Technological advances enable new business models for heavy equipment manufacturers, replacing or augmenting ownership-based models with access-based consumption.
An ever-increasing list of peer-to-peer sharing platforms (e.g., Trringo by Mahindra, Yard Club by Caterpillar, or Coop by Ryder) shows that it is paramount for decision-makers to understand the economic implications of such business models.
However, the efficacy of emerging models relying on access-based consumption is unclear. A lack of empirical evidence of their performance motivates the need for analytical insights.
This paper focuses on understanding the performance of different emerging business models, particularly that of peer-to-peer product sharing, by considering salient economic and operational factors in the context of heavy equipment.
Although sharing business models are widely publicized, the optimal model for a heavy equipment manufacturer will depend on operational factors linked to after-sales services, a point which has been previously overlooked and deserves closer attention by decision-makers.
We show when a heavy equipment manufacturer prefers setting up a sharing platform for its products, which provides a positive rationale for the emergence of such manufacturer-owned platforms in practice.
We also describe the optimal design of a sharing platform, highlighting the need to subsidize one part of the business (sharing) to the benefit of another (after-sales services).
Moreover, we provide insights into how manufacturers can leverage after-sales services when threatened by a third-party sharing platform's entrance.
With Niyazi Taneri (Cambridge University) & Sameer Hasija (INSEAD), available on SSRN
(currently undergoing revision).
Invited for major revision at Operations Research