Overview of the market

Industrial car hire is a US economy, which is made up of several billion dollars. The US industry segment is on average $ 18.5 billion in revenue per year. Today, there are approximately 1.9 million rental cars serving the US market segment. In addition to market executives, there are also many agencies that divide total revenues, namely Dollar Thrifty, Budget and Vanguard. Unlike other advanced industries, the automotive industry is highly consolidated, which naturally brings potential new customers with a cost disadvantage as they face high input costs and reduce economies of scale. Moreover, most of the profits are created by several companies including Enterprise, Hertz and Avis. For the fiscal year 2004, the company generated $ 7.4 billion of total revenue. Hertz came in second with $ 5.2 billion and Avis $ 2.97.

Level of integration

Sales of the automotive industry are quite different from five years ago. According to Business Travel News, vehicles are leased until the accumulation of 20,000 to 30,000 miles, until they are moved to the used car industry, while the mileage was 5,000 miles from 12,000 to 15,000 miles ago. Due to the slow growth of the industry and the narrow profit margin, there is no imminent threat to reintegration in the industry. In fact, among industrial players, only Hertz is vertically integrated through Ford.

Scope of competition

There are many factors that affect the automotive industry's competitive environment. Competition comes from two main sources of the chain. At the end of the end-user spectrum, competition is not only the market saturate and well-guarded by business executives, but competitors have cost disadvantages along with smaller market shares since the company has established a network of sellers over 90 percent of the free segment. In the corporate segment, competition at airports is very strong, as this segment is subject to strict Hertz supervision. Given that the industry has experienced a massive economic downturn in recent years, it has increased the scope for competition in most of the surviving companies. Competitively speaking, the landlord automotive industry is a war zone, as most of the rental agencies, including Enterprise, Hertz and Avis, are among the major players involved in the battle of the most capable.


Over the past five years, most companies have sought to increase their fleet size and increase their profitability. Currently, the largest car fleet company in the US since 2002 has added 75,000 vehicles to its fleet, helping to increase its facilities to 170 airports. On the other hand, Hertz added 25,000 vehicles and expanded its international presence in 150 regions compared to 140 in 2002. In addition, Avis increased its fleet from 210,000 in 2002 to 220,000 despite recent economic adverse events. Over the years following the economic downturn, although most companies across the industry have been struggling, the Enterprise among industry executives is constantly growing. Annual revenues, for example, amounted to USD 6,3 in 2001, USD 6,5 in 2002, USD 6,9 in 2003 and USD 7,4 billion in 2004, which in the last four years led to a growth of 7,2% per year. Since 2002, industry has begun to re-enter the industry as total sales have risen from $ 17.9 billion to $ 18.2 billion in 2003. According to industry analysts, better automotive industry days have not yet been accepted. Over the next few years, industry is expected to see accelerated growth of $ 20.89 billion in 2008, which after 2008 is "equal to CAGR 2.7% [increase] over the period 2003-2008." [19659002] Distribution

Over the last few years, the automotive industry has made significant progress in facilitating its distribution processes. Today, approximately 19,000 leases are available in the US, which means that there are approximately 1.9 million hired cars in the US. the number of car rental locations in the US, strategic and tactical approaches are taken into account to ensure proper distribution throughout the industry. Distribution takes place in two interconnected segments. In the corporate market, cars are distributed to the airport and the hotel. In the leisure segment, on the other hand, the vehicle is distributed to an agency owned by an agency located on most major roads and metropolitan areas. [19659002] In the past, car rental companies' managers relied on feelings or intuitive estimates when deciding how much cars to have in a particular fleet or the level of use and performance standards for keeping certain vehicles in one fleet. With this methodology, it was very difficult to maintain a balance that would satisfy consumer demand and the required level of profitability. The distribution process is relatively simple across the industry. First, administrators must determine the daily number of cars that must be in the inventory. Given that there is a very clear problem when there is too much or a lack of vehicles, most car rentals, including Hertz, Enterprise and Avis, use a pool, a group of independent rental vehicles that share a fleet of vehicles. (19659002) Market segmentation

Most companies throughout the chain generate profits based on the type of cars in operation. Rents are classified into economics, compact, medium, premium and luxury, and the top five are the top economic sectors. For example, the business segment itself accounts for 37.7% of total market income in 2004. In addition, the compact segment accounted for 32.3% of total revenues, while the rest of the other categories covered the remaining 30 percent for the US segment

