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Zip car Case Solution & Answer

Zip car Case Solution

Threats:

Other car rental companies try to undertake different strategies and to attract the customers such as Swiss mobility and Drive Start auto, which already have a strong market share in the car industry. Moreover, the increasing prices of fuel may increase the operational cost of the company, which, in turn, will put extra pressure on the company.

Operations:

Zipcar performs different operations to attract its customers such as sometimes it offers free ride to the customers in order to make then familiar regarding the quality of service; such offerings have helped the company to expand or to attract greater number of customers. Usually, the company introduces new discount promotions of saving the amount by placing four different members in the car so that the charges will be divided between the four passengers, which has proved to be a beneficial scheme for the working employees who do cannot afford the entire fare by themselves. Hence, providing timely innovations also shows the concern of the management towards the potential as well as these are different criteria which would be performed to analyze the investment capability of the company.

Financial plan in May 2000

According to the net income, Robin’s financial plan in May 2000 was accurate.

2A. Justification:

Zipcar faced a lot of difficulty due to the decision of the management. One of the reasons was that it was not the right time to increase the price. Zipcar was recently introduced to the US market, as people in the US tend to utilize public transport to save their amount and time and at the same time, Zipcar raised prices which resulted in low interest from its consumers.The per hour cost increased from $1.50 to $4.50 which later changed to$7.00 per hour, which was a significant increase in the price. Members were not concerned regarding parking problems a tall, as they utilized the company’s service as it was considered that if one pays such an amount to avail the services, then it would be better that one should purchase their own car.

On September, different investors invested in the company, and the amount ranged from $300,000 to $375,000 where both the owners did not receive their salaries. Due to this, their personal expenses increased by 40% per hour whereas, the expenses for the software developer increased by 60% per hour. Investors became hesitant, as it was forecasted that the company was going through a declining stage. The management confronted numerous complaints from the outside market. The revenue generated was much lower and less than expected. The owners were confused in determining the upcoming strategies, which would lead towards generating accurate results and would increase the profits as well. Moreover, the attrition increased to 3 on September, which was normally around 1 for expanding any business. Furthermore, the attrition rates started increasing once the customers and investors were not satisfied with the services of the said company. The revenue generated on September was much lower than the forecasted amount because of having more expenses in marketing and having high per hour charges. The company faced loss in the first year due to less market and usage of vehicles.

Most significant driver of Zipcar’s financial performance

Parking expense:

Traffic rules are to be followed strictly in the US, as no one can park their vehicle at the side of the main road or in the middle of the road. People have to pay for parking and to avoid facing any issue from authorities such as fines and law suits. Zipcar pays parking expenses in many areas of the US. These fees, as a result, reduce the company’s revenue and in turn, increase the cost of the company.Therefore, it could be said that the company’s financial performance is highly affected by the parking expenses.

Hour Usage rate:

Hour usage rate is the best option to generate more revenue as compared to the rate of full day, as the kilometers driven vary on an hourly basis, therefore it could be said that more revenue would be generated through hourly usage rate.  The more vehicles are charged, the more the revenue the company generates. For example, if a Zipcar’s vehicle costs $5.00 per hour, then in such a case it indicates that the company can earn $120 in one day, which is significantly high as compared to the full day revenue approach…………………..

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