Rentall Trucks Case Study
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Rentall Trucks Case Study
Introduction
This paper will provide an analysis of the case study of Rentall Trucks using Markov Analysis. The problem statement of the case is about legal issues that surrounded the operation of two main competitors in the truck renting industry Rentall and Rentran. The scope of a problem is the extent of perception, action or inquiry of a concept. In our case study, the scope is an omission in the contracts leading to the sale of Rentall Trucks that could cost the firm millions of dollars according to Jim Fox. (Render, Stair, R. Hanna, & Hale 2015). The critical decision issues to be addressed by Rentall Trucks include how to increase the competitive edge and maintain a large market share in the industry.
Analysis
One of the critical elements of the Rentall Trucks case is the fact that during its sale, the contracted law firm omitted a clause that would prove costly in the long-run. Folley, Smith and Christensen failed to include a clause that would prevent Bob Renton from competing directly with the firm. This led to the creation of Rentran. The case provides another critical element in which Rentall faces stiff competition from Rentran, despite the fact that it is only a few months into its operations. In six months, Bob has succeeded in convincing and poaching a number of key executives from Rentall into his company, Rentran. The firm managed to acquire a market share of approximately 5% in the first few months of its operation while Rentall had 80% and National rentals, another competitor, had 15% (Render, Stair, R. Hanna, & Hale 2015). The Market share determines the portion of a market controlled by a particular firm (Rego, Morgan, & Fornell, 2013). It is the percentage of total sales in a given market earned by a company (Gale, 2014). Pete Rosen, the president of Rentall Trucks, got concerned about the situation and decided to conduct research to determine future projections of the firm and the market. His concerns were that his firm would be incapable of maintaining 50% of the market in the future. The case has provided a clear set of facts on the current scenario facing the firms. These facts were established after a research company hired by Pete Rosen conducted an analysis on truck rental customers. The sample size was 1000 potential and existing customers. Of these, 800 were Rentall customers, while 60 and 140 were Rentran and National customers respectively. After one month, the sample was analyzed again. It was found that 200 Rentall customers switched to Rentran, 80 switched to National, 3 Rentran customers switched to rental, six switched to National, and finally, 14 National customers switched to Rentall and 35 to Rentran (Render, Stair, R. Hanna, & Hale 2015). An in-depth review of the essential issues is offered by these facts.
Solution
In addressing the main points outlined in the case, various recommendations are needed to solve the problem statement. According to Jim Fox, Rentall Trucks could do nothing to correct the problem of the costly contract omission by the law firm Folley, Smith, and Christensen. The only applicable solution would be to formulate and implement effective business strategies. These strategies would provide a framework through which counter measures would be adopted to prevent Rentran’s activities and market advancements. The policies adopted would be to curb Rentran’s ability to lure away both customers and investors from Rentall. Three areas would require to be reviewed and appropriate changes made. These areas are advertising, rental policy, and product line. The issue of rental policies would require that truck rental business is made easier and faster. This would necessitate the implementation of some of the policies used by car rental agencies like Hertz. To attract more customers, changes in the product line would have to include comfortable and easy to drive trucks, trucks fitted with automatic transmission, air conditioners, quality radio and stereo tape systems, comfortable bucket seats and cruise control (Render, Stair, Hanna, & Hale 2015). Zenetti and Klapper (2016), state that advertising promotes sales by influencing the behavior of potential customers. This showed that additional advertising was required to be aggressive and immediate. A good company had to be contracted and advertising in journals and the television increased. Implementation of these strategies would give Rentall Trucks a chance of maintaining their close to 80% market share. Changes in the advertising strategy would ensure that a bigger target audience is reached and their market behavior influenced to opt for Rentall Truck products and services. This would increase the number of new customers. On the other hand, changes in the product line and rental policies would help maintain a loyal customer base for the firm.
Justification
The recommended course of action is justifiable since policy makers and scholars alike agree to the effectiveness of the stated strategies. The above recommendations have been applied elsewhere and hence, are tried and tested. The justification for the recommendations is that:
1.) Advertising is a proven strategy to help convince more customers to trust the products and services being offered by a company as explained by Buil, Chernatony, & Martínez, (2013). Rentall Trucks is justified in increasing advertising, especially in television and journals.
2.) Changing a product line constitutes to rebranding. The strategy of rebranding helps a company in that it proves to doubtful customers that the brand has reinvented itself and will, therefore, be in a position to satisfy their tastes and preferences more that before (Todor, 2014). To Rentall Trucks, changes in the product line will ensure that those customers who had switched to their rivals are more convinced about its service and product quality and will be motivated to switch back.
3.) Reviewing of rental policies will revolutionize the whole industry. This is due to the fact that if Rentall are successful in simplifying the processes involved in renting trucks, they will set a standard to be followed by all competitors. Setting standards will make them stand out as market leaders and will therefore have that largest market share.
Summary
This case study provided a case scenario of Rentall Truck Company seeking to gain a competitive advantage over its competitors, Rentran and National. The companies were competing for the market share in the truck renting industry. Rentall faced stiff competition from Rentran, a company owned by its former founder. They found themselves in this situation due to a blunder of omission of an important clause in its contacts. To retain its customers, Rentall recommended changes in its advertising strategies, product line and rental policies. The strategies were justifiable through since they were tried and tested. The justification was further improved by the market research conducted by Meyers Marketing Research firm.
