Shiv Nadar University

School of Management and Entrepreneurship

Quarter 2

Operations Management (DOM 505)

Project Report on Sharing Economy

Prepared For:

Prof. Sandeep Kumar Gupta

Submitted By:

Akshay Anand
Gayathri Ganesan
Nandini T
Ramalu Dinesh Reddy
Shivam Sharma
Table of Contents
Shiv Nadar University.......................................................................................................................1
Introduction........................................................................................................................................3
History of sharing economy............................................................................................3
Evolution of present sharing economy...........................................................................4
Digitalization:.............................................................................................................................4
Shift from ownership to access:...........................................................................................4
Literature Review..............................................................................................................................5
The Platform Model:.........................................................................................................5
Global Perspective:.......................................................................................................... 6
The Business Ecosystem Model:....................................................................................7
Application of Sharing Economy..................................................................................................8
The Growth of Airbnb:......................................................................................................8
Suggested Business plan based on sharing economy...............................................10
Advantages of the Sharing Economy........................................................................................10
Supply Chain Management and sharing economy......................................................11
Disadvantages of the Sharing Economy...................................................................................11
References.......................................................................................................................................13

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Introduction
Sharing Economy is now mainly described as economic activity involving online transactions
but covers a wide range of meanings. It initially started off in the open-source community by
referring to peer-to-peer sharing of goods and services but now generalised as told including
even B-to-B transactions. The general view of critics is that it is a democratized marketplace.

Recently, people have started considering Collaborative consumption as equivalent to

Sharing economy referring to resource exchanging medium (community-based online
services) where a consumer can also act as a seller of products and services, basically a
hybrid market model of peer-to-peer transactions. This transaction got limelight due to peer-
to-peer dealings and now it is also being done via a mediator (store, app); online and offline;
sometimes for free and for other consumption (reward points, credits, etc.) This evolution of
Sharing Economy has been on the top list of researches based on ability of consumers to
change their roles.

With passage of time and advancements in recent times, technology has been a driving
force to provide information to consumers to help use resources optimally by making the
excess capacity that is available. This is of vital importance because information shared
mainly via online marketing tends to increase the value of the goods for the sellers and the
reputation and customer base for the medium

Collaborative consumption model being highly related to sharing economy is mainly used
now-a-days in online marketplaces like Amazon, eBay, etc. and also in developing forums
like social lending (libraries), accommodation, travel trips and advising, task assignments,
transport sharing, etc. But still some critics think the name is not suitable and should be
coined as “Access Economy” pointing to the fact that when there is a mediator between
people who don’t know each other it disrupts the concept of sharing, where we are just
paying to access other person’s goods.

History of sharing economy

The name sharing economy appeared in the early 2000 but the concept of sharing the
resources is several hundred years old. People shown the tendency to share the resources
during diverse situations for increasing everyone chance of survival.

Few examples of sharing economy used in past during the diverse situations

1854, Italy: Italian cooperative movement

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Italian cooperative movement was created by the workers mutual assistance society in Turin
to lessen the burden of high cost of living on the workers. Under the Italian cooperative they
have established social credit banks, vineyard and diary cooperatives, farmer cooperatives
and worker cooperatives. This was the starting point of several other cooperative’s
establishment on Italy.

1864, Germany: Community gardens

Community gardens were created for the mass migration of people from countryside to the
cities in search of work. Community gardens are the places where group of people were
given open land to cultivate such that they can grow their own food for survival.

1946, India: AMUL Cooperative

AMUL cooperative was created by the rural farmers of Anand, a town in Gujarat. The
purpose of this cooperative was to remove the interference of middlemen to get the milk to
markets from farmers and often the farmers are exploited. So, on advice from Sardar Patel,
farmers started AMUL cooperative to export milk directly to Bombay milk scheme.

1946, USA: Ride Sharing

Ride sharing was introduced during the World War II by US Government to conserve the
resources during the war. Ride share initiative was largely promoted through media by
petroleum authority and considered as success.

