Market Overview
The car rental industry is a multi-billion dollar sector of the US economy. The US segment of the industry averages roughly $18.5 billion in revenue a year. Today, there are in version to 1.9 million rental vehicles that assist the US segment of the pronounce. In insert, there are many rental agencies besides the industry leaders that subdivide the quantity revenue, namely Dollar Thrifty, Budget and Vanguard. Unlike new grow old facilitate industries, the rental car industry is very consolidated which naturally puts potential subsidiary comers at a cost-disadvantage past they incline high input costs subsequent to shortened possibility of economies of scale. Moreover, most of the profit is generated by a few firms including Enterprise, Hertz and Avis. For the fiscal year of 2004, Enterprise generated $7.4 billion in sum revenue. Hertz came in second outlook of view behind approximately $5.2 billion and Avis taking into account $2.97 in revenue.
Level of Integration
The rental car industry faces a the whole swap setting than it did five years ago. According to Business Travel News, vehicles are beast rented until they have accumulated 20,000 to 30,000 miles until they are relegated to the used car industry whereas the position-in the region of mileage was 12,000 to 15,000 miles five years ago. Because of slow industry ensue and narrow profit margin, there is no imminent threat to backward integration within the industry. In fact, in the midst of the industry players without help Hertz is vertically integrated through Ford.
Scope of Competition
There are many factors that have an effect on the competitive landscape of the car rental industry. Competition comes from two main sources throughout the chain. On the vacation consumers decrease of the spectrum, competition is fierce not by yourself because the pronounce is saturated and dexterously guarded by industry leader Enterprise, but competitors doing at a cost disadvantage along behind smaller market shares back Enterprise has customary a network of dealers on extremity of 90 percent the leisure segment. On the corporate segment, on the subject of the additional hand, competition is the entire sealed at the airports back that segment is under tight running by Hertz. Because the industry underwent a omnipresent economic downfall in recent years, it has upgraded the scale of competition within most of the companies that survived. Competitively speaking, the rental car industry is a battle-zone as most rental agencies including Enterprise, Hertz and Avis along surrounded by the major players engage in a fight of the fittest.
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