© London Business School, October 2003. This teaching note was written by Prof. Michael G.Jacobides, with the input of Prof. Pascal Courty and Taman Powell. The cases and this teaching noteare intended for teaching purposes only and are not meant to represent either adept or inept handlingof an administrative situation.

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Case Overview

This case describes easyCar’s entry into the European car rental market and iscomprised of four parts and one supplementary handout:

Part A

This part of the case focuses on industry and competitor analysis and the relevance ofeasyGroup’s capabilities to the market. The car rental market is described for 1998-1999 (prior to the entry of easyCar) and easyGroup’s history is reviewed.

Part B

This part of the case focuses on the entry of easyCar into the market and it’s chosenbusiness model. The case highlights the rapid expansion, apparent success, and leverageof the “easy” franchise.

Part C

This part of the case highlights the issues that arose from the initial business model andapproach to expansion.

Part D

This part of the case highlights the modifications to the business model.

Additional Handout: Enterprise Rent-a-Car

This handout provides an overview of Enterprise Cars. Enterprise Cars is an example ofa company in the US that identified a market segment that was not being served by theexisting car rental companies. It can be used as a complement of the easyCar case,ideally before the easyCar case itself is discussed; it reinforces the learning and providesan additional, self-contained case.

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Teaching Objectives, Audience and Case Layout

The case is appropriate for undergraduate, MBA and, especially, executive-levelcourses related to strategy, general management, industry analysis, value innovation,entrepreneurship, and international expansion.

The case can be used in a number of ways; it is a canvas, which allows for most of therelevant strategic management issues and challenges to be brought to the fore. It canalso be used as an integrator of the major strategic frameworks. However, it can also beused selectively, as the instructor can focus on only some of the issues, withoutweakening the class discussion or the analysis. In terms of time, we have spent as littleas one and a half hours, and as much as almost two full days on the basis of thisevidence. (The latter was in an executive context, where exercises on easyCar werecomplemented with exercises on the participants’ companies.)

While the case is accessible to younger students and more, it is particularly well-suitedto the MBA level and especially executive audiences. The industry is clear enough forexecutives to understand, yet there are several non-obvious subtleties. The multi-partformat has also worked well, and enhances the dramatic tensions in the classroom.

Issues – Areas Covered

There are several topics that can fruitfully be explored through this case:

• Industry analysis, especially focusing on market definition and strategic groups

• Creation of new market space and strategic innovation

• Business Model analysis; complementarity and fit between choices

• Resources and capabilities: Links between business and corporate strategy

• Disruptive innovations; new business model conception and evaluation

• Growth strategies and strategic staircase

It can also be used to illustrate some additional themes

• Implementation, strategy process and punctuated models of change

• Emergent strategy; strategic adaptation

• Timing and financial objectives (exit strategy) as they bear on business strategy

The amount of time and emphasis that is placed on each of these topics depends on theway the case is used, as well as the preferences and skills of the instructor. In this note,we first identify the types of assignment questions that are associated with each part ofthe case. We then explore the themes that this case highlights, from which the instructorcan pick and choose.

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Assignment Questions

Part A

1. Is the European car rental market attractive for a new entrant?

2. If so, is it an attractive opportunity for easyGroup?

3. If so, what should the business model be?

Part B

1. Will the easyCar business model work?

2. What indicators should be used to judge whether the business is a success or not?

3. How does easyCar deliver such low prices?

4. Is easyCar growing too rapidly?

5. Is easyGroup diversifying too much?

6. Will easyCar be a success? Why?

Part C

1. What has gone wrong?

2. What should easyCar do?

Part D

1. Do the changes to the business model make sense?

2. Will easyCar be successful now?

3. If so, what is this success due to and will it last?

4. Has easyCar learnt from its past?

5. How should easyCar respond to potential sluggish margins or growth?

Analysis of Areas Covered by the Case

As discussed, there are several topics this case can cover. We hereby briefly provide ourviews on how to analyze the most important ones. This list also reflects our view on thesequencing of topics and themes.

Industry analysis, especially focusing on market definition

This case is best used to explain how to use industry analysis and the five forces incontext, rather than just introduce or vindicate, e.g. the 5-forces.

