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This case discusses about easyCar.com and the situation faced by it at the start of 2003. EasyCar is the low priced European car rental business. It was established by easyJet innovator Stelios Haji-Ioannou. This case illustrates the present position of the company and its future goals. By the end of fiscal year 2004, the company wants to attain sales of 100 million and profits of 10 million, so that it can position itself for an initial public offering (John & Luis, 2005). For reaching at these goals, the company had undertaken several efforts that include opening of new locations and changes in some of its old policies.
In all these processes and changes attempted by the company, it confronted several issues in the form of legal and operational issues that will be discussed in this paper. All the substantial issues confronted by the company will be discussed here with the help of different subheadings.
Characteristics' of Car Rental Industry
Subsequent are the various characteristics' of car rental industry along with their impact on the design of service delivery process:
Intangibility: If it is seen in terms of service, the "service" of car rental is intangible but on the basis of the physical nature of the rented vehicle, it is not as intangible as various other services are. In this industry, the consumer can see and touch the rented vehicle, which is not possible in other services. In this industry the service provided is the physical car. This significantly affects the service delivery process of industry as they have to keep in mind that consumer wants more and more quality and in case of car rental they can easily judge it.
Perishability: Car rental service is a perishable service as if a car is not rented for some days, it may direct towards high losses. High fixed costs are associated with car rental service and need to be balanced in significant manner. This characteristic has direct impact on the service delivery process of industry as they have to operate with effective strategies related with perishability.
Heterogeneity: Car rental service is not an especially heterogeneous service in comparison to the other services like a doctor, lawyer and an architect. In this industry, the customers may request altered vehicles or additional services for example child seat and ski rack. They may require vehicles on diverse rental terms like return with empty or full tank and unlimited miles (John & Luis, 2005). All these things need to be concerned while designing service delivery process as otherwise it may direct towards imperfections in service delivery.
In general, service design is usually qualified as having following fundamental constituents:
Processes & procedures
Employee's professional persuasion (A Case Study Analysis on EasyCar.com, n.d.).
In concern to service design, car rental service is a relatively tangible, homogenous service with reasonably little levels of customer contact that represents the need to focus industry's service design on the physical facilities, operations and processes. Given that car rental service is a relatively tangible, homogenous service with fairly low levels of customer contact (i.e., simultaneity), rental companies tend to focus their service design on the physical facilities, processes and procedures (Clarke & Chen, 2007). Additionally, employees' behaviours are not insignificant as they are also having secondary importance to facilities, processes and procedures in service design in the car rental industry.
Easy Car's Low Price Strategy
For supporting its low price strategy, the EasyCar had adopted various measures that are substantially different from traditional car rental companies. Its approach is quite different from the approach used by traditional car rental companies (John & Luis, 2005). Its approach is built on the easyJet model. It rent only a single vehicle type at each location it operates, while most of its competitors rent a broad variety of vehicle types. EasyCar did not work with agents. Approximate 95% of its bookings are made through the company's website and the remaining bookings are made directly through the company's phone reservation system (Case Study Analysis: Easycar.com, n.d.).
On the other hand, the most of the traditional car rental companies work with a number of intermediaries. EasyCar manage prices in an effort to have its fleet rent out 100% of the time and to bring forth the maximum revenue from its rentals. Its information systems invariably measure figured demand and anticipated utilization at each site that assists it in adjusting its price accordingly (A Case Study Analysis on EasyCar.com, n.d.). In comparison to other car rental companies, EasyCar had adopted aggressive pricing that facilitate it in attaining a fleet utilization rate in excess of 90% that is much higher than other companies.
Subsequent to the discussion of strategies adopted by EasyCar for managing its low price strategy in comparison to other leading rental companies, it can be said that the service quality provided by it is quite significant. The company's approach to lead and low cost is very effective and as well as it also assist it in managing its service quality. Other companies concentrate on flexibility and service whereas EasyCar concentrates on reliable service at low price (John & Luis, 2005). The company believes in operating with the thoughts of service standardization, abbreviating the discretionary action of employees and employing more and more technology to maintain or replace for people in the procedure.
EasyCar as a Viable Competitor to Taxis, Buses and Trains
After going through, the case I can say that EasyCar is not a viable competitor to taxis, buses and trains as it has some policies that are not appropriate with the designs of its operations. Although, it allows effective flexibility to its customers in the form of rentals for as little as one hour and chooses exact pick-up and drop-off times and pay for only that time but it has several limitations also (John & Luis, 2005). All these flexibilities provided by it revolve around the price that is not sufficient to appeal customers.
The preparation fees or charges that the customer has to pay are not appropriate as in other vehicles these do not exist. At EasyCar, if a customer makes use of standard credit card for paying rental he is imposed with standard preparation charge. Additionally, in peak times customers may have to wait for collecting their car and then they have to waste their time for fuelling gas (Case Study Analysis: Easycar.com, n.d.). Afterwards, at the time of returning the car he or she needs to wash it or pay some charge. All these things are not involved in other transportation facilities that prompt customers to switch to other facilities.
