Assignment 1

- Zipcar Case-

Name:
Course Number:
Course Title:

Matthias Griebel
ISM 6488
IT Management and Security

Date Submitted:

02/01/2015

Question 1: Analyze the business model of Zipcar using

Porters Five Forces Model (based on textbook).

Based on the information given in the textbook, Porters Five Forces are
acting on Zipcar and the car sharing industry to varying degrees.
The potential threat of new entrants is typically identified by
switching

costs,

access

to

distribution

channels,

public

image,

governmental regulations and economies of scale. These factors are

used to determine the barriers to entry. Zipcars proprietary IT platform
doesnt use sophisticated and secret technology but a potential new
entrant needs the knowledge and capital to create at least a
comparable system including cars and distribution system. Regulations
for entering the market as well as the brand image have no or a low
effect on new entrants. Due to the fact that the car sharing industry
uses similar resources (e.g. cars) like the traditional car rental industry
there are lower barriers to entry for established firms like Hertz or
Enterprise (which already entered the market with Hertz 24/7 and
Enterprisecarshare). Economies of scale can lead to competitive
advantage and higher barriers of entry. That also explains why there
are merely big companies successfully entering the market. As a result,
the potential threat of new entrants is basically limited to already
existing huge companies.

The bargaining power of buyers is determined by switching costs,

buyer selection and differentiation. While the switching costs for
switching to a competitor are relatively low (e.g. cost for registration
and annual fees) Zipcar tries to decrease the likelihood of switching
by providing an easy and comfortable way for members/return buyers
to rent a car without waiting in line and filling out papers. This
differentiation is a big competitive advantage to traditional car rentals
but a table stake or commodity in nowadays car sharing industry.
Generally the bargaining power of buyers is limited because there are
plenty of customers (fragmented market).
The bargaining power of suppliers determined by the selection of
suppliers and the threat of backward integration. As there are plenty of
car manufactures (suppliers) the power of suppliers is relatively low
(fragmented

market).

Nevertheless,

car

manufactures

start

to

implement their own car sharing services (e.g. DriveNow by BMW and
Car2Go by Daimler, both Germany) which illustrates the threat of
forward integration by the suppliers. Still there is a possibility for
building strategic alliances like Zipcar did with Ford in 2011 (Vlasic,
2011).
The threat of substitute products

depends on the buyers

willingness to substitute. A buyer will substitute a product when there

is a higher expected benefit (price-to-performance). The car sharing
industry has to compete against traditional car rental companies, taxi

companies

incl.

real

time

ridesharing,

car

ownership,

public

transportation, and bikes etc. Due to the variety of potential

substitutes the threat of substitute products is relatively high.
The rivalry among the firms competing in an industry is
determined by differentiation of product or service, the market access
and cost-effectiveness. While the products within the car share
industry basically are staying the same, the services differed in the
beginning. Using Zipcar to rent a car was much easier than renting a
car from a traditional car rental company. New competitors in the car
share market adapted to Zipcars technologies that resulted in a low
level of differentiation. Still there are big differences regarding the
availability and variety of cars in different areas/cities. The switching
costs for the costumers are low (see above) as well.
As a result, the car sharing industry is highly competitive regarding the
rivalry among firms competing and the threat of substitutes, the
potential threat of new entrants is medium and the bargaining power
of buyers and suppliers is low.

Question 2: Discuss and describe the synergy between the

business strategy (mission/vision) of Zipcar and its use of
information technology.

The mission/vision of Zipcar is to enable simple and responsible urban

living and to envision () a future where car-sharing members
outnumber car owners in major cities around the globe (Zipcar, Inc.,
2015).
In a world of globalization and urbanization, mobility is one of the most
important drivers of substantial growth. Zipcar tries to implement new
concepts and solutions into urban areas where the infrastructure
operates on its limits.
Zipcar delivers on-demand mobility by providing cars 24/7 a week as
well as the necessary maintenance, insurance, petrol, customer
service, free parking etc. The fully integrated Information System
provides the possibility for the costumer to book the car online, locate
the car, pick-up, return, online payment etc.
The whole system works without or with just very little human
interaction that leads to less costs, less data redundancy and high
flexibility and convenience for the customers. Hence the prices for
costumers are affordable and often a better choice than renting a car
for a few hours or taking a taxi.

