The history of the car rental industry is almost as old as the history of the car industry. The first car rental was done with the first real mass-produced car: The "Ford T" by a man called Joe Saunders who rented his car for ten cents per mile, using a mileage counter. In 1925, Joe Saunders had car rental agencies in twenty one states in US and after World War II, the car rental industry grew because of the growing success of the airline transport. At the same time, Warren Avis, founder of the Avis Company, focused almost all his business on airports and surrounding areas. The industry met with some troubles when, after September 11, 2001, and the terrorist attacks in New York, the airline industry slowed down. But since the last few years, the market is getting better notably according to the fact that environmental issues are really strong nowadays and rent a car, rather than having one, can be a good way to be an "eco-citizen". For instance in Paris, according to the director of Rent-A-Car France, 50% of the citizens do not own a car.
[...] In the 1980's, internet wasn't available to everybody, and that makes a real difference, because, that fundamentally changes the way that customers can choose the car rental company they want to use. Customers can look for information on different car rental companies and their services, without leaving their room. They can also compare the prices and the car availabilities of every single company. In addition to this, internet fundamentally changes the way that rental car companies market their services. A good advertising campaign on the internet from one company can change the competitive rivalry force for all the others. [...]
[...] We can say that the threat of substitutes to the car rental industry is low from people who travel, but quite high from people who move on with their “everyday life”. The Bargaining Power of Suppliers Supplier power does not seem to be high in the car rental industry. Because of the availability of substitutes, and the level of competition, suppliers do not have a great influence on the terms and conditions of providing the vehicles. As the rental cars are usually purchased in large quantities by major companies, rental car agents have an important influence on the negotiations and on the terms of the sale because they possess the ability to play one supplier against another to make the sales price lower. [...]
[...] Porter's Five Forces Analysis The Threat of Potential Entrants The entry of new comers into the car rental industry puts them at a serious disadvantage. First of all, the car rental market requires capital that has to be readily available. New entrants will first need to constitute a fleet of recent vehicles, in order to compete with already existing companies. They will also need place to park the cars and will have to rent agencies at strategic locations. (Airports, touristic places, train stations If a new comer wants to establish himself in this market, he will have to order vehicles as large as the ones of the major companies in the sector (Avis, Rent A Car, Hertz) in order to obtain the same level of costs per unit. [...]
[...] In 2005, recovering demand was even higher than the increase in fleet size, allowing the most important car rental companies to increase rental rates by almost 10%. In difficult times like now, where there are numerous problems like recession, Economic crisis, and geopolitical conflicts, people are really not keen on buying new cars. Not many people travel for leisure in times of crisis, but people still need a car, because it is sometimes difficult to do without one. Hence, it is a double advantage for car rental companies, because there are always people who want to rent a car just because they don't want to have one of their own. [...]
[...] Competitive Rivalry among Sellers In the car rental industry, major companies are almost equal and hence, the competition can be very intense. In the last few years, broadening fleet sizes and increasing profitability has been the main focus of most companies within the car rental industry. Enterprise, Hertz and Avis are among the major companies that have been growing both in terms of sales and fleet sizes. Competition also intensifies because these companies constantly try to improve their existing conditions, and offer more to consumers. [...]
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