zipcar business model case study

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Zipcar: Refining the Business Model

By: Myra M. Hart, Michael J. Roberts, Julia D. Stevens

Zipcar is a start-up organized around the idea of "sharing" car usage via a membership organization. This case describes several iterations of the Zipcar business model and financial plan. These…

• Length: 20 page(s)
• Publication Date: Jan 13, 2003
• Discipline: Entrepreneurship
• Product #: 803096-PDF-ENG

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This case is accompanied by a Video Short that can be shown in class or included in a digital coursepack. Instructors should consider the timing of making the video available to students, as it may reveal key case details.

Zipcar is a start-up organized around the idea of "sharing" car usage via a membership organization. This case describes several iterations of the Zipcar business model and financial plan. These iterations include a very early version and a version developed just prior to the launch of the business, as well as data from the first few months of operations. Students are called on to analyze the underlying economics and business model for the venture and to discover how these assumptions are holding up as the business is actually rolled out.

Learning Objectives

To understand the notion of a business model and unit economics and flow through the impact of actual operating results.

Jan 13, 2003 (Revised: May 9, 2005)

Discipline:

Entrepreneurship

Harvard Business School

803096-PDF-ENG

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• January 2003 (Revised May 2005)
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Zipcar: Refining the Business Model

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About The Author

Myra M. Hart

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Zipcar: Refining the Business Model

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Product Description

Publication Date: January 13, 2003

Source: Harvard Business School

This case is accompanied by a Video Short that can be shown in class or included in a digital coursepack. Instructors should consider the timing of making the video available to students, as it may reveal key case details. Zipcar is a start-up organized around the idea of "sharing" car usage via a membership organization. This case describes several iterations of the Zipcar business model and financial plan. These iterations include a very early version and a version developed just prior to the launch of the business, as well as data from the first few months of operations. Students are called on to analyze the underlying economics and business model for the venture and to discover how these assumptions are holding up as the business is actually rolled out.

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Product details

Time period

Geographical setting, featured company, featured protagonist.

• Robin Chase (male), CEO

Zipcar Company’s Marketing Strategy and Future Case Study

• To find inspiration for your paper and overcome writer’s block
• As a source of information (ensure proper referencing)
• As a template for you assignment

Introduction

Two marketing concepts relevant to the case, analysis of the firm’s future, most important lesson/concept, reference list.

Zipcar’s initiative to provide cheap, reliable, and affordable carpooling services without necessarily owning cars is the newest invention that has transformed both public and private transport in urban centers. The firm needs to work on its marketing ethics and branding strategies, though. The next two decades will see this firm become one of the world’s leading carpooling companies owing to its appropriateness, especially in the urban areas. The most important lesson that this company offers is that people do not necessarily need to own cars to enjoy the driving experience.

Scott Griffith, the CEO of Zipcar, the world’s largest car-share company presented an in-depth analysis of how this company has tried to solve the problems of corporate ethic and the branding approach, as well as continue to expand to new markets and register new members within a short span after its launch. Zipcar’s journey, achievements, marketing strategy, and future are discussed in the discussion below.

The origin of Zipcar has a close connection to other carpooling services and companies. However, Zipcar intends to ensure that the living standards of populations, especially urban dwellers, should be improved. Zipcar became a car rental company that was about not just owning cars but also providing the driving experience to members. Fulfilling consumer needs by providing reliable and convenient rides to urban dwellers became the second pillar that drove this company to success. Fostering the brand community by creating an urban and environmentally conscious lifestyle has become an identity of this company (Hirsch, 2012).

Marketing Ethics

Explanation.

The significance of marketing ethics can hardly be underrated. It is crucial to make sure that the product advertised to the target audience meets the existing standards and requirements, therefore, posing no threat to its users. Moreover, the marketing tools adopted must prevent the customers’ data disclosure to any third party.

Application

Seeing that the entrepreneurship has not yet defined the strategy that will provide complete safety of the customers’ personal information, Zipcar’s entrance into the global economy can be viewed as ethically questioning (Pride & Ferrell, 2015).

Seeing that the current dent in the generally strong marketing strategy may jeopardize the customers’ wellbeing, it may become the foundation for the future legal repercussions. Therefore, the information system used in the firm must be updated.

Branding and product management

This trick enables consumers to identify with the company and believe that it is committed to providing what is good and resonates with their lifestyles. Particularly, its orientation is based on the urban and environmentally conscious lifestyle.

The CEO argues that the company informs, educates, and encourages its members and potential clients to make informed decisions by embracing its services (Keegan, 2009).

By developing an efficient branding strategy and creating the premises for targeting a larger audience, the company is likely to establish a strong presence in the target market. As a result, further growth of Zipcar is expected (Patel, 2009).

In light of the recent rapid growth of entrepreneurship, one may suggest that the company is likely to face a range of opportunities in the environment of the global economy. Particularly, the company may have a chance at expanding even further given the fact that it has recently been acquired by a more influential organization and carried out a merger with Fixedcars (Clifford, 2008). Seeing that entrepreneurship may target a larger audience, it will be reasonable to assume that Zipster should consider the design of a new brand image and, more importantly, a brand product that will represent it in the target market in a more accurate way.

Additionally, instead of the traditional approach of appealing to an average customer, Zipster should view the concept of segmentation as a necessity and the primary course of its further evolution. Particularly, the segmentation based on the customers’ annual income (e.g., $10,000-$20,000, $20,000-$30,000, etc.), the purposes of car renting (e.g., recreation, work-related trips, etc.), and other typologies should be considered. Consequently, customer loyalty rates are going to increase rapidly.

Since the company is already viewed as a major threat to the wellbeing of other organizations operating in the area, the competition rates are going to be very stiff. To address the issue above, Zipster should view different strategies for improving the quality of the services. For instance, the use of the Six Sigma approach, the concept of Lean Management, and the use of the TQM approach as the means of enhancing the quality of the service provision process (Kell, 2013).

Although the connection between a nursing facility and a car rental service might seem somewhat farfetched, the information represented in the case under analysis has shed some light on my future career. Particularly, I have learned that the adoption of a quality management approach that will serve as the tool for maintaining the services efficient and relevant is a crucial aspect of operating in the global economy. In other words, I will need to apply the TQM strategy to maintain the level of my expertise in nursing high.

Zipcar’s innovation adds value and vigor to the fight against environmental pollution and the desire to conquer the hassles of urban lifestyles. Griffiths and other like-minded individuals behind Zipcar’s success will leave a legacy that will impart relevant knowledge of individuals who are interested in conserving the environment and living a meaningful urban lifestyle. The future of Zipcar seems brighter as nations continue to seek ways of conserving the environment, ending congestion in urban lifestyles, and improving the standards of their citizens’ lives.

Clifford, S. (2008). How fast can this thing go, anyway ? Web.

Hirsch, J. (2012). Zipcar CEO talks about car sharing as lifestyle choice. The Seattle Times . Web.

Keegan, P. (2009). Zipcar – The best new idea in business. Fortune . Web.

Kell, J. (2013). Avis to buy car-sharing service Zipcar. The Wall-Street Journal . Web.

Patel, K. (2009). Zipcar: an America’s hottest brands case study . Web.

Pride, W. M., & Ferrell, O. C. (2015). Marketing 2016 . Boston, MA: Cengage Learning.

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IvyPanda. (2020, August 26). Zipcar Company's Marketing Strategy and Future. https://ivypanda.com/essays/zipcar-companys-marketing-strategy-and-future/

"Zipcar Company's Marketing Strategy and Future." IvyPanda , 26 Aug. 2020, ivypanda.com/essays/zipcar-companys-marketing-strategy-and-future/.

IvyPanda . (2020) 'Zipcar Company's Marketing Strategy and Future'. 26 August.

IvyPanda . 2020. "Zipcar Company's Marketing Strategy and Future." August 26, 2020. https://ivypanda.com/essays/zipcar-companys-marketing-strategy-and-future/.

1. IvyPanda . "Zipcar Company's Marketing Strategy and Future." August 26, 2020. https://ivypanda.com/essays/zipcar-companys-marketing-strategy-and-future/.

Bibliography

IvyPanda . "Zipcar Company's Marketing Strategy and Future." August 26, 2020. https://ivypanda.com/essays/zipcar-companys-marketing-strategy-and-future/.

ZIPCAR: REFINING THE BUSINESS MODEL Case Solution & Answer

Home » Case Study Analysis Solutions » ZIPCAR: REFINING THE BUSINESS MODEL

ZIPCAR: REFINING THE BUSINESS MODEL Case Study Solution

Comparison of Dec 1999 Financial Plan with May 2000 updated Plan and Revenue per day and Revenue per customer per month in September 2000

A number of factors had been changed in the financial plan for May 2000. First, the annual fee of $ 300 was reduced to $ 75 because most of the customers did not wanted to pay anything before the serviced are provided and this was a hurdle for them to use the services. Chase implanted the tiered pricing structure and he had increased the hourly charge from $ 1.5 per hour to somewhere between $ 4.5 and $ 7 per hour. This was dependent on the parking costs within the area.