Another substantial limitation is with the EasyCar's prices that usually increase as the time of the rental period draws near. Although some customers may aware in advance with the need of a vehicle for only a couple of hours on a given day but most of the consumers are not aware. In this industry, the market segment is probably to buy more at the last minute that needs to be considered by EasyCar (Clarke & Chen, 2007).
Most of the processes of EasyCar's are directed to the customer who in advance knows about his or her travel plans and have time to go to secondary location. This approach does not seem compatible with the customers who are not aware about their travel plans and does not have much time to go to secondary locations. All these aspects should be considered by EasyCar along with changes in their rent terms (John & Luis, 2005).
Operational Implications of the Changes made by EasyCar.com
Last year, the company introduced several vehicles other than the Mercedes A-Class that facilitated it in overcoming its weakness of rentals of only an hour. This assisted the company in having five vehicle types. This change of the company imposed its vehicle supplier to offer competitive prices and improve their quality and flexibility along the supply chain. Another substantial change was made in Clean Car Policy (Case Study Analysis: Easycar.com, n.d.). It lays out a transfer of a task traditionally done by the company to the customer. This policy assisted the company in reducing its need of staff that in turn reduces its cost.
This policy was combined with the empty fuel policy that helped the company in renting out its vehicle without any maintenance that require extra money and staff. With this policy, the company become able in renting a vehicle in the condition it was returned rather washing or fuelling it. If a customer does not return the vehicle with minimum level of fuel and by washing it he is required to pay extra charges. In this way, the company is able to reduce its own costs (John & Luis, 2005). Another substantial change adopted by EasyCar was empty-to-empty policy that was also consistent with company's low cost strategy.
This policy would substantially abbreviate the chance that an EasyCar employee would have to deal with the gas level. Earlier, customers were required to fill the tank and if they feel lack of time, they might leave this task for EasyCar employee. With the change in the policy, now the gas can be at any level till the low fuel indicator light is not on. This had reduced the chance that an employee would have to deal with putting gas in the car as mostly nobody would drive with this low level of gas. With this policy most of the customers' bring back the car in a condition that appropriates it to be instantly re-rented.
The last substantial change adopted by EasyCar was requiring its customers to purchase insurance. This policy effectively abbreviates the possibility of conflict among customers and company when they return damaged car. All these policies significantly assisted the company in reducing its costs (John & Luis, 2005).
Legal Challenges confronted by EasyCar
EasyCar confronts several legal challenges to its approaches but the most significant challenge is OFT ruling. Another substantial challenge against EasyCar is the posting of the pictures of renters with overdue vehicles. The OFT ruling requires EasyCar to grant customers seven days from the time they made a booking to cancel their booking and receive a full refund. The company does not want to follow this, as it believes that if customers are allowed 7 days to change or cancel reservations without penalty it would cause utilization to abbreviate from 90% to 65% and prices to triple (John & Luis, 2005).
For handling this legal challenge, the company had appealed the OFT's decision to the UK High Court on the bases that it was certainly a transportation service company and was at liberty to an exemption from this requirement. This legal challenge need to be managed significantly as otherwise, this ruling would destruct the company's book-early-pay-less doctrine and could extend to a tripling of prices. Additionally, it could also interfere with its plan for a 2004 IPO.
The other legal challenge confronted by the company related with the posting of the pictures of customers with overdue vehicles is not as significant but need concentrated efforts (John & Luis, 2005). The company has already received public warnings from lawyers that this new policy might breach data protection, libel, privacy, confidentiality and human rights laws. All these concerns need to be resolved before it takes serious claims against company.
EasyCar and its Goals for 2004
With the discussion of company's goals and its expansion plans, it can be said that the company can effectively attain its goals for 2004 but still it needs to make some changes. The company's operational plans and strategies' are having several bottlenecks. Its most of the operations concentrates on cost reduction that in turn may dissatisfy its customers in terms of convenience and service quality (Case Study Analysis: Easycar.com, n.d.). On the basis of car rental service characteristics', it is vital that all facilities and qualities are provided to customers as otherwise they may switch to other transport services.
The goals and the approaches used by the company are quite effective but need to concentrate more on service quality rather than only focusing on low price. At EasyCar, customers were required to wait for long time, they were not repaid for cancellations and they were also anticipated to pay for cleaning of cars and fuelling of gas (A Case Study Analysis on EasyCar.com, n.d.). All these approaches and strategies of the company were dissatisfying its customers. In addition to this, the company was having only one or two employees at its each location. Each of its employees was dealing with several customers that create severe dissatisfaction among its customers (John & Luis, 2005).
Nowadays, customers want quality and they does not consider price, if served with high quality. This need to be kept in mind by EasyCar so that it can also become able in not compromising cost on the basis of quality or facilities it may offer to its customers. With the help of some changes, it may easily and effectively attain all its 2004 goals.