Harvard Case - Hertz & Dollar Thrifty
"Hertz & Dollar Thrifty" Harvard business case study is written by Javier Estrada. It deals with the challenges in the field of General Management. The case study is 15 page(s) long and it was first published on : Mar 31, 2014
At Fern Fort University, we recommend that Hertz pursue a strategic acquisition of Dollar Thrifty, focusing on a smooth integration process that leverages synergies and addresses potential challenges. This approach will enhance Hertz's market position, expand its customer base, and unlock significant growth opportunities.
2. Background
The case study revolves around Hertz Corporation, a leading car rental company, and its potential acquisition of Dollar Thrifty Automotive Group, a smaller competitor. Hertz faces increasing competition from Enterprise Rent-A-Car and Avis Budget Group, while Dollar Thrifty struggles to compete effectively in the market. The acquisition presents an opportunity for Hertz to expand its market share, diversify its customer base, and gain access to valuable assets.
The main protagonists are:
- Mark Fields: Hertz's CEO, tasked with driving growth and profitability.
- Scott Thompson: Dollar Thrifty's CEO, seeking to enhance the company's competitive position.
- The Hertz Board of Directors: Responsible for evaluating the acquisition's strategic implications and financial viability.
3. Analysis of the Case Study
The case study can be analyzed using a framework that considers both strategic and financial aspects:
Strategic Analysis:
- Porter's Five Forces: The car rental industry exhibits moderate competitive rivalry, high bargaining power of buyers, and moderate threat of substitutes. The acquisition would strengthen Hertz's position against existing competitors, potentially reducing rivalry.
- SWOT Analysis: Hertz possesses strong brand recognition, a robust global network, and a solid financial position. However, it faces competition from established players and emerging disruptors. Dollar Thrifty offers a complementary customer base, a lower-cost operating model, and a strong presence in specific markets.
- Competitive Advantage: The acquisition would allow Hertz to leverage its brand and infrastructure to expand its reach, potentially driving cost efficiencies and creating a more diverse customer base.
Financial Analysis:
- Valuation: The case study provides information on the potential acquisition price and the expected financial benefits. A thorough financial analysis should consider factors like revenue synergies, cost savings, and potential risks.
- Return on Investment (ROI): The acquisition's ROI should be assessed based on the expected financial benefits, including revenue growth, cost reductions, and market share gains.
- Financial Modeling: A comprehensive financial model can be used to project the acquisition's impact on Hertz's financial performance, considering factors like revenue growth, cost synergies, and potential risks.
4. Recommendations
Hertz should proceed with the acquisition of Dollar Thrifty, focusing on a smooth integration process that addresses potential challenges and maximizes synergies.
Specific Recommendations:
- Strategic Integration: Develop a clear integration plan that leverages Dollar Thrifty's strengths, including its lower-cost operating model and presence in specific markets.
- Customer Segmentation: Identify and target distinct customer segments for each brand, ensuring a seamless experience for both Hertz and Dollar Thrifty customers.
- Brand Management: Maintain the distinct identities of both brands while leveraging Hertz's brand equity to enhance Dollar Thrifty's image and customer perception.
- Operational Efficiencies: Identify and implement cost-saving measures by leveraging shared resources, optimizing operations, and streamlining processes.
- Technology Integration: Integrate technology systems to improve operational efficiency, enhance customer experience, and enable data-driven decision making.
- Talent Management: Retain key talent from both companies, fostering a collaborative and integrated work environment.
- Communication and Transparency: Communicate the acquisition strategy clearly to stakeholders, including employees, customers, and investors.
5. Basis of Recommendations
The recommendations are based on a comprehensive analysis of the case study, considering the following factors:
- Core Competencies and Mission: The acquisition aligns with Hertz's core competencies in car rental and its mission to provide exceptional customer experiences.
- External Customers and Internal Clients: The acquisition caters to a broader customer base, while offering opportunities for internal clients to learn and grow.
- Competitors: The acquisition strengthens Hertz's position against competitors, providing a competitive advantage in the market.
- Attractiveness: The acquisition presents a strong financial case, with potential for significant revenue growth, cost savings, and market share gains.
6. Conclusion
The acquisition of Dollar Thrifty presents a strategic opportunity for Hertz to enhance its market position, expand its customer base, and unlock significant growth opportunities. By focusing on a smooth integration process, leveraging synergies, and addressing potential challenges, Hertz can successfully realize the benefits of this acquisition and solidify its leadership in the car rental industry.
7. Discussion
Alternative Options:
- Organic Growth: Hertz could focus on organic growth strategies, such as expanding its fleet, opening new locations, and improving customer service. However, this approach would require significant investment and may not be as effective in capturing market share quickly.
- Strategic Partnership: Hertz could explore a strategic partnership with Dollar Thrifty, sharing resources and collaborating on specific initiatives. However, this approach may not offer the same level of control and potential for synergy as a full acquisition.
Risks and Key Assumptions:
- Integration Challenges: Integrating two distinct organizations can be complex and time-consuming.
- Customer Retention: There is a risk of customer churn following the acquisition, especially among Dollar Thrifty's loyal customer base.
- Regulatory Approval: The acquisition may face regulatory scrutiny and potential delays.
8. Next Steps
- Due Diligence: Conduct a comprehensive due diligence process to assess the financial viability and potential risks of the acquisition.
- Negotiation: Finalize the acquisition terms and secure necessary approvals from regulatory bodies.
- Integration Planning: Develop a detailed integration plan, outlining key milestones, timelines, and responsibilities.
- Communication: Communicate the acquisition strategy to stakeholders, including employees, customers, and investors.
- Implementation: Execute the integration plan, ensuring a smooth transition and maximizing synergies.
By following these recommendations and taking proactive steps to address potential challenges, Hertz can successfully acquire Dollar Thrifty and unlock significant growth opportunities in the car rental industry.
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Case Description
Mark Frissora, Hertz's chief executive officer and chairman of the Board, had been pushing Elyse Douglas, the company's chief financial officer, to come up with a figure. The figure was how much Hertz should bid to acquire Dollar Thrifty and still generate value for Hertz's shareholders. Frissora had been pursuing the acquisition of Dollar Thrifty for almost three years now, and yet a deal remained elusive. "It's now or never," Frissora told Douglas in early August 2012, when he asked her to come up with a suggested bid for Dollar Thrifty before the week ended.
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