Academic journal article Journal of the International Academy for Case Studies

Easycar.com: Strategic Service System Design

Academic journal article Journal of the International Academy for Case Studies

Easycar.com: Strategic Service System Design

Article excerpt

CASE DESCRIPTION

The primary subject matter of this case concerns concepts relating to operations strategy and service system design. Secondary issues examined include the application of production line approaches to service, service quality concepts, and the value of demand management systems to the firm. The case has a difficulty level of four/five. The case was written for an MBA level introductory operations management class. It is also suitable for use in operations strategy or service operations management courses, at either the MBA or senior undergraduate level. The case has been designed to be taught in 75 minutes and is expected to require about two hours of outside preparation.

CASE SYNOPSIS

This case describes the situation faced by easyCar.com at the start of 2003. EasyCar is the low priced European car rental business founded by easy Jet pioneer Stelios Haji-Ioannou. EasyCar had just reached breakeven in 2002 on sales of £27 million, and had as its goals to reach sales of £100 million and profits of £10 million by the end of fiscal year 2004 in order to position itself for an initial public offering. To do this would require opening new locations at a rate of two per week and expanding its fleet of rental cars from 7000 to 24,000. The case describes the company's processes and facilities as well as its pricing and promotional strategies. It also describes a number of significant changes that the company has made in the last year, including a move to allow rentals for as little as an hour that was designed to position easyCar as a competitor to local taxis, buses, trains and even car ownership. The case also explores several legal challenges the firm faced, including a ruling that threatened one of the core elements of its business model. Students are asked to evaluate easyCar's operations strategy and assess the likelihood that easyCar will be able to achieve its ambitious goals.

INTRODUCTION

At easyCar we aim to offer you outstanding value for money. To us value for money means a reliable service at a low price. We achieve this by simplifying the product we offer, and passing on the benefits to you in the form of lower prices (easyCar.com website, 2003).

This was the stated mission of car rental company easyCar.com. EasyCar was a member of the EasyGroup family of companies, founded by the flamboyant Greek entrepreneur Stelios Haji-Ioannou, who was known simply as Stelios to most. Stelios founded low cost air carrier EasyJet.com in 1995 after convincing his father, a Greek shipping billionaire, to loan him the £5 million (Note: In January, 2003, £1 = euro1.52 = U.S. $1.61) needed to start the business (The big picture, 2003). Easy Jet was one of the early low cost, no frills air carriers in the European market. It was built upon a foundation of simple point to point flights, booked over the internet, and the aggressive use of yield management policies to maximize the revenues it derived from its assets. The company proved highly successful, and as a result Stelios had expanded this business model to industries with similar characteristics as the airline industry. EasyCar, founded in 2000 on a £10 million investment on the part of Stelios, was one of these efforts.

EasyCar's approach, built on the easyJet model, was quite different than the approaches used by the traditional rental car companies. EasyCar rented only a single vehicle type at each location it operated, while most of its competitors rented a wide variety of vehicle types. EasyCar did not work with agents - over 95% of its bookings were made through the company's website, with the remainder of bookings being made directly through the company's phone reservation system (at a cost to the customer of euro0.95/minute for the call). Most rental car companies worked with a variety of intermediaries, with their own websites accounting for less than 1 0% of their total booking (Click to fly, 2004). And like easyJet, easyCar managed prices in an attempt to have its fleet rented out 100% of the time and to generate the maximum revenue from its rentals. …

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