Davide Scaglia - Development of a Winning Business Model (Lesson 3)

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1、Session3NewVentureCreationAlexWangDevelopmentofaWinningBusinessModelByDavideScagliac2015090999WHATWERESOMEOFTHECRITICALTRANSFORMATIONSINZIPCAR’SBUSINESSMODELANDWHATWERETHEDRIVINGFORCESBEHINDTHEM?TheinitialbusinessmodelofZipcarwastoselltherighttodriveacarchargingapriceaccordingtoitsactualuse.

2、Theservicewasintendedto“fillthegapbetweentheusageoftaxisandrentalcars,forshortterm,ondemandprivatecaraccess”.Thesolutionwassuitabletothosecategorieswhoseuseofcarwasnotfrequentenoughtojustifyitstotalcostofownership,butthatneededitsconvenienceandflexibilityoccasionally.Thepricingstructureideat

3、edatthebeginningwasnotsuitableforthetargetmarketofthecompanybecauseitrequiredaninitialcashoutlayofabout$625,ofwhich$300werearefundablesecuritydeposit.Beforethelaunch,thepricinghasbeenmovedtowarditsvariablecomponentandamaximumdailyrate($44)hasbeenchoseninordertoofferacompetitivealternativetoc

4、arrentals.Atthelaunchofthestartup,themembershipfeewasreducedto$75andlaterto$50.Initially,thevariablepartofthefeewasbasedontimeanddistance,Griffith(CEOsince2003)decidedtomakeitindependentfrommileage,withinthelimitof180,becausethisstressedcustomers.TheelectionofGriffithasCEOofthecompanyhasbeen

5、acrucialmomentfortheevolutionoftheventure.HeimplementedmanychangesandnewsolutionswhichtransformedZipcarfromastartuptoacompanywith$100millionrevenues.Besidetheabovementionedpricingchanges,hesmartlydecidedtodividethecitiesinareasthatshouldhavebeenfilledofcarsonebyonebeforemovingtothenextones.T

6、hisapproachwasinlinewiththemainrequirementforthefinancialstabilityofsuchacapitalintensivebusiness:capacityutilization.Usersvaluedcarsthatwereclosetotheirhomeasaconsequencetheinfluenceofoneareaontheothersisnotrelevant,thereforeeachareas’capacityutilizationandmarketsaturationshouldbeevaluatedi

7、ndependently.Moreover,thelocalapproachenabledZipcartoofferthetypeofcarsthattheneighborhoodvaluedmostandtousethemosteffectivetypeofmarketing.Forexample,theadvertisingstampswerenotputontheclassycarsthatwereaimedatdeliveringastatusmessage.Theresponsib