Planning for Growth: Evaluating Growth Considerations for Rent-A-Car

This report evaluates growth considerations for Rent-A-Car, including PESTEL analysis and Porter's generic model. It explains opportunities to grow using Ansoff's Growth Vector Matrix and potential sources of funding available to businesses. The report also covers the preparation of a business plan and different options available with the company to exit industry or grow within industry.

Planning for Growth

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................1
MAIN BODY...................................................................................................................................1
P1: Evaluating the growth considerations and justifying the same for Rent-A-Car....................1
P2; Explaining the opportunities to grow using Ansoff's Growth Vector Matrix.......................3
P3 . Potential sources of funding available to businesses-...........................................................6
P4 – Preparation of business plan- ..............................................................................................9
P5 - The exit or succession options for Rent-a-car-...................................................................13
CONCLUSION-............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
A business enterprise performs operations to earn profit and grow steadily in market. It
states the goals, strategies and methods to reach new heights in market. The present case scenario
is based on the enterprise Rent-A-Car which is the largest car renting company in North America
which is a very famous brand. Report will outline different growth opportunities that a firm can
undertake using the Ansoff's matrix and critically evaluating risk involved with each of them. It
will also throw light on various sources of funding available to enterprise with pros and cons of
each and suggesting which source will be beneficial. Further, an in-depth business plan is
developed and how to apply the same to achieve objectives to scale up the business. Lastly, the
report will present different options available with company to exit industry or grow within
industry.
MAIN BODY
P1: Evaluating the growth considerations and justifying the same for Rent-A-Car
PESTEL Analysis of Rent-A-Car
Political Factors Political factors such as consistent regulatory
framework, international treaties, taxation
policies, etc., affects enterprise (Christodoulou
and Cullinane, 2019). Rent-A-Car should study
current trends of political changes. It can also
target the low tax market and earn high profits
for eliminating adverse impacts of the factor.
Economic Factors Growing economies provide opportunities to
Rent-A-Car to grow and diversify. The
growing GDP rate indicates the capability of
consumer to spend more. The expanding
financial markets provide easy access to the
capital.
Social Factors Social factors such as demographic trends,
cultural norms, spending habits, etc. affect the
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working of the organization. Demographic
levels help in selecting the correct target
market. Rent-A-Car can focus in high end
market where consumers are ready to purchase
luxury product at premium price.
Technological Factors Studying the technological environment will
lead company to better results. Development of
IT aids the company to adopt social media
marketing tools (Nandonde, 2019). With the
help of innovative technologies, concern Rent-
a-car can increase profits.
Environmental Factors US is implementing strict norms for
environment protection and waste
management. The company should take
necessary action to comply with such norms
and regulations, it can also focus on renewable
and reusable technologies for long term
profitability.
Legal Factors There are various laws for employee
protection, consumer protection, etc. Rent-A-
Car must have compliance with such laws to
operate in the country without any legal issues.
Porter's generic Model for examining Rent-A-Car
Cost Leadership: This strategy is adopted by enterprise to facilitate production level on
larger scale which will lead to cost reduction. Here, objective is to produce at a low cost to gain a
larger market share. A low cost product means reducing the production cost by improving
production techniques (Islami, Mustafa and Latkovikj, 2020). The firm has to continuously focus
on price reduction of the entire product line. Rent-A-Car must provide quality products at lower
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prices to the consumers. It can focus on the low-income group and middle-class group as they
place greater emphasis on prices.
Differentiation: The strategy focuses on new and unique product features to expand
customer base of the company (Ezra, Ishaku and Yohanna, 2021.). Rent-A-Car can adopt the
differentiation strategy to set a strong foot in the market. Company can focus on the branding
policy and build a distinctive logo so that the consumers can easily identify the product or
service. It can also focus on heavy advertising and promotions such as social media marketing
tools and techniques.
Cost Focus: It means that a company is focusing on a particular market either, by region
or industry and producing that product or service at a very low cost (Porter's generic
(Competitive) strategies, 2021). The company charges low price compared to other enterprises
that are competing in the same target market. Rent-A-Car can easily become cost leader in a
particular market by focusing on a particular niche market and reducing the costs.
