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Enterprise Case

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Submitted By ljbs66
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Is Enterprise’s competitive advantage sustainable? Why or why not?
Enterprise’s competitive advantage is sustainable. According to the “resource-based” school theory, this company meets all four requirements: heterogeneity within an industry, ex post limits to competition, imperfect resource mobility, and ex ante limits to competition.
First, heterogeneity exists within rental car industry. Unlike most rental-car companies who compete for airport business, Enterprise focuses on the niche home-city rental business. To create its unique and valuable position, Enterprise develops a set of activities such as employing sophisticated inventory and service tracking system, adopting quirky hiring and promotion practice, maintaining good relationship with local garage, insurance agents, and auto dealerships, and providing extra services for customers. The fit among these activities, which reinforce and optimize each other, substantially reduces cost and increases differentiation, enabling Enterprise to earn Ricardian rents. Second, ex post competition is limited. The interlocked activities developed by Enterprise over the decades can hardly be imitated by other competitors. Not to mention the reputation that Enterprise has already developed within the industry. Third, the resources employed by Enterprise are imperfectly mobile. For instance, the management of fleet costs is specific to Enterprise, because other rental-car companies heavily rely on manufacturer subsidies and buybacks. Moreover, the good relationship with dealer, insurance agents, and body shops has little value to competitors who primarily serve for the airport business. Finally, the ex ante competition is limited. Enterprise is the first rental-car company that focuses on the niche home-city rental business. No competition exits prior to Enterprise establishing its superior resource position.

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