Zipcar case analysis


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Zipcar case analysis

  1. 1. Andrew Olsen ZipcarCase Analysis
  2. 2. 2 Zipcar is a car-sharing company whose mission is to make it as easy for cityresidents to get behind the wheel of a car as it is to get a coffee or paper. This was not thefirst car-sharing business model, but it was a new concept in the U.S., which meant thatthere was plenty of opportunity and growth potential serving this new market niche, theurban, car-less residents in the U.S. Members could get a car without the hassle havingto pay for insurance, buy gas, or try to find parking on city streets. Zipcar was making astrong case for city residents to not own a car depending of course on how much theyactually drove. Zipcar’s goal was to provide reliable and convenient access to on-demandtransportation, complementing other means of mobility ( They offer a viableservice that would not be possible to build, operate, scale, or sustain without the Internetand other technological infrastructure. (See Appendix A) In addition, Zipcar has built asense of community with its members through an on-line newsletter and listserv (Russel,2003) along with their grassroot, almost simplistic marketing strategy. This also helpedthem established a strong brand image. Technology, brand image and communicationplay a large role in Zipcar’s strategy. Zipcar was interested in building a real company with real long-term growthpotential. They had ambitious targets, but established a realistic strategy and did not overextend itself. They started in Boston and have now expanded to five other states. Byestablishing themselves in the Boston they created a foundation on which they couldexpand. During this time Zipcar was a growth business and a majority of what funds it hadwas invested in developing its technology, which was essential to the business. The
  3. 3. 3remaining funds were invested in creating an identity and building the Zipcar brand. Thisnew service faced very little actual competition in its target market, Boston, and wouldnot expand until the business model was proven and established. At this point Zipcar waslooking to increase revenue productivity through enhancing its capabilities and providingits customers with convenience and cost savings while appealing to their environmentalsense. By the end of 2000 Zipcar had over 400 members and 97% of their trial membersbecame full members (Hart, 2002) along with excellent projections. From the customer perspective, Zipcar’s market share is college-educatedurbanites that drive less than 6,000 miles a year. As already mentioned, Zipcar’scustomer acquisition continued to increase and more importantly they were retainingthem. These customers became permanent members because Zipcar was more thanmeeting their needs. It was projected that they would achieve gross margins of 25%(Hart, 2002). Furthermore, Zipcar had an excellent image and reputation and establisheditself as a progressive and socially responsible company, which only added to its strongcustomer position. Zipcar’s internal process was predominately based on its technology. If itsinvestment in their technology was successful there was an excellent chance that they toowould be. Their technology allows Zipcar to provide quick, quality, convenient serviceto its customers. In addition, as demand increases, Zipcar has made sure to have enoughcars in order to maintain customer satisfaction. (See Appendix A) On the learning and growth perspective, Zipcar must continue to maintain itstechnological leadership because it is the foundation of its business. This is why its R&Ddepartment is so important. There were some initial difficulties with their R&D and
  4. 4. 4management teams. However, Zipcar amended the problem after they realized they didnot correspond with its strategy and corporate culture. Zipcar’s Balanced Scorecard willbe expanded on further in Appendices B, C, D, and E. Zipcar’s strategy has been quite successful. Currently, it has more than 10,000members and 250 cars in the Boston, New York/New Jersey, and Washington D.C. areas,with plans of continued expansion (Grimes, 2004). They have entered into severalpartnerships in its markets including several universities, such as Harvard, University ofNorth Carolina, and George Washington University. The fact that 98% of Zipcar’s usersare on college campuses and is becoming an integral part of commuter choice (Williams,2004) was key to partnering with these schools. These partnerships, specifically with the universities have been a win, winsituation for both parties. They have provided Zipcar with free/cheap parking, which hasbeen extremely valuable because one of its greatest hurdles to improved returns (ROI)has been the cost of parking. In addition, these partnerships provide them with free ordiscounted promotions. Zipcar has had a frugal marketing budget and has beendependent on basic marketing techniques and word of mouth promotions. The fact is thatover 40% of those who have joined Zipcar have heard about them from friends andsatisfied members (“The Fast 50:,” 2002). Zipcar has been the choice of partners becauseof its successful track record, user-friendly technology, and advanced web-basedreservation system, which continues to add to its success. Zipcar is less about transactions and more about establishing a village ofcustomers with a strong sense of community spirit (Kennedy, 2003). It is this sense ofcommunity that is very important for Zipcar. They foster this sense of community though