Focused Differentiation Strategy: The differentiation strategy is followed in a specific
market only, that is, it focuses on a narrow region or market and offers quality or customized
products which are better than the rivals' product. Rent-A-Car can also focus on particular
market and provide good quality services of renting.
On the basis of four strategies, Rent-A-Car can implement the Focused Differentiation
strategy. The reason is that the company can focus on a particular market at a time and can
provide the services as per the customers' requirement. The company is an established one and
have enough funds to focus on customization. Rent-A-Car can also increase the customer base
and give a tough competition to the rivals'.
P2; Explaining the opportunities to grow using Ansoff's Growth Vector Matrix
The company has to grow and diversify in the long term to sustain in the competitive
market. For that purpose, Ansoff's Matrix is applied to identify and evaluate all possible risks
associated with each option (Ansoff Matrix, 2021). Rent-A-Car company is planning to launch a
new product in the market and needs to study the market carefully before launching it. That is
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why, enterprise is approaching Ansoff matrix to assess the risks and benefits associated with the
new product. Each matrix of the Ansoff Matrix is discussed and evaluated below:
Market penetration: Market penetration strategy is used when the existing market are
tapped for growth with the products that already exist and operate in the market (Zanjani and
et.al., 2020). Rent A-Car company can acquire more cars to expand the customer base. Further, it
can focus on advertising and promotional schemes to get to the bottom of the market. In addition
to this, innovative supply chains and proper distribution system will show better accessibility.
The firm can also acquire rival company in the market which will reduce the competition levels.
Advantages Disadvantages
 It is cost effective to generate more
profits because the same market is
focused to increase the production
level.
 The better promotional activities helps
to expand the market which leads to
faster growth of the business.
 When a company decreases the prices,
the brand images of the product or
service is affected badly because it is
viewed as a cheap product or service.
 If the market has already reached its
saturation point, it creates pressure on
the sales department to make sales,
Market development: This strategy focuses on opening up to new markets with the
existing products. Here, the company tries to expand the market base with the same product or
service (Chintalapati, 2020). Rent A-car should invest in research and development for searching
new market by studying the cultural trends, consumers taste and preferences and their
behaviours. The company can expand its renting services to new regions and can open its new
branches, locally or internationally. Firm can also focus on brand awareness, educating the
customers about such services to expand and grow the business.
Advantages Disadvantages
 Company can easily increase the
customer base by launching the product
in the new market.
 The business can grow to large extent
by entering the new market.
 Entry to a new market is not easy and
requires a lot of funds to increase the
production level and promotion
activity.
 The buyers in the new market may
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resist the new product.
Product development: When a new product is launched by the company in the existing
market, it is called as product development strategy (Yang and Hsu, 2019). Rent A-Car can
launch a new and easy-to-use Mobile App which will give company a competitive advantage.
The enterprise can get more bookings through the App and can increase the revenue and
profitability. In addition to the car rentals, the company also go for renting a bike or bicycle in
the existing market which will create less pollution and will be eco-friendly and can see how the
consumers react.
Advantages Disadvantages
 With new products developed, the old
and obsolete products are minimized.
 When company introduces a new
product to the market, it increases its
reputation and goodwill.
 New product may not necessarily get
success. It can also fail unexpectedly if
consumers do not give a positive
feedback.
 It requires huge funds to launch a new
product in the market.
Diversification: In the diversification, the company has to look for new markets and
products. An innovative product is developed with distinctive qualities for the complete new
market (Mendoza-Abarca and Gras, 2019). Rent-A-Car can either introduce a new product under
the same product line or can go for different product which is similar to the product line.
Advantages Disadvantages
 It helps to access the new markets and
reduce the competition level.
 It also reduces the business risks
involved and give better Return on
Investment.
 The company does not have knowledge
and expertise of the new market and
has to spend more to get that
knowledge.
 The enterprise may incur loss at initial
stage before penetrating into the
market.
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By analysing all the strategies, Rent a Car can adopt the strategy of Market Development
to enhance its performance in new market. Through this strategy, company can generate more
profits by offering the same services to new customers in different regions. This normally
requires the identification of newer market which has potential customer base for company's
products and services. Company can identify a new geographical area, examine the demographic
structure and identify a group of customers to focus on. As a car renting company, it has vast
opportunities to tap new markets and provide quality renting services to latest customers by
offering discounts and applying better promotional activities.
