Name:郝禹 Student No:1630068012 BEACON&villagECaR: INtErgradation TOWARDS CAR-SHARING COMPANY Yu HAO 16300680126 Course: English for Academic Purposes(Business) Date: 27 December 2017
Name: 郝禹 Student No.: 16300680126 1 BEACON&VILLAGECAR: INTERGRADATION TOWARDS CAR-SHARING COMPANY Yu HAO 16300680126 Course: English for Academic Purposes (Business) Date: 27 December, 2017
Name:郝禹 Student No:1630068012 I The dilemma Beacon Car Rental is one of the industry's most established and respected firms Lately, Beacon acquired a car-sharing company named Village Car. Inside the company, there are several different opinions about the future directions of Beacon and Village Car. On the one hand, the chief marketing officer Tony asserts that due to the trend of share economy, the best path forward is to keep Village Car separate including the operations, branding and so on. He thinks that this will give the company access to a new geographic market. On the other hand, considering the costs and inefficiencies, the senior vice president of operations Henry and Beacons CFO Annabel insist that there is no difference between sharing and rental. and a full integration is the most cost-effective approach. In summary, they should get rid of the overlaps and maximize the synergies Faced with the contrary opinions, in the following part, I will probe into whether the auto rental company can fully integrate its car-sharing start-up without losing customers. To solve the key problem, they should make decisions about the pattern to integrate Beacon and Village Car. There are two ways to go: keeping them separate a car rental company and a car-sharing company or merge them into a joint venture However, if they integrate the two companies, they will have to consider how to attract the car-sharing customers, and how can they innovate and change their existing business model Il Different customer base and the trend of share economy As Beacon and village Car own customers bases of different generations. Beacon is obliged to take measures to attract customers from Village Car. The consumption view of young generation differentiates from that of the previous generation. For example, in the case Kyle says he is not into buying things, but his Dad Henry is proud of the first car he bought. It is effective to cater to the latest consumption view and follow the trend of share economy. according to a study of car-sharing customers in the case, they do care about affordability and convenience, but what they value most is access. Based on this access is the first-line factor Beacon should consider It
Name: 郝禹 Student No.: 16300680126 2 Ⅰ The dilemma Beacon Car Rental is one of the industry’s most established and respected firms. Lately, Beacon acquired a car-sharing company named VillageCar. Inside the company, there are several different opinions about the future directions of Beacon and VillageCar. On the one hand, the chief marketing officer Tony asserts that due to the trend of share economy, the best path forward is to keep VillageCar separate including the operations, branding and so on. He thinks that this will give the company access to a new geographic market. On the other hand, considering the costs and inefficiencies, the senior vice president of operations Henry and Beacon’s CFO Annabel insist that there is no difference between sharing and rental, and a full integration is the most cost-effective approach. In summary, they should get rid of the overlaps and maximize the synergies . Faced with the contrary opinions, in the following part, I will probe into whether the auto rental company can fully integrate its car-sharing start-up without losing customers. To solve the key problem, they should make decisions about the pattern to integrate Beacon and VillageCar. There are two ways to go: keeping them separate as a car rental company and a car-sharing company or merge them into a joint venture. However, if they integrate the two companies, they will have to consider how to attract the car-sharing customers, and how can they innovate and change their existing business model. ⅡDifferent customer base and the trend of share economy As Beacon and VillageCar own customers bases of different generations, Beacon is obliged to take measures to attract customers from VillageCar. The consumption view of young generation differentiates from that of the previous generation. For example, in the case Kyle says he is not into buying things, but his Dad Henry is proud of the first car he bought. It is effective to cater to the latest consumption view and follow the trend of share economy. According to a study of car-sharing customers in the case, they do care about affordability and convenience, but what they value most is access. Based on this, access is the first-line factor Beacon should consider. It
