers: Revenue from selling waivers that protect renters from liability for vehicle damage.
• Revenue Model Diversity: Hertz relies primarily on rental fees, but also generates significant revenue from ancillary services and vehicle sales.
• Recurring vs. One-Time Revenue: Rental fees provide recurring revenue, while vehicle sales are typically one-time transactions.
• Revenue Growth Rates: Revenue growth is influenced by factors such as economic conditions, travel trends, and competitive pricing.
• Pricing Models: Hertz utilizes dynamic pricing, adjusting rental rates based on demand, seasonality, and competitor pricing.

6. Key Resources

• Tangible Assets:
  • Fleet of Vehicles: A diverse fleet of cars, trucks, and SUVs.
  • Rental Locations: A network of airport and off-airport rental locations.
  • Maintenance Facilities: Facilities for maintaining and repairing vehicles.
• Intangible Assets:
  • Brand Reputation: A well-established brand known for reliability and quality.
  • Technology Platform: A sophisticated IT system for managing rentals, reservations, and customer data.
  • Customer Data: A valuable database of customer information and rental history.
• Shared vs. Dedicated Resources: Fleet management and technology infrastructure are typically shared across business units, while rental locations and customer service teams are often dedicated to specific regions.
• Human Capital: A skilled workforce of rental agents, mechanics, and customer service representatives.
• Financial Resources: Access to capital for fleet purchases, expansion, and acquisitions.
• Technology Infrastructure: Robust IT systems for managing reservations, fleet, and customer data.

7. Key Activities

• Fleet Management: Purchasing, maintaining, and disposing of vehicles.
• Customer Service: Providing assistance to renters before, during, and after their rentals.
• Rental Operations: Managing rental locations, processing reservations, and handling vehicle returns.
• Marketing and Sales: Promoting Hertz’s services and attracting new customers.
• Technology Development: Developing and maintaining IT systems for rental management and customer service.
• R&D and Innovation: Exploring new technologies and services to enhance the customer experience.
• Portfolio Management: Optimizing the fleet mix and rental location network.
• M&A: Acquiring or merging with other rental car companies to expand market share.
• Governance and Risk Management: Ensuring compliance with regulations and managing operational risks.

8. Key Partnerships

• Automakers: Strategic alliances with automakers for fleet purchases and technology collaboration.
• Travel Agencies: Partnerships with travel agencies to offer Hertz rentals as part of travel packages.
• Insurance Companies: Agreements with insurance companies to provide rental vehicles for insurance replacement.
• Technology Providers: Collaborations with technology companies to develop and implement innovative solutions.
• Ride-Sharing Platforms: Partnerships with ride-sharing platforms to provide rental vehicles for drivers.
• Supplier Relationships: Relationships with suppliers of parts, maintenance services, and other essential resources.
• Outsourcing Relationships: Outsourcing certain functions such as call center operations and IT support.

9. Cost Structure

• Fleet Expenses: The largest cost component, including vehicle purchases, depreciation, maintenance, and fuel.
• Operational Costs: Expenses related to rental locations, customer service, and marketing.
• Salaries and Wages: Compensation for employees across all business units.
• Technology Costs: Expenses for developing and maintaining IT systems.
• Interest Expense: Costs associated with debt financing.
• Depreciation: The reduction in value of vehicles over time.
• Fixed vs. Variable Costs: Fleet expenses and salaries are largely fixed costs, while operational costs and marketing expenses are more variable.
• Economies of Scale: Hertz benefits from economies of scale through its large fleet and global network, allowing it to negotiate favorable rates with suppliers and spread fixed costs over a larger revenue base.
• Cost Synergies: Sharing resources and consolidating operations across business units to reduce costs.

Cross-Divisional Analysis

Hertz’s global presence and diverse customer segments offer significant opportunities for cross-divisional synergies. However, realizing these synergies requires effective coordination and resource allocation. The company’s capital allocation framework must prioritize investments that enhance the overall portfolio value and support strategic growth initiatives.

Synergy Mapping

• Operational Synergies: Standardizing fleet management practices across regions to reduce maintenance costs and improve vehicle utilization.
• Knowledge Transfer: Sharing best practices in customer service, marketing, and technology development across business units.
• Resource Sharing: Consolidating procurement activities to negotiate better rates with suppliers.
• Technology Spillover: Leveraging technology investments in one region to benefit other regions, such as implementing a global reservation system.
• Talent Mobility: Providing opportunities for employees to gain experience in different regions and business units.

Portfolio Dynamics

• Interdependencies: The leisure and business travel segments are interconnected, with corporate clients often utilizing Hertz for leisure travel through employee discount programs.
• Complementary Business Units: The Americas and International divisions complement each other by providing a global network of rental locations.
• Diversification Benefits: Operating in multiple regions and serving diverse customer segments reduces the company’s exposure to economic downturns and regional disruptions.
• Cross-Selling: Promoting ancillary services such as insurance and GPS navigation to customers across all business units.
• Strategic Coherence: Aligning the strategies of different business units to support the overall corporate mission of providing convenient and reliable vehicle rental solutions.

