Zipcar Business Model Analysis Essay Example

accomplished this far.

Analysis

Based on the case study, Zipcar Company has developed a very unique business model that depend on the automation of many tasks in order to generate an easy and tailored customer spending experience. In fact, the service operation by customers is made very simple by this experience, and both the business and its customers are profited (Hart, Roberts and Stevens, 2005). Porter’s five forces analysis can easily be used to examine Zipcar’s business model, which is majorly based on five forces: threat of new entrants, threat of substitutes, bargaining power of customers, bargaining power of suppliers and competition among rivals. A company needs to counter balance as many as possible of the five forcers so that it can create competitive advantage. Porter’s five forces analysis is aimed to offer a simple viewpoint for analyzing and evaluating the position and competitive strength of any particular company. According to Porter (2008), all the five forces jointly determine the strength of industrial completion and profitability and threatening forces leading become the most significant.

The threat of new entrants was moderate for Zipcar Company. Even though there was an important starting cost, most of the car rental companies that were already in the market required only to enable slight technological changes in order to deliver services like those of Zipcar. That being the case, Zipcar’s unique business model would be difficult to replicate for any new entrants in the industry. Basically, it had capabilities of supplying personalized car-sharing services on cheap prices because of its recognized brands and its unique business model. In terms of the substitutes for car sharing, the threat of substitutes comprised car-pooling, public transportation,

and car ownership. Since most of the Zipcar members are not heavy users for cars, they need a car for a short period of time. Daily heavy users are only the most probable people who consider owning a car (Hart, Roberts and Stevens, 2005). Even though other substitutes could possibly be a threat on the business, renting a car using Zipcar was more efficient and appropriate. In addition, as the environment keep changing, customers are opting to share cars for a short period rather than owning one. Car ownership and public transportation might be expensive because the fuel prices are rapidly accumulating. Car-pooling might be suitable for some customers which make this specific substitute a threat to Zipcar Company.

Considering the bargaining power of customers, Zipcar service was exceptional due to the customers it was targeting. Bargaining power of customers was low because the market was small and it was hard to find a service like the one offered by Zipcar. Existing substitutes were not convenient for some of the customers and this made them to consider Zipcar service. By using Zipcar, customers could easily get a car without waiting or consuming a lot of money, which was more appropriate. Bearing in mind that Zipcar had a recognized brand name and a strong identity, most of the customers felt attached to it. In this case, the customers could not be high on price understanding because their bargaining power was reduced. However, the bargaining power of suppliers was low because most of the suppliers of Zipcar were not determined. As car sharing was a service where they offer car rentals for an hourly or daily basis, there

was no supplier power in the industry. The bargaining power of suppliers was low because most of the suppliers of Zipcar were not determined (Hart, Roberts and Stevens, 2005). These suppliers included car agencies, insurers and gas providers. It is important to note that all these suppliers worked in competitive industries. This means that there were several gas providers, insurers and car agencies, which Zipcar could opt to select.

While parking spaces might be owned by a business foundation or a government authority, Zipcar may require to construct and maintain collaborations with these entities in order to get the parking spaces. As a result, the supplier might have a more power because Zipcar requires those spaces near customers. The cars that Zipcar provided also required services and this made it limited to a very few suppliers. To maintain its business model, the company required to select one reliable supplier who could provide car services. Hence, car service suppliers and parking area owners could be regarded as the major suppliers. In respect to competition in the car sharing industry, Zipcar major competitors included Phillyshare, Swiss Mobility Car-Sharing, Drive Stadtauto, CommunAuto and Montreal (Hart, Roberts and Stevens, 2005). A lot of the competition came from companies that offered the same service without charging. Even though the competitors still affected the business, Zipcar had a competitive edge over these competitors because of the use of parented wireless technology as well as innovative technology. Most significantly, Zipcar had a strong presence and well-known brand name in the car sharing industry. It also rented cars in diverse places similar to its competitors. Other traditional car rental agencies, such as Hertz or

Avis, could have entered the market if they saw it as a considerable new business prospect. In fact, these competitors had a strong financial capability, experience and presence in car sharing industry, which enable them to remain as the major rivals to Zipcar Company.