Historica l Profitability levels [19659002] The overall profitability of the automotive industry has declined in recent years. Over the last five years, the industry has struggled just like other tourism. In fact, the US market experienced a slight decrease in the level of profitability between 2001 and 2003. In particular, revenue declined from $ 19.4 billion in 2000 to $ 18.2 billion in 2001. Subsequently, overall industry earnings further deteriorated to $ 17.9 billion in 2002; which is at least $ 17.7 billion, which is the total revenue for 1999. In 2003, it recorded an almost significant increase in the industry, bringing revenue to $ 18.2 billion. As a result of the economic downturn in recent years, some smaller players who have been highly dependent on the aviation industry have made a great deal of strategic change as a way to prepare their societies to cope with possible economic hardships. For 2004, the economic situation of most firms has gradually improved throughout the industry, as most agencies have returned much higher profits than previous years. For example, the company made sales of $ 7.4 billion; Hertz earned 5.2 billion dollars in 2004 and Avis for $ 2.9 billion. According to industry analysts, 2.6% of revenues are expected to grow in the automobile industry in the next few years, resulting in an increase

Competitive competition among vendors

There are many factors driving competition in the automotive industry. Over the last few years, fleet size has expanded and increasing profitability has been the focus of most car rental companies. Enterprise, Hertz and Avis among leaders grow in both sales and fleet sizes. In addition, competition is intensifying as companies are constantly trying to improve their current conditions and offer more consumers. The company has nearly doubled the size of the fleet since 1993 to approximately 600,000 cars. Given that the sector operates on such narrow profit margins, price competition is not a factor; however, most companies are actively involved in creating value and providing a range of equipment from technological devices to free rental to satisfy customers. For example, Hertz integrates its Never-Lost GPS system into its cars. Enterprise, on the other hand, uses sophisticated revenue management software to manage its fleets.

Finally, Avis uses its OnStar and Skynet systems to better serve the consumer base and offers free weekend rentals if the customer rents a car for five consecutive days. The automotive consumer base also has relatively low to no switching costs. Conversely, rental agencies face high fixed operating costs, including rental of real estate, insurance and maintenance. Therefore, rental agencies sensitively appreciate the rental of cars only to recover operating costs and adequately meet the requirements of their customers. Moreover, since industry has experienced slow growth in recent years due to economic stagnation, which has led to a massive decline in business travel and leisure, most companies, including industry leaders, are aggressively seeking to transform their businesses by gradually reducing their dependency on

Potential Entry of new competitors

Entering the car hire sector brings new enthusiasts a serious disadvantage. Over the past few years, following the economic downturn in 2001, most major rental companies have started to increase their market share in recreational activities in industry as a means of ensuring stability and reducing the level of dependence between the airline and the automotive industry. While this trend has made long-term success for existing businesses, it has increased the competitiveness of new customers. Due to the importance of competition, existing companies such as Enterprise, Hertz and Avis are being carefully monitored by their competitive radars to predict Sharpe's retaliatory strikes against new entrants. Another barrier to entry is caused by industry saturation levels

For example, Enterprise gained its first advantage with its capacity of 6,000 devices by spraying the leisure segment, thus introducing not only large restrictions on the most common distribution channels, but also high resource requirements for new businesses. Today's company has a rent site ranging from 15 million to 90 percent of the American population. Given that the network of traders set up by the Enterprise across the country has become relatively stable, more resilient to the recession and mainly less dependent on the aviation industry than its competitors. On the other hand, Hertz uses the full range of its 7,200 stores to secure its market position. In essence, it seems that most Leaders of Leaders in the Leisure Market not only manage rivalry but also differ directly from the level of complexity of entering the automotive industry.

Substitute Threat

There are many rewards available to the automotive industry. From a technological point of view, car rental for a meeting distance is a less attractive alternative to video conferencing, virtual teams and collaborative software with which the company can immediately hold meetings with its staff from around the world in one place. cheaper costs. In addition, there are other alternatives, including cabin take-over, which is a satisfactory substitute for quality and switching costs, but it may not be as attractive as renting a car for one day or longer. While public transport is most cost-effective from the cost point of view, it is more costly in terms of the process and the time it takes to reach the goals of one. Finally, because flying offers comfort, speed and performance, it is a very appealing substitute; however it is a non-regenerative alternative in terms of price in relation to car rental. In the business segment, car leasing agencies have greater protection against compensation, as many companies have established travel policies that set parameters when renting a car or using a replacement vehicle is the best procedure.

According to Tracy Esch, director of marketing operations, her company rented cars up to a 200-mile trip before considering an alternative. Substantially reimbursable is relatively low in the automotive industry because the effects of substitute products do not pose a significant threat to profit erosion across the industry.

Supplier Negotiating Force

The performance of the supplier is a low automotive industry. Due to availability of substitutes and competitiveness, suppliers do not have a major impact on the terms of rental car rental. Since rental cars are usually purchased in large quantities, agents of rented cars have a significant impact on sales conditions because they have the ability to play one supplier against another to lower the sales price. Another factor that reduces supplier performance is the absence of switching costs. This means that the buyer is not affected by the purchase from one supplier to another and, most importantly, the change to different suppliers of products is hardly noticeable and does not affect the consumer's decision to lease.

