Question

The sharing economy is a fast-growing phenomenon. People increasingly share their

home, car, clothing or tools on Internet platforms such as Uber, WeWork, and Airbnb. Statistics

shows that there were 44.8 million adults using the increasingly popular sharing economy

services in the United States in 2016. This figure was forecast to increase to 86.5 million by

2021.

Required:

Choose a sharing economy based company, briefly describe the business model of the

company, show the major costs of the company (please be specific and thorough), and discuss

the major challenges faced by the company to reach break-even (please limit your answer to

600 words or less)

Answer 1

What is sharing economy – The sharing economy is a business model defined as a peer to peer based activity of acquiring , providing , sharing access to goods and services .

The sharing economy involves short term peer to peer transactions to share use of idle asset and service .

The sharing economy sometime involves online platform that connects buyer and seller

The sharing economy is growing significantly byt faces regulator challenges

Sharing economy allow individual and group to make money from underused asset. Couple of example – Co working platform – companies provides shared open work space for freelances , work from employee etc. Peer to Peer lending platform , Fashion platforms ,

Business Model of Uber – Uber is a smartphone app which provides on demand service to users .it connect willing passengers to taxi cab driver. Taxi driver use their own car when providing taxi service and uber get 20% of the fare. In Nutsell business model include :

1)The Taxi driver-Anyone with valid driving license and a car can apply for an Uber driver

2) The passenger – Register uber user download the uber app to their phones and if they need a taxi , they call a taxi via the uber app

3)Fare- Uber set premium fare during peak hours and flat rate in non peak hours

4) Dividing the profit – divides the fare , 80% goes to driver and 20% to uber .

5) Growth – Growth is prime motto for any business. They are also have same plan .

Major challenges – There is demand for such service but Overhead cost + Legal cost threaten the business. While reviewing Q3 performance ( Unaudited ) financial result of Uber , noticed that Uber made EBITDA loss ( Albeit they reduced / narrow down loss as compare with earlier quarter but still bottom line is challenge .

Major reason for bottom line challenge is :

Cost of revenue is cover almost 50% of revenue ( excluding other cost) .

Under soend good amount of money in relates to Research and development .

Major challenge in Uber is tough competition with other sharing rider like Lyft , sidecar etc.

Also Uber faces are laws in California that require ride sharing companies to treat drivers as employees rather than Independent contractor.

Taxes challenge – legal battle is going on . If Uber dismissed as Technology company , government can argue that the entire ride payment is revenue for Uber and subject to city and state tax

Some countries and airports have banned ride sharing companies altogether .