We propose that the instructor first perform an industry analysis, e.g. using Porter’s fiveforces, or possibly models of competitive interaction. In terms of industry analysis andanalysis of competitive interaction, a few things should be noted. First, the toughcompetition in the airport market (in the US) and in the airport or even the local market(in different parts of Europe) relates to the lack of true differentiation and the similarityof competitors. The instructor may want to use the inter-national heterogeneity toexplore why different national markets appear to have different prospects; differences inboth buyer power and willingness-to-pay (as well as substitutes) between the differentnational markets should be pointed out. Next, the importance of sites and the risks of thesite-holders to dent the profitability of rent-a-car companies could be identified. But,

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perhaps more important, the ownership of car rental agencies by some of their keysuppliers, and the fact that they are used as showcases or outlets for the cars ofparticular car manufacturers should be pointed out. The reason is that this affects pricingand competitive dynamics; the industry may be excessively competitive, as there areother interests at play, not only optimizing on the margins of the rental bit. For instance,the creation of a market for used cars (six months out, after they are used by car rentals)could be seen as yet another distribution channel for car manufacturers. This just meansthat the industry can become “irrationally” competitive, as it is subsidized.

Having performed the overall industry analysis, the instructor may want to ask thegeneral question, “is this a good industry”? This is an obviously misleading question, asthere is significant heterogeneity in this industry. The instructor can use the technicaldetail of the case to provide an analysis of the dynamics of the market, and also identifythat there are different strategic groups within Europe, which are differentially liable tothe forces in the industry. For the economics-minded faculty, this is the time to stressthat a strategic group requires a finer description. The faculty might then suggest that:(1) Naïve description of a product is not sufficient to identify a market. (2) Marketidentification involves consumer, product characteristics and business model. (3)Market identification is a key strategic decision. (4) There might be multiple strategicgroups within a given market that are separated by mobility barriers.

This analysis can benefit from the Enterprise add-on to this case. The Enterprise story,which is self-evident and as such not repeated in this teaching note, helps reinforcethese points. Specifically, we observe that Enterprise has managed to be successful bytargeting a different part of the market, with different consumers, who lead to a differentmarket and business model; and this has led to the other “airport 7” not being realcompetition. The same comparison between the US players and Enterprise can now bemade between the European key players and Enterprise; and even between some of theparts of the European market.

In a more economics-geared version of the case, this analysis can be followed by adiscussion of what is a market, of elasticities of substitution between market and non-market participants, etc. (See, e.g. Geroski, 1998) Another framing is to argue thatEnterprise is a cases of a new player evading the straightjacket of a tough industry, andappealed to a different set of potential buyers, creating their own strategic group.

Recapping the basics: Strategy as a set of choices on who, what, and how.

A related teaching strategy is for the instructor to suggest that industry analysis can be agood starting point, but that it may also be misleading as it downplays the ability ofsuccessful companies and strategies to defy the problems of their context. Rather thanbuild on strategic groups, the instructor may want to introduce, or remind, a basicstrategic framework which we have found most useful – Costas Markides’s portrayal ofstrategy as a set of choices on the “who”, “what” and “how”. On the board, theinstructor can identify the major choices of the US incumbents, and then show howEnterprise differs. Students will soon realize that there are different customers, i.e.who’s (replacement & discretionary versus business), different products, i.e. what’s(experience versus value for money and pick-up), and different organization, i.e. how’s(service driven versus cost effective; pull vs push). The point is that Enterprise does nothave to suffer the difficult fate of the other participants as it has created a new strategy,a new market or niche, wherein it is protected. So there is hope even in tough industries!

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This can set the stage for the two basic questions at the end of this part of thediscussion: (1) Should a potential entrant replicate the Enterprise model in Europe?Should they do something different? (2) Should easyGroup in particular enter? If so,why, and how? This should lead to a lively discussion. The first question highlights thepromise from creating a new market space and strategically innovating; the secondhelps consider the role of resources and capabilities.

Creation of new market space / value or strategic innovation

As the instructor describes Enterprise as an entrant who managed to avoid the pressuresof a tough industry, he / she can introduce the “new market space” framework by Kimand Mauborgne (1997), and suggest that each of the new value propositions representeda different, new set of attributes that made the consumers happy, by drawing thecorresponding new value curves. Alternatively, one can use Markides’s (1999)framework and suggest that the ability to succeed requires a new set of who, what andhows- not necessarily any new technology, but a new, consistent strategy.

