Zipcar: Refining the Business Model
Zipcar: Refining the Business Model
Zipcar needs additional funding if it hopes to survive and expand. In order to gain additional funding they would have to bring in there best arguements to why they should be funded by outside investors. On pages 1 and 11 it states that Chase needs to work on a pitch that will get investors to invest. In other words, she needs to look at revising the current business model so investors will want to buy in.
Basic Issues: Lack Of Experience with start ups and cars has led many investors to dismiss them. Overhead is growing faster then she anticipated, parking and fuel fees are more expensive than expected, which increase the need for additional funds. Not ready to open. The technology was not perfect; not all the parking deals negotiated. Make a mistake in finding the wrong guy to be president, Chase needs to think out ideas to let him go. * Management is unbalanced; Chase is committed full time, while Danielson is only part-time (but they share ownership and profits) * Venture may not be big enough (offer enough return) to attract sophisticated investors * “Daily max pricing” means that costs continue to incur while billable revenue does not; cars per member is actually less than predicted because of this usage pattern. Don’t forget to take a close look at the appendices.
Urgency/Importance: It is very urgent as it is the end of September and she needs an effective presentation at the Springboard conference that takes place at the end of October if she hopes to raise additional funding in Zipcar. So the urgency/importance level is Four.
Decision Criteria: (Getting a plan B in business, we need to identify an idea to pursue. Taking the leap, we have to figure out the analogs, antilogs and some judiciously chosen. The market was growing without much marketing in Europe, individuals were most likely hearing about this from personal experience being spread. This is a good arguement because it means the idea is working and spreading through potential clients.
The U.S market was barely touched, alot of people took public transportation, this could mean more individuals would want to take advantage of this service in metro or rural areas
In order to better serve customers, Zipcar would have to develope so sort of technology to admit only the admitted driver to the car and also capture data usage.) All these content seem like implementation. Yes, it does.
Is the Zipcar profitable? Is the program environmentally friendly? Is the technology perfect and improved now? Is there reduction of variable cost and overhead cost? Is the customer satisfaction level high or low? Is there good quality of management?
These sound like things the investors will be considering in making their decision; however, Chase will have very different criteria in deciding which alternative solution to pursue to solve the immediate issue. What insight does the assigned article give you?
(Risks with this issue:
* Competition has already been found in three different companies in North America (different between Zipcar and the competition is that Zipcar bases their company motto with it has an environmental impact, rather the cost and convenience. ( this could target more of the green friendly target market) * Competitition with car manufacturers and car rental places could always be a problem, if they see there is high demand for this service and if it is profitable. ) This part can be put in the basic issue, but not the decision criteria. Risks are good to identify as part of decision criteria; however, there are other important factors that Chase needs to consider. In general, all of them have to help her revise the business model. Alternatives:
1. Environmental Impact of this type of service. They are taking a different viewpoint on the way they are marketing there company, rather then saying its cost efficient and conveniant. This is a big issue now a days especially in north america. So what is the suggested alternative here? What action are you suggesting Chase take? 2. Focus on the reduction of variable cost and the fuel expenses. Improve technology, and develop business in Boston first, if it is running good in Boston. Then expand market into other cities. At the same time, Chase should think out an approach to let the wrong person go as soon as possible. This is on the right track, but there are a number of other specific issues that could be fixed in the business model, too. 3. Improve the management knowledge and qualification, and hire the experienced and expertise person. After develop North America market, try to expand the markets in East Coast and Midwest as soon as possible. Do you mean that she should put off tryingto get investment now altogether, and start fresh with the help of new management? Be specific. Remember all of your alternatives must reasonably address/solve the immediate issue. Chase only has a month. Missing Information:
* Is there a form of technology out there that can help strive and grow the company? * Ways to that Zipcar can improve variable costs and expenses Some of this is indicated pretty specifically in the appendix. Assessment of Alternatives:
1. Pro: Environment is a hot topic these days, so influencing the fact that they are trying to keep a green viewpoint with there service would a benefical growth factor for the company. Con: Because the market is small right now for this service, it may not been taken seriously as an effective green friendly service, some individuals may think they are just green washing because there target population is not that big. 2. Pros: Reduction of expenses may lead to the profitable operation. And improvement in technology will made the business process smoothly and increase the customer satisfaction level. Pilot approach in developing market helps save costs and accumulate experiences. Finally, letting the person go as quickly as possible will cut the losses of zipcar. Cons: The is difficulty in carry out this approach. And it takes long time. The investors cannot see the good performance of Zipcar immediately. Then it will increase the difficulty of raising fund. 3. Pros: Dissipate suspicion of management’s qualification. Then investors will have more confidence of zipcar. Use their good performance to persuade investors to do more investment. Cons: There will be more risk in developing market in such a high speed.
Selection of Preferred Alternative:
The second alternative is preferred. Though alternative three is good and in time to persuade the investors to invest more money, it is more risky. Alternative two is perfect in solving zipcar’s current problems and improves the company’s operation performance.
Assumptions: * One assumption with alternative two would be that gas expenses stay favorable with the amount of money invested into that portion. * Anything can go wrong with a vehicle, so if you were going to go with this alternative, you may not be factoring in that many things can go wrong which can sky rocket expenses * Assuming that Zipcar can come up with a new technology that out does the compeitition Action/Implementation Plan:
1. In the short-term, Chase focuses on drafting good presentation to investors in order to raise more funding to support company’s operation. Let the wrong person go as soon as possible. At the same time, try to consult expertise person. 2. In the mid-term, find the possible approach to reduce variable and overhead cost. And develop market in Boston. Use survey to collect the response and the performance, and decide whether to expand to other cities or not. 3. In the long-run. Keep good, stable performance of company, and earn the trust of investors. 4. After half year implementation. Collect datas to measure the feasibility of the plan. If this plan is not good, then Chase should try to think out plan B, plan C, until they get onto the right way.
Remember that you have to implement this plan in a month, in time for Chase to present. So, really, your task is to create a Plan B for the business model that will sole the basic issues he has such that investors will buy in. You must address the immediate issue in your recommendation.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 15 October 2016
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