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Zipcar Business Model Essay

1.How is Zipcar’s business model different from its competitors?

First, Zipcar has a very user friendly website and app that allows customers the ability to find a car within a short distance, choose which model of car he wants, and reserve the car. When a car is rented through Zipcar, the insurance and gas cost are already included in the rental price. Other car rental companies have centrally located branches that may be far away from the customer and/or difficult to travel to. This is a very important difference since most customers are renting a car because they do not have access to a car. This makes traveling to a rental branch very difficult for a large percentage of the exact demographic targeted by rental companies. When a customer arrives at a rental branch, he may not be able to select which model he wants. He must also pay an additional fee for insurance and gas.

The biggest resource at Zipcar is its IT platform. Not only does this include a user friendly interface with the customer, it also allows the company to collect and analyze data. From these metrics, the company can see where all of its cars are located, which areas are more popular rental sites, the physical condition of the cars, how many miles the cars have driven, and which demographic is renting the cars. It can then alter how many cars are located in specific areas and whom to market these cars to.

The customers of Zipcar find value in the ability to rent a car for short periods of time instead of for an entire day. This would make many customers more likely to utilize this service. For example, if I did not own a car and wanted to go to Costco, I could rent a Zipcar for an hour. I would be much less likely to rent a car for an entire day for a simple errand like this. Zipcar also charges customers an annual subscription fee, so even when a customer is not utilizing the service, he is still adding profit to the company.

2.Discuss the synergy between the business model of Zipcar and information technology.

I do not see the business model of Zipcar and information technology as having a synergistic relationship since the business model is completely reliant on and structured around its information technology. Synergy is the sum of two agents being greater than the sum of their individual effects. Since outcome of Zipcar without its IT is zero, it can not have a synergistic relationship. I would describe this relationship as mutualistic. The classic mutualism example is a cow and the bacteria that live in its intestines. The cow can not digest food without the bacteria and the bacteria can not live without the conditions inside the intestine. Using this as a simile, the cow is like the business model that can not exist without the bacteria-like IT that it houses.

3.What network effects are part of the strategy of Zipcar? How do they add value? Like the example of the link provided, where an increase of Internet users caused an increase of websites, more Zipcar users will cause an increase of cars. In other words, if Zipcar had a small number of customers, it would only be able to afford a small number of cars. This removes the convenience of having multiple cars available within a short distance. As more customers use Zipcar, more cars can be purchased and placed in more locations. This added convenience will then increase the number of customers and so on.

4.As CEO of Zipcar, where is your most threatening competition today? What would you do to sustain a competitive advantage?

Another popular car sharing company, especially in Chicago, is I-go. I-go was recently purchased by Enterprise Rent-a-car. I-go advertises as having lower per hour rates, no annual fee, and the option to rent an electric hybrid car. I don’t feel that having a slightly higher per/hour cost and annual fee causes a loss in competitive advantage as long as these fees translate to more cars in more locations. Along with cars, Zipcar also rents vans, something that I-go does not do. In addition to vans, Zipcar could add a variety of car sizes to its fleet to meet the demands of varying usages. Since Zipcar was purchased by Avis, it should be able to purchase an assortment of vehicles at economies of scale pricing.

The biggest competitor, however, is car ownership. If the distance from a Zipcar is similar to an owned car, Zipcar should have a competitive advantage in urban areas. To sustain this, more locations may need to be created. I have also not seen much Zipcar advertising (except on the sides of Zipcars). Many people may see Zipcars driving around but have no idea what Zipcar is. They should also market heavily on the cost savings of not just the car and insurance but also the cost of parking. This is either a monetary cost (I pay $160/month) or the cost of time spent looking for a parking spot.

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