Without the use of an integrated IT system the whole business model

wouldnt work. Moreover there would be no possibility to operate on
affordable costs.

Question 3: Based on a review of the companys web site

(zipcar.com) and other sources, describe how each of the
following IT trends and priorities for 2015 has been already
adopted by the company and their importance.

a.

Automating knowledge work

Zipcar uses a real time reservation and fleet management systems

that synchronizes the collected data from each end point, for instance
interactive telephone systems, member service agents, vehicles,
regional employees, and the web-reservation system. The Knowledge
Center of Zipcar then uses a proprietary IT system to manage,
monitor, and maintain its vehicle fleet. Moreover the data analysis
allows planning and optimizing fleet size and future vehicle locations.

b.

Cloud/Client

computing

(including

alternative

architectures)
Regarding the use of mobile apps (see 3.g), web-reservation system
and the collection and analysis of data in one central data center
Zipcar is already using cloud computing in an advanced way.

c.

Collaboration technologies

Zipcar is trying to get advantages by connecting with different sharing

economy services. For example, Zipcar teamed up with Regus, the

world's largest provider of flexible workspaces, to offer an on-demand

access to vehicles and office space (Zipcar, Inc., 2013).

d.

Competing with Big Data and advanced analytics

Like described in answer 3.a, Zipcar is collecting data from interactive

telephone systems, member service agents, regional employees, the
web-reservation system and vehicles. The Big Data is getting
analyzed in the Knowledge Center, for example for fleet optimization.

e.

Digital Physical Blur: Extending intelligence to the

edge

Zipcar is already collecting real time data of its fleet (GPS, mileage
information, fuel level, battery voltage) and integrating the data into
the analytical models.

f.

Joining the social matrix (social media)

Zipcar developed a community of Zipsters where members can share

their personal experiences with other members. Additionally there are
Facebook and Google+ Profiles of Zipcar available as well.

g.

Mobile Apps and Applications

There are mobile apps for iOS and Android are available. The iOS app
was voted as one of the best apps in 2011 (Aamoth, 2011).

h.

Outsourcing

Zipcar offers a fleet optimization service called FastFleet that uses the
embedded IT it has installed in its fleet. The FastFleet service is also
available for companies or universities.

i.

Risk based security and protection

No information available/not adapted. Due to the fact that Zipcar uses

a proprietary IT system, Zipcar likely has implemented a kind of risk
based security and protection.

j.

Software Defined Anything

No information available/not adapted. Due to the fact that Zipcar uses

a proprietary IT system and has to handle a huge amount of data it has
possibly implemented a software-defined network or a softwaredefined data center.

Question 4: For the remaining trends not adopted, discuss

why you believe they should be adopted (e.g. business value),
or why they are not relevant (or why you cannot determine
their relevance).

The trends of question 3 that were not fully adopted by Zipcar (in my
view) are collaboration technologies, outsourcing, risk based security
and protection and software defined anything.
Zipcar should extend their efforts to adopt collaboration technologies
because there are a lot of great opportunities connecting hotels, public
transportation, social media etc. with integrated offers from Zipcar
(Strategic Alliances).
Outsourcing should be considered as an option at least for all the
repetitive functions in accounting and payroll processes.
An important factor within the next years will be a working risk based
security and protection system to prevent from system failures or data
theft. Zipcar is collecting and analyzing huge amounts of customer
data. A system failure can cause a downtime for the whole business
and data theft could cause a big loss of brand reputation.
Due to the fact that Zipcar has to handle a huge amount of data, the
use of a software-defined network or a software-defined data center

that is easier to scale can reduce costs and handle even bigger
amounts of data and data analyzing operations in the future.

