By the term economy, the situations of a geographical location, in terms of demand-supply forces are meant, which are usually measured in terms of monetary units. To measure the situation of an economy in a particular period, the goods and services produced in that particular economy, within that period of time, is taken into account, in general. The part of the economy, which can be accounted for is generally known as the white economy, for that concerned region (Alkon, 2012). These activities fall in the tax framework and regulatory construct of the economy.
However, there are several activities, which though present in the economy, cannot be accounted for and these do not fall in the regulatory and taxation framework of the economy. These unaccounted economic activities constitute what is known to be black economy. Activities falling under black economy may not necessarily be illegal in nature, though the illegal economic activities do fall under this domain mandatorily. To take reference, the services of the maids who are appointed in various households for performing household tasks, if paid in cash, automatically falls under the purview of black economy, though the activity is not illegal per se. Again, originally illegal economic activities, as bribing or money earned by unfair means, fall in this category (Black, Hashimzade & Myles, 2012).
There are different forms of economy existing in the global market, with constant dynamics and changes in their nature and types along with time. Example of one such form of economy is that of the shared economy. a shared economic framework is defined to be that economy in which the individuals can borrow or exchange assets, including goods and services that are already owned by other individuals. This imply that in this kind of economy there is provision of sharing already owned assets in lieu of monetary fees or also in free of cost. From the beginning of existence of what is known as society, shared economy has prevailed in the world. Over time the framework has undergone significant changes but the basic intuition behind the theoretical concept has remained more or less the same (Cohen & Kietzmann, 2014).
The objective of the shared economic framework is the overall maximization of the welfare of the society as a whole by efficient allocation of the limited resources present in the economy. Therefore, the under-utilized assets that are lying with one individual can be shared with another who is in need of the same good or service, in exchange of fares, thereby making the economy efficient in the aspect of allocation and utilization of resources (Schor, 2016). With time and advancement of technology and innovations facilitating communication, sharing has been easier and more convenient in the modern day world, thereby facilitating the existence of shared economy even more. There are significant evidences of presence of this type of economic framework in real case scenarios and the model shows potential of future expansion and dominance (Heinrichs, 2013).
The shared economic framework has received much attention of the business organizations as well as the governing authorities of different countries as this framework targets towards achievement of agility and efficiency in the economy, by maximizing the social welfare of the economy by increasing the efficiency in the allocation of scarce resources. However, not all the commercial organizations are advocates of this framework and they believe in operating in a more traditional economic framework. The traditional business models do not have any provision for sharing privately owned goods and services with other individuals according to the need of the society. These models, on the contrary, only allow the utilization of any kind of assets to its rightful owner and no one else. This portion of the assignment tries to compare and discuss the features of the two models for business, taking example of real life industry for each of these two business models.
In this section, both of these models are discussed and their feasibility and practicality in the contemporary business world is seen by studying their implications on the business performances of two real business organizations, both operating in the same hospitality industry and having huge market shares in the Australian economy. These two organizations are Airbnb and the Mariott International, both of which having significant business activities in Australia. However, the former one follows a shared economic framework for its operation, whereas the latter operates in a more traditional framework.
Airbnb has been in operation from 2006 and has earned huge market share in the global market in the hospitality industry. The organization being acting as a facilitator of accommodation, has a unique business framework and with time is taking in more and more people under its domain. With increase in the expansion of the company, more and more organizations are trying to follow its way of operating (Airbnb.co.in. 2017). However, the enterprise, surprisingly does not own any kind of lodging or residential properties and it merely acts as an open forum to facilitate the interactions of the people who wants to take housings or accommodations in lease or rent, across the world and those who own residential assets and want to rent them out to earn monetary benefits. Airbnb ventures in the accommodation industry in a much dynamic manner and the clients, coming under their domain have the provisions to let out or to take in rent, not only hotel rooms but also hostels and home stays, depending upon their requirements. Therefore, the commercial organization, as can be seen from the above discussion, aims to facilitate a more dynamic and efficient utilization of the existing residential resources in a geographical location, such that those demanding for them and those having those assets but are not using them can both profit in the process (Edelman & Geradin, 2015).
Airbnb, not owning any assets per se, acts as a mediator between the two relevant parties as discussed above and in turn, it receives a percentage of fees from both the sides, for every booking that has been taken, thereby, giving the company a business structure of that of a brokerage firm. With 191 countries and 65000 cities under its area of operation, Airbnb has started operating in almost all the primary locations of the world and it currently gives the clients the option to choose from more than three million housing and accommodating facilities of various nature, around the world. In Australia , Airbnb is already enjoying a significant market share and is also showing immense potential to expand in the near future, much of which can be attributed to the expansion of the tourism industry of the country. The company has a valuation of 30billion USD, which is huge for such a new commercial enterprise (Guttentag, 2015).
As is evident from the structure and operational framework of the company, which has been discussed in the previous section, the working method of Airbnb is much in relevance to that of the shared economic framework. The unique service mechanism of Airbnb Australia, which operates as an open and online platform for the interactions of the parties having the spare housing facilities and those looking for accommodations, thereby indicates the incorporation of the principles of operations as has been suggested in the shared economic framework. Under the domain of operations of this enterprise, people can share their underutilized and pre-owned private properties (housings and residential facilities in this case) with those who do not have the privilege to own that particular residential property but has the demand for it. This in turn facilitates a more dynamic and efficient allocation of the residential resources of the country which are scarce by their inherent nature. The primary objective of the commercial company, is mostly to facilitate the supplier-demander interaction, in order to maximize the overall welfare of the society as a whole, the welfare maximizing being in the accommodation and housing industry of the county (Möhlmann, 2015).