Capital Allocation Framework

• Capital Allocation: Allocating capital to business units based on their growth potential, profitability, and strategic alignment.
• Investment Criteria: Evaluating investment opportunities based on factors such as return on investment, payback period, and risk profile.
• Portfolio Optimization: Regularly reviewing the portfolio of business units to identify opportunities for divestitures or acquisitions.
• Cash Flow Management: Efficiently managing cash flow to fund investments and meet debt obligations.
• Dividend Policy: Determining the appropriate level of dividends to distribute to shareholders.

Business Unit-Level Analysis

Selected Business Units:

1. Hertz Americas (US): The largest division, focusing on leisure and business travelers in the United States.
2. Hertz International (Europe): A significant division catering to diverse European markets.
3. Hertz Car Sales: A unit dedicated to selling used rental vehicles.

Explain the Business Model Canvas

1. Hertz Americas (US):

• Customer Segments: Leisure and business travelers, corporate clients, insurance replacement.
• Value Proposition: Convenient and reliable vehicle rental solutions with a wide range of vehicles and locations.
• Channels: Website, mobile app, airport and off-airport rental counters, call centers, travel agencies.
• Customer Relationships: Transactional, personal assistance, self-service, loyalty program.
• Revenue Streams: Rental fees, ancillary services, late fees, fuel charges, damage waivers.
• Key Resources: Fleet of vehicles, rental locations, brand reputation, technology platform.
• Key Activities: Fleet management, customer service, rental operations, marketing and sales, technology development.
• Key Partnerships: Automakers, travel agencies, insurance companies, technology providers.
• Cost Structure: Fleet expenses, operational costs, salaries and wages, technology costs, interest expense, depreciation.

2. Hertz International (Europe):

• Customer Segments: Leisure and business travelers, corporate clients, government and military.
• Value Proposition: Similar to Hertz Americas, but with adaptations to local market conditions and customer preferences, including a focus on fuel-efficient vehicles.
• Channels: Website, mobile app, airport and off-airport rental counters, call centers, travel agencies.
• Customer Relationships: Transactional, personal assistance, self-service, loyalty program.
• Revenue Streams: Rental fees, ancillary services, late fees, fuel charges, damage waivers.
• Key Resources: Fleet of vehicles, rental locations, brand reputation, technology platform.
• Key Activities: Fleet management, customer service, rental operations, marketing and sales, technology development.
• Key Partnerships: Automakers, travel agencies, insurance companies, technology providers.
• Cost Structure: Fleet expenses, operational costs, salaries and wages, technology costs, interest expense, depreciation.

3. Hertz Car Sales:

• Customer Segments: Individuals and families looking to purchase used vehicles at competitive prices.
• Value Proposition: Providing a wide selection of well-maintained used vehicles with transparent pricing and financing options.
• Channels: Hertz Car Sales locations, online platforms, auctions.
• Customer Relationships: Personal assistance, financing options, warranties.
• Revenue Streams: Vehicle sales, financing income, warranty sales.
• Key Resources: Used vehicle inventory, sales locations, financing partnerships.
• Key Activities: Vehicle reconditioning, sales and marketing, financing, customer service.
• Key Partnerships: Financing companies, warranty providers, auction houses.
• Cost Structure: Vehicle acquisition costs, reconditioning costs, sales and marketing expenses, salaries and wages, financing costs.

Analyze how the business unit’s model aligns with corporate strategy

• Hertz Americas (US): Aligns with the corporate strategy of providing convenient and reliable vehicle rental solutions by focusing on the largest market and serving diverse customer segments.
• Hertz International (Europe): Aligns with the corporate strategy by expanding the global network and adapting to local market conditions.
• Hertz Car Sales: Aligns with the corporate strategy by generating revenue from used vehicle sales and managing the fleet lifecycle.

Identify unique aspects of the business unit’s model

• Hertz Americas (US): Focuses on a wide range of vehicles and locations to cater to diverse customer needs.
• Hertz International (Europe): Adapts to local market conditions and customer preferences, including a focus on fuel-efficient vehicles.
• Hertz Car Sales: Operates as a separate business unit with its own sales locations and financing options.

Evaluate how the business unit leverages conglomerate resources

• Hertz Americas (US): Leverages the corporate brand reputation, technology platform, and fleet management expertise.
• Hertz International (Europe): Leverages the corporate brand reputation, technology platform, and global network.
• Hertz Car Sales: Leverages the corporate fleet management expertise and access to used vehicles.

Assess performance metrics specific to the business unit’s model

• Hertz Americas (US): Revenue per rental day, fleet utilization rate, customer satisfaction.
• Hertz International (Europe): Revenue per rental day, fleet utilization rate, market share.
• Hertz Car Sales: Vehicle sales volume, average selling price, financing income.

Competitive Analysis

• Peer Conglomerates: Avis Budget Group, Enterprise Holdings.
• Specialized Competitors: Uber, Lyft, local rental car companies.
• Business Model Comparison: Hertz, Avis Budget, and Enterprise Holdings have similar business models, focusing on vehicle rentals and related services. Uber and Lyft offer alternative transportation solutions through ride-sharing platforms.
• Conglomerate Discount/Premium: Hertz may face a conglomerate discount due to the complexity of managing multiple business units and the potential for inefficiencies.
• Competitive Advantages: Hertz’s competitive advantages include its global network, brand reputation, and technology platform.
• Threats from Focused Competitors: Uber and Lyft pose a threat to

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