Zipcar Case Analysis

KATHMANDU UNIVERSITY SCHOOL OF MANAGEMENT

Zipcar: Refning Refning the Business Model CASE ANALYSIS SUBMITTED BY: Group-8 Anjali Shrestha Mohaed Isti!a" Rush"aSthapit  #a! $ra"ash %padha!a %padha!a

SUBMITTED TO: RUPESH KRISHNA SHRESTHA

Synopsis

Zipcar is a startup-business model organized around the idea of “sharing” car usage by membership organization. The case describe several iteration of Zipcar business model and financial plan. Zipcar faces many strategic decision ahead as they begin to expand their business. The case provoke the reader to analyze the underlying economics and business model of the company and assess its shortcoming and validity as the business actually rolled out. Case Facts Zipcar is a car sharing company started by Robin hase and !anielson. The idea "as conceived in late #$$$ and by %une &''' the company has already started running. The cars "ould provide solution for people "ho did not need cars &()* but "anted the convenience of  a private car occasionally. There are around &'' similar companies "orld"ide that act as potential competitors to Zipcar. +ut the industry is gro"ing at the pace of ,' annually and the market in the / is large and virtually untouched "ith only five to six companies running in the same model. Zipcar provides a service in "hich customers could reserve specific cars at specific locations from the company "ebsite or over telephone services. hase found out #( cities in "hich Zipcar business model could be replicate0 and she decided to start "ith +oston. 1n %anuary &'''0 hase raised 23'0''' from an angel investor. +y %une &'''0 she "as out capital and therefore raised another &30''' from the same angel investor. 1n %une itself0 Zipcar formally launched itself "ith #& cars. +y 4ctober &'''0 the company "as running "ith #$ cars and &3' members. hase ho"ever needs more money to run and expand Zipcar  at its full capacity. /he has faced many challenges and made several changes in her business model and come this far. 4n 4ctober0 she "ill make her pitch to raise funds at /pringboard &''' 5e" 6ngland. There are possibly some more amendments that she can make in her   business model "hich "ill be discussed further.

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Issues !oes the Zipcar business idea seems validate and realistic one7 8hy did the founder revise their financial plan7 8hat can be implied about the Zipcar business model from the actual operation data •

of /eptember7 8hat changes should hase do to refine her business model before making her pitch at /pringboard &''' 5e" 6ngland7 8hat could be the strongest arguments that founder of Zipcar could make at a springboard forum about the attractiveness of venture7

Analysis Robin hase has definitely adapted a very functional and efficient business model for Zip car. The car sharing company0 unlike conventional car rentals and taxi services operates on a very different frame"ork. 1nstead of crafting their customers as 9car renters:0 Zipcar has made their customers 9shared car o"ners:. Zipcar has very effectively been able to deliver the o"nership part to its customers. The customers can pick up a car any"here and go "herever  and "henever they like making them more of an o"ner than a renter. ;part from this the  business model comprises of technological sophistications and a very effective capacity management "hich enables the company to reach as many customers. ;s discussed earlier0 one of the prominent features of the business model is the inclusion of  technology to bridge gaps in business processes and reach unprecedented functional ability. ;part from delivering values to the shareholders Zipcar has been very successful in delivering values to the customers and society as "ell. Zipcar has clearly considered customers: convenience and comfort "hile designing its business model. The distribution channel primarily comprises of parking lots. 1nstead of having a 9tedious: airport parking or  selected exclusive parking locations0 Zip car has very cleverly opted for more accessible and convenient parking lots in malls and other such urban facilities. The value proposition for Zipcar lies some"here bet"een convenience and affordability. The target customers are the sort of people "ho "ants convenient and comfortable transport "ithout having to go through steep financial dispositions. The customers for Zip car do not "ant to go through the hassles of having a ne" car but still "ould love to have a car. The availability of numerous parking lots and the ad hoc service leads to the maximum utilization of vehicles. nlike other car rental companies "hich re
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to them0 Zip car has made it possible for the customers to 9dispose: off the car at their o"n convenience and comfort. This obviously saves the gearing up time for vehicles and also aids availability thus leading to maximum vehicle utilization. Zipcar is very much technological driven. 4ne of the best things about technological driven companies is that they engage "ith their customers to a large extent. Zip car has both "eb  based and mobile interface in its business process. The customers are re/ ?"ith more @4= than A4=B is to have maximum usage of a particular product or service. 6ven hase herself thought of having maximum usage of Zip cars. The "hole 9maximum vehicle utility: element of the business model is directed to"ards ensuring maximum usage of the vehicles. +ut "hen "e look at the  pricing strategy that hase adapted it doesn:t slot in. hase later increased the hourly usage rate to some"here bet"een (.3' /! and * /!. This increase in price "ould obviously  Ceopardize the possibility of having more usage based revenues and "ould also reduce  product availability. hase should clearly "ork on the revenue generation part of the business model. ;nother thing that hase might "ant to look upon is the membership fee she has in her  revenue generation model. There is a fierce competition in car rental business and forcing your customers to pay a membership fee even before they can actually use the service doesn:t sound good. +usinesses0 these days0 are more customers oriented. ompanies give anything to have a loyal customer base. The days of membership fees are slo"ly subsiding. nder  these circumstances0 it "ill be best if hase looks upon this matter as "ell. The success of collaborative consumption lies in the perception of the consumers. 8hy do  people go for collaborative consumption7 Aor a company like Zip car0 it is obvious people opt for collaborative consumption because of economic reasons. The company boasts that their  (