  5. 5. 5get-togethers in local markets for regional members so they get to know each other.Since roughly 15-20 members share the same car, members have a strong incentive totreat the cars as if they were their own (“The Fast 50:,” 2002). There is a greater chanceof this occurring as members get to know each other. Zipcar members also promote theservice at work and in their neighborhoods. It is this positive word of mouth and sense ofcommunity that is critical to Zipcars growth & success. At this point the Boston market is the only one returning a profit. However, expected to be returning a profit within a few months, but New York will take longerbecause of higher costs. As it continues to grow and develop, Zipcar will only becomemore dominant especially if you compare it to the success of similar car-sharing servicesthroughout Europe (currently in 450 cities) ( Adopting the car-sharing model to the American marketplace was a challenge inand of itself. Zipcar had to make fundamental improvements to existing models whilealso creating a market for a product that had never been offered in the U.S. It has beenquite successful in implementing its strategy, but there are some changes that should bemade in order to increase the success rate of their strategy. First, when Zipcar was attempting to raise the money for its business, Chaseshould not have been so presumptuous about reducing risks. The business conceptworked, but jumping the gun before receiving the necessary and sufficient financialbacking was foolish. In their attempt to reduce risks, Zipcar accrued unnecessaryexpenses, which could have left them dead in the water. This possibly may have sloweddown the potential success of this business venture. Zipcar would have been wiser toraise the required capital and then proceed to sign the contracts and build the
  6. 6. 6infrastructure. If they had waited, Zipcar could have increased its coverage quicker. Themore vehicles and locations Zipcar could support, the more accessible this new servicewould become to potential and current customers allowing for faster growth potential. In addition, when they where ready to close on the $1.3 million funding thereshould have only been two lawyers involved with this deal; one from Zipcar and the otherfrom the investor group. As mentioned in the case, because of all the lawyers involved ittook over two months to finalize the deal, which also may have delayed the developmentof this business. Zipcar should have also realized that they needed to hire a president that fit intotheir corporate culture; one that followed and believed in their corporate strategy. Thisperson should have been innovative and had experience in dealing with a start-upbusiness so he/she would understand the challenges that they present. By hiring someonethat they believed had the appearance of upper management and would address theconcerns of credibility to the investors was a poor choice. They had to eventually firehim from his position as president of Zipcar because he did not correspond to their visionand culture, which lead to more questions about Zipcar’s stability and potential to besuccessful business. Potential investors look for and want stability from their investment,but this decision lead investors to believe that there was more unnecessary risk involvedif they were to invest into Zipcar. Basically, when Chase took over, Zipcar was startingfrom scratch again because of their inconsistency and Chase’s inexperience. If they hadapproached this correctly, Zipcar may have avoided another delay to its potential success. Zipcar’s mission and strategy will be key to developing its BSC because that waythey will know how to approach making it a reality. Its mission is to offer members
  7. 7. 7affordable 24-hour access to private vehicles for short-term round-trip use as an efficientmeans of complementing the public transportation network. Zipcar’s vision is for everyurban resident to have a transit pass and a Zip Card, which should meet the transportationneeds of every urban dweller. There are four perspectives that will need to be evaluated.Financial Perspective:  Maintain steady growth, specifically in Washington D.C  Improve Returns  Reduce Costs  Increase Business Value(See Appendix B)Customer Perspective:  Competitive Pricing  Maintain & Increase Residential & Corporate Membership(See Appendix C)Internal Perspective:  Car-Sharing Market Leader  Maintain Service Excellence  Increase Partnerships  Increase Customer Awareness  Maintain Social Conscience & Community Involvement(See Appendix D)Innovation & Learning Perspective  Car-Sharing Market Leader  Maintain Superior Technology (R&D)  Maintain Infrastructure for Long-term Growth  Improved Communication of Zipcar’s Strategy(See Appendix E) These goals will be elaborated in Appendices B, C, D, and E and show howZipcar’s strategy can be evaluated. If positioned correctly, there will continue to be agreat demand Zipcar’s service.
