Case Study Analysis

CASE STUDY CASE STUDY ANALYSISANALYSIS

easyCar.comeasyCar.com

MISSION STATEMENTMISSION STATEMENT

“AT EASYCAR WE AIM TO OFFER YOU OUTSTANDING VALUE FOR

MONEY. TO US VALUE FOR MONEY MEANS A RELIABLE SERVICE AT A LOW PRICE. WE ACHIEVE THIS BY SIMPLIFYING THE PRODUCT WE OFFER, AND PASSING ON THE BENEFITS TO YOU IN THE FORM

OF LOWER PRICE.”

BRIEF INTRODUCTIONBRIEF INTRODUCTION EasyCar - member of easyGroup

family of companies .

Founded by the flamboyant Greek entrepreneur Stelios Haji-Ioannou.

EasyCar is into Car rental services.

EasyCar’s approach was built on the successful easyJet model.

EasyCar, founded in 2000 on a £10 million investment

Single vehicle type rented at each location.

Did not work with agents.

Aggressive pricing resulted in achieving a fleet utilization rate > 90 percent.

Broke even in the 3rd year of its operation by generating £27 million

Company’s goal for 2004 was to reach £100 million in revenue and £10 million in profit.

BRIEF INTRODUCTIONBRIEF INTRODUCTION

CASE OVERVIEWCASE OVERVIEW The case discusses about the success

story of easyCar.com, which is into car rental services.

The case also highlights the structure of the car rental industry in Western Europe.

The case provides inputs on the pricing, promotional and process aspects of easyCar.com

It also provides a SWOT analysis of the company and the road ahead for easyCar.com

THE RENTAL CAR THE RENTAL CAR INDUSTRYINDUSTRY

Western European rental car industry consisted of different, semi-integrated, national markets.

Presence of national, regional and international companies across most major European markets.

Rental car industry composed of two broad segments: a business segment (35%-55%), LESS price

sensitive, concerned about service quality, convenience and flexibility.

a tourist/leisure segment (45%-65%), large part of this segment was VERY price sensitive.

THE GROWTH STORYTHE GROWTH STORY EasyCar opened its first location in

London on 20th April, 2000.

In the same week, opened locations in Glasgow and Barcelona also, all three very popular easyJet destinations.

Fleet consisted of only brand new Mercedes A-class vehicles.

Vehicles initially were rented for €15/day plus a one time car preparation fee of €8.

Deal signed for a total of 5,000 Mercedes A-class vehicles costing a little over £6 million.

Why only Mercedes? This is what Stelios had to say “The choice of Mercedes reflects the easyGroup brand. EasyCar will use brand new Mercedes cars in the same way that easyJet uses brand new Boeing aircraft. We do not compromise on the hardware, we just use innovation to substantially reduce costs.”

THE GROWTH STORYTHE GROWTH STORY

THE GROWH STORYTHE GROWH STORY EasyCar quickly expanded to other locations

popular with easyJet customers.

Introduction of Vauxhall Corsa, a new vehicle, costing easyCar £2 a day less than Mercedes A-Class, savings passed onto customers.

By January 2003, many other type of vehicles were used.

EasyCar planned to expand its fleet of 7000 vehicles (January 2003) to 24,000 vehicles across 180 rental sites by the end of 2004.

EasyCar also changed its policy for 2003, to tap new segments and to achieve its ambitious future sales goals.

EASYCAR OUTLETSEASYCAR OUTLETS Facilities in total of 17 cities in 5

European countries.

Facilities were primarily near bus and train stations.

Looking out for sites that offered lower lease costs.

Prime airport locations were avoided.

Airport locations were kept open 24hrs a day.

Physical facilities were kept to a minimum.

High fleet utilization rate (i.e. >90%) an advantage.

To expedite the process of opening of new sites, easyCar focused on hardware and operational readiness.

EASYCAR OUTLETSEASYCAR OUTLETS

THE PROCESSTHE PROCESS

Customer have to come before booking time

Customer were required to bring prescribed documents

Processing a customer took around 30 minutes

The vehicle were rented with more or less empty fuel tanks.

The vehicle was to be returned within a prearranged 1 hr of time period.

Customers were expected to thoroughly clean the car.

THE PRICETHE PRICE Differentiated itself with its low price.

Pricing played a key role in achieving high fleet utilization rate.

The Company followed Demand based Pricing and strategy it followed was Synchro-Pricing.

Able to rent at € 5/day, available only on weekdays.

EasyCar price was less than half than its major competitors.

Payment was to be made in full and in advance and was nonrefundable.

The total price paid by the customer was higher in many cases depending on a number of factors.

THE PROMOTIONTHE PROMOTION 2002 – focused on posters and press advertising,

spent £1.43 million.

Advertising focused on the low price.

According to founder Stelios: “You will never see an advert for an easy company offering an experience-its about price. If you create expectations you cant live up to them you will ultimately suffer as a result.”

Used its fleet of vehicles as a promotional tool.

Took advantage of free publicity whenever opportunity presented itself.

2003 – Budget raised to £3 million, planned to advertise on television.

STRENGHTSSTRENGHTS Company is Financially strong. The business model which proved to be

successful in airline industry was yet again successful in rental car industry.

The founder is highly competent, aggressive and clear with his ideas.

Cost reduction though disintermediation. Demand based pricing approach to attain

maximum utilization. High use of latest technology and

technological equipments. The first car it rented was Mercedes A

class, then it went to less costly car segments.

Transparency of various costs to the customer.

Break even in the third year.

WEAKNESSWEAKNESS It offer only one kind of car at a

location. The process of picking up the car

is time taking. Lots of documentation

formalities. Very low advertising strategy.

OPPORTUNITYOPPORTUNITY The rental car industry is seen as ripe

for consolidation. Rental for one hour and booking for

one hour can be used as Taxi etc.

THREATTHREAT Legal Challenges.

Ruling by Office of Fair Trading. Legal criticism against company

policy of posting pictures of customers whose cars were 15 days or more overdue.

Established Competitors.

QUESTIONSQUESTIONS