Olympic rent a car

1836 Words Aug 25th, 2014 8 Pages
OLYMPIC RENT-A-CAR US CASE STUDY

STUDENT: JOSÉ FILIPE SOUSA CARVALHO

SUMMARY

Olympic is a US rent-a-car company facing some changes in the market it operates. A competitor company (Enterprise) is changing its loyalty program. Olympic managers have to evaluate the impact of those changes and to take actions in order to respond correctly to those changes without losing market share and if possible taking advantage of the situation. The aim of this study is to evaluate those changes and to propose a recommendation to respond to these market changes.

MARKET SUMMARY

The car renting industry in US is a $24 billion industry dominated by 4 big players, Enterprise, Hertz, AVIS and Olympic with the following market revenue shares: Enterprise is
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Anyone that rents a car can be a member depending on the number of days they rent, as consequence people are members of several loyalty programs as they rent in different companies. The rental loyalty programs are not really differentiating rental companies they are a perk for customers.

In 2012 10% of Olympic customers were members of Olympic medalist program and these customers provided 21% of the revenues. They paid for 3.996.000 days and claimed 375.000 free days. This means $323.400.000 of revenue come from members of Olympic medalist program, to this revenue we have to subtract the fixed costs, the free days cost and the program advertising costs ($28.000.000). The fixed cost is 20% of $21 ($4,2) multiplied by the total rental days and equal $1.575.000 and the free days cost is equal to $7.629.552. This gives an economic value of $233 per Olympic medalist program customer.

The regular customers represent 79% of revenues that translate into $1.216.600.000. The total rental days for these customers are 24.681.000 and these days represent a cost of $103.660.200 (24.681.000 x $4,2). There are also the advertising costs of ($108.000.000 - $28.000.000 = $80.000.000). Subtracting to $1.216.600.000 the variable costs and the advertising costs we end with $1.032.939.800. Dividing this value by the total number of

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