Harvard Case - Enterprise Rent-A-Car in the US
"Enterprise Rent-A-Car in the US" Harvard business case study is written by Meghan Busse, Jeroen Swinkels, Greg Merkley. It deals with the challenges in the field of Strategy. The case study is 20 page(s) long and it was first published on : Jan 16, 2024
At Fern Fort University, we recommend Enterprise Rent-A-Car pursue a multi-pronged growth strategy focused on digital transformation, strategic acquisitions, and international expansion to maintain its competitive advantage and achieve sustainable growth in the dynamic US rental car market. This strategy will leverage Enterprise's core competencies in customer service, operational efficiency, and entrepreneurial spirit while navigating the evolving landscape of technology, competition, and consumer preferences.
2. Background
The case study focuses on Enterprise Rent-A-Car, a leading player in the US rental car industry. Founded in 1957, Enterprise has grown from a small local business to a national giant, known for its customer-centric approach, extensive branch network, and unique business model that emphasizes local market penetration and personalized service. The case study examines the company's strategic challenges in a rapidly changing industry, including the rise of online booking platforms, increased competition, and the evolving needs of tech-savvy consumers.
3. Analysis of the Case Study
SWOT Analysis:
- Strengths: Strong brand reputation, extensive branch network, customer-centric culture, operational efficiency, strong financial performance, entrepreneurial spirit, focus on local markets, strong customer service, robust technology platform.
- Weaknesses: Limited international presence, reliance on traditional rental model, potential vulnerability to online competitors, potential for technology disruption, limited focus on sustainability.
- Opportunities: Digital transformation, expansion into new markets (domestic and international), strategic acquisitions, partnerships with technology companies, focus on sustainability, development of new value propositions.
- Threats: Increasing competition from online players, economic downturns, changing consumer preferences, technological disruption, regulatory changes, environmental concerns.
Porter's Five Forces Analysis:
- Threat of New Entrants: Moderate, due to high capital requirements and established brand loyalty.
- Bargaining Power of Buyers: Moderate, as customers have alternative options, but Enterprise's strong customer service and brand loyalty provide some protection.
- Bargaining Power of Suppliers: Low, as Enterprise has a large fleet and can negotiate favorable terms with suppliers.
- Threat of Substitutes: High, due to the availability of alternative transportation options such as ride-sharing services and public transportation.
- Competitive Rivalry: High, due to the presence of established players like Hertz and Avis, as well as emerging online competitors.
Value Chain Analysis:
Enterprise's value chain is characterized by its focus on customer service, operational efficiency, and local market penetration. Key activities include:
- Inbound Logistics: Managing vehicle acquisition and maintenance.
- Operations: Branch operations, vehicle rental, and customer service.
- Outbound Logistics: Vehicle delivery and return.
- Marketing and Sales: Branch network, online booking platforms, and customer loyalty programs.
- Service: Personalized customer service, local market knowledge, and flexible rental options.
Business Model Innovation:
Enterprise's success stems from its unique business model, which emphasizes local market penetration, personalized service, and operational efficiency. This model has been successful in capturing a significant market share and building strong customer loyalty. However, the company needs to adapt its model to the changing landscape of the rental car industry.
4. Recommendations
1. Digital Transformation:
- Invest in technology: Upgrade Enterprise's technology platform to enhance online booking capabilities, streamline operations, and improve customer experience.
- Develop mobile applications: Create user-friendly mobile apps for booking, managing reservations, and accessing customer support.
- Embrace data analytics: Utilize data analytics to gain insights into customer behavior, optimize pricing strategies, and improve operational efficiency.
- Partner with technology companies: Collaborate with tech companies to integrate new technologies and enhance digital capabilities.
2. Strategic Acquisitions:
- Acquire smaller rental companies: Expand Enterprise's market reach and geographic presence through strategic acquisitions of smaller rental companies.
- Invest in emerging technologies: Acquire companies specializing in autonomous vehicles, electric vehicle charging infrastructure, or other emerging technologies.
