BUS620 Ashford Week 5 Marketing Challenges in a New Shared Economy Week 5 – Assignment Marketing Challenges in a New EconomyRead the article: “Airbnb and t

BUS620 Ashford Week 5 Marketing Challenges in a New Shared Economy Week 5 – Assignment
Marketing Challenges in a New EconomyRead the article: “Airbnb and the Unstoppable Rise of the Share Economy (Links to an external site.)Links to an external site.”. A recent trend in the consumer marketplace is the ability for a consumer to share their personal belongings, such as their homes/apartments, autos, tools, bicycles, and so forth. The shared economy has now become a multibillion dollar business.
Explain how this 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.
The paper
Must be four to five double-spaced pages in length (not including title and references pages) and formatted according to APA style as outlined in the Ashford Writing Center (Links to an external site.)Links to an external site..
Must include a separate title page with the following:
Title of paper
Student’s name
Course name and number
Instructor’s name
Date submitted

Must use at least three scholarly sources from the Ashford University Library, one of which must be peer reviewed, in addition to the textbook.
Must document all sources in APA style as outlined in the Ashford Writing Center.
Must include a separate references page that is formatted according to APA style as outlined in the Ashford Writing Center.Carefully review the Grading Rubric (Links to an external site.)Links to an external site. for the criteria that will be used to evaluate your assignment. Running head: AIRBNB
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Airbnb Effects on the Economy
The sharing economy is a socio-economic ecosystem that has been built around the
sharing of human and physical resources. It includes the shared creation, production, distribution,
trade, and consumption of goods and services by different people and organizations. This model
is set to which people are able to borrow or rent assets that belong to someone else.
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Depending on whom you may ask, some people feel as though this is hurting our
economy and others feel as though it is not. The disruption of the economy comes from the
transition of where the money is being spent. In the business world, billions of dollars are spent
each year on business travel. This includes airlines, hotel chains, rental cars companies, and even
travel agencies. A company will usually commit themselves to one airline, hotel, and rental Car
Company to receive a huge discount. The airline may offer the company free upgrades, free
baggage, or maybe just agree to a flat rate or discount. These are the benefits that the company
will receive for utilizing them each time they are conducting business travel. A hotel may offer
free nights stay, free breakfast, discounted room rates, or late check in to a company in order to
ensure their business. A rental car company may offer free days of rental, free car upgrades, and
also an exclusive experience without the hassle of lines or waiting. These arrangements and
relationships can save companies a lot of money. It also boosts the economy because it is giving
money to the hotels, airlines, and rental car companies. This insures people to have jobs. With
the share economy, it is taking the business away from these companies.
Airbnb is a site in which a traveler can go online and search for a desired destination and
look for lodging for their stay. The lodging will be a person’s personal home or apartment in
which they are choosing to rent out in order to make money. The rates are dramatically cheaper
than a hotel and often offer more amenities. If you rent a house for a vacation on airbnb you can
decide how many bedrooms that you would like in the house. You can reserve a house that
sleeps 10 people and pay 100.00 dollars per night. This house will have a full kitchen and
multiple bathrooms. It will be fully furnished with televisions and some even include cable. This
would be the cheaper option for a person traveling with family or friends rather than spending
150.00 dollars per night on a hotel room that only sleeps four. You would then need three rooms
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to accommodate your 10 people. Most hotels will not have the kitchen so you then can add the
expense of eating out every day, versus the option of cooking in your rental home from airbnb.
This also increases your travel expense. More people are using the share market for their
personal travel because it is cheaper, then they become comfortable with it and decide they
prefer it for their corporate travel as well. This decreases the money spent in the chain hotels and
decreases the profits made which affects the economy by way of taxes and jobs. Airbnb saves an
average of 102.00 dollars per night, compared to hotels. (Ruch D. 2015). If they are saving the
companies then there is no reason not to use them.
Uber is another share economy effect that is taking money from the normal businesses.
Uber is similar to a taxi service. There is an application that you download to your Smartphone
to request a ride. The drivers of Uber are individuals who have decided to use their own personal
vehicles to transport patrons to their destinations. Since Uber does not purchase cars or insurance
it costs them absolutely nothing to run the business. Individuals use their personal vehicles and
provide their own insurance. With no overhead expenses the costs can be low. Uber is
dramatically cheaper than a taxi and often cheaper than renting a car. A typical ride in Uber is
about 7.00 dollars. A taxi will charge by mileage. This is causing a decrease in the usage of taxis
and rental car companies. One could argue that this puts taxi drivers out of work, but the
opposition could argue that it puts Uber drivers to work. The money is going directly to the
owner of the vehicles instead of the big businesses.
