Enterprise Rent-A-Car Case Study

Enterprise Rent-A-Car Case Study Executive Summary Enterprise Rent-a-Car was founded in St. Louis, Missouri in 1957 by Jack Taylor when he realized the demand there was for short-term car rentals. From the onset, Taylor focused the business on the local rental market and placed a strong emphasis on the importance of customer service. As the business grew over time and laws were passed requiring car insurance companies to reimburse for rentals while an insured owner’s car was being repaired, Enterprise began to cultivate relationships with insurance companies in order to position themselves as a preferred provider for these companies. This helped to grow their presence in the local rental market, a sector in which they have consistently held strong control over. In 1995, Enterprise made the decision to enter the airport rental market, an area in which they had previously not focused and in which Hertz and Avis held a decided share of the market. However, through targeted acquisitions, Enterprise was able to grow their share of the airport rental market to 20% by 2007, successfully securing their foothold in both the airport rental market as well as the local rental market. Enterprise’s success can be at least partly attributed to their unique company culture. They foster a competitive company culture which centers around the importance of customer satisfaction. Much of an employee's pay is performance-based compensation, and each week branch employees vote on who they think was the best and worst performing employee that week. These practices, among others, push employees to reach for the highest metrics attainable. Enterprise wants its employees to work hard, and they reward hard work. Overall, they have continued to operate under the same philosophy founder Jack Taylor set, “Take care of your customers and employees, and the bottom line will follow.” Value Pyramid Enterprise’s specialization can be broadly defined as the rental car market. However, I think it would be more accurate to say that they’ve truly specialized in the local rental market, serving customers who are looking for either discretionary rentals or repair/insurance replacement rentals. They hold a considerable majority of the market share in this segment, and it’s what they’ve focused on since the company’s inception in 1957. Enterprise’s core competence comes in the form of its human resources. Enterprise makes an effort to hire college grads who may not necessarily be in the top tier academically, but who come from a background in athletics or Greek life, among other things. They look for social individuals who will be adept communicators and who will not be a stranger to competition. These employees are brought into a managerial trainee program in which they will become a management assistant in a branch within a year, with an assistant manager position within reach in two years. Since Enterprise focuses exclusively on internal promotion to fill managerial posts, any employee who sticks with the managerial training program shouldn’t have an issue climbing the corporate ladder over time. However, in order to get ahead within this organization, employees must be ready to get competitive, outperforming other branches in their customer service scores and profitability in order to enjoy the largest bonuses. Enterprise’s greatest strategic innovations have come in the form of their sales and marketing advances. Since each branch manager has the authority to run their offices as their own profit centers, they are free to innovate and come up with whatever new ideas will increase their profitability. They’ve also made great progress in sales to insurance companies, many of whom have taken on Enterprise as their preferred provider of rental cars. This was achieved through the efforts of Enterprise employees actively networking with insurance agents, dropping off pizza or donuts and then staying after to talk business, or even just simply leaving their card along with the gift of food. This was an inexpensive way for Enterprise to get their foot in the door with a lot of insurance agencies. Finally, a key component of Enterprise’s marketing strategy has been the limitations of its marketing. They don’t run a large number of advertisements, mostly due to the fact that branches would be charged for advertising overhead, so managers who had their eye on maximized profitability were never in favor of expensive advertising. Clearly this strategy has worked, as Enterprise holds a majority of the market share without running the same national advertising campaigns as some of their competitors. As far as Enterprise’s risks go, an economic downturn could pose a core risk as this would surely cut back on the number of discretionary rentals coming into the local rental market. Enterprise’s practice of reselling their own cars is also a considerable core risk, as this does not guarantee that they will be able to achieve any specific repurchase price for these cars. Non-core risks could be considered to be growth of public transportation and mobile ride hailing services such as Uber and Lyft which people may see as an adequate alternative to renting their own car. Enterprise’s Unique Experience To create a leading, unique experience for customers, Enterprise provided ample time and attention to their customers. Due to positive interactions between employees and customers, this led Enterprise to have an ever-growing recurring customer base. Positive reviews via word of mouth also offered “free” advertising for the rental company. Enterprise also offered special services such as door to door pickup and drop off, which also allowed customers to have a much more stress-free and positive experience. To best meet the needs of their customers, Enterprise offered the mentioned premium customer service, but also at rates estimated at 30% below other airport rental fees. Great partnerships with insurance companies also helped customers enjoy a seamless, smooth transaction and experience. In almost all areas, Enterprise matched their customers’ needs with an exceptional rental experience and through strategic partnerships. Corporate Value Pyramid Analysis Enterprise became wildly successful because they were able to align their own corporate values with the interests of their employees. Enterprise really valued open dialogue, hard work, and excellent customer service. In order to meet these needs, Enterprise decided to hire extroverted college graduates that weren’t necessarily the top of their classes, but showed high levels of extracurricular activity and matched the energy needed to provide effective customer service. Having socially adept people was key to operate in their family oriented and honest values because these values cannot be implemented without effective communicators. An open dialogue at work was something that Enterprise gave a lot of importance to and having employee meetings where they discussed employee performance was crucial in developing this dialogue and transparency within the company. To ensure that these values permeated throughout the whole organization, Enterprise primarily hired from within and promoted high performing employees that carried these core values into managerial roles. Employing higher level positions in the corporation by promoting high performing employees also helped Enterprise incentivize a strong work ethic into their corporate values. This growth opportunity for employees was not the only method Enterprise used in order to maximize productivity within the organization. Enterprise implemented several motivational policies in order to keep employees working hard like acknowledging high performing employees with awards, commission based pay at the managerial level, and performance bonuses. These methods ensured that employees that stayed with the company were rewarded by monetary rewards or personal growth opportunities. Although their employee turnover is quite high, the employees that stayed and performed were compensated accordingly. Replicating Enterprise’s Success Unfortunately for Avis and Hertz, the early entry by Enterprise into the local rental market would make it incredibly difficult for them to be able to replicate their success. With Enterprise already having 6,000 branches covering all 50 states, Hertz’s 1,930 locations by 2010 was a distant second. Considering that the local rental market serves the two distinct needs of discretionary rentals and repair/insurance replacement rentals, Enterprise holds another massive advantage by having long standing relationships with most major insurance companies. In addition, their human resources and customer service values led to them creating reputable relationships with local auto dealers and repair shops so when customers had car trouble, managers at these facilities would have great influence in sending them to Enterprise over Avis or Hertz. In fact, Enterprise often established onsite offices within these nearby auto dealers and repair shops so customers could easily rent a replacement without even leaving the dealership. On top of that, Enterprise even offers door-to-door pickup and drop-off service to all renters. When looking at Enterprise’s relationships with insurance companies, they were a preferred provider and had full time employees on-site to facilitate bookings in addition to streamlining operational processes by interfacing its reservation system directly with the insurers’ computer systems. All of these advantages that Enterprise possesses due to their early entry makes it practically impossible for Hertz or Avis to replicate their success.