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Case Analysis Of ZipCar

1245 words (5 pages) Essay in Marketing

10/05/17 Marketing Reference this

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Zipcar was established in 1999 and it is a leading company in the car sharing industry in North America with a strong presence in the U.S., Canada and Europe (Goldman S., May 2008). The company has 200000 members in 50 markets and concentrates on businesses, residential areas and universities (Goldman S., May 2008). Their vision is “”Providing reliable and convenient access to on-demand transportation, complementing other means of mobility.”” (Goldman S., May 2008) The company car fleet consists of 5000 cars that include hybrid vehicles, SUVs and sedans (Goldman S., May 2008). Their business is concentrated on a small market where people need to rent a car on an hourly basis instead of daily basis. The customers can reserve a car online and use an RFID card called the zipcard to enter the reserved car by swiping the card on the reader near the driver’s windshield (Pearlson, K., Saunders, C. (2009)). Other than having a unique service Zipcar employs powerful technology to support its business model (Pearlson, K., Saunders, C. (2009)). They have a patented wireless technology that is used to monitor car security, feul level, hourly usage and other features (Pearlson, K., Saunders, C. (2009)) . Zipcar has developed a unique business model and supported it with appropriate technology which makes it a unique business.

Regarding the bargaining power of buyers, Zipcar service is considered unique and the market they are targeting is considered niche. Since it is hard to find a service like the one provided by Zipcar and the market is small the buyers bargaining power is low. The other substitute available is renting cars by day which is not convenient for some of the customers. Public transportation and car ownership is another alternative but it may be costly due to the rising fuel prices. In the other traditional car rental companies the customers have to wait for long to get their car. By using Zipcar they can find a nearby car without waiting which is more convenient. In addition, Zipcar has an established brand name and a strong identity which makes the customers more attached to it. With a unique service and an established brand name Zipcar customers cannot be high on price sensitivity and their bargaining power is reduced.

Concerning the bargaining power of suppliers, most of the suppliers for Zipcar are not concentrated. Insurers, gas providers and car agencies can be considered among the suppliers of Zipcar. All of these work in competitive markets. There are several insurers, car agencies and gas providers and Zipcar can chose among them which makes the bargaining power of suppliers low. However, Zipcar needs parking spaces and auto services which can be beneficial for the supplier. Parking spaces can be owned by a government authority or a business establishment. Zipcar may need to build and maintain relationships with these entities to get the parking spaces especially if the government or the establishment owns a huge parking area. This way the supplier might have the upper hand since Zipcar needs those spaces near the customers. Also, the cars that Zipcar uses need services which makes the company limited to a very few suppliers to provide this service. Since cars are the basis for the business, Zipcar needs to choose one reliable supplier for the car service. Therefore, parking area owners and car service providers can be considered powerful suppliers.

Considering the substitutes for car sharing, they may include public transportation, car pooling, car ownership, traditional car rental and borrowing. Most of the customers of Zipcar are not heavy users for cars, they are people who need a car for a short period of time. The ones who consider owning a car are mostly heavy users who need cars in their everyday life. The other substitutes may impose a threat on the business, but renting a car using Zipcar is more convenient. Also, environmental concerns are growing and becoming clear to the public which makes people more willing to share cars for a few hours than owning one. Public transportation and car ownership might be costly since fuel prices are rising. The other substitutes that include borrowing and car pooling might be convenient for some customers which make these substitutes in particular a threat to Zipcar business.

Regarding the competition in the car sharing industry, Zipcar has competitors like CAN and Phillyshare (Goldman S., May 2008). Their main competition is the companies that provide the same service for free. However, Zipcar still has an advantage over these competitors due to their advanced technology and patented wireless technology. In addition Zipcar has a strong brand name and a strong presence in the car sharing industry. Also, it rents cars in different locations similar to its competitors. Other traditional car rental companies such as Avis and Hertz can be considered as potential powerful competitors. They have a strong presence, financial ability and experience in the car rental industry which enables them to enter the car sharing market.

As mentioned earlier, Zipcar has powerful technological abilities that can assist in maintaining a competitive advantage for them. The company should be aware of the major car companies such as Avis. These companies can obtain similar technology as Zipcar and use it for their advantage. Incase competition becomes a threat Zipcar can use its powerful technology to remind people about their name. Advertisements, offers and promotions can be communicated through the network of Zipcar members. In order to sustain a competitive advantage Zipcar might try moving to a new market where they provide luxury vehicles such as limousines. Also, they can use the same technology they have to enter the shipping industry. They can provide shipping services to local businesses at low costs and use their technology to track the shipments and trucks. By doing that they will be relying on more than one source of profit instead of relying on car sharing that targets a small market. In addition, Zipcar can promote its green service or hybrid cars and how it helps in protecting the environment from the increase in cars usage. The segment where people are concerned by the environment is growing since more people are aware about environmental dangers. Zipcar can gain and retain several customers if they do such a promotion. Another way to maintain their competitive advantage is trying to have long term business partnerships with their suppliers or acquire these suppliers. Not only will they own the suppliers but they will also have a new source of income. Acquiring their suppliers can provide the company with several advantages over other competitors such as lower transaction and distribution costs.

In conclusion, Zipcar is one of the companies that has a powerful business model where IS strategy supports and complements the overall business strategy. Despite that, the company has to be aware of the changes in their market. As mentioned earlier, there are some substitutes for their service and other major car rental companies might enter the market. Zipcar has to develop proper responses to these changes. At the same time they have to maintain their strong brand identity and remind people that they are the leader in the car sharing industry.

Resources:-

Goldman, S. (May 2008). The North American Carsharing Industry Zipcar, Inc. and 3 Major Competitors. Retrieved on October 31, 2010 from https://portfolio.du.edu/portfolio/getportfoliofile?fiuid=73397

Pearlson, K., Saunders, C. (2009). Strategic Management of Information Systems (forth ed.), Zipcar (pp. 74-75). John Wiley and Sons Ltd.

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