Review of the nature, Marketing and Operation Link of Avis Budget Group
Avis Budget Group operates two of the most renowned brands in the global industry of car rentals. The operations include Avis and Budget. On one hand, the firm (Avis) is in the front line when it comes to rental cars supplies to the finest commercial and leisure fragments within the (travel) industry. On the other side, Budget is a leader in car supplies to the ‘value-conscious’ section of the industry. Avis Budget Group Inc. leading in operating rental vehicles in countries like Australia, North America, New Zealand, and other regions based on print airport tickets.
The company operates distinct brands of car services that are meant to target different industry segments. However, the two brands share technological, maintenance among other facilities. The Avis Budget Group has established approximately 6,500 operational locations in many parts of the world (Plunkett, 2008).
The Avis Budget Group categorizes it operations into three segments, that is, domestic, international and truck rental services. The company uses the strategy of optimizing its two brands in order to capture different market segments. It has designed the operations of the two brands such that they share administrative resource, fleets, and other resources. This has helped the company spend less in the positioning of the two brands in the market.
In supporting the two brands, the company employs marketing mix (that involves the use of internet, traditional media, among others). Its marketing activities capitalize on creating customer loyalty, retail advertising, crucial partnership, and internet marketing campaigns. Avis offers an opportunity to travelers to earn points whenever they use the company’s traveling services (Bennett and Strydom, 2001).
How the Two Functions Work Well Together
The two brands of Avis and Budget are operated together. The brands share similar fleets, administrative and maintenance facilities. The two brands differ only due to their target market segment in the industry. Due to the large numbers of fleets owned by the company, it use an internet based system known as the Wizard System. This system helps the company to cater for the large number of applications for reservations, rentals, processing of data, and information management system. All the information regarding both brands are received and processed in the same system. This has assisted the company in reducing its operation costs.
The Avis Budget Group Company operates franchises in many parts of the world. It allows many independent business entities to operate under its two brands worldwide. This enables the company to reduce the workload involved in terms of administrative cost and management of fleets (Peterson’s, 1999).
It is also important to note that the company does not create tight competition between the two brands. The customers can rent either of the two brands depending on their personal preferences. The Avis Budget Group Company includes both the brands in accounting for annual revenues.
Strengths of the Relationship
The relationship between the two brands is numerous. The following are some of the strengths that may be attributed to the two brands:
- Avis Budget Group operates both brands at international level hence the company is able to generate more revenues. The company could expand to create product mix so as to enjoy economies of scale. This can be done by adding other range of relevant services to the current two brands.
- Both brands joined together enable the Avis Budget Group to enjoy economies of scale.
- Both brands are designed for different segments of the travel industry hence providing Avis Budget Group with competitive advantage over its competitors
- Both brands enables the company to maintain its liquidity status
- The two brands share administrative infrastructure, administrative resource, and fleets. This helps in the reduction in the cost of operating both brands.
- They offer high quality travel services and at competitive prices
- Both have highly distinct corporate colors which make them easily recognized and distinguished from their Avis Budget Group’s competitors
- Both brands are presented in a user friendly website which describes, fully, the breakdown of their service prices. This can facilitate travelers’ financial plans.
- Both brands are maintained in a manner that is sensitive to environmental sustainability.
- Brands provide reliable travel services to customers without letting them to hassle.
- The brands operate on flexible business model and have minimal asset risk.
The weaknesses of the relationship
The two brands may have strengths but still they experience some weaknesses which include:
- Both brands seem to target the middle and the high economic class. They do not cater for the low economic class individuals who may also want to use the services. The company should diversify its operations to cover even the low income class so as to expand its profit margins
- Handling the transactions of both brands together is relatively slow taking into consideration that the Avis Budget Group gets thousands and thousands of business deals worldwide. The company should many the operations of the two brands distinctly
- The two brands face tight competition both domestically and internationally. This type of competition can sometimes restrict and inform the pricing policy in some of its regions of operations (Mylne, 2006).
- Anything that affects the company will affect both the brands simultaneously. To ensure security of either of the brands, they should be managed differently
- Managing the two brands dependently makes it difficult to monitor the performance of each brand.
How the Weaknesses Add To Sub-Optimization of the Company
Weaknesses are always disadvantageous to corporate organizations; this is closely related to sub-optimization whereby the extent to which a company may attempt to enhance its performance of one of its subsystems by its own designed criteria may have a detrimental outcome to the whole system including the sub-system being enhanced. This may also lead to the defeat of the company’s set objectives. There are the factors that drag the performance of the company behind and therefore should be tackled well. It is important for Avis Budget Group to know its own weaknesses so it knows how to handle the disadvantages that come with them.
Weaknesses of the Avis Budget Group may arise due to its relatively low competitiveness, insufficient resources or some form of mismanagement. Sub-optimization has also the effects as weaknesses. It arises when the company is not able to perform to its potential due to the two brands.
