Zipcar Entry in Japan

Introduction

The company Zipcar was founded by Chase and Danielson in 2000 and serves

more than fourteen states in America including London. The idea of Zipcar is a car share

operator in commission within the key areas of a locality. It works on a membership

style with corresponding membership fees and other costs annually including the rates of

the car per hourly basis. After a person has completed the application form, a card will be

given which will serve not only as a proof of membership but a device used to unlock the

card with Zip car compatibility fleet. The keys to the car is found tethered on the car itself

discouraging thieves from stealing. In addition, a variety of models are available ranging

from BMWs to Toyotas and until recently, a Porsche.

However, it is important to distinguish between the traditional car rental

company and that of a car sharing style. Car sharing are strategically situated all over the

city and in major locations for easy accessibility giving efficient ease to people who

wanted to avail of the services. The traditional renting of cars on the other hand are most

most of the time situated at airports and are on a daily minimum rates which makes the

target clients end up paying more rather than the hours spent for the cars. The second

distinguishing factor is that the vehicles can be reserved in just an hour before it will be

used.
 According to Venkateswaran (2012), the companies must be able to determine the

market and where to produce them. He proposed that the answer lies on the transportation

costs and regulation of the government in order for the local product to be served on the

country's market. The overall scheme of the strategy in the geographical aspect is to be

able to respond to the opportunities that it presents and move away from less cost-

effective ones. Among the different opportunities presented are the market size, the ease

of the compatibility of operations, costs and resource availability and the issue on red

tape

In addition, the growth of Zipcar on the Western part of the world is a testament

of the positive acceptance and popularity of the idea of providing the options for

transportation around the different countries and even forging alliances with the

Universities to offer discounts to students and cars located conveniently in the campus.

This paper will discuss on the reason why Japan is chosen as the next country for Zipcar's

expansion based on the different criteria as discussed by Venkateswaran and other factors

to consider.

Bringing Zipcar to Japan

Japan has a large economy and is considered as home for consumers who are

technologically advanced, coupled with a higher purchasing power and a disposable

income. According to the World Bank (2015), an average Japanese household has a

disposable income of more than $4000. Similarly, Japan is one of United State’s trading

partner, making it easy for Zipcar to enter the market due to the favorable trade
agreements and regulations. The presence of Zipcar in Japan as the base of its Asian

expansion is beneficial in creating a brand and adapting the experience of what its

Western counterparts are like.

The idea of car sharing has only been limited to the Western market and the issue

of its reception with positive implications on the regions like North America and

Europe.It is believed that the expansion must also be done in the Asian region.Japan was

the chosen country for expansion because of the innovativeness and the consideration as

one of Asia's strong house country in terms of development and technology.

Zipcar's strategic expansions based on Venkateswaran's criteria will be decided

specifically based on ease of compatibility of operations and the cost and resource

availability. Under the ease of compatibility of operations, the manager’s perception on

where to go would be easier to operate based on studies presented. Applying the

approach on Japan's expansion of Zipcar, the issue of Japan as being conscious on the

issues of climate change and the environment where a growing and a number of pressing

concern may stem, like for example the amount of carbon emissions of the cars

contributing to global warming on the streets of Japan. It is for this reason that the use of

Toyota Prius hybrids will be viable wherein they run on 50 miles per gallon making it

fuel efficient. Another reason for using Prius is its small and compact design made for

smaller spaces where real estate expenses can be lowered which requires barely 12

meters of land for parking. The country of Japan is already adapting the expansion on

possibilities of car sharing specifically targeted on condominium owners and dwellers.

The pressing concern that fuel prices are a notched higher than the counterparts on the

Western regions prove that they are more conscious of the service vehicles with lesser

consumption and a cleaner alternative.

In this way, Zipcar's strategy will use only vehicles that are fuel efficient and

environment friendly. In addition, the cost and resource availability that can be

underscored is the actual cutting and lessening of cars on the roads running through car

sharing because it will serve as a more practical substitute rather than owning a car. The

reason is that: instead of buying a car, a practical way of actually driving to your

destination would be car sharing. It should be noted that sharing of car through Zipcar is

a good substitute for a number of people who have personal vehicles. According to Yuri

(2007), the hybrid cars running in Japan are relatively small and that it is a product of

Japan itself whereby the transportation costs will go down as more units will be

manufactured. In addition, the different factors in Japan where vacations are

concentrated because of the different festivals namely the Spring Festival, New Year and

other events will greatly affect the services of Zipcar positively. The transportation

during the festival and seasons will bring an influx to the different systems of

transportation like the Shinkansen (bullet trains) all over Japan especially on major cities.

