This is the case study analysis and presentation for the purpose of final examination by two student of IE Business School. The sole purpose of this document is to provide the analysis for the final exam. This document should not be used as basis for any calculations/ decisions and user should conduct his/ her own analysis.

1. Olympics Car
Rentals
Final Exam Presentation
IMBA Nov 2012
Abhishek Kumar Mishra
Vivek Jha
Dec 13, 2013

2. Table of contents
Executive Summary
Car Rental Industry
Olympic Car Rental
Enterprise Car Rental
Recommendations
Risk and Mitigation
2

3. Executive Summary
 Olympic Car Rentals is the 4th biggest car rentals company in USA
 Airport Business rentals is an attractive segment and is 9.6 billion dollar segmant
 Enterprise, the biggest car rental company is moving aggressively in this segment,
creating significant business risks for Olympic
 How should Olympic car rentals react to this move and attract more customers
Our Recommendations
Differentiate itself as an
Elite provider
Summary
Industry
Olympic
Increase customer base
through Partnering
with local / small car
rental providers/
mobile companies
Enterprise
Adopt dollar based
reward system to
increase customer
spending and build
loyalty
Recommendation
Risks
3

4. Executive Summary
Car Rental Industry
Olympic Car Rental
Enterprise Car Rental
Recommendations
Risk and Mitigation
4

5. Car rental in US is a matured market of size $24 billion
Key categories
High
Growth
20%
80%
City
Airport
Low
Concentration
High
Concentration
Business
Leisure
50%
50%
Rental type
Traveler type
Airport revenue
$24 billion
Growth rate 2%
Leisure
Low profit margin
Business
Low Growth
0
2000
4000
6000
8000
10000
12000
Revenue ($ MM)
At $9.6 billion, business rentals at Airport account for 40% of the entire industry
Summary
Industry
Olympic
Enterprise
Recommendation
Risks
5

6. The car rental industry is very competitive and
consolidated
Car dealers
Insurance co
Maintenance co
Suppliers
High
Public transport
Personal vehicle
Shared vehicle
100%
Other
90%
5%
7%
Olympics
80%
14%
Avis
50%
Enterprise
70%
Threat of Entry
Medium
Industry
Consolidated
4 players
Threat of
Substitutes
High
60%
50%
40%
30%
High investment
Third party agencies
Car manufacturers
Customers
High
Business
Leisure
(Individual/
Corporate)
20%
24%
10%
Hertz
0%
Market share
Top 3 firms control 88% of Market share (revenue wise)
Hertz is the leader in business segment whereas Enterprise owns more than 50% of market share
Summary
Industry
Olympic
Enterprise
Recommendation
Risks
6
88%

7. Executive Summary
Car Rental Industry
Olympic Car Rental
Enterprise Car Rental
Recommendations
Risk and Mitigation
7

8. Olympic Car rental is a value player and not a strong player
4th largest company
Value player
Airport / Off- airport rentals
Company
7% Market share
(revenues)
Competiti
on
Customers
Hertz, Avis, Enterprise
Rentals
Business and leisure travelers,
individuals/ corporates
Summary
Industry
Olympic
Enterprise
Recommendation
Risks
8

9. Executive Summary
Car Rental Industry
Olympic Car Rental
Enterprise Car Rental
Recommendations
Risk and Mitigation
9

10. Enterprise Rent-A-Car’s, a big player in off-airport rentals is
looking to increase its presence in the business traveler market
Great coverage: Within 15 miles at 90% of population
Its new customer loyalty program targeted at attracting business customers is gaining popularity
Key Risks for Olympics- Potential loss of market share, aquisition
Summary
Industry
Olympic
Enterprise
Recommendation
Risks
10

11. Executive Summary
Car Rental Industry
Olympic Car Rental
Enterprise Car Rental
Recommendations
Risk and Mitigation
11

