What economies of scale may exist in the rental car industry

Reference no: EM131020798

An article in the Wall Street Journal discussed the purchase of the small Zipcar rental car firm by the much larger Avis. The article predicted that the purchase would be successful because of the "efficiencies gained by putting the two companies together." The article also observed: "On its own, Zipcar is too small to achieve economies of scale."

a. What economies of scale may exist in the rental car industry? Why would a rental car firm that is too small be unable to achieve these economies of scale?

b. What does the article mean by "efficiencies" that might be gained by putting the two companies together?

c. If Avis had already achieved minimum efficient scale before buying Zipcar, would the combined companies still be more efficient than if they operated separately? Briefly explain.

Reference no: EM131020798

Questions Cloud

Why would the marginal costs of offering a mooc be low : An article in the Economist magazine discussing MOOCs observed: "Though marginal costs are low, designing enticing online material is costly." Why would the marginal costs of offering a MOOC be low? What is the relationship between the marginal co..

List the errors in the following graph : List the errors in the following graph. Carefully explain why the curves drawn this way are wrong. In other words, why can't these curves be as they are shown in the graph?

What are diseconomies of scale : What are diseconomies of scale? What is the main reason that a firm eventually encounters diseconomies of scale as it keeps increasing the size of its store or factory?

Why rising costs chipmaking machines lead chipmaking company : In 1966 a new fab cost $14 million. By 1995 the price had risen to $1.5 billion. Today, says Intel, the cost of a leading-edge fab exceeds $6 billion. Why would the rising costs of chipmaking machines lead chipmaking companies, such as Intel, to b..

What economies of scale may exist in the rental car industry : The article predicted that the purchase would be successful because of the "efficiencies gained by putting the two companies together." The article also observed: "On its own, Zipcar is too small to achieve economies of scale." What economies of s..

Illustrate why companies did not merge their news operations : After analyzing the situation, the companies decided that a combined news operation would have higher average costs than either CNN or ABC News had separately. Use a longrun average cost curve graph to illustrate why the companies did not merge th..

Evaluate each of the given function for the value specified : Evaluate each function for the value specified. Write an inequality that shows the various number of hours you can work at each job.

Structure the cost and benefit analysis : TPC is spending Rs.50 to 70 million annually on CSR activities. Are the expenditures sufficient in view of the sustainability? What are the tangible and intangible returns for the company? How would you structure the cost and benefit analysis?

Company with long-term sustainability : TPC is undertaking CSR activities in six thrust areas; are the processes and people involved well-defined for the six thrust areas? How far will these activities help the company with long-term sustainability?

User Account

All Pages