Case Overview This case describes easyCars entry into the European car rental market and is comprised

of four parts and one supplementary handout: Part A This part of the case focuses on industry and competitor analysis and the relevance of easyGroups capabilities to the market. The car rental market is described for 19981999 (prior to the entry of easyCar) and easyGroups history is reviewed. Part B This part of the case focuses on the entry of easyCar into the market and its chosen business model. The case highlights the rapid expansion, apparent success, and leverage of the easy franchise. Part C This part of the case highlights the issues that arose from the initial business model and approach to expansion. Part D This part of the case highlights the modifications to the business model. Additional Handout: Enterprise Rent-a-Car This handout provides an overview of Enterprise Cars. Enterprise Cars is an example of a company in the US that identified a market segment that was not being served by the existing car rental companies. It can be used as a complement of the easyCar case, ideally before the easyCar case itself is discussed; it reinforces the learning and provides an additional, self-contained case.

London Business School, October 2003. This teaching note was written by Prof. Michael G. Jacobides, with the input of Prof. Pascal Courty and Taman Powell. The cases and this teaching note are intended for teaching purposes only and are not meant to represent either adept or inept handling of an administrative situation.

Teaching Objectives, Audience and Case Layout The case is appropriate for undergraduate, MBA and, especially, executive-level courses related to strategy, general management, industry analysis, value innovation, entrepreneurship, and international expansion. The case can be used in a number of ways; it is a canvas, which allows for most of the relevant strategic management issues and challenges to be brought to the fore. It can also be used as an integrator of the major strategic frameworks. However, it can also be used selectively, as the instructor can focus on only some of the issues, without weakening the class discussion or the analysis. In terms of time, we have spent as little as one and a half hours, and as much as almost two full days on the basis of this evidence. (The latter was in an executive context, where exercises on easyCar were complemented with exercises on the participants companies.) While the case is accessible to younger students and more, it is particularly well-suited to the MBA level and especially executive audiences. The industry is clear enough for executives to understand, yet there are several non-obvious subtleties. The multi-part format has also worked well, and enhances the dramatic tensions in the classroom. Issues Areas Covered There are several topics that can fruitfully be explored through this case: Industry analysis, especially focusing on market definition and strategic groups Creation of new market space and strategic innovation Business Model analysis; complementarity and fit between choices Resources and capabilities: Links between business and corporate strategy Disruptive innovations; new business model conception and evaluation Growth strategies and strategic staircase Implementation, strategy process and punctuated models of change Emergent strategy; strategic adaptation Timing and financial objectives (exit strategy) as they bear on business strategy

It can also be used to illustrate some additional themes

The amount of time and emphasis that is placed on each of these topics depends on the way the case is used, as well as the preferences and skills of the instructor. In this note, we first identify the types of assignment questions that are associated with each part of the case. We then explore the themes that this case highlights, from which the instructor can pick and choose.

Assignment Questions Part A 1. Is the European car rental market attractive for a new entrant? 2. If so, is it an attractive opportunity for easyGroup? 3. If so, what should the business model be? Part B 1. Will the easyCar business model work? 2. What indicators should be used to judge whether the business is a success or not? 3. How does easyCar deliver such low prices? 4. Is easyCar growing too rapidly? 5. Is easyGroup diversifying too much? 6. Will easyCar be a success? Why? Part C 1. What has gone wrong? 2. What should easyCar do? Part D 1. Do the changes to the business model make sense? 2. Will easyCar be successful now? 3. If so, what is this success due to and will it last? 4. Has easyCar learnt from its past? 5. How should easyCar respond to potential sluggish margins or growth? Analysis of Areas Covered by the Case As discussed, there are several topics this case can cover. We hereby briefly provide our views on how to analyze the most important ones. This list also reflects our view on the sequencing of topics and themes. Industry analysis, especially focusing on market definition This case is best used to explain how to use industry analysis and the five forces in context, rather than just introduce or vindicate, e.g. the 5-forces. We propose that the instructor first perform an industry analysis, e.g. using Porters five forces, or possibly models of competitive interaction. In terms of industry analysis and analysis of competitive interaction, a few things should be noted. First, the tough competition in the airport market (in the US) and in the airport or even the local market (in different parts of Europe) relates to the lack of true differentiation and the similarity of competitors. The instructor may want to use the inter-national heterogeneity to explore why different national markets appear to have different prospects; differences in both buyer power and willingness-to-pay (as well as substitutes) between the different national markets should be pointed out. Next, the importance of sites and the risks of the site-holders to dent the profitability of rent-a-car companies could be identified. But, 3

