Zipcar: Firm Strategy Analysis

Zipcar: Firm Strategy Analysis

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Zipcar: Firm Strategy Analysis

1. Financial Analysis

Zipcar is undoubtedly the largest automobile lending company globally. Avis Budget group purchased the shares of the company in 2013 at $12.25 per share. The agreement was a merger that dramatically influenced the financial development of the company. Zipcar’s quarter revenue in 2017 was almost $120.7 million, a marked rise from $62.9 million before the merger. Notably, Hurricane Sandy led to a loss of 1 million dollars that year. Indeed, the total revenue of the company increased from $241 to $ 278 the year after the merger (Sundararajan, 2013). The number of customers who use the company's services also increased progressively. It currently boasts over 80000 users globally. At the end of the fourth quarter, Adjusted EBITDA of 2017 was almost $20 million, a notable increase from 5.9 million in 2011. The GAP interest on the fee revenue of the company has also been strikingly increasing from 2012 to almost $90 million. At the moment, Zipcar has more than 80000 members who use nearly 10000 cars mostly in urban centers and Campuses (Sundararajan, 2013). The primary sources of revenue for the company are the US, Canada, Austria, and Spain respectively.

Its primary competitor in China is Uucars. Nonetheless, when compared to the company, Zipcar is apparently at an advantage because of its financial might. In fact, Uucars has struggled to maintain its electric cars operations, leading to a closure of a variety of operations due to financial difficulties. During the period of activity, the company received close to 20 million from investors, but it failed to sustain the business due to the high costs of buying and maintaining electric cars,besides the lack of a sufficient number of charging stations for the vehicles. Indeed, of the 15 major companies offering car rental services in China, none of them boasts the financial turnover that Zipcar does.  

1. An Analysis of the Major Competitors

The car hiring industry in China is currently crowded, and as a result, many companies in it have been increasingly floundering. The level of competition in the country is irrefutably high. Still, because of the high Chinese population, Zipcars services will always have a high demand. One of the most significant competitors of Zipcar in China is Uucars. At the moment, UUcars is facing a substantial risk of insufficient cash flow (Li & Kamargianni, 2018). The cost of hiring and maintaining cars has become progressively high forcing the company's financial turnover to dwindle. Uucars has even ceased operations in some cities in China, including Beijing.  Another competitor of Zipcar in China is Beijing Youyou Lianchuang has also been floundering because of the failures of the deals made (Li & Kamargianni, 2018). Despite the apparent challenges to these car sharing companies, the industry is likely to boom in the near future.

At the moment, the biggest challenge facing Zipcar’s competitors is the fact the charges for hiring vehicles are low because of a high number private of cars available. The users of these car renting services are also few (Li & Kamargianni, 2018). Nonetheless, Zipcar is likely to stay ahead of most of its competitors because of many elements they have adopted. For instance, it currently issues cards to its members that enable them to unlock automobiles for rent in major towns, airports and their neighborhoods. Another aspect that could make Zipcar stay a notch above its competition is that it usually charges fare per hour in addition to a membership fee. Uucas, on the other hand, charges few depending on the time and distance traveled, the cost of one kilometer being around 0.8 yuan.

With the increase in competition, the car-sharing industry in China is projected to have over 170000 cars by 2020, which will be owned by the dominant three companies, probably; Uucars, Zipcar-China, and New Harmony Commercial Factory Company. Therefore, for preventing any lags caused by the increasing  competition, it is essential that Zipcar reduces its operational costs for the fairs to be more affordable to the Chinese citizens.

1. Firm Mode of Entry

An ideal method for Zipcar to use to enter the Chinese market is through a joint venture. By collaborating with other relevant companies on short-term projects, the company can achieve most of its short-term target as it solidifies its place in the nation. Merging with potential competitor can be an ideal way to enter the market. Such a venture could help the company to progress at a faster rate, and thus, generate profits more hastily. Additionally, such a joint venture could reduce the need for borrowing from external investors (Botsman & Rogers, 2010).The Chinese car rental industry has some regulations and customs that Zipcar, as a relatively new company in the market, may not know how to maneuver. A joint venture offers the company a chance to access a market that has already been established. Therefore, such a joint venture is essential for minimizing the risks that accompany entering a new market (Li & Kamargianni, 2018). Other aspects such as capital, technology, and knowledge are some of the features that Zipcar will gain from such a joint venture. Notably, for a joint venture to be established in China, it has to be licensed by the Ministry of Economic Relations and Trade.  

1. Firm social Responsibility

Social responsibility is increasingly becoming an essential part of all international companies. Similarly, Zipcar has invested a considerable portion of its capital returns in the improvement of specific aspects of the environment. A critical reason why Zipcar is relevant to the society is that it promotes a "green environment". Indeed, the car-sharing business is more relevant to the community because it has helped to redefine significantly the transport systems in most of the major cities that are hugely congested (Ferrero et al., 2017). Unsurprisingly, the number of people who own automobiles in major cities is increasing globally. Although cars are primarily imported for transport, they have also been associated with a myriad of disadvantages, chiefly because of their role in pollution. Unfortunately, the exhaust fumes released by vehicles have been implicated in a great deal in the destruction of the environment. Also, the amount of congestion has led to jams that have considerably slowed movements in major towns, in addition to the pollution (Ferrero et al., 2017).