Zipcar Case Study

Company Overview/Statement of Problem

        Zipcar is a car sharing business that took form in 2000 with the partnership of founders Robin Chase, and Antje Danielson. Upon a trip to Berlin, they heard about the idea of car sharing industry, and decided that there was a potential to be a first-mover in the U.S. market.  The idea was to make the “Whole Foods” of the car share industry. They had originally been able to raise $1.3 million in start-up capital from 14 different investors, but things shifted dramatically for the company with Chase spent $5 million in pledged investor money, prior to that investment being finalized. After this massive problem, the board forced chase out, and hired Scott Griffith as their new CEO in 2003. Despite having $186 million in revenue during 2010, Zipcar has yet to post a profit. This is just a symptom of their main problem. Zipcar has yet to create any competitive advantage over their competitors. Their core competencies do not really act as a source of long-term competitive advantage either. They face extensive competition from other car rental companies who have entered the car sharing market, as well as the convenience of public transport. Zipcar needs to develop long-term competitive advantage, create differentiation in their business model amongst similar competitors, and work harder than ever to develop economies of scale.

Environmental Scanning/Stakeholder Analysis

Demographic

        Zipcars demographic segment is made up of mostly colleges and college students currently, although during their earlier years they were focused on taking over the urban markets. They still have a mix of customers from the urban market, but as of 2010, they had operations in 14 major metropolitan areas, and 230 college campuses. Unlike much of their competition, Zipcar has a lower age threshold of 18. This expands their market tremendously. Not only does Zipcar provide consumer service, but they also provide fleet services for businesses and college administration.

Economic

        Zipcar has great potential to grow in their economic climate. Due to the ever growing population in most urban markets, as well as the lack of parking and the associated cost of those parking spots, Zipcar offers a simple solution to consumers who constantly deal with these issues. However, due to the economic decline, car manufacturers are likely to continue increasing their prices, and are less likely to offer discounts and rebates. This will cause Zipcars capital expenditures to increase, and thus they will be forced to either eat those costs, and go further into debt, or they will have to pass those costs down to the consumer. The economy of their market is growing, as more millennials accept that the cost of car ownership is something that they don’t want to acquire. This is causing them to move more towards car sharing programs and public transportation. As of 2006, the car sharing industry had nearly 350,000 members worldwide. According to Navagant Research, the car sharing market is expected to surpass 12 million users by 2020.^[1] If Zipcar can control their expenses and continue to increase market share, this expected market growth will be a tremendous help to the company as they struggle to move into profitability.

Political/Legal

        Of chief concern in this area is the liability of college age drivers. Due to the crash rate of teenage drivers, Zipcar could face increasing insurance and liability expenses. Another concern is the increase of public transportation usage. Of course, this is related to the political/legal segment because of the fact that taxpayer monies go toward funding this public service. Zipcar shares the same demographic as public transportation serves. Research found that people who car share are much more likely to engage in the use of public transportation than those who do not car share. If funding to public transportation were to be cut at any point in time, then the usage of car sharing could be expected to increase, in order to cover for the existing need in that market.

Sociocultural

        Over the years, Zipcar has been considered a “counter culture” brand. Since this service is geared toward a younger, more environmentally friendly demographic, Zipcar has been able to carve out a significant portion of this major market. However, since they went public in 2008, many wonder if they will be able to maintain this image. It is possible that they could lose a “cool” factor by becoming part of the “establishment”.  Also, Zipcar has become increasingly popular with University Administrators. This is mainly due to the fact that there is growing concern for environmental sustainability among many college aged students. By doing business with Zipcar, Universities can essentially gain a competitive advantage over other Universities because, according to Zipcar, the car sharing service removes a minimum of 15 personally owned vehicles per Zipcar used. This effectively reduces CO2, and makes Zipcar an easy choice for college aged individuals.

Technological

        A major key of Zipcars service is their technological system that allows customers to access the vehicle without compromising the vehicles security. Zipcar uses radio frequency identification (RFID) technology to allow access to the vehicles when the member has set a reservation for that vehicle. Along with the added security that RFID technology provides, it also gives Zipcar the ability to track their inventory for billing, security, inventory management, and maintenance purposes. This system is referred to by the Zipcar community as the “Z3D Knowledge Center”. They also utilize a fleet management software known as FastFleet.

Global

        Globally, Zipcar has operations in Canada and the UK. Zipcar purchase a company called Streetcar Limited, and thus moved into the European market in April of 2010. The market opportunity is nearly twice as much in Europe as in North America. This means that if Zipcar can figure out how to attain economies of scale, brand recognition, and find a competitive advantage over the existing European market competition, they can begin to gain market share in the European car-sharing market.