The discussion will be made interesting once we move from the acknowledgment of thefact that strategic innovation / new market spaces are important, to the concreteevaluation of new ideas. Having discussed Enterprise, but not yet covered easyCar hasthe benefit of using the learning from one post-mortem onto another case. Thus, theinstructor can ask whether easyCar or any other firm should replicate the Enterprisemodel in Europe. The answer to that is likely to be no, and the reason is that the benefitsof enterprise (geographical spread, value of branding and national coverage, ability tosave on cheaper suburban locations, replacement market, strong need for a car) are notas relevant in densely populated Europe, where public transport is developed, as in theUS. This should lead the instructor to suggest that strategic analysis can uncover whatdrives the benefit of a particular model, and consider whether it is relevant in a new /different context.

Having made that point, the instructor can ask, possibly as a group exercise, for aspecific plan (who/what/how) of what an entrant, or easyGroup should do. He / she canalso ask why easyGroup in particular would be well suited to develop that project.

Resources and capabilities: Links between business and corporate strategy

The instructor may want to have student groups present their proposals on whateasyGroup should do, and how easyCar should look, and discussion on the merits andshortcomings of these proposed plans can follow. The instructor can then distribute case(B) and let the students read it in class (alternatively, case B can follow the discussionof resources & capabilities).

The instructor can then ask: Why should easyGroup in particular undertake thatventure? The answer is, obviously, because it has some key resources and capabilitiesthat are relevant to the venture. Students will be quick to point out the brand; and theability to use dynamic pricing aggressively, and the resulting asset sweating. This willbe a good time to discuss the difference between resources and capabilities, as well asthe exportability of resources. A discussion can be had on the links between businessand corporate strategy, as we consider how a corporation such as easyGroup takesresources and capabilities from one market and applies them onto another. There isample scope of discussing if the capabilities and resources are indeed relevant to thenew setting, if they are transferable, etc. Issues of applicability, replication, and value(as well as imitability) can be brought up.

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Business Model analysis and evaluation; complementarity and fit between choices

If case (B) had not been handed out, now would be a good time to give it. The instructorcan now ask, how does easyCar work? Do you think it can be a success? Won’t it befollowed immediately? The point here is to consider the role of fit and interactionbetween the different parts of the model, as well as perform a business model analysis.The instructor should explain that each venture, each business model, has a logic; a wayof making money, and that these can differ markedly from each other, even in the sameindustry. (Useful reading materials on this point can be found in Slywottzy’s ProfitZone, or the HBS teaching note Business Model Analysis for the Entrepreneur,#333333). The discussion in class should focus on articulating the structure of thebusiness plan. The discussion can start with Enterprise, and then move to easyCar,where students will probably converge to saying it is a coherent business model, albeit arisky one (however, more careful analysis will reveal flaws, as well as the need for verylarge scale, fast!)

The instructor can then ask whether Enterprise was a sustainable model as well. Toanswer that, we have to consider entry and mobility barriers. The evidence is clear- ithas been sustainable, and an important issue is that the fit between different choices, inaddition to critical resources, can act as a potent barrier. The activity system ofEnterprise can be put on the board, and the students will be fairly quick to identify thatthere are strong complementarities, especially between the pick-up strategy and the lackof advertising; or between the push, rather than pull philosophy and the HR used; andthat as such it is extremely hard for another company to emulate Enterprise withoutappropriately and fully cloning it, and that efforts to undertake a piecemeal imitationmay well backfire. The same argument might be made by some students for easyCar,and the students should be asked to take a view- hopefully, there will be supporters aswell as skeptics.

At this point, it would be useful (and fun!) for the instructor to create some tensions inthe class, by asking the nay-sayers to explain why they do not believe that easyCar willwork and even if it does, if it won’t be sustained. The point there is to show thedifference between a discussion based on beliefs and aesthetics (“I don’t buy this- it willnever fly”) to one which is based on an argumentation on the plausibility and relevanceof the particular plan in the particular set of countries chosen. By pushing the studentsto articulate what they think may not work, the instructor can get them to identify somecritical issues that might make or break the plan; the underlying assumptions; as well assome weaknesses, which should start becoming evident – and which are described incase (C). After the debate on whether easyCar (B) can or can’t work, the instructorshould distribute case (C).