There are resources of the company shared between the two brands. The principle of sub-optimization states that the fact that sub-optimization is done do not lead to global optimization. In doing sub-optimization between the two brands the Avis Budget Group is actually transferring the weaknesses of one brand to another. It is possible that a larger percentage of resources used by the Avis Budget Group Company are generated by only one brand yet they are shared equally in the running operations of the two brands. By doing sub-optimization between the two brands, the company is hiding the weaknesses of either of the brand.
It will be difficult to determine the brand that is not performing well. When this happens, it will be very easy for the Avis Budget Group Company to experience liquidity challenges. This indicates that both weaknesses and the process of sub-optimization are detrimental to the company in, some how, similar way. The company should be extra-cautious when doing sub-optimization and dealing with the company’s weaknesses (Spitzer, 2007).
Specific Improvements That Could Be Made
The first important improvement that the Avis Budget Group Company can make is to completely separate the operations of its two brands. When this is done, the company will be able to avoid the challenges that come with sub-optimization. The company will be able to evaluate the financial performance of each brand. The most important things the company should do when considering separating the operations of the two brands are separating their administrative infrastructures, maintenance facilities, financial accounting, technologies, and service operations. Separating the two brands will also ensure that they compete against each other in the market and hence increase the profitability of the company.
The Avis Budget Group should also not just focus on two segments of the travel industry. It should expand its travel services to cover all other segments in the industry like providing cargo transport services and also consider family based travel services. The company can also consider venturing into chuffer based travel services where customers are driven to their various destinations by the company’s employed drivers. Expanded services within the industry are ways and means of increasing the profitability of the Avis Budget Group Company; they will also give the company competitive advantage and increase its economies of scale.
Ways of making the changes
To make the improvements, the Avis Budget Group Company requires additional resources. It may decide to acquire more fleets on either hire purchase terms or credit subject to the agreements with companies selling fleets of cars and tracks. The company can also integrate the recommended improvements into its strategic plan as long term programs. This way, it may decide to set aside certain amount out of its annual returns to cater for the improvements. The Avis Budget Group Company should also increase the number of its franchises. This will lead to increased revenues and profit margins for the company. In fact, due to possible limited resource, the Avis Budget Group Company can offer some of these new services through franchises.
Resultant Outcome from the Improvements
Once the improvements are appropriately implemented, the company will be able to operate efficiently; especially after making the operations of the two brands to be independent. The company will be able to track, monitor and evaluate each brand independently so as to determine their profitability based on individual performance. By exploring other segments of the travel industry the company will be able to increase its level of liquidity and therefore be able to operate on large scale. The increased activities and improved services will also have a positive effect on the business of the company; the company with enjoy more benefits of economies of scale and also increase the size of already existing customer base.
Summary and closing thought
The Avis Budget Group Company is one of the leading providers of travel services on a global scale. The Avis Budget Group categorizes it operations into the three aforementioned segments. Each operation in each segment competes with other service providers in its segments hence making the whole company to be more efficient in its financial performance. Due to its differentiated product services the company is able to enjoy high competitive age over its competitors operating with only one brand.
It is important to realize that the company enjoys a lot of benefits from operating on a global scale. Some of these benefits include economies of scale, large customer base, customer loyalty, good reputation, and big profit margins.
It is also important to realize that as much as sub-optimization may be profitable to a company operating two subsystems together, such a strategy in many cases have some backfiring effects. The problem that may arise in one subsystem may negatively affect the whole system and cause probable irreparable damage. The effects of failed sub-optimization process are always closely related to the ones brought about by unchecked weaknesses of the company.
It is therefore important to separate the operations of subsystems so that each subsystem may be evaluated independently. This will ensure that the failure of one subsystem do not affect other subsystem or the whole systems. It is also crucial for companies, especially in the travel industry to diversify their products. This also gives the companies competitive advantages over their competitors. For instance, the Avis Budget Group Company has different travel services to its customers who have different taste of class when it comes to hiring cars either for private or corporate uses. Nonetheless, the travel industry has not yet been exhausted. There is still room for expansion for both existing and potential travel companies.
Reference List
Bennett, J. & Strydom, A. (2001). Introduction to travel and tourism marketing. Lansdowne: Juta and Company Ltd.
Mylne, L. et al. (2006). Frommer’s Australia 2007. Hoboken: John Wiley and Sons.
Peterson’s. (1999). Top, 2,500 Employers, 2000: Top 2,500 Employers. Texas: Peterson’s.
Plunkett, J. (2008). Cemeterians. Plunkett’s Automobile Industry Almanac. Houston, Texas: Plunkett Research.
Spitzer, D. (2007). Transforming performance measurement: rethinking the way we measure and drive organizational success. New York, NY: AMACOM Div American Mgmt Assn.