A marketing plan I constructed on Hertz Car Rental complete with Internal, External, and Customer analysis. Marketing recommendations and action plans were created by me to enhance company
A marketing plan I constructed on Hertz Car Rental complete with Internal, External, and Customer analysis. Marketing recommendations and action plans were created by me to enhance company profitability and customer market share.
The External Environment<br />Industry Analysis<br />Using Michael Porter’s 5 Forces Model will help to determine the current position that Hertz Car Rental has within the Rental and Leasing Services industry. The components of Michael Porter’s 5 Forces Model are competitive intensity, the threat of new entrants, the threat of substitutes, the bargaining power of buyers, and the bargaining power of suppliers.<br />
There is a substantial amount of competitors currently operating within the Rental and Leasing Services industry. The fight for consumer market share has forced these companies to differentiate themselves through price and their level of customer service. Unfortunately, because the intensity of this industry is so high, many competing companies offer similar prices, features and benefits to consumers. As a result, companies lose potential profits as they compete in price-wars to gain consumer market share.
To start a rental service company, an individual needs to have an extensive amount of financial resources. The likelihood of achieving profitability in a highly competitive industry serves as a barrier for new entrants.
There are a lot of competitors within the Rental and Leasing Services industry. This has caused consumers to view the products and services offered by car rental service companies as commodities because of their similar features and prices.
Consumers can also utilize taxi, train, and bus shuttle services as a means of transportation.
The bargaining power of buyers can be classified as low and high because it is largely dependent on the buyer’s financial resources. If an individual wanted to rent a car service, they would have low bargaining power. This is because the loss of potential financial resources will not significantly impact company revenues. If the individual is a buyer from an automotive company seeking to purchase several vehicles, they would have high buying power. Losing a potential sale that could bring in significant company revenues will hurt the company.
The automotive industry supplies vehicles to car rental service companies. Similar to the Rental and Leasing Services industry, the automotive industry is also highly fragmented. If Hertz Car Rental felt that a supplier was charging unreasonable prices, they can choose to go with another company. Losing such a substantial account that brings in significant revenue for automotive companies gives suppliers low bargaining power.
Competitive Pressures<br />The competitive pressures within the Rental and Leasing Services industry are high. The numbers of competitors create an intense environment as they continually battle for market share. Hertz Car Rental faces intense competition from brand, product, generic, and total budget competitors.<br />
Brand competitors provide consumers with products that have similar features, benefits, and prices as that of Hertz Car Rental.
Avis, Budget, Enterprise Rent-A-Car, Alamo, and National Car Rental
Total budget competitors represent other activities that consumers choose to spend their limited financial resources on.
Shopping, restaurant dining, travel tickets, sporting events, and entertainment tickets
To understand the performance of Hertz Car Rental, it is critical to analyze their operating performance in comparison to their top competitors that provide the largest threat of market share reduction. The two top competitors of Hertz Car Rental in the Rental and Leasing Services industry is Avis Budget Group and Enterprise Holdings, Inc. <br />
Avis Budget Group
Avis Budget Group is a company that operates two subsidiary car rental service companies: Avis and Budget. Avis is the leading car rental service company that provides luxurious, premium vehicles to consumers. On the opposite spectrum, Budget provides products and services to consumers who are price-value conscious. Avis Budget Group has the ability to operate globally in the United States, Canada, Australia, New Zealand, Latin America, Europe, Africa, Asia, the Caribbean, and Middle East regions. This is because their extensive rental fleet consists of more than 350,000 vehicles. In 2009 alone, Avis Budget Group was responsible for over 23 million vehicle rental transactions that totaled revenue of $5,131 million at the end of the fiscal year (“Company Information” Avis Budget Group).
Enterprise Holdings, Inc. was formed in 2009 to combine the operations of three subsidiary car rental service companies: Enterprise Rent-A-Car, National Car Rental, and Alamo Rent A Car (“Enterprise Launches New Holding Company” St. Louis Business Journal). Their largest subsidiary, Enterprise Rent-A-Car is the largest car rental company in the United States. Their primary focus differs than that of their competitors by focusing on the market of consumers in need of a replacement vehicle resulting from accident, theft, or mechanical failure. Their focus on customer service has allowed them to consistently reach average annual revenues of $12.6 billion (“Enterprise Holdings” Enterprise Holdings, Inc.).
Economic Growth & Stability<br />The general economic conditions that Hertz Car Rental operates in have an impact on their operating performance within the industry. Although it is impossible to control current economic conditions, Hertz Car Rental can monitor their performance and implement the necessary strategies to reduce the severity of impact these external conditions will have on the company. The economic climate can best be understood by analyzing the current consumer confidence index and unemployment rates. <br />
Consumer Confidence Index
The current consumer confidence index score reached 54.1 in November of 2010, the highest score obtained over the past 5 months (“Consumer Confidence Survey” The Conference Board).
Consumers have a positive outlook on the economy. The higher the consumer confidence index score, the more likely consumers will increase their financial spending habits.
