Assignment on Start Up A New Business

NEW START UP
BUSINESS (REPORT)

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
MARKET ATTRACTIVENESS.....................................................................................................3
INDUSTRY ATTRACTIVENES....................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7
APPENDIX......................................................................................................................................8

INTRODUCTION
Rent A Car is a car rental company that is based in London and has recently
entered the industry. They are planning to launch their services in areas surrounding
London like Kensington, Brixton, Westminster, Dulwich Village, Canterbury etc.
(Velazquez Abad, 2017). This will expand their business operations and also help in
establishing them. In this report market analysis and industry analysis has been made
regrading the industry and the market in which company intends to operate. The idea is
an extremely innovative one and will add a value in the market as the concept of luxury
rental cars is not a common one and it is a highly differentiated product as it will offer
addituional services of providing luxury wedding vehicles as well.
MAIN BODY
MARKET ATTRACTIVENESS
Determining market attractiveness is a very important aspect in evaluating the
present market scenario. Rent a car Company based in London, UK is a new venture in
car rental industry which intends to establish their business successfully and therefore
need to evaluate various factors associated with attractiveness of the market like size,
structure, growth etc. which have been supported with adequate figures and data. The
main purpose of Rent A Car company is to provide luxury vehicles for rent like Bentley,
Rolls Royce etc. and it has been supported by data accordingly.
Market Size:- As per the reports of car rentals in UK, it has been published that for the
year 2019, there have been 5.1 million active users of rental cars. Further, it has been
estimated that this the users in this market are expected to rise from 7.6% in 2019 to
8.1% by the year 2023 (Car Rentals, 2019). Therefore, it can be argued that this market
is regularly growing and venturing in this market appears to be a profitable option for
Rent A Car Company. Further, on a global level, the luxury car rental market in UK is
estimated to be 29% of the entire world and it is further expected to reach £18.3 billion
by the end of year 2022.
Market Growth:- In respect to the car rental industry, the market is expected to grow
by 2.7% CAGR at an annual rate and the volume of the market is expected to grow

from 1418m in 2019 to 1578m till the year 2023 (Car Rentals, 2019). On a global level,
the CAGR is expected to grow by 20% where the luxury car rental market has already
attained its maturity level in UK.
Market Value:- On an average while commuting in London or in surrounding areas,
major factor is the type of car booked and distance travelled. However, the prices
charged are a bit expensive and if Rent A Car company somehow charges a little lower
than its competitors, it will be extremely easy for them to penetrate the industry (Search
for car hire in London, 2019). An estimated car rental figure chart based on car type and
location has been attached in the appendix. The market value of luxury car rentals is
expected to reach 40050 million euros by the year 2022 at the global level since the
market is growing rapidly (Luxury Car Rental 2019 Global Market, 2019).
Market Forecast:- It can be sufficiently evidenced that in future, with increasing
maintenance cost of cars, the demand of rented cars would increase and hence this is a
good market to enter. Overall, the luxury car rental market in UK is already developed
and therefore it is easy to enter it where at initial level the company can incur profits.
PEST Analysis:- By assessing various factors relate to the external environment, it is
possible to create a better view on the performance and impact of various factors on
operation of the industry.
Political Factors:- Political leadership determines the tax, industry regulations etc.
which help in deciding that whether political environment is in support or not and at
present, UK's political market is in support as it encourages less fuel consumption.
Economical Factors:- The growth trend and rate are a huge factor in determining
whether investment in new business should be made or not and at present the economy
of UK even after Brexit has shown a positive attitude of dealing with crisis and therefore,
it is safe to start-up a new business. However, fuel prices, environment regulation etc.
impact negatively on company (Moreno-Izquierdo, Ramón-Rodríguez and Perles-Ribes,
2016).
Social Factors:- The better and expensive the car in which a person travels, more
wealthier he is assumed to be. Therefore, hiring of expensive cars for occasional

