Zipcar for Avis Budget Group

Question:

Write an essay on  Zipcar.

Answer:

Introduction

Zipcar is known as an American car-sharing organization and a supplementary of Avis Budget Group that provides automobile uncertainties to its customers. Antje Danielson and Robin Chase founded the organization, which was later purchased by Avis Group on March 14, 2003 (Zhou, 2014). Until, the institute had more than 920,000 members and it provides more than 11,000 vehicles all over the United States, France, United Kingdom, Canada, Turkey and Austria (Zipcar, 2016). 

Goals of Zipcar was to provide trustworthy and convenient transportation that would complement the others means of transportation. The management of Zipcar is responsible for offering a bunch of feasible services that cannot be operated, scaled and sustained without the help of the internet and other major technical supports (Shaheen & Cohen, 2013).  

The mission of the organization is to build a future where car-sharing organizations can outnumber car owners in most of the cities of the world (Cohen & Kietzmann, 2014). They want to build self-service Zipcars in each of the major cities of the world that would be a five-to-ten minute walk from most of the residents. The authority of the organization wants to become an important part of these pulsating communities that will include well-informed and associated citizens who will enjoy urban life and vast options of transportation.

New Objectives of Zipcar

Financial:

• Maintain a stable growth primarily in Washington D.C

• Improve returns

• Minimizing the overall cost

• Improve value for business

Customer Perspective

• To offer a competitive pricing

• To increase suburban and corporate membership along with maintaining the existing one

Internal Perspective 

• To become market leader in car-sharing industry 

• Improve and maintain excellent services

• Increase partnership

• Increase awareness among customers 

SWOT analysis of Zipcar 

SWOT analysis of Zipcar will reflect its strengths, weaknesses, future opportunities and threats that are mentioned in the below table. 

SWOT Analysis Description

The market explored by Zipcar is totally untapped

• The operations and usage of the Zipcar services are easy to use for the customers

• The technology employed by the organization is patented

• Marketing strategy of Zipcar is not cost efficient which offers competitive advantage

• Their positive connection with Ford helps them a supreme edge over the rivals

• The operations of the organization are environmentally conscious

• The network of Zipcar is well established thus online and telephonic reservations are fast

Weaknesses • Economic model of Zipcar is destitute

• The company is currently dealing with financial instability

• Launch procedures of the organization are premature

• One of the biggest weakness of the organization is its inability to leverage current resources

• The attribution rate is high

Opportunities

Market for an expedient alternative to owning vehicle is slowly but steadily improving

• The organization is entirely capable of gaining a notable market share

• The numbers of low cost and low commitment consumers are increasing

• They are already merged with one of the most famous car manufacturing organization that is Ford

Threats

• Rising fuel cost in most of the countries is the major threat to the business

• Parking cost is also getting high

• The chances are high that in the future car manufacturing organizations will tap into Zipcar’s market

• Competition is expected to become high in the car-sharing business

• Competitors will be able to get their hands on an already established customer base

• Insurance cost of the vehicles is high

SWOT analysis (internal analysis) summary:

From the SWOT analysis, it is clear that in the future the organization has definite chances to become one of the most successful cars sharing organization that might provide an intense competition to the car manufacturing companies. Besides, as their strategy is not cost effective and the customers are slowly but steadily shifting their focus on car-sharing rather than owning a car, the opportunities are also high for the organization (Liu et al., 2014). However, Zipcar was unable to start their business on a high note and lost a huge amount of financial resources in their premature launch. Therefore, it can be said that they will have to re-structure their future marketing strategies with the limited resources they have currently. On the other hand, their future business perspective also has threats with opportunities. The rising cost of fuel and expected high competition is going to hit the car-sharing market, which is also affecting the business goals of Zipcar (Clark et al., 2015). 

Porter’s five forces model

Threat of new entrants (Medium)

Car rental services are present in the market for a long time; however, the threat of new entrants in the market is medium. The hourly system introduced by Zipcar has allowed other companies to enter the new market easily as it is only required to make capital investments to develop a system that would be similar to the system of Zipcar (Shaheen & Chan, 2015). However, the unique IT system build by Zipcar helps the organization to raise a barrier of entry for the new organizations. 

Bargaining power of buyers (low to medium)

 Bargaining power in this industry is relatively low than any other industry. As the demand for this service is high, Zipcar can dictate the cost of the products (Cepolina et al., 2014). On the other hand, Zipsters is responsible for sharing the experience of Zipcar that allows them to control the quality and prices of this service.

Industry competitors 

Existing traditional car rental organizations such as Enterprise, Hertz are giving tough competition to Zipcar. However, their systems and methods of operations are yet not unique and user-friendly. On the other hand, Peer-to-Peer car rental companies such as GetAround and RelayRides that are the online-based car rental services are also there in the market to present competition to Zipcar (Mitropoulos & Prevedouros, 2014). 

Bargaining power of suppliers: (low)

Bargaining power of vendors is considered as low in the car sharing industry as a wide range of suppliers is available across the country (Kent, 2014).

Threat of substitutes

The threat of substitute in this industry is high as several organizations that offer the same services present in the market. Taxi services are quick and convenient as the services of Zipcar where customers do not need to take any membership or to give away any application fees (Nourinejad et al., 2015). Personal cars are also quick and practical while people are traveling in their own cities or countries. However, for travelers this is not an option; therefore, they will have to look for services that Zipcar provides. On the other hand, cheap Motorcycles services can also provide competition to Zipcar. 