Zipcar has the competitive advantage against their competitors because it is the pioneer of car-sharing concept. Being that its marketing plan depended on several low-budget tactics, Zipcar strategy has enabled it to maintain the precedence in the car sharing industry. Chase and Danielson noted that the existing car rental services were missing a big customer requirement, and there was an important portion of people who were irregular drivers (Hart, Roberts and Stevens, 2005). In this case, the company concentrated on two major aspects of customer requirements. First, it defined its major capability with wireless technology and used it to construct a convenient, hassle-free and efficient car rental experience. This enabled customers to rent cars by the hour through online platform, whereby after the rental process was through, the car was distantly configured to open only for the right resident. In fact, Zipcar members possessed a postcard that they could use to access the car they had booked. The entire rental process took just a short period of time. This strategy kept costs down; while the postcards did not change, new pictures and features could be incorporated into the Company site. Zipcar also improved the access to its fleet of cars. The company put its cars in reserved parking spaces near universities and business organizations, where they could be accessed any moment by its members using Zipcar member card. This substituted the manual

way of renting a car and most importantly saved time. Without any doubt, Zipcar’s strategy to offer quick car rental services, using wireless, hassle free technology worked and its revenue has increased steadily since its establishment. They are the leaders of the market with 186.1 million in revenues and with more than 40 percent of the share (Hart, Roberts and Stevens, 2005).

Evaluation

Zipcar used several marketing strategies in order for the company to succeed. It did the benefit oriented positioning, which it worked very well. Positioning strategy was among the best feature for the evaluation and the changing of the parameters (Hart, Roberts and Stevens, 2005). In this concept of positioning, the company was to state clearly on the benefit it will bring to the buyers. Good positioning was to change regularly according to the requirements of what the organization was targeting. At the same time, Zipcar was to expand the perception by checking the amounts of benefits they will get in renting out of Zipcar cars to customers. This kind of the strategy was meant to achieve objectives such as the hassling to own a car, in presence of the resources to own a car and avoiding the maintenance responsibility.
To achieve its major objectives, the company introduced the pro-client services. It made the people to become the members of Zipcar car rental service through payment of membership fee annually of $60. This membership fee was effective because it is very difficult to drive a car on the individual choice for $7.50, especially when the insurance is included, gas, and the bonus added, which are in the form of free miles (Hart, Roberts and Stevens, 2005).

Once their customers have used the car, he or she would return and Zipcar would take care of the maintenance and the cleanliness. Success of the Zipcar strongly depended on how its product fulfilled the needs of the people. In fact, they marketed the product in respect to the feelings of the customers. It is significant to note that customers are motivated and satisfied by services if they are in accordance to their needs. These needs include social, physiological, safety, the catering of the needs to someone’s self-actualization and the self-esteem (El and Pereira, 2013).

Zipcar Company had the beliefs that were tangential to the safety and the social needs of their customers. This objective fact and logic has guided the company immensely and advance the beliefs they have in terms of creating product that satisfy every person completely (Byers, Dorf and Nelson, 2011). They strongly serve the people in the urban areas and in rural areas, which are densely populated, and where people can own a car without the hassling of their own car. Zipcar Company started with the value system, which reflected what existed in the customer’s mind best known as the environmental consciousness. Once Zipcar business found themselves in market, they focused on the revaluating the course. They went ahead to check the factors, which were compelling for the rental factors for strategies and model services (Hart, Roberts and Stevens, 2005). Success of marketing campaign mostly depended on the client. Participation of the client either actively or passively has bearing in the outcomes of the company. Zipcar carried out the promotional activities and the events that enabled the interaction of the clients with

the company. Despite this success, it was difficult in targeting a large number of people though a single strategy. This was especially when considering that the customer does not have track for ten minutes without meeting the Zipcar. On realizing this, the team concerned with marketing organized advertisements which were communicated through the local ads and this ensured the outreach to majority of people.

Positioning is a reflective of requirements and the values that guided them in the promotion of the business. It was differentiated by the two factors; the beliefs and the benefit oriented. Zipcar started with the strategy, based on the value, then later adopted the benefit oriented (Hart, Roberts and Stevens, 2005). Even though its major objective was to make the lifestyle of the urban and rural residents impressive, most of the people were living in the densely populated areas such as London, New York or Boston wanted. During the start, Zipcar used the value-based strategy for the positioning so that their way of operation can be different from the other competitors. This strategy created a link of admiration in the market. As well, this concept was environmental consciousness and hence was an advantage because just a few companies were promoting the idea of environmental consciousness in the market of cars renting. Stephany (2015) argues that when the firm used the benefit-oriented strategy, it underscores several reasons for the car renting. Zipcar was able to deal with all the reasons through the incorporation of a solution to each problem in the services and the policies.

