Zipcar Analysis Essay Example
Zipcar Analysis Essay Example

Zipcar Analysis Essay Example

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  • Pages: 2 (497 words)
  • Published: April 14, 2017
  • Type: Case Analysis
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The ZipCar concept is showing several positive signs as a sustainable venture. However, in order to secure funding for ZipCar, Robin Chase must address a few key aspects. This includes recruiting a competent management team, defining her role and that of her partner, establishing a realistic timeline for IT infrastructure development, creating a roadmap for ZipCar's expansion in Boston, conducting a thorough analysis on network effects, and identifying the next target cities for fast growth and revenue generation.

Right Direction

Robin Chase has effectively implemented the shared car concept in Boston and demonstrated its success. Through her September operations, it is evident that if the utilization rate could reach 40% (currently at 30%, Exhibit A), the revenue of $18,956 (multiplied by 1.3) would cover variable costs of $9,058, local fixed costs of $14,000, and some corporate co

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sts as well.

Chase has effectively managed her cash flow, adjusted her finances to reflect realistic figures, recognized the positive network effects of her venture, been flexible in adapting pricing models, and demonstrated the ability to hire capable presidents and release them when necessary. She has also made efforts to understand her customers and determine the market size in Boston as well as similar markets where her efforts can be replicated. The good news is that the new pricing model diversifies revenue through yearly fixed fees, hourly revenues, and mileage revenues. Based on the numbers in Exhibit B, even with a reduced yearly fee, the increased hourly rate and introduction of mileage revenue generated 18% more revenue ($1696) compared to her original model. This new model also helps mitigate excessive mileage usage and rising costs. Furthermore, attrition rates have remained low, decreasing

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from 6% to 3% in the first four months.

The text suggests that by converting certain fixed costs, such as high billing fees, to variable costs and implementing reduced pricing during weekday daytime hours, utilization and net income could increase. Customer acquisition costs have remained low through various marketing strategies. The September data indicates significant cash-based revenue. However, the diagnosis highlights that the ZipCar venture requires changes before it can be scaled and attract funding. The first concern is the management team: Chase, a stay-at-home mom, runs the venture from her home office, while her partner Danielson, who came up with the idea, seems less committed due to her existing career and pregnancy.

The experience with a new president has been unfavorable. To achieve an operational level for ZipCar, a capable and diverse team is essential. Moreover, the current business plan forecast does not accurately incorporate the September operations and fixed costs of 44K. Despite the low marketing expenses, Chase has not presented a strategy for consistently attracting new members or optimizing the network of ZipCars to maximize usage. Future plans and strategies, including target cities and staffing recommendations, must be clearly outlined.

Finally, the $300K in convertible loans presents an additional obstacle in terms of determining final equity. These loans represent approximately 25% of the required $1.3M cash injection, which introduces concerns about controllership for the venture capitalists.

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