Launching a Car Rental Company at OKC Airport Essay

Total Length: 2037 words ( 7 double-spaced pages)

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New Car Rental Property Proposal



Despite the proliferation of ride-sharing services such as Lyft and Uber, the rental car industry continues to thrive, with average fleet sizes and revenues experiencing significant increases since 2015 (2016 U.S. car rental market, 2017). One market location that is well positioned for a new non-franchise car rental enterprise is Oklahoma City, Oklahoma (OKC) which hosts a world-class international airport, the Will Rogers World Airport, located just 6 miles from the city's downtown. This paper provides an overview of the U.S. car rental market and a description of the basic business model that will be used by the new car rental enterprise which will be known as Stardust Car Rentals. In addition, a description of four performance measures, data collection methods and how the data will be used is followed by an outline and analysis of two cost-benefit decisions that will have to be considered. A discussion concerning two possible approaches for achieving and sustaining a competitive advantage is followed by an assessment of the immediate competition in the Oklahoma City car rental market and two potential risks to profitability and a mitigation plan for each. Finally, a summary of the research and important findings concerning the car rental industry in general and the proposed launch of Stardust Car Rentals in particular are presented in the paper's conclusion.

Overview of the U.S. rental car Industry



The U.S. car rental industry includes about 5,000 companies that have combined annual revenue of approximately $40 billion (Seay and Narsing 113). The car rental industry in the U.S. is highly concentrated, and the fifty largest companies account for more than 80% of the industry's total revenues (Seay and Narsing 113). According to Seay and Narsing, "Major companies include Enterprise Holdings, Hertz Global holdings, Avis Budget Group, Ryder, and U-Haul International. Companies in this industry rent and lease passenger cars, recreational vehicles, trucks (without drivers), and trailers" (114). A number of these companies have expanded their operations to the international level through franchises at international airports (Seay and Narsing 114). Against this backdrop, it is important to formulate a basic business model that can compete effectively with major franchises as discussed below.

Basic business model to be used to generate revenues across products or services



The basic business model for Stardust Car Rentals (hereinafter alternative "Stardust" or "the company") will be an independent company (e.g,. non-franchise) that is focused on renting compact brands and classes of automobiles on a daily, weekly and monthly basis targeting business and leisure air travelers in the Oklahoma City area. The company will offer car rentals that are competitively priced compared to major franchise brands. The location of the new rental company will be the Will Rogers World Airport located at 5201 S. Meridian Avenue in Oklahoma City.



An initial fleet of 15 new Kia Souls will be used to launch the company. The manufacturer's lowest suggested retail price for these vehicles is $16,100 for a total of $241,500; however, it may be possible to negotiate a better purchase price for 15 vehicles.

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The Kia Soul received the highest rating out of 24 compact cards from U.S. News and World Report and features massive cargo room and spacious seating (Kia Soul, 2017), making this an ideal rental car for travelers. The Kia Soul is illustrated in Figure 1 below.



Fig. 1. 2017 Kia Soul



Source: https://cars.usnews.com/static/images/Auto/izmo/i10824740/ 2017_kia_soul_ angularfront.jpg

Performance measurements, data collection and uses



Four performance metrics that will be used to monitor the effectiveness of marketing initiatives and company profitability are as follows:



1. Revenues generated from vehicle rentals. This data will be collected on a daily basis and aggregated on a weekly and monthly basis for comparison to previous periods to assess profitability.



2. Number of cars rented. Similar the above metric, this data will also be collected on a daily basis but aggregated on a monthly basis to determine demand levels.



3. Number of repeat customers. This data will be collected automatically in the company's customer relationship management database and will be analyzed on a monthly basis to gauge customer loyalty levels.



4. Number of paid loyalty club members. As discussed further below, the number of paid loyalty club will be analyzed on a monthly basis to evaluate the effectiveness of promotional initiatives.

Outline and analysis of two cost-benefit decisions that will have to be considered



One of the most important cost-benefit decisions involved in the new car rental industry is the type of vehicles that will be offered. Although there are numerous compact models that are priced higher (and lower) than the Kia Soul, its demonstrated quality, proven dependability and other attributes make this the optimal choice for the company envisioned herein. Furthermore, by using a single model, the company will be able to maximize its maintenance efforts by minimizing the range of specialized services required for a single vehicle type.



A second important cost-benefit decision that will have to be considered is the compensation and benefit packages that will be offered to company employees. The failure to offer reasonably generous wages and benefits will adversely affect the company's ability to attract and retain qualified staff as well as turnover levels and employee performance during their tenure (Moyle 42). The high costs of turnover are well documented and disengaged employees can have an enormous impact on customer service levels. Employee costs for wages and benefits, however, will represent one of the largest expenditures for Stardust, making the need to identify an appropriate balance essential from the outset. Compensation and benefit packages will need to be reviewed on a regular….....

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Works Cited

Kia Soul (2017). U.S. News and World Report. Available: https://cars.usnews.com/cars-trucks/kia/soul.

McGinn, Daniel. "Get Me out of This Line! It's Still Typically Free to Be a Frequent Flier. but 'Paid Loyalty Programs' Are Now All the Rage at the Car-Rental Counter, at Hotels and Even in Some Stores." Newsweek (2009, November 14), p. 36.

Monies, Paul. (2015, Jan. 15). "Will Rogers World Airport posts record passenger year." NewOK. Available: http://newsok.com/will-rogers-world-airport-posts-record-passenger-year/article/5384709.

Moyle, Jarrod. "HR Metrics: Measuring Up; Strategic Pay's Latest HR Metrics Survey Benchmarks Everything from Recruitment and Training, to Sick Days, Absenteeism and Staff Turnover." New Zealand Management (2012, Nov.), p. 42.

OKC facts. (2017). Forbes. Available: https://www.forbes.com/places/ok/oklahoma-city/.

2016 U.S. car rental market (2017). Auto Rental News. Available: http://www.autorentalnews. com/fileviewer/ 2451.aspx.

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