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    Case - Car Rental Market Entry Strategy

    Uploaded by

    Jialing Wu

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Case - Car Rental Market Entry Strategy

    Uploaded by

    Jialing Wu
    16 views6 pages

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    © © All Rights Reserved

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    16 views6 pages

    Case - Car Rental Market Entry Strategy

    Uploaded by

    Jialing Wu

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 6

    www.preplounge.

    com

    Car rental market entry


    strategy
    Topic Difficulty Style
    Growth strategy Intermediate Interviewer-led (McKinsey
    Market analysis style)
    Market entry
    Market sizing
    Mergers & Acquisition
    Operations strategy
    Valuation

    The client is CarRentalCo, a global car rental company present on the


    European and North American markets. In Europe, it is present in most EU
    countries but has not yet entered the Baltic countries. CarRentalCo has asked
    us to determine whether or not they should enter the Baltic (Estonia, Latvia
    and Lithuania being here considered as one market) and, if so, what should
    their entry strategy be.

    Transaction ID: 66355 (jz3003@columbia.edu)

    Page 1
    Comments

    This is a case study example to help you prepare for your interviews at
    McKinsey & Company or Bain&Co. Go through the exercises and practice
    the case with a partner who can challenge your thinking and give
    feedback.

    Since this is an interviewer-led case, the interviewer should guide the


    candidate through the interview.

    Short Solution

    In order to achieve the profit margin targets a high market share is


    needed(+30%)
    An acquisition of an existing competitor is the best option
    Among the existing competitors a big local player is the best option
    There are seleval integration factors that need to be evaluated before
    the integration

    Transaction ID: 66355 (jz3003@columbia.edu)

    Page 2
    Paragraphs highlighted in blue can be verbally communicated to the
    interviewee

    Question 1: In the introductory meeting with the European


    director, he asks you how you plan to approach the problem. Give
    a brief description of the key areas you want to focus on to
    analyze the problem.

    Market

    Size of the market


    Growth rate
    Segmentation
    Competition: How many competitors?
    Respective market shares
    Differentiation factors
    Alternative competitors/substitutes

    Consumers

    Type of consumers: business, tourist, local /Segmentation


    Trend in consumer demand
    Capabilities/Core strengths

    Brand

    Corporate agreements
    Customer Loyalty program

    Question 2: Based on the approach presented above, how would


    you go about conducting the analysis and gathering the
    information required?

    a) Client information: Any internal report or interviews conducted with the


    management of the company

    b) External information: Market reports, internet

    c) Consulting firm information: Any internal info from the consulting firm,

    Transaction ID: 66355 (jz3003@columbia.edu)

    Page 3
    reports, expert interviews

    Question 3: Based on the various data gathering methods


    suggested above, we have some data to help with the market
    entry analysis. CarRentalCo is looking at a net profit target of at
    least €200k after the initial 3 years. So, more specifically, what
    data would you need to determine the equivalent market share
    CarRentalCo needs to capture in the Baltic to reach the profit
    target in 3 years?

    Ask for if there is more info on the market, like size, if there is data related to
    margins, etc. Then you would receive the following:

    Total Size of Car Rental Market in Baltic: €10m


    Annual Market Growth: 10%
    Net Profit Margin: 5% (in lieu of any details on cost structure)

    With such info you can calculate what is requested:

    Market size after 3 years: €12.1m

    Each market share percentile equals €6,050 in net profit for CarRentalCo

    To reach a target of €200k in net profit, CarRentalCo would need about 30%
    market share in 3 years.

    Question 4: Analyzing the competition of the market and knowing


    the targets, what should be the best market entry strategy? How?

    i) International Car Rental: 35% market share – serves primarily


    international business travellers and tourists.

    ii) Local player: 45% market share – serves a mix of tourists and local
    customers.

    iii) Other smaller rental companies: 20% market share – primarily


    local customers

    Organic growth is highly unlikely to get to the market share targets.

    Transaction ID: 66355 (jz3003@columbia.edu)

    Page 4
    Therefore, an acquision is the best option.
    International can rental does not look a good option to acquire since
    they are direct competitors
    The smaller companies do not seem a good option due to high
    complexity and still lower market share than the target
    Local player seem the best option. We will probably have enough cash
    for the acquisition and the 40% will be more than enough for the target

    Question 5: What are the main challenges of the integration?

    Difference in existing customer base vs CarRentalCo’s targeted


    customers
    Local customers will move to smaller players as price sensitive and
    unwilling to pay premium for CarRentalCo
    Business travellers may not be impressed by service quality of local
    player. This would require investment in staff training to bring service
    levels up to CarRentalCo standards
    Significant capital investment to bring car fleet up to CarRentalCo’s
    standards
    Difference in reservation and computer systems requiring IT investment
    and training
    Effort spent on integration might divert focus away from operations,
    resulting in potential benefit for competitors. They might gain additional
    market share and grow an even stronger foothold in the growing
    segments

    Question 6: What is your final recommendation to the client?

    Entering the baltic market is recommended and an acquision of a local player


    is the best strategy.

    The market is growing and its a good opportunity


    The local player acquisition ensures the €200K target in profit for year 2
    This acquisition simplifies the M&A process since it only requires one
    acquisition with a 40% of market share

    There are several challenges that we need to address for the integration
    related to the existing customers, IT systems or company culture.

    Transaction ID: 66355 (jz3003@columbia.edu)

    Page 5
    Transaction ID: 66355 (jz3003@columbia.edu)

    Page 6

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