Value creating factors in sharing economy platform businesses
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School of Business |
Master's thesis
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Authors
Date
2022
Department
Major/Subject
Mcode
Degree programme
Information and Service Management (ISM)
Language
en
Pages
74+5
Series
Abstract
Sharing economy in 2022 is more relevant than ever, when the world is recovering from a once in a lifetime pandemic that shut down most global commerce for nearly two years. Almost overnight, the world went from global supply chains and production optimization to local production and resourcing. Even now, after more than two years since the pandemic started, global supply chains are still suffering from production disruptions and scarcity of resources. Limitless quantitative easing combined with supply chain issues have skyrocketed inflation up to a level not seen in the 21st century, while cheap interest rate fueled lending has increased the level of debt to new global heights, making interest rate hikes difficult. With global travel almost all but eliminated, the travel and hospitality industries as well as ride-hailing industries suffered immensely for two years. Now, with the world opening, shortages in building materials and vehicle production have made the rebound difficult for traditional companies. Luckily the new sharing economy platform companies within these industries have shown incredible resilience and adaptability, and this resilience has allowed them to bounce back much quicker than their traditional competitors. The purpose of this thesis is to find out what are the factors behind sharing economy platform businesses that allow them to thrive in today’s competitive landscape and ensure a durable, competitive advantage. The study is composed of a theoretical and empirical part, where two industries (hospitality and ride-hailing) are analyzed and compared with each other. In the ride-hailing industry there are two companies, Uber Technologies and Lyft, and in the hospitality industries there are Airbnb, Booking Holdings, Expedia Group, TripAdvisor and Trip.com. Earlier research on this area has yielded some ideas of which factors seem to have a positive impact on value creation, but there is a serious gap in empirical evidence that would support their views. This thesis attempts to close this gap by taking an in-depth look at different value driving factors and testing their effect on revenue generation by running a series of regressions on different variables. The study relies on the assumption that market efficiency theories hold true and that the value of a business is all its future cash flows to shareholders discounted to today with the appropriate discount rate. Findings are mixed in this research, supporting some of the value creating factors found in academic research. There are three main value driving factors within the sharing economy platform businesses: attracting a network of users and incentivizing them, incremental improvements to the platform and saturating the market. Some of the factors seem to have a bigger impact than others and show a higher correlation, however, proving a conclusive causation between factors and value proved to be impractical. This thesis also argues that there are no major differences between platform businesses and any other business when it comes to sustained success. Platform companies also have to build a rational business model that is protected against outside threats and manage them in a way that is intelligent, focused on the long-term and offer products that bring true value to the participants. The findings of this thesis shed some light on the intricate nature of platform value, which as a concept is not well understood in the current theoretical grounding.Description
Thesis advisor
Tuunainen, VirpiKeywords
sharing economy, platform business, platform economics, information economics, valuation, finance