Zipcar: Refining The Business Model Harvard Case Solution & Analysis

Zipcar: Refining The Business Model Case Study Solution

Comparison of Plan and Actual Business Model:

In actual, the initial annual fee has 300 United States dollars which found to be higher as compared to the competitors, so, it has revised to 75 United States dollars with increased tiered pricing by changing the hourly rate of car sharing services from 1.5 United States dollars to 4.5 to 7 United States dollars. The Boston’s rate for attrition, parking, lease, and cost of the equipment initially estimated at the lower base which is now increased in the new plan. The changes in price structure will increase the total number of members up to 10,000 at the end of five years in this revising plan.

The actual results of September show a detailed picture of the validity of the business model.It is a concern even though the overall result of September is satisfying,however, with plenty of factors to consider. The revenue as compared to a revised business model has reduced from 2467 to 1003 United States dollars.Furthermore, the total cost has increased from 724 to 779 United States dollars per car because of which the contribution has come down from 1744 to 224 United States dollars.

Revenue/member has decreased from 130 to 93 United States dollars due to which the contribution that each member is making is 26 United States dollars in September than in a revised financial plan of 91 United States dollars.The estimation of fixed cost level in the revised financial plan for Corp level has 10500 United States dollars per month, which exceeded to 30000 United States dollars in September and 4581 United States dollars in Boston that exceeded to 14000 United States dollars per month.

The estimated number of members in Year 1 has 440, however the number of members in September accounts to 141, which means the expected members per year can exceed up to 1200.The attrition is less than the estimate, which has 15 percent however, the results in September showed an attrition of less than 3 percent.

The total number of trips is less than estimated however, the miles and hours both exceed the estimated.Nonetheless, each individual trip is much longer in both time and miles. The actual number of miles per trip has around 49 however, the estimated number of miles per trip has 22. Moreover, the estimated total number of hours per trip has 4 whereas; the actual number of hours has 9.6. The summary of calculations is shown in Exhibit 1 of the document.

Even though the results vary from the business model however, the venture is still very successful and exceeds the expectations of membership, but still, prices are needed to be increased for breakeven.

Margin per Member per Month:

The margin per member per month is 11,212 United States Dollars which is shown in Exhibit 2 of the document. While in actual (for September), it has 2,270 United States dollars per member per month. This shows that Zipcar will make money in the future and as a Venture Capitalist (VC), the money could be invested in the car sharing business.

Exhibit 1: Per Car Rate

Exhibit 2: Per Member Rate

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