Zipcar Case Study Analysis

Topics: Car rental, Zipcar, Carsharing Pages: 8 (2494 words) Published: December 10, 2012
[Case: Zipcar] Zipcar’s SWOT and financial analysis a) Strengths Firstly, Zipcar seized 80% of US market share, making it the strong player in the market. Secondly, as the company is able to acquire its competitors (Flexcar-US, Streetcar Ltd-UK), they can reduce the competitors as well as gain those market shares and customer bases from those 2 companies. Thirdly, Zipcar’s customer-friendly and disruptive business model is what makes it unique. They leverages accessibility, make it available close to where people live or work and need access to vehicle, which is one of the threat of car renting. The company also allows the members to use a car when required, which provides true flexibility. Supported by advanced technology (RFID System r), its vehicles are easy and readily available to use. Besides, the flat organizational structure makes it flexible and able to communicate efficiently and quickly to both employees and customers. Finally, the company has created brand recognition by calling its customers “Zipsters”. b) Weaknesses Zipcar has no prior experience in similar industry, but have fairly good experience in automotive industry. A fall in Zipcar’s gross and operating margins in the last reported quarter as compared with the prior-year period reflects high costs. The company ended the quarter having 8% more vehicles as compared to the year-ago period, while its fleet operation costs shot up by nearly 23%. The fleet operations, the company’s primary expenses consumed 71.2% of revenue in the first quarter of 2011. And the high costs make it unable to achieve the economies of scale. c) Opportunities Zipcar’s penetration in the international markets is not very high. Despite of the home market, there is only 1 presence in the Europe, which means there is more room to grow such as Spain. And because of the unfavorable economic situation in the European countries, people tend to get the idea of car sharing quite fast, which affects the growth in world’s car sharing market. Moreover, rising fuel costs as well as high maintenance costs will be beneficial for the company as people shift to car sharing instead of buying new cars. To respond the global warming trend, people realize to reduce CO 2 and etc. which match the firm’s service. And the use of social network enable the firm to lower the cost of marketing. d) Threats The strong and increasing competitors such as Hertz and Enterprise that already have a strong foothold in the car rental industry pose a threat to Zipcar’s business. The availability of public transportation could harm the firm as over 73% of buses have bike racks for rider available to use 24/7. Also, there is increasing scarcity and cost of parking spaces in big cities such as New York and London. Insurance and liability expenses related to serving this market are high. More importantly, there are several substitutes of Zipcar such as taxicab, and public transportations. As we can see in exhibit 3, there have been increases in sales by 23.79% in 2009 and 41.86% in 2010. However, the fleet operation accounted for 71.2% of the revenue (2010) and net loss seemed to continue (74.16% in 2009 and 114.46% in 2010) if the company can’t cover the cost. As a result, return on investment slightly dropped by 9.67% and the ability to pay for the daily operation

[Case: Zipcar] costs has dropped by 2% in 2010. The good news is the control in operating cost gets better as the operating profit market has improved by 65.9% and 11.16% since 2009. Descript the challenges faced by a start-up company in an undefined market. How did Zipcar handle the tasks and uncertainties inherent in being a first mover? As big leaders in the market have captured almost of the market pie, it is hard for a start-up company in an undefined market to seek a room to grow. First, a start-up company needs a huge investment for the business; including the costs of vehicles, insurances, maintenances, and etc. what I mean by a huge investment is...
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