Evolution of present sharing economy

Digitalization:

Introduction of World Wide Web (WWW) in 1989 has opened the way for users
communicating and connecting to each other which is commonly called as the peer-to-peer
networking. Usage of Internet has grown rapidly over the years and opened a new way of
information sharing over the peers like movies sharing, music sharing etc.
EBAY was the first organisation to use the power of internet to join many buyers and sellers
together. EBAY created a virtual market where people can buy and sell the products.

Shift from ownership to access:

Digital revolution had brought a lot of changes in the today`s world, there is an economic
shift in the paradigm of the social to the commons, from ownership to access. In today’s
world everyone can get a ride using bla-bla car or uber or ola(Third party websites which
helps in joining owners and the users to share the resources). Using this type of system both
the users and owners are benefitted a lot.

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Literature Review

The Platform Model:

This idea is not new to us nor the society. It has been with us and evolving over time. We
have been taught sharing resources from childhood and it from our survival to a business
survival in the market everything has been possible because of sharing. The trends have led
to coining terminology for this concept. As told in technical terms and definitions, recent
times have made sharing economy better and little different from the old one through the
insertion of a platform at the heart of the exchange. The previous two-way path has now
become a three-way path. A medium or a platform standard at the middle thus connecting
the buyers and the sellers, managing the payments and thus maintaining their share of
resources and job running. They also keep upgrading themselves with the ratings-based
reputation system for improvement.

And with the evolution of science and technology, this concept has developed itself too. With
technology reaching out to everyone’s hand and pocket, people can connect with internet
the second they wish to. From exchanging goods during Barter system to taking an Uber
pool ride or purchasing an item on eBay or Amazon sharing economy has evolved drastically
with it. People has started focusing on it more than just business concept with exclusive
interest for research purposes.

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Global Perspective:

So, looking at Sharing Economy from larger or a global point of view, it gives much more
understanding behind this simple terminology. Customers with better exposure have started
demanding customizations in everything. They want more complex, sustainable and better
integrated services rather than just standard ones. As mentioned before, the boom of
internet and in-hand technology, surplus of goods produces from idle capacity, increasing
environmental awareness among consumers, etc. have enabled them to utilize goods and
services that have generally been underutilized. Global for-profit firms mainly Uber, Airbnb,
Lyft, etc. have become pioneers of their industry in their own way by taking their market
share. They have depended on data analytics and market coordination to gain their share on
the transactions. People mentality has also changed recently, they don’t use it just for social
interaction and just use the advantage of better goods at lower costs.

Studies have started focusing on the two aspects of this topic: 1) the sharing of services or
goods for a charge or fee and 2) the use of internet as medium. And thus, sharing economy
business models have evolved over three main concepts: 1) the capitalisation of unused or
underused resources; 2) payment for temporary usage and not ownership on internet-based
media and 3) faith on network and social interactions between both parties for mutual
benefits. This changing trend of addressing the concept as “Access economy” can be linked
with Zipcar ad WeWork, where their business model aims at renting to customers who
remain as active participants in their business running. The major contributors to this idea
have retained their market shares on a regular basis and they were assessed on certain
characteristics as well.

The three main features of sharing economy firms.

Characteristic of sharing economy Uber Airbnb Zipcar Netflix eBay

The business focuses on unlocking the value of
Yes Yes Yes No Yes
unused or underutilized assets.
Consumers pay for temporary access instead of
Yes Yes Yes Yes No
ownership using an internet-based platform.
It relies on C2C interactions and network effects for
Yes Yes No No Yes
growth.