Other differences between the two financial plans is the parking costs that were decided to be $ 600 per car per year, which in initial model were 0. The assumed attrition rate was also increased to 15% from 5% based on more detailed analysis conducted by Chase for the Boston residents. Lease cost and access equipment costs were also increased to $ 4400 per vehicle per year and $ 500 per vehicle per year respectively. These changes were made to make the pricing more favorable for the customers and this is evident by the decline in the revenue per Zipcar in one day

Justification of $ 1.3 million Investment and VC ownership

The Zipcar membership data in exhibit 8a shows that the number of the members has been growing in each month. Now, Chase wanted additional funding of $ 1.3 million to prove the market’s viability of the business model of the company. The most important thing is to complete the development of the technology as it is still partly completed. Through this, Chase would be able to prove the business model and also better understand the demand in the market.

The user profile in Boston showed that the membership base would grow in 10,000 in 5 years’ time and then the same business model could be implemented in other cities. The funding would also help Chase to increase the network effects by the increase of the usage within the single market. The variable costs as revealed by the September 2000 data showed that the operating costs had also increased with overhead costs of $ 44,000 per month which is quite huge and $ 14,000 Boston specific overhead.

Therefore, the financing of approximately $ 1.3 million is justified to grow the company, complete its technological system and assess the market viability. Finally, the investment that I propose VC for this investment would be lower than 50%. Chase and Danielson both have 50% equity ownership in the business currently and if external financing is acquired through VC then they should take ownership of less than 50% from the ownership of Danielson, because the control should be maintained by Chase.

Elevator Pitch

“Hi, this is Chase and I am the CEO and Co founder of ZipCar Company. The business model of the company has been established on the basis of the car sharing framework and the business is expanding. However, to sustain the future growth of the company, acquisition, knowledge and retention of the new staff is highly important along with the development of the technological infrastructure for the company. Therefore, in order to become capable of appealing to the environmentally conscious and financially savvy customer. Therefore, I invite to you invest $ 1.3 million in our venture for ownership of 40% in business equity.”

Recommendations

In order to sustain the business operations, acquire the required financing and optimize the economics of the business, Chase is recommended to implement the following changes in its business model and operations:

• An increased knowledge base should be created through the development and creation of an advisory board.
• The revenue should be increased by changing the pricing model and customers that use cars less often but longer durations should be charged differently. The daily rental rate should be increased and number of free miles should be reduced.
• The patent pending technology should also be deployed in the Zipcar’s cars and this would reduce the operating costs.
• Multiple revenue streams should be pursued and this should be done quickly to help the development of the technology.
• Cost drivers such as parking, insurance and gas should be deeply understood and the new ways to reduce and control these costs should be researched.
• The members base should be increased for the company by forming partnerships such as with parking specific companies for lowering the annual parking costs.
• Finally, customer feedback should be continuously received to not only retain customers but to develop a strong business and brand………………..

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Case Study - ZipCar

Zipcar 2009 Mayor's Environmental Excellence Award Winner:  Outstanding Achievement for Innovation in Green Products or Services

Zipcar is the world’s largest car sharing company, offering self-service, on-demand cars by the hour or day for personal or business needs.  The low hourly and daily rates include gas, insurance, maintenance and parking. As the creator of the industry in the US, Zipcar has made car sharing a mainstream amenity in more than 50 cities  throughout the United States, Canada and the United Kingdom, solving the significant parking, congestion and transportation issues that plague urban residents. Zipcar began in 1999, and now has 6,000 vehicles that are shared by more than 275,000 consumer and business members around the world. The fleet includes more than 30 makes and models of vehicles, including the Toyota Prius hybrid, Honda Civic hybrid, Volvo S40 and the MINI Cooper.

Zipcar has spent nearly a decade building the industry’s leading technology and processes required to operate its sustainable, high growth business model. It is a self-service business, and more than 95% of member activity ranging from reservations to billing all takes place online. Zipcar’s industry-leading proprietary technology platform fully connects the information flow between vehicles, members and Zipcar.com and provides secure, self-service access to more than 6,000 vehicles on demand 24/7. Zipcar has several innovative technology applications, such as:

• Zipcar Mobile Locator – a phone application used to view and reserve Zipcar’s worldwide fleet of vehicles based on the member’s current location. It was developed in partnership with uLocate, and launched on WHERE™, the world’s first mobile GPS widget platform.  By downloading the WHERE application and activating the Zipcar widget, consumers can conveniently find the nearest Zipcar locations via their iPhone and make a reservation. Additionally, consumers can now easily facilitate carpooling with friends by sharing car location information via the iPhone in real-time.
• Google Maps – Zipcar has enhanced the online reservation system experience for members, by letting them view the locations of available cars via Google Maps and reserve cars within the map screen.
• Text Message Alerts – Members can sign up to receive text message alerts about an upcoming reservation as well as alerts regarding an existing reservation that is about to expire. Members can respond via text message in order to extend their reservation, provided that the car is available.

Zipcar’s value to the environment and local communities is evident in the fact that it has become a fixture of the urban transportation mix in the District of Columbia  The company has 700 cars parked in more than 340 locations in the metro area. Having to consider whether or not a car is necessary has changed driving and personal behavior patterns. With Zipcar, members are more likely to take advantage of all methods of transportation and use cars only when they need to. This behavior results in less congestion on the roadways, fewer greenhouse gas emissions and fewer vehicle miles traveled (VMTs). Since March 2004, Zipcar has had on-street parking in the District metro area, which has added to the convenience of car sharing. Highly visible 12-foot orange poles contain information about car sharing and clearly designate the spot as an official Zipcar parking space. This makes car sharing even more accessible and has resulted in one of the highest car adoption rates in the world.

Members in the District metro area have seen a transformation in transportation behaviors since joining Zipcar, including:

• 47% of members have increased their use of public transportation
• 59% of car owners have gotten rid of their vehicle
• Of the members who did not get rid of a car, 63% were able to delay or halt the purchase of a car due to Zipcar  (Source: Zipcar DC Survey Results May 2008)

As a leader in the car sharing industry, Zipcar has provided undeniable value to the environment already, and this value will only enhance in the future. Zipcar envisions a future where there will be more car sharers than car owners. As the urban population continues to grow and searches for ways to help the environment while saving money, getting rid of their personally–owned vehicles will continue to be the obvious choice. To date, Zipcar estimates it has taken more than 100,000 cars off the road, resulting in savings of more than 16 million gallons of gasoline and 150 million pounds of CO2 annually.

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Zipcar Refining the Business Model Case Analysis and Case Solution

Posted by Peter Williams on Aug-09-2018

Introduction of Zipcar Refining the Business Model Case Solution

The Zipcar Refining the Business Model case study is a Harvard Business Review case study, which presents a simulated practical experience to the reader allowing them to learn about real life problems in the business world. The Zipcar Refining the Business Model case consisted of a central issue to the organization, which had to be identified, analysed and creative solutions had to be drawn to tackle the issue. This paper presents the solved Zipcar Refining the Business Model case analysis and case solution. The method through which the analysis is done is mentioned, followed by the relevant tools used in finding the solution.

The case solution first identifies the central issue to the Zipcar Refining the Business Model case study, and the relevant stakeholders affected by this issue. This is known as the problem identification stage. After this, the relevant tools and models are used, which help in the case study analysis and case study solution. The tools used in identifying the solution consist of the SWOT Analysis, Porter Five Forces Analysis, PESTEL Analysis, VRIO analysis, Value Chain Analysis, BCG Matrix analysis, Ansoff Matrix analysis, and the Marketing Mix analysis. The solution consists of recommended strategies to overcome this central issue. It is a good idea to also propose alternative case study solutions, because if the main solution is not found feasible, then the alternative solutions could be implemented. Lastly, a good case study solution also includes an implementation plan for the recommendation strategies. This shows how through a step-by-step procedure as to how the central issue can be resolved.

Problem Identification of Zipcar Refining the Business Model Case Solution

Harvard Business Review cases involve a central problem that is being faced by the organization and these problems affect a number of stakeholders. In the problem identification stage, the problem faced by Zipcar Refining the Business Model is identified through reading of the case. This could be mentioned at the start of the reading, the middle or the end. At times in a case analysis, the problem may be clearly evident in the reading of the HBR case. At other times, finding the issue is the job of the person analysing the case. It is also important to understand what stakeholders are affected by the problem and how. The goals of the stakeholders and are the organization are also identified to ensure that the case study analysis are consistent with these.

Analysis of the Zipcar Refining the Business Model HBR Case Study

The objective of the case should be focused on. This is doing the Zipcar Refining the Business Model Case Solution. This analysis can be proceeded in a step-by-step procedure to ensure that effective solutions are found.

• In the first step, a growth path of the company can be formulated that lays down its vision, mission and strategic aims. These can usually be developed using the company history is provided in the case. Company history is helpful in a Business Case study as it helps one understand what the scope of the solutions will be for the case study.
• The next step is of understanding the company; its people, their priorities and the overall culture. This can be done by using company history. It can also be done by looking at anecdotal instances of managers or employees that are usually included in an HBR case study description to give the reader a real feel of the situation.
• Lastly, a timeline of the issues and events in the case needs to be made. Arranging events in a timeline allows one to predict the next few events that are likely to take place. It also helps one in developing the case study solutions. The timeline also helps in understanding the continuous challenges that are being faced by the organisation.

