Essays24.com - Term Papers and Free Essays
Search

What Is the Strongest Argument That Would Make Zipcar Appealing to Investors?

Essay by   •  February 6, 2017  •  Case Study  •  1,072 Words (5 Pages)  •  967 Views

Essay Preview: What Is the Strongest Argument That Would Make Zipcar Appealing to Investors?

Report this essay
Page 1 of 5

1.

What is the strongest argument that would make Zipcar appealing to investors?

Several arguments are brought in the case.

1. Most investors consider their investments based on long term profit and sustainable benefit from a business. Zipcar has a revolutionary concept which allows users to enjoy the convenience while saving money and being environmentally-friendly. As society grows, needs for transportation will change as well, more and more vehicles will be on the road, causing problems like insufficient parking lots, intense traffic jams and accidents. As per case perspective, one Zipcar deployment can replace 7.5 individual cars in the city. Comparing using Zipcar with buying individual cars, Zipcar allows users to use vehicles conveniently while saving their money. The potential growth opportunity and the revolutionary concept is key to encourage investors to invest in Zipcar, because there are long run benefits for investors if the business is managed well.

2. Zipcar Finance its business mainly by convertible loan, which gives investors opportunity to gain ownership of the business in the long run. Convertible loans also allow investors to have earnings every year, if Zipcar makes profit in future years, investors will be beneficial in the long run as well.

3. History has proven that the concept of Zipcar is fits well in western culture. This industry has become more mature and profitable over the past few years. North America has more population and intense transit system, which gives Zipcar a good opportunity to operate and grow. This is a very appealing argument for investors.

In my opinion, this first argument is the most appealing of all. As investors focus mainly on sustainability, profitability of a business, the future of Zipcar seems to fit investors' expectation in the long run. Zipcar will be more than likely to succeed than fail because the business concept focuses on "convenience", "lower cost", and "environmentally friendly

What is potential of the Zipcar

1. Lack of funding in the early stage

Zipcar had a very tough time raising funds in the beginning, the company invested most of its funding in the development of the wireless system, and the system was not yet perfect. Zipcar still needs an additional 1.3 million to prove the Boston market's viability. Insufficient funds will directly influence operation of the business and slow down the deployment of its wireless system, which is crucial for Zipcar's growth in the future.

2. Increasing cost per car over time

Life changes with time, needs for parking and gas will change as well. Zipcar experienced several unexpected cost increase when the first few Zipcars were deployed, causing budgeting issue and price adjustment. However, these costs per car will only increase in the future but not decrease, resulting in less profit over time. Zipcar needs to constantly adjust the rate to avoid loss, which is a potential threat for its profit. Leasing company treats Zipcar as a bigger credit risk, resulting in increasing leasing fees, more unexpected cost were associated per car.

3. More competitions in the future

As a start-up company, the major competitor is the more convenient, cheaper, environment-friendly transit system, along with other start-up companies like Zipcar. For Zipcar to win in the market, improvement of its wireless system is significantly crucial, use of advertisement as well as promotion materials are needed to support the business. Failure to compete in the market will harm the business in the long run.

4. Loss of ownership due to convertible loans

The case allows me to understand that most of Zipcar's initial funding come from convertible loans, it's very risky to finance the business by too much equity. Shareholders can have more control power over the business if they have more company shares. This is not a good sign in the long run, as the founders will slowly lose the control power. Convertible loans may solve Zipcar's funding issues in the short run, but it's a potential threat in the long run.

Are there any weaknesses? If so, how does Zipcar address this to investors

1. Lack of knowledge and expertise of two founders

Both founders don't have enough experience in auto industry, investors are anxious about the business because of this. Zipcar hired a president whose experience and age might help Zipcar to gain more industry credibility. But eventually this didn't work really well for Zipcar.

2. Weak marketing impact

"word of mouth" and free media coverage lower the advertising cost for the company, but also lowers the marketing efficiency and marketing impact. For a start-up company like Zipcar, advertising is crucial for long term growth.

...

...

Download as:   txt (6.6 Kb)   pdf (79 Kb)   docx (10.2 Kb)  
Continue for 4 more pages »
Only available on Essays24.com
Citation Generator

(2017, 02). What Is the Strongest Argument That Would Make Zipcar Appealing to Investors?. Essays24.com. Retrieved 02, 2017, from https://www.essays24.com/essay/What-Is-the-Strongest-Argument-That-Would-Make/73938.html

"What Is the Strongest Argument That Would Make Zipcar Appealing to Investors?" Essays24.com. 02 2017. 2017. 02 2017 <https://www.essays24.com/essay/What-Is-the-Strongest-Argument-That-Would-Make/73938.html>.

"What Is the Strongest Argument That Would Make Zipcar Appealing to Investors?." Essays24.com. Essays24.com, 02 2017. Web. 02 2017. <https://www.essays24.com/essay/What-Is-the-Strongest-Argument-That-Would-Make/73938.html>.

"What Is the Strongest Argument That Would Make Zipcar Appealing to Investors?." Essays24.com. 02, 2017. Accessed 02, 2017. https://www.essays24.com/essay/What-Is-the-Strongest-Argument-That-Would-Make/73938.html.