12. Olympics Rent A Car needs to shield itself from the possible
business risks arising from Enterprise’s latest move
“In order to compete against the Enterprise and other competition,
Olympics should take the following steps”
Increase customer
base through
Partnering with local
/ small car rental
providers/ mobile
companies
Differentiate
itself as an Elite
provider
Summary
Industry
Olympic
Enterprise
Recommendation
Adopt dollar
based reward
system to
increase
customer
spending and
build loyalty
Risks
12

13. 1. Olympic should target upper class of renters and offer “Elite”
services
»
»
»
»
»
Hertz is earning 24% revenue share with 17% fleet share
Hertz
Olympic
Unit %
17
6.70%
Revenue
( %)
24.00%
7%
Revenue
($ MM)
5760
1680
Heavy business travellers pay $190 per trip, Medium business traveller pay
~$ 57 per trip
In business category, Enterprise is weak with just 20% market share of
business travellers
20% business traveller contribute to 80% revenue for airport rentals
Offer premium Services




Summary
Free pick up and drop
Zero Black out
No queue for members – 5 minute check out promise
Key handing over to Air travellers at Airport
Industry
Olympic
Enterprise
Recommendation
Risks
13

14. Enterprise is too big player to enter in to price war instead
capturing target customer is better proposition
»
»
»
»
»
Enterprise holds 50% revenue share and 53% fleet of cars
Diversification is needed to spilt risk- Elite club is
differentiation and diversification both
Olympic should bring Elite club to weekend travellers ,
They contribute just 5 % in revenue but 9% in profits
Olympic is highly leveraged and further addition in debt
may increase its cost of debt.
Bronze members should be invited to join elite club. They
are active and are 11 times more than gold club members
Summary
Industry
Olympic
Enterprise
Recommendation
Risks
14

15. Olympic needs to spilt efforts between Elite and regular
customers and balance between value Vs volume
»
»
»
»
»
“Olympic Elite” group for those whom service is more
important than lowest price
30% of cars for “Elite Club” – safety net & growth prospect
Avoid risk of failure by100% transition in to Elite club
Utilise current facilities and increase web presence
Olympic should aim at increasing revenue by 8 % and
profit margin to 4% from 2.1% for “Elite club”
Total Inventory
2012 revenue - $ Million
30% Inventory
30% revenue
Increase revenue by 8%
New Profit Margin @ 4%
Delta Profit Margin - $ Million
Summary
Industry
Olympic
Enterprise
108000
1540
32400
462
498.96
19.96
10.2564
Recommendation
Risks
15

16. 2. Olympic should expand its customer base by partnering
with independent companies, mobile / coupon companies
Internal factors
Competition
Trends
Stiff competition
Lesser number of
locations
Number of bookings is
not increasing
Higher use of online
booking
Budget friendly
High debt- 136% of
revenues
Lesser flexibility
compared to competition
New entrants- coupon
deal providers/ price
comparators
Convenient bookings
Lower prices
Lower prices, higher
convenience
Difficult to increase its revenue by increasing prices, possible to increase by
addressing customer concerns of convenience
Summary
Industry
Olympic
Enterprise
Recommendation
Risks
16

17. Smaller/independent firms provide higher number of locations
as an important convenience factor for passengers
6000
Locations with other firms
5000
Fox Rent A Car
Triangle Rent-A-Car
4000
Payless
3000
ACE rent-a-car
2000
Affordable/sensible
1000
Rent-a-wreck
U-save
0
Independents
Other companies
Independent
Pros
Large network
Lower requirements
Higher flexibility
Less control
Cons
Less loyalty
Other firms
0
50
100
150
200
Partnership
Smaller network
Easy to partner with
Cheaper
Simpler
Higher control
Higher valuation
250
300
350
400
Acquisition
Large number
Lesser number
Costly
Olympics can create a network of independent car rentals, smaller firms and
giving it a great customer base and convenience
Summary
Industry
Olympic
Enterprise
Recommendation
Risks
17