perhaps more important, the ownership of car rental agencies by some of their key suppliers, and the fact that they are used as showcases or outlets for the cars of particular car manufacturers should be pointed out. The reason is that this affects pricing and competitive dynamics; the industry may be excessively competitive, as there are other interests at play, not only optimizing on the margins of the rental bit. For instance, the creation of a market for used cars (six months out, after they are used by car rentals) could be seen as yet another distribution channel for car manufacturers. This just means that the industry can become irrationally competitive, as it is subsidized. Having performed the overall industry analysis, the instructor may want to ask the general question, is this a good industry? This is an obviously misleading question, as there is significant heterogeneity in this industry. The instructor can use the technical detail of the case to provide an analysis of the dynamics of the market, and also identify that there are different strategic groups within Europe, which are differentially liable to the forces in the industry. For the economics-minded faculty, this is the time to stress that a strategic group requires a finer description. The faculty might then suggest that: (1) Nave description of a product is not sufficient to identify a market. (2) Market identification involves consumer, product characteristics and business model. (3) Market identification is a key strategic decision. (4) There might be multiple strategic groups within a given market that are separated by mobility barriers. This analysis can benefit from the Enterprise add-on to this case. The Enterprise story, which is self-evident and as such not repeated in this teaching note, helps reinforce these points. Specifically, we observe that Enterprise has managed to be successful by targeting a different part of the market, with different consumers, who lead to a different market and business model; and this has led to the other airport 7 not being real competition. The same comparison between the US players and Enterprise can now be made between the European key players and Enterprise; and even between some of the parts of the European market. In a more economics-geared version of the case, this analysis can be followed by a discussion of what is a market, of elasticities of substitution between market and nonmarket participants, etc. (See, e.g. Geroski, 1998) Another framing is to argue that Enterprise is a cases of a new player evading the straightjacket of a tough industry, and appealed to a different set of potential buyers, creating their own strategic group. Recapping the basics: Strategy as a set of choices on who, what, and how. A related teaching strategy is for the instructor to suggest that industry analysis can be a good starting point, but that it may also be misleading as it downplays the ability of successful companies and strategies to defy the problems of their context. Rather than build on strategic groups, the instructor may want to introduce, or remind, a basic strategic framework which we have found most useful Costas Markidess portrayal of strategy as a set of choices on the who, what and how. On the board, the instructor can identify the major choices of the US incumbents, and then show how Enterprise differs. Students will soon realize that there are different customers, i.e. whos (replacement & discretionary versus business), different products, i.e. whats (experience versus value for money and pick-up), and different organization, i.e. hows (service driven versus cost effective; pull vs push). The point is that Enterprise does not have to suffer the difficult fate of the other participants as it has created a new strategy, a new market or niche, wherein it is protected. So there is hope even in tough industries! 4