Question 5:

Given the scope and potential geographic

expansion for the company, provide a brief description on how

the IT function might be structured, and how the infrastructure
might

be

deployed

(e.g.

centralized

vs

regional

vs

decentralized). Explain your rationale.

Zipcar already expanded to different countries, e.g. Canada, Spain,

France, Austria and the UK.
A centralized infrastructure uses one data center where everything is
managed, supported and analyzed. The advantage is data consistency
and the possibility to supervise every transaction from one point.
Additionally every Zipcar member could use the every vehicle or
service in every country all over the world (technically). Furthermore,
the existing data can be put into automated knowledge management
systems. A disadvantage is the single point of failure issue. If there
were problems at the central data center, the business from all over
the world would shut down. Big distances to the central server can also
cause delay and response time problems that end up in poor
performance and annoyed users.
A decentralized infrastructure uses plenty of data centers in every
city/area. It can prevent from the single point of failure problem as well
as the delay issues. Unfortunately it can cause problems with data

consistency when mirroring the data centers (e.g. one member travels
to a different city and wants to use the Zipcar local service). Also it
wouldnt be possible or very difficult to use all the data to analyze the
behavior of members and predict future demands in real time (just
local demands).
A regional infrastructure is a mix of both the centralized and the
decentralize infrastructure. For example North America and Europe
could use one centralized system each. This architecture allows real
time analysis in each area as well as a good response time.
In my opinion, a centralized system based on a Software Defining
Anything/Software as a Service would be the best option because it
combines the advantages of the systems above. Furthermore, it is
easier to scale in case of big growth and new methods for analyzing
data.

Question

6:

For

Zipcar

and

Uber,

compare

and

assess

similarities and differences in how technology has been used

to support their business strategies.

Zipcar offers car sharing options, Uber is an app-based transportation

network for real time ridesharing and a taxi company. The companies
are operating both national and international.
Uber and Zipcar are mostly interacting with their customers via a
mobile app. They are using location services and highly automated
standards that result in impressively low human interaction.
As explained above, Zipcar uses the IT to run and manage the whole
process of a car rental (booking a car, providing information about the
car, picking up the car and returning the car) as well as supporting all
the activities to locate and maintain the cars.
Uber uses IT as enabler for their business model. The Uber-App and
membership gives access to a platform where private people can offer
rides for standard rates and members can also book rides for standard
rates. The profit margin and business model of Uber is basically a
provision for providing the platform. Additionally Uber offers taxi rides
with authorized and officially registered premium cabs.
Unlike Zipcar the business model of Uber causes a lot of trouble due to
regulations in different countries. Uber is accused to practice illegal

taxicab

operations

that

cause

unfair

business

practices

and

compromises passenger safety (e.g. Germany) (Preston, 2014).

While offering different services, Uber and Zipcar are competing for
mostly the same customers (see question 1, threat of substitute
products). The rise of the companies was enabled by the use of
Information Technologies in a new and different way. Neither of both
companies could exist without their unique IT systems.

Bibliography
Aamoth, D. (2011, 01 27). Time. Retrieved 02 01, 2015, from Time:
http://content.time.com/time/specials/packages/article/0,28804,20444
80_2043593_2043625,00.html
Preston, R. (2014, 04 09). InformationWeek. Retrieved 02 01, 2015,
from

InformationWeek:

http://www.informationweek.com/strategic-

cio/digital-business/digital-disruption-uber-style-is-never-pretty/a/did/1306955
Vlasic, B. (2011, 08 31). Then New York Times. Retrieved 02 01, 2015,
from

Then

New

York

Times:

http://www.nytimes.com/2011/08/31/business/ford-and-zipcar-joinforces.html?_r=0
Zipcar, Inc. (2015, 02 01). Zipcar. Retrieved 02 01, 2015, from Zipcar:
http://www.zipcar.com/mission
Zipcar, Inc. (2013, 04 03). Zipcar, Inc. Retrieved 02 01, 2015, from
Zipcar:

http://www.zipcar.com/press/releases/zipcar-teams-with-regus-

to-help-businesses-save-money