ZIPCAR: REFINING THE BUSINESS MODEL Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

ZIPCAR: REFINING THE BUSINESS MODEL Case Study Solution

Zipcar is a startup car sharing business that had introduced the idea of sharing car and using it through the membership organizations. This case highlights the development of the business model and various revisions of the financial plan of the company from the end of 1999 to the mid of 2000. Zipcar is now facing many strategic issues and it faces the challenge of refining its business model. Several changes were made in the revised financial plan in May 2000 which reduced the average Zipcar revenue per day. However, the actual operating data from September 2000 showed that some costs have exceeded the budget and expectations of Chase, the CEO of Zipcar. The estimate of revenue based on September 2000 actual data shows that revenue has actually increased but the costs have also increased. After detailed analysis, Chase should seek financing of $ 1.3 million from VCs to complete the technological system development and fuel the growth of the company.

Problem Diagnosis

Zipcar is a startup business and the model of the company has been just completed. This business has been established around the idea of car sharing services and charging the customers based on the car usage by the member organizations. Several iterations are defined in the case for the development of the financial plan and the business model for Zipcar. Now, the business is facing many strategic decisions as it is moving ahead and thinking to expand in 14 other cities. The problem at hand is to analyze and assess the current business model of the company and its underlying economics for evaluating the validity and the shortcoming of the business as it actually rolls out.

There are several issues that we would be analyzing and discussing in this report:

On what value proposition is the business model for Zipcar built?
Why was the financial plan revised in May 2000?
What does the actual operations data in Sept 2000 tell us about the business model of Zipcar?
Is the $ 1.3 billion financing justified for the company?
What recommendations should Chase follow to put strong arguments in front of the Springboard forum?

Analysis

We begin the analysis first by defining the business model and the business proposition on the basis of which this business model has been built.

Zipcar Business Proposition, Potential Challenges and Revenue per Day in Dec 1999

The business model adapted by Robin Chase is highly efficient and functional business model for the Zipcar. This car sharing company operates on the basis of a completely different framework through which the company has made its customers as the shared car owners. The company has succeeded to effectively deliver the ownership part to its customers.

Along with this, the business model of the company comprises of the technological sophistications that have enabled the company to extend its capacity resulting in effective capacity management and this would help the company to reach as many customers as the company wants. Through the inclusion of the technology and the technological system, the company had bridged the gap between the unprecedented functional ability and the business processes of the company.

Zipcar has proved to be successful in delivering the value to the customer, shareholders and the wider society by becoming green in its operations. The customer satisfaction is high as the owners have considered the comfort and the convenience of the customers while designing the business model. The value or the business proposition of the company lies between affordability and convenience that is provided to the customers.

The target customers of the company need comfortable and a convenient mode of transportation without the requirement for the steepest financial dispositions. The target market of the company comprises of those customers that do not want to go through the hassle of acquiring a new car but they want to take the benefit of having a car. This model’s proposition lies in the fact that it does not requires the customers to bring their cars at a specific location but it requires the customers to dispose of their cars at their own comfort and convenience.

This leads to the maximum available capacity and utilization of the vehicles. The company and the business model of the company are both technology driven and they engage their customers within the operations to a large extent. Mobile interface and web site is also provided by the company and this has been strengthening the public relations and reputation within the customers and this has been achieved with the least possible marketing efforts and marketing costs.

The above factors highlight all the reasons due to which this business model makes sense however, the detailed and complete inspection of the model would help us to reveal the flaws or the holes within the business model of the company. The potential challenges for the company in future could include:

The fixed and the variable costs of the company are high. The variable costs of the company such as fuel, parking and others are high and to compensate these high variable costs the company needs to have maximum usage of its services.
The pricing strategy does not seem to be strong. Chase had increased the price between $ 4.5 to $ 7 but this would jeopardize the possibility of a higher usage of the services of the company and reduce the availability of the product.
Charging a membership fee is another issue in the business model and this is evident by the fact that the days of membership fees are subsiding slowly. Business should be more customer oriented as the company is in the startup stage.
Shifting the perceptions of the customers from rationality to luxury might not be a good idea. Therefore, the company should not get much into giving the luxury of driving environment friendly cars because consumes less tendency would take over the consume cheap tendency in long run.
The partnership of Chase with Danielson might be questioned by potential investors after knowing that she works as a part time manager...................

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