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Executive Summary

Enterprise’s differentiated position in the competitive U.S. rental car market has allowed the Company to maintain long-term profitability while propelling it to the top of the industry with nearly 50% market share. By focusing on local rather than airport customers, Enterprise developed consonance across its franchise structure, fleet management, customer service, human resources, and relationships with key referrers. These competencies gave Enterprise the edge against direct competitors Hertz and Avis; however, they do not provide a clear advantage against Zipcar in the emerging car-sharing market.

While Zipcar operates at a loss and targets a different market than Enterprise’s—i.e., not regular drivers but city dwellers seeking to sell or postpone buying cars—it poses a long-term threat to Enterprise’s base of discretionary and car repair/insurance replacement customers, particularly those in urban areas. Enterprise’s response to Zipcar must be rationed, though, as entry into the car-sharing business is unlikely to capitalize on the company’s competitive advantages and, in such a high fixed cost business, may in fact undercut them. Rather, Enterprise should respond to Zipcar with small incremental investments leveraging Enterprise’s core competencies, with the goal of nipping Zipcar’s expansion in the bud at minimal trade-off to Enterprise’s existing business. We recommend that Enterprise pursue the following strategies in major cities, e.g. New York, D.C., Boston, and Chicago:

1. Offer half-day rentals at lower prices than half-day rentals from Zipcar.

2. Institute a customer loyalty program in which “prestige” customers can earn points to redeem in hourly rentals.

3. Ramp up sales efforts with universities and large businesses.

Zipcar’s Threat: Why Enterprise Should Respond

Presently, Zipcar’s limited customer base and lack of profitability do not pose a threat to Enterprise, but in the long term, if Zipcar grows to overcome the high...