I believe that the share economy is definitely creating a new value to the consumer, not
just replacing existing businesses. The existing businesses are big businesses that are strictly in
the business of making money. They often increase their rates so high that they are profiting 100
percent. This share economy is going to force the big businesses to bring their prices down in
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order to compete. There will always be a need for a hotel. Consumers are going to shop around
for the best rates. That is why the share economy is doing so well because they are offering the
goods and services that the consumers want, at the prices that they can afford. This also validates
that things can be provided at cheaper rates, the businesses just are being greedy for more profit.
If Uber can offer you a ride for eight dollars to the same destination that a taxi will charge you
18.00 dollars for, it is obvious what choice the consumer will make. They will choose to use the
Uber service. It is also obvious that the taxi company was over charging. If the businesses want
to stay relevant and compete in the changing world and economy they are going to have to
become more competitive with pricing.
In conclusion the share economy is a huge part of today’s economy. It is changing the
traditional way that the economy was running, but the economy is still evolving because of it.
People who may not be otherwise working are now working by renting out their personal goods
or service. It is providing them with an income. Hopefully the big companies will become
competitive to make the consumers want to continue to use them so that there are more options.
If they close down, the options will decline and that will bring about other issues.
Resources
Finch, J. (2012). Managerial marketing. San Diego, CA: Bridgepoint Education, Inc
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Geron, T. (2013, January 23). Airbnb and the unstoppable rise of the share economy.Forbes.
Retrieved from http://www.forbes.com/sites/tomiogeron/2013/01/23/airbnb-and-theunstoppable-rise-of-the-share-economy/.
Ruch, D. (2015). The Sharing Economy is on The Brink of Disrupting Business Travel. Crunch
Network
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RUNNING HEAD: AIRBNB
Airbnb and the Share Economy
Your Name Here
BUS620: Managerial Marketing
Instructor: Dr. Uchenna Nwabueze
July 13, 2015
AIRBNB
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Airbnb and the Share Economy
Abstract
Airbnb has taken advantage of the sharing economy to become a major force in the hospitality
industry. In this essay, a brief history of Airbnb will be provided for context. Additionally, the
disruption to the traditional economy caused by Airbnb will be examined. Finally, Airbnb’s
leveraging of the shared economy will be analyzed to see if it adds value for their customers.
The analysis provided in this essay will be conducted through a literature review of relevant
materials pertaining to the subject matter.
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Airbnb has been on the forefront of what has become known as the sharing economy. The
sharing economy can be defined as “an economic system based on sharing underused assets or
services, for free or for a fee, directly from individuals” (Botsman, 2015, Para. 8). The sharing
economy is also referred to as a collaborative economy, which is an “economic system of
decentralized networks and marketplaces that unlocks the value of underused assets by matching
needs and haves, in ways that bypass traditional middlemen” (Botsman, 2015, Para. 7). For the
purposes of this essay, the term sharing economy, or share economy, will be understood to
include the definition of collaborative economy unless otherwise stated. Since the shared
economy is a relatively new phenomenon, a brief history of Airbnb will be provided for context.
To better understand the concept of the shared economy, this essay will analyze how this is
disrupting the traditional economy. Additionally, the shared economy will be examined to
determine if it is creating new value for the consumer or if it is just replacing existing business.
Airbnb History
The idea behind Airbnb was hatched in 2007 in San Francisco by roommates Joe Gebbia
and Brian Chesky as a means to help pay their rent (Campbell, 2015). With a conference being
held in San Francisco and hotel rooms being scarce, Gebbia and Chesky tried to leverage the
situation by renting space and air mattresses in their apartment for conference attendees
(Campbell, 2015). They created a website for this venture called Airbed and Breakfast and were
able to rent space to three individuals for $80 each (Campbell, 2015). From this humble start,
Airbnb has grown to a “company [that] boasts more than 1 million listings across 190 countries
in 34,000 cities with more than 25 million guests served” (Alvarez, 2015, p. 6). While the
growth of Airbnb has been remarkable, it has not been without controversy. The main issues
concerning Airbnb relate to the quality of life, housing markets, safety, and taxation issues in the
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areas that the company operates (Alvarez, 2015). In San Francisco, Airbnb hosts were subject
to fines and were threatened with eviction until recent legislation was passed “that permitted
short-term lease rentals and added regulations, including requirements for hosts to register with
the city, pay a hotel tax and have liability insurance” (Alvarez, 2015, p. 6). In New York, the
Attorney General Eric Schneiderman released a report claiming that 72% of Airbnb listings
violated either New York State or New York City regulations (Alvarez, 2015). The report stated
that these illegal listings generated $304 million in revenue, with Airbnb’s cut being around $40
million (Alvarez, 2015). None of this revenue was subject to taxes. Airbnb is working with
governments around the world to rectify the tax concerns, with the goal being to help collect
more tax revenue (Alvarez, 2015). Even with these types of issues unresolved, Airbnb is still
growing, with new investments bringing the valuation of the company to $20 billion (Logan,
2015).