SWOT analysis of Zipcar Refining the Business Model

An important tool that helps in addressing the central issue of the case and coming up with Zipcar Refining the Business Model HBR case solution is the SWOT analysis.

• The SWOT analysis is a strategic management tool that lists down in the form of a matrix, an organisation's internal strengths and weaknesses, and external opportunities and threats. It helps in the strategic analysis of Zipcar Refining the Business Model.
• Once this listing has been done, a clearer picture can be developed in regards to how strategies will be formed to address the main problem. For example, strengths will be used as an advantage in solving the issue.

Therefore, the SWOT analysis is a helpful tool in coming up with the Zipcar Refining the Business Model Case Study answers. One does not need to remain restricted to using the traditional SWOT analysis, but the advanced TOWS matrix or weighted average SWOT analysis can also be used.

Porter Five Forces Analysis for Zipcar Refining the Business Model

Another helpful tool in finding the case solutions is of Porter's Five Forces analysis. This is also a strategic tool that is used to analyse the competitive environment of the industry in which Zipcar Refining the Business Model operates in. Analysis of the industry is important as businesses do not work in isolation in real life, but are affected by the business environment of the industry that they operate in. Harvard Business case studies represent real-life situations, and therefore, an analysis of the industry's competitive environment needs to be carried out to come up with more holistic case study solutions. In Porter's Five Forces analysis, the industry is analysed along 5 dimensions.

• These are the threats that the industry faces due to new entrants.
• It includes the threat of substitute products.
• It includes the bargaining power of buyers in the industry.
• It includes the bargaining power of suppliers in an industry.
• Lastly, the overall rivalry or competition within the industry is analysed.

This tool helps one understand the relative powers of the major players in the industry and its overall competitive dynamics. Actionable and practical solutions can then be developed by keeping these factors into perspective.

PESTEL Analysis of Zipcar Refining the Business Model

Another helpful tool that should be used in finding the case study solutions is the PESTEL analysis. This also looks at the external business environment of the organisation helps in finding case study Analysis to real-life business issues as in HBR cases.

• The PESTEL analysis particularly looks at the macro environmental factors that affect the industry. These are the political, environmental, social, technological, environmental and legal (regulatory) factors affecting the industry.
• Factors within each of these 6 should be listed down, and analysis should be made as to how these affect the organisation under question.
• These factors are also responsible for the future growth and challenges within the industry. Hence, they should be taken into consideration when coming up with the Zipcar Refining the Business Model case solution.

VRIO Analysis of Zipcar Refining the Business Model

This is an analysis carried out to know about the internal strengths and capabilities of Zipcar Refining the Business Model. Under the VRIO analysis, the following steps are carried out:

• The internal resources of Zipcar Refining the Business Model are listed down.
• Each of these resources are assessed in terms of the value it brings to the organization.
• Each resource is assessed in terms of how rare it is. A rare resource is one that is not commonly used by competitors.
• Each resource is assessed whether it could be imitated by competition easily or not.
• Lastly, each resource is assessed in terms of whether the organization can use it to an advantage or not.

The analysis done on the 4 dimensions; Value, Rareness, Imitability, and Organization. If a resource is high on all of these 4, then it brings long-term competitive advantage. If a resource is high on Value, Rareness, and Imitability, then it brings an unused competitive advantage. If a resource is high on Value and Rareness, then it only brings temporary competitive advantage. If a resource is only valuable, then it’s a competitive parity. If it’s none, then it can be regarded as a competitive disadvantage.

Value Chain Analysis of Zipcar Refining the Business Model

The Value chain analysis of Zipcar Refining the Business Model helps in identifying the activities of an organization, and how these add value in terms of cost reduction and differentiation. This tool is used in the case study analysis as follows:

• The firm’s primary and support activities are listed down.
• Identifying the importance of these activities in the cost of the product and the differentiation they produce.
• Lastly, differentiation or cost reduction strategies are to be used for each of these activities to increase the overall value provided by these activities.

Recognizing value creating activities and enhancing the value that they create allow Zipcar Refining the Business Model to increase its competitive advantage.

BCG Matrix of Zipcar Refining the Business Model

The BCG Matrix is an important tool in deciding whether an organization should invest or divest in its strategic business units. The matrix involves placing the strategic business units of a business in one of four categories; question marks, stars, dogs and cash cows. The placement in these categories depends on the relative market share of the organization and the market growth of these strategic business units. The steps to be followed in this analysis is as follows:

• Identify the relative market share of each strategic business unit.
• Identify the market growth of each strategic business unit.
• Place these strategic business units in one of four categories. Question Marks are those strategic business units with high market share and low market growth rate. Stars are those strategic business units with high market share and high market growth rate. Cash Cows are those strategic business units with high market share and low market growth rate. Dogs are those strategic business units with low market share and low growth rate.
• Relevant strategies should be implemented for each strategic business unit depending on its position in the matrix.

The strategies identified from the Zipcar Refining the Business Model BCG matrix and included in the case pdf. These are either to further develop the product, penetrate the market, develop the market, diversification, investing or divesting.

Ansoff Matrix of Zipcar Refining the Business Model

Ansoff Matrix is an important strategic tool to come up with future strategies for Zipcar Refining the Business Model in the case solution. It helps decide whether an organization should pursue future expansion in new markets and products or should it focus on existing markets and products.

• The organization can penetrate into existing markets with its existing products. This is known as market penetration strategy.
• The organization can develop new products for the existing market. This is known as product development strategy.
• The organization can enter new markets with its existing products. This is known as market development strategy.
• The organization can enter into new markets with new products. This is known as a diversification strategy.

The choice of strategy depends on the analysis of the previous tools used and the level of risk the organization is willing to take.

Marketing Mix of Zipcar Refining the Business Model

Zipcar Refining the Business Model needs to bring out certain responses from the market that it targets. To do so, it will need to use the marketing mix, which serves as a tool in helping bring out responses from the market. The 4 elements of the marketing mix are Product, Price, Place and Promotions. The following steps are required to carry out a marketing mix analysis and include this in the case study analysis.

• Analyse the company’s products and devise strategies to improve the product offering of the company.
• Analyse the company’s price points and devise strategies that could be based on competition, value or cost.
• Analyse the company’s promotion mix. This includes the advertisement, public relations, personal selling, sales promotion, and direct marketing. Strategies will be devised which makes use of a few or all of these elements.
• Analyse the company’s distribution and reach. Strategies can be devised to improve the availability of the company’s products.

Zipcar Refining the Business Model Blue Ocean Strategy

The strategies devised and included in the Zipcar Refining the Business Model case memo should have a blue ocean strategy. A blue ocean strategy is a strategy that involves firms seeking uncontested market spaces, which makes the competition of the company irrelevant. It involves coming up with new and unique products or ideas through innovation. This gives the organization a competitive advantage over other firms, unlike a red ocean strategy.

Competitors analysis of Zipcar Refining the Business Model

The PESTEL analysis discussed previously looked at the macro environmental factors affecting business, but not the microenvironmental factors. One of the microenvironmental factors are competitors, which are addressed by a competitor analysis. The Competitors analysis of Zipcar Refining the Business Model looks at the direct and indirect competitors within the industry that it operates in.

• This involves a detailed analysis of their actions and how these would affect the future strategies of Zipcar Refining the Business Model.
• It involves looking at the current market share of the company and its competitors.
• It should compare the marketing mix elements of competitors, their supply chain, human resources, financial strength etc.
• It also should look at the potential opportunities and threats that these competitors pose on the company.

Organisation of the Analysis into Zipcar Refining the Business Model Case Study Solution

Once various tools have been used to analyse the case, the findings of this analysis need to be incorporated into practical and actionable solutions. These solutions will also be the Zipcar Refining the Business Model case answers. These are usually in the form of strategies that the organisation can adopt. The following step-by-step procedure can be used to organise the Harvard Business case solution and recommendations:

• The first step of the solution is to come up with a corporate level strategy for the organisation. This part consists of solutions that address issues faced by the organisation on a strategic level. This could include suggestions, changes or recommendations to the company's vision, mission and its strategic objectives. It can include recommendations on how the organisation can work towards achieving these strategic objectives. Furthermore, it needs to be explained how the stated recommendations will help in solving the main issue mentioned in the case and where the company will stand in the future as a result of these.
• The second step of the solution is to come up with a business level strategy. The HBR case studies may present issues faced by a part of the organisation. For example, the issues may be stated for marketing and the role of a marketing manager needs to be assumed. So, recommendations and suggestions need to address the strategy of the marketing department in this case. Therefore, the strategic objectives of this business unit (Marketing) will be laid down in the solutions and recommendations will be made as to how to achieve these objectives. Similar would be the case for any other business unit or department such as human resources, finance, IT etc. The important thing to note here is that the business level strategy needs to be aligned with the overall corporate strategy of the organisation. For example, if one suggests the organisation to focus on differentiation for competitive advantage as a corporate level strategy, then it can't be recommended for the Zipcar Refining the Business Model Case Study Solution that the business unit should focus on costs.
• The third step is not compulsory but depends from case to case. In some HBR case studies, one may be required to analyse an issue at a department. This issue may be analysed for a manager or employee as well. In these cases, recommendations need to be made for these people. The solution may state that objectives that these people need to achieve and how these objectives would be achieved.