This can set the stage for the two basic questions at the end of this part of the discussion: (1) Should a potential entrant replicate the Enterprise model in Europe? Should they do something different? (2) Should easyGroup in particular enter? If so, why, and how? This should lead to a lively discussion. The first question highlights the promise from creating a new market space and strategically innovating; the second helps consider the role of resources and capabilities. Creation of new market space / value or strategic innovation As the instructor describes Enterprise as an entrant who managed to avoid the pressures of a tough industry, he / she can introduce the new market space framework by Kim and Mauborgne (1997), and suggest that each of the new value propositions represented a different, new set of attributes that made the consumers happy, by drawing the corresponding new value curves. Alternatively, one can use Markidess (1999) framework and suggest that the ability to succeed requires a new set of who, what and hows- not necessarily any new technology, but a new, consistent strategy. The discussion will be made interesting once we move from the acknowledgment of the fact that strategic innovation / new market spaces are important, to the concrete evaluation of new ideas. Having discussed Enterprise, but not yet covered easyCar has the benefit of using the learning from one post-mortem onto another case. Thus, the instructor can ask whether easyCar or any other firm should replicate the Enterprise model in Europe. The answer to that is likely to be no, and the reason is that the benefits of enterprise (geographical spread, value of branding and national coverage, ability to save on cheaper suburban locations, replacement market, strong need for a car) are not as relevant in densely populated Europe, where public transport is developed, as in the US. This should lead the instructor to suggest that strategic analysis can uncover what drives the benefit of a particular model, and consider whether it is relevant in a new / different context. Having made that point, the instructor can ask, possibly as a group exercise, for a specific plan (who/what/how) of what an entrant, or easyGroup should do. He / she can also ask why easyGroup in particular would be well suited to develop that project. Resources and capabilities: Links between business and corporate strategy The instructor may want to have student groups present their proposals on what easyGroup should do, and how easyCar should look, and discussion on the merits and shortcomings of these proposed plans can follow. The instructor can then distribute case (B) and let the students read it in class (alternatively, case B can follow the discussion of resources & capabilities). The instructor can then ask: Why should easyGroup in particular undertake that venture? The answer is, obviously, because it has some key resources and capabilities that are relevant to the venture. Students will be quick to point out the brand; and the ability to use dynamic pricing aggressively, and the resulting asset sweating. This will be a good time to discuss the difference between resources and capabilities, as well as the exportability of resources. A discussion can be had on the links between business and corporate strategy, as we consider how a corporation such as easyGroup takes resources and capabilities from one market and applies them onto another. There is ample scope of discussing if the capabilities and resources are indeed relevant to the new setting, if they are transferable, etc. Issues of applicability, replication, and value (as well as imitability) can be brought up. 5

Business Model analysis and evaluation; complementarity and fit between choices If case (B) had not been handed out, now would be a good time to give it. The instructor can now ask, how does easyCar work? Do you think it can be a success? Wont it be followed immediately? The point here is to consider the role of fit and interaction between the different parts of the model, as well as perform a business model analysis. The instructor should explain that each venture, each business model, has a logic; a way of making money, and that these can differ markedly from each other, even in the same industry. (Useful reading materials on this point can be found in Slywottzys Profit Zone, or the HBS teaching note Business Model Analysis for the Entrepreneur, #333333). The discussion in class should focus on articulating the structure of the business plan. The discussion can start with Enterprise, and then move to easyCar, where students will probably converge to saying it is a coherent business model, albeit a risky one (however, more careful analysis will reveal flaws, as well as the need for very large scale, fast!) The instructor can then ask whether Enterprise was a sustainable model as well. To answer that, we have to consider entry and mobility barriers. The evidence is clear- it has been sustainable, and an important issue is that the fit between different choices, in addition to critical resources, can act as a potent barrier. The activity system of Enterprise can be put on the board, and the students will be fairly quick to identify that there are strong complementarities, especially between the pick-up strategy and the lack of advertising; or between the push, rather than pull philosophy and the HR used; and that as such it is extremely hard for another company to emulate Enterprise without appropriately and fully cloning it, and that efforts to undertake a piecemeal imitation may well backfire. The same argument might be made by some students for easyCar, and the students should be asked to take a view- hopefully, there will be supporters as well as skeptics. At this point, it would be useful (and fun!) for the instructor to create some tensions in the class, by asking the nay-sayers to explain why they do not believe that easyCar will work and even if it does, if it wont be sustained. The point there is to show the difference between a discussion based on beliefs and aesthetics (I dont buy this- it will never fly) to one which is based on an argumentation on the plausibility and relevance of the particular plan in the particular set of countries chosen. By pushing the students to articulate what they think may not work, the instructor can get them to identify some critical issues that might make or break the plan; the underlying assumptions; as well as some weaknesses, which should start becoming evident and which are described in case (C). After the debate on whether easyCar (B) can or cant work, the instructor should distribute case (C). The question which now should be answered is, what went wrong? And why? This opens up a very important part of the case, as it allows us to dig more deeply into the evaluation and assessment of the business plan, with the benefit, of course of hindsight. Its also fun to teach, since often students (and seasoned executives alike) have not managed to identify the critical issues that have brought about the problems. Case (C), when juxtaposed with (B), helps bring up several shortcomings, but some are not so readily revealed. Our own analysis suggests that the problem were due to the following: (1) the benefits as a result of more aggressive asset sweating were very small; the differential is not as big as in airlines, because both the asset base is a smaller part of the cost, and because the ability to improve is not as big. More broadly, the idea that sweeping savings could be made did not take into account 6

