Harvard Case - Share Now: How to Achieve Profitable Growth
"Share Now: How to Achieve Profitable Growth" Harvard business case study is written by Philip Moscoso, Manuel Soto. It deals with the challenges in the field of Operations Management. The case study is 15 page(s) long and it was first published on : Jun 11, 2019
At Fern Fort University, we recommend Share Now pursue a growth strategy focused on international expansion, leveraging its existing operations strategy and technology to achieve profitable growth. This will involve a combination of strategic planning, market research, and operational optimization to enter new markets effectively.
2. Background
Share Now, a car-sharing company, faces a challenging situation. While experiencing rapid growth and strong customer demand, they are struggling to achieve profitability. Their current business model, relying heavily on subsidies and partnerships, is unsustainable in the long term. The case study highlights the need for Share Now to develop a sustainable growth strategy that balances expansion with profitability.
The main protagonists in the case are Nico, the CEO, and the team at Share Now, who must navigate the complexities of scaling the business while ensuring financial viability.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Strong brand recognition and customer loyalty
- Innovative technology and user-friendly platform
- Experienced team with expertise in car-sharing operations
- Strong partnerships with car manufacturers and municipalities
Weaknesses:
- Limited profitability due to reliance on subsidies and partnerships
- High operational costs, including vehicle maintenance and insurance
- Challenges in managing vehicle availability and utilization
- Limited international presence
Opportunities:
- Growing demand for car-sharing services globally
- Potential for expansion into new markets with favorable regulations
- Technological advancements in autonomous driving and electric vehicles
- Partnerships with ride-sharing platforms and public transportation systems
Threats:
- Increasing competition from established car-sharing companies and ride-hailing services
- Potential regulatory changes impacting the car-sharing industry
- Fluctuations in fuel prices and economic conditions
- Technological disruption from emerging mobility solutions
Porter's Five Forces:
- Threat of new entrants: High, due to low barriers to entry in the car-sharing market.
- Bargaining power of buyers: Moderate, as customers have multiple options available.
- Bargaining power of suppliers: Moderate, as car manufacturers and insurance providers hold significant influence.
- Threat of substitute products: High, from ride-hailing services, public transportation, and personal vehicles.
- Rivalry among existing competitors: High, with numerous established players in the market.
Financial Analysis:
Share Now's financial statements reveal a significant gap between revenue and expenses, highlighting the need for cost optimization and revenue generation strategies. The case study suggests that the company needs to achieve a higher utilization rate of its vehicles and reduce operational costs to achieve profitability.
4. Recommendations
1. International Expansion:
- Target markets: Identify high-growth markets with favorable regulatory environments and strong demand for car-sharing services.
- Market research: Conduct thorough market analysis to understand local preferences, competition, and potential challenges.
- Localized approach: Adapt the business model and service offerings to cater to the specific needs of each market.
- Partnerships: Explore strategic partnerships with local businesses, municipalities, and transportation authorities.
2. Operational Optimization:
- Inventory management: Implement Just-in-Time (JIT) production principles to optimize vehicle inventory and minimize holding costs.
- Capacity planning: Utilize demand forecasting methods and queueing theory to ensure sufficient vehicle availability while minimizing idle time.
- Process improvement: Implement Lean manufacturing principles and Six Sigma methodologies to streamline operations and reduce inefficiencies.
- Technology and analytics: Leverage data analytics and Internet of Things (IoT) technologies to optimize vehicle utilization, maintenance schedules, and customer experience.
3. Revenue Generation:
- Pricing strategies: Implement dynamic pricing models that adjust based on demand, time of day, and location.
- Value-added services: Offer additional services like parking reservations, insurance packages, and vehicle upgrades.
- Partnerships: Explore partnerships with ride-sharing platforms and public transportation systems to expand customer reach and generate additional revenue.
- Subscription models: Introduce subscription-based plans to provide customers with predictable and affordable access to car-sharing services.
4. Sustainability and Innovation:
- Green operations: Implement sustainable operations practices, including using electric vehicles, reducing emissions, and promoting responsible driving habits.
- Innovation: Invest in research and development (R&D) to explore new technologies and services, such as autonomous driving and electric vehicle charging infrastructure.
- Digital transformation: Embrace digital transformation initiatives to enhance customer experience, improve operational efficiency, and create new revenue streams.
5. Basis of Recommendations
- Core competencies and consistency with mission: The recommendations align with Share Now's core competencies in technology, operations, and customer service. They also support the company's mission to provide convenient and sustainable mobility solutions.
- External customers and internal clients: The recommendations address the needs of both external customers and internal stakeholders, including employees, investors, and partners.
- Competitors: The recommendations consider the competitive landscape and aim to differentiate Share Now from its competitors by focusing on international expansion, operational efficiency, and innovative services.
- Attractiveness: The recommendations are expected to generate positive returns on investment (ROI) through increased revenue, reduced costs, and market share expansion.
Assumptions:
- The global demand for car-sharing services will continue to grow.
- Share Now will be able to successfully navigate regulatory challenges in new markets.
- The company will have access to the necessary funding and resources to implement the recommendations.
6. Conclusion
Share Now has a significant opportunity to achieve profitable growth through a strategic combination of international expansion, operational optimization, revenue generation, and sustainability initiatives. By leveraging its existing strengths and embracing innovation, the company can position itself for long-term success in the evolving mobility landscape.
7. Discussion
Alternatives:
- Focus on domestic market: Share Now could choose to focus on consolidating its position in its existing markets rather than expanding internationally. However, this would limit growth potential and expose the company to increased competition.
- Merger or acquisition: Share Now could explore a merger or acquisition with a competitor to gain market share and access new resources. However, this would require significant financial investment and could lead to integration challenges.
Risks:
- Competition: Increased competition from established players and new entrants could erode market share and profitability.
- Regulatory changes: Unfavorable regulatory changes in new markets could hinder expansion plans.
- Economic downturn: A global economic downturn could negatively impact demand for car-sharing services.
Key assumptions:
- The global demand for car-sharing services will continue to grow.
- Share Now will be able to successfully navigate regulatory challenges in new markets.
- The company will have access to the necessary funding and resources to implement the recommendations.
8. Next Steps
- Develop a detailed international expansion plan: This should include market selection, entry strategy, and resource allocation.
- Implement operational optimization initiatives: This should involve process improvement, technology adoption, and inventory management.
- Develop new revenue generation strategies: This should include pricing adjustments, value-added services, and partnership opportunities.
- Invest in sustainability and innovation: This should include adopting green operations practices and exploring new technologies.
- Monitor performance and adjust strategies as needed: Regular performance reviews and data analysis will be crucial for ensuring the success of the growth strategy.
By taking these steps, Share Now can position itself for continued growth and profitability in the dynamic mobility market.
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Case Description
The case describes the recent decisions taken by the management of Share Now, a leading carsharing company (the result of a merger between Car2Go and Drive Now). As part of its strategic plan for the city of Madrid, the company has decided to increase its area of coverage by 27 km2, while adding another 450 electrical cars to the fleet. Furthermore, it will implement dynamic prices that change according to demand. Share Now's main challenge is to match its customers' priorities with the company's objectives. On the one hand, the customers are interested in a broad area of coverage and very high vehicle availability. On the other hand, Share Now had to aim to grow the number of users and make the operation profitable in the medium term.
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