The case study analysis and solution, and Zipcar Refining the Business Model case answers should be written down in the Zipcar Refining the Business Model case memo, clearly identifying which part shows what. The Zipcar Refining the Business Model case should be in a professional format, presenting points clearly that are well understood by the reader.

Alternate solution to the Zipcar Refining the Business Model HBR case study

It is important to have more than one solution to the case study. This is the alternate solution that would be implemented if the original proposed solution is found infeasible or impossible due to a change in circumstances. The alternate solution for Zipcar Refining the Business Model is presented in the same way as the original solution, where it consists of a corporate level strategy, business level strategy and other recommendations.

Implementation of Zipcar Refining the Business Model Case Solution

The case study does not end at just providing recommendations to the issues at hand. One is also required to provide how these recommendations would be implemented. This is shown through a proper implementation framework. A detailed implementation framework helps in distinguishing between an average and an above average case study answer. A good implementation framework shows the proposed plan and how the organisations' resources would be used to achieve the objectives. It also lays down the changes needed to be made as well as the assumptions in the process.

• A proper implementation framework shows that one has clearly understood the case study and the main issue within it.
• It shows that one has been clarified with the HBR fundamentals on the topic.
• It shows that the details provided in the case have been properly analysed.
• It shows that one has developed an ability to prioritise recommendations and how these could be successfully implemented.
• The implementation framework also helps by removing out any recommendations that are not practical or actionable as these could not be implemented. Therefore, the implementation framework ensures that the solution to the Zipcar Refining the Business Model Harvard case is complete and properly answered.

Recommendations and Action Plan for Zipcar Refining the Business Model case analysis

For Zipcar Refining the Business Model, based on the SWOT Analysis, Porter Five Forces Analysis, PESTEL Analysis, VRIO analysis, Value Chain Analysis, BCG Matrix analysis, Ansoff Matrix analysis, and the Marketing Mix analysis, the recommendations and action plan are as follows:

• Zipcar Refining the Business Model should focus on making use of its strengths identified from the VRIO analysis to make the most of the opportunities identified from the PESTEL.
• Zipcar Refining the Business Model should enhance the value creating activities within its value chain.
• Zipcar Refining the Business Model should invest in its stars and cash cows, while getting rid of the dogs identified from the BCG Matrix analysis.
• To achieve its overall corporate and business level objectives, it should make use of the marketing mix tools to obtain desired results from its target market.

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Or explore sectors:

Why zipcar's business model is so successful.

Zipcar business model canvas

Zipcar’s Company Overview

Zipcar is an American car-sharing company, a subsidiary of Avis Budget Group. Zipcar provides automobile reservations to its members, billable by the hour or day.

Country: Massachusetts

Foundations date: 2000

Type: Private

Sector: Transportation

Categories: Mobility

Zipcar’s Customer Needs

Social impact:

Life changing:

Emotional: reduces anxiety, provides access, badge value

Functional: saves time, simplifies, reduces risk, organizes, connects, reduces effort, reduces cost, integrates, avoids hassles, quality

Zipcar’s Related Competitors

Zipcar’s business operations.

Affiliation:

Commissions are used in the affiliate revenue model example. Essentially, you resell goods from other merchants or businesses on your website or in your physical store. You are then compensated for referring new consumers to the company offering the goods or services. Affiliates often use a pay-per-sale or pay-per-display model. As a result, the business can access a more diversified prospective client base without extra active sales or marketing efforts. Affiliate marketing is a popular internet business strategy with significant potential for growth. When a client purchases via a referral link, the affiliate gets a portion of the transaction's cost.

Customer loyalty:

Customer loyalty is a very successful business strategy. It entails giving consumers value that extends beyond the product or service itself. It is often provided through incentive-based programs such as member discounts, coupons, birthday discounts, and points. Today, most businesses have some kind of incentive-based programs, such as American Airlines, which rewards customers with points for each trip they take with them.

Access over ownership:

The accessibility over ownership model is a business concept that allows consumers to utilize a product without owning it. Everything serves a purpose. As a result, consumers all across the Western world are demanding more value from their goods and services, and they are rethinking their relationship with stuff.' Furthermore, with thriving online communities embracing the idea of access above ownership, the internet is developing as a robust platform for sharing models to expand and prosper.

Acquiring non customers:

Acquiring non customers who traditionally did not seem to be the target of customer value proposition. Customer acquisition refers to gaining new consumers. Acquiring new customers involves persuading consumers to purchase a company’s products and/or services. Companies and organizations consider the cost of customer acquisition as an important measure in evaluating how much value customers bring to their businesses.

A digital strategy is a strategic management and a business reaction or solution to a digital issue, which is often best handled as part of a broader company plan. A digital strategy is frequently defined by the application of new technologies to existing business activities and a focus on enabling new digital skills for their company (such as those formed by the Information Age and frequently as a result of advances in digital technologies such as computers, data, telecommunication services, and the World wide web, to name a few).

On-demand economy:

The on-demand economy is described as economic activity generated by digital marketplaces that meet customer demand for products and services via quick access and accessible supply. The supply chain is managed via a highly efficient, intuitive digital mesh built on top of current infrastructure networks. The on-demand economy is transforming commercial behavior in cities worldwide. The number of businesses, the categories covered, and the industry's growth rate are all increasing. Businesses in this new economy are the culmination of years of technological progress and customer behavior change.

Membership club:

Belonging to a group, either individually or collectively. Certain memberships may charge a fee to join or participate, while others are free. Others have particular skill criteria that must be met before membership is granted. Members are entitled to specific benefits or advantages, but not all members may enjoy the same rights and privileges. Another method is taken by a members-only luxury lifestyle management business that offers concierge services such as vacation reservations, restaurant suggestions, and event access.

Mobile first behavior:

It is intended to mean that as a company thinks about its website or its other digital means of communications, it should be thinking critically about the mobile experience and how customers and employees will interact with it from their many devices. The term is “mobile first,” and it is intended to mean that as a company thinks about its website or its other digital means of communications, it should be thinking critically about the mobile experience and how customers and employees will interact with it from their many devices.

Self-service:

A retail business model in which consumers self-serve the goods they want to buy. Self-service business concepts include self-service food buffets, self-service petrol stations, and self-service markets. Self-service is available through phone, online, and email to automate customer support interactions. Self-service Software and self-service applications (for example, online banking apps, shopping portals, and self-service check-in at airports) are becoming more prevalent.

Technology trends:

New technologies that are now being created or produced in the next five to ten years will significantly change the economic and social landscape. These include but are not limited to information technology, wireless data transmission, human-machine connection, on-demand printing, biotechnology, and sophisticated robotics.

Rent instead of buy:

Services that do not need the product to be purchased but rather rent it for the economic benefit of requiring less money to access the commodity. When you rent, you assume less obligation since most of the burden is placed on the owner's shoulders. There is no debt; you are just responsible for the monthly rent. When renting, you have more flexibility by signing a six-month or one-year lease. This implies that you will be confined to that location for at least that period. When your lease term expires, you have the option of switching to another product or renewing your lease.

Disruptive trends:

A disruptive technology supplants an existing technology and fundamentally alters an industry or a game-changing innovation that establishes an altogether new industry. Disruptive innovation is defined as an invention that shows a new market and value network and ultimately disrupts an established market and value network, replacing incumbent market-leading companies, products, and alliances.

Pay as you go:

Pay as you go (PAYG) business models charge based on actual consumption or use of a product or service. Specific mobile phone contracts work on this principle, in which the user may purchase a phone card that provides credit. However, each call is billed separately, and the credit balance is depleted as the minutes are used (in contrast to subscription models where you pay a monthly fee for calls). Pay as you go is another term for pay & go, pay per use, pay per use, or pay-as-you-go.

Take the wheel:

Historically, the fundamental principles for generating and extracting economic value were rigorous. Businesses attempted to implement the same business concepts more effectively than their rivals. New sources of sustained competitive advantage are often only accessible via business model reinvention driven by disruptive innovation rather than incremental change or continuous improvement.

Product innovation:

Product innovation is the process of developing and introducing a new or better version of an existing product or service. This is a broader definition of innovation than the generally recognized definition, which includes creating new goods that are considered innovative in this context. For example, Apple launched a succession of successful new products and services in 2001?the iPod, the iTunes online music service, and the iPhone?which catapulted the firm to the top of its industry.