The question which now should be answered is, “what went wrong? And why?” This opensup a very important part of the case, as it allows us to dig more deeply into the evaluationand assessment of the business plan, with the benefit, of course of hindsight. It’s also fun toteach, since often students (and seasoned executives alike) have not managed to identify thecritical issues that have brought about the problems. Case (C), when juxtaposed with (B),helps bring up several shortcomings, but some are not so readily revealed. Our own analysissuggests that the problem were due to the following: (1) the benefits as a result of moreaggressive asset sweating were very small; the differential is not as big as in airlines, becauseboth the asset base is a smaller part of the cost, and because the ability to improve is not asbig. More broadly, the idea that sweeping savings could be made did not take into account

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the actual cost structure of the industry. The last exhibit portrays this, comparing the relativeadvantages of the traditional players to the low-cost players in airlines and cars, and showsthat the cost benefits were not that humongous, which then means that prices cannot be aslow, which then means smaller scale. (2) Mistakes were made in the identification of thecustomer base: the demand was not where Stelios expected it to be; this will vindicate thestudents who had suggested local markets. (3) Stelios was lulled by their presence in theeasyJet airports, and did not calculate the excessive cost of running ventures in disparatelocations that required extensive travel, time, and costs for the executives who were puttingup new locations all over western Europe. (4) The venture was quite scale-intensive. Thecore of the benefits came from an extremely centralized management of stock and prices(contrast this with the autonomy of the Enterprise branches). Also, this was a fully-ownedoperation, and the lots in any airport were not cheap! (5) The growth strategy had not beenthought of. A good business model should not only have an idea of a statically plausiblestory, but also of how it would grow to support its business objectives (a theme that can befurther developed, as we suggest below).

These, and other factors the instructor may want to bring up, highlight the need for arobust analysis of a business model; it is not inappropriate to point out that much of theboom and bust of the internet ventures was due to an utter lack of critical eye andsophistication on the analysis of business models supported by banks and investorsalike. A discussion can be had, especially with the more senior audiences, on whetherthere would be a way to identify the problems ex ante, so that strategy can haveprospective value. The answer is a guarded yes, and the case provides a good templatefor some strategic soul-searching.

New business model development, cont’d; disruptive innovation; mental models

Next, the instructor can ask the students to go, once again, in Stelios’s shoes, and askwhat they would do at that point. The discussion can turn on process as well as content,depending on the teaching objectives. In terms of process, the question is what Steliosshould do; the discussion could be more open-ended with the senior execs, and issues ofturn-around management and dealing with crises can be brought up. The point thatStelios simply went there, and tried to figure things out for himself, as discussed in (D),is a refreshing note to which the instructor can return, once (D) is distributed.Leadership issues (and the problems of the overly mercurial figure running the show)can also be brought to bear.

In terms of content, before giving out (D), we have found it useful to push the studentsto think creatively again. The question here is what they can do to provide yet anothertwist that will enable easyCar to be successful. It’s worth spending time “guessing”what case (D) suggests. Some leading questions, such as “what are the impediments tosuccess”? or “what are the cost drivers in the business”? or “what other statistics shouldwe look at”? (hint- cars being washed, etc) or “how can they better leverage dynamicpricing?” (hint- by charging more if you bring it back earlier than agreed), should leadto an approximation of what case (D) describes. Then, the instructor can give out (D) tothe students.

This would provide a good opportunity to introduce two additional elements, if theyhave not been discussed to date. The first is creativity on the individual level (mentalmodels); the second is the problem with implementing within an organization new ideasthat individuals have come up with, but which are inconsistent with existing practice orexisting resource allocation processes. The former is well presented by Markides

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(1999); the latter by Christensen (1997). The instructor can ask, “what constrains theability of all of us to come up with new ideas?” or “why did it take such a long time tocome up with a strategic innovation in the European R-A-C market”? The answer is thatthe existing structure of business creates mental models, the perceptual filters that areboth useful and constraining in our ability to see and take advantage of newopportunities. Even Stelios had his own mental model of what the situation was, whatwas the correct analogy (low-cost airlines), what people wanted (standard product withsomething to make them feel safe) and his pre-conception and frames did not allow himto use some of the available information. This can be a minor point, or turned into amore substantive discussion, perhaps touching on cognitive frames, perceptual filtersetc as they affect strategy.

