Enterprise Rent-A-Car S.W.O.T. Analysis Strengths:

Enterprise Rent-A-Car

S.W.O.T. Analysis

Strengths:

Weaknesses:

Opportunities:

Threats:

Ethics:

Managing Productivity, Quality and Service:

Innovation and Change:

Managers and Their Roles:

Globalization:

Enterprise Rent-A-Car

Jack Taylor founded Enterprise Rent-A-Car (Enterprise) in 1957, by Jack Taylor, as Executive Leasing Company of seven cars, in the St. Louis region ("1957"). The company was originally a one-man organization that shared basement space with a local body shop (Schlereth). A second location was opened four years later, and in 1962 the company began their short-term rent-a-car program, in response to customer's needs of needing to rent a vehicle while their's was in the shop ("1962"). By the end of the decade, the company began to expand outside of St. Louis with the introduction of their Atlanta region group ("Enterprise"). Unable to use the Executive Leasing name in all of the markets, Jack changed the name of the company to Enterprise ("1969").

The 1970s saw Enterprise further expand their operations into Florida, in the Orlando and Tampa markets, Houston, Dallas, Kansas City, Kansas, Colorado, and Indiana. Rental units climbed to 5,000 and the company "began offering fuel, maintenance and insurance products (which led to the company's present-day fleet services operation)" ("Enterprise"). The company quickly realized that there was a profitable niche market in servicing hometown renters ("1970"). In 1980, the company opened it's national reservation center, complete with toll-free phone number for their customers ("1980"). By the end of the 1980s the company had 150,000 units with 1,000 branch offices, across the country.

The 1990s saw continued U.S. expansion as well as entry into Canada, Germany and the United Kingdom. Rental units had more than tripled to 450,000 units, and locations had more than doubled to more than 2,500 offices, making Enterprise the largest car rental organization in America. Today, Enterprise continues this history of growth and expansion. Today, the company is comprised of 64,500 employees worldwide ("About Enterprise"). They have more than 600,000 cars and 7,300 offices, with revenues on $7.4 billion in their fiscal year that ended in July 2004 ("Enterprise").

S.W.O.T. Analysis

Enterprises' success has been built on their strengths and their ability to take advantage of emerging opportunities. By understanding their strengths and weaknesses, as well as the new opportunities and threats that lie on the horizon, Enterprise can continue to take advantage of their leadership position in the industry and continue their history of growth.

Strengths:

There are four primary strengths that Enterprise has at their disposal:

Robust revenue growth lead industry position

Partnership with credit unions

And, the offering of a wide variety of services ("Enterprise")

Enterprises' estimated revenue figures have increased significantly from 1999 to 2004, from $4.7 billion in 1999 to $7.4 billion in 2004. This growth represents cumulative growth rate (CAGR) of 9.4%. During fiscal 2004 itself, the company's revenues grew 7.2% over fiscal 2003. In 1999, the company had revenue per employee (estimated) of $122,222. By 2003, this figure had increased to $129,034, representing a CAGR of 1.1% ("Enterprise").

Recently, Enterprise released revenue figures for fiscal year ending July 31, 2006. The company posted a record $9.04 billion in global revenues, up from 2005 reported revenues of $8.3 billion and correlating to a compound annual revenue growth rate of 20% over the past 25 years (Conrad & Perlut). Enterprises' continued revenue growth and their increases in revenue per employee is demonstrative of the organization's ability to increase employee efficiency as well as demonstrate their growing market share dominance in the industry ("Enterprise").

In addition, the company also finds strength in their industry leadership position. Datamonitor states that due to Enterprises' sheer size the company has an office within 15 miles from approximately 90% of the United States population. The company's fleet represented approximately 3.5% of the total number of cars and light trucks that were bought and sold in the United States, in 2003. The company has further secured their leadership position by serving air travelers in all of the top 100 airports in the continental U.S., giving the organization a significant competitive advantage against its competitors ("Enterprise").

Enterprise also enjoys partnerships with credit unions as part of their strengths. It is through these partnerships that Enterprise has been able to create comprehensive car sales marketing and promotional programs for credit union members. All of the financing for the vehicle sales are handled through the credit unions, which reduces the administrative costs for Enterprise. Partnerships such as Enterprises' agreement with the United Airlines Employees Credit Union allows members to purchase a vehicle from more than 75 makes and models of used vehicles, at more than 100 nationwide Enterprise car sales locations. In addition to reduced administrative costs, the relationship also allows access to thousands of customers ("Enterprise").

An additional strength the organization wields is their diverse range of services. The company's operations go beyond simply the short-term rental of vehicles and include leasing vehicles, managing fleets of vehicles for other organizations, commercial truck rental, California vanpool services, and sales of used cars and trucks ("What We Do").

Its fleet services operation offers guidance and products for businesses to manage their fleets, which are usually comprised of 15-125 vehicles. Enterprise Rent-A-Truck offers a special delivery service for commercial accounts to provide for the commercial truck rental needs of businesses. The company also sells used cars. The company's used vehicle sales operation provides 12-month / 12,000-mile limited warranty and roadside assistance. The company's diverse service offerings make it a virtual one-stop shop for automobile related services ("Enterprise").