Consumers will start to spend their financial resources on travel, restaurants, entertainment venues, etc. again
During the economic recession, individuals were forcibly unemployed. They lost their health insurance, life savings, and pension plans. While the US experienced a record-high of 9.6% in 2009, the global unemployment rate grew to 30%. The creation of jobs in the retail trade, healthcare, mining, and professional business services sectors have shrunk the global unemployment rate to 8.7% as of November 3, 2010 (“World Unemployment Rate” CIA World Factbook).
Political, Legal, & Regulatory Issues<br />The external environment that Hertz Car Rental locations operate within has changed due to political and regulatory issues. Hertz Car Rental has also been involved in several legal allegations. The political, legal, and regulatory issues vary significantly between countries.<br />
The North America Free Trade Agreement, signed in 1993, allows consumer goods produced in Canada or Mexico to be sold in the United States with no import fees (Studer).
Large companies take advantage of this agreement and outsource their production operations to Mexico and Canada to take advantage of their lower employee wage rates. This caused the unemployment rate in the US Automotive industry to reach 10% after NAFTA was implemented in 2007 (Studer).
NAFTA creates political controversy because US individuals feel that US automobile production should be restricted to the US. They believe restricting the US automobile production will the US economy and decrease unemployment rates.
The Telephone Consumer Protection Act is a regulation that prohibits businesses from relaying advertising messages to consumers over the phone regarding information on their availability of property, goods, and services (Hertz Annual Report, 2009: 45).
Advertising to consumers over the telephone is considered legal only after the consumer expresses either written or verbal consent to the business stating they accept advertisement solicitation.
As of February of 2006, Hertz Car Rental has shifted the liability on all vehicle damage caused by poor weather conditions to their customers (Schlossberg). This regulation does not apply to customers who rent their vehicles in Wisconsin and California due to legal law restrictions.
Customers are liable for all damages to their rental vehicles caused by severe thunderstorms, floods, blizzards, hailstorms, hurricanes and tornadoes. Customers must also pay for any damages incurred to their rental vehicles as a result of falling tree limbs and utility poles.
The suggested minimum age to rent a vehicle from any car rental service company is 25 with a driver’s license that has been valid for at least 1 year. On their company website, Hertz Car Rental states that they allow individuals to rent their vehicles if they are at least 21 years old and have had a valid driver’s license for at least 1 year. If a customer is between the ages of 21-24, they will be charged an Age Differential fee in addition to their rental rate (“Requirement Details” Hertz Car Rental).
Their high-performance vehicles and Prestige Collection vehicles are not available for rent to customers under the age of 25.
On October 13, 2006 a legal suit was filed against Hertz Car Rental by Janet Sobel, Daniel Dugan, and Lydia Lee. These individuals claim they were wrongfully charged airport concession recovery fees in addition to their total rental rate charges. These consumers rented their vehicles in Nevada, a state where it is unlawful to charge airport concession recovery fees (Hertz Annual Report, 2009: 45).
As of late 2009, the legal suit is still active awaiting a final court decision.
On February 19, 2007, Hertz Car Rental filed a legal suit against Enterprise Holdings, Inc., TSD Rental LLC, and The Crawford Group, Inc. Hertz Car Rental claimed that all three companies were involved in unfair and deceptive business practices that made competing with their consumer offers impossible (46).
Hertz Car Rental received a non-monetary settlement from all companies involved and the case was dismissed in June of 2009 (47).
Hertz Car Rental faces a substantial amount of legal suits filed against them from customers who demand compensation for personal property that was damaged during the operations of their vehicles.
Changes in Technology<br />The continuous evolution of technology has changed the way consumers search for product information, comparison shop, and place their product reservations. To remain competitive within the Rental and Leasing Services industry, Hertz Car Rental must quickly adapt to these changes to continue offering services that will satisfy their customers.<br />
Product Information Search
Companies create an internet website to highlight their prices, products, services, and current promotional offers to consumers online. Consumers can purchase their car rental products and services directly from the website through company reservation portals.
Online websites provide consumers with access to all car rental service rates available in nearby geographic regions. Consumers can compare the car rental service rates from competitors all in one location. This allows for easy comparison shopping.
Consumers have several channels available to them that make the task of renting a car service quick and easy. Consumers can book their car rental products and services through reservation portals located on the company website or through the company’s mobile smart phone application.
Consumers can also book reservations by calling or walking into any Hertz Car Rental location.
Changes in technology has enabled Hertz Car Rental to make changes in their production activities to increase their operational efficiency and lower the car rental service costs they offer to consumers as a way to remain competitive. Technology has allowed Hertz Car Rental to develop their Lighthouse Project to strengthen their customer relationships.<br />
The Lighthouse Project
The Lighthouse Project is a program developed by Hertz Car Rental in 2009 that looks for ways to continually improve and streamline their car rental process from the vantage point of their customers (5).
The Lighthouse Project operates multiple facilities that are located in large cities.
