Benefits and Limitations of Sharing Economy: A Case Study on Uber

This report analyzes the benefits and limitations of sharing economy through a case study on Uber. It discusses the advantages and disadvantages of this economy and provides a reflective analysis. The report also includes a brief concept on crowdsourcing website and a selected crowdsourcing website. Subject: Business Information Systems, Course Code: N/A, Course Name: N/A, College/University: N/A

Running head: BUSINESS INFORMATION SYSTEMS
Business information system
Name of the university
Name of the student
Author Note

1BUSINESS INFORMATION SYSTEMS
Executive Summary:
At present, the concept “sharing economy” has earned huge importance. Many
companies have successfully extended their activities through this peer-to-peer economy.
Hence, it is essential to understand this activity with some real examples. This report is trying
to find some benefits and limitations of this sharing economy after explaining the activity of
Uber. At the end, this report has provided a reflective analysis based on this sharing
economy.

2BUSINESS INFORMATION SYSTEMS
Table of Contents
Introduction:...............................................................................................................................3
Recent scenario of sharing economy:........................................................................................4
Special case study on Uber:.......................................................................................................5
Advantages and disadvantages of sharing economy:.................................................................6
Advantages of sharing economy:...........................................................................................6
Disadvantages of sharing economy:.......................................................................................7
Crowdsourcing website:.............................................................................................................8
Reflection about sharing economy:............................................................................................9
Future of sharing economy:.....................................................................................................10
Conclusion:..............................................................................................................................10
References:...............................................................................................................................11
Appendix:.................................................................................................................................13

3BUSINESS INFORMATION SYSTEMS
Introduction:
At present, sharing economy is becoming a well-known phenomenon, where through
an open-source community an individual can sell or lend private assets or services to another
individual for earning revenue by peer-to-peer services (Bratianu 2018). However, this
collaborative consumption system can also be seen under business-to-business (B2B)
activities for which, this concerned economic activity can be described as a hybrid market
model, where people can operate their daily transactions through online along with a
democratized market platform. The chief characteristic of this system is resource circulation,
where an individual can play dual role, which are, resource receiver and resource provider
(Korhonen, Honkasalo and Seppälä 2018). Thus, through this sharing economic system, the
comprehensive attribute regarding the dual role of a consumer can be analyzed deeply where
a person or a community can earn profits by lending their unutilized assets to their customers
in the form of service, for instance, car service of Uber and room service of Airbnb.
This sharing economy consists of multiple operational platforms, viz., platforms of
peer-to-peer lending, fashion, co-working and freelancing. Through peer-to-peer lending, an
individual lends money to others by charging lower interest rates compare to any commercial
banks while by using platforms of fashion, people can sell or purchase their clothes to others
(Piscicelli, Ludden and Cooper 2018). In addition to this, co-working platforms offer open
workplaces to various companies for working together while freelancing platforms offer
people to work independently. Thus, after analyzing the present share market scenario with
some relevant instances, this business report aspires to analyze some advantages and
disadvantages related to this system. After that, a brief concept on crowdsourcing website is
going to be analyzed based on which the report can provide a reflective discussion. At the
end, this report has provided a conclusion, covering the entire solution briefly.
Recent scenario of sharing economy:
Through capturing significant market share, the sharing economy has earned a
significant market position in world economy. Thus, it is important to understand about the
present status of this specified collaborative economy by considering its suppressed socio-
economical and political factors along with technological one, which can affect this activity
significantly to develop. Immediate enhancement of this sharing economy has created various
new and unseen challenges for business organizations, policy makers, economic regulators

