The rental car industry
June 8th, 2010Market Overview
The car rental industry is a multi-billion dollar industry for the U.S. economy. The segment of U.S. industry average of $ 18500000000 revenue a year. Today there are 1.9 million cars, maintenance segment of the U.S. market. Also there are many rental agencies along leading the division of total income, which bloomed Dollar, Budget, and Vanguard. Unlike other adult services industry, the rental car industryis highly consolidated, with obvious potential new sets at a disadvantage because they face high production costs, with limited scope for economies of scale. Moreover, most of the profits from some companies, including companies, Hertz and Avis. For 2004, Enterprise has raised 7.4 billion U.S. dollars of total turnover. Hertz in second place with about $ 5200000000 and Avis, with $ 2.97 in revenue.
Degree of integration
The rental car industry facesenvironment totally different from what it was five years ago did. According to Business Travel News, rental cars until accumulated 30,000 20,000 miles up to the user banned automotive industry that the inversion was 15 000 km and 12,000 km for five years ago. As a result of slow growth, and now operating profit, there is no imminent threat of backward integration in the field. Indeed, of the stakeholders are Hertz verticalemployed by Ford.
The level of competition
There are many factors that shape the competitive landscape of the car rental industry. Competition comes from two main sources in the entire chain. On the final consumer of the party spectrum is fierce competition, not only because the market is saturated and completely protected by industry leading Enterprise, but participants at a disadvantage to companies with limited market share Since the company has a network ofSellers 90 percent of leisure travel segment. In the corporate segment, however, competition is very strong at the airport, as this segment is closely monitored by Hertz. As the business has suffered huge economic decline in recent years has enhanced the level of competition in most businesses have survived. Competitive car rental industry has seen a war zone as most rental agencies Enterprise, Hertz and Avis of the greatPlayers engage in a battle of the fittest.
Growth
Over the past five years, many companies are working to improve their fleet size and increase profitability. Enterprise is currently the company with the largest fleet in the United States added to its fleet of 75,000 vehicles by 2002, we have more than 170 installations at the airport. Hertz, on the other hand, adds 25,000 vehicles and expand its presence international in 150 countiescompared to 140 in 2002. In addition, Avis Fleet 210000-220000 in 2002, despite recent economic problems. Over the years, because of the recession, though most companies in the industry giants, was still among the leaders in the industry is still growing. For example, annual turnover reached 6.3 $ 2,001 $ 6.5 2,002 6.9 dollars in 2003 and $ 7,400,000,000 in 2004, with a growth rate of 7.2 percent annually over the last four years .Since 2002 the industry began with the foot in the industry as a whole for the recovery of sales grew from 17.9 billion U.S. dollars to 18.2 billion dollars in 2003 according to analysts better day for the rental car industry is not yet arrived. Over the next few years, the industry expects rapid growth to a value of $ 20890000000 every year to experience the next 2008 "equal to a CAGR of 2.7% [] The growth in the period 2003-2008.
Distribution
Over the lastfew years, the car rental industry has a great advance in order to facilitate distribution. Today there are about 19,000 offices rental yield of about 1.9 million rental cars in the United States. Due to the increasing number of car rental locations in the U.S. strategic and tactical approach taken into account to ensure proper distribution sector. The distribution will take place in two segments. In the corporate market,Car distributed to airports around the hotel. About free segment, second, the agency distributed cars, property located on major roads and large urban areas.
In the past, guess the leaders of the rental companies used to rely on feelings and intuitive decisions about the number of cars for a particular fleet or the level of use and performance for the organization of some vehicles in a park.With the method, it was very difficult for a balance that would be consumer demand and the level of profitability to satisfy the customer. The distribution process is quite simple in the field. To begin with, the directors determine the number of cars should be the inventory on a daily basis. Due to a very significant problem occurs when too much or not enough cars available, as most rental companies Hertz, Avis and enterprises use a "pool" thatA group of equipment leasing that are part of a fleet of vehicles. In short, with swimming pools in town in places of rent actually reduced the risk of low stocks, if there are off-hire.
Segmentation
Most businesses along the chain surplus by type of hire car. The rental car was scheduled for the economy, compact, intermediate, premium and luxury. Among the five categories, the economyprovides the maximum benefit. For example, the economy segment by itself responsible for 37.7 percent of total market revenue in 2004. Furthermore the compact segment, which is responsible for 32.3 percent of total revenue. The rest of the other categories cover the remaining 30 percent of the segment of the United States.