Sociocultural Trends<br />Changes in sociocultural trends are causing a shift in the following lifestyle trends that affect the Rental and Leasing Services industry.<br />
Hertz Car Rental has 8,100 car rental service locations in 145 countries (Hertz Annual Report, 2009: 3).
The wide distribution of their car rental service locations provides Hertz Car Rental the opportunity to reach diverse customers. As they continue to expand their global operational structure to new locations, they will attract new customers and increase both their sales and market share.
The economic recession increased the price sensitivity of consumers. Consumers will purchase products if they perceive the price to be a fair in regards to quality.
The Customer Environment<br />Who are the Firm’s Current & Potential Customers?<br />The customers of Hertz Car Rental have been identified in regards to their demographic, geographic, and psychographic characteristics.<br />
Demographic (“Requirements to Rent” Hertz Car Rental).
Use rental vehicles to travel to and from airport locations.
Uncomfortable leaving personal vehicle unattended in airport locations when they travel
More likely to rent through travel agencies or third-party travel websites
These customers are further segmented based on their role in the purchase process. The major roles in the purchase process are the purchaser, the user, the influencer, and the financially responsible party.<br />
Individuals who purchase car rental products from Hertz Car Rental.
These customers seek to purchase car rental products to satisfy the basic consumer need of transportation.
Friends and family members influence the purchaser’s decision to purchase car rental products and services from Hertz Car Rental. Past Hertz Car Rental customers can also influence the purchaser’s decision through posts on product/service review websites.
They engage in informal word-of-mouth marketing by relaying their personal opinions of the company and/or past customer service experiences.
These word-of-mouth interactions can be both positive and negative.
When consumers reserve car rental products and services from Hertz Car Rental, a credit check is performed by Hertz Car Rental to ensure individuals have adequate financial resources.
The individual looking to purchase the car rental products and services must be the account holder of the credit/debit card that the credit check was performed on (“Frequently Asked Questions” Hertz Car Rental).
What do Customers do with the Firm’s Products?<br />The customers of Hertz Car Rental can purchase or consume the products and services that are offered to them.<br />
Consumers have the option to purchase car rental products and services at Hertz Car Rental locations or through their company website.
The Hertz Car Rental company website contains a reservation portal where consumers can purchase car rental products and services in a financially-secure environment.
Customers who purchase car rental products and services from Hertz Car Rental based on customer convenience and price.
They do not use car rental products and services from Hertz Car Rental often. They will go to a competitor if promotional deals and pricing is better.
Hertz Car Rental is responsible for the proper disposal of the rental vehicles they offer to consumers.<br />
When vehicles are no longer eligible for manufacturer repurchase or enrollment in the guaranteed depreciation program, Hertz Car Rental will remove the rental vehicle from their product line (Hertz Annual Report, 2009: 14).
Hertz Car Rental uses the following channels to dispose of their rental vehicles:
Where do Customers Purchase the Firm’s Products?<br />Hertz Car Rental operates 8,100 car rental locations in 145 different countries (Hertz Annual Report, 2009: 3). Consumers can purchase car rental products and services from these Hertz Car Rental locations. The growth of e-commerce has enabled customers to purchase their car rental products and services online in a more convenient, faster way.<br />
Branch Locations/Company Website (“Vehicle Guide” Hertz Car Rental).
The following products and services can be purchased at Hertz Car Rental locations and through the company website:
Provides customers with the option to rent vehicles at low hourly rates. These low hourly rates include the costs of fuel, insurance and the in-car navigation system.
Satisfies customers who want to drive a variety of vehicles with no required maintenance.
When do Customers Purchase the Firm’s Products?<br />Hertz Car Rental is currently implementing the following promotional offers and incentives to entice consumers to choose Hertz Car Rental products and services over their competition (“Featured Offers” Hertz Car Rental).<br />
Hertz Ultimate Experience Challenge
Hertz Car Rental is so confident in the quality of their rental car products and services that they are willing to match the offers that their competitors are currently offering to consumers. In addition to matching competitive offers, Hertz Car Rental also provides customers with a coupon for $50 off a future car rental.
If a consumer between the ages of 21-24 is looking to rent a vehicle, Hertz Car Rental will waive their Age Differential fees. Promotion is eligible on all car classes except for the Prestige and specific vehicles in their Fun Collection.
Even with promotional campaigns, there are seasonal factors that affect a consumer’s decision to choose Hertz Car Rental to provide all their mobility needs. In their 2009 annual report, Hertz Car Rental recognized the seasonal patterns within their car rental sales.<br />
Hertz Car Rental experiences a significant increase in demand during the Spring and Summer months of the year.
To prepare for the increase in demand, Hertz Car Rental locations increase the number of vehicles in their rental fleet and hire additional employees.
The company website also provides customers with the option to chat with a member of their support team upon request. Support team employees are available to provide customers with 27/7 assistance.
Special Amenities (“Products & Services” Hertz Car Rental).