4BUSINESS INFORMATION SYSTEMS
and consumers, worldwide (Lombardi and Schwabe 2017). This statement can be supported
by some statistical data, for instance, by considering rapid expansion of Airbnb and Uber, it
can be predicted that this concerned economy is going to earn $ 335 billion profit in 2025
while in 2014 this amount has remained at $ 14 billion. Based on those data, it can also be
analyzed that most of the private vehicles have remained around 95% underutilized
throughout their entire lifetime and consequently can be used for commercial purposes.
Hence, in practical scenario, Ola, Uber and Lyft, by using sharing economy, have provided
their services to customers along with cheaper rates compare to other traditional one. In
U.S.A, almost 51% consumers have preferred to book their summer travel through sharing
economy (refer Appendix figure 1). Based on the Allianz Travel Insurance Sharing Economy
Index, almost 26% people have chosen Uber, Lyft and Airbnb for getting services while 25%
people have preferred traditional one. In addition to this, the total number of consumers using
sharing services has increased significantly, since 2015 (Liang, Choi and Joppe 2018). For
instance, in 2015 only 32% people have known about the home rental service of Airbnb while
in 2017 the number has increased by 51% (Farronato and Fradkin 2018). Moreover, people
with middle age group that is between 16 and 34 have utilized this service more compare to
people of other age groups. However, this economy can got receive equal importance all over
the world, for instance, only 1% citizens of Japan has received benefits from this sharing
economy.
However, many companies under sharing economy have experienced losses, which in
turn have led them to enjoy limited platforms, except Airbnb. The company has collected $
3.1 billion as venture capital and also has earned valuation at $ 30 billion. On the contrary,
the performance of Uber has varied over time. Initially, the company has collected $ 10
billion as venture capital and has earned company valuation at $ 70 billion though after 2016,
the company has lost its revenue by $ 2.8 billion while in the previous year it has earned $ 6.5
billion. Thus, those opposite incidents have criticized sharing economy significantly and have
generated major challenges for those companies. Thus, to understand this situation precisely,
it is beneficial to analyze Uber based on their performance and profit trend.
Special case study on Uber:
Uber Technologies Inc has developed the Uber app, where people can book cars along
with driver facilities for transportation purpose. This system has substituted traditional
transportation services, that is, taxi, globally. The specified company has launched other

5BUSINESS INFORMATION SYSTEMS
services like UberPOOL in Los Angeles and New York City in 2015. In China, Uber has
invested $ 600 million in 2014 though the company has failed to compete with to compete
with Didi Chuxing and has sold their operations to this company. According to the statistical
data of Uber, the average customer number of this company is $ 49 million per month in
2017 (Shaheen and Cohen 2018). By comparing the number o user among Uber, taxi and
Lyft in New York, it can be observed that the percentage of taxi users has decreased
significantly within 1 year, that is, between 2014 and 2015 (refer to figure 2).
The chief reason behind the success of Uber is networking. Positive feedbacks of
users have successfully influenced others to utilize this service, which in turn has positively
influenced Ube to increase its revenue and value of the company. Moreover, this process has
influenced this specified company to hire more drivers for delivering more car services along
with other facilities to its customers. Hence, the company has developed their business by
providing some facilities to their customers, for instance, sharing their riding experience with
Uber (Faghih, Safikhani, Moghimi and Kamga 2017). In addition to this, the specified
company has charge lower prices compare to other traditional services, which further has
helped the company to generate revenue by attracting more customers. However, Uber has
faced some difficulties as well. Firstly, in some cities of Paris and the United Kingdom, taxi
drivers have protested against this service and consequently, the government has prohibited
this company. This legal constraint has affected the company adversely and has increased its
costs of business. Moreover, Uber has also experienced limited economies of scale as it has
invested huge amount of money for sales, marketing, research and development purposes
(HAO and YAMAMOTO 2018). Uber has also experienced strong competition as other
companies, like Lyft, has provided similar services through sharing economy to their
customers.
In this context, it can be said that this collaborative consumption can influence an
economy in both positive and negative directions. Hence, analyzing of benefits and
limitations associated with this sharing economy can be beneficial to understand the
implication of this activity deeply.
Advantages and disadvantages of sharing economy:
Through sharing economy, some leading companies like eBay, Uber and Airbnb have
captured significant market shares though at the same time, it has adversely affected the

