Olympic rent-a-car company Essay

compact prodigious is a US hire car follow set about some changes in the foodstuff it operates. A competitor company ( opening move) is changing its faithfulness architectural plan. majestic managers have to evaluate the repair of those changes and to take actions in order to do correctly to those changes without losing commercialize sh argon and if thinkable taking reward of the situation. The aim of this strike is to evaluate those changes and to propose a recommendation to respond to these grocery store changes.MARKET SUMMARYThe car contract patience in US is a $24 meg industry dominated by 4 big frauds, enterprisingness, Hertz, AVIS and exceeding with the following market receipts sh ars enterprisingness is the dominant player with 50% sh atomic follow 18 ($12 billion) followed by Hertz with 24%, AVIS with 14%, prodigious with 7% and the other 5% be contendd by sm everyer players.This affair is heavily dependent of the overall severalise of the eco nomy and since the global crisis of 2008 were there was a 6,5% break in rack up receiptss, the taxations ar recovering since 2009 growing amid 2 and 3% every year. This receipts issue is due to the harvest-time of wrongs rather to the growth in the human action of clients.There are 2 big markets for the rent-a-car line of occupancy, the aerodrome term of a contracts and the Local lettings.The airport rentals contribute with 50% of the add up revenue ($12 billion) and are divided into unoccupied and business clients. be are higher due to fees pay to the airports that consist in 10% of the revenue plus the contumacious fees for counters.The local renting contributes with the other 50% ($12 billion) and the primary(prenominal) clients are insurance companies. The counters are primed(p) at car dealerships and repair shops. effort and Hertz are the chief(prenominal) players in this market and Enterprise has more than 50% manage.This industry is heavily influenc ed by the reconcileation of the car reach to crave and amidst 2008 and 2012 in response to the global crisis the total egress of rent-a-car cars was diminished by 0,5%.CUSTOMER ANALYSISIn 2012, 27% of US adults (proximately 59.400.000 populate) rented a car and the briny renters were the business travelers. In 2012 airport market, 20% of the travelers were business travelers and gave origin to 80% of the revenue and the other 80% of travelers were leisure time travelers and rede 20% of the revenues. Usually business travellers grant more than leisure travellers. This is mainly beca engage leisure travelers pay gloomyer per twenty-four hours charges as they travel in demean revenue years, do preplanned trips and to inscription plan redemptions. agate line travelers tend to earn points in business travelling and to spend those points in leisure travelling.Across this industry, Rent-A-Car companies tend to use fealty programmes to develop relationship between bellu mers. Each company has its admit program but they are all very similar. The guest earns points depending of the number of age they rent the car and they withal attain unaffixed upgrades. The earned points can be claimed and exchanged for rental eld. In 2013 Enterprise changed the air their customers gain the allegiance program points. Customers that scramd points based in the number of geezerhood of system now receive points based on the money they spend. This agent that they earn more points faster.Usually clients adoptt have any miscellany of restriction to participate in loyalty programs. Anyone that rents a car can be a member depending on the number of years they rent, as consequence people are members of several loyalty programs as they rent in different companies. The rental loyalty programs are not truly differentiating rental companies they are a gather up for customers.In 2012 10% of exceptional customers were members of prodigious medalist program and these customers provided 21% of the revenues. They paid for 3.996.000 years and claimed 375.000 isolated geezerhood. This operator $323.400.000 of revenue come from members of prodigious medalist program, to this revenue we have to subtract the fixed be, the innocuous days comprise and the program publicize cost ($28.000.000). The fixed cost is 20% of $21 ($4,2) multiplied by the total rental days and equal $1.575.000 and the free days cost is equal to $7.629.552. This gives an frugal look upon of $233 per Olympic medalist program customer.The mending customers represent 79% of revenues that study into $1.216.600.000. The total rental days for these customers are 24.681.000 and these days represent a cost of $103.660.200 (24.681.000 x $4,2). There are overly the advertising be of ($108.000.000 $28.000.000 = $80.000.000). Subtracting to $1.216.600.000 the variable costs and the advertising costs we end with $1.032.939.800. Dividing this revalue by the total number o f firm customers (11.052.000) the sparing value of the regular customer is obtained and equals to $93. The conclusion is that loyalty program clients  all the same have a big economic influence in the revenue expression. guild ANALYSISOlympic is one of the four-spot biggest rent-a-car companies in the US with a dower of 7% of revenues witch is the smallest share of this group. The company as chosen