18. Consumers are becoming tech savvier and increasing becoming
comfortable with online transactions and third party agencies
Booking channels- business customers 2012
140
120
100
80
60
40
20
0
119
90
2009
Online
46%
Other
methods
42%
2012
Online sales of leisure and business travels
increase by more than 20% in 3 years
Third
party
12%
58% of business travelers booked their
travel through online methods
(operator/third party)
Online trends/ third party agencies provide convenience and price options. More
consumers will be moving to online platform/ third party agencies
Summary
Industry
Olympic
Enterprise
Recommendation
Risks
18

19. Emerging trends such as mobile devices and online
coupons are attracting further customers online
Mobile devices
32% of travel
bookings expected in
2016
Online coupons
Convenience
Increase in online
coupon vendorsGroupon and
Comparative pricing
sites
Best deals
Best prices
Business/ Leisure
Leisure
An early partnership with mobile companies, app developers, third party agencies and
online coupons companies can help Olympics push its deals before competition
Summary
Industry
Olympic
Enterprise
Recommendation
Risks
19

20. 3. Olympics should use its reward system to incentivize
3. Olympics should adopt dollar based reward system
customers and increase number of trips
All Loyalty club members
Spend/
Members % active rental Spending/
(000s)
members
day
member
60%
40%
Gold
Silver
Bronze
20%
0%
The number of Olympic’s Medalist
reward program members is way
behind Hertz, Avis and Enterprise
210
630
1460
37%
48%
58%
66
98
75
127
188
136
Silver members spend highest/ day and
higher/ member
Olympics should strengthen its reward program to include more
members in Silver membership
Summary
Industry
Olympic
Enterprise
Recommendation
Risks
20

21. Moving to a dollar based reward system will incentivize
business customers to spend more
Day based
program
1.45%
26625000
386062.5
21
Number of rentals
Annual rentals
total free rental days
Extra cost/day
Total extra cost (Million)
Increase in membership
Increse in spend (%)
Extra earning
Net loss
Dollar based
program
1.80%
26625000
479250
21
19.6
5%
126%
20.36
-0.79
Dollar based incentive program will be successful, if the customer
base increase by 5% and customers spend atleast 25% more
Summary
Industry
Olympic
Enterprise
Recommendation
Risks
21

22. Heavy business travelers are a good target for higher
consumer spend
% of all
business
travellers
# of trips
(Million)
% of
industry
revenues
Heavy
37
35
55
6600
190.17
Medium
45
42
20
2400
56.86
Light
18
17
5
600
35.54
Customer segments
Revenue
($ Million)
Revenue/
trip
Business customers pay higher/ trip- as such moving to a dollar based reward system will
incentivize customers to earn higher reward, at the same time, higher spend by
customers can make up for the additional revenue for extra trip
Summary
Industry
Olympic
Enterprise
Recommendation
Risks
22

23. Executive Summary
Car Rental Industry
Olympic Car Rental
Enterprise Car Rental
Recommendations
Risk and Mitigation
23

24. Risks and Mitigation
Risks
Impact
Mitigation factors
Competition replicate the strategy easily
High
Have deep relationships, sign
exclusive agreement
Olympic car rental
through a LBO
High
Adopt a good financial
strategy
High
Adopt a good financial
strategy
gets
acquired
Insufficient funding to fund elite
program
Incentive scheme fails to increase the
market share
Prices drop down further
Low
Elite club fails to attract enough
customers
Summary
Industry
Olympic
Medium
Medium
Enterprise
Support incentive scheme
with a good advertising
strategy, provide more value
added services
Focus on premium services
Support with a good
advertising strategy, provide
more value added services
Recommendation
Risks
24

25. Thank You
25

26. 3. Olympics should use its reward system to incentivize
Sensitivity Analysis for Dollar based program
customers and increase number of trips
-0.79
90%
100%
125%
150%
3%
11
10
7
5
5%
5
3
-1
-5
7%
-1
-3
-9
-14
10%
-10
-13
-21
-29
26