6BUSINESS INFORMATION SYSTEMS
traditional activity of a county. Hence, this business activity has some advantages as well as
some disadvantages, which can be described briefly.
Advantages of sharing economy:
Through this peer economy, a country can increase its national income through
generating employment opportunities, which in turn can influence the country’s national
income positively. Hence, it can be easier to understand about the importance of this
economy by describing those positive aspects.
Employment opportunity:
Through various companies, sharing economy has generated huge amount of
employment opportunity, for instance, Uber has hired many people as driver. Moreover,
people can sell or lend their assets to others, which is turn has helped them to earn revenues.
Higher amount of savings:
With limited income, it becomes difficult for a person to purchase products according
to the requirement. However, through this peer economy, various companies have offered
their services in the field of transportation, fashion, property, consumer goods and health care
and so on, from where, people can rent a house or hire a car at cheaper price (Böcker and
Meelen 2017). This opportunity has helped people to fulfill their requirement and has helped
to increase their savings by reducing costs.
Utilization of products:
Durable products, like house and car, can be used for long time though sometimes
they have remained unused or underutilized. Under this situation, owners of those private
properties can sell those commodities to another person by charging a lower price or can lend
it to earn revenue (Bellos, Ferguson and Toktay 2017). Through various online platforms
under this sharing economy, people have performed those peer-to-peer business activities,
which in turn have helped an economy to reuse many products. Those economical activities
have also helped an economy to decrease the negative externalities by reducing the
production along with pollution.
Strong relationships within community:

7BUSINESS INFORMATION SYSTEMS
As people can sell or lend their products to others for consumption purposes through
this specified peer-to-peer business activity, it can help an economy to make a strong
relationship among citizens. Hence, by increasing trusts among people, this sharing economy
has made a strong relation among people of a country (Yang, Song, Chen and Xia 2017). In
addition to this, fare reviews of customers have helped Uber, Airbnb and other companies to
develop their business by attracting more customers.
Disadvantages of sharing economy:
Sharing economy also has affected a country negatively and thus has possessed some
limitations or disadvantages. By considering those disadvantages, the government of a
country can take essential steps to protect other business activities.
Negative impacts on traditional services:
After sudden development of sharing economy, other traditional sectors have faced
various difficulties, which further have affected the economy of a nation negatively.
Increasing demand of Uber and Lyft due to cheaper price, have decreased the demand of
traditional taxi services, which further has decreased the employment opportunities o many
taxi drivers (Benoit et al. 2017). Moreover, through Airbnb, people have received
opportunities to book a room at a lower price compare to hotel. This has adversely influenced
the demand of hotel rooms and consequently, their contribution to the national income of a
country has also affected adversely.
Adverse affects of community:
Through Airbnb, people offer their unused rooms to other as rent to visitors or
unknown persons. However, this can inversely affect the community negatively by allowing
unknown people, which in turn can increase threats within a society (Acquier, Daudigeos and
Pinkse 2017). In addition to this, people sometimes have faced difficulties after booking a car
through online apps of Uber or Lyft.
Fraud activities:
As under this sharing economy, people have traded their unused products to others
through online sites; it can be observed sometimes that customers have received products
with low quality or completely other products, which they have not ordered (Stemler 2017).

