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Collaborative Economy And The Scenario In Australia

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Question:

Briefly Explain the Advantages and Disadvantages of the Collaborative Economy for Workers, Businesses and the Government.
 
 

Answer:

Introduction

The collaborative economy is one of the promising and dynamic sectors in the present scenario of international economy. In order to review the collaborative economy of Australia, one must have a clear sense of collaborative economy first. There are several different definitions of the collaborative or the sharing economy.  According to Rachel Botsman “an economy built on distributed networks of connected individuals and communities versus centralized institutions, transforming how we can produce, consume, finance, and learn.” (Cannon and Summers 2014) However, this broad definition also includes the business models that operate in the traditional economy as well. However, the concept of collaborative economy is not a new phenomenon; it has always been a part of the economical development. Like many other governments, Australian government is now also attempting to take action to the rising collaborative innovations. Therefore this analytic report focuses on such government inquiries. In order to do that, this report will trigger to focus on the transport industry and how that has been challenged with the collaborative economy model. Therefore it will also discuss and analyze the use of the business model in respect to the firm Uber.

Advantages and Disadvantages of the Collaborative Economy

The phenomenon of collaborative economy has its advantages and disadvantages in accordance with the proponents and the opponents of the collaborative economy such as the government, businesses and the workers. In this section the essay triggers to discuss the pros and cons of this economy.

Advantages:

Recycling and repurposing of the products:

The possessions of human beings such as the gadgets, cars and other properties are accumulated at one point of time. The usage of such products becomes lesser with the course of time. In the collaborative economy, the vehicles of the private owners can be offered to others for a minimum fee (ohen and Kietzmann 2014). This same goes for the accommodation industry as well. If there is an unused room, the owner can sublet that room to other people for rent. Through these kinds of exchange the unused possessions do not go for wastage.

Lessening the number of unemployed citizen

The collaborative businesses give people the chance to work from home online as well. These works are flexible and beneficial for the people who are working along with studying or having family responsibilities. Therefore they can work both ways. The employers in the collaborative economy therefore look for such candidates who can post such items online (McRostie 2017). As far as selling the items that were pre-owned the sellers can gain sufficient profit and at the same time the buyers can acquire such items at a lower cost.

Opening of new business ideas

The concept of collaborative economy produces several non profit and profit organizations and the business that offer the population funding and easier transportation services (Rubin, Aas and Stead 2015). For instance, Uber is such an organization that makes the transportation easier and less costly. With the emerging of collaborative economy, people with new and innovative ideas who did not have sufficient money can now get funding easily from other individuals who own private cars but in spite of using it they put in rent.

Disadvantages:

Application of unfair means

There are several people who do not support the emerging of the collaborative economy. They indicate that most of the people who work under this collaborative economy, are deprived of the huge benefits that the other employees who work as the full time employees. These benefits include sick payments, paid leaves, bonuses etc (Rubin, Aas and Stead 2015). In addition to that emerging of the organizations such as Uber reduces the number of people who used to drive the taxies from its beginning and it affected the profit of those taxi drivers and other companies who were offering the transportation service before.

Loss of Government Revenues

The loss of the Government revenues is one of the major setbacks of the collaborative economy. According to the critics this collaborative economy enhances the chance of a huge loss of the tax revenues for the governments. In this business the people who are involves mostly conduct their business online and through sharing (Johnston and Huggins 2016). However, most of such practices are not regulated by the governments. As a result to that, paying the income taxes is not compulsory for everyone which enhances the loss of tax revenue.

 

A new form of Capitalism

The critics see the collaborative economy not exactly as it is said. They put a lot of significance on the darker side of the economy. The critics call it the ‘access economy’ as it only provides the venue of working to the people for accessing their products and services. However, at the end the players of this field are the ones who are mostly profited by the business, not the individuals who are providing the services.

The Traditional and Collaborative Business Model in the Transport Industry

Recent surveys and report suggest that there is an emerging awareness about the collaborative economy in Australia. The reports also show that around fifty three percent of the entire population has participated in some kind of collaborative economy, whereas around sixty three percent of them have a plan of participating in these ventures. There are numbers of significant business which are involved in the collaborative economy, especially in the transport industry. It has been shown in reports that on the transportation and automotive sector, the company Uber has generated around $38.5m (McCormick et al. 2016). Therefore it can be said that Australia is being one of the attractive markets for the sharing and collaborative economy applications, especially in the transportation industry. This is also because of the higher internet penetration in the country. Around seventy percent of the household have broadband at their homes, whereas seventy four percent of mobile users use smart phones.

