Fleet News

Why flexible fleets are best in Europe

Professor Peter Cooke, of Nottingham Business School, questions the wisdom of those companies that operate an inflexible pan-European leasing strategy.

There has been much talk in the last few years about the importance of operating a consistent pan-European fleet policy with the same fleet structure in every market. However, is there any real advantage to introducing and implementing an inflexible policy?

Just who is the organisation trying to impress with the same vehicles in every market, the same fleet hierarchy?

In my more cynical moods I would claim it is a policy an out-of-touch chief executive or chairman might follow to cover up other inadequacies.

A consistent fleet policy means far more than being consistent across Europe – it means achieving the best value for the organisation and for the shareholders through fleet cost minimisation. That condition is rarely, if ever, achieved through a rigid common policy.

In this article I want to examine some of the more important strategy issues and their implications for the business. A well-planned pan European fleet policy takes in local and international issues.

Asking a question like 'what do we need to do to achieve the best value across the region?' is as important as asking 'how do we provide that vehicle capacity to offer the best provision and cost profile for the individual company and the total for the organisation?' It is quite rare to have a totally consistent method of finance across the region.

The first questions to be resolved before any decisions are made about vehicle finance are those relating to the organisation's operations across the region.

One may well warn against seeking too much consistency. It's important to beware of creating additional cost, rather than creating added value when seeking a pan-European provision and finance strategy for the fleet.

Such a rule is ignored by far too many organisations. Merely because one business provision model works in the home market or in the largest markets does not necessarily mean that it will work across the region.

A field sales manager in one market may have responsibility for more sales than a managing director in another country. There could be implications in the type of car to be provided.

The idea of creating a common corporate image across the region, and the use of a company car policy to assist in such action, may be a great idea from the ivory tower of the head office, but on the ground it may provide endless headaches.

What are the comparative cars provided by direct competition? What do equivalent local companies offer? Would the company finances be able to stand it? Perhaps even more important, is there any need to offer consistency? Are clients the same in different markets, and do they expect to deal with consistent suppliers, or are they more interested in achieving the best possible price for the product or service they buy from you?

Consistency has its price. Is the organisation – or the client - willing to pay for that consistency, or is it a low-key factor when total cost is the key issue?

Perhaps it is more important to be business-like rather than putting over a global corporate image in the current climate, and that may well need to be reflected in the provision of business cars.

The critical issue is perhaps one of balancing the cars provided against local market and company demand. The questions in Figure 1 (see end) may be worthwhile asking before moving into questions of finance.

It is important that the organisation spends some time to get its thinking, policies and strategies right. There is no such thing as 'one policy fits all' – every organisation has its own particular requirements that need to be resolved.

It's important not to allow delusions of grandeur to take over with a pan-European policy, setting the fleet at the highest level of current car provision rather than a consistent, equitable one to match local needs with company image and driver requirements. It is a difficult balancing act.

Perhaps the phrase 'pan-European leasing' is prejudging the situation. While it may be administratively convenient for the organisation, or at least central management, to use a single leasing company for the whole of Europe, there are a number of other issues to be reviewed and resolved.

It is important that for each national company a proper analysis is made regarding vehicle provision; a number of key questions need to be answered – consider those questions shown in Figure 2.

Resolution of those basic questions should provide the fleet operator with an indication of whether the business might use a single supplier or several suppliers for its fleet requirements – and therefore the fleet finance requirements.

I cannot stress too much the importance of measuring vehicle provision offering against local competition and prime competitors.

Those requirements may vary from one market to the next but, unless there is some compelling reason why local requirements should be overruled, the local needs should take precedent.

The third issue to be reviewed and resolved is as important as the others - the choice of vehicle suppliers - and the services that will be provided.

Many commentators would suggest that while it is administratively convenient to use a single provider for the EC markets, one has to challenge the ability of a single fleet services provider to be able to supply a consistent level of service across the region.

Thus, as shown in Figure 3, there may be a number of critical issues that need to be considered in choosing a single, or consortium of providers, to supply vehicles across the region. Equally important, the choice of local method of provision should not operate to any preconceived ideas or rules, but should be determined in line with local needs as noted previously.

Selection of a pan-European provider is a delicate business if the organisation decides to take that route.

The services offered must be consistent; equally, the quality has to be reflected in requirements of both larger and smaller client operations in the individual markets. Any planned acquisition and provision strategy must be linked to local market needs and underpinned by a policy of cost minimisation.

There is always a temptation when an organisation operates in a number of markets to look at using a common method of provision and a single supplier. However, I would always caution moving ahead without looking at the question from all sides.

What are the strategic benefits for the organisation if it is to utilise a single provider – whether in terms of lower costs, consistent standards or administrative benefits? It's absolutely vital to look at the position as objectively as possible.

  • Professor Cooke is working on a new Management & Strategy Guide to the Issues of pan European Business Vehicle Fleet Management. Email: peter.cooke@ntu.ac.uk

    Figure 1

    Critical questions about pan-European business car provision:

  • Does the organisation plan to provide cars across Europe?
  • Is the fleet to be consistent across Europe – or set against local competition?
  • Which organisations are considered to be local competition?
  • Do those local competitors operate across Europe?
  • Is there to be a single manufacturers/badge policy – or a local market policy for Europe?

    Figure 2

  • Pan-European vehicle provision:

  • In what markets will vehicles be required?
  • Does the organisation seek to use a single provider?
  • Will vehicle requirements be tailored to local company/needs/markets?
  • What are the local finance requirements/balance sheet status?
  • Who runs/would manage the local fleet?
  • What is the local market philosophy towards fleet finance?

    Figure 3

  • Does the potential provider(s) operate in all relevant markets?
  • If not, do the principal prospects have acceptable local associates?
  • Are the potential providers able to offer a full range of services?
  • Are the rates offered by 1-2 suppliers competitive with local service buyer provision?
  • Is there an overriding pan-European discount?
  • How consistent is the potential providers service offering across the region?

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