Negotiating Force Buyers

While the leisure sector has little or no power, the business segment has a considerable impact in the automotive industry. An interesting trend, which is currently taking place throughout the industry, is forcing car rental companies to adapt to the needs of corporate travelers. This trend significantly reduces the performance of the supplier or leased companies. power and increase the purchasing power of businesses because the business segment is unbearably price-sensitive, well informed about the industry's price structure, buys in bulk, and uses the internet to force lower prices. Holiday buyers, on the other hand, have less influence on rental terms. Because tourists are usually less price sensitive, buy less or buy more often, have weak negotiating powers.

Five Forces

Today the automotive industry is facing a completely different environment than it was five years ago. Competitively speaking, the revolution of five car leasing forces is exerting a strong economic pressure that has significantly impacted the competitiveness of industry. As a result of the economic downturn in recent years, many companies have moved under a specific Budget and Vanguard Group because their business infrastructure has been incompetent to compete. Today, very few companies, including Enterprise, Hertz and Avis, have slightly above-average earnings compared to the rest of the industry. Realistically, the automotive rental sector is not very attractive to the industry due to the level of competition, the barriers to entry and the competitive pressure of substitute companies.

Strategic Group Mapping

As a moderately concentrated sector, there is a clear hierarchy in the automotive industry. From an economic point of view, there are differences in a range of dimensions, including revenue, fleet size and market size that each firm holds on the market. For example, Enterprise dominates an industry with a fleet size of approximately 600,000 vehicles, along with its market size and profitability. Hertz is ranked second with its market share and fleet capacity. Avis also takes third place on the map. Avis ranks among one of the companies that have difficulty recovering their earnings margins from a downturn. For example, in 2000, Avis returned revenues of approximately $ 4.23 billion. Over the next few years after 2000, Avis's earnings were significantly lower than in 2000. As a way to reduce uncertainty, most companies are gradually reducing their dependence on the aviation industry and the emerging leisure market. This trend may not be in the best interests of Hertz, as its business strategy is complexly linked to the airport.

Key Success Factors

There are many key success factors that increase the profitability of the entire automotive industry. Capacity utilization is one of the factors that determine success in the industry. Given that leased companies experience loss of revenue if there is too little or too many vehicles in their ranks, it is very important to effectively manage fleets. This fact of success represents a great deal for the company, as it reduces, if not completely eliminating the possible shortage of rental cars. Efficient distribution is another factor that leads industry to profit. Despite the positive relationship between fleet size and profitability, the company is constantly expanding its fleet size due to the competitive forces that surround the industry. In addition, convenience is one of the key attributes for consumers to choose from. This means that rental cars to consumers are more prone to renting cars from companies that have a good rental and clearance. Another key factor of success that is shared by competing firms is the integration of technology into their business processes. Through technologies such as car rentals, they create ways to meet the demand of consumers by renting a very pleasant test by adding the convenience of online rental among other alternatives. In addition, companies integrated navigation systems along with roadside assistance and offered their customers room for car search.

Industrial attractiveness

There are many factors that affect the attractiveness of the automotive industry. As the sector is slightly concentrated, it puts new entrants at a disadvantage. This means that its low concentration is a natural barrier to entry into the industry, as it allows an existing company to anticipate sharp retaliation against new entrants. In view of the risks associated with entering the industry among other factors, it is not a very attractive sector of the market. From a competitive point of view, the 90% leisure market is saturated for the company's active efforts to dominate this market sector. On the other hand, airport terminals are heavily guarded by Hertz. Realistically speaking, entry into the industry offers low profitability due to related costs and risks. For most consumers, the main deciding factors of choosing one company are the second price and convenience. For this reason, rental companies are very prudent in terms of setting rates, and in general it even forces major players in the sector to offer more consumers, just to remain competitive. For example, Hertz offers its customers a wireless Internet connection that gives them more convenience. Avis on the other hand will offer free weekend specials if the customer rents a car for five consecutive business days. Based on the effects of five forces, the car hire industry is not very attractive for potential new entrants.


Industrial car rental is in a state of restoration. Although the sector may appear to have a good financial performance, it has gradually become more robust over the past five years than the current economic position. As a way of ensuring profitability, they share a common goal, looking for market share and stability, to achieve a common goal of reducing dependence on the aviation industry and towards the leisure segment. This movement has caused strong competition among industrial competitors trying to defend their market shares. From the futuristic point of view, the better times of the automotive industry have not yet been adopted. As the rate of profitability increases, I believe that most executives in the industry, including Enterprise, Hertz and Avis, will be bordered by the economic and competitive barriers to mobility of their strategic groups, and new entrants will have a greater chance of infiltration and success


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