The main interest of consumers reduced costs can be attributed to reducing users’ search
and information costs by enhancing their position in monitoring transactions and evaluating

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the underlying risks like reviews and ratings. So, technology has now become the backbone
of this concept allowing the transactions to happen in their virtual marketplaces. They have
the added advantage of accessing the customer regardless of time, place and contract
customizations. Their business will keep growing until the demand from both the suppliers
and consumers end keeps growing. Their success not just lies with the transaction fee but
with the widespread adoption and participation in success. The more sellers, they get more
consumers for the price reductions and better customization offers. The better and efficient
usage of the platforms has added more value to the goods and services offered and thus
helped in expanding their networks.

This platform poses less barriers for suppliers to join and a greater number of options for
customizing their orders. Firms adopting this approach concentrate more on their marketing
and operations with the loads of data they have access to. So, we can mainly divide the
model into 4 parts technology, operations, marketing and customer service.

The Business Ecosystem Model:

There is another model of Sharing Economy often named as the “Ecosystem Model”. It gives
immense opportunities to explore extensively on its internalization process by giving due
credits to the business ecosystem. This ecosystem is made up of all the stakeholders
interlinked with the business and are simultaneously undergoing changes based on the
consumers’ choices and preferences with the huge development in technology as well. This
model is centered with a platform as in the previous model, but this focal point is connected
to its suppliers and complementary asset providers from various geographical locations to
industries and its consumers in all possible non-linear ways. This model is highlighting the
network effects and non-linear relationships in the sharing economy world of value-
enhancing transactions. These ecosystems are considered as open communities connected
to consumers, suppliers (direct and indirect), complementary asset providers, regulatory
authorities and competitors, who all have different roles and identities in the whole
ecosystem process.

There is much scope of variation in how this model is perceived across the world solely
relying on the competition in the industry, the developments, infrastructure of business world,
etc. The main success of this model lies in its dynamic nature. This model is enhanced by
the networking and interaction between the stakeholders. So, in the early stages, all the
stakeholders are developing their stand in the society and trying to adjust to find the best
possible combination of how to create and capture value when they have lots of rules and
regulations being imposed. But as the society evolves, the situations slowly change allowing

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the industry, environment and rules to be well configured and established. This is when the
competition increases allowing the lead players to impose entry barriers due to their
technical expertise and large market share. In this ecosystem perspective, no industry is
isolated, they involve many other industries to have a flourishing business with multiple
supply chains influenced by cross-industry links much controlled by innovative developments
and technological improvements.

Application of Sharing Economy

The Growth of Airbnb:

Consider the examples of Airbnb, MakeMyTrip or Goibibo, they don’t own any of the
services they provide reservation access to. The major industries like accommodation,
travel, etc. have and own properties that are huge but rely much on these kind of search
engines for reservations. These websites all options from comparing hotel rooms and
booking them to planning and deciding a vacation trip to booking tickets for the travel by all
modes is there anything left that they don’t offer? This gives one other major characteristic of
sharing economy firms, internalizing the value chain of reservation system and the customer
relationship management.

Airbnb and many other vacation facilitators now account to about 50% of the rental markets.
Airbnb is well established in nearly 200 countries with 1.5 million listings, 10 million bookings
and planning on targeting China now. Their bookings are expected to reach about 60 million
by 2020. Estimates show that they offer about 1% of global hotel rooms today. It is expected

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to reach at least 5% with their market growth. Generally, traditional hotels and vacation
rentals have been growing despite the emergence of such facilitators in the market and the
supply-demand gap keeps increasing which is a plus point to the former.

These sharing economy platforms are hugely attracting the long-stay travelers and general
business travelers travelling for short trips rely more on the direct means even now. But with
the growing popularity of these facilitators and their specific targeting of the business
segment might prove detrimental for the hotel business growth. There is higher chance of
playing with the supply-demand gap and can take over the control of the pricing power. It is
lieu of this future threat that big hotel firms have started investing much in home-sharing
rivals. It can be difficult to estimate the trends for a longer period but there is a good chance
of the market control by these sharing economy platforms.