Name.郝禹 Student No:16300680126 means the younger generation requires flexible access to a car on a regular basis, not he sense of ownership which Beacon's rental business adds to. Rental cannot offer such freedom and liberating assets is the wave of the future Village Car varies from Beacon for the customers owing to distinguishing ervices,corporate cultures, and brand positioning. For instance, Village Car has its proper community in which users call themselves"Villagers". In the community, they have both fixed social circles and latent contacts. This is a lifestyle, even a culture more than a special service. Therefore, people who choose Village Car would be firmly loyal to the brand of Village Car. Making good use of customers'brand loyalty is a sensible choice. As Tony says, if they merge the brands, they will alienate a portion of the village Car customer base-and possibly for Beacon customers, too II Concern of the business model and cost performance From the perspective of macrostructure, the business models of Beacon and Village Car are distinguishing. The former is a traditional car rental company, and the latter is a car-sharing company. Even though Beacons corporate brand is attractive to those car owners and business travellers, the downturn of the whole industry has strong impact on Beacon. Car rental is the mainstream in the market for the time being, but the characteristic of the product itself determines that sharing is more convenient and efficient than rental. as a result. beacon needs innovation in business models, such as using share economy model for reference Moreover, as Henry remarks, the company should consider not only marketing but also efficiencies and costs. Totally separate operations cost and risk a lot, and different directions may lead to inefficiencies. Combined with all the factors above, a feasible way out of this dilemma is put forward i The planned operational mode in the short term With regard to operational modes, the stage division is of vital importance. In the short term(probably in the next five years), it is effective and economical to integrate Beacon and village Car as a merged company. That means the two companies share
Name: 郝禹 Student No.: 16300680126 3 means the younger generation requires flexible access to a car on a regular basis, not the sense of ownership which Beacon’s rental business adds to. Rental cannot offer such freedom, and liberating assets is the wave of the future. VillageCar varies from Beacon for the customers owing to distinguishing services, corporate cultures, and brand positioning. For instance, VillageCar has its proper community in which users call themselves “Villagers”. In the community, they have both fixed social circles and latent contacts. This is a lifestyle, even a culture, more than a special service. Therefore, people who choose VillageCar would be firmly loyal to the brand of VillageCar. Making good use of customers’ brand loyalty is a sensible choice. As Tony says, if they merge the brands, they will alienate a portion of the VillageCar customer base—and possibly for Beacon customers, too. Ⅲ Concern of the business model and cost performance From the perspective of macrostructure, the business models of Beacon and VillageCar are distinguishing. The former is a traditional car rental company, and the latter is a car-sharing company. Even though Beacon’s corporate brand is attractive to those car owners and business travellers, the downturn of the whole industry has a strong impact on Beacon. Car rental is the mainstream in the market for the time being, but the characteristic of the product itself determines that sharing is more convenient and efficient than rental. As a result, Beacon needs innovation in business models, such as using share economy model for reference. Moreover, as Henry remarks, the company should consider not only marketing, but also efficiencies and costs. Totally separate operations cost and risk a lot, and different directions may lead to inefficiencies. Combined with all the factors above, a feasible way out of this dilemma is put forward. Ⅳ The planned operational mode in the short term With regard to operational modes, the stage division is of vital importance. In the short term (probably in the next five years), it is effective and economical to integrate Beacon and VillageCar as a merged company. That means the two companies share
