The Zipcar business model exceeds the expectations for it provides insights on the perception of people in commute. Chase and Danielson invented the car borrowing system and were eager to get cars on the urban roads. Chiefly, this idea needed the application of effective strategies to foster growth and maintain profitability.
The main hurdles included investment needs and assumption miscalculations. However, their expertise in pivoting methods renewed hope for the achievement of the business. Chase developed new ventures that involved revised transportation methods and reduced consumer costs. Consequently, Zipcar business holds significant potential as a unique service in urban areas.
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Business Model
The business model targeted city dwellers that did not need to buy a car. However, most of these residents would still require a car for small trips and errands. Forthwith, the car-sharing program would provide cars in every public station to meet such needs. Members would pay on an hourly or mileage rate without having to maintain or keep the car.
Zipcar program would track each car to establish their status and location. Equally, it would use patented ZipCards in place of keys to unlock and start the car. The initial business model involved a hefty fee of $300 per mile and $1.50 per hour. Chase used cost assumptions and pricing structures to set these calculations. However, it proved inaccurate forcing Chase to restructure the model after gaining insights. Consequently, she reduced the annual fee by $225 and increased the cost per hour from 5% to 15%.
Difference between Zipcar and a Traditional Rental Car Business Model
Some characteristics create a crucial difference between Zipcar and a traditional rental car business model. Indeed, there are more affordable rates for luxury cars. Specifically, traditional rental car businesses charge more than $200 a day while Zip car costs less than $100. Besides, Zipcar has a variety of vehicles ranging from vans to cargo vans contrary to traditional car rental companies.
Zipcar has full-time access whenever a member needs a car. Notably, when members need a vehicle at night, or early in the morning, they find convenient stations near them or use an app to reserve it. However, in traditional car rentals, one has to book a car online, go through the paperwork, and wait for confirmation. Zipcar business model facilitates movement from the airports without having to queue as in traditional car rentals. Additionally, members do not pay for gas at Zipcar, but at traditional rentals, one is charged for every liter used.
Data from Actual Operations in September
The data from actual operations in September show much improvement making the consumers accept the idea. Therefore, the sales have increased proving that the recalculations were significant in the progress of the business. Moreover, Chase actions gave comfort for she paved the way for new marketing methods to improve the business. Besides, the pricing strategy was sufficient for it reached out to low-income residents. However, according to the projected financial report, the company was not able to meet the expected revenue.
Similarly, the business would fall short of 50% revenue and an increase in parking, equipment, and lease costs. Certainly, it would cause an increase in expenses and a decrease in profit thus scaring away investors. Conversely, the data shows that the cost of goods sold is recoverable through the projected cost. Variable costs like fuel bills and parking are 10% higher than anticipated. Further, according to the September data, there is a loss of $74,000 threatening the ability of Zipcar to cover the cost of goods sold in the future.
Actions to Take
Consequently, Chase should change the budget as a result of the September operating results. Instead, she should consider essential parts of the business. Notably, variable costs such as parking costs and leasing took a significant cost beyond the projection. Therefore, Chase should pay close attention to such expenses that exceed their projection for they negatively affect revenue collection. Surprisingly, only $1500 was used for monthly marketing. Indeed, this information would help investors ease the difficulties of urban marketing.
Further, Chase should use the cars she provides to serve as a marketing strategy. Besides, she should gain investment to fund fixed costs and increasing variables within the business. Chase and Danielson should hire experts of car manufacturing to provide experience and practical information about the venture. Otherwise, the business may fail due to a lack of insights on car-related functions. Additionally, Zipcar needs to establish experts to lead different departments with specific roles and projections.
Strongest Argument to Make to a Potential Investor
Chase could make an argument for investors about the progress of the business model. Also, she should focus on decreasing market needs and increasing variable costs. Besides, she should explain the different categories in which the investment would go. They include overhead costs, parking spots, and purchasing cars. Further, Chase should explain to the investor how the market is projected to grow at a rate of 30%. Notably, the argument would give hope to the investor who would want to invest in a business with huge potential.
Therefore, she should emphasize the efforts that she is putting on developing technology to ease the business process. The technological aspect of the company would make it competitive thus making the investor more interested. Thus, Chase should include the social responsibility aspect in her argument. Chiefly, a business becomes attractive to investors when it shows concern to the environment and the community. By explaining the business concept of being environmentally friendly, Chase will formulate an argument to convince the potential investor.
The idea of sharing a car in the community is significant to this business. With accurate calculations, the market risk is worth taking. Chase developed the Zipcar business model through assumptions and miscalculations. However new measures were put in place making the business potential, especially in the urban areas. Chase could witness the significant success of Zipcar if she takes the recommended steps such as budgeting and cutting costs.
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