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Universal Car Rental Case Solution & Answer

Universal Car Rental Case Solution

Introduction:

As a district manager, my responsibility is to simulate the 12 months weekday and weekend price in order to maximize the profits for the company, along with to evade the price wars from competitors, maximize capacity utilization rate and to increase final market share. For this purpose, I have used the premium strategy to maintain the competitive advantage and to increase the profits because many consumers are willing to pay a large premium for the quality provided by Universal Car Rental. As known that the price and demand have an indirect relation and in lower prices, the demands are high which might be unable to meet by the company due to its low available capacity. Along with it, another reason to follow the premium pricing strategy is to avoid the price war between Universal Car Rental and its competitors by creating the unbeatable price gap in order to create the unique brand perception in the mind of their business and leisure customers that they are providing the remarkable premium services against their competitors that is why the prices are high which ultimately creates the competitive advantage over competitors.

Pricing Strategy:

During playing the game, the premium pricing strategy have been used in order to maintain the competitive advantage and to increase the profits because many consumers are willing to pay a large premium for the quality provided by Universal Car Rental. Here, in order to maximize the cumulative profits, the high prices for weekday have maintained during the simulation while the weekend prices have changed along with their demand possibilities.

The reason behind to use the premium prices is to increase the profits and to meet with 100 percent demand at that prices. Because price and demand have an indirect relation and in lower prices, the demands are high which might be unable to meet by the company due to its low available capacity. By increasing the price per unit of car in Orlando, the market total demand have decline which lead towards the increase in profits along with an increase in capacity utilization rate. The excess fleet size in Orlando have shifted in the Miami in order to fulfill the unfilled orders. But it is observed that anincrease in fleet size in Miami are leading towards a decrease in capacity utilization rate along with a decrease in profits. So, the prices have again increased in Miami as $50 for weekday price and $44 for weekend price.

Another reason to follow the premium pricing strategy is to avoid the price war between Universal Car Rental and its competitors by creating the unbeatable price gap in order to create the unique brand perception in the mind of their business and leisure customers that they are providing the remarkable premium services against their competitors that is why the prices are high which ultimately creates the competitive advantage over competitors.

Goal of Pricing Strategy:

The goal of the pricing strategy is to maximize the cumulative profit of Universal Car Rental Company, to avoid price wars, maximize capacity utilization rate and to increase final market share.

Weekday vs Weekend Demands:

There is a difference between the weekday and weekend demand. It is observed that the weekend demand is not have any relation with weekday demand but it is always a lower as compared to weekday demand. The reason behind this difference is an off from the offices which might lead towards a decline in the rental car services. This decline is also lead towards the decline in weekend prices as compared to weekday prices.

Behavior of Business and Leisure Customer:

There is an indirect relationship between the changes in price and the behavior of business and leisure customers as the prices increased, the percentage of business and leisure customers decreased in an elastic way.

Observations Regarding Differences:

As known that the Orlando segment is a huge segment as compared to the Miami segment but the fleet size in the Orlando is excess of its market demand which ultimately lead towards the underutilization of capacity and increasing the overall company’s cost. To address this, I have shifted the excess capacity in Orlando to other company’s segment for the purpose to level the capacity utilization rate in Orlando and other segments of the company.

It had also observed that the weekday and weekend utilization in Orlando is approximately same but in Miami there is a huge difference between the weekend and weekday demand of cars. The underutilization of cars in weekend are leading towards the decrease of capacity utilization rate which cannot be reversed because the weekday demand is 100 percent utilized and fulfilled………

 

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