Collaborative Economy Business Model - Essay Example

Collaborative Economy Business Model Name Course Name and Code Date Introduction The paper is divided into parts, but the overall topic is the collaborative economy and the impact of the collaborative economy to the wider economy. The first part of the paper discusses the advantages and disadvantages of the collaborative. The second part it discusses a traditional business and how the traditional business operates. The third section discusses Uber model in providing taxi services and presents information on competitive advantage and value to the customer. The last part of the paper presents the unintended consequences of Uber business model and overall consequences of the collaborative economy. Advantages and Disadvantages of the Collaborative Economy The importance of collaborative economy is the utilization of underutilized resources. Millions of people have invested in different properties including cars and apartments, and allowing individual to generate profits through utilization of these properties is important (Cohen and Kietzmann, 2014). The rent for some of these properties is lower compared with the traditional prices of hotels. The utilization of the cars also results in reliable and quicker services compared with traditional taxi services (Chang, 2015). Apart from the income, the collaborative economy enables utilization of resources rather than been wasted or underutilized. Collaborative economy encourages the growth of outsourcing opportunities and bringing together entrepreneurs (Avital et al. 2014). For example, increase in freelance employees provides businesses with opportunities of an alternative source of employees, which is cheaper compared with full-time and salaried workers (Uber, 2016). In addition, some of the businesses such as TaskRabbit give professionals with the opportunity of outsourcing some mundane tasks while the professionals continue to focus on their respective work (Cohen and Kietzmann, 2014). The collaborative economy also enables entrepreneurs to work together, and people can utilize rental areas to complete tasks (Rauch and Schleicher, 2015). Offices are developed, and the spaces are shared, which may result in collaborative work resulting in the collaborative economy. Even though the collaborative economy has numerous benefits, these economies affect the government in terms of regulations and tax requirements (Dredge and Gyimóthy, 2015). The central and local government usually regulates businesses and requires taxes in terms of permits and licenses to operate the business (Cohen and Kietzmann, 2014). However, the collaborative businesses do not pay taxes or even are not regulated because these businesses do not apply for licenses and permits. It poses safety and health issues because the working environments have not been audited (Avital et al. 2014). Therefore, the regulation, tax requirements, safety and health issues are factors that affect the collaborative economy (Uber, 2016). Issues associated with employee requirements and legal expectations are degraded. For example, the minimum wage and other employment policies are not met. It is due to high competition and employers seeking strategies to capitalize the operation of the employees (Avital et al. 2014). Other benefits such as insurance and pension scheme do not exist meaning the employee is disadvantaged (Cohen and Kietzmann, 2014). The safety of the employees or owners of the business is also raised because the collaborative economy such as the rental business allows persons who are unknown to let spaces. For example, the letting of residential apartments poses threats both to the owners of the facilities, who by extension the employers and also the immediate community. Hence, the needs and requirements of the employees are not considered in the current model of operations. Hence, advancement of legislations and collaboration of different stakeholders in the collaborative economy is integral to the success of any strategic obligation. Taxi and Car Hire Industry Traditional Business Model Taxi and car hire industry have been supporting the movement of people from one place to the other. The approach is either hiring out the car to another individual or using the car as a taxi. The individual is required to open an office or strategically pack the car so that an individual can signal the car and seek for transport (Cohen and Kietzmann, 2014). The taxi cab with a driver allows movement of a single passenger or a group of passengers between locations (Avital et al. 2014). The difference in the taxi business from other modes of transport is the passenger picks the destination but in public transport, the pick-up and drop-off points are determined by the person offering the services. The taxi business can be further divided into four distinct parts: Private hire vehicles – these are vehicles, which are pre-booked are licensed for private hire. The persons seeking the services for private hire vehicles visit the office and make payments based on the time or the number of days the vehicle is hired. The strategy is allowing the customer to go with the car and return it based on the agreed terms and conditions. Taxi buses –these taxis operate based on defined set routes. The drivers are allowed to pick multiple independent passengers and are allowed multiple stops. Hence, the drivers are allowed to move to a predetermined location and pick passengers while on the move. Hackney carriages – these are allowed to move everywhere. The taxis are licensed to move individuals throughout the community. Limousines – these are specialized taxis for specialized situations and operate based on pre-booking. Licensing is important and determines the engagement between the owners of the business and the users of the taxis. The limousines are commonly used in ceremonies and entertainment activities. Rules and regulations are important in this sector. Licensing and adhering to numerous legislations and regulations defines the success of the business. For example, some of the taxis are required to operate within a specific route or location. In addition, the taxi drivers and companies are required to pay taxes and receive the appropriate documentation (Cohen and Kietzmann, 2014). Reviewing the safety and health concerns of these taxis are important and frequent checking are required. In operating these vehicles, the quality of the service is not important to certain conditions. For example, returning customers is not important, and the aim is to generate income through moving the passengers between locations (Avital et al. 2014). The government and local institutions are tasked with ensuring the complaints and requirements of the customers are championed. In addition, the taxi drivers sometimes do not value the customer and may participate in