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The Car Rental Industry

  • The car rental market is a multi-billion dollar sector of america economy. America segment of the marketplace averages about $18.5 billion in revenue per year. Today, around 1.9 million rental vehicles that service the US segment from the market. Furthermore, there are several rental agencies aside from the industry leaders that subdivide the total revenue, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service industries, the rental car market is highly consolidated which naturally puts potential newbees at a cost-disadvantage given that they face high input costs with reduced possibility of economies of scale. Moreover, most of the profit is generated by a number of firms including Enterprise, Hertz and Avis. For the fiscal year of 2004, Enterprise generated $7.4 billion in total revenue. Hertz arrived second position with about $5.2 billion and Avis with $2.97 in revenue.


    There are many factors that shape the competitive landscape with the rental car industry. Competition originates from two main sources throughout the chain. For the vacation consumer’s end with the spectrum, competitors are fierce not merely because the market is saturated and well guarded by leader in the industry Enterprise, but competitors operate at a cost disadvantage together with smaller market shares since Enterprise has built a network of dealers over Ninety percent the leisure segment. On the corporate segment, on the other hand, levels of competition are strong on the airports since that segment is under tight supervision by Hertz. Because the industry underwent a huge economic downfall lately, it has upgraded the size and style of competition within a lot of the firms that survived. Competitively speaking, the rental car industry is a war-zone since several rental agencies including Enterprise, Hertz and Avis among the major players take part in a battle with the fittest.

    Over the past couple of years the rental-car industry makes a lot of progress to facilitate it distribution processes. Today, roughly 19,000 rental locations yielding about 1.9 million rental cars in the united states. Due to increasingly abundant number of rental-car locations in the usa, strategic and tactical approaches are looked at in order to insure proper distribution throughout the industry. Distribution happens within two interrelated segments. Around the corporate market, the cars are provided to airports and hotel surroundings. Around the leisure segment, conversely, cars are offered to agency owned facilities which can be conveniently located within most major roads and metropolitan areas.

    During the past, managers of rental-car companies accustomed to count on gut-feelings or intuitive guesses to produce decisions regarding how many cars to possess in a particular fleet or perhaps the utilization level and performance standards of keeping certain cars in one fleet. Achievable methodology, it absolutely was difficult to conserve a amount of balance that will satisfy consumer demand and also the desired level of profitability. The distribution process is reasonably simple during the entire industry. Firstly, managers must determine the amount of cars that must definitely be on inventory on a regular basis. Must be very noticeable problem arises when way too many or otherwise not enough cars can be obtained, most rental car companies including Hertz, Enterprise and Avis, work with a "pool” which is a number of independent rental facilities that share a fleet of vehicles. Basically, with the pools set up, rental locations operate more proficiently given that they prevent low inventory or even eliminate rental car shortages.
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