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Zipcar Harvard Case Solution & Analysis

Home >> Harvard Case Study Analysis Solutions >> Zipcar

Zipcar Case Solution

Contains a detailed description of the processes and tasks associated with the creation of a new enterprise in a developing industry (subscription carpooling to urban residents). Chronicles the development of the concept of the entrepreneur, industry analysis, market research, determining the identity and brand building. Also provides background information on writing a business plan, budget creation and building finance, development management team, the creation of business partnerships and financing business. This case is only available in paper format (HBP do not have the rights to distribute digital content). As a result, a digital copy of an educator if not available through this Web site. “Hide by Myra M. Hart, Wendy Carter Source: Harvard Business School 17 pages. Publication Date: 01 Oct 2001. Prod. #: 802085-HCB-ENG

EVALUATION OF ZIPCAR

Chase’s care sharing venture, Zipcar, is a typical example of a revenue model with multiple revenue streams. This car sharing service allows members to access cars parked at designated spots through zipcards which are issued to members and provide convenience to individuals who do not own a car and yet do not want to go through the hassle of keeping a private car.

The multiple revenue streams in this model include revenue from an annual membership fee, application fee for new members, security deposits and variable income in the form of charges per mile and hour. Additional revenue heads include late fee charges.(Appendix 1 ) The major impact on the revenue is from an increase in memberships which not only leads to an increase in security deposits but also to a potential rise in variable revenue heads such as per hour/mile charges.

The main cost drivers (Appendix 2) in this business model are in the form of corporate overheads and cost of goods sold such as lease costs per car, fuel, insurance and maintenance for the cars along with parking and equipment charges for each car. There are additional variable costs in the form of fee for consultants and software developers for developing the wireless technology system for the business but these would be non-recurring costs since they only have to be incurred till the development is complete. Corporate overheads are expected to be $44000 per month while the Boston office alone has overheads of $14000.

This business model has already used up $50000 as the initial investment in the form of cash borrowed from friends while an additional contribution of $375000 was made by a venture capitalist. Even then the business requires an additional investment of $1.3 million for being built on the pattern as originally planned out by the entrepreneurs. This shows how the initial investment was not worked out well and neither were the sources of finance planned out effectively.

The critical success factor for this business is the ability of the service to attract the target market with its low cost and convenience driven model since the business would require a regular revenue stream for a successfully covering the costs and generating a positive inflow.

Chase has managed to launch the idea even though the wireless platform has not been developed yet which shows that she did not want to let the company down by postponing the launch of the service and this shows considerable effort on her part to have taken this strategy and idea forward as a potential business venture

BUSINESS MODEL ANALYSED

Originally the business model was based upon a wireless technology platform which would allow members to make online reservations and access cars at designated parking spots through specific zipcards .The system was to capture information about the car in the form of usage per miles and hours which was then sent to a central location for billing.

The initial plan in Dec 1999 was to charge $25 as the non-refundable application fee along with $300 as a fully refundable security deposit from each member along with annual charges of $300 per member. The original charges per hour were decided at $1.5 and the per mile charge kept at $0.4. The costing model was developed to cover the overheads and the costs of goods sold .

When the actual model was put into practice, several changes had to be made in the original plan of December 1999. For starters, the complete technology platform had not been implemented before the launch and so the system which was introduced initially did not have car specific zipcards. The keys had to be left in the glove compartment for each car as well as the wireless system was not developed yet. Even the records had to be kept and maintained manually by the members for billing purposes instead of the wireless based billing system as originally planned for Zipcar.

As far as the cost model was concerned, customers found the $300 annual deposit too high and it had to be reduced to $75 per year. To balance the revenue stream , the hourly rate was raised from $1.50 to approximately $5.5. So, the initial contribution per member was estimated at 2559.2 whereas in actual it came out to be $ 1723.2 (Appendix 3)

As per the original financial plan for December 1999, the variable costs per car were estimated at $7580 ( Appendix 4) while the plan for May 2000 estimated the cost per car at $8680 because of an additional parking charge of $600 per car. However, the actual cost was even more than that initially planned out since leasing companies charged more if additional cars were added while the parking and fuel costs were higher than expected. So the actual cost per car came out to be $9338 per car. However, with 350 current members and 12 operational cars, the total revenue adds up to be $603155 and the Total cost of goods sold are $112056 which gives a gross income of $391099.  With overheads cost of $180975, this gross income is enough to cover the overheads as well so the business does not seem to be in any sort of financial trouble.

With an additional revenue stream in the form of more members in the next five years, the business would see an increase in revenue stream and would become self-sufficient with lesser dependency on additional funds. Currently the business has to take care of additional set-up expenses in the form of the wireless system and fees for its consultants and software developers. Further advertising and research would also need to be done and all this needs additional funds which have to be generated in the form of a loan . The business does seem to have a regular cash flow and revenue stream for now and this would help in paying back the initial investment .

RECOMMENDATIONS

The September results mention an increase in the parking costs along with the increase in lease and fuel costs. Even with these additional costs, the business does seem to work out fine with 350 members as mentioned in the press release of June 2000 .

However, looking at the September results, it can be seen that the actual members enlisted are 239 rather than the assumed 350. This means that further efforts have to be made in increasing the number of memberships. It should also be noted that out of 112 new memberships, only 105 are approved while 7 are rejected in the September results. The business needs to focus more on advertising efforts instead of just relying on word of mouth and advertising through post cards . The business currently advertises at sub stations and near parking spots for their cars. Since the target market is mostly college students who would prefer to share a car than own it, advertising efforts could also be aimed at colleges in Boston. Chase should try to avail marketing strategies that compare the cost effectiveness of Zipcar with that of privately owned cars for making this venture worthwhile for the target market.

Another alternative is to target a different market altogether alongside the current segment. A different set of cars  can be used for the other segment which would be different from the current market . Corporate markets can be targeted and bigger vehicles can be used for corporate use. One advantage of targeting the corporate sector is that they are less price sensitive and ZipCar can charge higher prices from corporate members listed in the corporate plan.

Ultimately Chase has to consider finding alternative options for financing the technology platform that would be the main strength of the project. With lesser memberships, Chase should look at a plan of implementing marketing strategies that can attract potential investors so that the platform can be completed quickly.

The operating results also bring concern in the form of accounting practices which only book 1/12 th   of the revenue from the membership fee of $75. Instead of following this conservative practice of accounting revenue, Chase could adopt a strategy of allowing revenue to be realized earlier so that the business can take an attractive plan for financing possibilities in front of potential creditors.

However, the September results do not portray any major problem that needs to be addressed other than the fact that the membership status is lesser than that planned out for the new venture and unless that is improved, the business may find itself with high costs in the form of overheads that may not be easily balanced with the revenue stream

ARGUMENTS FOR CHASE

In attracting a potential investor to invest in ZipCar, Chase has to use a different strategy altogether which needs to focus on the financial attractiveness of the venture, making it seem worthwhile for an investor who would be putting $1.3 million at risk. Chase could discuss the concept of convertible loans as had been done for other investors in the past where investments of $50000 and $375000 had been taken as loans only to be converted into equity in the future.

Several arguments can be presented to potential investors for making this business model seem like an attractive investment. For instance, Chase could focus on the idea that the market for car sharing is growing at a rate of 30% annually which would mean that there is a lot of potential for new investors in this segment. Secondly, Chase could also show how the previous investors have only brought in capital of $375000 and $50000 which was to be converted into share capital or equity in the future while a current investment of $1.3 million would mean a greater share in equity for the potential investor.

Chase could further stress on the potential in the US market by pointing out that the US market was large and virtually untouched so far as far as the concept of car sharing was concerned. Bringing this concept into the US market with a full force using the wireless technology would give ZipCar a competitive edge. This concept could be further stressed by pointing out that currently there is no car sharing service in this particular side of the East Coast and by launching this service in Boston and in other states in the US, ZipCar would be looking at a market of immense potential.

The strongest argument that could be put forward is that of ZipCar launching a service which would be using a wireless security and data transmission system. Not only would this be an innovation, it would be a new concept altogether and investing in such a business venture would generate positive revenue inflows since customers would be looking for convenience and cost savings in the form of a new idea.

The strategy to be adopted at the Springboard forum would be different altogether. It should be focusing on the idea of women entrepreneurs working on developing a model which is generally not considered viable for females. Therefore, the entrepreneurs would need support in the form of encouragement and financial help for taking the idea forward. Along with that, the environmentally friendly concept of the car sharing model could be addressed at the Springboard forum with a specific emphasis on the idea that this concept would cater to the demands of 7.5 individual car owners so that would mean one shared car would replace 7.5 individually owned ones.

Likewise, the focus can further be on the fact that this venture would bring about ease of use and cost savings for the general American individual. This would lead to major costs savings for households that would be needing transportation but would prefer not to get into the hassle of handling a car and its maintenance.

Through these strategies, Chase can put forward her case in front of the private investor and at the Springboard and can present it as a worthwhile idea which would get financial and moral support…….

Zipcar Case Analysis

Many people wonder about the benefits of the Zipcar business model. What do these car-sharing services offer? Is it right for them to look into using the service?

The Zipcar Business Model, as defined by the Zipcar website, is “for people who want to give cars away for a monthly membership fee.” They give you the use of a vehicle and you pay the monthly membership fee. So, if you only want one vehicle and you are planning on only using it during the month, you should consider using a different type of car sharing.

Another case study that can be used to evaluate the benefits of the Zipcar business model is the Mercedes Benz. It does not get any more American than the Mercedes Benz. How does this comparison point out benefits of the Zipcar business model? I have a few comments about the statement.