Value chain internalisation of Airbnb

Growth in bookings of Airbnb

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Suggested Business plan based on sharing economy

Creating an Agricultural co-operative society in the village panchayats where the required
agricultural equipment is provided for the farmers in need. Equipment is facilitated for a fixed
charge and the owners of the equipment will be provided details of requirement. Using this
approach owners of equipment will be benefitted by effective utilization of their equipment
and the farmers in need are benefitted by renting the vehicle in need rather than to purchase
the equipment or to wait for the government to provide facilities.

The plan of Agricultural co-operative society will provide better job opportunities for the
people in the village and further leads to development of society by reducing the percentage
of unemployment in the village. We will make sure that there are predefined rules and
regulations for the mutual usage such that the owner equipment should not be spoiled, or
the service provided to the consumer is not meeting the consumer expectations.

Advantages of the Sharing Economy

Cheaper Goods and Services

Goods and services can be available at cheaper prices with the help of sharing economy
because renting a product or service for one-time usage or few times usage is cheaper than
owning.

More sustainable use of resources

Using sharing economy, the resources can be utilised more efficiently, and the
underutilisation of the resources can be eliminated.

Builds Community Trust

Community is driving factor of the sharing economy since It is based on trust and
collaboration between both the users and the providers. Sharing economy service will be
successful only with honest exchanges and transparency.

New and Better Opportunities

People get access to things that might not be practical to own or obtain with the help of
sharing economy. For example, many people simply can’t afford a car, but the facilities of
car can be accessed using the sharing economy.

Extra Income for Providers

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Owner can utilise the potential value of an item, such as a vehicle by providing it for rent
which otherwise be sitting idle.

Growth of Outsourcing Opportunities

Business are provided with great alternative of outsourcing the work to freelancers than to
hire full-time salaried workers.

Supply Chain Management and sharing economy

1. For the past twenty years, the world has grown accustomed to the global supply
chain.
2. The supply chain will become even more critical with the rise of Omni channel sales.
3. The shared economy is not so much of a replacement of the supply chain, but a
logical extension of it.
4. Sharing economy helps supply chain management to enhance sustainability.
5. Crowd sourced asset in core supply chain.
6. The sharing economy taps into unused resources to reduce waste.

Disadvantages of the Sharing Economy

Privacy/Safety Concerns

The sharing economy has lot of safety issues because most of the times the deals are made
with unknowns and we might not aware the hazards the persons brings on.

No or Few Guarantees

The risk that you won’t get paid or that the items you share will be damaged When you share
your resources with others – whether by renting out a house, car, or equipment, or
participating in a talent marketplace – you also assume.

Cooperation with Others

Sharing economy requires close cooperation between people on each side of a transaction
although its community-building power can be a benefit.

Lack of Regulations

There is a lack of regulation in sharing economy, overseeing the products and services
exchanged during the transaction which can be downside of the sharing economy in many
cases.

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Unstable income and no benefits
A steady income is not provided in sharing economy because the income is mostly demand
based.

Recommendations

Establish better regulatory bodies.

• Better safety measures for users and owners.

• Monitor the pricing and payments involved.

Creating awareness in the society.

• Efficient utilization of resources.

• Waste management.
• GDP growth and helps betterment of the society.

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References

• The sharing Economy, New opportunities, new questions by Chiara Farronato and
Jonathan Levin
• Sharing Economy: Review of Current Research and Future Directions by
Chakravarthi Narasimhan, Purushottam,Papatla, Baojun Jiang, Praveen
• K. Kopalle, Paul R. Messinger, Sridhar Moorthy, et al.
• https://watermark.silverchair.com/rsw047.pdf
• https://www.weforum.org/agenda/2017/12/when-is-sharing-not-really-sharing
• https://searchcio.techtarget.com/definition/sharing-economy
• https://en.wikipedia.org/wiki/Sharing_economy
• https://www.investopedia.com/terms/s/sharing-economy.asp

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