This study will focus the comparison of the traditional business model of the previous transportation and the new revenue model of transportation in Australia. With the emerging of organizations like Uber, there are a lot of new innovations that have been included in the transportation industry such as the ride sharing, car sharing, and peer to peer car sharing. With this implementation of the new revenue model, the service fee for the regular business of the service providers has reduced to a huge extent (Kinnear, Rose and Rolfe 2015). The company only takes a small percentage of the entire transaction for the successful transactions between the two parties in the market. The company has also reduced the cost of the flat membership at the same time, as they only have to rent a flat in an annual or monthly membership. The company also offers a vast range of the subscription plans for different prices on the basis of the frequency of usage. The collaborative businesses in the transport industry also offer to charge for an annual membership plans based on the usage of the members. Therefore it is easier for the users to travel and it reduces the cost. In these businesses the company generally offers the basic services to the users for free, such as the application can be downloaded without any cost. These new implementations have provided a ridesharing platform for the potential riders and the drivers; therefore they can efficiently match on the basis of their location within few minutes which have reduced the need of relying on the running taxis. These opportunities made the business of Uber run so well, that it has contribute over 1m rides in a year and it had earned approximately $20m in one city. The analysts have even claimed that it has made the financial expenses a lot down as one has to spend only $1 at the place of spending $12 on the taxi services.

 

Collaborative Economy in Uber (Transport Industry)

The sharing economy is the advanced process of establishing the business in the global context. This process has been widely accepted as the most significant business strategies for the growing sectors (Owyang, Tran and Silva 2013). It has been observed that the emergence of the sharing economy in the Australian transport industry is much helpful for saving the taxi bills and increasing the employment rates. However, in spite of the increasing benefits through sharing economy process, the transport industry has been facing some of the recognizable challenges. Cusumano, (2015) exclaimed that government needs to ensure the safety parameter of both the consumers and the providers. The major concern is whether the sharing economy process will improve the expense of the wages and safety (Lee et al. 2016). The above section of the study discussed the significant challenges that the transport industry faced due to the emerging trend of the sharing economy. The policies associated with the peer-to-peer economy are ensuring the economic benefits derived from the sharing economy. For example, it can be estimated that Uber can cut down almost $500 million from the Australian taxi bill, which is quite close to almost 10% of the expenses spend each year to catch the taxis in Australia.

However, it has been noticed that the application of the Collaborative Economy Revenue Models has transformed the traditional business approaches in the industry. Moreover, it can be implied that the application of such business model is much helpful in creating and capturing values (Lee et al. 2016).  It is already discussed that the revenue model is associated with different factors such as service fees, membership plus usage, tiered subscription, freemium, and white level. It is necessary to mention that this approach is quite different to the traditional business models used for improving the service quality and economic parameter (Hamari, Sjöklint and Ukkonen  2015). In case of Uber, it has been observed that the company has been facing the similar challenges with the expenses of the wages and safety (Owyang, Tran and Silva 2013). Therefore, it is necessary for the company to pay the closer attention towards the identified factors related to the specific business model.

According to Evangelista (2014), in order to match up the two different sides of the marketplace, the company can cut down the percentage from the total transaction. The company has the access to cut down the percentage form the drivers and passengers that will help in increasing the revenue in a significant way. The business model includes the flat subscription for the members that incurs the monthly or annual fee regardless of the usage. It will be an innovative way of increasing revenues (Rifkin 2014). As per the business model, Uber can also use the range of subscription plan at different price points that depends on the frequency level of using the transport services. One of the most innovative feature of this business model is the use of the membership plus, which ensures that the company can change the annual membership fee (Banister and Button 2016). With the help of such usage, the additional fees can be altered and increase the value of the transport services.

The sharing economy model introduces the back-end platform under the brand and license of other companies (Lee et al. 2016). Along with such service, Uber can offer some of the basic services to the users as the additional benefits associated with exclusive features (Owyang, Tran and Silva 2013). Offering such facilities would be much beneficial in generating the positive response from the Uber users. The major comparison between the traditional business model and the current business model is the improved technological uses (Sundararajan 2014). The service fee in the current business model is quite less than the traditional collaborative economy model. The minimal amount of the service fee is quite affordable to the passengers due to which the providers can earn more revenues. Therefore, it can be suggested that the development of the current business model would be much beneficial for the transport industry, especially for Uber.

 


Providing the effective facilities and services to the users will be helpful in generating the positive experience. The positive word of mouth would attract more users for availing such innovative transport services. The application of such business strengthens the competitive edge of the company by ensuring the string consumer base. This instant transport services are saving the time at minimal cost due to which people prefer the service even at the emergencies (Lee et al. 2016). Moreover, the innovative facilities are contributing to the current demands of the sophisticated facilities as per the expectation level of the community people. Regardless to the alternative consequences, the services are efficiently improving the current method of using the instant transport services. Seeking the proper help from the government will also secure the competitive edge in current business market.

