Analysis of Business Models of AIRBNB and UBER - Case Study Example

Analysis of Business Models of AIRBNB and UBER Name Institutional Affiliation Date Analysis of business models of AIRBNB and UBER Introduction New trends in technology have changed the mindset of the senior management and employees within an organization by influencing how they perform and undertake their activities (Jomo, Felker & Rasiah, 1999). A scenario that has led to substantial innovations and invention based on business performance, and later changing business operation to result in big revenues (Malerba & Vonortas, 2009). Technological developments have also transformed the world into a global village, mostly by the use of the internet, People have launched business platforms that anybody can access irrespective of their places (Luo, 2010). These developments have also transformed our living standards, hence leading people to appreciate the great people who facilitated these new changes. Nevertheless, dwelling only on the positive effects in which these innovations have brought forth, will not assist us much. Hence, it is also important to understand that despite the advantages of these technological developments, there are several disadvantages attached still to the same (Mietzner & Reger, 2005). In an nut shell, this technology has facilitated the development of a new business model, where companies or rather organizations maximize the revenues as they implement measures to reduce their costs (Osterwalder, Pigneur & Clark, n.d.). Therefore, this paper will first analyze utmost two business model, that is, AIRBNB and UBER, and present the model that proves the most disruptive to traditional industries. Secondly, the paper will reveal the business model that has the most potential to avoid full costs as they engage in their business operation. However, before embarking in the main objective of the paper, it will be important to introduce the paper by a brief discussion on the business model, what business model entails and how it come to existence. According to the research conducted, there is no a precise meaning of the term business model. Rather, scholars define this term, “business model” by breaking the two words. A detailed discussion of the term while in combination refers to any activity that involves the seller and the buyer via the internet platform. In other explanation, it refers to the structure or rather the system that is devised by an organization to accrue revenue from the public. Overview of AIRBNB AIRBNB represents an online marketplace that allows people from different parts of this globe to connect with each other with an objective of finding solutions. Particularly, AIRBNB presents an online platform where individuals are looking to rent their homes and people who are seeking accommodation connect with each other. AIRBNB users are the hosts, who list down their homes for rent and travelers who are constantly searching for accommodation in over 190 countries in the world. The online company, AIRBNB, was established in the year 2008 in the month of August, and it is located in San Francisco in California (Byers, Proserpio & Zervas, n.d.). The company operates in a unique way. People can book a room, regardless of their locations, and the house owners can reserve rooms for them. The hosts list their properties such as single rooms, apartments, a suite of rooms, moored yachts, houseboats, a castle, and so forth (McCarthy, n.d.). The hosts list their properties for free as they indicate the price they will charge for the properties. Each listing permits the host to promote their properties via titles; photographs entailed with captions, descriptions and a profile of the user that allows guests to communicate with the hosts. An individual is only required to log into their website and make a reservation for a room without even traveling to their premises (Byers et al., n.d.). In addition, the company provides an online center where the travelers can view the conditions of the rooms, and whether the rooms meet his or her expectations. How it Works Travelers search the database with the properties at his or her convenience time. However, the traveler is required to create a profile with AIRBNB to be allowed to make any reservations. Travelers communicates with the hosts using an online data that appears on each page of the listing, and he or she can make reservation by a click of the “Book It” button and then record payment information through a secured payment system. The travelers are required to pay down a guest service fee of between 6-12 percent on top of the reservation amount to cater for services such as the host guarantee and the customer support. The company allows several major payments methods that are commonly used across the world. They include credit cards (MasterCard, AMEX, Visa, JCB, and Discover), Google Wallet, PayPal, and other debit card that can be processed as credit. Interestingly, the travelers are only charged upon confirmation of the reservations (Horder, 1965). Once the traveler has paid, and the host confirms the booking, the company withholds the payment for 24 hours after the check-in has been done before releasing the money to the host. The hosts are paid through Automated Clearing House system or direct deposits and so forth; because the payout methods, as well as currencies, vary across the countries. The payment process also includes the value-added tax, which applies to both the travelers and the hosts. In addition, if a traveler makes a reservation in a currency that is different from the one indicated by the host, then the travelers’ currency will be subject to the AIRBNB’s