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Characteristics of the automobile rental industry

Car hire is clearly an extremely perishable service. When a day goes on and an automobile is not rented, the possibility to generate revenues from that unrented time is lost permanently. Perishability is a crucial element in the local rental industry given the generally high fixed cost from the service (i. e. , a fleet of vehicles). All industry players must handle this perishability and different companies will have slightly different approaches for interacting with it.

The service of car hire is intangible, given the physical aspect of the rented vehicle, it really is much less intangible as much other services in the sense that the consumer can easily see and touch the rented vehicle. For almost all the period where the client uses the service of car rentals, the physical car is the service provided. For many services, intangibility makes it very difficult for the consumer to guage quality and for the producer to regulate quality. This isn't nearly as difficult a proposition regarding car lease. The convenience factor (e. g. , location, acceleration of pick-up and drop-off, etc. ) associated with hire is the most significant intangible associated with local rental cars.

Service design has been characterized as having three basic components - (i) physical facilities, processes & procedures, (ii) employee's conducts, and (iii) employee's professional judgment. Given that car rental service is a relatively tangible, homogenous service with rather low degrees of customer contact (i. e. , simultaneity), rentals companies have a tendency to target their service design on the physical facilities, techniques and types of procedures. While employees' behaviors aren't unimportant, they can be of supplementary importance to facilities, functions and procedures operating design in the car rental industry. This is seen industry wide.

2. EasyCar definitely competes based on low price. What does it do in functions to support this strategy?

EasyCar is concentrating on a particular portion of the marketplace that is very price mindful. The need of this segment is more than simply low price. The idea of value as an idea relating both quality and price can be introduced here, with value equating to the benefit of the service provided relative to the purchase price paid. Proportions of quality in an effort to better understand the multidimensional aspect of quality are: performance, features, trustworthiness, conformance, sturdiness, serviceability, looks, and perceived quality. EasyCar's customers would likely define quality in terms of the essential operation (i. e. , center performance advantage) of the automobile rented, the consistency of the vehicle rented, and the conformance of easyCar functions to the requirements provided on the easyCar website (across all locations).

3. How will you characterize the level of quality that easyCar provides?

Quality is important that easyCar situation clearly illustrates low cost does not actually imply poor in the brains of the customer. EasyCar's customers may likely determine quality in conditions of the essential functionality (i. e. , center performance advantage) of the automobile rented, the reliability of the automobile rented, and the conformance of easyCar procedures to the specs provided on the easyCar site (across all locations).

4. Is easyCar a practical competitor to taxis, buses and trains as Stelios says? How does the design of its operations presently support this form of competition? How not?

EasyCar sees itself as a potential competition to taxis and buses because it allows customers to lease a car for as little as 1 hour. From easyCar's position, this makes sense within their effort to attain maximum utilization of their fleet. If they can book an automobile for even extra a couple of hours when the automobile would otherwise sit in a car port unused, then it increases their bottom line. Further, it's possible that such very short term rentals seem probably to come through the work week, a typically slower period for easyCar given its principal appeal is to leisure travelers who demand vehicles more on weekends than on weekdays. In this way, the short-term rentals may help balance out demand on a weekly basis.

EasyCar's change to allow rentals for as little as one hour offers a good chance to discuss the problem of the overall flexibility of EasyCar's procedures. The easyCar process is adaptable for the reason that it allows customers to choose exact pick-up and drop-off times and pay for only that time. Traditional rental car companies demand by 24-hour intervals and for at least one day. Further, easyCar charges customers for each and every individual service that they use (e. g. , cleaning the automobile, extra kilometers), allowing customers to pay only for the services that they require. This flexibility really revolves around prices. In two cities, easyCar also offers flexibility in conditions of location. Totally half of easyCar's local rental sites are in either London or Paris.

Having many locations in the same city also evidently makes easyCar a more viable rival to taxis, buses and car ownership. It has significant implications to easyCar's development strategy. If it truly wishes to compete against taxis, buses and car ownership, it will focus its enlargement on beginning multiple locations in the major European cities. If it sees itself more as rivalling for holiday customer, it'll open more locations in vacationer destination locations, either near airports or coach and bus stations.

