Eric Hoffman
Professor Rosanne Siemens
Monday, March 2, 2015
TA400 Case Study 2-2, “ZIPCAR”
Before providing my answers below, I wanted to disclose that I went a bit ‘beyond’ the
textbook. Having never heard of the company, I wanted to see if it actually existed and find out
more about it so I could answer the questions posed a little more intelligently.
1. Analyze the business model of ZIPCAR using Porter’s five forces model.
a. Potential Threat of New Entrants – I think that the potential for new entrants, at least
entrants with the same business model, is fairly low. To begin with, the startup costs are
extremely high. Having a unique and easily distinguishable brand name in this industry would
also be challenging, and to be able to transfer that identity to the web it would have to be a
single word…such a “ZIPCAR”, http://www.zipcar.com/. I also believe that they have already
established a strong market dominance by virtue of their business model, niche product, and
market presence that would be a deterrent to new entrants.
b.
Bargaining Power of Buyers – In this instance, ZIPCAR offers an onsite blog
called Ziptopia, http://www.zipcar.com/ziptopia, where members can post whatever they have to
say, and reportedly many changes and refinements have been made to the business model
based on feedback provided. Other than that, the biggest example of bargaining power comes
from frequent use in a given market area. The ZIPCAR center in Wichita, (and most other
cities), charges $9.00 per hour for rentals, or $69.00 per day. However, in Miami, (where the
rental volume is much higher), the rates can be as low as $7.00 per hour.
c.
Bargaining Power of Suppliers – Unlike most businesses, here, suppliers can do
little to influence operations. There are thousands of automobile dealers across the country
offering hundreds of makes and models of economy vehicles. If one dealer doesn’t want to offer
appropriate volume discounts another will gladly step in to fill those supplier shoes. Same with
the insurance that is included in the rental fees…if one agency or insurer tries to put the
squeeze on ZIPCAR, there are plenty more to choose from. This is one threat the company
does not really have to worry about.
d.
Threat of Substitute Products – I believe that “Zipsters”, (the term given to
ZIPCAR members), are currently required to pay an initial $25.00 “Application” Fee, and then a
$60.00 yearly “Membership” fee, could prove to be a defining negative factor that opens the
door to the Threat of Substitute Products as well as Industry Competitors. To avoid redundancy,
please see ¶ e, below:
e.
Industry Competitors – The list is small. In fact, I was only able to identify five:
1. GetAround – https://www.getaround.com/, a company that acts as a
“middleman”, and offers a unique, peer-to-peer car rental program where
private automobile owners rent their vehicles to customers that are registered
with the service.
2. RelayRides – https://relayrides.com/, same basic business model as
GetAround.
3. Uber – https://www.uber.com/, which is a taxi-based service that eliminates
rentals altogether.
4. FlightCar – https://flightcar.com/, which eliminates airport parking fees for
fliers. Basically, you ‘rent’ your car to FlightCar when you arrive at the airport,
who in turn rents it to someone else. You get a small percentage of the fee,
and do not have to pay (the sometimes huge), airport parking fees.
5. Traditional car rental agencies.
Again, while GetAround and RelayRides provide somewhat of an ‘alternative’ to ZIPCAR, I
wasn’t able to find anyone offering a truly analogous product/service. So at this point in time,
ZIPCAR really has no direct competitors. Naturally, the more successful they become the more
they’re going to have to keep their eyes focused on the horizon to spot (and overcome) invading
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Eric Hoffman
Professor Rosanne Siemens
Monday, March 2, 2015
TA400 Case Study 2-2, “ZIPCAR”
competitors, but for the time being I think they simply need to do exactly what they’re
doing…staying focused on expansion.
2. Discuss the synergy between the business strategy of ZIPCAR and information
technology.
The entire business model and strategy of ZIPCAR is IT-based from the outset. In fact, there
are no storefronts or other physical ‘locations’, other than the location where the car you are
going to rent is actually parked. Everything is done online…from joining to renting. When you
get to the location to pick up your car, there is no attendant, there is no key…you open the door
with a “smartcard”, (a “ZIPcard”), and drive away.
There is a phone number to call if you encounter a problem with a vehicle, but other than
that, all facets of the transactions involved are digital. It is no surprise that their website is
superbly designed…simple…easy…simple…and easy!
The “synergy” is simply inherent.
3. What network effects are part of the strategy of ZIPCAR? How do they add value?
In this instance, I think that the “Plentitude” at issue would equate to the number of cities
and locations served as well as the number of vehicles available. But I would take that one step
further and add rental ‘price’ to that list of effects. As explained in relation to “Bargaining Power
of Buyers”, ZIPCAR offers an onsite blog called Ziptopia, http://www.zipcar.com/ziptopia, where
members are free to post their comments and share their experiences. Moreover, it is loaded
with videos, photo ‘albums’, and links to other social media. All of this helps to ‘spread the word’,
and add value every time a new member joins as a result.
Their social strategy is to attract young urbanites through vehicles such as Facebook, (yep,
pun intended :-), https://www.facebook.com/zipcar, where they have acquired 201,912 “Likes” to
date…using lines like:
“Dude, what are you waiting for? Get wheels when you want them!”
A quarter of a million “Likes” equates to a high social value…
4. As the CEO of ZIPCAR, where is your most threatening competition? What would you
do to sustain a competitive advantage?
I don’t believe I can add anything else other than what I’ve already said in ¶ 1 e.
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