P3 Potential sources of funding available to businesses-
Investment Decision making- It refers to the allocation of funds to different investments
for earning the maximum possible returns. Investors should select the appropriate investments
after analysing the payback period and net present value (Shrotriya, 2019). Payback period states
how much time a company take to cover the original investment and net present value refers
shows how much profitable the project will be as compared to its alternatives.
The sources of funds available for Rent a car are enumerated below:
Sources Advantages Disadvantages
On the basis of period –
Long term Sources-It means
capital which is acquired for
more than 5 years, 10 and 20
years or more which depends
on many other factors. Capital
expenditures such as plant and
machinery etc. are funded
through long term sources.
Equity shares, debentures,
retained earnings etc.
 Long term sources have
flexible repayment options
which allows to repay in a
controlled manner and help
to achieve long term
strategic goals.
 Long term financing helps
in growth and expansion of
the firm.
 Due to high
finance and
regulations, this
type of finance
need additional
controlling and
monitoring for
proper
functioning.
Medium term sources- It
refers to any finance that the
firm receives for a period of 2
 Medium term loans usually
carries fixed rate of interest.
Therefore, this type of loans
 It is difficult to
obtain medium
term finance and
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to 5 years. Medium term
sources can be in the form of
preference share capital,
medium term loans from
banks, financial institutions or
government.
can help the owner of rent-
a-car know the overall cost
of loan over time.
 Medium term sources of
funds can be used for many
business purposes.
more paper work
is required as
compared to short
term finance.
 Some of the
medium term
sources may
require offering
collateral in
exchange for that
loan which is not
possible for small
businesses and
start-ups.
Short term sources- These are
credit that is borrowed for less
than a year. They are in the
form of trade credit, banks,
commercial paper, factoring
etc.
Interest rates are lower than long
term which makes it suitable for
meeting ongoing operational
expenses and changes in working
capital.
Some people may caught
in debt trap by making
expensive purchases and
then facing shortage of
funds and again taking
loans.
On the basis of ownership -
Owner's funds – These are
acquired by the owners of
Rent-A-Car. These includes
equity shares and retained
earnings.
It does not involve any interest and
there is no deadline when the
money is to be paid back.
All the shareholders or
partners may not always
agree while making
decisions.
Borrowed Funds-These are
the funds that a firm need to
borrow from outsiders. They
include debentures, lease
It helps to reduce cash crunch of
Rent-A-Car.
Rate of interest is fixed.
It includes payment of
interest.
Restrictions has been put
regarding the use of the
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financing, public deposits etc. funds.
On the basis of source of
generation -
Internal sources -It refers to
the money that comes from
within the business. They are
equity shares and retained
earnings.
It allows rent-a-car to maintain
proper control.
It is not ideal for long
term projects.
External sources- These
include money that comes
from outside the firm. They
include
It helps in preserving the resources
of Rent-A-Car.
It helps in preserving the
resources of Rent-A-Car.
The sources of fund suitable for the product are - Retained earnings – This is a portion of profit that is set aside to meet future needs of the
business.
Advantages- It is cheaper source of fund as compared to loans and other sources as the company
has no requirement to pay to outsiders. Retained earnings enhances the financial position of the
Rent-a-car.
Limitations- If the purpose of retained earnings is not properly stated then it may lead to useless
spending of funds. Equity-
Advantages- If there is not good creditworthiness or lack of financial records, equity is more
suitable than debt financing.
Disadvantages- Less control can be exercised as it is shared among all the shareholders and
chances of conflict may arise. Loans-
Advantages- If profit is not to be shared among the shareholders, loan is the best option as the
profits are not to be shared with the banks.
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Disadvantages- As loan from bank is based on security, Rent-a-car may find difficult to get
finance. Debentures-
Advantages- The amount of interest payable is tax deductible, therefore net obligation to get
reduced.
Disadvantages- Debentures are secured against all the assets so Rent-a-car may find difficulty to
raise further loans from banks or outsiders. Factoring-
Advantages- In case of urgent cash requirements, factoring is the best option as it requires less
documentation and quicker application.
Disadvantages- The liability of the vendor is not completely discharged as if a party fails to pay
the debts to the factor then he is entitled to recover the debts from the seller.