the actual cost structure of the industry. The last exhibit portrays this, comparing the relative advantages of the traditional players to the low-cost players in airlines and cars, and shows that the cost benefits were not that humongous, which then means that prices cannot be as low, which then means smaller scale. (2) Mistakes were made in the identification of the customer base: the demand was not where Stelios expected it to be; this will vindicate the students who had suggested local markets. (3) Stelios was lulled by their presence in the easyJet airports, and did not calculate the excessive cost of running ventures in disparate locations that required extensive travel, time, and costs for the executives who were putting up new locations all over western Europe. (4) The venture was quite scale-intensive. The core of the benefits came from an extremely centralized management of stock and prices (contrast this with the autonomy of the Enterprise branches). Also, this was a fully-owned operation, and the lots in any airport were not cheap! (5) The growth strategy had not been thought of. A good business model should not only have an idea of a statically plausible story, but also of how it would grow to support its business objectives (a theme that can be further developed, as we suggest below). These, and other factors the instructor may want to bring up, highlight the need for a robust analysis of a business model; it is not inappropriate to point out that much of the boom and bust of the internet ventures was due to an utter lack of critical eye and sophistication on the analysis of business models supported by banks and investors alike. A discussion can be had, especially with the more senior audiences, on whether there would be a way to identify the problems ex ante, so that strategy can have prospective value. The answer is a guarded yes, and the case provides a good template for some strategic soul-searching. New business model development, contd; disruptive innovation; mental models Next, the instructor can ask the students to go, once again, in Stelioss shoes, and ask what they would do at that point. The discussion can turn on process as well as content, depending on the teaching objectives. In terms of process, the question is what Stelios should do; the discussion could be more open-ended with the senior execs, and issues of turn-around management and dealing with crises can be brought up. The point that Stelios simply went there, and tried to figure things out for himself, as discussed in (D), is a refreshing note to which the instructor can return, once (D) is distributed. Leadership issues (and the problems of the overly mercurial figure running the show) can also be brought to bear. In terms of content, before giving out (D), we have found it useful to push the students to think creatively again. The question here is what they can do to provide yet another twist that will enable easyCar to be successful. Its worth spending time guessing what case (D) suggests. Some leading questions, such as what are the impediments to success? or what are the cost drivers in the business? or what other statistics should we look at? (hint- cars being washed, etc) or how can they better leverage dynamic pricing? (hint- by charging more if you bring it back earlier than agreed), should lead to an approximation of what case (D) describes. Then, the instructor can give out (D) to the students. This would provide a good opportunity to introduce two additional elements, if they have not been discussed to date. The first is creativity on the individual level (mental models); the second is the problem with implementing within an organization new ideas that individuals have come up with, but which are inconsistent with existing practice or existing resource allocation processes. The former is well presented by Markides 7

