Easycar.com: Strategic Service System Design (2005)

CASE DESCRIPTION The primary subject matter of this case concerns concepts relating to operations strategy and service system design. Secondary issues examined include the application of production line approaches to service, service quality concepts, and the value of demand management systems to the firm. The case has a difficulty level of four/five. The case was written for an MBA level introductory operations management class. It is also suitable for use in operations strategy or service operations management courses, at either the MBA or senior undergraduate level. The case has been designed to be taught in 75 minutes and is expected to require about two hours of outside preparation. CASE SYNOPSIS This case describes the situation faced by easyCar.com at the start of 2003. EasyCar is the low priced European car rental business founded by easy Jet pioneer Stelios Haji-Ioannou. EasyCar had just reached breakeven in 2002 on sales of £27 million, and had as its goals to reach sales of £100 million and profits of £10 million by the end of fiscal year 2004 in order to position itself for an initial public offering. To do this would require opening new locations at a rate of two per week and expanding its fleet of rental cars from 7000 to 24,000. The case describes the company's processes and facilities as well as its pricing and promotional strategies. It also describes a number of significant changes that the company has made in the last year, including a move to allow rentals for as little as an hour that was designed to position easyCar as a competitor to local taxis, buses, trains and even car ownership. The case also explores several legal challenges the firm faced, including a ruling that threatened one of the core elements of its business model. Students are asked to evaluate easyCar's operations strategy and assess the likelihood that easyCar will be able to achieve its ambitious goals. INSTRUCTORS' NOTES Recommendations for Teaching Approaches The case has been written primarily to illustrate concepts relating to operations strategy and service process design. Specific concepts that the case can be used to illustrate include: How to align a company's operations strategy with its business strategy (i.e., low price market strategy supported by processes, procedures and systems totally focused on achieving low cost), and how to use the concept of order winning criteria to facilitate linking process design decisions to the firm's operations strategy (Hill, 1999). How to apply production line approaches to a service through standardization, the use of technology, and the reduction of the discretionary actions of employees (Levitt, 1972). Why a low cost service does not necessarily imply a low quality service to the consumer. The case provides a good illustration of Parasuraman, Zeithaml and Berry's (1985) service quality model and the notion of service quality relating to customer perceptions compared to customer expectations. How services differ from manufactured products (i.e., intangibility, perishability, heterogeneity and simultaneity), how services differ from each other, and how the characteristics of a given service influence the design of the service delivery process (i.e., relative focus given to physical facilities and policies, employee behaviors and employee judgment). How the customer can be designed into the service delivery process (i.e., so that they are performing a portion of the service delivery). How valuable sophisticated forecasting and demand management systems can be to a firm and how process details can be designed to aid forecasting and capacity planning efforts (e.g., early bookings, no cancellations). The discussion questions that follow were written so that the instructor can simply walk the class through the questions in sequence. This takes the class basically through a discussion of different order winning criteria that a rental car company might choose to compete on (cost, quality, flexibility) and looks at easyCar's processes, policies and procedures with respect to these possible order winning criteria. …