one car "ould replace almost D normal cars. This means the company believes that the "orld is better off "ith less number of cars. 1n the short run this may seem subtle but in the long run this may
Break Even analysis +ased on the original financial plan0 to achieve breakeven point ?no profit no lossB0 the company need to operate #3 cars on average or should make &** average member in year # ?#3F&**B and then year & ?#DF,&$B0 year , ?&'F,3GB0 year ( ?&'F,G'B and year (?&'F,G#B. !ue the revision made in the financial plan0 the re
Analysis of Actual Operating Data The analysis of /eptember actual operating data gives a clear idea on the validity of business model. The operation data sho"s a "ide variation both positive and negative from the  proCected financial of Zip car. pon considering the result of /eptember0 "e can find that almost 3'-G' service are demanded at night and "eekend so it "ill be profitable if car  availability can be ensured at that time. The t"o maCor negative variation of /eptember data reveals thatF )

#. 4verheads for orporate and +oston office have increased significantly by #DG and &'3 respectively. +ut once the company start to expand its branches corporate overhead "ill spilt up. &. ;ctual number of trip is deceased to #.( trips per month per member "hile the estimate of Hay plan represent ( trips per month per member. +ut there is potential increase the number of trips through improving the service perhaps increasing the ease of use of the Zipcar or improving the availability of vehicles. Though negative variance are there but positive variances seem more beneficial for future gro"th prospects of the businessI they areF #. Aor daily trips0 only $( miles "ere used instead of expected #&3 miles0 and #G hours "ere used instead of expected &( hours. &. =ourly usage is expected to be ( hours per trip ho"ever0 result sho"s that per trip G.& hours have used. This variation has positive impact for company as hourly charge is variable thus increased hours reflects increased earnings0 "hile daily charge are fixed0 thus decreased miles reflect saving.

+ail! iles dri,en  Miles driven− dailyus - .(iles dailyuses

+ail! hours usage - /*hours

0ourl! usage -

 Hours used −hourly uses hourly uses - *1& hours

;lso0 there is &.D3 attrition rate "hich is far lo"er than forecasted indicating that Zipcar has  perhaps found a model that "ork for meeting the needs of the market.

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/o0 the actual operating data of /eptember sho"s that the business is in overall positive direction and to secure the funding for the expansion of the business0 chase should focus on the follo"ing points.

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6nvironment friendly concept. =ighlight financial forecast based on breakeven analysis. The market is gro"ing at the rate of ,' and had huge potential. The technology it has developed "ill ease the business process thus creating a

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competitive advantage for the company. 1nnovative marketing-controlled marketing budget.

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Recommendation There are several factors Zipcar should take into consideration for its success such as the need for recruiting skillful and kno"ledgeable staff0 the need for technology in Zipcar to be incorporated and implemented0 the need to address the financially strong consumers "ho are also conscious to"ards the environment and so on. Thus0 there are numerous options that should be taken into consideration to achieve these success factors. #. ;dvising +oard The necessity of an increased kno"ledge base through the creation and nurturing of advisory  board does seem to be deemed necessary. &. Ericing hange in the pricing structure to gain more revenues by catering to"ards customers those also using cars less often but for a longer period of time. Ericing structure included that "ould be more on daily rental and decrease in free miles. ,. Technology 1ncorporate technology that "ill lo"er the operating costs of Zipcar and yield to"ards higher  customer satisfaction. (. Revenue /ources

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Eursuing viable revenue streams in order to minimize the risk to Zipcar. Aocusing on a gro"th by increasing the revenue rapidly to foster its gro"th. Revenues in turn are necessary to incorporate re
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