First, let’s look at the total annual travel expense. It takes about an hour and forty minutes to get from Point A to Point B, using the average United States driven automobile. Using the Zipcar model, the individual would spend about three hours each way with just one vehicle.

Then the amount of time that would be necessary to travel back and forth between the vehicles would add up to more than four hours of total travel time. So the benefit is getting a vehicle and paying a monthly fee for usage of one vehicle. How does this compare to the total annual travel expense for the Zipcar model?

The Zipcar model only offers one vehicle, which the cost would be two hundred and twenty dollars a month. That is a lot less than most, if not all, of the automobiles available on the open market. Therefore, the Zipcar business model only costs about one-third of what a similar automobile would cost on the open market.

In my opinion, the Zipcar business model is the best vehicle for an individual who would only need a car for a short period of time. Although the actual price for a Zipcar is more expensive than renting a similar vehicle for a week or two, the cost savings are worth it. In addition, the individual can purchase additional Zipcars at a higher price than they would be able to afford otherwise.

It also should be noted that Zipcar will provide insurance. However, in a few states, the requirement for auto insurance varies from state to state. So, depending on the zip code in your area, you may be required to have a separate policy for your Zipcar rental. Zipcar provides their own coverage, so no extra charge is necessary.

Another benefit of Zipcar is that if you rent a car, then you can come back again later. If you wanted to go on vacation and rented a car, you would have to make arrangements for returning the car.

There are many things to consider when considering Zipcar. If you were an entrepreneur, wouldn’t you want to make money?

Using Zipcar, on the other hand, allows the individual to have control over their expenses. The Zipcar cost will be fixed until you cancel. The downside is that it will take much longer to get a Zipcar than it would to rent a car using the typical business model.

In my opinion, the Zipcar business model is a good solution for individual entrepreneurs who are short on time but don’t necessarily want to give up the convenience of a car. If you are in a job that gives you plenty of time and flexibility, a Zipcar is a great alternative.

Zipcar SWOT Analysis

There is a certain way to run a business, and that way is that it has to go through a SWOT Analysis. This is one of the fundamental aspects of any business plan. In fact, you can’t do any of your business planning without a SWOT Analysis.

Why do I say this? Because in any industry where you are dealing with other people’s money, you have to determine what you want to achieve and what you want to do with it. What you want to buy, what you want to do with it, and how you want to profit from all of those things.

But this goes beyond marketing. It is about finding out what keywords will bring you targeted traffic and profit. It is about finding out what keywords will lead to more sales.

Marketing is only part of the equation. We must identify what we want to get out of the business for the long term. What is the reason that you are running this business?

In a general overview, a business is a relationship. Your customers are your consumers. You are your customers. Your customers are ultimately interested in your products and services.

So your business plans will start with identifying your customer, why they are buying your product or service, and how the product or service will help them meet their needs. A SWOT Analysis will provide you with the insight into your customers to get this done.

To get down to the details of how to conduct the analysis, let’s break it down into two big picture questions. The first question is what type of customer are you? Are you a home-based business owner who needs extra income?

Or are you a business website owner looking to make some money off of organic search engine optimization? The second question is how will your competitors be affected by changes in your industry? For example, if you have a lot of new competitors entering the market, what can you do to keep them?

The important information is that you need to identify where you are today and what you want to become tomorrow. And you need to know how other companies are faring in their industry. This will help you have a better chance of success than you otherwise would have had.

This becomes even more important when you are trying to think about how to get your business started. How is your competition doing?

That is where the SWOT Analysis comes in handy. If you can determine what areas you need to improve in and which of your competitors’ needs to reduce in order to keep them, then you can determine how to go about doing that.

So remember, if you are considering starting up a business, especially an online business, the most important aspect is that you have a SWOT Analysis to help you get there. What is your competitive advantage? What are your strengths and weaknesses?

Zipcar Porter’s Five Forces Analysis

Zipcar is a privately held company that makes its profits by offering car rentals to its members. It has been known to take a “cost per mile” approach, requiring participants to pay a fee for each kilometer they drive. This cost may be as low as 10 cents per mile, although it is known to be higher. Zipcar is currently available in every major U.S. city and several Canadian cities, with more areas opening up in the future.

Since Zipcar’s inception, it has been trying to improve upon the first model by further improving on the other two. However, it seems the company is still struggling against the traditional car rental companies in terms of making it stand out from the crowd. In this article, I will outline the five forces that have helped make Zipcar successful.

First of all, Zipcar offers a free car. This has made the business very appealing to many people who do not own a car of their own and use it only for travelling. Even people who own cars and rent them out still choose to use Zipcar over their local car rental services. The free car represents a great source of publicity and brand recognition for the company.

Another aspect of Zipcar’s free car promotion is that the company provides its customers with good vehicles at low rates. Although there are many car rental services which have lower rates for paying members, none of them give their customers’ vehicles at such cheap rates. Zipcar is able to provide a great deal of competition to its competitors because of the cheap cars and the low price tag attached to the membership.

Zipcar does not limit itself to one specific region. It goes on to say that the car rental services which have been around for so long have not been able to establish themselves all over the country or even the world. By being flexible about location, Zipcar proves that it is not afraid to step out of its comfort zone and challenge the status quo.

Although the cost per mile concept has been very popular in recent years, many people think that Zipcar is overcharging its customers. In fact, the company is actually doing its best to provide its members with the best possible value for their money. It has not just retained the old concept of the ten cent per mile charge. It has also improved on this concept and has introduced more new and improved ways of charging.

As is customary in any startup, Zipcar has received significant private funding. The private funding was used to improve the quality of its service, expand into new cities, and attract new members. The company’s revenue has increased greatly since it has received the private funding. This is because private funding will usually help a company to increase its sales volume and profit margin.

Zipcar has already established a strong following among the public. In addition, it has the potential to spread this following even further. If you do not belong to Zipcar yet, you can sign up at their website and get your membership, which includes a free car. You can then advertise for them online. However, you need to remember that your success depends on how good a market you have established yourself in.

Many people are attracted to Zipcar’s discount prices and the amazing discounts they offer. The model has provided its members with an excellent deal on their car rental service, but it has also helped the company to build an impressive image. Many people like to have discounts on their services, because it can mean savings for them. This is why many people are looking for ways to get better deals and better service at affordable prices.

For several years, Zipcar has been offering its members the benefits of low prices, and getting discounts. As a result, it has proven that it is possible to achieve this without having to spend much on advertising. Just like many other small businesses, it has grown despite of its relatively low initial investment.

This is a very successful model, because people love to get discounts for their services. and like to be able to save money on their vehicle rental needs. Because it is privately owned, it has also been able to retain and expand its base of members, which ensures that it will continue to be around for a long time.

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Zipcar: Refining the Business Model

Subjects Covered Business models Business plans Entrepreneurship Financing Growth strategy Logos Operating costs Wireless technologies Women in business

by Myra M. Hart, Michael J. Roberts, Julia D. Stevens

Source: HBS Premier Case Collection

20 pages. Publication Date: Jan 13, 2003. Prod. #: 803096-PDF-ENG

Zipcar: Refining the Business ModelHarvard Case Study Solution and HBR and HBS Case Analysis

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Find a Circular Strategy to Fit Your Business Model

Products and services that maximize use and reuse of materials and other resources can be both growth opportunities and sustainability measures..

• Sustainability

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Companies seeking to meet ambitious sustainability goals to reduce fossil fuel consumption and reduce waste must go beyond a shift to renewable energy. Roughly half of global emissions are linked to the production and consumption of goods such as food, packaging, buildings, and textiles. 1 Accelerating decarbonization will require that we rethink the materials and services sourced from suppliers, the distribution and use of products by customers, and what happens to products at end of life.

That’s where circular models come into focus. They aim to optimize the use of material resources in organizations and thus help reduce carbon emissions and mitigate strain on natural systems. For businesses, circularity promises to enhance competitiveness by improving bottom lines through resource efficiency and boosting resilience against resource market volatility through closed-loop supply chains. Moreover, compelling circular offerings, such as refurbished furniture or new items made from recycled materials, appeal to customers striving to meet their own sustainability goals.

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Despite these advantages, circular businesses remain uncommon, largely due to the challenge of identifying and operationalizing suitable models that align with a firm’s overall strategy and capabilities. 2 In this article, we draw on our research into organizations implementing these models to explain four different routes to circularity, and key considerations for effectively implementing them.

The practical principles underlying circular business models can be stated as simple goals: use less , use longer , use again , use differently . 3 (See “Four Approaches to Circularity.”) Most circular models emphasize one of these paths, but often in combination with others.

Extend Product Lifespan

Reuse, resale, repair, or refurbishment are among the use-longer tactics that help companies maximize the usable life of products, reducing both waste and consumption of new resources. The challenge for companies that pursue this approach is preserving the benefits customers derive from newly manufactured products. Some ways to operationalize this include the following:

Design products for longevity. To enable repair or refurbishment, products must be designed for durability, modularity, and disassembly. That may require using more durable materials, avoiding adhesives in assembly, and ensuring that standard tools can be used in repairs.

