Implications of Sharing Economy on Traditional Business Models

This article discusses the implications of the sharing economy on traditional business models and how businesses can adopt this practice to stay relevant in the market. It explores the growth of the sharing economy, reasons behind its popularity, and its impact on traditional marketing and sales concepts. The article also provides theoretical conceptualization and relevant examples of the sharing economy in action. Overall, it emphasizes the need for businesses to embrace the sharing economy in order to meet customer demands and avoid becoming obsolete.

Running head: INTERNATIONAL MARKETING
International Marketing
Name of the Student
Name if the University
Author Note

1INTERNATIONAL MARKETING
Introduction
Sharing or collaborative economy refers to the situation where economic activities are
carried out over online portals using interconnected networks (Daunorienė et al. 2015). In
this kind of economy, the consumers do not rely much on the big companies and instead they
rely on each other in order to meet their needs and wants. In this kind of economy there are
two kinds of individuals available. One individual has something that the other individual
wants to buy. The economy therefore involves buying, renting, borrowing, swapping and
trading the required goods and the services in exchange for a fee. These exchange of the
goods and the services usually takes place through a middleman that is the internet. The
internet and the several attractive web pages are making several products and services to the
customers and are providing a wide range of substitutes for expensive items. Collaborative
consumption is therefore the coordination of the individuals in the resource acquisition and
distribution in return to a fee or any other compensation. The term any other compensation
refers to any kind of non-monetary consumptions. This concept is also termed as peer to peer
economy, crowd based capitalism, on demand economy or the zero marginal cost economy
(Schor 2016). One example of collaborative consumption can be the Uber. Uber has
modelled the application for both the owners and the riders. The owners own their cars and
the cars are tagged in the application by the owners. The riders find the availability of such
car service from the Uber application and can book the ride from anywhere and use the ride
in exchange for a fee. The popularity of this concept is increasing in the present competitive
scenario.
Reason for growth in sharing and collaborative economy
The collaborative consumption theory is having an exponential growth over the last
couple of years. It has undergone huge growth since the 2008 crisis. The pivotal reason of the
growth in this economy is technology as well as cost benefits. There are a lot of online

2INTERNATIONAL MARKETING
sharing platforms that have emerged and that provides access to the products and services
like cars, household, furniture and many more to the customers. There are several other
driving forces other than the technological factors and they are the environmental concerns,
communities and the global recession (Wallsten 2015). The new age web technologies help in
the construction of attractive web pages and other large scale sharing communities. The
internet helps in providing a smooth and flexible feedback to the users of the internet. The
practices of sharing or renting things were already in the market since the traditional times
but the internet and technological advancements have acted as a catalyst thereby making this
concept wide spread (Massa, Tucci and Afuah 2017). The individuals in the present day are
more concerned about the environmental issues and sustainability. They do not trust those
companies that are not involved into corporate social activities. Moreover, the big companies
also try to make out huge profits through their products and the services. The sharing or the
collaborative economy turns out to be helpful under these circumstances. At the time of
scarcity sharing of the resources and collaborating means a more sustainable way of living.
Sharing also helps in saving of the money. The services become available at a lower price or
just for a minimum fee. This helps in the time of the global crisis by helping the people save
their money and maintaining their purchasing power. The online activities are a reincarnation
of the traditional concept of the community. The people who never knew each other can get
involved into sharing of resources at a much easier way (Tandoc and Thomas 2015).
Implication of the practice on traditional business model
The modern concept of this sharing economy has several implications for the business
that are still using the traditional marketing and sales model. The sharing platforms are
changing the way the traditional business like the foods and beverages, travels and tourism,
transportation, furniture and accommodation and other services are conducting their business
operations and the owners are thereafter forced to think about some alternative business

3INTERNATIONAL MARKETING
models. The concept of the sharing economy has widespread implications. It provides a
superior convenience in acquiring services. It helps in the improved utilisation of resources
and awareness in the digital marketing. It also provides environmental benefits and helps in
the creation of several jobs opportunities for the society (Möhlmann 2015). The sharing
economy segment is increasing day by day. It has become more diversified and includes
people and skills, health, financial services, household goods, transportation, accommodation,
education and logistics (Dredge and Gyimóthy 2015). The traditional business concepts find
it very hard to reach a pool of customers within a very short period of time. The old
marketing concept involves the use of several marketing channels in order to distribute the
products and the services from the producers to the consumers. The traditional marketing and
sales concept is therefore a lengthy and time taking process. The emergence of the
collaborative economy has removed this time barrier. The old marketing concepts involves a
lot of cost till the final distribution of the products and the services. It makes the cost of the
products high in the market (Gemünden 2015). The sharing economy on the other hand helps
in enjoying the cost benefits as it does not involve incurring a large amount of costs in
reaching the customers. The sharing economy is therefore putting pressure on the traditional
marketing concepts and is enjoying a competitive advantage.
Theoretical conceptualization and relevant examples
Taking the example of normal taxis, the taxis charge improper amounts at certain
times, especially at the time of rush. The people are also unaware about the fares that will be
charged till the end of the ride. In case of Uber, it is not the same. The people are told about
the estimated fare they have to pay at the end of the trip. The individuals are preferring Uber
over the traditional taxis because of the price, convenience, quality and safety primarily.
There are two kind of Uber available and they are the Uber Pop and the Uber Black. The
people who prefer to pay the lower price prefers to ride in the Uber Pop that provides ride at a

