Learning to Play in the new“ Sharing Economy” Tian Ruyan 16300680072 Course: English for Academic Purposes(Business) Date: 27 December 2017
1 Learning to Play in the New “Sharing Economy” Tian Ruyan 16300680072 Course: English for Academic Purposes (Business) Date: 27 December, 2017
Beacon Car Rental is one of the most established and respected firms in the car-rental industry. In the past few years, it has carried out a series of Mergers and Acquisitions However, Beacon is now confronted with some problems when integrating a car-sharing company named Village Car. The business model of Village Car is quite different from the traditional car-rental model. Consequently, the management of Beacon cannot reach a consensus on the integrating, giving rise to the following problems To what extent does rental differ from sharing? What do customers care more about, functionality or community? How to deal with the integration of village Car, to fully integrate it or to keep it separated? I How should Beacon position itself in the rise of "Sharing Economy"? Only if both sides can benefit from it does a merger make sense. From this point of view the best consequence of village Car acquisition is a win-win situation. Moreover, from an exterior perspective, the rising sharing economy' will influence the process of decision-making of Beacon's management. Hence, the following problem should be focused How should Beacon deal with the integration of Village Car for a win-win situation in the new "Sharing economy Since two typical markets(car-rental market and car-sharing market) are involved in the case, the analytical method of STp is applicable. Through STP analysis, Beacon will be analysed from the three aspects of segmentation, targeting and positioning, shown as follows S egmentauion Beacon and Village Car have totally different business models and target different consumer groups. The traditional business model of car-rental is designed mainly for business travellers who need a car temporarily. By contrast, the business model of car-sharing serves people who not only want more flexible access to a car, but also believe in community, which is a bond around a common ideal. The common ideals can be anti-consumerist, pro-environment and so on. For the young generation, not owning is liberating. They do not want to buy too many things. They just want to use them when they need. That explains why car-sharing model is in great popularity among youngsters
2 Beacon Car Rental is one of the most established and respected firms in the car-rental industry. In the past few years, it has carried out a series of Mergers and Acquisitions. However，Beacon is now confronted with some problems when integrating a car-sharing company named VillageCar. The business model of VillageCar is quite different from the traditional car-rental model. Consequently, the management of Beacon cannot reach a consensus on the integrating, giving rise to the following problems: To what extent does rental differ from sharing? What do customers care more about, functionality or community? How to deal with the integration of VillageCar, to fully integrate it or to keep it separated? How should Beacon position itself in the rise of ‘Sharing Economy’? Only if both sides can benefit from it does a merger make sense. From this point of view, the best consequence of VillageCar acquisition is a win-win situation. Moreover, from an exterior perspective, the rising ‘sharing economy’ will influence the process of decision-making of Beacon’s management. Hence, the following problem should be focused on: How should Beacon deal with the integration of VillageCar for a win-win situation in the new ‘Sharing Economy’? Since two typical markets (car-rental market and car-sharing market) are involved in the case, the analytical method of STP is applicable. Through STP analysis, Beacon will be analysed from the three aspects of segmentation, targeting and positioning, shown as follows. Segmentation: Beacon and VillageCar have totally different business models and target different consumer groups. The traditional business model of car-rental is designed mainly for business travellers who need a car temporarily. By contrast, the business model of car-sharing serves people who not only want more flexible access to a car, but also believe in community, which is a bond around a common ideal. The common ideals can be anti-consumerist, pro-environment and so on. For the young generation, not owning is liberating. They do not want to buy too many things. They just want to use them when they need. That explains why car-sharing model is in great popularity among youngsters
Therefore, the whole market can be divided into two segments, which are respectively car-rental market and car-sharing market ■ Targeting Both market segments are important. In terms of the present scale, Beacon has obvious superiority in car-rental market. However, in the long term, chances are that car-sharing market has far more potential than car-rental market. There is no doubt that new informat ion and communication technologies are rapidly changing the sharing concept and practices on the global stage, making them more accessible and flexible in the 21st century business than ever before. For instance, Airbnb, a prominent platform for short-term accommodations has served more than 50 million guests since it was founded in 2008. Now it has a market capitalization eclipsing 30 billion dollars. The " Sharing economy' is nowadays becoming increasingly significant among business practice Therefore, Beacon should follow the tendency and chase the opportunity to expand its business in car-sharing market while maintaining the existing business resources in car-rental market ■ Positioning In both markets, customers care about affordabil ity and convenience. If car-rental and car-sharing business are combined, the comprehensiveness of service will become a distinctive feature of Beacon and will satisfy requirements of different consumer groups Therefore, on the one hand Beacon can make car-sharing business a new profit growth point and on the other hand, Village Car can improve its popularity Further, the underlying aims of the Village Car acquisition are to give Beacon access to adjacent markets and to help Village Car run a more profitable business. Beacon needs access to adjacent markets, which means that it should attach more importance to the fact that Village Car as well as the idea of "Sharing Economy'is in great popular ity among loca customers. The customers of Village Car have fanatical loyalty and their community is growing every day. If Beacon treats Village Car just like its other acquisitions and changes Village Car's business model arbitrarily, it will risk losing not only a great number of loca ZERVAS, GEORGIOS, DAVIDE PROSERPIO, and JOHN W. BYERS. 2017. The Rise of the Sharing Economy: Estimating Impact of Airbnb on the Hotel Industry. "Journal of marketing Research(JMR)54, no 5: 687-705