Unintended Consequences of the Success of the Model

In spite of such facilities generated from such services, some of the unintended consequences are also becoming much visible. It has been noticed that incurring the costs from the service facilities is decreasing the government revenues. Hence, there is the possibility of lack of adequate governmental supports in future (Ferrari 2016). It can be predicted that some of the regulatory aspects may affect the future of such services. On the other hand, it can also be interpreted that such transport services are increasing revenues, which are more beneficial for the service providers than the companies (Lee et al. 2016). The company directly cannot earn more revenues from the service users. The percentage of the service providers is much higher. Apart from such consequences, it has been seen that emergence of such facilities have transformed the form of capitalisms (Martin 2016). The existing transport services, such as taxi services can be abandoned for keeping the prices higher. When the customers are receiving the expected transport services at reasonable rate from such innovative services, they tend to ignore paying to the taxis. Hence, it will be the unintended consequences for every taxi drivers in Australia. In such cases, it is necessary for the government to pay fruitful attention towards policies implemented on the transport industry. The availability of the proper transport systems would be much demanding to the users all across the country.

 

Conclusion

The study highlights the major consequences for the use of the transport services in an innovative way.  It has been noticed that the use of the traditional business model was quite expensive for the Australian people who use the taxi services much frequently. The sharing economy in the Australian transport industry is much helpful for saving the taxi bills and increasing the employment rates. Introducing the new business model is specifying some of the changes in technologies and facilities that are attractive for the service users in Australia. The study identifies the advantages and the disadvantages associated with such emerging transport services in Australia. The major comparison between the traditional business model and the current business model is the improved technological uses. The service fee in the current business model is quite less than the traditional collaborative economy model. The changes in the form of capitalism through the Collaborative Economy in transport services would ensure the innovative process in current business market. Uber has been moving forward to capture such value added services for securing the competitive edge. The supports from the government would be necessary in determining the sustainability of such transport services for long run.

 

References

Allen, D., 2015. The sharing economy. Review-Institute of Public Affairs, 67(3), p.24.

Banister, D. and Button, K. eds., 2016. Transport in a free market economy. Springer.

Cannon, S., and Summers, L. H. (2014). How Uber and the Sharing Economy Can Win Over Regulators. Harvard Business Review, 13.

Cusumano, M. A. (2015). How traditional firms must compete in the sharing economy. Communications of the ACM, 58(1), 32-34.

Evangelista, P., 2014. Environmental sustainability practices in the transport and logistics service industry: An exploratory case study investigation. Research in Transportation Business & Management, 12, pp.63-72.

Ferrari, M.Z., 2016. Beyond Uncertainties in the Sharing Economy: Opportunities for Social Capital. European Journal of Risk Regulation, 7(4), pp.664-674.

Hamari, J., Sjöklint, M., and  Ukkonen, A. 2015. The sharing economy: Why people participate in collaborative consumption. Journal of the Association for Information Science and Technology.

Johnston, A. and Huggins, R., 2016. The Spatio-relational nature of urban innovation systems: Universities, knowledge intensive business service firms, and collaborative networks. Journal of Urban Technology, 23(1), pp.29-52.

Kinnear, S., Rose, A. and Rolfe, J., 2015. Emissions reporting in the Australian road freight transport sector: is there a better method than the default option?. International Journal of Sustainable Transportation, 9(2), pp.93-102.

Lee, Z.W., Chan, T.K., Balaji, M.S. and Chong, A.Y.L., 2016, June. Technology-mediated sharing economy: Understanding user participation in collaborative consumption through the benefit-cost perspective. In Proceedings of the 20th Pacific Asia Conference on Information Systems (PACIS).

Martin, C.J., 2016. The sharing economy: A pathway to sustainability or a nightmarish form of neoliberal capitalism?. Ecological Economics, 121, pp.149-159.

McCormick, K., Neij, L., Mont, O., Ryan, C., Rodhe, H. and Orsato, R., 2016. Advancing sustainable solutions: an interdisciplinary and collaborative research agenda. Journal of Cleaner Production, 123, pp.1-4.

McRostie, S., 2017. App-based companies in the gig economy. Proctor, The, 37(2), p.34.

ohen, B., and Kietzmann, J. (2014). Ride on! Mobility business models for the sharing economy. Organization & Environment, 27(3), 279-296.

Owyang, J., Tran, C. and Silva, C., 2013. The collaborative economy. Altimeter, United States.

Rifkin, J., 2014. The zero marginal cost society: The internet of things, the collaborative commons, and the eclipse of capitalism. Palgrave Macmillan.

Rubin, T.H., Aas, T.H. and Stead, A., 2015. Knowledge flow in technological business incubators: evidence from Australia and Israel. Technovation, 41, pp.11-24.

Sundararajan, A., 2014. Peer-to-peer businesses and the sharing (collaborative) economy: Overview, economic effects and regulatory issues. Written testimony for the hearing titled The Power of Connection: Peer to Peer Businesses, January.

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