8BUSINESS INFORMATION SYSTEMS
Moreover, it can also be seen that after receiving a products, customer has denied to paying
for this or seller cannot trace their customers due to wrong address or contract number.
Hence, those fraud activities can hamper the shelf-interest of both sellers and buyers.
Crowdsourcing website:
Through crowdsourcing websites, people have received opportunities to buy products
along with business funds by crowdfundings and business ideas related to this sharing
economy like logo and product redesign, innovative ideas related to a particular business
(Goodman and Paolacci 2017). Some open and large groups of people have offered those
services through internet and the number of those websites is increasing significantly.
Selected crowdsourcing website:
In this report, the selected crowedsourcing website is Kickstarter. It is one of the well-
known websites of crowd funding, which is used all over the world. This platform rewards
their customers for donating (Parhankangas and Renko 2017). Here, by supporting a specific
project, donation has occurred, which in turn has awarded people according to their level of
donation. People have received funds for their unique projects, for instance, music album or
innovation of new products.
At present, crowdfunding sites have huge demand as they support other companies
through providing funds. It becomes helpful for an individual to collect fund from large
number of people rather than collecting it from limited numbers of investors and it also has
helped the person to promote their products.
Request to kickstarter:
To receive funds from this website, an individual needs to inform about project by
filling a form and needs to fulfill the goal of competing this projects. Otherwise, the website
does not provide funding assistance to their customers (Soultanis, Rivas, Konstantinidis and
Siafakas 2017). Many people have collected huge amount of funds by creating music videos
and by writing books through this website.
This project has huge contribution to the sharing economy as it helps other people to
obtain investment. Through investing in a project, investors earn revenue after the project has

9BUSINESS INFORMATION SYSTEMS
fulfilled its goal. However, the most important criteria related to this project is, investors do
not bear any responsibility if a project fails. They only lose their invested amount.
Success of this request:
Being a well-known crowdfunding source, many people have used this site has
successfully completed their projects. Many people have visited this site everyday and have
asked questions about a project in which they feel interest to invest money. However, people
have invested more to those projects, which have innovative ideas. To receive benefits, the
chief criterion is to make a project more interesting and innovative.
Contribution to the sharing economy:
Each project contributes to this sharing economy significantly, as people have
received rewards from this project. By investing through this site, people accept to earn
rewards. Through online, people get opportunity to collect funds from other unknown
persons, which in turn has helped investors to generate revenues. Hence, this website also
performs their activity under sharing economy by peer-to-peer service.
Reflection about sharing economy:
At present, sharing economy has earned huge importance as some well-known
companies have enhanced their business activities with the help of internet. Hence, this
growing business sector has captured huge importance to develop a country’s economic
activity as it helps to generate employment opportunity, which in turn has helped a country’s
national income to increase.
Future of sharing economy:
As sharing economy is expanding rapidly, it can achieve huge success in future. The
number of customers of Uber, Lyft and Airbnb has increased rapidly. This number is going to
increase further as the number of internet users is increasing rapidly (Zervas, Proserpio and
Byers 2017). However, many traditional services, like taxi or other retail shops have affected
adversely through this service. Hence, it is essential for the government to implement policies
to protect those other services.

10BUSINESS INFORMATION SYSTEMS
Conclusion:
In conclusion, it can be stated that sharing economy has earned huge importance at
present by offering various services in the form of fashion, transport and others with lower
prices compare to other traditional sectors. This economy has affected an economy in both
positive and negative way. For instance, this economy has generated huge employment
opportunities and has made strong relations within a community. On the other side, fraud and
illegal practices can be seen here. Hence, strong governmental intervention is required to
protect shelf-inertest of both buyers and sellers. In this context, the concept of crowdsourcing
websites is also important from where an individual can receive various assistances in the
form of funds or business ideas.

