The car rental industry is a multi billion dollar industry in the US economy. The US segment of the industry average of about $ 18500000000 a year income. Today, there are about 1.9 million rental vehicles that service the US segment of the market. In addition, many rental agencies in addition to industry leaders that share of the total revenue, ie dollar-saving, low cost and Vanguard. Unlike other mature service industry, the car rental industry is highly consolidated potential new entrants which is of course a cost disadvantage because they face high input costs decreased possibility of economies of scale. In fact, most of the profit generated by the several companies, including Enterprise, Hertz and Avis. The financial year 2004 Enterprise generated $ 7.4 billion in total revenue. Hertz came in second position for about $ 5200000000 $ 2.97 and revenue of Avis.
The level of integration
The rental car industry is facing a totally different environment than five years ago. According to Business Travel News, leased vehicles, until they accumulate 20,000 to 30,000 miles, until they are pushed into the background in the automotive industry speed was used as the mileage of 12,000 miles to 15,000 five years ago. Because of the slow growth of the industry and the slim profits, there is no immediate threat to backward integration in the industry. In fact, among the industry players only Hertz is vertically integrated through Ford.
There are many factors that shape the competitive landscape of the car rental industry. Competitors are two main sources of the chain. The holiday consumer & # 39; s extreme, competition is fierce not only because the market is saturated and well guarded industry leader Enterprise, but competitors operating cost disadvantage with smaller market shares since Enterprise set up more than 90 percent of a network of dealers in the leisure segment. In the corporate segment, on the other hand, the competition is very strong at the airports, as this segment during the close supervision Hertz. As the industry has a huge economic downfall in recent years, it has upgraded the scale of competition in most of the companies that survived. Competitively speaking, the rental car industry into a war zone, like most rental agencies including Enterprise, Hertz and Avis are the big players in the battle of the fittest.
Over the past five years, most companies have been working to enhance fleet size and increase profitability. Enterprise is currently the company's largest fleet in the US is 75,000 vehicles to its fleet since 2002, which helps to increase the number of facilities in 170 airports. Hertz, on the other hand, we have added 25,000 vehicles and expand its international presence in 150 counties, compared to 140 in 2002 In addition, Avis fleet has increased 210,000 in 2002 to 220,000 despite recent economic adversity. In the years following the economic downturn, although most companies in the industry is struggling, Enterprise among the industry leaders also continues to grow. For example, the annual sales revenue reached $ 6.3 2001 $ 6.5 2002 $ 6.9 billion in 2003 and $ 7.4 in 2004 which translated into a growth rate of 7.2 percent per year over the past four years. Since 2002, the industry began to regain its footing in the sector's overall sales increased to $ 17.9 billion from $ 18.2 billion in 2003, according to industry analysts, to better days in the rental car industry is yet to come. During the next few years, each year the industry experienced accelerated growth is expected to be $ 20890000000 after 2008 ", which corresponds to a CAGR of 2.7% [increase] for the period 2003-2008."
In recent years, the rental car industry has made great progress in order to facilitate the distribution process. Today, approximately 19,000 rental locations so that approximately 1.9 million rental cars in the US. Given the increasingly abundant number of car rental locations in the US, strategic and tactical approach to be taken into consideration in order to ensure the proper distribution of the entire industry. It takes place in two interrelated segments within Distribution. In the corporate market, the cars apart Airport and the hotel's surroundings. The leisure segment, on the other hand, cars are facilities owned by the agency that distributed comfortably within the major roads and in large urban areas.
In the past, the leaders of car rental companies used to rely on gut feelings and intuitive guesses to make decisions about how many cars there are in a particular fleet or the utilization and performance standards serve to some cars in a fleet. With this methodology, it was very difficult to maintain a level of balance that meets consumer demand and the appropriate level of profitability. The allocation process is quite simple throughout the industry. To begin with, managers must determine the number of cars that must inventory each day. Since it is very noticeable problem arises when too many or too few cars available, most car rental companies, including Hertz, Avis and Enterprise, a "pool" that is shared by a group of independent equipment rental fleet. Basically, instead of swimming pools, car rental locations operate more efficiently by reducing the risk of low inventory, if not eliminate rental car shortages.
