Zipcar Analysis

Topics: Cost, Costs, Variable cost Pages: 3 (824 words) Published: February 21, 2012
Case Write Up
Diagnosis The ZipCar concept shows several favorable data points as a sustainable venture. The data (mostly positive), however, is not the main show-stopper to date. In order to make ZipCar fundable, Robin Chase needs to (1) recruit a capable management team, (2) substantiate her role and that of her partner (give her a non-active role) (3) provide a realistic timeline to develop the IT infrastructure, (4) develop a roadmap to the expansion of ZipCar in Boston, (5) detail a supported analysis on network effects and (5) pinpoint the next target cities and their plans as a venue for fast growth and cash generation. Right Direction Robin Chase has successfully taken the shared car concept and proved it could work in Boston. Her September operations show that if 40% utilization could be achieved (currently 30%, Exhibit A), revenue ($18956*1.3=$25,211) will cover variable cost ($9058), local fixed costs ($14000) as well as some of the corporate costs as well. Chase additionally has managed her cash flow well, revisited finances to reflect realistic figures, understood the positive network effects of the venture, was flexible to adjust pricing models and finally demonstrated the capability to hire a capable president and release of duty when necessary. Finally, Chase tried to understand her customers, determined her market size in Boston as well as similar markets where here efforts could be duplicated. The good news As a venture, the new pricing model provides diversification of revenue through yearly fixed fees, hourly revenues, and mileage revenues. As the numbers in Exhibit B show, even with he reduced yearly fee, the increased hourly rate and adding mileage revenue generated 18% more revenue ($1696) than her original model would have. It also hedges against excessive mileage usage and rising costs. Attrition rates also remained low, decreasing from 6% to 3% in the first four months. With the conversion of certain fixed costs like billing...
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