Zip Car Case Analysis

Topics: Variable cost, Costs, Contribution margin Pages: 1 (362 words) Published: April 29, 2013
According to the actual data of operation in September, the business model and especially the financial plan seemed to work well in practice as the numbers reflect as planned and even better. In term of new members, the month of September has exceeded the planned number of 440 new members during the first year with a total of 101 new members registering in only 1 month. However, this number is very likely to go down in the following months as September was just the second month of operation. Some other variable costs, however, went down partly because of this unexpected high volume of new registrations. Lease cost went up to $4,800 per vehicle because as Zip Car got bigger, the exposure to risk also got bigger for car manufacturers as their leased vehicles will be used by a larger pool of different drivers. Parking fee per car per year was also higher than expected (25% more) and fuel bill were 10% higher than planned. Because these were variable cost, they would bring down the company’s contribution margin. However, as the fixed costs seemed to be stable in September, it would not hurt the earning that much. The good news was that the actual number of registrations was much larger than expected which showed a good sign for the future of Zip Car. This could be a good reason for growing fast because the market seemed to react very positively to the idea of Zip Car. Space for growing was also large as according to Chase’s research, there were approximately 15,000 people in Boston only fit the Zip Car profiles. Another reason for Chase to consider to grow fast was because the entry barrier to this “niche” market is not strong as it requires only a small amount of capital and the distinguish that Zip Car provided to its customers was not that much of an advantage. That potential market share could easily be taken if Zip Car doesn’t grow fast. The big challenge of Chase at the moment was to be able to convince investors the bright future of Zip Car and get more funds...
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