Most of the companies in the chain, the profit-based types of cars are rented. A hire car can be divided into economy, compact, intermediate, premium and luxury. Among the five categories, the economic sphere yields the most profit. For example, the economic segment alone is responsible for 37.7 percent of total market revenue in 2004. In addition, the compact segment accounted for 32.3 percent of total revenue. The rest, the other category includes the remaining 30 percent of the US segment.
historical levels of profitability
The overall profitability of the car rental industry has been shrinking in recent years. Over the past five years, the industry has been struggling like the rest of the travel industry. The fact that experienced in 2001 and 2003, the US market is a moderate decrease in profitability. Specifically, revenues fell to $ 19.4 billion in 2000 to $ 18.2 billion in 2001. Subsequently, the overall industry revenue eroded further to $ 17.9 billion in 2002; an amount that is higher than the minimum $ 17700000000, which is the total revenue in 2003, the industry barely noticeable brings growth $ 18.2 billion profit in 1999. As a result of the economic downturn in recent years, some of the smaller players were highly dependent on the airlines have a large shifts in strategy as a way of preparing the company to cope with the possible economic disasters that surround the industry. For the year 2004, on the other hand, the economic situation, most companies gradually improved throughout the industry, as most rental agencies have returned compared to much higher profits anterior years. For example, Enterprise earned revenues of $ 7400000000; Hertz and Avis returned revenues of $ 5200000000 $ 2.9 billion in revenue in fiscal year 2004, according to industry analysts, the car rental industry is expected to experience continued growth in revenue of 2.6 percent over the next few years, which translates into an increase in profit.
competition for sellers
There are many factors that drive competition in the car rental industry. In the past few years, expanding the fleet size and increasing profitability has been the focus of most companies in the car rental industry. Between Enterprise, Hertz and Avis are also becoming leaders in both sales and fleet size. In addition, competition intensifies as firms are constantly trying to improve the current conditions and offer more to consumers. Enterprise has nearly doubled its fleet size since 1993 to about 600,000 cars today. As the industry continuously such tight profit margins, price competition is not a factor; However, most companies are actively involved in value creation and a range of amenities that technological gadgets to satisfy customers even free rent. Hertz, for example, integrates the context of unprecedented GPS systems for cars. Enterprise, on the other hand, sophisticated yield management software to manage the fleet.
Finally, Avis uses the OnStar system Skynet and better serve the customer base, and a free weekend rental if a customer rents a car for five consecutive days in addition to the rental car industry customer base is relatively low to no switching costs. Conversely, rental agencies are faced with high fixed operating costs, including the lease of property, insurance and maintenance. Consequently, rental agencies are sensitively prices for rental cars only to recover operating costs, and adequately meet the needs of clients. In addition, since the industry slow growth in recent years of economic stagnation, which resulted in a significant reduction in both corporate travel and leisure sector, most companies, including industry leaders aggressively trying to position companies to gradually lower dependence level in the airline industry and regained from under their feet the ground, leisure competitive arena.
Potential new competitors
access to the car rental industry makes it a serious disadvantage to new entrants. In the past few years, following the economic downturn in 2001, most of the major rental companies have started increasing their market share in the vacation industry as a way of ensuring stability and reduce the level of dependence on the airline and the car rental industry. Although this trend has led to long-term success of existing companies, this has intensified the competitive landscape for new entrants. Due to the severity of competition, existing companies like Enterprise, Hertz and Avis carefully monitor the competitive radars to Sharpe retaliatory strikes against the advance of new entrants. further complicated by the entry is created because of the saturation level of the industry.
For example, Enterprise took the first-mover advantage in 6000 of leisure facilities is saturated segment, thereby not only high restrictions are the most common distribution channels, but also large resource requirements for new businesses. Today, an Enterprise rental location 15 miles of 90 percent of the US population. As the network of dealers Enterprise has established the nation as a whole, it has become relatively stable, more evidence of recession and, most importantly, with less reliance on the airline industry compared to its competitors. Hertz, on the other hand, is taking advantage of the full spectrum of stores in 7200 to ensure a place in the market. Basically, the appearance of most of the industry leaders in the leisure market is driven not only competition, but also that is directly related to the complexity of entering the rental car industry.
The threat of substitutes
There are many substitutes for the car rental industry. In technical terms, we rented a car to go the distance after a less attractive alternative, as opposed to video conferencing, virtual teams and collaboration software, which the company immediately set up an appointment for employees anywhere in the world at a cheaper price. In addition, there are other alternatives, including a taxi, which can replace the switch with respect to the quality and cost, but it can not be priced as a rental car during the day, or more. While public transport is the most cost-effective alternatives to the costly process in terms of the time it takes to reach a & # 39; s goal. Finally, because the flying comfort, speed and performance, it can be a very tempting; However, this is an attractive alternative to the price of renting a car. The business segment, car rental companies substitute more protection because many companies have implemented travel policies that define the parameters for when renting a car or a replacement is the best thing you can do.
According to Tracy Esch, director of marketing operations Advantage, she hires a car before even considering an alternative 200-mile journey. Basically, the threat of substitutes is rather low in the car rental industry, as the impact of substitute products do not pose a significant risk to erosion of profit throughout the industry.
bargaining power Suppliers
Conveyor low power the car rental industry. Since the availability of substitutes and the level of competition, the suppliers do not have much influence on the conditions of supply of rental cars. Because rental cars are usually bought in bulk, the terms of rental car sales agents major influence, as have the ability to play one supplier against another to lower the sales price. Another factor that reduces the cost of the change of supplier power there. That is, buyers do not affect the purchase of one service over another, and most importantly, changing the various suppliers & # 39; s products are hardly noticeable and does not affect the customer & # 39; and hiring decisions.