The Dutch Ministry of Defense (MoD) has adopted a circular approach to the uniforms it provides, cleaning and repairing them to extend their usable life. It redesigned uniforms to allow easy replacement of components like damaged sleeves without destroying the whole item. This not only reduced waste but also led to an annual savings of 8 million to 10 million euros that would have been spent on new purchases and disposal. 4 Smartphone manufacturer Fairphone similarly designed phones with modular, swappable components. Customers wanting a better camera or battery can simply upgrade those components rather than having to buy a new phone, delaying obsolescence.

Designing for disassembly and repair does involve trade-offs. More durable and modularized components or detachable fasteners can increase manufacturing complexity and cost. Despite the complexities, this approach is a key principle in enabling circular models from electronics to buildings. 5

Establish repair and refurbishment capabilities. Extending product lifespans requires building repair and refurbishment capacity, either in-house or through partnerships. The Dutch MoD chose the latter route. With item volumes in the hundreds of thousands, the MoD needed an industrial-scale repair facility. Rather than build it themselves, it partnered with Biga Groep, a social enterprise that provides employment to members of disadvantaged communities. The two parties collaborated to develop industrial-scale repair capabilities. This partnership grew over time as Biga Groep gradually expanded its capabilities, also creating new jobs.

It is crucial that product development teams work closely with those responsible for repair and refurbishment to better understand design requirements for longevity and repair. When shoe manufacturer Vivobarefoot launched a repair and refurbishment program, it learned that its shoes could be difficult to repair. It subsequently started having its design teams engage with repair partners to gain feedback for future product.

Manufacturers must also plan for longer-term availability of spare parts and repair services, including how repair and refurbishment will be provided, such as through expanded warranty plans or as chargeable services that could be additional revenue streams. Buy-back plans can encourage customers to return products to manufacturers for refurbishment and resale.

Depending on the sector, independent companies may already offer resale, repair, and refurbishment services, for example, in the mobile phone market. Manufacturers can support this market with spare parts, repair kits, and manuals. This may become a regulatory requirement under emerging Right to Repair laws across different jurisdictions. For example, the EU’s right to repair rules require manufacturers to make spare parts available for professional repairers for up to 10 years for certain product categories. A looming issue on this front is support for software components in so-called smart products.

Leverage data and digitalization. Data can enable more effective maintenance, repair, and refurbishment. Some manufacturers use internet-connected sensors and predictive analytics to monitor product health and schedule maintenance. Data analysis can also shed light on customer usage, common faults, and wear-and-tear patterns to improve product designs.

Additionally, digital platforms provide a channel for resale of used and refurbished products, especially if supported by comprehensive data on product condition and history, enhancing transparency and trust in the resale market. Brands may find that their used or refurbished products are already available on marketplaces like eBay, Vestiaire Collective, or Back Market.

Reclaim and Regenerate Resources

For companies following the use-again approach to capture value from waste materials, the distinction between technical and biological resources is key. Originally defined in the cradle-to-cradle model, 6 biological resources include raw materials such as food, wood, cotton, and other animal or plant-based materials, while technical resources include metals, plastics, synthetic chemicals, and other artificial materials. The two require different approaches.

Because biological resources are in principle renewable, the focus should be on recovering and reusing nutrients to regenerate natural systems and ensure sustainable production. Plant and animal waste can be composted and used to enrich soil health, and biogas can be recovered for energy production through anaerobic digestion.

Remanufacture or recycle technical materials. Metals used in electronic products, such as copper, lithium, aluminum, and gold, could theoretically be reused indefinitely, particularly if recovered into their elemental forms. On the other hand, plastic is a nonrenewable resource, and plastic packaging has limited reuse. A use-again approach through recycling can be a viable option to ensure circularity of technical materials. U.K.-based packaging manufacturer Charpak uses recycled plastic as raw material for its products, which are themselves recyclable.

Turn waste into revenue. Use again can also involve turning waste resources into products through intermediate processing. For example, materials science companies Biohm and Ecovative are using agricultural residues to grow mycelium, the rootlike structures of fungus, as bio-based materials for packaging, fashion, and building materials. Biotech company Entomics Biosystems uses organic waste to cultivate insect larvae, which is turned into a sustainable protein source for animal feed in livestock farming.

Use again can also involve turning waste resources into products through intermediate processing.

Given the vagaries of fashion, unsold inventory can be a significant source of waste for apparel manufacturers. Luxury brand LVMH has spun out a platform, Nona Source, where others can purchase deadstock yarn, fabric, and leather. Aside from avoiding waste, this enables smaller, independent designers to purchase high-quality material that they typically would not have access to. Rype Office remanufactures used office furniture into high-quality, low-carbon products for corporate clients. As furniture makes up to 30% of embodied emissions in commercial buildings, shifting to remanufactured items can help organizations reduce their carbon, resource, and waste footprint.

Design products with recycling in mind. Like use longer, use again starts with product design. Most products today suffer from low recycling rates, and most recycling is really downcycling into lower-quality products, such as garments into rags or insulation materials.

One reason for this is that many products are not designed for recyclability. They are often composed of a mix of materials, each with different degrees of recyclability and requiring different treatment. For example, clothing often contains a mix of natural and synthetic fibers; electronic devices comprise a host of different metals, plastics, glass, and other materials; and packaging frequently includes labels or linings. Ideally, products should be made from single materials, such as mono-fiber textiles or polyethylene terephthalate (PET)-only packaging, although this is often not possible.

Most products suffer from low recycling rates, and most recycling is really downcycling into lower-quality products.

Designing for use again involves several approaches. The first step is to maximize the proportion of recycled or regenerative materials that are themselves recyclable or biodegradable in order to reduce the use of virgin materials and production of waste. This includes eliminating toxic elements. For example, flooring company Tarkett’s carpet brand Desso and carpet manufacturer Hook & Loom designed out toxic chemicals and materials that would limit the reusability or biodegradability of their materials.

Designers must also consider disassembly. Just as with use-longer models, products should be designed to be easily taken apart so that components can be remanufactured or recycled. The E.U.-funded Buildings as Material Banks project applied this principle, developing standards and tools such as the Reversible Building Design Protocol so that buildings can be deconstructed to recover and reuse materials.

This design approach will often require development of new materials and processes that meet quality and performance criteria. Charpak addressed this by working with innovation partners on modular design and replacing black plastic with 100% recyclable gray plastic. This required a full life-cycle analysis of product design for recyclability, including considering the post-use phase and managing trade-offs. For example, a certain percentage of virgin material was required to meet functional and aesthetic requirements.

Establish reverse logistics systems and partnerships. Designing circular products does not necessarily result in actual circularity in the absence of effective reverse logistics systems. Modern supply chains are typically optimized for producing and distributing products into the market, with less emphasis on getting products and materials back for reuse. For manufacturers transitioning to a circular model, the challenge extends beyond merely ensuring effective recycling of their products to also guaranteeing certainty of supply of raw materials to create their products.

Accomplishing this may require innovation in the waste-processing segment of the value chain, including technologies and processes for effective collection, sorting, and recycling of waste into new raw materials. In some segments, like post-consumer plastic waste, direct recovery of products can be challenging. Plastics enter the waste management stream and need sorting and processing before they can be reused. Charpak addressed this in the U.K. by partnering with city councils, waste management providers, and reprocessors to establish a local circular plastics loop. Under the Cambridgeshire and Peterborough Waste Partnership (RECAP) program, household plastic waste is collected, sorted, cleaned, and sent to be reprocessed into new materials, which Charpak then sources.

Rype Office grappled with uncertainty in its supply of used furniture, which typically depended on office clearance events. To mitigate this, it established take-back channels in partnership with building retrofitters and offered its customers leasing and buy-back options. For situations where remanufactured furniture is insufficient to meet client demands, Rype Office recommends new pieces that are easily remanufactured over multiple uses, further ensuring future supply.

Maximize Product Use

In many cases, consumers may not feel the need to own a product. Companies can sell access rather than ownership; sharing, renting, and service-based approaches can replace product sales. These models boost circularity by increasing asset utilization and aligning incentives to encourage customers to use less, use longer, and use again. The use-differently approach also can broaden access to products that might otherwise be out of reach for some consumers.

Service-based models come in different forms, such as very short-term rentals of cars (Zipcar) or designer clothing (Rent the Runway), or peer-to-peer platforms like Hello Tractor, which enables farmers to rent idle equipment to other small-scale farmers who can use the machinery to improve crop yields. Another model is providing products-as-a-service, where providers retain ownership and customers pay based on usage. Lighting multinational Signify offers a pay-per-lux service: The company will install, maintain, and decommission lighting equipment, including reuse, repair, and recycling.

Design services based on customer jobs-to-be-done. Identifying the customer’s goals can inspire innovative circular models. 7 As Signify illustrates, customers want reliable and efficient lighting, and a “lighting as a service” model both circumvents the complexities of managing assets and reduces capital expenditure on equipment. Similarly, many city dwellers prefer to not own a car, but they occasionally need transport with more flexibility, convenience, and range than a bike, bus, or train. This idea underpins shared mobility models like Zipcar — rather than multiple households owning cars that are infrequently used, customers can access shared cars on demand.