strikes to compel the employers to improve working conditions (Rauch and Schleicher, 2015). Hence, the traditional taxi business has to follow numerous legislations, which affects their respective operations. Uber Business Model as an Example of Collaborative Economy Firm An example of taxi business in the collaborative economy is the Uber (Uber, 2016). Uber Technologies Inc developed a mobile application, which allows passengers with Smartphone to submit a trip requested, which is then rerouted to other drivers with the application and cars. The Uber drivers use their own cars to move passengers between locations (Rauch and Schleicher, 2015). The business model is unique because drivers are not required to have licenses or permits, but the application allows the drivers to pick passengers. The model offers numerous benefits to the customers when compared with the traditional methods. The Uber taxi offers lower fare compared with the competitors because drivers do not rely on the incomes from Uber (Uber, 2016). In addition, it provides convenience upon pickup and arrival. A customer is required to tap “Request” on the Smartphone and wait for confirmation that a driver is on the way or has arrived. After the trip, a customer gets out of the car without the need of making a payment because the card is charged. It is also easy in solving disputes. Each ride has a receipt, and the receipt contains a GPS track and a map, and the passenger can launch a complaint when a diver takes the inappropriate route (Cohen and Kietzmann, 2014). In addition, the compensation or seeking a refund is easy and faster. The services offered are also of high quality because the passengers rate the driver, and the poor drivers are discontinued. Hence, the Uber drivers are required to provide good service and maintain a clean car to increase reputation, which translates to more customers (Avital et al. 2014). The value of the approach is different from the traditional approach because it is hard for conflict resolution because of the absence of evidence sometimes and the quality of the service is not quantified (Uber, 2016). Therefore, Uber model of taxis offers better service compared with the traditional approaches. The competitive advantage of Uber is the convenience, reliability and allowing consumers to make savvy purchases and achieve these requirements at a lower price compared to the competitor e.g. traditional taxi business (Avital et al. 2014). Uber continuous emphasizing on price and convenience results in fostering connections, which contributes to competitive advantage. The aim is not fostering trust between strangers but concentrating on market mediation (Uber, 2016). The aspect of access is also another thing because travelers require immediate feedback from the Uber drivers and accurate timing when it comes to picking up and drop points (Cohen and Kietzmann, 2014). Uber competitive strategy is also on pricing in which the same distance that the traditional taxis cost has been reduced due the business framework of Uber. Hence, the pricing, reliability and conveniences are some of the factors, which continue to offer a competitive advantage to Uber. Unintended Consequence Unintended consequences exist on different stakeholders. The original taxi businesses (incumbent) faces numerous losses because of the change in business model. The non-Uber business owners are against the Uber model because of costs and the lack of appreciation for change. Safety and health are additional issues because the private cars are not frequently checked to confirm with requirements of a taxi (Cohen and Kietzmann, 2014). Any car can be used in the current situation meaning the quality and safety of the car is questionable. The government and different institutions are affected because of lack of adherence to legislations and regulatory conditions (Uber, 2016). The Uber drivers do not pay taxes on income generated from moving the customers. The winners are the consumers and persons registered and offering the Uber services. Most of the Uber drivers have a car, and underutilization of the car does not benefit the owner of the car (Avital et al. 2014). Therefore, the Uber services increase the use of the car and also generates income for the driver. The driver may also use his/her free time to carry passengers, which also generates additional income (Cohen and Kietzmann, 2014). The customer also benefits because the cost is reduced while the needs and requirements of the customers are considered (Rauch and Schleicher, 2015). The convenience and reliability is an advantage to the passenger. Hence, the Uber driver and passenger benefit from the collaborative business model. Conclusion The economic conditions keep changing meaning the conditions surrounding the economy should also change. Collaborative economy enables people to share resources, which generate income to the owners of the properties. For example, Uber provides taxi services and has changed the model of business because anybody with a Smartphone can download an application and seek or provide services. The Uber advocates for convenience, quality, price and reliability. However, the government and other stakeholders face challenges when it comes to legislation and regulatory requirements. For example, the Uber drivers are not required to seek appropriate permits and licenses meaning the government cannot manage the taxation system appropriately. Safety and health concerns are common because background information of the customer and persons utilizing the services are unknown. Lose of business by the traditional business owners are other unintended consequences while the consumers benefit from benefits of the collaborative economy. The government and other stakeholders are required to create modalities and frameworks to improve the service resulting in the generation of revenues regarding taxes and other governmental obligations. References Avital, M., Andersson, M., Nickerson, J., Sundararajan, A., Van Alstyne, M., and Verhoeven, D., 2014. The Collaborative Economy: A Disruptive Innovation or Much Ado about Nothing? In ICIS. Chang, W., 2015. Growing Pains: The Role of Regulation in the Collaborative Economy. Intersect: The Stanford Journal of Science, Technology, and Society, 9(1). Cohen, B. and Kietzmann, J., 2014. Ride on! Mobility business models for the sharing economy. Organization & Environment, 27(3), pp.279-296. Dredge, D. and Gyimóthy, S., 2015. The collaborative economy and tourism: Critical perspectives, questionable claims, and silenced voices. Tourism Recreation Research, 40(3), pp.286-302. Rauch, D.E. and Schleicher, D., 2015. Like Uber, But for Local Governmental Policy: The Future of Local Regulation of the “Sharing Economy”. George Mason Law & Economics Research Paper, (15-01). Uber. (2016). Homepage. Retrieved from www.uber.com Read More