Due to the nature of consumers riding, it is seen as potential increase on the product

offered by Zipcar due to more people travelling.

Mode of Entry for Zipcar

 Since Zipcar was first introduced in Japan- specifically the first expansion in the

Asian region, the suitable mode of entry would be under the greenfield investment.

According to Klug (2007), a greenfield investment is the materialization of a bare ground

and literally builds a company from the ground. There are a number of advantages using

the greenfield investment namely the achievement of economic scale and scope in

production, marketing, finance and other areas. The aspect of greater control over the

business is also seen under the greenfield strategy.

A greenfield strategy is probable because there are currently no car-share

operators in Japan even though proposals were made as early as 2006 by Mazda Rental

Corporation (greencarcongress.com). However, it was put on hold due to the relaxed

restrictions on unattended service centers all over Japan. The issue of making a strict

acquisition of an existing car sharing company according to Rajagopal (2009) would

deem it impractical for the reason that there is still no established car share operator in

Japan. Second, the most important reason for a greenfield strategy or investment is that it

will make Zipcar to build first in Japan which is different from the usual operation in the

United States catering to the local and satisfaction of the consumers specifically for

Japan; due to the fact that Zipcar upon using the greenfield strategy will build everything

from scratch up by constructing new operational facilities and creating long-term jobs by

hiring new employees. Using this approach, the core values of the company and the

innovativeness where it was built including the technological capacity of the devices and

the cars will still be observed in addition to the preferences of Japan's needs. Bringing car

sharing in Japan will have a number of positive and favorable conditions due to the fact
that the style is new and the traditional ones on car rental services in Japan are on a

scheduled or per day basis.

The issue of trade relation in Japan as a wholly owned subsidiary in accordance

with the definition of Jerayathmm (2008), where Zipcar completly sets up everything

new the operations in a new country. Since the parent company owns all of the shares,

the risks are low even though the entire development costs are high since Zipcar would

need to be built from the ground level itself in Japan. Nonetheless, there are agreements

between Japan and the United States on the expansion of foreign investments because

they account for more than 30% of domestic products worldwide (Cooper, 2014). which

includes the agreements formed by leaders of the two countries discussing on the free

trade agreement such as the Trans Pacific Partnership. In 1996, Japan signed for the

World Trade's agreement on the increase of opportunities boosting international

competition entailing it to open its market for new businesses all over the world

(jetro.go.jp, 2005).

Conclusion

Zipcar's strategy in entering Japan as a car sharing company is a totally new

concept for the consumers. There are no direct competition so the innovativeness brought

by Zipcar will introduce the idea of car sharing as an alternative to owning a car at a less

minimum expense because of the issues on high fuel proving less costly than owning one.

The efficiency of Zipcar as compared with traditional car rental companies are evident on
the hourly basis rather than the daily prices and are located strategically and conveniently

all over the major sites in Japan.

References:

Cooper, W. (2014). U.S.-Japan Economic Relations: Significance, Prospects, and Policy

Options. Retrieved from: https://www.fas.org/sgp/crs/row/RL32649.pdf (February

18,2014).

Kageyama, Yuri. “Japanese automakers pull ahead while Big Three slash and crash.”

Montreal Gazette 11 April 2007, Final Ed.: B8. Factiva. 15 April 2007

Klug, Foster. “U.S. Treasury official urges Japan to allow entry of more foreign firms.”

The Associated Press 17 April 2007. Lexis Nexis. 23 April 2007

Car Sharing Gaining Popularity in Japan. Retrieved from:

http://www.greencarcongress.com/2007/06/car_sharing_gai.html (June 19, 2007).

Laws & Regulations on Setting Up Business in Japan. 2005. JETRO. 13 April 2007.

< http://www.jetro.go.jp/en/invest/setting_up/laws/>.

Japan Date. Retrieved from: http://data.worldbank.org/country/japan (August 15, 2015)

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you don’t have to read the whole chapter – just the last five pages]
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