Zipcar Entrepreneurship Research Paper
- Length: 6 pages
- Sources: 6
- Subject: Business
- Type: Research Paper
- Paper: #11070221
Excerpt from Research Paper :
Scott Griffith, the brains behind Zipcar. Zipcar is a company that is engaged, basically, in the automobile rental business. The premise is that people join Zipcar, giving it membership-based revenue, and then they pay when they want to use the car. Zipcars are located in neighborhoods, so that people can walk to the nearest car after they have booked it, and just take it. The target market for Zipcar is mainly urbanites who generally do not need to maintain a full-time automobile but who might need one for temporary purposes -- a run to Costco, or a short trip -- where a Zipcar will be cheaper and more convenient than a conventional rental car option.
Griffith was educated in mechanical engineering, not running a car-sharing business. Griffith has stated on many occasions that his engineering background was critical to developing the traits needed to succeed as an entrepreneur (Levitt, 2014). While there is nothing academic that he learned that helped him, his engineering background gave him some of the mental preparation, especially in terms of ways of thinking, that allowed him to succeed with this entrepreneurial venture. This corresponds well with the material in the text.
The first thing is that it is his thinking that he credits to his success, which highlights the first myth of entrepreneurship, that entrepreneurs are doers and not thinkers. While no doubt entrepreneurs need to "do" a lot of things, they must first and foremost have a good idea and then be able to think their way through a lot of problems. The text highlights that there is a need for commitment and determination in entrepreneurs, and that is something that Griffith was able to demonstrate in the way that he learned how to think. He notes that "engineers take a situation, pick it apart, examine the pieces, and then put them back together in a better way. Looking at business problems this way gave Griffith a fresh perspective from many of his peers" (Levitt, 2014).
The idea for Zipcar came about from Griffith' passions for cities, transportation and technology. The text points out that creativity and innovation are critical elements to entrepreneurship because the entrepreneur needs to be able to identify gaps in the market and to be able to implement an idea to address that gap. In the case of Zipcar, Griffith was able to identify that an increasing number of urban-dwellers were turning their backs on the version of the American dream that included car ownership (Kilcrease, 2011). There were still certain things for which people wanted cars, and they would rent them or borrow them to fulfill these needs. However, consumers who lived a near-car-free lifestyle had trouble implementing this plan and wanted a new solution.
Griffith was able to recognize at an early stage that "the future of transportation and car ownership is changing now and will continue to change." This was simple application of the creative process. Demographic changes were occurring -- people were being drawn back into cities, and this was creating a market niche of people who did not own vehicles. This combined with increasing attractiveness of urban living, new urban residential construction, rising fuel costs, lower real incomes that demanded sacrifices to the American dream for many, and greater environmental consciousness. These trends, being numerous, were set to accelerate with the coming of the Generation Y or millennial generation. Thus, Griffith was able to identify a large unserved market and devised a creative solution to addressing this market's needs in the form of the car-sharing program (Kilcrease, 2011).
Description of the Approach
As noted, one of the key components of the success of Zipcar's is the engineering mindset that Griffith had towards problem-solving. He did not have a lot of managerial experience, but was able to build his company with managerial principles in mind. This is something that often does not happen when a company reaches the venture capital stage in particular. The entrepreneur is often sidelined at that stage in favor of professional management, but Griffith was not only retained but later found himself in the venture capital business (Rao, 2014).
The professional approach that Griffith brought to Zipcar was evident from the beginning. He grew the company by instituting effective management processes, to turn what was a promising idea into a profitable company. He was able to make several mergers that grew the company more rapidly than it perhaps would have otherwise, for example adding Flexcar to the stable of services (Gates, 2007). Buying a business is a skill for entrepreneurs, as they need to value the business and be able to negotiate a fair deal. The principles are the same regardless of whether buying into a business to start your entrepreneurial career or to expand your fledgling company. Buying an established business involves understanding what that business brings to your company, how much it is worth, and what it will take in order to integrate that business into yours.
The idea of Zipcar was founded on the idea of meeting customer needs, in particular meeting their transportation needs. The different elements of the company have been developed in line with this principle -- when mobile became big Zipcar added apps, and it has been able to expand into a large number of cities around the world as part of its commitment to meeting the needs of customers. Thus, when the different elements of successful entrepreneurship are examined, Zipcar has them. It had a clear vision of the innovation that it wanted to offer, and it had a vision of how its innovation was going to help customers. Zipcar therefore did not need to sell its innovation, just the benefits that its innovation was going to bring to people in the market. Further, Griffith was able to create growth at the company while maintaining a relatively flat structure, focused around a series of regional offices that served local markets, with only a limited amount of oversight from the head office. Zipcar basically built a franchise model that was familiar to larger firms in the industry, and in that respect Griffith had his exit strategy -- Zipcar was eventually sold for $500 million to Avis (Gara, 2013).
One thing that stands out in the Zipcar case is that the company succeeded largely by being the most dogmatic, professional organization in the industry. this put Zipcar in a position to buy out a lot of its competitors, allowing it to effectively corner the car-sharing market. The determination that Griffith showed to get this idea off the ground when it was struggling back in 2003 was based on a belief in the vision, but it was the implementation that made the company successful where it had been struggling. With professional systems, the company was no longer trading simply on having a great vision of a market opportunity -- Zipcar was in a position of thriving because its costs were managed, and its market was grown in a controlled but persistent manner. The management systems were the key to growth, because each office was run according to the same principles, in the manner of a franchise but without franchising.
Griffith was able to enter the business because he saw an opportunity with a struggling company. He knew that it had the potential to be a success, but was going to need managerial expertise and problem-solving in order to bring that success to fruition.. so Griffith was a classic case of an entrepreneur who did not innovate, but found an innovative idea that was struggling to find a market. This is an acceptable way of entering a new business, and becoming an entrepreneur, because he was not getting involved in a business that had any proven track record -- the entire industry was only a couple of years old and with new proven track record.
Building Zipcar relied on strategies such as building up organizational learning. As noted, it was the way o thinking that differentiated Zipcar within its industry and allowed it to be the most successful firm. An entrepreneur needs to have the ability to not only have a vision, but meet the different challenges that come with bringing that vision to fruition (Peavler, 2014). Thus, it was the problem-solving techniques that allowed Zipcar to overcome a lot of the logistical problems that were holding the company back. It made changes to its service offering to make it more enticing to potential members, and in doing this managed to build its market share. Zipcar also needed to gain more brand exposure, something that is always difficult to do with limited cash flow. It is established that cash flow is pretty much everything to an entrepreneur, because without cash you cannot grow. Thus, one of the key jobs that Griffith did in his earlier days was to establish sufficient cash flow to allow the business to continue to grow.
Strategic management techniques were also employed at Zipcar. Things like a SWOT…