Why (and How) do Customers Select the Firm’s Products?<br />Customers choose to rent vehicles from Hertz Car Rental locations because of the variety of products and the unique services they provide.<br />
Variety of Products
Hertz Car Rental offers cars and SUVs to satisfy customers who want to travel with the basics. They offer their special Green, Fun, and Prestige Collections to satisfy customers who want to travel with added convenience, comfort, and style.
These rental vehicles are guaranteed to satisfy all customer personal preferences.
The Rental and Leasing Services industry is highly competitive, which forces Hertz Car Rental to offer their products at similar prices as their competitors.
Their unique services are responsible for differentiating their products.
Why do Potential Customers NOT Purchase the Firm’s Products?<br />Consumers choose not to conduct business with Hertz Car Rental for several reasons. The Hertz Car Rental requirements regarding valid driver’s licenses and credit history are two main reasons consumers decide to utilize other means of transportation.<br />
Valid Driver’s License
Consumers who want to purchase car rental products and services must have a valid driver’s license.
Driver’s license must be valid for at least 1 year at the time when the consumer purchases car rental products and services.
Consumer driver’s licenses that have been suspended in the past, or contain restrictions that require the consumer to carry a breathalyzer with them at all times will not be acceptable to purchase Hertz Car Rental products and services (“Requirements to Rent” Hertz Car Rental).
A majority of elderly consumers feel uneasy when driving in crowded, low-visibility conditions. Some elderly consumers no longer have a valid driver’s license.
These consumers utilize bus, train, and taxi services to increase their mobility.
The Internal (Organizational) Environment<br />Review of Marketing Goals & Objectives<br />The current vision of the Hertz Corporation is “to be the first choice brand for vehicle and equipment rental/leasing by providing customers with total mobility solutions” (Hertz Annual Report, 2009: 1). Hertz Car Rental strives to make their vision a reality by incorporating the values of integrity, continuous improvement, passion, teamwork, transparency, diversity, commitment and accountability in their current marketing strategies.<br />
Hertz Car Rental is currently in the process of expanding their business using the continuous growth strategy of market penetration to increase their sales and revenue in the off-airport market.
According to the online article, Hertz Gearing up for Rental-Car Fight, Hertz Car Rental is increasing their off-airport locations to directly compete with Enterprise Rent-A-Car. Enterprise Rent-A-Car currently dominates in the off-airport market segment with a consumer market share of 65% obtained from the 7,000 locations they operate. While Hertz Car Rental is not as large a presence as Enterprise Rent-A-Car, they plan to double their market share in the off-airport market segment within the next 2-3 years (Perone).
Review of Current Marketing Performance<br />To understand the current marketing performance of Hertz Car Rental, it is important to analyze their financial performance based on their sales and profitability from 2007 to 2009. Analyzing their financial performance before and after the economic recession will provide further insights on the impact the recession had on the company.<br />
At the end of fiscal year 2007, Hertz Car Rental generated a positive net income of $284.2 million. Their car rental service sector alone brought in $6,900.7 million (Hertz Annual Report, 2009: 54).
As a result of the economic recession that the economy faced in 2008, Hertz Car Rental ended the fiscal year of 2008 with a negative net income of $1,185.9 million. Their car rental service sector generated $6,730.4 million. Hertz Car Rental experienced a negative net income because of the impairment charges they paid out. Hertz Car Rental spent $1,168.9 million in impairment charges to assist their customers during harsh economic times.
Although no impairment charges were spent in 2009, Hertz Car Rental experienced another negative net income of $111.3 million at the end of the fiscal year. The revenue brought in from their car rental service sector showed a slight decline to $5,972.9 million (54).
Review of Current & Anticipated Organizational Resources<br />The anticipated organizational resources that Hertz Car Rental has are a direct result from their current financial resources, human capital, and the strong relationships they have developed with their key suppliers.<br />
As of October 5, 2010, Hertz Car Rental generated more than $1 billion in revenues according to the online article found on Yahoo! Finance, Hertz says Non-Airport Rentals Bringing in $1B (Associated Press). Although the 2010 year end revenue totals are not complete, it is still a $100 million increase from the revenues Hertz Car Rental experienced at end of the 2009 fiscal year. This amount of financial resources will allow Hertz Car Rental to open 250 more locations in the off-airport market. This will support their marketing strategy of market penetration in the off-airport market segment to gain market share.
At the end of 2009, Hertz Car Rental had approximately 15,680 individuals employed in their US operations and 7,370 individuals employed in their international operations (Hertz Annual Report, 2009: 20).
Because of their negative financial performance when the economic recession occurred in 2008, underperforming Hertz Car Rental locations were shut down. Employees working in those locations that were unable to transfer to other locations were forcibly unemployed.
Hertz Car Rental has developed strong relationships with their key suppliers by continuing to support them as they recover from the extensive losses they incurred during the economic recession.<br />
Ford Motor Company
As of December 31, 2009, Hertz Car Rental acquired 31% of their total US market rental vehicles from Ford Motor Company. 27% of their total international market rental vehicles were also from Ford Motor Company (13).