P4 – Preparation of business plan-
Overview- Currently Rent-a-car is providing pick up services to a wide range of customers.
Currently it is providing services from business to customers. It is usually located near airports
and often supported by a mobile application allowing online bookings. To meet the demands of
manufacturers, Rent-a-car will also provide business to business services. In this service, Rent a
car will allow the transportation of not only passengers but goods also from one manufacturer to
another or manufacturer to retailer.
Mission- To provide superior services through two-way business communication.
Vision- To expand the services by creating professional environment through building the
mobility of goods.
Objectives -
 Providing on demand motor vehicles that support environmental feasibility.
 Helping the manufacturers save time in the transportation of the goods.
 Provide cost effective system of transportation of both goods and passengers. Providing reliable services in order to develop a strong customer base.
Financing Summary – Rent-a-car will sign 8 year debt financing proposal of $50 million
towards the acquisition of 400 more vehicles to Hyundai Ltd. It will also raise a capital of $1
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billion from Saudi Arabia's wealth fund. Rent-a-car will also issue 40000 shares of 50 each to its
members.
Industry Outlook- The global car rental industry comes under the corporate sector. It includes
vehicle rental providing renting services from B2B and B2C (Venkataraman, 2017). It provides
services for short periods usually for few hours or few weeks. Car rental companies basically
serve people who require vehicle for temporary purposes or beneficial for owners whose vehicles
are damaged and awaiting insurance compensation or repairs (Xu, 2020).
SWOT - Strengths- Over the years Rent-a-car has developed a reliable network of distribution that
reach majority of potential customers. Weakness- The main weakness is that they provide old model cars than their
competitors. Opportunities- Rent-a-car can promote energy conservation by renting fuel efficient
vehicles. Threats- Some threats include Hertz rental service that is the most popular car service at
airport location.
PEST- Political- Rent a car is following the laws relating to Renting and leasing services
including Antitrust laws, compulsory employee benefit schemes. Economic- Unemployment rate, inflation rates, skill of rental workforce etc. Social- As popularity increases, prices in major areas rose too which is good for Rent-a-
car but not for riders. Technological-Consumers book cars through the mobile app. This app is very important
for Rent-a-car.
Market potential-With the expansion of markets globally, the demand of the transportation
systems by B2B is growing rapidly.
Competitors- Hertz and Avis Budget Group
Advertising/ Promotions- Promotions of Rent-a-car can be done through creating blogs,
newsletters, pay per click etc.
Marketing strategy including pricing strategy- Product – Rent-a-car offers an app and a web application that is used for booking cabs.
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 Price- It follows an upfront pricing where the users can check the cost of travel before
booking (Han and et.al., 2019). Place- Rent-a-car is present in 9000 home locations and 419 airport location and the app
can be downloaded anytime and anywhere.
Strategy and implementation summary-
 Rent-a-car has to market their differentials. Differentials are the factors that make the
service unique (Mäkelin, 2019). This can be implemented through publishing them in the
magazines, newspapers, journals etc. To increase the customer base. This can be increased through coupon promotions.
Personnel management-
 Ownership – It is an executive leasing company owned founded by Jack. C. Taylor.
 Number of employees- 80000 Employee cost for next 3 years- 2 million
Financial Plan- The below six months’ cash budget is based on the assumptions-
 Number of employees remains same that the employees remain same that is 80000.
 The employee cost per day is £20000 per employee per month.
 Number of vehicles are assumed to be 50000. Rent charges are 5000 per vehicle per day.
CASH BUDGET
PARTICULARS AMOUNT
Total receipts-
Rental charges 450000000000
Rent a Car prime 6000000
In cab
advertisements 5000000
Trip commission 200000
450011200000
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Payments-
Employee cost 9600000000
Car rental
equipment 500000
Local taxes 50000
Fuel 8000000
9608650000
Net receipts 440402550000
Pay Back Period-
Rent-a-car's payback period is expected to be 2.4 months.
Initial investment - 1200000000
Cash flow per year- 500000000
Break even analysis- The breakeven point is the point where the total cost becomes equal to
total revenue. If Rent-a-car runs 2 -3 hours a day then breakeven point is reached.
