Strategy Journal 3

I read an article recently talking about a new business model called "collaborative consumption", which is based on an old idea: sharing. Since 2008, a growing number of Bay Area internet start-up companies have entered into this business. People are allowed to share a variety of things on those companies' websites, from physical goods like cars to services like babysitting, with the companies taking a cut of any transaction fees. This article reminds me of the Five-Force model we discussed in class. For this industry, the supplier and consumers are the same -- people offer goods and services to share or exchange with others, the company just plays the role to gather them together and provide some sort of safety terms to protect its users. Since the companies just provide technology that allows people to share, and the start-ups typically don't have to deal with the costs of the physical goods or the labor expenses of providing the services, the entrance barrier of this industry is low. And due to the low barrier, the rivalry between competitors is pretty severe. The leader of this industry, Airbnb Inc., tells us how it stands out among others. Because people share instead of trading belongings, there is a high chance that their belongings will be damaged by the borrowers. And this is the controversy that many companies are facing. Thus, who can provide its users the security of their goods becomes the winner. Airbnb has a well-developed "trust and safety features" that protect its users.