Hi Prof Hugo
Listed below are the requirements for the assignments
Explain how the peer-to-peer (shared economy) concept is disrupting our traditional economy
Describe whether the shared economy is creating new value for the consumer or if it is just replacing existing business
Please feel free to add anything additional to enhance the paper
The assignment must be 3-4 pages not including reference and cover page
Running Head: MARKETING CHALLENGES IN A NEW ECONOMY The Concept of the Shared Economy
BUS 620 Managerial Marketing
Dr. Susan Sasiadek
June 13, 2016 1 Running Head: MARKETING CHALLENGES IN A NEW ECONOMY 2 The Concept of the Shared Economy
A shared economy is a socio-economic ecosystem built around the sharing of human,
physical and intellectual resources (Matofska, 2016). In the article Ailrbnb and the Unstoppable
Rise of the Share Economy, the author discusses the emergence of a new shared economy were
owners are creating income by utilizing spare things such as a bedroom. The rise of peer-to-peer
sites has grown with sites like Uber and Lyft and has contributed an income for many people.
?The sharing concept has created markets out of things that wouldn?t have been considered
monetizable assets before? (Geron, 2013). Forbes estimates that this year 3.5 billion dollars of
the shared economy will flow directly into the pockets of the people and will grow 25% (Geron,
2013). The shared economy has caused a disruption in the traditional economy because of taxes
not being collected that harms industries such as hotels, taxis and car rental. Like any business,
the shared economy does have issues but it is still growing at a rapid rate.
How this Concept is Disrupting the Traditional Economy
When the economy took a downturn in 2008, many Americans lost their homes, jobs and
high credit scores. Once the economy started to turn for the better many people did not recover
the lifestyle they were once accustomed to, so they began to think of alternative ways to earn
additional income. For example, Sara can utilize Airbnb to list her luxury apartment for rental
for weekend for $100. When Sara accepts the offer from Jane through Airbnb, she will would
leave her apartment for the agreed upon date and net $97 dollars tax-free from the weekend
transaction. Since sellers connect directly with the buyer, this may allow them to capture profits
that would shared with channel partners (Finch, 2012 para5). Although this is great for Sara,
there are issues with this new model that is causing quite a stir. Because the lack of taxing for Running Head: MARKETING CHALLENGES IN A NEW ECONOMY 3 the overnight stay accommodations, many in the hotel industry believe that it is unfair because
they provide the same service and is taxed for it.
With traditional hotels, there are certain standards that the hotel must achieve to be a fully
operational business. According to Malhorta, ?short term rentals create shortages of affordable
log-term housing when nightly rates exceed monthly rates?. Sharing would directly affect lower
income families although it would increase the income from homeowners. Furthermore, it also
hurts the hotel industry because the price of the peer-to-peer accommodations forces the hotels to
lower prices in order to compete for customers.
Another popular peer-to-peer service that is on the rise is Uber, which allows private
citizens to utilize their personal vehicle to give rides share services for a fee. Uber gives the taxi
and drive services direct competition. With taxi companies, such as Yellow Cab, all drivers must
be licensed and carry special commercial insurance. Ride sharing is increasing by evading costs
and regulations that regulate businesses (Malhotra, 2014). Not only does Uber avoid the fees
that are required by taxi drivers, but Uber can also avoid lawsuits when accidents occur. For
example, if an Uber ride-sharing driver strikes a pedestrian and kills them, the sharing service
would not be held responsible because the shared driver is considered a contractor (Malhotra,
2014). The company is considered not considered a transportation service, so it successfully
avoided paying the victim?s family because of this loophole.
Value or Replacing Existing Business
Providing an alternative way to earn money for regular people is less expensive to the
consumer; however, it lowers the standards from professionals and endangers the customers.
According to Malhotra, ?peer-to-peer exchange based on sharing ideas or performing work, such Running Head: MARKETING CHALLENGES IN A NEW ECONOMY 4 as TaskRabbit on the cheap, strips opportunity from the bottom of the pyramid, as jobs move
from traditional manufacturing and services to micro-services?. Although the host may have
insurance to cover damages, their rates would increase and the company has no consequences.
Insurance companies also face losing profits as well because with peer to peer sharing the
claims if there was an accident is basically fraud which causes rates to increase for everyone.
For example, since Uber drivers are considered ?contractors? if they would have accident with a
person in their car, their insurance claim would be fraudulent because they could list the person
as a passenger when actually they?re a client because the contractor is making a profit for the
service. This type of blatant misrepresentation is reckless and increasing everyone?s insurance
Finally, peer-to-peer sharing eliminates traditional jobs such as taxi drivers and hotel
jobs. Peer-to-peer sharing allows cheaper rates and hotels have to drop their prices to stay
competitive. When rooms aren?t being booking employees lose their jobs and businesses close.
The sharing economy is dangerous and could cause many traditional businesses to fall but it also
opens the doorway for more increase and fierce competition.
In the new economy, anyone can become a part time or temporary host to earn extra
money. This is appealing to someone who has an extra bedroom or willing to leave their home
for someone else to enjoy for a short time period; however, this puts a strain on traditional
establishments who pay extra taxes and go through additional regulations to operate. The new
economy is creative but can be hazardous to the ?contractor? and the ?customer? if an incident
occurs. Running Head: MARKETING CHALLENGES IN A NEW ECONOMY 5 Reference Finch, J. (2012). Managerial Marketing. San Diego, CA: Bridgepoint.
Geron, T. (2013, January 22). Airbnb and the unstoppable rise of the share economy. Forbes,com
Malhotra, A. a. (2014). Economic and Business Dimensions The Dark Side of the sharing
Economy and How ro Lighten It. Communications of the ACM , 57 (11), 24-27.
Matofska, B. (2016, April 25). The People Who Share. www.thepeoplewhoshare.com .
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