4INTERNATIONAL MARKETING
price that is 20% lower than that of the normal legacy taxis. People who prefer to show class
also gets a choice to go for rides using the Uber Black that provides luxury cars and limos.
The normal taxi does not have a system of wallet payment or debit and credit card payment
whereas the Uber offers these payment options (Lee et al. 2018). The individuals also gets
the option to pay the amount due before availing the next ride. This implies that they does not
need to be paid the amount immediately. The amount spent on the rides are also tracked in
the history and one can also maintain a proper record of his or her expenditure. Locating taxi
and getting it empty is a difficult task and takes time but the Uber application provides an
easier option of locating their cars through their application (Calo and Rosenblat 2017).
Therefore the effect of this particular concept is very harsh on the traditional concepts. The
taxi drivers often addresses that Uber concept has eaten up the jobs of the normal drivers
whereas it is the opposite. It is creating a lot of opportunities for many drivers and also
facilitating the economy by providing quality services at a cheaper price (Cramer and
Krueger 2016).
Adopting the practice of sharing economy
The traditional market and the sales people or the owners need to adopt this practice.
It is because of the increasing concerns of the people related to efficiency, flexibility and
sustainability. The technological advancement has made so many services available in the
internet and hence the people using internet can access to those services by just a blink of an
eye. The people just need to write the type of the services they want to avail on the search
engines and they get the results of those services listed on a page as soon as they are searched
for (Kritzinger and Weideman 2017). This easy availability of the names of the organisations
on the internet helps in reaching the customers much before the traditional marketers. The
established industries must therefore adopt effectively to this concept in order to meet the
technological realities as well as to avoid the risk of becoming obsolete. They are required to

5INTERNATIONAL MARKETING
customise their business procedures and the services as per the requirements of the
customers. The traditional sectors require to do a lot of forward and backward market
integrations in order to reach the customers effectively (Bocken et al. 2016). They involve a
lot of middlemen like the distributors, the wholesalers and the retailers. The transfer of the
products and the services from each of these middlemen to the ultimate consumers makes the
price of the products higher. The sharing economy on the other hand uses one internet based
platform where all the services are listed and are readily available and accessible. The use of
only one middleman that is the internet reduces the cost of the distribution of the product.
The contents used in the web pages are also very attractive and the pages can also contain
attractive graphics and videos (Hamari, Sjöklint and Ukkonen 2016). This helps in targeting
the respective customers effectively. It is very difficult for the traditional market researchers
to know about the consumption patterns of the different customers belonging to different
social class and age groups at a less time. Market research and development takes a lot of
time if done traditionally and hence the products are not properly targeted to the required
customers and the firm can face several problems. The online process of resource sharing has
been very effective. It is because most of the companies now use the process of search engine
optimisation and web analytics that helps in the analysis of the consumers in just seconds.
The search engine optimisation helps the companies to list their services at the top of the
search list and the web analytics process helps the company to understand the patterns of the
consumer’s tastes and preferences on the basis of the options being clicked by the customers
(Domenico et al. 2018). Web analytics include all such process of recording the time spent on
a particular page, the number of times a particular option has been searched for and the
capturing of the feedbacks. This particular process minutely captures the requirements of the
customers and the companies can easily make the necessary changes to their existing services
and the products thereafter gaining the customer loyalty easily (Järvinen and Karjaluoto

6INTERNATIONAL MARKETING
2015). It is therefore that the traditional marketers should also adopt to these technologies as
otherwise it would be difficult for them to reach a diversified pool at one single point of time.
If they fail to adopt to these strategies of the sharing economy they will not be able to serve
the customers properly and will lose the customers in the long run. Uber uses the RFID
technology that helps the customer track its live location and also helps in the sharing of the
location with others for safety purpose (Harding et al. 2015). This is not available in case of
the taxis and hence the traditional taxi business is now a failure.
The involvement of the sharing in the model
Sharing means having a proportion or a part of something with another person. The
concept of sharing is very broad. In a narrow concept, it can be defined as the using
something jointly or alternatively.in a broader perspective sharing is an integral part of the
human communication. It can refer to any kind of gifts, free information sharing and free
grants. The definition of sharing is different for different segments. This concept does not
necessarily involve a monetary cost. In case of sharing economy, the concept of sharing the
services has been linked with a monetary cost. The individuals can share the resources owned
by the other individuals but it can be done in return of a fee or any other compensations. In
case of Uber, the cars are being owned by some individuals and these cars are made available
on the application with the help of the RFID and GPS technology. The riders who need to
avail the rides can get the ride but not at free of cost (Posen 2015). They can share the car by
paying a certain amount that is much below that of the taxi fares. This concept is more of a
collaboration than sharing.
Conclusion
It can be inferred from the above discussions that the importance of sharing economy
has increased in the competitive market and most of the business firms are required to adopt