Profit and loss account-
Profit and loss
account
PARTICULARS AMOUNT PARTICULARS AMOUNT
To Promotion
Expenses 5000000 By rent charges 55000000000
To Employee cost 9600000000
By rent a car
prime 5000000
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To car rental
equipment 600000
By cab
advertisements 5000000
To local taxes 50000
BY trip
commission 200000
To fuel 9000000
To profit and loss 45395550000
9614650000 55010200000
Future plans to Expand the business-
Rent-a-car can expand its business by organizing local automotive events in which all such
companies and customers can meet at one place and necessary recommendations can be made.
Rent-a-car can come up with new marketing ideas. By developing the car rental software a
company can manage its day to day functions such as business reporting, fines and tolls, leasing
etc. (Gross, 2022).
P5 - The exit or succession options for Rent-a-car-
Business exit strategy is a plan which does not mean failure, it means to start the business with
the purpose of exiting after a certain number of years. Some of the exit strategies that Rent-a-car
may adopt are-
Merger or acquired by other business- In this strategy, Rent-a-car is either merges or
acquired by a company with similar goals to Rent-a-car (Hawkey, 2017).
Advantages-
 This helps in having a clean break for Rent-a-car if that is what is required for the
company. The price, terms and other details can be negotiated of the merger or acquisition.
Disadvantages-
 This process is costly, time consuming and quite unsuccessful process.
 The business might cease to exist with different consequences related to this action.
Management or employee buyout- At the time of exiting the business, the people who
are working with the Rent-a-car may want to buy the company.
Advantages-
 The business can be hand off to someone who has good experience. Business legacy remain intact.
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Disadvantages-
 It may become difficult to find the employee or manager who wants to acquire business.
 These management changes are difficult to implement.
Sell the stake to partner or an investor- It means selling off the stake to a businesss
partner or other investors.
Advantages-
 The legacy will remain intact and the business continue to function as usual. Dealing with the buyer already known makes the process much easier to approach.
Disadvantages-
 Staying involved in the business may become quite difficult. The process could become disputable between the owner and investor leading to potential
problems.
Key reasons of business failure- Financial Problems- Due to lack of working capital, Rent-a-car may lead to funding
shortfalls that can put the company out of operation. Improper Management- While the business owners may have the appropriate skills, they
sometimes lack strong manager. Without adequate management team, certain aspects of
company may mismanage. Market uncertainty- Sometimes owner of the company decide to cash out because of
uncertainty of market developments. This can be due to entering of competitors in the
market that threatens the business (Schaap, 2017). Bad planning and lack of strategy- Planning is the key to success of any company.
Therefore, when planning is not proper, it can lead to business failure. Failure to understand the target market- Lack of gathering and analysing the market
information, not able to understand consumer needs and not knowing about the
fundamentals of target market. No customer strategy- Not knowing about how the customers can influence the business
can lead to business failure. Lacking uniqueness – Lacking a strong value proposition if there is a huge demand of
the products then probably more Rent-a-car will have more competitors and failing to
stand unique in the crowd.
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Prevention-To prevent business failure of Rent-a-car, merger and acquisition may be considered
as the best strategy popular for growth and expansion to gain a competitive edge. The 2 basic
forms of M&A are cost and revenue synergies. Cost synergies are about reducing costs by
consolidating in one company. Revenue synergies include creating opportunities to change
market by selling more products or rising prices. This can be done by reducing competition,
opening new territories, expanding the customer base etc. M&A may help Rent-a-car to save
time and expense of growth strategy.
CONCLUSION-
The report concluded the various growth strategies are cost leadership, differentiation, cost
focus and focused differentiation strategy and the best suited strategy which is implemented by
Rent-a-car is focussed differentiation strategy. Rent-a-car is planning to launch a new product
keeping in view market penetration, market development, product development and
diversification and the strategy adopted by Rent-a-car is Market development strategy where the
Rent-a-car may not have to focus on new service rather it has to tap new markets to increase its
revenue. The various sources of funding are also included in the report. The most suitable
sources of fund are Retained earnings and equity as they do not involve payment of interest.
Rent-a-car is planning to introduce a new service that is providing Business to business service
of transportation of goods. For launching a new service, the company has done swot, pest, and
adopted various marketing strategies. At last, the report depicted various exit strategies in case of
business failure. In case of failure, the best exit strategy that Rent-a-car may adopt is Mergers
and Acquisitions.
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