exchange rates(Byers et al., n.d.). Overview of UBER UBER is an international that deals in transportation; or rather, it is a transportation network corporation. Kalanick and Camp established the company as an UberCab in the year 2009 and the app that facilitated their operations was released on the following June (Uber, 2015). At the beginning of the year 2012, the company already had sub-diaries in other countries and the company was now estimated at the worth of fifty billion dollars (Uber, 2015). The company is located in San Francisco, in California, which is its headquarters. The company mainly operates in an innovates market, whereby it operates the Uber mobile app that allows customers in possession of smart phones to submit a trip request, which is later routed to the Uber drivers who use their vehicles (Uber, 2015). Due to the persistent marketing, the company was able to establish their services in more than 50 countries as well as 300 cities globally. UBER Company provides a long-term cashless solution, which charges your transport directly to your credit card on file with your respective account (Uber, 2015). The company operates in an interesting way. The mode of connecting with other people is simply amazing since the company connects with people by an app in a Smartphone (Uber, 2015). If a customer needs a ride, he or she will only be required to upload the app in his or her phone, tap a button, and finally, the app will reveal to you exactly the place where your are, the cost of transport and means of getting the service (Uber, 2015). Discussion Business that proves the most disruptive According to both analysis of the business model of the two companies, it is realized that the company utilizes technology to facilitate their operation, of which is commendable (Guttentag, 2013). Despite the diversity in business operation, the company reveals that some operations interfere with the operation of traditional industries. Traditional Industry refers to the production or rather the development of techniques and products that were free from foreign influence (Steward, 1967). In other words, the old age activities that were carried out to bring forth income is what is referred to as a traditional industry (Sarngadharan & Rajitha Kumar, 2007). Based on these two-business models, both disrupt the traditional industries. First, their activities, or rather, how they conduct their business operations conform to the latest or current technology. For instance, in the old age, rooms were booked manually, where one was required to move from one point to another to search for accommodation; that is not the case in AIRBNB Company. Individuals access the internet, and make a reservation through an online platform. In addition, based on UBER Company, the same situation upholds. The company utilizes a Smartphone app, where individuals can access to ask for a ride, regardless of their locations. Considering the above factors, UBER company proves the most disruptive because of the wide utilization of technology which has changed totally the operations of the old age. Business model that has the most роtеntiаl to аvоid ехtеrnаlitiеs In the comparison of the two-business model, AIRBNB has the potential to avoid capturing of the full cost. Based on how AIRBNB Company operates, it is clearly revealed that the company is only paid for being an intermediary, or rather by connecting the hosts and the travelers. The travelers are required to pay an extra cost to the company, besides making payments to the hosts. Externality refers to the cost that an individual, company or an organization bears because of the activities performed by their counterparts. In the aspect of renting a home or an apartment, the hosts and the traveler enter into an agreement that oversees the contract. In case of any damage, the company AIRBNB will not be liable to such issues. The risks and losses that will occur and later breach the agreement are externalities; hence, concerning the model of AIRBNB, they will not be liable to pay any funds. On the other hand, Uber Company is not capable of fully avoiding such externalities costs. Their business involves the direct interaction with the customers, hence incase of loss or injuries, the company will have no option, but only to compensate the victims. References Byers, J., Proserpio, D., & Zervas, G. The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.2366898 Guttentag, D. (2013). Airbnb: disruptive innovation and the rise of an informal tourism accommodation sector. Current Issues In Tourism, 1-26. http://dx.doi.org/10.1080/13683500.2013.827159 Horder, J. (1965). Methods of Payment. BMJ, 1(5446), 1381-1381. http://dx.doi.org/10.1136/bmj.1.5446.1381-b Jomo K. S., Felker, G., & Rasiah, R. (1999). Industrial technology development in Malaysia. London: Routledge. Luo, J. (2010). Business and technology in China. Santa Barbara, Calif.: ABC-CLIO. Malerba, F., & Vonortas, N. (2009). Innovation networks in industries. Cheltenham, UK: Edward Elgar. McCarthy, P. Online gravity. Mietzner, D., & Reger, G. (2005). Advantages and disadvantages of scenario approaches for strategic foresight. IJTIP, 1(2), 220. http://dx.doi.org/10.1504/ijtip.2005.006516 Osterwalder, A., Pigneur, Y., & Clark, T. Business model generation. Sarngadharan, M., & Rajitha Kumar, S. (2007). Traditional industries of India in the globalised world. New Delhi: University of Kerala in association with New Century Publications. Steward, J. (1967). Contemporary change in traditional societies. Urbana: University of Illinois Press. Uber,. (2015). the history of uber. Retrieved 11 October 2015, from http://uber company Read More