- Expand into new markets: Acquire companies operating in international markets to accelerate Enterprise's global expansion.
3. International Expansion:
- Focus on emerging markets: Target high-growth emerging markets with a strong demand for rental cars, such as China, India, and Brazil.
- Adapt business model: Tailor Enterprise's business model to local market conditions and cultural nuances.
- Develop strategic partnerships: Collaborate with local companies and government agencies to facilitate market entry and build relationships.
5. Basis of Recommendations
These recommendations are based on a comprehensive analysis of Enterprise's strengths, weaknesses, opportunities, and threats. They align with the company's core competencies in customer service, operational efficiency, and entrepreneurial spirit. The proposed strategy addresses the changing landscape of the rental car industry, including the rise of online competitors, the increasing demand for digital services, and the need for global expansion.
Quantitative Measures:
- Increased revenue: Digital transformation and international expansion are expected to drive significant revenue growth.
- Improved profitability: Strategic acquisitions and operational efficiencies will enhance profitability.
- Enhanced customer satisfaction: Improved customer experience through digital services and personalized service will lead to increased customer satisfaction.
Assumptions:
- The US economy will continue to grow, driving demand for rental cars.
- Technology will continue to evolve, creating opportunities for innovation in the rental car industry.
- Consumers will increasingly prefer digital services and value convenience and personalized experiences.
6. Conclusion
Enterprise Rent-A-Car is well-positioned to navigate the evolving landscape of the rental car industry and achieve sustained growth. By embracing digital transformation, pursuing strategic acquisitions, and expanding internationally, Enterprise can leverage its core competencies and maintain its competitive advantage. This strategy will enable the company to capitalize on emerging opportunities, address evolving consumer preferences, and create long-term value for its stakeholders.
7. Discussion
Alternatives:
- Focus solely on domestic market: This would limit growth potential and expose Enterprise to increased competition from online players.
- Delay digital transformation: This would put Enterprise at a disadvantage in the increasingly digital world.
- Ignore international expansion: This would miss out on significant growth opportunities in emerging markets.
Risks:
- Technological disruption: Rapid technological advancements could render Enterprise's current business model obsolete.
- Economic downturn: A recession could negatively impact demand for rental cars.
- Competition: Increased competition from online players and traditional competitors could erode Enterprise's market share.
Key Assumptions:
- The US economy will continue to grow.
- Technology will continue to evolve at a rapid pace.
- Consumers will continue to embrace digital services and value convenience and personalization.
8. Next Steps
- Develop a detailed implementation plan: Outline specific actions, timelines, and resource allocation for each recommendation.
- Secure necessary funding: Allocate resources for technology upgrades, acquisitions, and international expansion.
- Build a strong leadership team: Identify and develop leaders with the skills and experience to drive digital transformation, strategic acquisitions, and international expansion.
- Communicate the strategy to stakeholders: Ensure transparency and alignment among employees, customers, and investors.
- Monitor progress and adjust as needed: Regularly assess the effectiveness of the strategy and make adjustments based on market conditions and performance metrics.
By taking these steps, Enterprise Rent-A-Car can position itself for continued success in the dynamic and competitive rental car industry. The company's commitment to customer service, innovation, and strategic growth will ensure its long-term viability and prosperity.
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Case Description
Little more than a year had passed since Chrissy Taylor, granddaughter of the company's founder and daughter of its longest-serving CEO, had been promoted, in December 2019, to CEO of Enterprise Holdings, the parent company of Enterprise Rent-A-Car. Taylor had spent her entire career in the family-owned business, but like all Enterprise employees, she started as a management trainee at a branch office. "Just like everybody else in our upper management, I started behind a rental counter," Taylor said in an interview at the time of her promotion. "I worked my way up in various roles, learning the job by doing it: washing cars, picking up customers." She was determined to continue the legacy of her family's company, which her father famously described as being committed to three things: "listening to and satisfying our customers, creating opportunities for our employees, and achieving long-term, sustainable growth."
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