5. What exactly are the functional implications of the changes created by EasyCar. com in the last year?

Rental by the Hour - Introduction of vehicles apart from the Mercedes A-Class - Possibly the most interesting change that easyCar made, apart from allowing accommodations of only one hour, was to move away from its one car model and offer a number of different, although generally similar, vehicles at its different locations. The change was made to keep pressure on suppliers (i. e. , the auto manufacturers) to lower costs and to in turn be able to lower the price tag on accommodations to customers. What's perhaps shocking in the change is that easyCar travelled from having one vehicle type to presenting five vehicle types. Area of the operational benefits of a single fleet is site specific. Any car can go to any customer and significant economies of size would are present in the maintenance of the fleet. However, having different vehicles at different locations reduces easyCar's overall flexibility to switch vehicles between locations easily if demand is higher at one location than at another.

Clean Car Insurance policy - these changes is plainly very steady with easyCar's low priced strategy. Essentially it represents a transfer of an activity usually done by the business to the customer. Operationally, it includes several implications. It reduces the necessity for staff at the local rental site, aiding easyCar reduce one of its costs. More significantly, perhaps, it also rates of speed the turnaround of a car. That is, this policy merged the empty gasoline policy, means that most vehicles are returned in a problem that allows those to be immediately rented to another customer. This helps easyCar maintain an extremely high fleet utilization. But what is also interesting operationally is that it creates the employees' process somewhat less predictable. Whereas with the old policy employees knew they might have to completely clean each vehicle, and they knew how many vehicles were coming back each hour, with the new policy there can be an additional factor of uncertainty in the process because an occasional car will need to be cleaned. This might mean that a number of customers may need to hang on at the easyCar site as the worker cleans such a car. This is especially a concern at sites which can be staffed by a single employee.

Empty-to-Empty Policy - This change, like the previous one, is plainly steady with easyCar's low priced strategy. Operationally, the empty-to-empty insurance policy would seem to be to significantly reduce the chance an easyCar employee would need to offer with the gas level. Previously, customers needed to worry about taking the time to fill up the tank. Customers running later part of the might skip this step to save lots of time, leaving the duty for an easyCar worker. With the new plan, the gas can be at any level so long as the low petrol indicator light is not on. Since most drivers are unlikely to allow the gas level in their vehicles to drop this low in any case, the chance that an easyCar employee would need to deal with placing gas in the car is small. Combined with past change, this insurance policy basically means the vast majority of customers bring their car back in a condition which allows it to be immediately re-rented.

Requiring Customers to get Insurance - This policy change probably has greater implications on the marketing area than on the functions part. Operationally, however, it greatly reduces the probability of turmoil between customer and easyCar employee whenever a customer comes back a destroyed car. Recently customers who did not purchase the optional insurance experienced some liability, and the employee on duty would need to type this out with the customer. This is often a timely process, and present complications particularly for a location staffed by only 1 person. Such incidents would likely cause delays for other customers attempting to grab or return vehicles at the same time.

6. How significant are the legal difficulties that easyCar is facing?

Clearly the OFT ruling against easyCar is a lot more significant than is the publishing of the pictures of renters with overdue vehicles. The OFT ruling against easyCar was created primarily to bolster the price benefits gained from easyCar's demand management system and its high utilization rates it achieves.

The other legal obstacle easyCar faces handles its posting of the pictures of customers with overdue vehicles. This is not as significant, both because its impact is much less great and because no legal action has yet been used.

7. What's your evaluation of the likelihood that easyCar will be able to realize its goals?

The set up goals, a quadrupling of sales from 27 million to at least one 1 00 million via the opening of 1 1 30 new locations within the next 2 yrs while realizing a 1 0 million profit are certainly ambitious. It really is worthy of noting that easyCar's operational model certainly makes starting new locations easier than for traditional rentals car companies, given the minimum amount facilities required and the creation on the part of easyCar of vans with all the equipment had a need to run a location. The bottlenecks for extension more likely rest with selecting and training all of the employees to staff these locations, as well as providing sufficient marketing support to kick off 130 new locations on a minimum marketing budget. The higher challenge operationally is to continue steadily to find ways to operate a vehicle costs down while retaining customer satisfaction such that it can realize revenue at exactly the same time.

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