The use-differently approach also can broaden access to products that might otherwise be out of reach for some consumers.

Leverage digital platforms. Hello Tractor’s sharing model illustrates how data, connectivity, and digital platforms can enable sharing, rental, and service models to monitor and optimize assets and connect supply and demand. Hello Tractor’s mobile app connects small farmers with tractor owners to schedule and manage bookings and payments. The company also helps tractor owners outfit their equipment with low-cost internet of things devices to track location, fuel levels, tractor operations, and maintenance needs. That data can support new services such as route optimization for tractor owners and help them to better manage their equipment assets. Importantly, Hello Tractor understands that access to tech is uneven among small farmers, so it also engages local booking agents to help with bookings and aggregate local demand.

Align incentives. Service design critically hinges on aligning incentives between the service provider and the customer around economic, functional, and sustainability factors. To achieve circularity goals, providers and customers must actually use items responsibly and efficiently.

Signify’s lighting-as-a-service contracts include delivery of performance metrics for lighting quality and energy efficiency. Customers are concerned with only the reliability and performance of lighting. Extending the use of equipment and materials through monitoring, durable design, reuse, repair, refurbishment, and recycling saves costs for the provider. A service-based model also facilitates closed-loop reverse logistics systems, as the provider retains control and chain of custody of the assets.

Minimize Resource Use

Figuring out how to use less of any resource should always be a priority when conservation is the objective. With this goal, organizations can think broadly about how they can minimize the use of energy, materials, and water in operations.

Focus on efficiency. Look for practices and technologies that optimize resource use while minimizing waste. Lean manufacturing principles, for instance, can significantly reduce material waste and energy consumption. Designers can experiment with ways to deliver the same value using fewer materials. Additionally, integrating energy-efficient technologies in operations, such as LED lighting or optimized heating and cooling systems, can reduce the environmental footprint significantly.

Efficiency optimization can also be applied to capacity utilization of assets. Shared resources, like coworking spaces or shared manufacturing facilities, can optimize space and equipment use. Designing buildings for reconfigurability can enable flexibility for multiple uses. In logistics, fleet optimization ensures full vehicle loads, reducing the number of trips and thus lowering emissions and costs. Similarly, demand-responsive services like cloud computing can adapt supply efficiently to meet actual demand, avoiding excess capacity.

Design out waste. Naturally, using less begins with product or process design. Consider packaging: Significant efficiencies can be found here before looking at the product itself. U.K. supermarket retailers Tesco and Waitrose, for example, reduced plastic waste by removing plastic wrapping from some multipack food and beverage items. Food technology companies Mori and Apeel Sciences are developing edible coatings that extend the shelf life of produce, replacing plastic packaging. Bulky liquid products that contain a great deal of water, like cleaning or beauty products, can be reformulated as concentrate or tablets. This reduces product size and weight, which lowers the carbon impact of shipping and the cost and footprint of storage and delivery.

Tap data analytics. Insights afforded by digital tools are as important here as they are in other approaches. Advanced data analytics pinpoint ways to minimize resource consumption and waste production. Ikea reduced food waste by 54% in its in-store restaurants by using smart scales and AI to track and analyze food waste. Ikea also partnered with food platform Too Good to Go to further reduce food waste through selling its surplus at discounted prices.

Key Success Factors for Circularity

Numerous opportunities are available for companies to embed circularity into their products and operations. While approaches may vary, our research has found that successful initiatives pay attention to the following factors:

Strategic fit. The cornerstone of circular transformation is how it fits with your business strategy. Identify a model that aligns well with your company’s strategic positioning and brand ethos and leverages core strengths and values. A chosen model should enhance both sustainability and profitability. For example, a luxury brand should provide premium retail experiences for resale, repair, or refurbished offerings.

Committed leadership and circular mindset. Circularity transformation starts with leadership, mindset, and culture. The company’s leadership needs to champion and drive the circularity agenda and provide resources and training to the whole organization. A key lesson is that circularity must go beyond specific initiatives; it requires a mindset where everyone is constantly looking at waste as a valuable resource. Sugar processor British Sugar has turned almost every by-product stream from its beet sugar manufacturing process into inputs for new products, including biofuels and industrial and agricultural products, as well as a new business segment for animal feed.

Combined models. The four models — use less, use longer, use again, and use differently — are not mutually exclusive and should be combined to create viable circular offerings. For example, the Dutch MoD recycles items once they can no longer be repaired. A similar model could be applicable for electric vehicle batteries. With electric cars expected to account for more than two-thirds of global car sales by 2030, pressures will increase from mineral scarcity and electronic waste. A more circular approach could keep batteries in use in vehicles through repair and refurbishment (use longer). Once degraded, used batteries could be remanufactured into energy storage systems for renewable power grids (use differently), and finally recycled to recover materials to make new batteries (use again).

Compelling value proposition. Successful circular offerings must go beyond purely environmental benefits to also meet customer needs such as functionality, desirability, aesthetics, accessibility, and economics. Consider the end-to-end value chain design and trade-offs required to ensure customer acceptance of a circular offering. Rype Office recognized that corporate clients would not compromise on furniture quality and aesthetics for lower carbon options, so it provides interior design services to help clients integrate remanufactured pieces into existing office aesthetics. Hello Tractor’s network of local agents was in part based on user insight on ensuring accessibility and supporting the needs of small farmers.

Value-based collaborations and partnerships. Most companies will struggle to build circular capabilities by themselves. While organizations may embed circular requirements into green procurement criteria, challenges arise when suppliers cannot meet these demands in the short and medium term. A more effective approach may require co-innovation partnerships with suppliers, peers, and other partners. A prime example is Jaguar Land Rover’s RealCar project, where it worked with industrial, academic, and public-sector partners to develop aluminum recycled from postindustrial waste for use in its cars. This required innovation in material chemistry to develop aluminum grades with suitable performance, recyclability, and applicability. A critical key success factor was the approach to collaboration around shared goals for the entire value chain for recycled aluminum. 8

Related Articles

Journey of learning and iteration. The circularity transformation should be approached as a journey of learning and iteration. The winning circular models are often not obvious, emerging through experimentation and engagement with customers, suppliers, and other stakeholders. Explore what works and what doesn’t, and adapt strategies based on these findings. Equally important is understanding and managing trade-offs and unexpected consequences that arise. Starting with small-scale pilots allows companies to test ideas in a controlled environment, learn from these experiments, and then scale up successful initiatives, building capabilities over time.

The journey to circular economy models is complex. However, many brands may already have active markets for resale, repair, or refurbishment of their products, as well as potential partners in different sectors. Beyond meeting environmental goals, engaging in circular models offers businesses opportunities to control customer relationships and experiences, gain valuable market insights, and capture additional revenue.

About the Authors

Samsurin Welch is a research associate at the Circular Economy Centre at Cambridge Judge Business School, University of Cambridge, and senior associate at the University of Cambridge Institute for Sustainability Leadership. He is also cofounder and chief operating officer at HyveGeo. Khaled Soufani is a management practice professor of financial economics and policy, director of the Circular Economy Centre, and director of the Cambridge Executive MBA Program at Cambridge Judge Business School. He is also a fellow of Clare Hall.

1. Ellen MacArthur Foundation, “ Completing the Picture: How the Circular Economy Tackles Climate Change ,” 2019, www.ellenmacarthurfoundation.org.

2. K. Soufani and C. Loch, “ Circular Supply Chains Are More Sustainable. Why Are They So Rare? ” Harvard Business Review, June 15, 2021, https://hbr.org.

3. Adapted from M. Geissdoerfer, M.P.P. Pieroni, D.C.A. Pigosso, et al., “ Circular Business Models: A Review ,” Journal of Cleaner Production 277 (Dec. 20, 2020): 123741.

4. K. Soufani, T. Tse, M. Esposito, et al., “ Bridging the Circular Economy and Social Enterprise: The Dutch Ministry of Defence and Biga Groep ,” The European Business Review, March 18, 2018, www.europeanbusinessreview.com.

5. Circular Electronics Partnership, “Circular Electronics System Map: An Industry Blueprint for Action,” Sept. 22, 2022; and A. van Stijn, L.C.M. Eberhardt, B. Wouterszoon Jansen, et al., “ Environmental Design Guidelines for Circular Building Components Based on LCA and MFA: Lessons From the Circular Kitchen and Renovation Façade ,” Journal of Cleaner Production 357 (July 10, 2022): 131375.

6. M. Braungart and W. McDonough, “Cradle to Cradle” (New York: North Point Press, 2002).

7. S. Hankammer, S. Brenk, H. Fabry, et al., “ Towards Circular Business Models: Identifying Consumer Needs Based on the Jobs-to-Be-Done Theory ,” Journal of Cleaner Production 231 (Sept. 10, 2019): 341-358.

8. P. Cassell, I. Ellison, A. Pearson, et al., “ Collaboration for a Closed-Loop Value Chain: Transferable Learning Points From the REALCAR Project ,” PDF file (Cambridge, United Kingdom: University of Cambridge Institute for Sustainability Leadership, Jaguar Land Rover, and Novelis, January 2016), https://www.cisl.cam.ac.uk.

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