External factor analysis summary

From the external analysis of Zipcar, it is clear that the organization has an advantage in the industry as bargaining power of suppliers and buyers are extremely low (Birdsall, 2014). However, as the prices of personal cars are increasing slowly but steadily, more and more companies are joining car-sharing industries with new features and offerings. This might provide a threat for Zipcar shortly (Ornetzeder & Rohracher, 2013). However, as the organization exists in the market from a long time, they already have the required tools and technologies to dictate the terms of car-sharing industry. 

Additional value:

The organization provides value to the environmental needs of the customers. This is why; Zipcar introduced included electric cars in 2003 with Toyota RAV4 EV. Since then, they have added Chevrolet Volts and Honda Fit Evs. Additional value: Enterprise has slowly but steadily acquired Philly-Car services, Mint Cars on-demand and IGO car sharing services that helped them to get more than 35,000 customers (Cames & Helmers, 2013).

In order to avail the services of Zipcar, one will have to activate their Zipcar by logging into www.Zipcar.con/ncsu. Then he will have to click “Reserve” and enter a six digit number on the lower left corner of Zipcar. 

This is a point-to-point car-sharing service that allows the customers to book a car 30 minutes before they want to leave (Herrmann et al., 2014).  At the end of the trip, the customers will decide whether they will keep the service or end it according to the parking rules of that city. 

Uber has maintained number one spot in the industry. As Uber is not a public company, it does not have to report its earnings. The overall revenue generated by the company is less than the investment. The company is still in the expansion phase. Although its market valuation is insanely high, the company is yet not profitable. 

Lyte $46.7 million Lyte enjoys second position in the car sharing industry. The company is a relatively a new entrant in this segment and is expanding by seeking investment from various sources. The company is not profitable yet and is expected to generate positive returns by the end of 2016. In addition, the company has increased its investment to chip in the market share of its archrival Uber in the U.S. market.

Hertz on demand $2.7 billion (Q2 The company reported a net income of $23 million. The company is constantly improving its situation in the market. The main drivers of company’s growth are cost reduction strategy that has helped the company to save $300 million in the second quarter 2015 (Firnkorn & Müller, 2012). In addition, as the company has established itself in the market and generation positive revenues, it is planning increase its market shares by investing in fleet size and entering into new markets.

Getaround $100 million (estimated) The company does not provide exact profit and revenue figures citing competitive reasons. The company has a valuation of $200 million. In addition, private investors have plowed $2 billion to increase market share. The company’s strategy is to exploit technological tools and platforms to increase its market share and redefine the peer to peer car sharing industry.   

In the above table, three financial ratios of Zipcar have been shown. The above three financial ratios are indicating the weak financial performance of the company. In comparison between the financial ratios of the company between 2 consecutive years that are 2009 and 2010, it can be seen that the EPS and the return on equity of the company have decreased from 2009 to 2010. As the EPS was lower, the shareholders and the other investors of the company became unsatisfied with their investments (Advfn.com, 2016). Due to this, the external investment started to decrease, for which the capacity of the company to adopt new and advanced technologies also decreased and as they became unable to adopt new technologies, the production cost of the company was higher than the competitors, which created big problem for the company.

In comparison between the financial performance of Zipcar with other four companies that are Uber, Lyte, Hertz on demand and Getaround, it can be said that the performance of Zipcar needs to be improved (Cartenì et al., 2016). There is huge difference between the revenue percentage of Uber and Zipcar, which indicates that Uber is much financially stronger than Zipcar. At the same time, the market valuation of the company is also very high than Zipcar. On the other side, the new entrant Lyte, has also performed good along with the other two. At the same time, if the financial ratios of Zipcar is noticed then it can be seen the return on equity of the company was negative and the P/E ratio and EPS was much lower, which indicates lower revenue and profitability of the company (Cohen & Kietzmann, 2014).

In conclusion, it can be said that the management of Zipcar needs to adopt new and advanced technology. At the same time, the company also required to improve its current market strategy by decreasing the fare of the car. Otherwise, the company is going to face more difficulties in the coming financial years. 

Recommendation

From the study, it is clear that the organization is doing good in almost all of the business areas. However, as the competition is increasing in the market, they will have to target different target markets along with current segments. Different types of the can are used for the new target segment. For that new target market, the organization can aim for corporate markets and can offer bigger vehicles for corporate uses. 

Three alternative strategies 

Pricing: It is quite difficult to acquire the services of Zipcar if a person is looking to get a car for some hours only. The service only looks cheap if a car is taken for days. Therefore, most of the customer would prefer to have regular rental cars. Therefore, it is recommended that Zipcar should manage their pricing strategies to acquire more customers.

Changing Global strategy: Zipcar strongly believes that their approach is universal and that is why they are investing in foreign markets continuously. However, their approach is considered as risky as they have a very strong set of core principles bad values (Herrmann et al., 2014). Therefore, it is recommended that they should change their global strategy by making changes in their organizational structure and culture.

Social networking strategy: Social networking sties have become a primary tool for business organizations to strengthen their market position and to develop amicable customer relationship (Cohen & Kietzmann, 2014). Therefore, Zipcar should also focus on its social networking strategies such as giving away discount coupons and gifts through Facebook and Twitter.

Among these three strategies, it is necessary that Zipcar must change their organizational structure in the first place before implementing any other global strategy. If their organization culture is not flexible, they will not gain any success in the global market.

Conclusion

In the end, it can be concluded that in spite of charging a little bit higher than its competitor's charge, Zipcar is technologically stronger and is providing better services to its customers. However, the market of the car-sharing industry is changing rapidly; therefore, the authority of Zipcar will have to improve its technology (R&D) and infrastructure in order to lead the market of car sharing.

References

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