Analyze the Business Model of Zipcar Using Porter’s Five Forces Model

Masters in Engineering Management (MEM)

School of Engineering

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Information Systems Management

Case Study 2-2: ZIPCAR

Guzel Bulekbayeva

ID: 100001876

Date: 18-Sep-2015

1. Analyze the business model of Zipcar using Porter’s five forces model

Threat of New Entrants: There is a medium threat of new entrants on the market. Although the car rental system have existed long time, the hourly system was first introduced by Zipcar. Existing companies can enter the new market of hourly rental business easier, because it is only required to make capital investments to develop a system, similar to the Zipcar. The uniquely developed IT system of Zipcar raises the barrier of entrance to new companies.

For newcomers of the business the entry barrier is higher, because of increased capital investments, necessary to open a car rental business. However, in general, since the Zipcar raised the awareness of such rental system, for new entrants to the business it will not be necessary to educate the public of the product, therefore the entrants to this marker will hold much less risks.

Bargaining Power of Buyers: The bargaining power of buyers is low-to-medium. Because of the high demand for this service, the company can dictate the cost for a product. On the other hand, the community of Zipsters, by sharing the experience of using Zipcar, can be in control of quality and prices of this service.

Bargaining Power of Suppliers: Because of a wide range of possible supplier across the country, the bargaining power of suppliers is low.

Threat of Substitutes: At that moment, several substitutes existed to the service:

• Taxi. As quick and convenient as Zipcar, the taxi did not require any membership and application fees.
• Public transport. Very cheap alternative to Zipcar, however, not as convenient.
• Own car. Quick, convenient and cheap alternative for those, who are travelling in their own cities or countries. For travellers this might not be an option
• Bike. Much cheaper than Zipcar, can also be obtained 24/7. But not an option in winter, and the travel time is much longer than a travel time of a car.

Industry Competitors: There are several main competitors of the product:

• Existing traditional car rental companies. Enterprise, Hertz have later entered the market of hourly rental. (Trevis Team 2012) However, at the time of the Case, these companies still lacked this system and used conventional methods of renting cars, and thus, the Zipcar had hold a unique competitive advantage.
• Peer-to-peer car rental companies: GetAround, RelayRides. (Gaille 2014) Again, these online-based car rental services appeared log after Zipcar.

1. Discuss the synergy between the business strategy of Zipcar and information technology

The strategy of Zipcar is closely interlaced with the information technology. Usage of information technology in the car rental has given the company a strong competitive advantage. The ability to rent a car without going to the rental place and standing in the lines was reached through online booking and tracking system. The Zipcar uses IT in every part of the system: from booking and rental, opening of the car, and creation of community to share experiences. Thus, using IT in the car rental the speed and convenience of the service has been achieved, as well as effective advertising.