As of December 31, 2009, Hertz Car Rental acquired 21% of their total US market rental vehicles and 14% of their total international market rental vehicles from General Motors Corporation.
When General Motors Corporation used government bailout money to continue operations, they received heavy criticism and a negative image from the media. Hertz Car Rental continued their business with General Motors and will continue to support General Motors as they improve their brand image.
As of December 31, 2009, Hertz Car Rental acquired 16% of their total US market rental vehicles and 27% of their international market rental vehicles from Toyota Motor Corporation.
In early 2010, Toyota Motor Corporation was forced to announce recalls on a significant amount of their vehicles. 13% of vehicles that Hertz Car Rental obtained from Toyota Motor Corporation were subject to the safety recall (13).
Just as they did with General Motors Corporation, Hertz Car Rental continued their business with Toyota Motor Corporation and supported Toyota Motor Corporation as they worked to resolve the issue.
Review of Current & Anticipated Cultural & Structural Issues<br />When analyzing the current and anticipated cultural and structural issues of Hertz Car Rental, it is necessary to first examine the individuals who are placed within key executive positions. From there, employee satisfaction and their overall customer orientation must also be briefly analyzed.<br />
Key Executive Individuals (“Executive Officers” Hertz Car Rental).
Mark P. Frissora/Chief Executive Officer (CEO)
Mark Frissora has served as both the CEO and Chairman of the Board for Hertz Corporation since January 1, 2007. Before moving to join the team at Hertz Corporation, he was the CEO of Tenneco Inc., an automotive operations company. He has also obtained product development and marketing skills from his 10 years experience at General Electric and Philips Lighting Company.
Before joining the Hertz Holdings team, Elyse Douglas was the Assistant Treasurer at Nabisco from June of 1995 to December of 1999. When she moved to Hertz Holdings, she first served as an Interim CFO from August to October of 2007. Her exceptional job performance led to her to a permanent position as CFO on October 29, 2007.
With the economic recession, Hertz Car Rental was forced to lay off a significant amount of their human labor force and close underperforming locations to cut costs. The human labor force that remained was subjected to a decrease in financial compensation. Regardless of the setbacks employees faced, Hertz Car Rental reported an employee satisfaction rating of over 85% in late 2009 (Hertz Annual Report, 2009: 3). This is partly because of their learning and mentor programs, accelerated management training programs, and their expanded employee stock purchase program (3).
Like all companies, the orientation and emphasis on customer service is critical to the success of their business. With the Rental and Services industry being seen as an industry that offers commodity products, customer service is important to win market share, remain competitive and continue operations (2).
Strengths<br />Strength 1<br />
Global Operational Structure
Hertz Car Rental has control over two subsidiary car rental service companies: Dollar and Thrifty. Combined, these two rental car service companies are located in 8,100 locations spread out amongst the 145 countries Hertz Car Rental operates in (Datamonitor, 2009: 5). These two car rental service companies compete on a global scale with locations in the major cities of US, Canada, France, Germany, Italy, the UK, Spain, the Netherlands, Switzerland, Belgium, Luxemburg, the Czech Republic, Australia, New Zealand, China, and Brazil (5).
Having a global operational structure has allowed Hertz Car Rental to compete as equals against their competitors. Continuing expansion into global markets will create new customer relationships, bring in substantial revenue, and increase their market share.
Strength 2<br />
In 2009 alone, Hertz Car Rental successful acquired two diverse assets from multiple companies through the use of acquisitions. They began with the first acquisition of Advantage Rent A Car in April for a total of $33 million. The second company that they acquired was the online car marketplace, Automoti Group, in August (6).
The acquisition of Advantage Rent A Car allowed Hertz Car Rental to expand their rental car fleet and increase their assets while gaining the loyal customers of Advantage. The acquisition of Automoti Group allowed Hertz Car Rental to utilize e-commerce services that has made their global car rental operations a success.
Strength 3<br />
Unique Services Provided to Customers
Hertz Car Rental has satisfied the diverse preferences of their consumers by creating several specialty segments within their car rental service fleet. They have also set themselves apart from the competition by offering their Rent-it-Here/Leave-it-There program, Connect by Hertz, and the new Hertz Rent2Buy services (7).
The Rent-it-Here/Leave-it-There program allows consumers to rent a car for one way travel without having to worry about the obligation to return the car to its original Hertz Car Rental location. For consumers who only need to rent a car for hours, they can utilize the Connect by Hertz program. This program lowers customer costs. Lastly, the Hertz Rent2Buy service satisfies customers who are in the market for a new vehicle. Making a car purchase is stressful to consumers and expensive. Renting a vehicle to reassure consumers on the type of car they wish to purchase in the future removes the buying risk on such a significant financial purchase.
Weaknesses<br />Weakness 1<br />
Decline in Financial Performance
Hertz Car Rental has seen a steady decline in their revenues since 2007. At the end of 2007, Hertz Car Rental obtained revenues reaching $8,685.6 million for the fiscal year. In 2009, those revenues experienced a 10% decline to $7,101.5 million (7).