(1999); the latter by Christensen (1997). The instructor can ask, what constrains the ability of all of us to come up with new ideas? or why did it take such a long time to come up with a strategic innovation in the European R-A-C market? The answer is that the existing structure of business creates mental models, the perceptual filters that are both useful and constraining in our ability to see and take advantage of new opportunities. Even Stelios had his own mental model of what the situation was, what was the correct analogy (low-cost airlines), what people wanted (standard product with something to make them feel safe) and his pre-conception and frames did not allow him to use some of the available information. This can be a minor point, or turned into a more substantive discussion, perhaps touching on cognitive frames, perceptual filters etc as they affect strategy. The instructor may also want to take the discussion on the organizational level, by suggesting that even if an individual comes up with a great new idea, it is often hard for an (established) firm to adopt it. This may be due to vested interests and the division of power in a firm; but it may also be due to culture, or, as Christensen points out, to the resource allocation process. The organizational drivers of inertia become clearer when one considers that incumbents in the US did not respond, for more than 30 years, to the threat of Enterprise, allowing Enterprise to become the biggest RAC firm in the country! This fact could spark a discussion on how and why this happened; in addition to the fit arguments (which work on the level of individual branches), the disruptive technology (or, more broadly, disruptive strategy) concept can be brought in. The instructor can point out that the new venture was inconsistent with the existing business model. However, one should be quick to point out that the dramatic growth of Enterprise is also due to the fact that its own sub-market developed very fast as a function of demographics (more couples would need two cars, with dual-career couples, so that replacement rentals sky-rocketed), changes in related industries (insurers and dealers competing on providing free car rental in the case of a breakdown or accident), etc. Bringing the discussion back to easyCar, it can be pointed out that easyCar also provided a disruption. While it was not as good as the other RAC companies, it was good enough to take part of the market and be based on different principles. The further point here, though, is that while established players may not be quick to respond, others may jump in, and not allow easyCar to reap the fruits of its disruption. So, the question becomes, will other firms stay still? Which will and which will not? Who can emulate or disrupt easyCar itself? Strategic staircase; planning for growth After the analysis of what worked and what did not for easyCar, and ideally just before the discussion on mental models and disruption, one theme suggested earlier can be highlighted more: A venture, new or old, should think of the different steps in needs to take to reach its objectives, and its strategic staircase should be consistent with the business model. This is clear from case (C), and the exhibits of (B), even though it is not explicitly articulated in the text. Students can be pushed to discover it: The problem is that easyCar had large fixed costs (from central administration) and it had to grow faster to eventually be able to spread these fixed cost across enough volume. Additionally, the marginal cost of each additional location was high and this dramatically slowed down both short run profitability and growth potential. More to the point, the regulatory barriers in getting permissions for new locations would have easily wiped out any cash the company got, were it not for the support of the easyGroup; so their neglect of thinking about the dynamics of growth could have caused 8

them their existence. The company should have thought about the speed with which it needed to grow to reach profitability, and the steps it could have taken. This becomes even clearer later, through case (D). easyCars new, potentially successful business formula is based on the concentric growth model as well as on the focus on locations with a very small marginal cost, and with no regulatory headaches to delay them (as they are parts of parking lots); that is, they have changed not only their business model, but also they have integrated into it a growth model, a strategic staircase which will help them move forward. The changes they introduced after the case was written, which was the strategy of using franchises to complement their growth, further reinforces this important, and often neglected point. Strategic adaptation; Punctuated models of change In addition to considering all the cool new things that easyCar has introduced, the instructor should also spend some time on the elements which were part of the initial conception of the easyCar venture, but which were subsequently changed. One of the most important ones is the change of car policy, from one car to several different cars. This is, ex post, a no brainer. The benefits from only one car are very small, so that the experience (frame, mental model) from the airline business was not really transferable. Also, the costs of the Mercedes A class on the road were quite high. (We suspect that Stelios had got a very favourable deal on them, as he agreed with Mercedes when the A class had troubles; but we did not have access to pricing details). Also, the choice of just one car was not fully consistent with the customer base (who) and the service (what). The additional justification, that is, that, as it was an internet venture, a hallmark of realness such as a Mercedes, was useful, was also no longer valid. This is even more striking when we consider that Stelios was in a unique position to implement his contestable supply policy, i.e. make the rounds with car manufacturers and pit their offers against each other, snatching the lowest cost lease. This was due to the fact he was entirely unconstrained from trying to support one type of cars. But this only dawned on them late. As he himself notes, he believed his own BS. This is an important issue to note, and can be discussed in class- that is, when and how one idea, which may have been proven wrong, is changed; when we do realize that a plan or strategy was misplaced. At this point, the instructor can observe that while information on how things evolve come on a continuous basis, adaptation to change and to the information coming happens in discrete episodes, validating the models of punctuated change. The instructor can point out that once changes were introduced, they were introduced together at a number of different levels. This can be justified not only on the basis of the previous analysis of fit (and hence the need to undergo systemic, rather than piecemeal adaptation) but also of the organizational trauma that accompanies change. In terms of managing the process, the fact that Stelios spent a week in an easyCar location, trying to figure out how to improve and change the format (change the recipe of business, as it were) could be the basis of discussion of both strategic adaptation and of leadership. The discussion about leadership can also turn to a subtle, but important difference between the two strategic innovators, easyCar and Enterprise. Organizationally, Enterprise is decentralized; initiatives for strategic adaptation, or the details of business design are left to the branch managers. This means that a smoother path of learning happens, as new ideas can be transferred to the centre, and competitions between branches mean that not only a thousand flowers are left to bloom, but also that there is a real competition for the best flower. In complete contrast, easyCar is a very 9