7INTERNATIONAL MARKETING
to these concepts in order to survive in the long run and make profits. The collaborative
economy concept has damaged the traditional marketing concepts. The advanced
technologies and the internet helps the concept to grow further and reach the customers at a
fast pace. The taxi market has been affected severely because of the emergence of Uber. It is
concluded that Uber is providing a quality and convenient transportation service thereafter
reducing the scopes for the traditional taxis. These cars are accessible form any locations and
comes to pick up the customers at the desired location and drops exactly at the required
location, unlike the normal taxis. The car uses safety options and the rides can be shared with
other individuals. The RFID technology and GPRS technology tracks the ride every moment
and the riders feel safe to travel. The customers can also choose the type of the cars on the
basis of their requirements. It also provides credit facilities that the traditional market can
never provide. The records are always available to both the riders and the owners thereafter
increasing security. It is therefore concluded that sharing economy is widely accepted by the
consumers now and will go on expanding in the coming future.

8INTERNATIONAL MARKETING
References
Bocken, N.M., de Pauw, I., Bakker, C. and van der Grinten, B., 2016. Product design and
business model strategies for a circular economy. Journal of Industrial and Production
Engineering, 33(5), pp.308-320.
Calo, R. and Rosenblat, A., 2017. The taking economy: Uber, information, and power.
Colum. L. Rev., 117, p.1623.
Cramer, J. and Krueger, A.B., 2016. Disruptive change in the taxi business: The case of Uber.
American Economic Review, 106(5), pp.177-82.
Daunorienė, A., Drakšaitė, A., Snieška, V. and Valodkienė, G., 2015. Evaluating
sustainability of sharing economy business models. Procedia-Social and Behavioral
Sciences, 213, pp.836-841.
Domenico, D.A.T.O., Lucchese, C., Nardini, F.M., Orlando, S., Perego, R., Tonellotto, N.
and Venturini, R., Istella SpA, 2018. A method to rank documents by a computer, using
additive ensembles of regression trees and cache optimisation, and search engine using such
a method. U.S. Patent Application 15/747,224.
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.
Gemünden, H.G., 2015. Success factors of global new product development programs, the
definition of project success, knowledge sharing, and special issues of project management
journal®. Project management journal, 46(1), pp.2-11.

9INTERNATIONAL MARKETING
Hamari, J., Sjöklint, M. and Ukkonen, A., 2016. The sharing economy: Why people
participate in collaborative consumption. Journal of the association for information science
and technology, 67(9), pp.2047-2059.
Harding, A.C., Suhr, J.K. and Allen, N.P., Intermec IP Corp, 2015. Testing automatic data
collection devices, such as barcode, RFID and/or magnetic stripe readers. U.S. Patent
8,944,332.
Järvinen, J. and Karjaluoto, H., 2015. The use of Web analytics for digital marketing
performance measurement. Industrial Marketing Management, 50, pp.117-127.
Kritzinger, W.T. and Weideman, M., 2017. Parallel search engine optimisation and pay-per-
click campaigns: A comparison of cost per acquisition. South African Journal of Information
Management, 19(1), pp.1-13.
Lee, Z.W., Chan, T.K., Balaji, M.S. and Chong, A.Y.L., 2018. Why people participate in the
sharing economy: an empirical investigation of Uber. Internet Research, 28(3), pp.829-850.
Massa, L., Tucci, C.L. and Afuah, A., 2017. A critical assessment of business model
research. Academy of Management Annals, 11(1), pp.73-104.
Möhlmann, M., 2015. Collaborative consumption: determinants of satisfaction and the
likelihood of using a sharing economy option again. Journal of Consumer Behaviour, 14(3),
pp.193-207.
Posen, H.A., 2015. Ridesharing in the sharing economy: should regulators impose Uber
regulations on Uber. IowA L. REv., 101, p.405.
Schor, J., 2016. Debating the sharing economy. Journal of Self-Governance & Management
Economics, 4(3).

10INTERNATIONAL MARKETING
Tandoc Jr, E.C. and Thomas, R.J., 2015. The ethics of web analytics: Implications of using
audience metrics in news construction. Digital journalism, 3(2), pp.243-258.
Wallsten, S., 2015. The competitive effects of the sharing economy: how is Uber changing
taxis. Technology Policy Institute, 22, pp.1-21.