Airbnb – Disrupting the Traditional Economy?
There is no doubt that the sharing economy is having an effect on what is considered the
traditional economy. Airbnb is currently valued more than the Hyatt chain of hotels, and “Uber
is currently valued at $18.2 billion relative to Hertz at $12.5 billion and Avis at $5.2 billion
(Cannon & Summers, 2014, Para. 1). Airbnb has been able to change the balance of power in the
hotel industry, enabling home owners with a spare room to connect with short-term renters,
creating “a peer-powered business with virtually no overhead” (Ingram, 2012). Airbnb is also
making inroads in to the corporate travel market. In the U.S., companies are projected to have
$310 billion in business related travel costs (Ruch, 2015). With Airbnb saving business travelers
an average of 41%, or $102 per night, over hotels, they are gaining more and more of the
business travel market (Ruch, 2015). Further proof of this provided by Concur, a top travel-
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management company, that “reported in July 2014 that Airbnb transactions in their expense
reports had increased by 27x year-over-year while Uber transactions had climbed 5x” (Ruch,
2015, Para. 7). With the Airbnb business model that charges between 6%-15% per transaction,
traditional hotels cannot compete because of the overhead and infrastructure costs they have.
The situation faced by traditional hotels in response to Airbnb can be illustrated by the costbased pricing strategy. This strategy is based “on an understanding of production- and
marketing-related costs as the key elements in determining a product’s initial or standard price”
(Finch, 2012, p. 283). The standard price is the price floor of the room, and any costs above this
are the profit margin (Finch, 2012). The typical Airbnb renter does not have all of the overhead
costs associated with a hotel, so the price floor is much lower leading to a higher profit margin.
It also allows the Airbnb price to be lower than the hotel’s price. As the sharing economy
expands across other industries, the potential for further disruption of the traditional economy is
high.
Airbnb – Creating New Value for Customers?
Along with offering customers an economical alternative to traditional hotels, Airbnb
creates value for them in other ways. Airbnb has developed Airbnb Neighborhood guides that
“provide destination-specific tips and information, which not only help advise users as they go
through the booking process, but also extend Airbnb-consumer interaction” (Hoeltje, 2014, Para.
4). The neighborhood guides help people decide where to stay by providing local information
for popular cities, allowing people to experience different cultures and unique travel experiences
they may have not otherwise done (Hoeltje, 2014).
Airbnb has also developed a Hospitality
Lab for property owners that provides online and offline workshops, along with hospitality tips,
that allows for consistency and enhances the customer experience (Hoeltje, 2014). The steps
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taken by Airbnb have not only created value for its customers, they align with the company’s
community-driven mission.
Conclusion
Airbnb has leveraged the sharing economy to become one of the largest companies
providing guest accommodations in the world. This essay has analyzed how Airbnb has done
this by disrupting the traditional economy associated with the hotel industry, along with creating
new value for the customers that use their product. Examples were provided that illustrate the
economic disruption and new values created by Airbnb, further reinforcing the strategy that has
allowed Airbnb to become a market leader in the hospitality industry. Based on the information
presented in this essay, it can be concluded that Airbnb will continue be the pace setter in the
hospitality industry.
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References
Alvarez, R. (2015). Airbnb popularity soars despite obstacles. (cover story). Westchester County
Business Journal, 51(18), 1-6. Retrieved from http://eds.b.ebscohost.com.proxylibrary.ashford.edu/eds/pdfviewer/pdfviewer?sid=c80df2c4-776d-440e-8910d05ce6264d21%40sessionmgr111&vid=1&hid=114
Botsman, R. (2015). Defining the Sharing Economy: What is Collaborative Consumption-And
What Isn’t? Fast Company. Retrieved from http://www.fastcoexist.com/3046119/
defining-the-sharing-economy-what-is-collaborative-consumption-and-what-isnt
Campbell, J. (2015). Airbnb. Salem Press Encyclopedia. Retrieved from
http://eds.b.ebscohost.com.proxy-library.ashford.edu/eds/detail/detail?sid=a54cfa0c3bf7-47cc-a644-1cbcd703d982%40sessionmgr113&vid=1&hid=114&bdata=
JnNpdGU9ZWRzLWxpdmU%3d#db=ers&AN=100259201
Cannon, S. & Summers L. (2014). How Uber and the Sharing Economy Can Win Over
Regulators. The Harvard Business Review.