centralized company, which is dominated by the presence of its founder. This cuts both ways, as any innovation is centrally mandated and implemented; its a classical case of top-down, for any veneer that is used, and not even the CEO has real autonomy. (The easyCar CEO and CFO resigned the summer of 2003, rumours have it because of their limited ability to set policy, as Stelios had solid reigns over the venture). This means that organizational learning is little more than the learning of the Chairman, and possibly of the senior executive team. Since the benefit of easyCar lies on some centralized elements (brand, ways of managing demand, etc), this is to be expected; it also affords easyCar very low costs in terms of HR, where it is a ruthlessly low-cost player. However, this does affect the dynamics of strategic adaptation. So the instructor can point to the link between the organizational logic and the dynamics of strategic adaptation, and possibly have a discussion of how organization design affects strategy. Implementation dynamics & emergent strategies This case can also serve to highlight the role of strategy as an emergent process, as well as of the ways to bring together a rational analysis and a more chaotic organizational approach. The fact that the discussion follows a strategy as it evolves is in itself a potent way of instilling to the students both the usefulness of a structured strategic analysis, and the importance of non-rational factors, as well as of the fact that no successful venture or company ever had it right from the beginning. To wit, while we are not very clear about what the business model was in 1998 when they entered, it also appears that the easyCar team were not all that clear either. The business model and the strategic plan became clearer over time, and it also adapted as a result of some assumptions being proved wrong, and some right. There are several ways of framing this debate. One is to build on Mintzbergs emergent strategy discussion; but to do so requires an adaptation of his thesis. easyCar did not represent a company which de facto started having another strategy, which diverged from its original one. Its a case of a company that realizes its strategy as it goes; it starts with a general sense of direction and purpose, and finalizes things, even if in a way which may prove mistaken, along the way. As it identifies its mistakes, it changes its strategy, and the sense-making that goes with it, in episodic ways. A crisis is the opportunity to rethink the structure, and the a-has of discovering new ways of adding value come on the way. But this is not a random process; Stelios and his team try to keep some consistency in what they do. They just change their overall direction to better fit their market, and to adjust for the mistakes in their assumptions. Issues of framing and how that affects the emergence and evolution of strategy can be usefully introduced at this point. One last related theme is the use of information from the market. The basic question is what one should do when the market response is not what is expected. The instructor could ask the students, e.g. at the end of case (C), what they would do. The two polar extremes, which could be identified as such, are (a) the powerpoint theorist syndrome- that is, believing your plan too much, and falling in love with your strategy awaiting that the market will eventually recognize the strategic brilliance of the plan, and as such that problems are only transient; and (b) the CFO knee-jerk syndrome, which suggests that at the slightest deviation from plan, a change is made. The discussion should lead to the conclusion that strategic success when we manage to be somewhere in the middle, combining theory and data, intuition and reaction. Theory and the strategic framework should be guiding action; but data should be used to update 10