Name郝禹 Student No:163068126 buildings, fleets, information, systems and other resources. Meanwhile, both the car-sharing and car rental models are retained. The two brands would coexist aiming at different customer segments. In this situation, Village Car can preserve its existing customers while make use of Beacon's capabilities to expand its market scale as well as improving its service. For Beacon, Village Cars in-town parking spaces will help Beacon build their presence in urban areas. These are exactly the synergies Comprehensive income makert share Comprehensive income makert share of China' s online video, 2012(Q1) of China s online video, 2013( Q3) 21(20.6%) 14(14.0%) Youku&tudou Others PPTV 5(5.0%) 114108%)sohu 11(10.8%) 10(100%) https://www.analysyscn/analysis/trade/detail/5529 https://www,analysyscn/analysis/trade/detail/5732 Diagram 1 Diagram 2 观智库,“行业数据:2012年第1季度中 Source:易观智库,“行业数据:中国网络 视频广告市场规模达到21亿,市场回 视频市场趋势预测2012-2015 https://www.analysyscn/analysis/trade/d https://www.analysys.cn/analysis/trade etail/5529/, accessed Nov 2017 /detail/5732/, accessed Nov 2017 Here is a classic case of corporate combination. On May 7th 2013,Baidu announced a purchase of PpS at 370 million dollars. Furthermore, PPS and QIY would be merged into one company with two brands retained. The major direction of PPS is live TV on the Internet while QiY has an advantage in short videos. Therefore, QIY and PPS owned different customer base. This integration meaned that QlY could make use of PPS'S CDn and P2P technologies to reduce the running costs. At the same time, the merged company covered both the web side and the mobile side, building a new business model. As Diagram 1 shows, not long before the merger, Qly 1薛娟.“爱奇艺与PPS合并视频业加速整合”,中国经济时报,May8",2013,p.8
Name: 郝禹 Student No.: 16300680126 4 buildings, fleets, information, systems and other resources. Meanwhile, both the car-sharing and car rental models are retained. The two brands would coexist aiming at different customer segments. In this situation, VillageCar can preserve its existing customers while make use of Beacon’s capabilities to expand its market scale as well as improving its service. For Beacon, VillageCar’s in-town parking spaces will help Beacon build their presence in urban areas. These are exactly the synergies. Here is a classic case of corporate combination. On May 7th 2013, Baidu announced a purchase of PPS at 370 million dollars. Furthermore, PPS and QIY would be merged into one company with two brands retained. The major direction of PPS is live TV on the Internet while QIY has an advantage in short videos. Therefore, QIY and PPS owned different customer base. This integration meaned that QIY could make use of PPS’s CDN and P2P technologies to reduce the running costs.1 At the same time, the merged company covered both the web side and the mobile side, building a new business model. As Diagram 1 shows, not long before the merger, QIY 1 薛娟.“爱奇艺与 PPS 合并视频业加速整合”.中国经济时报, May 8th ,2013,p.8. Diagram 1 Diagram 2 PPTV Source: 易观智库, “行业数据：2012 年第 1 季度中 国网络视频广 告市场规模达 到 21 亿，市场回 暖” .https://www.analysys.cn/analysis/trade/d etail/5529/, accessed Nov.2017 Source: 易观智库, “行业数据：中国网络 视 频 市 场 趋 势 预 测 2012-2015 ” https://www.analysys.cn/analysis/trade /detail/5732/, accessed Nov.2017
Name郝禹 Student No:163068126 and PPS had fallen behind Youku, Tudou and Sohu. But within a quarter of the merger QIY and PPS has a jump in the income market share of Chinas online video approaching Youku and Tudou (See Diagram 2). Faced with similar situation, this successful integration provides some reference for Beacon and Village Car V Business model innovation in the long term As a matter of fact, Beacon attempts to break the status quo that the company is competing more and more on price, which needs gradual change of Beacons business model. In the long term, the company should promote the assimilation of two brands Beacon can introduce some new businesses from share economy such as hours-rental transactions, fostering the community to build customers'brand loyalty and so on Hours-rental transaction is a combination of rental and sharing. which absorbs the strengths of both- the former is well-managed as well as the latter is flexible and convenient. Village Car provides sufficient spaces for Beacon to build up simple rental stations. Nowadays, Al technology has applied to the parking lots, and in the near future, rental stations are likely to introduce AI to manage cars with low cost and efficiency. This exactly caters to Beacons demand ANTECEDENTS SOCIAL NORM AFFECTIVE ONSEQUENCES ANTECEDENTS cling States/ Word o. Mouth imary Affect LOYALTY RELATIONSHIP DENIS SITUATIONAl Source: Dick A S, Basu k customer loyalty: Toward an integrated conceptual framework. 2BlueCardCompanyentErprisepRofile",http://www.bluecardsoft.com/aboutaspx?id=610,accessedDec.2017
