challenges and trade-offs entrepreneurs face in launching new ventures
Robin chase was a co-founder of Zipcar company, which was established in the year 1999, and it became a leading company in the car sharing industry in North America. Being a new company in the market Robin Chase and co-founders had a big challenge of popularizing and creating networks for the company. Choosing the right company name was also another challenge because the name of the company was going to influence how customers will perceive the business. Pricing and lack of sufficient capital was also another challenge for the ZipCar company. Robin chase concentrated on establishing strong networks for the company while the other co-founders focused in different managerial roles. The company currently strong networks in Europe and Canada, and it concentrates in businesses, residential areas and universities. The vision of the company is to provide convenient access to the means of transport on demand. Therefore, technology establishment and creativity was another problem. The company concentrates on a small market where clients hire vehicles on an hourly basis instead of a daily basis. Robin Chase’scompany was in the right direction, and he did not fear to tell the people on the success of his company, and he said “you’re out selling, selling all the time. You’re selling to prospective employees; you’re selling to prospective investors, you’re selling to suppliers. And when we’re in selling mode, we’re constantly so upbeat and excited, and it’s only good stuff. You have to remember, deep in your heart, when something sucks, you’ve got to change it out right away.” (Belk,1595). On the same year, October just four years after the company was launched Robin could not believe what the excell spreadsheet was revealing after the first funding. Zipcar co-founder Robin Chase after spending the past ten months building a team, creating networks for the company and seeking funding, Robin Chase discovered that the revenue earned by the company on October was only half of what Chase was expecting. After this alarming discovery, the question on Chase’s mind was on how to set the company on a profitable course while safeguarding the company’s developing relationship with its members. The case study helps to highlight challenges and trade-offs entrepreneurs face in launching new ventures.
At the middle of October just four months after the establishment of the company, the company received its first funding. Robin Chase who had strong quantitative abilities believed that the data in disposal was sufficient to show whether the company was in the right direction. Chase wanted to use the data to establish whether the business model, which had just been established was sound. By this time the company had ten cars on the road and over 400 members. With help from Jim Grube, an MIT student who was getting his master’s in transportation, Chase pored over the numbers. From the beginning of the company, Chase used to send emails to the company members talking about the growth of the company and sharing customer’s experience. During the process of networking, Chase had a long number of contacts of people who he was supposed to contact and market the new business. The people who Robin Chase targeted included the policymakers in the city of Cambridge, Owners of parking lots, Owners of the land upon which the parking lots sat and car rental companies. At some point during the challenging marketing process, Robin Chase expressed his feelings, “you are trying to find the way up, find the path upward, and you are blind. You have no idea which way is the path. You have to construct the path. And some of these people are useless, and you never, ever talk to them again. But you are constantly going in these odd directions, and then you’re kind of making your way up. And when you’re up you can look back and see ”(Koen,52). Some car rental companies doubted whether Chase’s company was going to thrive in the new business because of its small volume of the market.
Chase company had no enough capital during its launch, and therefore Chase spent most of his time raising funds for the company from different sources. Between January and the time ZipCar was launched, Chase had attended about 100 meetings focused on fundraising. She met with several investors and capital firms seeking advice on raising capital. After receiving some money from private investors, all the investors were thinking to get 30 times on return after six months, but the market for the ZipCar company had fallen. Another problem which surrounded the ZipCar company upon its establishment was on choosing the right marketing strategy. This was evident because the Zipcar company staff would be seen on the streets with cards advertising the new company. After the first funding of ZipCar company, the numbers revealed inefficiency on the way the company was operating. Car utilization was only 22%, much lower than the estimated 40%. The 24-hour car was being used less than 5 hours a day opposed to 10 hours a day. Chase had only achieved half of what she had expected from the company, and therefore she had a huge decision ahead of him to make. Chase sought advice from different firms and individuals in the process of solving the problems and put her company on profitable mode.
Chase solved the technological problem by building a team to help him come up with technology, which would make operations of the ZipCar company more comfortable and flexible. Chase’s husband Roy Russel, an electrical engineer from MIT who was a worker in a technological company, was in hand to help Chase to come up with suitable technology for her company. Chase and her team designed a website where customer orders were now being handled through the website. An alternative solution for this challenge would be creating an android application where customers would make the requests more efficiently. This solution is more effective because most of the customers for ZipCar company have access to smartphones and phone application will be very convenient for them when booking for the transportation services.
Pricing challenge was one factor that contributed to the closure of the Zipcar company just four months after its launch. To solve the problem Chase, fortunately, had access to pricing models used by many European car-sharing companies. Chase then settled for a pricing model similar to that of the other companies beginning with a security deposit of $300 and an annual membership fee of $50. Chase also visited David bell a professor at Harvard Business School who was an expert in pricing. Another alternative way of pricing is involving potential customers in the process of determining the most suitable and affordable prices. Potential customers can be interviewed by use of questioners on their most preferable prices. After the customers’ responses, company owners can then settle on the optimum price. The method will see the company settling on price, which is affordable to the customers and at the same time a rate that is profitable to the company.
Marketing challenge in the Zipcar Company was solved by hiring a group of employees purposely to advertise the new company. The marketing team would go to the streets with the company’s postcards where they persuaded several customers. The company was dependent on guerilla-style of marketing. Chase had several postcards printed the services offered by the Zipcar company, and the cards were given to the potential customers’ in streets. The strategy saw the company reach new customers. Using an electronic advertisement method is an alternative way to create customer awareness of the services offered by the Zipcar company. The electronic advertisement includes the use of television, radio, and social media to create customer awareness. The advantages of electronic advertisement are that customers can know how the company offers transportation services and therefore, answering most of customers services. This marketing strategy will help the company become popular and reach more customers because most of the people have access to electronic devices such as radios, televisions and mobile phones.
Decision making is a major problem encountered by Robin Chase in her newly formed company. For a new business, several decisions have to be taken such as setting prices on how the new business will sell its services. After Chase realized that her company was not doing well, she called all the staff to decide on what the company was required to do to make the company profitable. Different members of the staff gave their suggestions and settled on that rising the prices could not solve the company’s problem. Chase knew that in a business setup involving all the staff members was vital in ensuring that right decisions are arrived at.
In conclusion, new entrepreneurs face several challenges in the process of launching new ventures in the market. Some of the challenges faced include financial challenges, marketing strategy, decision making, competition from other businesses, deciding the suitable method of advertisement, delegating of tasks and deciding on the right prices for their services. Starting a new business requires a lot of efforts from the entrepreneur. The entrepreneur needs to create a new product or service to offer, promote it, contact people, create profiles on social networks, and also answering client questions effectively. A near entrepreneur requires to have business language, which is persuasive so that they can compete favorably in the market and attract more customers. Financial planning is an essential part of any new business. Proper financial planning ensures that the company has sufficient cash flow to maintain its operations. New entrepreneurs lack adequate experience about business knowledge, and therefore they are likely to make some mistakes. To minimize these errors, it is necessary to research carefully the type of market you are going to venture. New entrepreneur requires to understand the operations of the competing companies and research on the most recurring consumer demands.