Enterprise Rent-A-Car Case Study Analysis

Case Write-Up – Enterprise Rent-A-Car

The local or home-city market is Enterprise’s primary focus. This market is comprised of i) discretionary renters and ii) insurance replacement renters. Both categories place a premium on customer service, proximity and price (though relatively lower). Additional value-added services such as pick-up and drop-off enhance the benefit to local customers. Enterprise’s other customer base, the airport market, consists of i) business renters, and ii) leisure renters. These renters, particularly the business travelers, place a premium on speed of check out/check in, vehicle availability and brand. Additional value added services such as in-car GPS enhance the benefit to airport customers.

Enterprise’s unique combination of assets and activities allow the company to meet the needs of its target customers in ways other car rental companies, such as. Avis and Hertz cannot. Assets and activities that provide Enterprise a competitive advantage over their peers, are:

• Large network of local franchises (Asset): Enterprise’s large network of suburban locations allows for low prices and convenience/proximity to its customers. Home-city or neighborhood locations cost less than airport locations and therefore Enterprise can pass this cost advantage through to its end customers. These locations also allow Enterprise to provide a level of convenience to their customers because of their close proximity to renters. Although Enterprise’s initiatives in the local car market, such as the “we’ll pick you up” campaign, have helped the company capture a majority of this market, a major trade-off has been foregoing a significant portion of the airport rental car market, which is sized close to $10B.
• Local Footprint leads to more convenience (Advantage): Enterprise’s decentralized structure of operations allows it to have a unique connection with its customers as well as payers, i.e. the insurance companies.
• Customer-focused HR culture (Activity): Enterprise hires college graduates with great people skills and their recruiting process focuses on the bottom 50% of the batch, thereby giving them a more realistic target base of employees. Instead of targeting the best and brightest students, Enterprise hires ‘people people’ – or people with good problem solving ability, leadership and communication skills, sales and customer service skills, a strong work ethic, and flexibility. All these hires are trained to provide a superior quality of service even if that means compromising on the speed of service.
• Tied Performance (Activity): Enterprise tied the performance of individual employees to the performance of his or her branch as a whole. This activity created a local spirit and healthy rivalries among Enterprise branches.
• Insurance company relationship (Asset): Enterprise is a preferred provider for many insurance companies. Enterprise was able to become the preferred provided by taking specialized measures such as deploying full-time employees on insurance sites and streamlining operational processes. An example of this operational streamlining was Enterprise interfacing its reservation system directly with the insurers’ computer systems, allowing insurance companies to book an Enterprise car every nine seconds during every business day in 2006. Furthermore, Enterprise was able to build relationships with insurance companies by having its employees actively seek out and call on insurance agents and insurance claims representatives. This created significant competitive advantage for Enterprise as it cultivated deep referral relationships with major insurance companies, resulting in more business on the back of a promise of enhanced service to insurance companies’ policyholders.
• Brand Recognition (Advantage) –The trust that Enterprise has been able to create among their customers through high quality service has helped to fortify the company’s presence in the local market. This same brand awareness and reputation for high quality service led many customers to request that Enterprise increase its airport footprint.
• Monopolization of the insurance use case (Advantage) through an in-house technology system (Asset): The Automated Rental Management System (ARMS) developed by Enterprise connected its reservations and operations system (Ecars) with the computer systems of 300 insurance partners and the repair shops. This move helped Enterprise to gain preferred provider status with many of these insurance companies, making it very difficult for any other car rental company to partner with these insurance companies. This technology system was also an asset because thousands of car dealers and repair shops connected their existing business management systems to ARMS.
• Fleet Mix (Activity): A potential area of concern for Enterprise was that its fleet was made up entirely of “risk cars”, whereas competitors only used risk cars for approximately half of their fleets. However, Enterprise was able to use efficient operational practices to maintain a lean inventory and keep its cars on the road 6 months longer than its competitors. Additionally, Enterprise managed to sell over 60% of their cars back to its dealers, with the rest being sold through a mix of auctions, salvage and direct sales.

Enterprise uses ESQi to measure performance at a local level and is trying to take advantage of the home-city model, wherein they provide service not as an individual but as an entire store. One potential problem with this model is that a high performing employee may not get promoted because of his or her residence in a low performing store. On the other hand, promoting a low performing employee because of overall store performance may lead to dilution in the quality of the organization. Additionally, the ESQi scale is vulnerable to differences in people’s inclination to rate on a scale, as people’s perception of a rating of “4” vs “5” may differ by the customer’s nature and mood. Therefore, an HR policy that some may see as a potential weakness for Enterprise could be in fact the company’s emphasis on shared performance.