  8. 8. 8 References:www.Flexcar.comwww.ZipCar.comGrimes, Brad. (2004, February 17). “Leave the Driving To Zipcar.” PC Magazine. Retrieved March 20, 2004 from PC Magazine’s Homepage on the World Wide Web:,4149,1476477,00.aspHart, Myra. (2002, September 18). “Zipcar.” Harvard Business School case 9-802-085.Kaplan, Robert S. & Norton, David P.; (1996, September). The Balanced Scorecard: Translating Strategy into Action. Harvard Business School PressKennedy, Randy. (2003, October 10). "Taking the Co-op Out for a Spin: New Car Rental Idea Depends on Courtesy of Strangers." New York Times, Metro Section. Retrieved March 18, 2004 from MdUSA database ABI/Inform on the World Wide Web:, Scott. (2003, May 26). “NEW CHAIRMAN, CEO SHIFT GEARS AT ZIPCAR.” The Boston Globe, Section: Business, pg. D1. Retrieved March 18, 2004 from MdUSA database LexisNexis on the World Wide Web:, Toni. (2002, November 11). “New spins on work/life balance.” Network World, Volume 19, Issue 45, pg. 31. Retrieved March 22, 2004 from MdUSA database ABI/Inform on the World Wide Web:
  9. 9. 9“Leading Business Organization, Springboard Enterprises, Reports Surge in Activity for Emerging Companies.” (2003, November 19). Business Wire. Retrieved March 19, 2004 from MdUSA database LexisNexis on the World Wide Web:“Metros SmarTrip Card and Zipcar Now One.” (2003, June 18). Business Wire. Retrieved March 23, 2004 from MdUSA database LexisNexis on the World Wide Web:, Mark (2002, December 27). “Weathering the storm.” Boston Business Journal, Section: Business Strategies. Retrieved March 22, 2004 from Biz Journal’s Homepage on the World Wide Web:, Franklin R. (1999). Entry Strategies For International Markets, Revised & Expanded. Lexington Books.Russell, Belinda. (2003, September). “From Zipcars to water wells - Communication plays a role in urban design.” The Communicator, The Newsletter of the School of Communication, Emerson College. Retrieved March 22, 2004 from Emerson College’s Homepage on the World Wide Web: =1124Swanson, Jessica. (2003, November 12). “Architects, engineers, others drive Flexcar growth.” Daily Journal of Commerce. Retrieved March 17, 2004 from MdUSA database ABI/Inform on the World Wide Web:
  10. 10. 10“The Fast 50: Trendsetters" (Zipcar #31). (2002, March). Fast Company. Retrieved March 22, 2004 from the Fast Company Homepage on the World Wide Web:, Nakisha. (2004, February 3). “New Car Service Zipping to a Lot Near You.” The Hilltop. Retrieved March 22, 2004 from the Hilltop Homepage on the World Wide Web: Car.Service.Zipping.To.A.Lot.Near.You-596001.shtml“Zipcar Expands Car Share Service Into B2B. MIT, Mass General Hospital, NYC Chambers and RE Developers Sign On.” (2002, November 27). Business Wire. Retrieved March 20, 2004 from MdUSA database LexisNexis on the World Wide Web:“Zipping Away From the Heat of Another Summer in the City is Now Fast, Easy and Affordable. Zipcar Provides Freedom and Mobility for Short Escapes.” (2002, May 23). Business Wire. Retrieved March 18, 2004 from MdUSA database LexisNexis on the World Wide Web:
  11. 11. 11 Appendix A:(Kistner, 2002)
  12. 12. 12 Appendix B: Financial Perspective Objectives Measures Targets InitiativesMaintain steady growth, Market Share Increase Market Greater Marketspecifically in Share 7-10% in Awareness throughWashington D.C. total market per Extensive/Mature month and Promotion maintain at least a 2-3% growth Maintain its ahead of its Technological & Service competitors LeadershipImprove Returns Revenue Mix Increase Revenue Greater Market (Corporate/Residential 3-4% Awareness through Members) Extensive/Mature Promotion Revenue Growth Maintain its Technological & Service Leadership Partnership GrowthReduce Costs Improved Returns No Specific Maintain its Technological & Service Leadership Partnership GrowthIncrease Business Value Related