3 Therefore, the whole market can be divided into two segments, which are respectively car-rental market and car-sharing market. Targeting: Both market segments are important. In terms of the present scale, Beacon has obvious superiority in car-rental market. However, in the long term, chances are that car-sharing market has far more potential than car-rental market. There is no doubt that new information and communication technologies are rapidly changing the sharing concept and practices on the global stage, making them more accessible and flexible in the 21st century business than ever before. For instance, Airbnb, a prominent platform for short-term accommodations, has served more than 50 million guests since it was founded in 2008. Now it has a market capitalization eclipsing 30 billion dollars1 . The ‘Sharing economy’ is nowadays becoming increasingly significant among business practice. Therefore, Beacon should follow the tendency and chase the opportunity to expand its business in car-sharing market while maintaining the existing business resources in car-rental market. Positioning: In both markets, customers care about affordability and convenience. If car-rental and car-sharing business are combined, the comprehensiveness of service will become a distinctive feature of Beacon and will satisfy requirements of different consumer groups. Therefore, on the one hand Beacon can make car-sharing business a new profit growth point and on the other hand, VillageCar can improve its popularity. Further, the underlying aims of the VillageCar acquisition are to give Beacon access to adjacent markets and to help VillageCar run a more profitable business. Beacon needs access to adjacent markets, which means that it should attach more importance to the fact that VillageCar as well as the idea of ‘Sharing Economy’ is in great popularity among local customers. The customers of VillageCar have fanatical loyalty and their community is growing every day. If Beacon treats VillageCar just like its other acquisitions and changes VillageCar’s business model arbitrarily, it will risk losing not only a great number of local 1 ZERVAS, GEORGIOS, DAVIDE PROSERPIO, and JOHN W. BYERS. 2017. "The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry." Journal of Marketing Research (JMR) 54, no. 5: 687-705
customers, but also access to a more promising market As analysed above, Beacon should not fully integrate Village Car. Instead, they can conduct close cooperation in the more innovative ways as detailed in the follo () Scope Economy Effect Scope economy refers to the phenomenon that enterprises based on their existing resources provide products or services through cooperation or synergism to increase their operating efficiency or benefits. Scope economy is mainly used in enterprisesvertical integration, diversified operations, products cost complementation, brand effect and mutual sales channel According to the theory of scope economy, Beacon and Village Car will improve their management and realise better development if they share their funds, fleets, technologies and customer information. Therefore, it will actually incur no extra cost to keep Village Car independent. On the contrary, the costs will be reduced and both companies can benefit from Take fleets example. The advantage of car-sharing is that the cars are allowed to be parked in dedicated spots in public areas for easier access instead of sitting in rental car lots However, with a limited budget, Village Car is incapable of providing vehicles of different sizes. If Beacon and village car share their fleets with each other, customers will have easier access to a car whether for rental need or for sharing need Meanwhile. there will be various kinds and sizes of cars, providing more choices for customers. Customers can not only find a car more conveniently, but choose a car according to their personal preferences as well. It will attract more customers in both markets and generate more profits for Beacon and Village Car D Complementary advantages The Village Car acquisit ion provides an opportunity to full cooperation of the two companies and makes it possible for them to share their resources. Beacon has an edge on scale, which means that it has more resources of funds, vehicles, capabilities and customers Meanwhile, Village Car is influential in the local market and is in popularity among young generation. What's more, the innovativeness of Village Car is particularly important to Beacon because the basic business model of car-rental has not changed for 30 years and all the major 杨晓郭晓川范围经济研究综述.资源与产业2016,18(4):110-15.001:10.13776/, cnki. resourcesindustries.2016.04.015
4 customers, but also access to a more promising market. As analysed above, Beacon should not fully integrate VillageCar. Instead, they can conduct close cooperation in the more innovative ways as detailed in the following sections. (I) Scope Economy Effect Scope economy refers to the phenomenon that enterprises based on their existing resources provide products or services through cooperation or synergism to increase their operating efficiency or benefits. Scope economy is mainly used in enterprises’ vertical integration, diversified operations, product’s cost complementation, brand effect and mutual sales channels. 