Read the Case Study 2-2, Zipcar. Respond to the following questions:
- Analyze the business model of Zipcar using Porter’s ﬁve forces model.
- Discuss the synergy between the business strategy of Zipcar and information technology.
- What network effects are parts of the strategy of Zipcar? How do they add value?
- As the CEO of Zipcar, where is your most threatening competition? What would you do to sustain a competitive advantage?
CASE STUDY 2-2 Zipcar
Zipcar is an answer for customers who want to rent a car for a few hours in their home city rather than for a few days from a traditional rental agency. Car reservations are for a specific pick-up time and location around the city, often in neighborhoods so the customers need only to walk to pick up their reserved car. Customers apply for a Zipcard, which enables them to reserve a car online and unlock their car when they arrive at its location. The company operates with a very small staff compared to traditional rental agencies. Very little human interaction is required between the customer and Zipcar for a transaction. A customer reserves a car online, enters into the reserved car by waving the RFID-enabled Zipcard against the card reader mounted behind the driver’s side windshield, returns the car to the same location, and is billed on the credit card already on file. The customer can check all rental records and print receipts from the online reservation system. The system also has a color-coded time chart showing the availability and location of all rental cars in the vicinity. This transparent information exchange allows a customer to pick the car he or she wants, if available, or delay the reservation until that car is returned by another customer. Zipcar also created and installed a GPS-enabled wireless device in each car, which allows members to find and reserve a vehicle nearby using a cell phone. Customers also can use an iPhone or Android app on their iPhone or Android mobile device to find and reserve a Zipcar on a 24/7 basis. Zipcar sends text alerts near the end of the rental period, and customers can text back if they want to extend their rental time. All cars were outfitted with patented wireless technology. Zipcar’s proprietary IT platform carries information flow between customers, vehicles, and the company. It is used to monitor car security, fulfill reservations, record hourly usage, and maintain mileage information. The platform also relays vital technical information such as battery voltage and fuel level. It even informs the central system if a customer forgot to turn off headlights, which can quickly drain battery power. This business model provides unique advantages over traditional car rentals. Customers do not have to stand in line or fill out papers to rent a car. They know exactly which make and model they will be getting. Unlike most off-airport rental agency locations, which are open only during business hours, Zipcar locations are open 24 hours. The company’s rates also include the cost of gas and insurance as well as reserved parking spots at some locations. Additionally, the company uses social networking technologies to develop an online community of Zipcar members—Zipsters. It encourages Zipsters to talk about their Ziptrips (i.e., share their personal experiences with Zipcar). Thus, information technology is not only the key enabler of this business model but also a facilitator in creating a buzz and encouraging community development around the concept. Zipcar changed the rules of the rental car industry by bringing the new Web 2.0 mind-set of focusing on automation, customer empowerment, transparency, and community. Zipcar is very successful; as of August 2015, its Website boasts over 900,000 paying members and renting over 10,000 vehicles in 30 major metro markets in the United States, Canada, and the United Kingdom, as well as 400 college campuses and 50 airports.