The bargaining power of buyers
However, the leisure sector has little or no power, the business segment has a significant amount of influence in the car rental industry. An interesting trend that is ongoing throughout the industry forcing car rental companies to adapt to the needs of corporate travelers. This trend significantly reduces supplier power or the rental companies & # 39; power and increases corporate buyer power since the business segment excruciatingly price sensitive, knowledgeable of the industry & # 39; s price structure, buying in larger quantities and use the internet to force lower prices. Vacation buyers, on the other hand, have less influence over lease terms. Since the holiday is generally less sensitive to price, buying in smaller quantities, or buy less often, their weak bargaining position.
Today the car rental industry is facing a totally different environment than five years ago. Competitively speaking, the revolution of the five forces surrounded the car rental industry exerts some strong economic pressures significantly tarnished the competitive attractiveness of the industry. As a result of the economic downturn in recent years many companies went under namely Budget and the Vanguard Group because the business infrastructure succumbed to the unsustainability of the competitive environment. Today, very few companies, including Enterprise, Hertz and Avis return a slightly above-average income than the rest of the industry. Contemplating the car rental sector is not very attractive industry because of the level of competition, entry barriers and fierce competition in the replacement companies.
Strategic Group Mapping
The moderately concentrated sector, a clear hierarchy in the car rental industry. From an economic perspective, there are huge differences in the number of dimensions, including revenue, fleet size and market size of each company in the market. For example, the company dominates the industry with a fleet size of about 600,000 vehicles the size and profitability of the market. Hertz is the second in line for more market share and fleet volume. In addition, Avis third location on a map. Avis is one of among the companies that have problems before revenue margins recovery of the economic downturn. For example, in 2000 Avis returned revenues of approximately $ 4230000000th During the next few years, in 2000 the revenue Avis has been significantly lower than in 2000 as a way to reduce uncertainty most companies are gradually reduce the level depends on the airline industry leisure and emerging markets. This trend can not be in the interest of Hertz since its business strategy is intricately linked to the airport.
key to success
Many of the most important success factors that drive the profitability of the car rental industry. Capacity utilization is one factor that determines the success of the industry. For rental firms experience loss of revenue, if any, or too few, or too many cars are much, it is very important to effectively manage the fleet. This success factor is a major force in the industry, as it reduces, if not eliminates any running short on rental cars. Efficient distribution is another factor that keeps the industry profitable. Despite the positive relationship between fleet size and profitability, companies are continually increasing the size of the fleet, because market forces surrounded to him. In addition, for the convenience of one of the key attributes that consumers select rental companies. That is, consumers are more inclined to hire cars from car rental companies that rent and convenient drop off locations. Another important success factor that is common to the competing companies in the integration of technology in business processes. The technology, for example, the car rental companies to create a way to meet customer demand for renting a car is a very pleasant ordeal by adding the convenience of online rental among other alternatives. Furthermore, while companies integrated navigation system for roadside assistance to customers piece of mind when renting cars.
Industrial attractiveness of
There are many factors that affect the attractiveness of the car rental industry. Because the industry is moderately concentrated, to the detriment for new market entrants. This means that at low concentrations is entering a natural barrier to the industry, as it allows a pre-existing company against sharp reprisals, the new entrants. Because of the associated risks are to the industry, among other factors, this is not a very attractive sector of the market. A competitive point of view, 90 percent of the leisure market is saturated because of active efforts to dominate the industry in the Enterprise market. On the other hand, the heavily guarded airport terminals Hertz. Contemplating entry in the industry offers low profitability compared with the costs and risks. Most buyers are key determinants in choosing the company over another price and convenience. For this reason, rental companies are very careful adjusting their rates, in general, force is still the main players in the industry's position that consumers prefer less, just to remain competitive. Hertz, for example, Internet-only wireless clients to add more convenience to your travel plans. Avis on the other hand, free weekend specials when a customer rents a car for five consecutive weekdays. Based on the effects of the five forces, the car rental sector is not very attractive for potential new operators in the industry.
state of the rental car industry is in a recovery. Although it may seem like the industry is performing well financially, however, that gradually regains its footing relative to the actual economic situation of the past five years. In addition to looking for a way of ensuring the profitability and stability of the market share, most companies in the chain have a common goal to deal with reducing the level of dependence on their way to the airlines for leisure segment. This state of motion brought some fierce competition among industry rivals are trying to protect their market share. A futuristic point of view, the better days of the car rental industry is yet to come. Since profitability increases, I believe that the majority of industry leaders, including mobility of limited company, Hertz and Avis will be by economic and competitive barriers to strategic groups and new arrivals will have a better chance of achieving success in infiltrating and car rental industry.
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Source by Rodrigue Monestime