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Zipcar Case

In: Business and Management

Submitted By Learn228
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The proposed venture in this case study has great potential in highly populated areas with a need for transportation. Since Zipcar provides the cars in areas close to the customer, this service would be easy to use. The drawback would be finding a way to make the benefit of utilizing Zipcar more compelling over other forms of transportation such as owning a car, using other car rental services, taxis, subways, or buses. The nice component of Zipcar is that it offers hourly services which can attract people who need a car only for a doctor’s appointment or grocery run.

Zipcar has been able to progress its venture which is notable since funding and parking have been an issue. Most of the funding was used to start building the wireless technology to serve as the operating system. Unfortunately, the shortcoming in Zipcar’s progression could be because the “ Z-card” reader is not finished. With no asset and few angel investors, Zipcar can seem as a risky investment. Instead of rushing to start operating the business perhaps Chase could have gained investors by guaranteeing that she had a system that functioned. Despite the technological setback, Zipcar was able to obtain 3 cars and rely on members to keep a driving log to track usage. The advantage of Chase and Danielson starting Zipcar early is that since both lacked a degree of expertise, Zipcar would be able to grow by observing customer’s usage patterns and understanding the operational and financial parameters of running a business.

Zipcar’s first business model was influenced by European car-sharing. This model gets revenue by charging a membership fee, security deposit, application fee, per mile fee, per hour charge, and a late fee. For the target market, requiring a $300 membership fee is steep and expects the users to have a greater disposable income. After revising the model to a $75 membership fee, the company makes up the difference by increasing the variable costs such as the per hour charge. This model also incorporates a daily charge of $44. This makes users consider daily renting more. With the $300 security deposit, Zipcar can profit a small amount from interest income. In the first model the costs of leasing and parking are lower than expected, so the second model adds $600 to parking and $400 dollars to leasing.

From the actual operations in September, the exhibit shows that Zipcar’s expectations exceeded what was actually met. Zipcar expected attrition to be an optimistic 5% when it was actually 15%. The data also shows an increase of members with the number of car uses being greater than the number of its members. As expected many users would take advantage of the convenience of the hourly rate which would explain the higher demand for hourly uses over daily uses. The 60% in night and weekend trips is a probable percentage since it’s a behavioral trend to use cars more during the weekends for social needs. It’s evident that the structure of Zipcar is to generate revenue from its hourly uses. Hourly uses generate a significantly greater value in mileage revenue in comparison to daily usage. Even with hourly uses being preferred by customers, the difference in hourly and daily usage revenue does not quite show this. For this to be confirmed with the operations data the range of revenue should be higher.

In Chase’s pitch, she should state the paucity of car-sharing in the United States and its success in European cultures. She should emphasize the target market of Zipcar and their slogan “wheels when you want them”. The service is for someone who wants a car temporarily, but does not need to own one. Explaining the meaning of Zipcar would highlight the importance of convenience, simplicity, and cost effectiveness of car-sharing. These components should be the focus of her pitch and not the environmental benefits. She should hint the competitive advantage of offering hourly service and promote her website so investors can find out more about Zipcar and potentially aid her business. She should state why Boston was an ideal location (parking, population, urban city, college-educated, and web connected). Lastly, she should state any additional progress, sales, customer retention, and angel investors before her plea for financial assistance from investors.

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