to Whole BSC Related to Whole Related to Whole BSC BSC Currently Zipcar is the car-sharing market-leader and faces no real direct competition in any of its markets except in Washington D.C. where it competes directly with number two car-sharing company, Flexcar. Flexcar’s membership growth averaging 7% a month (Swanson, 2003) and it needs to be Zipcar’s goal to exceed their competitor’s growth, especially where they directly compete with each other without sacrificing quality and service. Zipcar’s estimated/actual returns have been impressive since it was incorporated. Through a diverse mix of residential and corporate members, extensive partnerships, and increased marketing efforts returns will continue to improve. Its revenue increased 2.7%
  13. 13. 13in 2002 and it was expected to triple in 2003 (Micheli, 2002) and it raised $2 million justin the third quarter of last year (“Leading Business…,” 2003). Their impressive market share, improved return and reducing costs are directlyrelated to Zipcar’s technological and service leadership and extensive partnerships. Ashas been mentioned, it is Zipcar’s successful track record, user-friendly technology, andadvanced web-based reservation system, that has been the basis for its success and thathas also made it an attractive partner. Already, Zipcar has partnered with severaluniversities, Boston, D.C., and Westchester’s Metro systems and senior centers to havereserve parking spaces for free or at discounted rate, which is its greatest expense anddirectly affects its hourly and per mile rate. Increasing Zipcar’s business value is a combination of all four BalancedScorecard perspectives.
  14. 14. 14 Appendix C: Customer Perspective Objectives Measures Targets InitiativesMaintain Competitive Customer Retention Prices at or above Partnership GrowthPricing & Satisfaction their competitors Reduce CostsMaintain & Increase Market Share & Monthly Active PromotionResidential & Corporate Member Retention MembershipMembership Growth of 7-10% Continue Zipcar Community (Customer Relationship) Maintain Social Initiatives Zipcar customers love the service and many have given up their own cars and now use Zipcar exclusively or decided against buying a second car. An internal Zipcar survey revealed that 15% of their customers had sold their cars since they began using the service and 40% had abandoned plans to buy cars (“The Fastest 50:,” 2002). This is specifically because Zipcar is less expensive than owning or renting a car because members do not pay for insurance, maintenance, parking or gas. Research conducted by AAA shows the average monthly costs associated with car ownership in urban areas is a total of $700 a month whereas a typical monthly Zipcar member bill for 15 hours of driving during three sessions is $100-$150 (“Zipcar Expands…,”2002). In addition, for those unable to purchase a car, Zipcar increases mobility and connectivity among transportation modes leading to more efficient travel. Zipcar is priced a little more than its competitors, but its technology, service, convenience, and a strong sense of community spirit amongst its members have separated from the rest. Members feel like they are part of the “Zipcar Family.” During past snowstorms, members have volunteered to dig out buried Zipcars. It has sponsored happy hours, pizza parties and bowling nights. Zipcar has even delivered turkeys for the
  15. 15. 15Salvation Army around Thanksgiving with the help of its members (Zipping Away…,”2002). Furthermore, Zipcar has a positive effect on air pollution because car-sharingvehicles are usually more environment friendly and they are already starting to add“clean fuel” and hybrid vehicles to their fleet helping to reduce pollution. Thisenvironmental responsibility is another attractive incentive to current and potentialmembers.