Calculations
- What will the market shares be in one month if these changes are made? If no changes are made
Rentall – π1 = 0.8
Rentran – π2 = 0.06
National Rentals – π1 = 0.14
Tree diagram (Month 1 with no change)
0.65 0.25 0.1
P = 0.05 0.85 0.1
0.65 0.25 0.1
π (1) = π (0)P
0.65 0.25 0.1
= (0.8, 0.06, 0.14) 0.05 0.85 0.1
0.65 0.25 0.1
= 0.52+0.003+0.091, 0.2+0.051+0.035, 0.08+0.006+0.014
= 0.6, 0.29, 0.1
= 60% 29% 10%
Market share without the changes will be:
60% for Rentall
29% for Rentran
10% for National Rentals
Tree diagram (Month 1 with change)
0.85 0.125 0.025
P = 0.15 0.75 0.1
0.2 0.25 0.55
π (1) = π (0)P
0.85 0.125 0.025
= (0.8, 0.06, 0.14) 0.15 0.75 0.1
0.2 0.25 0.55
= 0.68+0.009+0.028, 0.1+0.045+0.035, 0.02+0.014+0.077
0.72, 0.18, 0.1
72%. 18%, 10%
Market share without the changes will be:
72% for Rentall
18% for Rentran
10% for National Rentals
This shows that Rentall will have a larger market share if the actions suggested are implemented. Rentall’s market share will remain high while Rentran will grow at a slower rate. National Rental’s market share remains the same.
- What will the market share be in three months with the changes?
π (n) = π (0)Pn
π (3) = π (0)P3
0.61 0.002 0.00002 3
(0.8, 0.06, 0.14) 0.003 0.42 0.001
0.008 0.27 0.17
= 0.6, 0.3, 0.1
Market share after 3 months will be:
60% for Rentall
30% for Rentran
10% for National Rentals
- If market share remains the same, what market share will Rentall have in the long-run?Ho does this compare to if the changes were not made.
If the market conditions remain the same, the market share for Rentall in the long-run would keep reducing, though at a lower magnitude than if Rentall did not make the changes. The new market shares are shown in the tables below. The market share moves from 80% to 72% in month 1 to 66 % in month 2, 61% in month 3, 58% in month 4 and 56% in month 5. If the changes were not made, Rentall’s market share would have deteriorated quite fact, moving from 80% to 61% in month 1, 48% in month 2, 40% in month 3, 35% in month 4 and 32% in month 5. This would be a significant loss to Rentran, which would have 58% of the market by the fifth month. Therefore, it can be concluded that the changes will reduce the rate at which the company loses its market share to Rentran. However, Rentall still continues to lose its market share and better strategies are required to enhance competitiveness.
| After Change (Excel calculation) | ||||||
| Probabilities | Current Market share | |||||
| 0.85 | 0.15 | 0.2 | 0.8 | |||
| 0.125 | 0.75 | 0.25 | 0.06 | |||
| 0.025 | 0.1 | 0.55 | 0.14 | |||
|
Market share |
||||||
| Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | ||
| Rentall | 0.72 | 0.66 | 0.61 | 0.58 | 0.56 | |
| Rentran | 0.18 | 0.25 | 0.29 | 0.32 | 0.34 | |
| National | 0.10 | 0.09 | 0.09 | 0.10 | 0.10 | |
| Before Change (Excel calculation) | ||||||
| Probabilities | Current Market share | |||||
| 0.65 | 0.05 | 0.65 | 0.8 | |||
| 0.25 | 0.85 | 0.25 | 0.06 | |||
| 0.1 | 0.1 | 0.1 | 0.14 | |||
|
Market share |
||||||
| Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | ||
| Rentall | 0.61 | 0.48 | 0.40 | 0.35 | 0.32 | |
| Rentran | 0.29 | 0.42 | 0.50 | 0.55 | 0.58 | |
| National | 0.10 | 0.10 | 0.10 | 0.10 | 0.10 | |
Reference
Buil, I., De Chernatony, L., & Martínez, E. (2013). Examining the role of advertising and sales promotions in brand equity creation. Journal of Business Research, 66(1), 115-122.
Gale, . (2014). Market share reporter. Place of publication not identified: Gale, Cengage Learning. management. (12th ed.). Upper Saddle River, NJ: Pearson.
Rego, L. L., Morgan, N. A., & Fornell, C. (2013). Reexamining the market share–customer satisfaction relationship. Journal of Marketing, 77(5), 1-20.
Render, B., Stair, R. M., Hanna, M. E. & Hale T. S. (2015). Quantitative analysis for Todor, R. D. (2014). The importance of branding and rebranding for strategic marketing. Bulletin of the Transilvania University of Brasov. Economic Sciences. Series V, 7(2), 59.
Zenetti, G., & Klapper, D. (2016). Advertising Effects Under Consumer Heterogeneity–The Moderating Role of Brand Experience, Advertising Recall and Attitude. Journal of Retailing, 92(3), 352-372.
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