Case 3-3 Easy Car

Case 3-3 Easy Car

1. What are the characteristics of the car rental industry? How do these characteristics influence the design of service delivery processes in this industry in general?

Car rental is clearly a very perishable service. If a day goes by and a car is not rented, the opportunity to generate revenues from that unrented time is lost forever. Perishability is a critical factor in the rental industry given the generally high fixed cost associated with the service (i.e., a fleet of vehicles). All industry players must cope with this perishability and different companies will have somewhat different strategies for dealing with it.

The "service" of car rental is intangible, given the physical nature of the rented vehicle, it really is not as intangible as many other services in the sense that the consumer can see and touch the rented vehicle. For the vast majority of the period during which the customer uses the service of car rental, the physical car is the service provided. For many services, intangibility makes it very difficult for the consumer to judge quality and for the producer to control quality. This is not nearly as difficult a proposition in the case of car rental. The "convenience" factor (e.g., location, speed of pick-up and drop-off, etc.) associated with rental is the most significant intangible associated with rental cars.

Service design has been characterized as having three basic components - (i) physical facilities, processes & procedures, (ii) employee's behaviors, and (iii) employee's professional judgment. Given that car rental service is a relatively tangible, homogenous service with fairly low levels of customer contact (i.e., simultaneity), rental companies tend to focus their service design on the physical facilities, processes and procedures. While employees' behaviors are not unimportant, they are of secondary importance to facilities, processes and procedures in service design in the car rental industry. This can be seen industry wide.

2. EasyCar obviously competes on the basis of low price. What does it do in operations to support this strategy?

EasyCar is targeting a particular segment of the market that is very price conscious. The need of this segment is more than simply low price. The idea of value as a concept relating both quality and price can be introduced here, with value equating to the benefit of the service provided relative to the price paid. Dimensions of quality as a way to better understand the multidimensional nature of quality are: performance, features, reliability, conformance, durability, serviceability, aesthetics, and perceived quality. EasyCar's customers would likely define quality in terms of the basic functionality (i.e., core performance benefit) of the vehicle rented, the reliability of the vehicle rented, and the conformance of easyCar processes to the specifications provided on the easyCar web site (across all locations).

3. How would you characterize the level of quality that easyCar provides?

Quality is important that easyCar situation clearly illustrates low cost does not necessarily imply low quality in the minds of the customer. EasyCar's customers would likely define quality in terms of the basic functionality (i.e., core performance benefit) of the vehicle rented, the reliability of the vehicle rented, and the conformance of easyCar processes to the specifications provided on the easyCar web site (across all locations).

4. Is easyCar a viable competitor to taxis, buses and trains as Stelios claims? How does the design of its operations currently support this form of competition? How not?

EasyCar sees itself as a potential competitor to taxis and buses because it allows customers to rent a vehicle for as little as one hour. From easyCar's position, this makes sense as part of their effort to achieve maximum utilization of their fleet. If they can rent out a car for even extra one or two hours when the vehicle would otherwise sit in a garage unused, then it adds to their bottom line. Further, it is possible that such very short term rentals seem most likely to come during the work week, a traditionally slower period for easyCar given its primary appeal is to leisure travelers who demand vehicles more on weekends than on weekdays. In this way, the very short-term rentals may help balance out demand on a weekly basis.

EasyCar's change to allow rentals for as little as one hour provides a good opportunity to discuss the issue of the flexibility of EasyCar's processes. The easyCar process is flexible in that it allows customers to choose exact pick-up and drop-off times and pay for only that time. Traditional rental car companies charge by 24-hour periods and for a minimum of