The revenue stream from 2007 to 2009 has been steadily declining, which is creating a significant weakness in comparison to their competitors. Even with the economic recession that hit, the top two competitors of Hertz Car Rental have experienced steady revenues every year.
Weakness 2<br />
Lack of Funded Employee Pension Plan
Hertz Car Rental provides benefits to their employees who have retired from the company. These benefits include a financial pension plan. Unfortunately, with the current economic conditions, Hertz Car Rental was unable to find a company to help fund the costs of providing pension plan benefits to their retired employees.
As a result, Hertz Car Rental has been forced to continue the payments to employee pension plans out of their own profits. With the current economic instability already, this has placed added pressure on their profit margin regarding their current debt/equity financial situation. Funding this program through their own profits has led Hertz Car Rental to continually underperform in comparison to their top competitors in regards to financial performance. This weakness also affects the likelihood of new investors.
Opportunities<br />Opportunity 1<br />
US Airline Industry Recovery
The economic recession that occurred in 2008 forced consumers to reduce their amount of financial expenditures. Companies began to experience a decline in revenues and were unable to cover the costs of their operations. As a result, employees were released from their jobs and forcibly unemployed. With travel considered a luxury expense, consumers cut back on their financial spending in the US Airline industry. With the economy slowly improving, the rise in consumer confidence has allowed consumers to stimulate the economy with an increase in spending.
This is an opportunity for Hertz Car Rental to take advantage of the increase in consumer spending. A majority of their car rental services revenue stream is generated from their airport locations. In 2009 alone, Hertz Car Rental airport locations were solely responsible for generating 67% of the company’s total revenue for the year (8).
Opportunity 2<br />
Growth in the Used Car Market
Hard economic times have forced consumers in the market for a vehicle to purchase used vehicles rather than brand new vehicles for their transportation needs. The price of these used vehicles has increased by 16.3% in March of 2010 to match the increase in demand for used vehicles (9).
The growth in the used car market presents an opportunity for Hertz Car Rental because they sell used rental vehicles to automotive dealerships when they are no longer eligible for manufacturer repurchase. Of the total cars that were not purchased back by their manufacturers, Hertz Car Rental was able to sell 88% of these vehicles to automotive dealerships through auctions (9).
Threats<br />Threat 1<br />
Intense Industry Competition
As stated previously in the industry analysis, the Rental and Services industry is highly fragmented. Hertz Car Rental has to fight for market share with both global and smaller, local car rental service companies within the industry. Competing companies offer similar products at competitive prices.
This is creating a threat due to the price wars occurring within the industry. Consumers view the Rental and Services industry as an industry that offers commodity products. If companies continue to base their strategies on lowering prices to increase customer market share, they will eventually run themselves out of business when they lose the profitability necessary to continue business operations.
Threat 2<br />
Increase in Fuel Costs
Costs for fuel are known to fluctuate because their prices are heavily influenced by the current condition of the economy. As our economy slowly recovers from the economic recession, the price for fuel is expected to increase. The cost of fuel in 2010 is currently $76 per barrel. If the economy grows by the expected 3.9% that is forecasted, fuel prices will be expected to reach $82 per barrel in 2011 (10).
Rising fuel costs present Hertz Car Rental with a major threat because it will force the airline industry to raise the price of their tickets to cover the additional costs to maintain their operations. The higher prices for air travel will decrease the amount of consumers willing to spend the money to travel. Hertz Car Rental generates a majority of their car rental service revenues from their airport locations. Rising fuel costs will decrease their revenues, hurt their profitability, and increase their cost of operations to fuel their rental vehicles.
Threat 3<br />
Safety Recall Risk of Manufacturers
Hertz Car Rental currently operates with a fleet of vehicles that are largely from General Motors and Toyota. Within the past few years, both companies have been largely scrutinized in the media for their manufacturing defects resulting in the safety recalls of their vehicles. As a company that rents and sells these vehicles to consumers, should anything happen to the consumer as a result of safety recalls, Hertz Car Rental could be held liable.
The vehicles that Hertz Car Rental has to recall create two threats for the company. Their consumer image could potentially be tarnished if consumers feel that Hertz Car Rental vehicles are unsafe. Also, Hertz Car Rental will lose profits if they are held liable for any accidents related to the recall. Removing the recalled vehicles in their extensive fleet limits the product line available to consumers.
SWOT Matrix <br />
STRENGTHSGlobal operational structureGrowthUnique services provided to customersWEAKNESSESDecline in Financial PerformanceLack of Funded Employee Pension PlanOPPORTUNITIESUS Airline Industry recoveryGrowth in the used car marketTHREATSIntense Industry competitionIncrease in fuel costsSafety recall risk of manufacturers
Matching, Converting, Minimizing, and Avoiding Strategies<br />Hertz Car Rental can match their strengths to their opportunities for long-term success in the future. Upon recognizing the external threats that they cannot change, actions should be taken to minimize the potential impact that they will have on their company.<br />
Matching Strengths to Opportunities
Hertz Car Rental has achieved strengths due to their growth and global operational structure. They can use these strengths to capitalize on both opportunities of the US airline recovery and the increased growth in the used car market. They have experience with their growing company as an advantage. Also, as they continue to offer their unique services to customers, it will increase their market share as they expand their business further into the US airline and used car market segments.