assumptions. The joint impact of the two should lead to periodic, and not overly abrupt, changes of strategic direction. Of course, other instructors may want to use their own frameworks, but either way this case provides a good template for discussion. Timing and financial objectives (exit strategy) as they bear on business strategy One last theme, which we have not developed fully in the case (as there were no official or discloseable data we could use), can be introduced in the discussion. This regards the importance of the financial context in shaping business strategy, and it also helps explain the fundamental differences between Enterprise and easyCar. Enterprise is a privately held company; growth in and of itself is less important than the sustainability of their position. Also, capital is used more sparingly, with a franchise system. easyCar, on the other hand, has the clear intention of going to IPO as fast as possible; it is supported by money from venture capitalists, who are also keen to see it go public. Its objective has thus got to be more growth-related, and it is keener to prove the concept (to the financial community and potential investors, even more so than to customers and suppliers). This changes the priorities, and might explain some of the attributes of not only the actual business plan, but also the growth trajectory. The instructor may thus want to consider the significant and usually unexplored links between financial structure (or position within the group, in easyCars case) and business strategy. easyCar: The Road Ahead One of the nice features of this case is that the jury, so to speak, is still out, and this affords the instructor to moderate a discussion on easyCars prospects, as they stand in case (D). The discussion can integrate and recap the frameworks we have to assess the viability of the plan, especially in the full-length version of the case. Rather than providing our own biases on how to do this, we simply point out a few major issues. First, the question of the speed of growth, and of the ability to cover the significant fixed costs. Second, the danger of new entrants coming in, emulating the clever bits of the business design that are integrated in easyCar (D). This hinges on the analysis of mobility / entry barriers and of the resources and capabilities that easyCar has. While brand is arguably a significant advantage, especially in the UK (where growth has been the greatest), some of the other elements of the business design make it feasible for local players to come in. In France, for instance, in the fall of 2003, several new players have emerged on the low-cost segment with exactly the same pricing structure, as such dynamic pricing is not hard to engineer. Not surprisingly, car parks have started participating in the game, as they are holders of some of the key resources- parking space. The possibility of employing a local saturation strategy, by keeping new entrants out may work at places; it has effectively been employed by Enterprise in the US, and which appears to be consistent with the concentric growth model. In this case, speed becomes of the essence, yet doubts are cast on the long-run margins. It is also not surprising that easyCar, reversing its previous model, is now franchising the easyCar operations, which will enable it to gain the necessary scale as well as fend off new competitors in the making. Finally, it is interesting to note that as of October 2003, plans for the 2004 IPO had been shelved, without much information on what would follow.

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Some final thoughts on teaching this case The amount of time and emphasis that is placed on each of these topics depends on the way the case is used, as well as the preferences and skills of the instructor. In this note, we laid out in detail all the themes that we found to be important. This case can be taught from an economics-based angle, focusing on market definition and competitive interaction / strategic group; from a mainstream strategy angle, focusing on strategic innovation, the strategy process and creating new market spaces; or from an organizational angle, focusing on how strategy evolves, and how organization structure affects its development, adaptation and change. Furthermore, the structure of the case, as well as of the learning is modular. Many topics can be left out, without hampering the individual point-by-point analysis. In terms of where to teach the case in the context of a traditional course, there is a fair amount of leeway and options that can be used. If this case is taught toward the end of the course, so as to cover issues of strategy in action, implementation etc., it can easily build on what has been analyzed. That is, the industry analysis can be provided in a very few minutes by the instructor, who could refer to what we know already; ditto for value curves, strategic innovation, etc. If the case is taught early in a course, it can be used to illustrate the who-what-how, and the evolution of business models. And finally, if a course is taught in the middle of a course it can be reserved to the careful analysis of a business model, and an analysis on how it evolves over time. In this case, the instructor can make some links to both the material he / she has covered, and to what will be covered, to wet the students appetite. Finally, the fact that it is built around four case-lets, which can be handouts given in class, or reading for the next class, allows for interesting debates, exercises, etc. And we should not underestimate the fact that students have heard of both easyGroup and Stelios- we have found this case to be particularly engaging, with people taking sides. We hope that you will enjoy teaching it as much as we did!

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