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Enterprise

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Enterprise
Question 3
Enterprise had excellent growth in the last few years, with revenues reaching $3.1 billion worldwide for the year 1996, combined with a leaner cost structure, product and service differentiation and successful exploitation of a unique market niche. The company has been able to achieve over 20% market share in a highly competitive industry. A number of industry changes are occurring at the time of the case, including the consolidation of major industry players. New strategic moves implemented by Enterprise’s management should take into account these new industry dynamics and an increased competitiveness. Enterprise participates in a highly competitive industry. The market is generally divided into two segments: airport rental businesses and home-city rental businesses. Customers in the rental car sector have significant bargaining power and demand seems to be very elastic, leading to significant price competition. Price wars are generally higher in the airport business. Switching costs are very low given the lower customer loyalty and high product substitution. That is, prices charged by rental companies are limited by the alternative option of hiring a taxi service. Furthermore, bargaining power of suppliers is moderate. Fleet costs account for nearly half of operating expenses and are highly dependent on Automakers’ performance. In years were automakers were in trouble, fleet costs reduced significantly as manufacturers were selling inventory at massive discounts. Yet, these discounts disappeared as the auto market improved. The ability of rental car companies to manage fleet costs effectively differentiates the costs structure of market players. Enterprise has been successful in negotiating prices to buy and sell cars, selling inventory in 30 retail lots it owns around the country, and not relying on manufacturer subsidies and buybacks

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