Zip Car Case
Q1) Would you like to pitch Zip Car? Why or why not?
I like to pitch Zip Car. The most important reason is that Zip car is directly targeting niche market in the U.S as a pioneer. That is, it can give competitive advantages – new, low-cost, convenient alternative – which is differentiated from having his or her own vehicle and existing rental car service. To be specific, users have to go to a rental office to get a rental service, and the users have to pay at least a daily fee for a few-hour service. This gives people living in urban area little incentives to use the rental car service in aspect of time and cost. In contrast, it is attractive in that users pay the cost per time of usage and the company gives high accessibility to cars using innovative technology.
Historically, there were also reference business models in Europe; there were more or less 200 car-sharing organizations in 450 cities in Europe that were growing rapidly (30% annually), which implies a considerable possibility of its business success. In addition, the U.S market is large enough to start a car sharing business; 66 million Americans lived in the urban areas, and 20 million Americans used public transportation to get to work, all of whom can be a potential customers if Zip car directly satisfies their needs. Based on the facts, Zip car tries to select cities with similar conditions in Europe as candidate markets.
Q2) What do the data from September say about how the business model is playing out in practice? Do the data give you comfort or concern?
At the variable cost level, lease costs were a bit higher than anticipated – $ 4,800 per vehicle per year. It was because of the risk premium asked by car companies. They thought Zip Car was a bigger risk than they though because Zip Car was growing. Parking and fuel cost were also higher than expectation. At the fix cost level, overhead was $