Historical profitability
The total cost of the rental car industry in recent years, declining. Over the last five years struggling industryLike the rest of the tourism sector. Actually lived in the years 2001 and 2003, the U.S. market, a decline in profitability. operating income of $ 19400000000 2000-18200000000 in dollars in 2001. So the total industry revenue $ 17900000000 further eroded in 2002, a minimum quantity is more than 17.7 billion U.S. dollars, the total income for the year 1999. In 2003, the industry has a barely perceptible increaseputs profit 18.2 billion U.S. dollars. Because of the economic slowdown in recent years, some of the younger players who are very dependent on air transport an opportunity for a large part of a restructuring strategy, a way to prepare their companies to continue the final economic evils that surrounds industry. In 2004, on the other hand, the economic situation of most enterprises, a gradual improvement in the sector, as most rental agencies have returnedmuch larger profits on the years ahead. For example, to use income of $ 7400000000 Enterprise, bringing back a profit of $ 5200000000 and Avis, with $ 2.9 billion in revenue for 2004. According to industry analysts expect the rental car, a steady growth of 2.6 percent in revenues experienced during the coming years, which corresponds to an increase in profits.
Competition among sellers struggle
There are many factorscompetition in car rental. In recent years, a growing fleet expansion and profitability focus for most companies hire car. Enterprise, Hertz and Avis are among the best ever, both for sales and fleet size. In addition, increased competition as companies are constantly working to improve their current situation and offer more to consumers. Enterprise has nearly doubled its fleet size from 1,993 to about 600,000'S today. How the industry works on such a small margin, price competition is not a factor, but most companies are actively involved in creating value and providing a range of technology services for free gadgets even hire customers Requirements. Hertz, for example, integrates its Never-Lost GPS system in his car. Enterprise, on the other hand, uses sophisticated fleet management yield management.
Finally Avis uses its OnStar and Skynetsystem to a better basis for the consumer and offer a free rental weekend if the customer rents a car for five consecutive days are also based on consumption for the automotive industry is a relatively low rent or free for the switch. On the other hand, agencies hire high fixed operating costs including holiday ownership, insurance and maintenance. Consequently, rental agencies, rental rates are sensitive only to recover operating costs and their customers demands enough. Moreover,because the industry has grown slowly in recent years due to economic stagnation, which led to a massive decline in both business travel and leisure sector, most companies, including industry leaders in aggressively trying to move their activities, gradually reducing dependence on aviation and the restoration of their foot in the arena of competition.
The potential entry of new competitors
Entering the car to newcomersa serious disadvantage. Over the past two years, after the economic slowdown in 2001, most large companies have begun to do their share of the market is still in the holiday sector as a way to ensure stability and a reduction in the level of dependence between the airline and car rental companies. Although this trend has led to a long-term success of existing businesses, which increased competition for new entrants landscape. Due to strong competitionexisting companies, Enterprise, Hertz and Avis to closely monitor their attacks radar Sharpe competitive retaliation against new entrants. Another barrier to entry has been made because of the saturation level of the sector.
For example, Enterprise has the first mover advantage with its 6,000 plants to saturate free segment is not only a high restriction on distribution channels most common, but also a high demand for resources for newcompanies. Today, Enterprise has a rental location within 15 miles of 90 percent of the U.S. population. Because the network of dealers Enterprise has created for people, has been relatively stable, recession proof increasingly important, less dependent on the airline industry over its competitors. Hertz, on the other hand, exploiting the full range of its 7,200 shops its market position secure. In essence, the emergence of most of the industry leaderscompete on free market units not only directly but also the method with the level of complexity for the registration of rental car industry.
Threat of substitute
There are many replacements available for the rental car industry. From a technical standpoint, car remote to go to a meeting is less attractive alternative, in contrast to video-conferencing, virtual teams and collaboration software that a company can create an immediate meeting with Hisfrom around the world a better price. In addition, there are other alternatives, including taking a taxi, which is a satisfactory substitute in terms of quality and costs of change, but can not be an attractive price as a rental car for more than a day or more. While public transport is the cheapest of the alternatives is more expensive in relation to the process and that time has reached half a man. Finally, since flying offercomfort, speed and performance, is a very convincing replaced, but it is a viable alternative in terms of price than renting a car. In the corporate segment, car rental more protection against damage, since many companies have implemented a travel policy that sets the parameters when a lease car or use a replacement is the best plan of action.
According to Tracy Esch, director of marketing advantage, its business unitsmachine for a journey of 200 miles, before considering an alternative. Basically, the threat of substitution is relatively low in rental cars, because the consequences of the replacement products are not a significant risk of profit erosion in the area.
The power of suppliers to negotiate
Supplier power is low in rental cars. Thanks to the availability of alternatives and the degree of competition, suppliers have a significant impact on the terms anda supplier of rental cars. Because rental cars are usually bought in bulk, car rental companies have a significant impact on sales because they have the ability to play against one another supplier selling prices. Another factor that has reduced data strength is the lack of switching costs. That is, buyers are not affected by the acquisition of a supplier over another, especially switching to another supplier of products are lowsurprising and has no impact on consumer choice to hire '.