Weaknesses:

Despite the many strengths Enterprise has at its disposal, there are also two primary weaknesses they must be aware of. These two weaknesses are:

Over-dependence on the American market

Lack of one-way rental service ("Enterprise")

As noted earlier, Enterprise began their international expansion in the 1990s, however despite entry into a variety of countries, the core of their business rests in America.

Approximately 90% of Enterprises outlets are located within the United States. In addition, the organization has very little presence in the fast growing and emerging Asian economies. This is of particular significance considering Asia's rapidly growing tourist industry coupled with their increasing business travel industry. In contrast, Enterprise's primary competitors such as: Hertz, Avis and Europcar have a much broader geographic presence. Both Hertz and Avis have established a strong presence in the Asian market. Because of this limited international presence, Enterprise growth could be negatively affected ("Enterprise"). In addition, they may be poorly positioned to take advantage of some of the more lucrative markets available globally.

In addition to their lack of international presence and over-dependence on the American market, a second weakness Enterprise must face is their lack of one-way rental service. The organization's business is focused on local city rental of automobiles. Most of their customers live and/or work within the city that they are renting from. For this reason, Enterprise has yet to implement a one-way rental system. For customers, this means that they always have to return their car to the same location they picked it up from. For customers that need greater flexibility in having different pick up and drop off locations, they must go to Enterprise's competitors ("Enterprise").

Opportunities:

There are several opportunities that exist for Enterprise. By taking advantage of these opportunities, the company will be able to continue their history of revenue and market share growth. These opportunities include:

Growing demand for rented/leased vehicles

Month or More' service

Alliance with American Express ("Enterprise")

New vehicle leasing has become an increasingly attractive option for many Americans. "During fiscal 2004, car rental and leasing companies accounted for more than 21% of sales in 2004. Between 2004 and 2008, the car rental and leasing market in the U.S. is expected to grow at a CAGR of 4.8% to reach a value of $22.1 billion in 2008" ("Enterprise"). As the largest rental/leasing organization in America, Enterprise should be well positioned to take advantage of this significant industry growth.

Enterprise launched it's innovative "Month or More" service in February 2004. This program has served to become a growing niche for both business and leisure motorists that need new and reliable automobiles for more than 30 days at a time. With the "Month or More" plan, drivers can save up to $75 off each month, with extended rental periods. All Enterprise locations in America and Canada offer this unique service. The "Month or More" program was developed as a response to customers' needs to rent a vehicle for extended periods of time ("Enterprise"). Enterprise should be able to further capitalize on this affordable and innovative program.

Lastly, Enterprises recent partnership with American Express is a significant opportunity. The two organizations partnered in an effort to offer a cost-saving opportunity for business in America that accept the American Express Card. "Enterprise will offer up to a 25% discount on rentals at any of its branches in the U.S. Enterprise is one of ten companies to partner in this Business Savings program" ("Enterprise"). This partnership offers an opportunity for Enterprise to expand their customer base.

Threats:

There are several threats that Enterprise needs to be wary of, in order to ensure their continued prosperity. These include:

Used car sales

Increasing trend of car sharing

Weakened U.S. tourism industry ("Enterprise")

The sale of used cars by other organizations is a significant threat to Enterprise. Many of the world's largest car manufacturers, like Daimler Chrysler, General Motors, and Ford, are offering large incentives and low interest financing through their dealers on new vehicle purchases. For this reason, it makes owning a new vehicle more affordable for more consumers and conversely weakens used car pricing industry wide. This could be devastating for Enterprise with their traditional procedure of acquiring new vehicles and then disposing of them through their used car outlets. To date, Enterprise has enjoyed higher resale values on their vehicles, when compared to standard residual value, due to their consistent level of maintenance service. However, in recent years this margin between the vehicle sale price and the residual value has narrowed considerably, especially as used car pricing becomes more susceptible to price fluctuations.

The introduction of less expensive and better quality imports from Asian manufacturers has also compounded the problem, enticing consumers to buy new, rather than rent or buy used ("Enterprise").

In addition to the threat to revenues due to decreasing used car sales and pricing, the growing trend of car sharing is also a significant threat. Car sharing is an innovative program. Companies like Greenwheels allows members to locate the nearest available car on the Internet and then reserve it. A signal is sent to the vehicle and an onboard computer is set to recognize the driver's personalized key and code number. Research has indicated that between 4 and 10 private cars are replaced by one shared car. This has become an increasingly popular option for many people in Europe, in place of renting or leasing. This could negatively affect Enterprise's revenue in Europe, as well in America if car sharing becomes more popular in the United States ("Enterprise").

Lastly, a weak American tourism industry is also a significant threat to Enterprise. Despite the slight improvement of tourism in recent years, the industry still anticipates that 10% fewer international visitors came to America in 2004, than in 2000.

The U.S. tourism industry is already losing global market share as borders in many parts of the world have become easier and cheaper to cross, and as countries from Spain to Singapore outspend the U.S. In tourism marketing and advertising. Between 2000 and 2003, the U.S.'s share of travelers from Britain declined by 14%, while that of tourists from Germany declined 17%. The country also saw the number of tourist from Japan falling by 14% while the number of travelers from Brazil fell by 28% ("Enterprise").