To minimize the threat of industry competition, Hertz Car Rental should try to find a unique niche to focus their operations in. This will decrease the number of direct competitors and increase their probability of finding a competitive advantage to capitalize on. This will differentiate their car rental products and services that they offer to consumers.
Knowing that the fuel prices are estimated to increase as the economy improves; Hertz Car Rental should look into constructing a contractual agreement with their fuel providers. This will keep costs down as their competitors struggle to cover the increase in operating costs.
Another threat Hertz Car Rental should look to minimize is the threat of safety recall risks on the products received from their manufacturers. Hertz Car Rental should formulate a contractual agreement stating that their manufacturers will cover the incurred costs as a result of their operational defects to minimize Hertz’s liability. It will also force their manufacturers to improve the quality of the products they produce.
An entire new line of vehicles will be added to the Hertz Car Rental fleet beginning in April of 2011. Promotional expenditures to market this new collection of vehicles will need to increase by 15% to reach the intended target market. This new collection of vehicles will generate a 20% increase in market share for the consumer segment of individuals between the ages of 35 and 50. This new addition of consumers into the Hertz Car Rental market share will generate a 20% increase in sales at the end of fiscal year 2012.
Increase the number of customer service satisfaction surveys completed by consumers to 100% by making it mandatory when consumers purchase Hertz Car Rental products and services by the end of fiscal year 2010.
Obtain a 90% customer satisfaction rating from collected survey data by the end of fiscal year 2011.
The new collection of vehicles will provide consumers with the complete entertainment experience. The extra amenities and services provided will increase customer satisfaction and develop customer loyalty. Our random upgrade promotional campaign will also increase customer satisfaction.
The world population of males and females from the ages of 30-54 in 2050 is projected to reach 2,913,309,688 people in 2050 (U.S Census Bureau). This information shows an average annual growth rate of 17,440,613 individuals per year.
Consumers who travel will seek car rental products and services to increase the ease of their mobility. While traveling, consumers prefer products that will provide additional convenience and comfort.
The target market can be reached through television commercials, internet websites, e-mails and promotional offers. For increased effectiveness, marketing expenditures should be placed on travel and airport-booking websites and television channels. The target market is knowledgeable of the latest technology; therefore, social media should also be utilized for marketing support.
There will be no set discount/markdown policy when the customer rents a vehicle in the Entertainment Collection. Hertz Car Rental should focus on highlighting the features and benefits that come with the vehicle collection to justify prices. Promotional offers can be used if customers rent the vehicle within the qualifying time period. Only if customer is highly dissatisfied with the vehicle and provides specific reasons will a discount/markdown rate be discussed with the branch manager of the specific Hertz Car Rental location.
General Supply Chain Strategy
Alliance Auto Transport will transport and ship Entertainment Collection vehicles to all 8,100 Hertz Car Rental locations.
Hertz Car Rental employees will communicate price, features and additional consumer benefits associated with the Entertainment Collection to customers.
Notify phone and walk-in customers before they book their rental vehicle
Elements of Trade Sales Promotion (Push) Strategy
Direct-selling performed by Hertz Car Rental employees to customers regarding the price, features and added benefits of renting a vehicle from the Entertainment Collection will push customers to either upgrade their existing reservation or reserve a vehicle within the Entertainment Collection.
Elements of Consumer Sales Promotion (Pull) Strategy
Advertising found in magazines, online company website, social media websites and on television commercials will pull customers into Hertz Car Rental locations when they specifically request to rent a vehicle from the Entertainment Collection.
Product Action Plan<br />Objective<br />
To introduce a new vehicle collection into the Hertz Car Rental product line.
Target Market<br />
Individuals ages 35-50 who need a car rental service.
Prices will be lower than the Prestige Collection, but higher than the Fun Collection; two vehicle collections that Hertz Car Rental has. Unfortunately, pricing for vehicles is subject to change based on location, mileage package, and the length of the rental.
Pricing will show an increase in sales by 20% by end of fiscal year 2012.
Sales will be monitored 4 months prior to and 4 months after the launch of the Entertainment Collection.
This will provide a more accurate representation of the sale the Entertainment Collection is responsible for.
Program Responsibilities<br />
Hertz Car Rental employees will be responsible for discussing the new Entertainment Collection in regards to pricing and the features/benefits associated with customers.
IT professionals will create employee training software.
Engineering professionals will install the sales tracking software packages to computers.
Marketing employees will monitor and analyze the financial and sales data collected.
IT professionals will complete the employee training software on the Entertainment Collection by the December 31, 2010.