The instructor may also want to take the discussion on the organizational level, bysuggesting that even if an individual comes up with a great new idea, it is often hard foran (established) firm to adopt it. This may be due to vested interests and the division ofpower in a firm; but it may also be due to culture, or, as Christensen points out, to theresource allocation process. The organizational drivers of inertia become clearer whenone considers that incumbents in the US did not respond, for more than 30 years, to thethreat of Enterprise, allowing Enterprise to become the biggest RAC firm in thecountry! This fact could spark a discussion on how and why this happened; in additionto the fit arguments (which work on the level of individual branches), the disruptivetechnology (or, more broadly, disruptive strategy) concept can be brought in. Theinstructor can point out that the new venture was inconsistent with the existing businessmodel. However, one should be quick to point out that the dramatic growth ofEnterprise is also due to the fact that its own sub-market developed very fast as afunction of demographics (more couples would need two cars, with dual-career couples,so that replacement rentals sky-rocketed), changes in related industries (insurers anddealers competing on providing free car rental in the case of a breakdown or accident),etc. Bringing the discussion back to easyCar, it can be pointed out that easyCar alsoprovided a disruption. While it was not as good as the other RAC companies, it wasgood enough to take part of the market and be based on different principles.

The further point here, though, is that while established players may not be quick torespond, others may jump in, and not allow easyCar to reap the fruits of its disruption.So, the question becomes, will other firms stay still? Which will and which will not?Who can emulate or disrupt easyCar itself?

Strategic staircase; planning for growth

After the analysis of what worked and what did not for easyCar, and ideally just before thediscussion on mental models and disruption, one theme suggested earlier can be highlightedmore: A venture, new or old, should think of the different steps in needs to take to reach itsobjectives, and its strategic staircase should be consistent with the business model. This isclear from case (C), and the exhibits of (B), even though it is not explicitly articulated in thetext. Students can be pushed to discover it: The problem is that easyCar had large fixed costs(from central administration) and it had to grow faster to eventually be able to spread thesefixed cost across enough volume. Additionally, the marginal cost of each additional locationwas high and this dramatically slowed down both short run profitability and growth potential.More to the point, the regulatory barriers in getting permissions for new locations wouldhave easily wiped out any cash the company got, were it not for the support of theeasyGroup; so their neglect of thinking about the dynamics of growth could have caused

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them their existence. The company should have thought about the speed with which itneeded to grow to reach profitability, and the steps it could have taken. This becomes evenclearer later, through case (D). easyCar’s new, potentially successful business formula isbased on the concentric growth model as well as on the focus on locations with a very smallmarginal cost, and with no regulatory headaches to delay them (as they are parts of parkinglots); that is, they have changed not only their business model, but also they have integratedinto it a growth model, a strategic staircase which will help them move forward. The changesthey introduced after the case was written, which was the strategy of using franchises tocomplement their growth, further reinforces this important, and often neglected point.

Strategic adaptation; Punctuated models of change

In addition to considering all the cool new things that easyCar has introduced, theinstructor should also spend some time on the elements which were part of the initialconception of the easyCar venture, but which were subsequently changed. One of themost important ones is the change of car policy, from one car to several different cars.This is, ex post, a no brainer. The benefits from only one car are very small, so that theexperience (frame, mental model) from the airline business was not really transferable.Also, the costs of the Mercedes A class on the road were quite high. (We suspect thatStelios had got a very favourable deal on them, as he agreed with Mercedes when the Aclass had troubles; but we did not have access to pricing details). Also, the choice of justone car was not fully consistent with the customer base (who) and the service (what).The additional justification, that is, that, as it was an internet venture, a hallmark of“realness” such as a Mercedes, was useful, was also no longer valid. This is even morestriking when we consider that Stelios was in a unique position to implement his“contestable supply” policy, i.e. make the rounds with car manufacturers and pit theiroffers against each other, snatching the lowest cost lease. This was due to the fact hewas entirely unconstrained from trying to support one type of cars. But this onlydawned on them late. As he himself notes, “he believed his own BS”. This is animportant issue to note, and can be discussed in class- that is, when and how one idea,which may have been proven wrong, is changed; when we do realize that a plan orstrategy was misplaced.