  16. 16. 16 Appendix C: Internal Perspective Objectives Measures Targets InitiativesCar-Sharing Market Share & Revenue Remain Top Continue to maintain andMarket Leader Growth car-sharing improve on its successful track company record, user-friendly technology, and advanced web- based reservation system Market PromotionMaintain Service Customer Retention & No Specific Continue Technological &Excellence Satisfaction Service LeadershipIncrease Cost Reduction No Specific Continue to maintain andPartnerships improve on its successful track Market Promotion record, user-friendly technology, and advanced web- Increased Parking Facilities based reservation systemIncrease Customer Revenue & Market Share No Specific Market PromotionAwareness Growth Grow Zipcar CommunityMaintain Social Great Promotion No Specific Environmental ResponsibilityConscience &Community Improved Market Share Remain Active in theInvolvement Community Improved Brand Identity Much of what has already been mentioned in the appendices is also directly linked to Zipcar’s internal perspective and this is the purpose of developing a Balanced Scorecard. All perspectives are linked to each other one way or another. In summary, Zipcar is in continued negotiation with many other potential partners, such as other universities, co-opts, transit systems, and so forth. Environmental responsibility is a main aspect of all car-sharing business and Zipcar will continue its community involvement because that is an essential piece to its “Zipcar Family” strategy. This also will further improve its already positive brand image and identity. Furthermore, Zipcar’s technology and convenience has lead to its initial success and will continue to lead to further improvements in its service and market leadership.
  17. 17. 17 Appendix D: Innovation & Learning Perspective Objectives Measures Targets InitiativesCar-Sharing Market Market Share & Remain Top car- Continue to maintain andLeader Revenue Growth sharing company improve on its successful track record, user- friendly technology, and advanced web-based reservation system Market PromotionMaintain Superior Competence & No Specific Invest in R&D &Technology (R&D) Awareness of Infrastructure TechnologyImprove Infrastructure for Employee & Customer No Specific Employee Training &Long-term Growth Satisfaction Feedback Market Share Invest in Infrastructure ROIImproved Communication Employee Everyone will Regular Meetings &of Zipcar’s Strategy Competence & Value Clearly Status Reports to Discuss Understand the Position & Direction Zipcar’s Strategy of Zipcar & Vision Learning and growth is an intricate part of Zipcar remaining a car-sharing market leader. Any company that intends to remain a market leader must be innovative and continue to learn and grow to meet the challenges an ever-changing market presents. Zipcar’s technology has been the basis for its success, but as the market changes they will have to continue to improve its technology (R&D) and infrastructure. By using advanced communication technologies Zipcar economically provides rental cars on an hourly basis without the need for a central garage or in-person reservation agent. Zipcars unique web-based reservation system provides secure, keyless entry to all of its cars, and its on-board computer system tracks all billing and usage information without the need having paper work or logs to fill out. (See Appendix A for diagram explaining this
  18. 18. 18process) In addition, it has recently successfully integrated D.C. Metros SmarTrip cardtechnology with Zipcars and upon approval from WMATA, Zipcar members who carryboth SmarTrip and Zip Cards will be able to unlock their vehicles with either card(“Metros SmarTrip…,” 2003). This is just one brief example of the many technologicalinnovations Zipcar has and is developing. The employees at Zipcar are at the core of this continued improvement, whether itis in the boardroom or on the tech and service front. They are the gears that make thecompany run and in order to operate efficiently and effectively it is necessary to haveopen lines of communication, especially regarding Zipcar’s strategy and vision. It isimperative that everyone is on the same page and there is critical analysis of its goals.Open dialog, constructive criticism, and continuous feedback will enforce and strengthenZipcar’s strategy and vision. Zipcar has been able to do a lot with a small team of 18 employees because itscorporate culture is incredibly adaptive (Kirsner, 2003). They have learned how to runthe business and make the best use of technology and are focused on learning how tomarket their service more efficiently (Micheli, 2002). Moreover, Zipcar’s strong brand,ability to understand their customers, strong established relationships with their members,along with continuously testing their marketing message and its means of delivery willprove to be successful for Zipcar and further its market dominance.