This industry decline obviously negatively affects leisure car rental revenues for Enterprise, especially with the bulk of their revenues being garnered from the United States.

Ethics:

Ethics in today's hyper-competitive, increasingly globalized world is an important concept. With major corporations being drug through the proverbial mud due to unethical practices, at every turn, it would seem that the concept of ethics may be lost on large American corporations. This is not true for Enterprise and, in fact, it is their commitment to ethics that they hold as a primary reason for their success.

According to Andrew Taylor, CEO and Chairman of Enterprise, ethics begins with building relationships. The company's expansion into new geographic markets has been successful due to their ability to start building strong relationships with community members (Schlereth). This is echoed in their commitment to customer service.

The company has a core philosophy that is centered on putting people first, whether it be the customer or the employee. They may be a big company, but have a small company feel ("Who We Are"). By putting people first, profits will grow naturally ("Management Philosophy"). This philosophy of impeccable ethical behavior that leads to putting people at the forefront was developed by Jack Taylor. In addition, Jack Taylor also "taught (Andrew) the importance of hard work and of staying true to your values. He also taught (Andrew) about maintaining your values in the business world, and his principles are a guiding force for (the) company today" (qtd. In Schlereth).

It is these values and commitment to ethical behavior that has allowed Enterprise to become an international success. Jack Taylor was simply driven to do the right thing, and today the organization continues to follow his lead in maintaining those ethics. As such, the company formalized their "Founding Values" in 2003. These values state:

Our brand is the most valuable thing we own.

Personal honesty and integrity are the foundations of our success.

Customer service is our way of life.

Enterprise is a fun and friendly place where teamwork rules.

We work hard... And reward hard work.

Great things happen when we listen... To our customers and to each other.

We strengthen our communities, one neighborhood at a time.

Our doors are open ("Our Founding Values").

Enterprise is committed to the upholding of these values and the ethical behavior tied to them.

When Andrew Taylor was specifically asked about what business schools could teach students about ethics his reply was inspiring. He stated that he believed that ethics and strong values are an important component of business, now more than ever. There have been too many examples of what happens to companies when they act unethically and throw their values to the wayside. "Success and ethical behaviors are not mutually exclusive" (Schlereth).

Managing Productivity, Quality and Service:

One key component to Enterprise's success is their ability to effectively and efficiently manage productivity, quality and service. Motivation is critical to this effective and efficient management. Enterprise is one of the few innovative organizations that actually ties rewards to team performance. This takes the rewards out of the hands of the employee's bosses and places it in the hands' of their customers. Customer and peer feedback, as a truer indicator of productivity, are an integral part of performance rankings and these are tied to compensation and promotions (Reichheld & Rogers).

For managers to get promoted, their branches must deliver customer service at or above the average for all comparable branches. Success is judged by a metric called the Enterprise Service Quality index (ESQi), which shows the percentage of customers who rate a branch five out of five when asked if they were completely satisfied. If a branch doesn't achieve or exceed the company's average feedback score, the entire team is ineligible for promotion (Reichheld & Rogers).

Many of the Enterprise branches have also instituted a weekly metric named The Vote, where team members openly discuss and rank one another on their customer service. This personal accountability for the entire team's success has equated to higher ESQi scores, for these branches (Reichheld & Rogers). These higher scores relate directly to improved productivity, improved quality and improved service for the organization.

Complimenting this program is Enterprise's unique management training program. The organization trains their managers-in-training to run their own business. Unlike other businesses, they reward these employees for entrepreneurship ("Rewarding Success"). This only serves to enhance productivity, quality and service.

Innovation and Change:

In today's hyper-competitive rental car industry it is only through being innovative and embracing change that Enterprise has garnered the top spot in their industry. Enterprise's success began with innovation. While most rental car agencies such as The Hertz Corp and Avis Rent-A-Car focused on servicing travelers at airports, Enterprise decided to focus on local customers who needed a short-term replacement vehicle ("Neighborhood Network"). It was a revolutionary idea that would greatly affect the structure of the organization and the plethora of offices located where their customers lived and worked. As Bachmann notes,

Enterprise Rent-A-Car Co. has shot from relative anonymity to become the clear leader among car rental companies. They achieved this position not by copying Hertz and Avis but by specializing in different markets. Instead of competing for airport rentals, they aimed at the insurance and car repair markets.

Further innovation and change has come with their "We'll pick you up" service, as well as their "Month or More" service. It is through Enterprise's innovation that the rental car industry was redefined. They utilized what Berry et al. term "market-creating service innovation." This is defined "as an idea for a performance enhancement that customers perceive as offering a new benefit of sufficient appeal that it dramatically influences their behavior, as well as the behavior of competing companies" (Berry, Shankar, Parish, Cadawallader, & Dotzel). Enterprise Rent-A-Car provides a well-documented example of niche marketing at its finest, identifying customers' needs and addressing them more competently than anyone else (Levoy). It is this commitment to continued innovation and change that will lead Enterprise into a successful future.