Zipcar Case Study AnalysisPresenters:

Ujjwal Maghaiya – 14516Jipin Nakarmi – 14520Chandha Parajuli Neupane – 14521Roshan Shrestha - 14530

Case Synopsis

▪ Zipcar was incorporated in January 2000.

▪ Robin Chase was the CEO and co-founder of the company and her partner was Antje Danielson.

▪ They raised their first $50,000 from one angel investor.

▪ Introduced their first business plan for Boston in December 1999

▪ Revised the plan in May 2000

Case Synopsis Continued

▪ Initially split the equity ownership of the business equally.

▪ Their 50% ownership stakes would be diluted by subsequent financing.

▪ Chase obtained a $50,000 “Convertible Loan” from a former Sloan Classmate.

▪ At the end of October, 2000 the two entrepreneurs were ready to Pitch their idea at Springboard to search for funding.

How Zipcar Works

1. Register the one time membership with the membership charge and pay per use

2. Locate a car near you using mobile app or internet services or through telephone calls

3. Get the confirmation about the car and the location4. Unlock the car with zipcard and use it5. Return after use to the nearest car parking.

Planned Launch – “Boston”

▪ Insufficient and expensive off-street parking

▪ Large number of college-educated and web connected individual

▪ Boston lent itself well to a network of cars positioned close to transit stations.

Industry Analysis

▪ Organized car sharing business originated in Switzerland in 1987. Later in Germany, Austria, and the Netherlands.

▪ Porter’s five forces model:

Threat of New Entry – Low

Threat of Substitutes – Medium

Bargaining power of Suppliers – Medium ( Two suppliers one for car and the other insurance companies)

Bargaining power of the customers – high

Rivalry among the competitors – high

SOWT Analysis

▪ Strengths:

New, Low-cost and convenient alternative to own an automobile

Short-term, on-demand private car access

Environmental friendly vehicles, 24/7 customer service, High Technology

▪ Weakness:

Weak management Team

Significant investment before profit can be realized

SOWT Analysis continued

▪ Opportunities:

Increased customer preference for car sharing

Increasing opportunities of partnership with universities

No competitors currently in their region

▪ Threats:

Locating affordable parking

Fluctuating oil price

Value Addition to Customers

▪ Easy to use: Efficient Technology Platform

Easy membership signup and reservation online

Locate nearest Zipcar through mobile app and keyless vehicle access through zipcards

Free parking facilities with no fuel charges.

▪ Convenience: Strategic location of Zipcars

Shopping malls, airports, entertainment areas and housing estates.

Value Addition to Customers continued

Best alternative solution to:

▪ High initial cost of purchase and maintenance of a car

▪ Inconsistency in the availability and pricing of taxi

▪ Overcrowded public transports and expensive per day rental charges of a car.

Competitors

▪ CommonAuto, launched in Quebec City (1994) and in Montreal (1995)

▪ Two West Coast companies: Portland-based Car-sharing inc., (1998) and Seattle-based Flexcar (2000).

▪ Traditional car rental agencies: Hertz or Avis might enter the market for this new business opportunity.

▪ Car manufacturers who are the suppliers could enter the market directly.

Potential Customers

▪ Point-to-point users:

Mobile professionals, shoppers, University and college students

Daily fixed time users like the working professionals

Cost oriented Vs. Convenience oriented customers.

Marketing Strategies

▪ Marketing plan relied on several low-budget tactics.

▪ Word of mouth marketing with customer referral benefits

▪ Free media coverage generated through public relations

▪ Grass roots guerilla marketing efforts.

1st Business Plan

▪ $25 - nonrefundable application fee

▪ $300 - fully refundable security deposit

▪ $300 - annual subscription fee

▪ Additional member - $1.5 per hour, $.40 per mile

▪ $20 fine for late return

▪ Assumed annual renewal rate for members – 95%

▪ Assumed a 5% attrition rate each year

▪ Assumed – avg. member would take 4 trips per month at an avg. of 4 hours and 22 miles per trip

Revised Business Plan

▪ $25 - nonrefundable application fee

▪ $300 - fully refundable security deposit

▪ $75 - annual subscription fee

▪ Additional member - $5.5 per hour, $.40 per mile

Real time operation in September

▪ Two major negative impacts include:

Overheads for Boston and Corporate office have increased by 205% &186% respectively

Actual no. of trips per month per member is found to be 1.4 trips per month while the estimates of May plan represent 4 trips per month per member

Real time operation in September

▪ Positive aspects were:

For daily trips, 94 miles used, instead of expected 125 miles, and 16 hours used instead of expected 24 hours (it is schemed that billing for daily trips is fixed for 125 miles per day as $44 which saves 31 miles and 8 hours)

Hourly use is expected to be 4 hrs. Per trip however actual results show that 6.2 hrs. per trip are used. Since we know that hourly charge is variable, increased in hour’s means increased earnings, while daily charges are fixed, thus decreased miles reflect savings. Therefore we can say that business is in overall positive direction.

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