purpose of even in daily life has been on trend in London and hence company should
incorporate some luxury cars as well.
Technological Factors:- There have been a lot of technological developments in cars
like navigation systems, GPS tracking etc. and customers are becoming more
demanding specially regarding the safety features. Therefore, the company should
incorporate these features which is a costly affair.
INDUSTRY ATTRACTIVENES
For measuring and identifying the attractiveness of the industry as a whole, the
best model that can be applied is Porter's Five Force Model which helps in analysing
the competitors as well as the industry.
Existing Rivalry (High):- At present there are a huge number of competitors in the car
rental industry of UK. There are some big competitors competing on a global level like
Hertz, Europcar etc. who have an established and loyal customer base (Brubacher,
Desapriya, Erdelyi and Chan, 2016). Therefore, for Rent A Car company it is difficult to
establish themselves on both aspect i.e. quality as well as prices. However, if the
company adopts prices differentiation strategy, then it might be able to penetrate UK's
car rental market.
Bargaining power of Buyers (High):- The bargaining power of buyers is high as they
can easily switch over to another car rental company in case of higher rents or any
compromise on quality aspect. However, there is a rising trend of loyalty programmes
under which additional discounts are given to regular travellers and therefore, the
company can utilize this aspect to ensure that customers do not leave the company.
Bargaining power of Suppliers (High):- There are two major types of suppliers
associated with the rental company i.e. the car suppliers and fuel suppliers. Both
exercise high bargaining power as the sellers of the car have varied options and outlets
for selling their car and a fuel seller would never compromise due to rising power of fuel
suppliers (Velazquez Abad, 2017). Therefore company is not in a favourable position on
this aspect and have to accept the prices charged by the suppliers.
Threat of New Entrants (Moderate):- There is a lot of investment that is required while
entering this business like acquiring cars, establishing buyer-supplier relationship etc.

and this involves lot of time and money. Therefore, the entry is not so easy and it takes
time to establish a business in this industry thus making this aspect as one with
moderate risk.
Threat of Substitute Products (Moderate to Low):- There are a various number of
substitute products available in the market and the customer is always on the lookout
for other options. Travelling through metros, flying, walking etc. are some other options
which have a high preference. However, it is not easy to entirely substitute travelling
through rental cars as it fulfils many other aspects which cannot be provided by other
modes of travel. For e.g.- For a bachelor part, the groom often prefers to hire a Bentley
rather than taking his friends on a metro or train. Therefore, this threat poses a
moderate to low risk for the company and acts as a plus point for the company in
revenue generation.
Hence, the Five Force Analysis has pointed out that initial few years of
establishing a company will be tough as Rent A Car is a new venture in the already
established car rental market but by introducing some exclusive services and creating
price differentiation, the company can utilize competitive advantage thus establishing
themselves.
CONCLUSION
The data analysed in this report and the research conducted helps in determining
that car rental industry is not a profitable industry in the initial years but this industry is
extremely attractive as it presents signs of growth in future which will be profitable and
once the company establishes itself, it can enjoy large customer base generating huge
revenues. Therefore, it can be concluded that a firm should have sufficient resources in
the initial years to keep the firm operating and later on profits can be reaped.

REFERENCES
Books and Journals
Brubacher, J.R. And et.al., 2016. The impact of child safety restraint legislation on child
injuries in police-reported motor vehicle collisions in British Columbia: An
interrupted time series analysis. Paediatrics & child health, 21(4). pp.e27-e31.
Moreno-Izquierdo, L., Ramón-Rodríguez, A.B. and Perles-Ribes, J.F., 2016. Pricing
Strategies of the European Low-Cost Carriers Explained Using Porter's Five
Forces Model. Tourism Economics, 22(2). pp.293-310.
Velazquez Abad, A., 2017. Techno-economic and environmental comparison between
battery and fuel cell electric vehicles (Doctoral dissertation, University of
Southampton).
Online
Car Rental Market Forecast. 2019. [ONLINE] Available
through :<https://www.grandviewresearch.com/industry-analysis/car-rental-
market>
Car Rentals. 2019. [ONLINE] Available
through :<https://www.statista.com/outlook/270/156/car-rentals/united-kingdom?
currency=gbp>
Luxury Car Rental 2019 Global Market. 2019. [ONLINE] Available
through:<https://www.marketwatch.com/press-release/luxury-car-rental-2019-global-
market---challenges-drivers-outlook-growth-opportunities-analysis-to-2025-2019-02-08>
Search for car hire in London. 2019. [ONLINE] Available
through :<https://www.easycar.com/car-hire/england/london>

APPENDIX
Market Size
Market Growth
Illustration 1: Users of Car Rental Service in UK
Source:- Car Rentals, 2019

Market Value
Based on Type of Car:-
Illustration 2: Expected growth of industry in UK
Source:- Car Rentals, 2019
Illustration 3: Estimated cost based on Car type
Source:- Search for car hire in London, 2019

Based on Distance:-
Market Forecast
Illustration 4: Estimated Cost based on Distance
Source:- Search for car hire in London, 2019

Illustration 5: Forecast Luxury rental market
Source: Car Rental Market Forecast, 2019