ENTERPRISE RENT A-CAR :
CASE
Learning objective:
Markets
Offerings
Capabilities
I>
Competitive
Advantage
Porter forces
Apply the concepts of value creation and value capture ? Understand the interaction of
internal and external strategies in creating competitive advantage ? Understand the
difference between market-level and firm-level demand elasticity ? Understand economies
of scale and network externalities ? Determine the applicability of skills and resources to
new markets
I . Business Definition
How would you define the Car rentals business , within the perspective of this
case / What markets are being served, with what kind of offerings and to what
customer segments ?
How is ERAC positioned in this industry ? What is its unique proposition ? Is this
sustainable?Are there any inherent gaps or weaknesses in this position-
Who are its competitors ? what are the sources of ERACs competitive
advantage ?What capabilities are demanded to create value
II>
II. Industry Structure
How would you characterize the economic forces that influence outcomes in this
industry of all the five (customer power, suppliers, barriers to change ie entry
ad exit , substitution and competitive rivalry), which ones seem to dominate the
most by impact.. read Porter refresher below
1.
2.
3.
4.
5.
A primary force represents the barriers to change in industry structure,
either from new competitors entering the industry or current
competitors existing the industry. Barriers to entry often include heavy
investment in capital and market development. Barriers to exit often
include service contracts that must be honored, and alternative use of
facilities/assets.
A second force comes from the competitors and their strategies for
gaining market share. Each competitor offers a set of products and
services that attempts to provide higher value to the product-market
segments they address. Strategies can be to provide some combination of
higher performance, more fashion and features, higher quality, or lower
price. Increased rivalry often leads to price or service competition that
can reduce the profitability of the business.
A third force comes from the industry suppliers. Industry suppliers often
control critical inputs that can affect a firms ability to compete. Access to
critical assets or competencies can determine what firms will lead the
industry..
Another force represents the potential for change in product-market
structure of the industry through the substitution of products or services
with alternative approaches to satisfying the customer's needs. This
requires the identification of potential substitutes and the characteristics
that would cause rapid substitution
And fifth, comes customer segments that make up the markets. The size
and importance of customers may provide the power to change the
profitability of the industry. The relative size and growth of segments
determine their potential influence
Vision /
Goals
III. IDENTIFY KEY SUCCESS FACTORs
Strategic
focus
What goals had Andy Taylor set for ERAC in 1985/ what was the envisioned
future for the company
Capabilties
Value
creation and
capture
What drives value creation and value capture for ERAC ?
`
- competitive positioning ?
-creation of strategic capability / core competences ?
1. Customers are looking for products that provide some
level of value for the price they pay. Each buyer
segment has different requirements that affect its key
success factors. Requirements can include high
performance, ease of use, or rapid availability.
2. Competition is often based on price, quality, and
delivery. Depending on their strategic focus, each firm
must develop a set of skills (strategic weapons) that
allow it to perform better than their competitors on
each competitive dimension.
3. Industry regulations or standards on issues like safety,
pose minimum requirements for participation in a
competitive arena.
4. Firm competences / capabilities are sources of
advantage as markets are exploited for economies of
scale , learning and network effects.
III>
IV. What are the key elements of ERACs internal growth strategy
In what customer segments does ERAC dominate ? Without focus,
is it impossible to develop effective offerings Describe ERACs position
in its chosen segment(s). The price-quality-profitabilty position as a
tool to market leadership. Pricing power elasticity firm level and
market level demand Identify the strategic process(es) required to
execute ERAC strategy successfully. Skills and competences that
drive strategic performance.Identify the market development
strategy.Scale the business leveraging competences, build barriers
network
IDENTIFY CRITICAL CAPABILITIES AND PROCESSES. Ability to implement
strategy is dependent upon both the functions and business processes .
These capabilities can be classified into product / service creation processes,
and product / service delivery and satisfaction functions and processes. The
service profit chain works as below
V. Evaluate ERAC Strategy
Based on Internal assessments above. What do we understand to be the firms key strengths
and weaknesses.?
And what does our external assessment tell about the key opportunities and threats facing the firm.?
Put the two together . and wrap up the case with a SWOT analysis.
What critical issues need addressing if ERAC needs to maintain or improve its competitive and
financial performance.
The combination of strengths, weaknesses, opportunities, and threats must be ranked by priorities so
that action can be planned in a manageable way.
Since managers have limited time and resources, it is important that actions be taken in order of
importance.What could renewed strategic goals be : Both for Financial performance and Market goals?