At this point, the instructor can observe that while information on how things evolvecome on a continuous basis, adaptation to change and to the information cominghappens in discrete episodes, validating the models of punctuated change. The instructorcan point out that once changes were introduced, they were introduced together at anumber of different levels. This can be justified not only on the basis of the previousanalysis of fit (and hence the need to undergo systemic, rather than piecemealadaptation) but also of the organizational trauma that accompanies change.

In terms of managing the process, the fact that Stelios spent a week in an easyCarlocation, trying to figure out how to improve and change the format (change the recipeof business, as it were) could be the basis of discussion of both strategic adaptation andof leadership. The discussion about leadership can also turn to a subtle, but importantdifference between the two strategic innovators, easyCar and Enterprise.Organizationally, Enterprise is decentralized; initiatives for strategic adaptation, or thedetails of business design are left to the branch managers. This means that a smootherpath of learning happens, as new ideas can be transferred to the centre, and competitionsbetween branches mean that not only a thousand flowers are left to bloom, but also thatthere is a real competition for the best flower. In complete contrast, easyCar is a very

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centralized company, which is dominated by the presence of its founder. This cuts bothways, as any innovation is centrally mandated and implemented; it’s a classical case oftop-down, for any veneer that is used, and not even the CEO has real autonomy. (TheeasyCar CEO and CFO resigned the summer of 2003, rumours have it because of theirlimited ability to set policy, as Stelios had solid reigns over the venture). This meansthat organizational learning is little more than the learning of the Chairman, andpossibly of the senior executive team. Since the benefit of easyCar lies on somecentralized elements (brand, ways of managing demand, etc), this is to be expected; italso affords easyCar very low costs in terms of HR, where it is a ruthlessly low-costplayer. However, this does affect the dynamics of strategic adaptation. So the instructorcan point to the link between the organizational logic and the dynamics of strategicadaptation, and possibly have a discussion of how organization design affects strategy.

Implementation dynamics & emergent strategies

This case can also serve to highlight the role of strategy as an emergent process, as wellas of the ways to bring together a rational analysis and a more chaotic organizationalapproach. The fact that the discussion follows a strategy as it evolves is in itself a potentway of instilling to the students both the usefulness of a structured strategic analysis,and the importance of non-rational factors, as well as of the fact that no successfulventure or company ever had it right from the beginning. To wit, while we are not veryclear about what the business model was in 1998 when they entered, it also appears thatthe easyCar team were not all that clear either. The business model and the strategicplan became clearer over time, and it also adapted as a result of some assumptions beingproved wrong, and some right.

There are several ways of framing this debate. One is to build on Mintzberg’s emergentstrategy discussion; but to do so requires an adaptation of his thesis. easyCar did notrepresent a company which de facto started having another strategy, which divergedfrom its original one. It’s a case of a company that realizes its strategy as it goes; itstarts with a general sense of direction and purpose, and finalizes things, even if in away which may prove mistaken, along the way. As it identifies its mistakes, it changesits strategy, and the sense-making that goes with it, in episodic ways. A crisis is theopportunity to rethink the structure, and the a-ha’s of discovering new ways of addingvalue come on the way. But this is not a random process; Stelios and his team try tokeep some consistency in what they do. They just change their overall direction to betterfit their market, and to adjust for the mistakes in their assumptions. Issues of framingand how that affects the emergence and evolution of strategy can be usefully introducedat this point.

One last related theme is the use of information from the market. The basic question iswhat one should do when the market response is not what is expected. The instructorcould ask the students, e.g. at the end of case (C), what they would do. The two polarextremes, which could be identified as such, are (a) the “powerpoint theorist”syndrome- that is, believing your plan too much, and falling in love with your strategyawaiting that the market will eventually recognize the strategic brilliance of the plan,and as such that problems are only transient; and (b) the “CFO – knee-jerk syndrome”,which suggests that at the slightest deviation from plan, a change is made. Thediscussion should lead to the conclusion that strategic success when we manage to besomewhere in the middle, combining theory and data, intuition and reaction. “Theory”and the strategic framework should be guiding action; but data should be used to update

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assumptions. The joint impact of the two should lead to periodic, and not overly abrupt,changes of strategic direction. Of course, other instructors may want to use their ownframeworks, but either way this case provides a good template for discussion.