Recommendation

Currently, the sharing economy is taking off and most of the companies should take note of this. Many companies

following Zipcar business model are successful because they do not directly offer the service or assets, but are instead just the platform that links people with resources. Car sharing as an operation, nevertheless, is substantiating to be something a bit more than simply changing one’s car rental service into a car-sharing service. The current major competitors for Zipcar in car sharing industry include Turo, Car2Go, RelayRides, FlightCar and Getaround (El and Pereira, 2013). Being one of the major peer-to-peer car sharing company, Turo is best matched for longer trips as they provide daily or weekly duties. One of the advantage of Turo compared to Zipcar is that it do not have signup or member fees. It is also available in many cities as well as airports and enables participating car owners to save 75 percent of rental prices and mileage overage fees (Duening, Hisrich and Lechter, 2010). However, it do not offer hourly services because its minimum rental service is for daily basis.

Rather than investing in a fleet of cars that you can micro-rent for when customers require to go anywhere, GetAround provides peer-to-peer car rental service that disregard the agency completely (Haar and Meyer-Stamer, 2008). It enable its customers to book vehicles online and can charge whatever prices they like for you to rent their car. GetAround even deliver additional insurance coverage if something unpredictable occurs with the means of transportation. On the other hand, FlightCar enables vehicle owners to rent their vehicle to the organization, who will then earn profit after renting to traveler arriving to a nearby airport. A free shuttle to the airport is also encompassed. Also, RelayRides is established on

the same perceptions as GetAround because it is a peer-to-peer car sharing service that provide insurance coverage on a vehicle for a take on the profits of a rental agreement (Bhalla, 2011). Even though is not well known in the United States like Zipcar, Car2Go company rent a vehicle by the minute, and their customers do not certainly have to reserve a vehicle. This company is the best choice for any person who is seeking a more eco-friendly vehicle option. There is also no membership fee, which makes Car2Go an affordable option for numerous people (El and Pereira, 2013).

Based on the current competition, Zipcar should continue to concentrate on product efficiency and product differentiation via its exceptional fleet of vehicles that comes with ease of usage and quality service. In fact, it should find out opportunities to perform partnership through acquisition and mergers at the same time create strategic deals with IT suppliers, local investors and car manufacturers to further establish its competitive advantage. Furthermore, in order to sustain a competitive edge, Zipcar might attempt to change the market and start delivering luxury vehicles such as limousines. By doing that, they will be depending on more than one source of profit rather than depending on car sharing that target a trivial market. Zipcar can also promote its green service and how it ensure protection of the environment from the increase in cars usage so that it can retain and attract several customers.

Conclusion

As per the above discussion, it is significant to conclude that Zipcar Company started with powerful and unique business model that was integrated to the present technology. Its target market is heavily concentrated on

dense urban residential regions, where numerous people do not possess cars due to congestion, poor infrastructure, vandalism, sky-high parking fees and high maintenance costs. Regardless of its growth, the company has to be aware of the evolving car sharing market. There are various substitutes for their service and new car rental companies might enter the market. In this case, Zipcar has to establish appropriate strategies to counter these changes. In the same way, the company have to maintain their consistent brand identity and prove to the people that they are leading car sharing industry. Through incorporated marketing strategy, Zipcar can increase awareness of its services and further advance them.

References

1. Bhalla, G. (2011). Collaboration and co-creation. New York: Springer Science Business Media, LLC.
2. Byers, T., Dorf, R. and Nelson, A. (2011). Technology ventures: From idea to enterprise. New York, NY: McGraw-Hill.
3. Duening, T., Hisrich, R. and Lechter, M. (2010). Technology entrepreneurship. Burlington, MA: Academic Press.
4. El, S. and Pereira, F. (2013). Business modelling in the dynamic digital space: An ecosystem approach. Berlin: Springer.
5. Haar, J., and Meyer-Stamer, J. (2008). Small firms, global markets: Competitive challenges in the new economy. Basingstoke England: Palgrave Macmillan.
6. Hart, M., Roberts, M., and Stevens, J. (2005). Zipcar: Refining the business model. Boston, MA: Harvard Business School Pub.
7. Porter, M. (2008). Competitive strategy: techniques for analyzing industries and competitors; with a new introduction. New York, NY u.a., Free Press.
8. Stephany, A. (2015). The business of sharing: Making it in the new sharing economy.