The company, within a very small timeframe has gained significant positive responses form the people in the global scenario. The unique services as provided by the company is increasingly becoming a strong alternative to the conventional way of operations in the hospitality industry and with time it is taking in more and more people under its domain, both in demand side as well as in the supply side. The main purpose of the company, which is increasingly becoming the main plus point in its business structure, is to remove the constrictions and hurdles regarding finding lodging in different places at affordable rates. The enterprise is breaking those hurdles by venturing in non-popular but prospective areas across the world. Airbnb, being one of its kind of service providers in the international hospitality scenario, is projected to experience a he increase in its area and magnitude of operations both in the world as a whole and in Australia specifically, with more and more people getting accustomed to the concept of the sharing economic framework. The tourism industry of the country also experiencing an upward trend, is expected to contribute significantly in this aspect (Orsi, 2013).
However, in the recent scenario, the taxing and legal framework of the company, especially Airbnb Australia, is becoming an issue of significant concern especially among the monetary and taxing regulatory authorities of the county. The services that are offered by the company are hugely varied and are also not of purely commercial by nature. This, therefore, provides a number of avenues for the company to reduce or manipulate their taxing mechanisms. The company purely operates in an online framework and therefore, the chances of reducing the tax burden on part of the company becomes even more easy as in an online framework the monitoring mechanisms on part of the taxing authorities and regulatory bodies are not that stringent. One of the tactics, as has been seen to be taken by the enterprise, in this aspect alos supports this view.
The Airbnb Australia, when takes any booking for the country itself, both from the demand side as well as the supply side, does not show the accounts of its transactions under the Airbnb Australia accounts. All the economic and monetary transactions of the company is taken into account under the Ireland chapter of the company. This also happens even if the service providers are operating in Australia and the clients are also demanding accommodation in the country itself. The company as is speculated by the financial researchers and speculators to decrease the tax burden of the company does this. The taxation regulations of Ireland being less stringent and more business friendly, the company tends to divert all of its accounts to that of its Ireland chapter, thereby making the tax burden less for the company. The online way of operating also assists the company in this aspect, thereby making this an issue of concern for the tax regulators and the monetary authorities of the country (Williams, 2014).
Barring these limitations, the enterprise, however, is performing in a really impressive manner in the global business scenario, which can be seen from its huge revenue earnings and expansion of clientele with time. The company poses as a strong example of a commercial organization operating under the shared economic framework and inspires other entrants to adapt this operating form for their businesses.
However, not all firms are in favor of the shared economic framework as the concept of sharing of private properties may not sound to be applicable and feasible in real life to these organizations. These organizations tend to stick to a more traditional business framework for their operations. One such example, in this case, as has been mentioned in the above section in the Marriott International, which also has a significant market share in the hospitality industry in Australia and has the target of expanding even more in future.
The Marriott International is a chain of luxury hotels all across the world, with an average annual revenue of $14 billion. It is a traditional hospitality chain, operating in more than 110 countries and giving their clients to choose from the huge variety of 1.2 million rooms across the world. In Australia, the company has their properties in primary locations like Sydney and Melbourne and it plans to expand to other part of the country in near future (Marriott.com, 2017).
The Marriott, being operating under the domain of the traditional business framework, owns almost all its properties and does not have the provision of sharing private properties with private individuals of the country. The services are only available to the users after they fully pay for the services they demand for and they cannot share the services with others.
Over the years, the chain has become increasingly popular in the country and has been expanding its operation, in an impressive manner, under the traditional economic framework. However, the company has been facing a huge criticism regarding its pricing mechanisms and predatory pricing, which to a huge extent contributes to the anti-competitive practices of the enterprise. The company utilizes its card as a premium service provider at the prime locations of the country and due to this advantage, they are often practicing luxury pricing as they have confidence on the goodwill that they have earned and the loyalty of their customers. In spite of these short comings, the company is still one of the primary service providers in the hospitality industry of the country and is an example of the success and viability of the traditional models in the contemporary business world.
Reducing black economy is one of the primary concern of the governing authority of any country, including Australia. The Interim Report published by the Treasury in the Black Economy Taskforce, has made several recommendations for the overall welfare of the economy of the country (Treasury.gov.au, 2017). Among them, the recommendations, which if implemented, can be fruitful in the purpose of reducing the share of contribution of shared economy to the black economy formation, are discussed as follows:
The recommendations, as mentioned above, in general have the potential of reducing the share of the effect of shared economy in the black economy formation of the country. Among these recommendations, those talking about reducing regulatory burdens on the small firms, increase the usage and implementations of non-cash payment methods, spreading awareness regarding the taxing framework and regulations and expanding the taxing mechanism, should be given more importance. This can reduce the problem of the increasing contribution of shared economy to the black economy of Australia (Singh, Jain-Chandra & Mohommad, 2014).
References
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Alkon, A. H. (2012). Black, white, and green: Farmers markets, race, and the green economy (Vol. 13). University of Georgia Press.
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Healy, P. M., & Palepu, K. G. (2012). Business analysis valuation: Using financial statements. Cengage Learning.
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Marriott.com. (2017). Find Australia Hotels by Marriott. Marriott.com. Retrieved 14 September 2017, from https://www.marriott.com/hotel-search/australia.hotels/
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Singh, A., Jain-Chandra, S., & Mohommad, A. (2014). Inclusive growth, institutions, and the underground economy. Human dignity and the future of global institutions, 103-122.
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Williams, C. C. (2014). Confronting the Shadow Economy: evaluating tax compliance and behaviour policies. Edward Elgar Publishing.
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