The car hire market in the UK evolves around the tourism industry

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The car hire market in the U.K. evolves around the tourism industry. Although the figures of the number of foreign tourists visiting the U.K. in 2002 are better than the figures in the year 2001, the tourism industry has seen the biggest decline in twenty years due to the impact of the foot-and-mouth disease outbreak and the event of September 11. Moreover, the number of Britons holidaying abroad has increased thus the internal tourism has decreased over the last two years. However, due to the fear of flying, there has been a 25% increase in self-drive holidays taken by Brits within the U.K. (http://news.bbc.co.uk/). To maximize opportunities a successful company must carefully translate its objectives in to an action-orientated strategic marketing plan, basing its decisions on sound market information.

Factors affecting the car hire market environment:

The macro-environment factors in the car hire market:

These are factors out of the company’s control thus have to be taken into consideration and well studied before identifying or positioning the product within the specific target market.

Economic environment:

As in many service industries, the level of activity in the car hire industry depends on the level of economic activity generally. Therefore, it is not surprising to find that the industry has undergone something of a loss in recent years. This is particularly the case with short-term rental, where there is a high correlation between car rental levels and GDP. A car rental company is also heavily dependent on the level of overseas visitors to the UK and (by implication) the level of global economic activity.

The UK’s economy is growing at its slowest rate for a decade, according to the latest official figures. The annual growth figure for service industries (including car rental services) was 2.2% compared with the previous annual figure of 2.5%. (http://news.bbc.co.uk/). Moreover, while a recent upturn in UK economic growth is expected to continue over the next six months, further economic weakness in the US and the Euro zone is expected. This economic instability in the U.S, the U.K and Europe will consequently affect consumer expenditure thus the tourism.

Political environment:

The probability of the involvement of Britain in a war with Iraq, forms a threat to the economy of Britain thus not only the consumer expenditure, but would also lead to a decrease in the number of tourist visitors coming to the U.K. affecting the car rental environment on its turn.

Driving regulations: The driving regulation in the U.K. sets a minimum age for driving of 17 and a maximum age of 70.

Changes in the tax system can have a significant effect on the long term rental market. Changes in business and corporation tax may affect vehicle users’ decisions on purchasing as opposed to renting, while income tax changes relating to the taxation of company car benefits are an important concern of the business car rental market. (http://www.the-list.co.uk/acatalog/mp71008.html)

Competitive market environment:

Despite the macro-environment threats, the UK car rentals market predictive indicators are showing increases in rentals to around 6 percent (http://news.bbc.co.uk/), because of the rise in the fuel price and under capacity; nevertheless, this may be a temporary measure in the UK as the market has been distorted by the recent rail problems in addition to the increase in the Rail companies fares. The UK car rental market is dominated by a small number of major international companies, including National Car Rental (previously EuroDollar), Avis Europe and Hertz, which tend to operate through a combination of wholly-owned and franchised operations. The remainder of the market consists of a plethora of small companies which serve primarily local markets. Avis the biggest ranked car rental company in England has had shortages of cars and is experiencing extremely high demand from corporate and public clients, which creates opportunities to new companies to emerge the market.

Target Marketing is “the process of identifying market segments, selecting one or more of them, and developing a marketing strategy to meet their needs” (Hill & O’Sullivan, 1999).

The company’s segmentation strategy

Segmentation strategies can range from the concentration strategy where the company targets on one segment, to the multi-segment strategy where the company selects several segments in the market, satisfying each with a different marketing mix. A concentration strategy is risky, since any downturn in the selected market can expose the company to considerable financial risk. On the other hand, a too broad selection of segment might result in the spread of the marketing effort so thin that extra expenses would have to be paid. Therefore, in today’s fierce competition in the car hire market it is favourable to adopt a multi-segment strategy, which can provide a measure of stability by spreading risk across few segments.

Potential target segments in the car hire industry:

The car hire sector has two main customer groupings – business and leisure. These are roughly equal in importance to the industry, with business customers accounting for 53% of revenue and leisure customers the balance (http://www.the-list.co.uk/acatalog/mp71008.html). Hence, our target will be the corporate business client and the leisure client and the marketing plan will be divided two into different strategies to target both sectors corresponding to their needs accordingly.

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