Posted: May 25th, 2022

The Hertz Car Rental company essay paper


The Hertz Car Rental company has been a dominant force in the market for decades. Recently, it has added a new service to its menu of services, arguably, one that was modeled very directly on the services introduced and provided by the Zipcar company. More specifically, Zipcar pioneered the practice in the rental car business of allowing customers to simply unlock and drive its vehicles remotely through the click of a few keys of their smart phones. The Zipcar business model is based on an annual membership fee (currently $60) that entitles customers to select and use the vehicle of their choice without the normal inconvenience of having to pick it up at the company’s office. Its vehicle use fees range between approximately $9.00 per hour to approximately $16.00 per hour. In 2008, Hertz introduced a very similar concept intended to compete directly against Zipcar, initially called “Connect” and since renamed “Hertz on Demand” last year.

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Zipcar currently dominates the market of on-demand rental cars, with approximately half a million paying members of its program. Meanwhile, Hertz is the unquestioned leader in the overall rental car market but currently has fewer than 100,000 paying program members sharing fewer than 700 vehicles deployed in its version of the on-demand system first introduced by Zipcar. Nevertheless, the sheer size and potential market power of Hertz presents a significant threat to Zipcar. In that regard, Hertz has nearly 400,000 vehicles in its rental fleet and has revealed its plan to convert all of them for compatibility with its Hertz on Demand program shortly.

In fact, the magnitude of the potential threat that Hertz represents to Zipcar is demonstrated by the recent increase in the volume of Zipcar stock shares held by short sellers, investors who hope to profit not from the growth and strength of the company but precisely on the expectation that the entire venture will ultimately fail. One important advantage that Zipcar enjoys over Hertz is that Hertz still relies on its established rental office locations where its customers must pick up and drop off their vehicles. The Hertz on Demand program does allow customers to avoid waiting in lines and dealing with customer service desks, but it does not do away with the problem of limited access based on their proximity to Hertz locations. By contrast, customer access to Zipcar vehicles does not depend on their proximity to company offices; that is because Zipcars are parked right on the street for customers to pick up much closer to where they live or work.

Responses to the Problem

Zipcar spent more than a decade developing a creative solution to circumvent the problem of reliance on established office locations in order to allow its customers to pick up their cars much more conveniently. Specifically, Zipcar has invested in securing more than 2,500 parking spots to enable its customers to pick up their cars right from their neighborhoods. Moreover, Zipcar has carefully employed demographic information and what it refers to as “street-level data” that incorporate population density, rate of advanced education, and percentage of car ownership within its target areas. This approach has allowed Zipcar to place its vehicles strategically to maximize their availability to the very consumers who are most likely to utilize its services in every city in which it operates.

Initially, Hertz actually considered making an offer to purchase the entire Zipcar enterprise. Instead, it opted to develop its own version of the same service since there are no proprietary rights associated with merely adapting existing consumer transactions to the smart phone medium. To increase consumer awareness of its Hertz on Demand program, the company is currently preparing an aggressive advertising campaign in major cities such as New York that incorporate online and print newspapers ads, billboards, and even New York City subway platforms. In principle, the Hertz approach is to emphasize the affordability of per-hour rentals instead of traditional rentals by the day and the convenience of making reservations and changes via their cell phones and without customer service representatives involved in the process.

Personal Opinion on the Issues

I have mixed feelings about the competition. On one hand, it is obvious that Hertz has simply copied a business model invented by Zipcar. On the other hand, I understand that just transitioning existing business transactions to the smart phone medium is not subject to any ownership rights and that this is obviously the eventual direction of virtually all conceivable consumer transactions that used to require face-to-face interaction with salesmen or customer service associates.

Therefore, while I recognize Hertz’s legal right to compete in this new market invented by Zipcar, I am simultaneously rooting for Zipcar to prevail in that competition.

The main lesson that I have learned from this case study is that even extremely novel and profitable business ideas may not necessarily provide a long-term benefit. That is simply a function of the fact that, to the extent the ideas on which profits depend are unable to be protected from being copied by competitors, they may have only limited (i.e. short-term) potential value.


The current competition between Hertz and Zipcar is somewhat representative of the inevitable trends in contemporary business, particularly those that emphasize customer service interactions to negotiate services, especially in connection with business models whose provided services do not actually require any direct involvement of company personnel. That trend is already widely evident in transactions such as gasoline purchases employing smart card technology and will likely become standard retail procedures even in ordinary stores quite soon. From a wider perspective, the competition between Hertz and Zipcar also illustrates that new and prosperous business concepts that rely substantially or exclusively on new ideas that cannot be subjected to proprietary ownership may not necessarily continue to reap their initial profitability if those concepts are readily emulated by other companies, especially by competitors with the benefit of tremendous market share dominance within the same industry.


Clothier, M. “In the Race for the Carless, Can Hertz Outrun Zipcar?” Bloomberg

Businessweek, (April 2-8, 2012).

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