Name: 郝禹 Student No.: 16300680126 5 and PPS had fallen behind Youku, Tudou and Sohu. But within a quarter of the merger, QIY and PPS has a jump in the income market share of China’s online video, approaching Youku and Tudou(See Diagram 2). Faced with similar situation, this successful integration provides some reference for Beacon and VillageCar. ⅤBusiness model innovation in the long term As a matter of fact, Beacon attempts to break the status quo that the company is competing more and more on price, which needs gradual change of Beacon’s business model. In the long term, the company should promote the assimilation of two brands. Beacon can introduce some new businesses from share economy such as hours-rental transactions, fostering the community to build customers’ brand loyalty and so on. Hours-rental transaction is a combination of rental and sharing, which absorbs the strengths of both— the former is well-managed as well as the latter is flexible and convenient. VillageCar provides sufficient spaces for Beacon to build up simple rental stations. Nowadays, AI technology has applied to the parking lots2 , and in the near future, rental stations are likely to introduce AI to manage cars with low cost and efficiency. This exactly caters to Beacon’s demand. 2 BlueCard Company, “Enterprise Profile”, http://www.bluecardsoft.com/about.aspx?id=610, accessed Dec. 2017 Figure 1 Source: Dick A S, Basu K. Customer loyalty: Toward an integrated conceptual framework. Journal of the Academy of Marketing Science, 1994, 22(2):99-113
Name:郝禹 Student No:1630068012 According to the brand loyalty theory, customers relative attitudes towards the brand affect the loyalty relationship. Emotions, switching costs and expectations are antecedents of attitudes(See Figure 1). These are all about building a Beacon's community. In the case, the expert from Airbnb put forward the ideals that customers get opportunities to connect with people who have similar values and interests- sharing. In the community, customers are able to stay anywhere, to meet other people to have an adventure". In other words, the community provides sense of belonging and expectations for customers. Consequently, it motivates people to be loyal to Beacon with high switching costs and ident ities. or emotions VI Lead rather than follow the future What's more, necessary publicity accelerates spreading the idea of share economy. Business promotion includes holding share economy seminars or lectures, inviting proper celebrity spokesmen and participation in serving the public good to maintain a good image of the company. For instance, as Lu Han speaks for OFO, millions of fans are attracted by the yellow-printed sharing bikes. On behalf of the young generation, Lu Han has a huge impact on spreading the sharing ideal Over time, people will have a better understanding of share economy, and many rental clients may turn to the new form. Beacon plays the role of leader in the process to provide the community as well as active publicity, which brings a slew of benefits To a great extent, this is not to chase the trend but create a future for share economy
Name: 郝禹 Student No.: 16300680126 6 According to the brand loyalty theory, customers ’relative attitudes towards the brand affect the loyalty relationship. Emotions, switching costs and expectations are antecedents of attitudes (See Figure 1). These are all about building a Beacon’s community. In the case, the expert from Airbnb put forward the ideals that customers get opportunities to connect with people who have similar values and interests— sharing. In the community, “customers are able to stay anywhere, to meet other people, to have an adventure”. In other words, the community provides sense of belonging and expectations for customers. Consequently, it motivates people to be loyal to Beacon with high switching costs and identities, or emotions. Ⅵ Lead rather than follow the future What’s more, necessary publicity accelerates spreading the idea of share economy. Business promotion includes holding share economy seminars or lectures, inviting proper celebrity spokesmen and participation in serving the public good to maintain a good image of the company. For instance, as Lu Han speaks for OFO, millions of fans are attracted by the yellow-printed sharing bikes. On behalf of the young generation, Lu Han has a huge impact on spreading the sharing ideal. Over time, people will have a better understanding of share economy, and many rental clients may turn to the new form. Beacon plays the role of leader in the process to provide the community as well as active publicity, which brings a slew of benefits. To a great extent, this is not to chase the trend, but create a future for share economy