2 According to the theory of scope economy, Beacon and VillageCar will improve their management and realise better development if they share their funds, fleets, technologies and customer information. Therefore, it will actually incur no extra cost to keep VillageCar independent. On the contrary, the costs will be reduced and both companies can benefit from it. Take fleets as an example. The advantage of car-sharing is that the cars are allowed to be parked in dedicated spots in public areas for easier access instead of sitting in rental car lots. However, with a limited budget, VillageCar is incapable of providing vehicles of different sizes. If Beacon and VillageCar share their fleets with each other, customers will have easier access to a car whether for rental need or for sharing need. Meanwhile, there will be various kinds and sizes of cars, providing more choices for customers. Customers can not only find a car more conveniently, but choose a car according to their personal preferences as well. It will attract more customers in both markets and generate more profits for Beacon and VillageCar. (II) Complementary advantages The VillageCar acquisition provides an opportunity to full cooperation of the two companies and makes it possible for them to share their resources. Beacon has an edge on scale, which means that it has more resources of funds, vehicles, capabilities and customers. Meanwhile, VillageCar is influential in the local market and is in popularity among young generation. What’s more, the innovativeness of VillageCar is particularly important to Beacon because the basic business model of car-rental has not changed for 30 years and all the major 2杨晓,郭晓川.范围经济研究综述.资源与产业,2016,18(4):110-115.DOI:10.13776/j.cnki.resourcesindustries.2016.04.015
competitors in the car-rental industry were forced to compete increasingly on price. If Beacon wants to dominate the competition, it must seek for change The sharing economy represents a serious threat to some established industries like car-rental, hotel and taxi. However, new opportunities also emerge in particular for forward-thinking companies and innovative start-ups. As a traditional car-rental company Beacon needs to increase its investment on sharing business and make advantage of the innovativeness of Village Car to improve its car-sharing business, which will eventually benefit both companies (I) Co-branding Co-branding is a strategy that allows valuable brand assets to be leveraged and combined with other brand names to form a strategic alliance in which, from a financial point of view the brand value of both is greater than individual parts. Beacon is a dominant brand in car-rental industry. If Village Car wants to realise rapid development in the car-sharing market, it needs brand-name expansion. Brand-name expansion contributes to the realization of maximal brand-name benefits. Co-branding strategy can raise the brand awareness of Village Car. Meanwhile, it indicates that Beacon is seeking for changing its original business model, which will make Beacon more popular among youngsters who are fond of car-sharing Therefore, it will be easier for Beacon to enter adjacent markets and car-sharing industr (V Resource sharing To develop a mobile application is a smart way for the two companies to share their customers and systems. With the single application, customers can choose various services based on their personal preferences. A representative example is Didi, which is the worlds leading one-stop mobile transportation platform. DiDi offers app-based mobility options for more than 450 million users. The mobile application Didi Chuxing is composed of various functions including DiDi Taxi, DiDi Express, DiDi Premier, DiDi Hitch and so on. Each function offers a specific service. In this way diDi is able to cater to different demands from different consumer groups. Thus, different businesses can share the same system and customer information. It is suggested that Beacon and Village Car should also develop a mobile application like Didi chuxing to combine car-sharing business and car-rental business Rao, A,& Ruekert, R. (1994). Brand alliances as signals of product quality. Sloan Management Review, 36, 87-97
5 competitors in the car-rental industry were forced to compete increasingly on price. If Beacon wants to dominate the competition, it must seek for change. The sharing economy represents a serious threat to some established industries like car-rental, hotel and taxi. However, new opportunities also emerge in particular for forward-thinking companies and innovative start-ups. As a traditional car-rental company， Beacon needs to increase its investment on sharing business and make advantage of the innovativeness of VillageCar to improve its car-sharing business, which will eventually benefit both companies. (III) Co-branding Co-branding is a strategy that allows valuable brand assets to be leveraged and combined with other brand names to form a strategic alliance in which, from a financial point of view, the brand value of both is greater than individual parts. 3 Beacon is a dominant brand in car-rental industry. If VillageCar wants to realise rapid development in the car-sharing market, it needs brand-name expansion. Brand-name expansion contributes to the realization of maximal brand-name benefits. Co-branding strategy can raise the brand awareness of VillageCar. Meanwhile, it indicates that Beacon is seeking for changing its original business model, which will make Beacon more popular among youngsters who are fond of car-sharing. Therefore, it will be easier for Beacon to enter adjacent markets and car-sharing industry. (IV) Resource sharing To develop a mobile application is a smart way for the two companies to share their customers and systems. With the single application, customers can choose various services based on their personal preferences. A representative example is Didi, which is the world’s leading one-stop mobile transportation platform. DiDi offers app-based mobility options for more than 450 million users. The mobile application Didi Chuxing is composed of various functions including DiDi Taxi, DiDi Express, DiDi Premier, DiDi Hitch and so on. Each function offers a specific service. In this way DiDi is able to cater to different demands from different consumer groups. Thus, different businesses can share the same system and customer information. It is suggested that Beacon and VillageCar should also develop a mobile application like Didi Chuxing to combine car-sharing business and car-rental business. 3 Rao, A., & Ruekert, R. (1994). Brand alliances as signals of product quality. Sloan Management Review, 36, 87–97