Timing and financial objectives (exit strategy) as they bear on business strategy

One last theme, which we have not developed fully in the case (as there were no officialor discloseable data we could use), can be introduced in the discussion. This regards theimportance of the financial context in shaping business strategy, and it also helpsexplain the fundamental differences between Enterprise and easyCar. Enterprise is aprivately held company; growth in and of itself is less important than the sustainabilityof their position. Also, capital is used more sparingly, with a franchise system. easyCar,on the other hand, has the clear intention of going to IPO as fast as possible; it issupported by money from venture capitalists, who are also keen to see it go public. Itsobjective has thus got to be more growth-related, and it is keener to prove the concept(to the financial community and potential investors, even more so than to customers andsuppliers). This changes the priorities, and might explain some of the attributes of notonly the actual business plan, but also the growth trajectory. The instructor may thuswant to consider the significant and usually unexplored links between financial structure(or position within the group, in easyCar’s case) and business strategy.

easyCar: The Road Ahead

One of the nice features of this case is that the jury, so to speak, is still out, and thisaffords the instructor to moderate a discussion on easyCar’s prospects, as they stand incase (D). The discussion can integrate and recap the frameworks we have to assess theviability of the plan, especially in the full-length version of the case. Rather thanproviding our own biases on how to do this, we simply point out a few major issues.First, the question of the speed of growth, and of the ability to cover the significantfixed costs. Second, the danger of new entrants coming in, emulating the clever bits ofthe business design that are integrated in easyCar (D). This hinges on the analysis ofmobility / entry barriers and of the resources and capabilities that easyCar has. Whilebrand is arguably a significant advantage, especially in the UK (where growth has beenthe greatest), some of the other elements of the business design make it feasible for localplayers to come in. In France, for instance, in the fall of 2003, several new players haveemerged on the low-cost segment with exactly the same pricing structure, as suchdynamic pricing is not hard to engineer. Not surprisingly, car parks have startedparticipating in the game, as they are holders of some of the key resources- parkingspace. The possibility of employing a “local saturation” strategy, by keeping newentrants out may work at places; it has effectively been employed by Enterprise in theUS, and which appears to be consistent with the concentric growth model. In this case,speed becomes of the essence, yet doubts are cast on the long-run margins. It is also notsurprising that easyCar, reversing its previous model, is now franchising the easyCaroperations, which will enable it to gain the necessary scale as well as fend off newcompetitors in the making. Finally, it is interesting to note that as of October 2003,plans for the 2004 IPO had been shelved, without much information on what wouldfollow.

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Some final thoughts on teaching this case

The amount of time and emphasis that is placed on each of these topics depends on theway the case is used, as well as the preferences and skills of the instructor. In this note,we laid out in detail all the themes that we found to be important. This case can betaught from an economics-based angle, focusing on market definition and competitiveinteraction / strategic group; from a “mainstream strategy” angle, focusing on strategicinnovation, the strategy process and creating new market spaces; or from anorganizational angle, focusing on how strategy evolves, and how organization structureaffects its development, adaptation and change. Furthermore, the structure of the case,as well as of the learning is modular. Many topics can be left out, without hamperingthe individual point-by-point analysis.

In terms of where to teach the case in the context of a traditional course, there is a fairamount of leeway and options that can be used. If this case is taught toward the end ofthe course, so as to cover issues of “strategy in action”, implementation etc., it caneasily build on what has been analyzed. That is, the industry analysis can be provided ina very few minutes by the instructor, who could refer to “what we know already”; dittofor value curves, strategic innovation, etc. If the case is taught early in a course, it canbe used to illustrate the who-what-how, and the evolution of business models. Andfinally, if a course is taught in the middle of a course it can be reserved to the carefulanalysis of a business model, and an analysis on how it evolves over time. In this case,the instructor can make some links to both the material he / she has covered, and towhat will be covered, to wet the students’ appetite.

Finally, the fact that it is built around four case-lets, which can be handouts given inclass, or reading for the next class, allows for interesting debates, exercises, etc. And weshould not underestimate the fact that students have heard of both easyGroup andStelios- we have found this case to be particularly engaging, with people taking sides.

We hope that you will enjoy teaching it as much as we did!