Force buyers to negotiate
While the free field has little or no effect on the business segment has a major influence in rental cars. One interesting trend that is currently in rental cars, forcing companies to adapt to the needs of business travelers. This tendency to reduce the power supplier or leasing company to strengthen and enhancePurchasing can then business segment is price sensitive and painful well informed about the industry's pricing structure, in larger quantities to purchase and use the Internet to enforce lower prices. car buyers on the other hand, have less impact on the conditions of hire. Why tourists are generally less price sensitive, buy smaller quantities more often or for sale, have weak bargaining power.
Five Forces
Today, the rental industryrepresents an environment totally different from what it was five years ago did. Having regard to the five competitive forces of revolution around the rental car industry to exert strong economic pressure, competition is much more attractive to industry expectations. Because of the economic slowdown in recent years, bowed several companies, including budget and Vanguard Group, for their unsustainable infrastructure enterprise market competition.Today very few companies, including companies, Hertz and Avis to return a bit 'of above-average income compared to the rest of the industry. Realistically car rental industry is a very interesting business, because the degree of competition, barriers to entry and competitive pressures by business alternatives.
Strategic Group Mapping
As a moderately concentrated industry, there is a clear hierarchy in the automotive sector. From an economic standpointdifferences on a number of dimensions, including revenue, fleet size and market size, and each company holds in the market. For example, companies dominate the sector with a fleet of 600,000 vehicles, with its market size and profitability. Hertz came in second place with a series of market share and fleet capacity. Avis is also the third tab. Avis is among the companies that have problems to restore their incomesmargins of the economic downturn. For example, Avis in 2000 revenues of approximately $ 4,230,000,000. In the years following 2000 Avis income was significantly lower than that for 2000. As a way to reduce uncertainty, most firms eventually reduce dependence on aviation and pleasure again. This trend can not be in the best interest of Hertz since the company's strategy is complicatedconnected with the airport.
The key to success
There are key success factors to profitability in rental cars. Capacity utilization is one factor leading to success in the field. Because rental businesses are experiencing the loss of income that are either too few or too many cars have put their fate, is indispensable for the effective management of the fleet. This conversion factor is a big driver for the industry asreduced if not completely avoid the race relatively small rental car. Efficient distribution is another factor that prevents the operation profitable. Despite the positive relationship between fleet size and profitability, companies are increasing their fleet sizes because of the competitive forces surrounding the area. Moreover, the convenience of one of the key features that consumers choose rental companies. That is, a rental car consumers are more likely torental car companies that recruit and convenient drop-sites. Another important success factor in common between competitors is the integration of technology into their business processes. Through technology, such as rental cars are ways to meet consumer demand for a better rent a car test by adding the convenience of online rentals, among other alternatives. Enterprise and Integrated navigation systems with breakdowngives customers the peace of mind when the rental car.
Industry Attractiveness
There are many factors influencing interest in rental cars. Because the industry is moderately concentrated, it presents a new market operators adverse market. That is, its low concentration represents a natural barrier for entry to the sector because it can trade retaliation against existing competitive newcomers expect. Because of the risks associated with those in areaamong other factors, it is a very interesting market. From the perspective of competitive, free market is 90 percent complete for the active role of the corporate sector to dominate the market. On the other hand, are heavily protected by Hertz airport terminal. Realistically the whole industry to provide low profitability compared to the costs and risks. For most consumers, the main factors for choosing a companyAnother is the price and convenience. Because of this, rental companies are very careful to set their own prices, and players generally applicable, even big business can offer consumers more for less just to stay competitive. Hertz, for example, offers wireless internet to its customers even more convenience to add to their travel plans. Newspaper and on the other, gives a free weekend specials as customer renting a car for five consecutive weekdays. Based onimpact of the five forces, the car rental industry is a business very attractive to potential entrants.
Closing
The car rental industry is in a state of preservation. Although it may seem like the industry is doing well economically, is gradually restoring the feet in relation to the real economic situation over the past five years. As a means of ensuring profitability that, except to take the market share and stability, most companies in the sectorhave a common goal, which is responsible for reducing the degree of dependence in the field of aviation and leisure travel segment. This mode of movement created strong competition among competitors in the industry, in trying to make their market share to defend. From a futuristic perspective, rental companies better days the machine has not yet arrived. With increasing profitability, I think most industry leaders such as Enterprise, Hertz and Avis will be bounded byeconomic and competitive limits the mobility of their strategic and new groups will have greater opportunity to infiltrate and gain success in the rental car.
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