Tme 3013 - Zip Car Sharing

Case Study

Zipcar

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TME 3013 – Entrepreneurial Finance

Jieming Zheng

3503015

September 23, 2015

Outline

Car-sharing is an innovative model of car rental where people rent and use automobiles for short periods of time, often on an hourly basis. They are really attractive to customers who only use a vehicle occasionally, as well as others who want to try different types of car. Customers can access this service easily, reserve a car online or by phone, go to the parking spot, use electronic key card to open the doors, then drive off. Zipcar is one of the car-sharing company specializing in convenience and cost savings. Zipcar look forward to a future where car-sharing customers outnumber car owners in main cities around the globe. Most citizens of these cities will live within a ten-minute transportation of a self-service Zipcar. And Zipcar will be an integral component of these energetic communities of connecting people. The mission of Zipcar is to create simple and responsible urban living.

As with any new idea, car-sharing confronts challenges in getting an important position as an alternative transportation mode. One of the most fundamental obstacles is how to attract enough investments from potential investors. In the case, we can see that Robin Chase, CEO and cofounder of Zipcar, was looking for investments. This case study will offer an analysis and recommendations as to how Zipcar could be successful.

Analysis and Recommendations

Experience play a critical role in venture establishment and development. The two founders, Chase and Danielson, are both well-educated with great working experiences. Chase has MBA in applied economics and finance. She had worked over 13 years in different companies. Danielson had worked as car salesman for two years. All these precious experiences turn into the foundation of Zipcar. According to their respective areas of expertise, the two founders took charge of different tasks. Chase researched the market and Danielson built car industry relationships. Chase’s experience made her finish the market research and come out the business plan for a U.S.-based car sharing venture. They tested the feasibility of this business plan with a group of trusted advisors, then started the financing process. A wide breadth of experience offered Chase and Danielson the chance to start up Zipcar.

Pricing was one of the key points to Zipcar’s success. Most operators have introduced more ingenious pricing mechanisms, in order to make car-sharing services financially attractive to as many people as possible. Excellent pricing mechanisms can attract more customers and keep them in the services. Chase’s price structure provided a relatively low hourly charge and charge of per mile driven. It was really attractive that customers probably choose a company with lower rates. But Chase compared her pricing model with other companies’ model, $300 annual fee was too high that it became a barrier of potential customers. Then Chase decided to lower the annual membership fee and raise a bit on the hourly charge. These changes are necessary to eliminate the threshold of high annual fee.