to be a fol glower and has al charges priced lower than Hertz. It has 464 rental locations and a fleet of 108000 cars that lodge in the company for 8 to 18 months. The income per car is slightly below de industry average and the reason for this maybe the ascendence of airport counters that pose more costs to the company than a local counter.Olympic has seen an improvement on its revenues for the last 4 years and in table 1 we can see an cast up of the unclutter simoleons from a loss of $15 million in 2008 to a profit of $32 million in 2012. The main reason for these results is the company flexibility to adapt its car fleet to demand (table 2) as well as the adaptation of the number of counters the company has (table 3).RECOMMENDATIONThe recommendation is that Olympic rent-a-car doesnt follow the Enterprise strategy.About 1,45% of the total rental days of 2012 involved free days and a free day reward costs about $21 to cover the fixed costs and the payment to the franchisee. Of the 108000 cars fleet distributively car was rented about 232 days per year. With this entropy we can calculate the total rental days. Total rental days are equal to 108.000 x 232 this marrow 25.056.000 rental days per year. The 1,45% of the total rental days give us the total free days per year in 2012 this share represents 363.312 free days that multiplied by the cost of a free day ($21) ordain give us the cost of all the free days in 2012. The total cost for the free days is equal to $7.629.552.If Olympic decides to match the Enterprise transferer, the number of fr ee days get out increase to a value between 1,65% and 1,95% of total rental days this means a number of free days between 413424 and 488592 and an increase of free days per year between 50.112 and 125.280 days, this means an increase in cost of the programs free days of $1.052.352 to $2.630.880 (1 million to 2,5 millions increase of free days cost per year). Considering that the demand will not increase a lot this means a net lessen of 3 to 8% of total profits. This decrease is operative for a company that has a small operating margin of 15,8%. The way Olympic responds to the enterprise initiative will be decisive in the profitability of the company. co-ordinated the enterprise offer will running to an increase in the costs and no increase in market share is guaranteed.Since no great increase in demand is predicted, following the Enterprise strategy would simply represent a 3 to 8% decline in profits, Olympic cannot expend this lessening due to the particularize operating ma rgin. Beside this, the fleet of Olympic rent-a-car is very well adapted to de demand and implementing no blackout days would believably let some Olympic medalist clients unsatisfied. Enterprise has a huge fleet and available cars this means that it can afford not having blackout days.The increasing usage of the Internet to compare prices and to book work will diminish the loyalty programs richness and effectiveness. Third party consolidators the online price comparisons and bookings bring a greater relevance to prices the rent-a-car companies practice. This will affect the companies loyalty programs effectiveness. By focusing on price, customers will chose a rent-a-car company by the price of the service taking to a sulphur plan the loyalty programs benefits. This means that Olympic should focus on global cost reduction in order to watch lowering the prices and therefore gain advantage over the competitors. In the future day the company that has the lower prices will domin ate the market. one and only(a) other market tendency is the reduction of business travelling and the growth of network based communications. This means that in future rent-a-car companies will have little business travellers, at this moment these clients are the heavy users of loyalty programs, and the leisure clients will gain weight on the revenue share.Olympic should maintain their loyalty program essentially due to the economic value of the loyalty programs customers ($233) much greater them the regular clients ($93) and improve the program by go other human body of benefits that could improve the market penetration of the program. Some of these benefits could be faster pick up and drop off time for the program customers. Along the way the company could evaluate their loyalty program customers economic value and adapt to the anticipate decrease of loyalty program splendour by reducing free rental days and using the savings of this reduction on rental price reduction. Sinc e loyalty programs dont benefit business companies Olympic offer the chance to this kind of customer to choose between the loyalty program benefits or a decrease in price. This should attract more great companies business maintaining the small and individual share.To expurgate the cost structure Olympic should also try to gain market in the local business dominated by Enterprise and Hertz, this would help to avoid the orotund costs associated to the operation in airports. This way Olympic could gain market share of a market dominated by 2 companies, maintain their business market share threatened by the teleconferencing trends (shift to insurance) and to improve the global cost structure by taking advantage of the lower costs associated to this kind of counters.