11BUSINESS INFORMATION SYSTEMS
References:
Acquier, A., Daudigeos, T. and Pinkse, J., 2017. Promises and paradoxes of the sharing
economy: An organizing framework. Technological Forecasting and Social Change, 125,
pp.1-10.
Bellos, I., Ferguson, M. and Toktay, L.B., 2017. The car sharing economy: Interaction of
business model choice and product line design. Manufacturing & Service Operations
Management, 19(2), pp.185-201.
Benoit, S., Baker, T.L., Bolton, R.N., Gruber, T. and Kandampully, J., 2017. A triadic
framework for collaborative consumption (CC): Motives, activities and resources &
capabilities of actors. Journal of Business Research, 79, pp.219-227.
Böcker, L. and Meelen, T., 2017. Sharing for people, planet or profit? Analysing motivations
for intended sharing economy participation. Environmental Innovation and Societal
Transitions, 23, pp.28-39.
Bratianu, C., 2018. The crazy new world of the sharing economy. In Knowledge Management
in the Sharing Economy(pp. 3-18). Springer, Cham.
Edelman, B., Luca, M. and Svirsky, D., 2017. Racial discrimination in the sharing economy:
Evidence from a field experiment. American Economic Journal: Applied Economics, 9(2),
pp.1-22.
Faghih, S.S., Safikhani, A., Moghimi, B. and Kamga, C., 2017. Predicting Short-Term Uber
Demand Using Spatio-Temporal Modeling: A New York City Case Study. arXiv preprint
arXiv:1712.02001.
Farronato, C. and Fradkin, A., 2018. The welfare effects of peer entry in the accommodation
market: The case of airbnb(No. w24361). National Bureau of Economic Research.
Goodman, J.K. and Paolacci, G., 2017. Crowdsourcing consumer research. Journal of
Consumer Research, 44(1), pp.196-210.
HAO, M. and YAMAMOTO, T., 2018. Shared Autonomous Vehicles: A Review
Considering Car Sharing and Autonomous Vehicles. Asian Transport Studies, 5(1), pp.47-63.

12BUSINESS INFORMATION SYSTEMS
Korhonen, J., Honkasalo, A. and Seppälä, J., 2018. Circular economy: the concept and its
limitations. Ecological economics, 143, pp.37-46.
Liang, L.J., Choi, H.C. and Joppe, M., 2018. Understanding repurchase intention of Airbnb
consumers: Perceived authenticity, electronic word-of-mouth, and price sensitivity. Journal
of Travel & Tourism Marketing, 35(1), pp.73-89.
Lombardi, P. and Schwabe, F., 2017. Sharing economy as a new business model for energy
storage systems. Applied energy, 188, pp.485-496.
Parhankangas, A. and Renko, M., 2017. Linguistic style and crowdfunding success among
social and commercial entrepreneurs. Journal of Business Venturing, 32(2), pp.215-236.
Piscicelli, L., Ludden, G.D. and Cooper, T., 2018. What makes a sustainable business model
successful? An empirical comparison of two peer-to-peer goods-sharing platforms. Journal of
Cleaner Production, 172, pp.4580-4591.
Shaheen, S. and Cohen, A., 2018. Is It Time for a Public Transit Renaissance?: Navigating
Travel Behavior, Technology, and Business Model Shifts in a Brave New World. Journal of
Public Transportation, 21(1), p.8.
Soultanis, C.M., Rivas, D.G., Konstantinidis, K. and Siafakas, K., 2017. The Athens uniportal
video-assisted thoracic surgery masterclass—an ambitious kickstarter. Journal of visualized
surgery, 3.
Stemler, A., 2017. The Myth of the Sharing Economy and Its Implications for Regulating
Innovation. Emory LJ, 67, p.197.
Yang, S., Song, Y., Chen, S. and Xia, X., 2017. Why are customers loyal in sharing-economy
services? A relational benefits perspective. Journal of Services Marketing, 31(1), pp.48-62.
Zervas, G., Proserpio, D. and Byers, J.W., 2017. The rise of the sharing economy: Estimating
the impact of Airbnb on the hotel industry. Journal of Marketing Research, 54(5), pp.687-
705.

13BUSINESS INFORMATION SYSTEMS
Appendix:
Figure 1: Number of users using sharing economy in the United States
Source: (Edelman, Luca and Svirsky 2017)
Figure 2: Users of taxi, Uber and rental car in the United States
Source: (Shaheen and Cohen 2018)

14BUSINESS INFORMATION SYSTEMS