Hertz Car Rental employees will be educated on the new Entertainment Collection starting in January of 2011.
Engineering will begin the creation of the sales tracking software immediately.
This software will be installed on all computers by March of 2011.
Marketing will begin monitoring sales and financial data by January of 2011.
Data sorting/analyzing/tracking fees: $1,250,000
Total: $1,620,500 (per Hertz Car Rental location)
Free monthly consumer upgrades to the Entertainment Collection will begin April of 2011.
Tactical Marketing Activities<br />Specific Tactical Activities(Action Plans)Increase marketing expenditures by 15% from April 2011 to April 2012Increase market share by 20% by end of 2012Increase sales by 20% by end of 2012Obtain 90% customer satisfaction rating by end of 2011Production ActivitiesIntroduce new Entertainment Collection vehiclesxxPricing ActivitiesAnalyze sales data 4 months prior to and after launch of Entertainment CollectionxxDistribution ActivitiesDistribute the Entertainment Collection to all 8,100 Hertz Car Rental locationsxxIMC/Promotional ActivitiesProvide 2 free consumer upgrades to the Entertainment Collection per monthxxx<br />Budgets<br />Product Development Budget<br />Product Action PlanFleet of 20 GM Vehicles……………………………………….……………$720,000Flat Screen TVs……………………………………………………………….$4,000Sirius XM Radio…………………………………………………………….…$6,000Nintendo Wii consoles w/ controllers…………………………………….$5,000Assorted Nintendo Wii games……………………………………………..$1,000Best Buy installation fees…………………………………………………….$10,000Total: $746,000/ vehicle collectionGrand Total: $6,042,600,000 ($746,000 x 8,100 Hertz Car Rental locations)<br />Pricing Budget<br />Pricing Action PlanEmployee Training software development….…………….……………$850,000Sales tracking software development…………..……………….......….$100,000Sales analysis fees…………………………………….………...… ….….…$500,000Grand Total: $1,450,000 (per Hertz Car Rental location) <br />Distribution Budget<br />Distribution Action PlanShipping costs….…………….……………………………………….…$324,000,000Projected international fees…………..………..…………….......….$150,000,000Grand Total: $474,000,000 (per Hertz Car Rental location) <br />IMC/Promotional Budget<br />IMC/Promotional Action PlanDate sorting/analyzing/tracking fees………………………………….$1,250,000Customer tracking software….………………………...…………….…$350,000Projected upgrade costs…………..………..……………….….......….$20,000Customer satisfaction surveys………………………………………..…$500Grand Total: $1,620,500 (per Hertz Car Rental location) <br />Output Control Mechanisms<br />Product Performance Standards<br />
Entertainment Collection vehicles will provide customers with the ultimate travel experience by increasing travel comfort and convenience through special amenities.
Adding the Entertainment Collection to Hertz Car Rental’s current fleet will increase both sales and consumer market share by 20% by the end of fiscal year 2012.
If consumer market share and sales do not increase by 20%, Entertainment Collection vehicles will only be available in select Hertz Car Rental locations. These locations will be larger rental locations in large cities. Locations that are underperforming will no longer carry the Entertainment Collection vehicles.
All Entertainment Collection vehicles removed will be sold as used cars in General Motors automotive dealerships. Hertz Car Rental will receive 70% of sales on vehicles and GM dealerships will keep the remaining 30% as sales revenue.
Distribution Performance Standards<br />
Distribution of all Entertainment Collection vehicles will be available for consumers to rent in all 8,100 Hertz Car Rental locations by April of 2011.
If all vehicles are not shipped and delivered to all Hertz Car Rental locations by launch date in April of 2011, marketing sales individuals will contact the Alliance Auto Transport shipping company.
Marketing sales employees will demand and negotiate reimbursement from Alliance Auto Transport that will cover potential missed sales in locations where vehicles were not received by deadline.
Price Performance Standards<br />
Pricing of new Entertainment Collection vehicles will increase sales by 20% by the end of fiscal year 2012.
If designated change of 20% in sales is not obtained, Hertz Car Rental will remove Entertainment Collection vehicles from underperforming Hertz Car Rental locations.
Vehicles will be removed and sold as used cars in General Motors automotive dealerships. 70% of sales revenue from sold Entertainment Collection vehicles will be collected by Hertz Car Rental, while the remaining 30% in sales revenue will be collected by GM dealerships as sales revenue.
IMC/Promotional Performance Standards<br />
Promotions will increase marketing expenditures by 15%, but will help to obtain a 90% in customer satisfaction ratings by the end of fiscal year 2011.
Additional questions will be added to the customer satisfaction surveys to further understand why customers were not satisfied with their Entertainment Collection experience.
Customer responses will be analyzed to decide the changes that will need to be implemented.
Success of the free consumer upgrade promotional offer will be tracked and recorded in regards to its effect on sales. If Entertainment Collection sales increase significantly from repeat customers, promotion will continue rather than terminate in April of 2012.
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