Retrieved from https://hbr.org/2014/10/
how-uber-and-the-sharing-economy-can-win-over-regulators/
Finch, J. (2012). Managerial Marketing. San Diego, CA: Bridgeport Education, Inc.
Hoeltje, A. (2014). Airbnb Building Brand Value by Creating Authentic Connections with-andBetween Users. Sustainable Brands. Retrieved from http://www.sustainablebrands.com/
news_and_views/marketing_comms/annika_hoeltje/airbnb_building_brand_value_creati
ng_authentic_connect
Ingram, M. (2012). Airbnb, Coursera, and Uber: The Rise of the Disruption Economy.
Bloomberg.com. Retrieved from http://www.bloomberg.com/bw/articles/2012-1025/airbnb-coursera-and-uber-the-rise-of-the-disruption-economy
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Logan, T. (2015). At Airbnb, growth brings scrutiny, regulation. Los Angeles Times. Retrieved
from http://www.latimes.com/business/la-fi-airbnb-20150610-story.html#page=2
Ruch, D. (2015). The Sharing Economy Is On The Brink Of Disrupting Business Travel.
Techcrunh.com. Retrieved from http://techcrunch.com/2015/03/28/the-sharing-economyis-on-the-brink-of-disrupting-business-travel/
Required Resources
Text
Read the following chapters in Managerial marketing
(https://ashford.instructure.com/courses/43118/external_tools/retrieve?
display=borderless&url=https%3A%2F%2Fcontent.ashford.edu%2Flti%3Fbookcode%3DAUBUS620.12.1)
:
• Chapter 12: Marketing Channels and Distribution Decisions
• Chapter 13: Marketing Challenges in the New Economy
• Chapter 14: Managing Marketing in the Global Economy
Article
Geron, T. (2013, January 23). Airbnb and the unstoppable rise of the share economy
(http://www.forbes.com/sites/tomiogeron/2013/01/23/airbnb-and-the-unstoppable-rise-of-the-shareeconomy/) . Forbes. Retrieved from http://www.forbes.com/sites/tomiogeron/2013/01/23/airbnb-
and-the-unstoppable-rise-of-the-share-economy/
Recommended Resources
Websites
Google Analytics
(http://www.google.com/analytics) (http://www.google.com/analytics).
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Weekly Lecture
Week Five Lecture
Market Entry Strategies
Analyzing whether to be a market pioneer or follower leads to several important questions, with no easy
answers. Questions such as: Is it better to be first into the marketplace and lead the way? Or, is it better
to be a follower, learning from and correcting pioneer mistakes? According to Kaličanin (2008).
“Pioneers often have higher profitability, greater market share, and a longer business life….However,
there are companies that consciously choose to follow, rather than innovate, believing this to be a more
advantageous strategy” (p. 90).
Zantac – Successful Follower Strategy
In 2001, GlaxoWellcome merged with SmithKline to become GlaxoSmithKline. However, originally, they
were competitors. In 1977, SmithKline Corporation introduced Tagamet in the U.S. as a revolutionary new
treatment for peptic ulcers. The product quickly captured the market and became a $1 billion dollar seller
– which was a sales milestone during that time period (GSK, 2011).
In 1983, Zantac was launched in the United States. Glaxo developed a superior product to Tagamet and
heavily promoted the product, first to specialists and then, to the general physician population. Glaxo’s
marketing of the product piggy-backed on Tagamet’s product leader reputation and capitalized on the fact
that the current market leader had potential side effects. Zantac was positioned as an improvement over
the existing treatment option. According to Corsig, Soloway, and Stanaro (1995), “…these side effects
proved to be Zantac’s window of opportunity and Tagamet’s ‘Achilles Heel’’ (p. 246). Zantac quickly
achieved fame as the “best selling prescription drug in the world” and catapulted Glaxo’s “market value
from $4 billion to $36 billion” (p. 242).
This is an example of a market strategy where the company examined the opportunities that still existed
after an innovative product was launched. As noted, Tagamet was an effective product, but was not
without side effects. The Glaxo research and development department focused on creating a product with
the same efficacy and an improved side effect profile. Bolton (1993) offered two key lessons that are as
relevant today as when they were first written 18 years ago: “When technology changes quickly, imitators
who learn-by-watching will leapfrog pioneers” and “Imitators in industries with extensive information flow
can outperform innovators” (p. 38).
Imitrex – Successful Pioneer Strategy
“In the United States, more than 30 million people have one or more migraine headaches per year.
Approximately 75% of all persons who experience migraines are women” (Medscape, 2012, para 1). In
1991, Glaxo launched Imitrex – an innovative product for the treatment of migraine headaches. Up to that
point, patients were taking other medications that were not specifically ind…
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