Zipcar Case Study

Zipcar Case Analysis

Zipcar, Inc. is a provider of car sharing and car club services. The company offers transportation alternative for individuals, businesses and universities. They are in the car sharing industry, which means that customers are able to gain the benefit of private vehicle use without bearing the costs and responsibilities of ownership. This analysis describes the general environment, the industry itself, the main competitors of Zipcar, an internal analysis of Zipcar, and finally recommendations for Zipcar to pursue.

General Environment

Technology: As technology continues to get better and better, the industries that use it will continue to grow in the way they operate and deliver value to customers. The advancement of the internet is a huge success of many marketing campaigns and startup companies as well as a main component in how companies communicate with their customers. For instance in the car share and rental industry, a customer can reserve a car, and drop it off without ever having to talk to a human or see one face to face. It can all be done on a computer of wireless mobile device. Radio frequency technology has also allowed companies to use radio frequency identification (RFID) technology to gain an abundance of information about their products and the uses and whereabouts.

Demographics: Individuals attracted to car sharing are generally residents of dense urban areas where public transit, walking, and cycling are popular transportation options, parking is difficult or costly and residents do not necessarily require cars to go about their daily activities. Over 80% of North America's carsharing membership is comprised of people who live in this residential demographic, followed by significantly smaller percentages in business, college, and low-income groups. Car sharing is becoming more and more attractive to urban citizens as opposed to rural or suburban citizens because of the infrequent need for a car of their own. The increasing cost of car ownership is starting to seem like too much especially to people like Manhattan residents who only need a personal vehicle once or twice a month.

Economics: The failing economy has hit everyone in some way or another an the car share industry is no different. Depreciation costs have greatly raised making things lose their value much faster. Large businesses are not able to give some of the same discounts they once were able to give and smaller companies are feeling the effects of economies of scale. Car manufactures in general have been in hard times causing manufactures to raise prices. Space availability in densely populated cities is also becoming scarcer, causing price increases for rent on building and parking.

Political/Legal: One of the few legal issues pertaining to the car share industry is car insurance which must be paid for any vehicle. Many of the target audience for car share companies is younger people, which have statistically shown to have a greater chance of being in an automobile accident.

Sociocultural: More and more people are starting to become enviormentally aware and starting to change their habits and attitudes. Cities are becoming more populated making traveling an expensive and hassle filled task. Many people use public transportation or other alternatives to a personal vehicle. Many people are also walking and riding their bikes, making use for cars obsolete the majority of the time. Many hybrid cars and flex fuel cars are now being produced because they are better for the environment, which is a popular trend these days.

Global: Car sharing became popularized in Europe in the mid-1980s and by the mid-1990s this interest had migrated to North America, with start up operations in several major U.S. and Canadian urban cities. Worldwide there is a trend of preservation, which is causing many people to turn to more cost effective and environmentally friendly options. Many cars that are sold and purchased in the US today are foreign, such as Toyota and Honda, two major compaies that saw supply shortages after the natural disasters in Japan. Events such as this can cause problems for companies who rely on these manufactures.

Industry Analysis

Threat of New Entrants: There is a low to moderate threat of new entrants in the car share industry. Although it does take a large amount of capital to start and run a company that owns a fleet of hundreds of thousands of vehicles, the idea could become more intriguing to already established rental car companies, dealerships, or other companies with large amounts of capital or players who are already established in the auto industry. Economies of scale can also play a huge part in the success or failure of a starting company and in the automotive industry economies of scale can ruin a company with low capital.

Supplier Power: Supplier power is obviously high in the car share industry. There are very few car manufactures to choose from and even fewer who can supply you with reliable and affordable cars. Car manufacturers can choose who they do the majority of business with and can charge what they please for the cars. Suppliers can manipulate the smaller companies with economies of scale, which leaves little options