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As a digital transformation consultant, your task is to prepare a detailed report covering below points (equal weights) and use words that a digital consultant would use, more specfically words in the field of IS,IT,MIS.
1. What are the triggers (problems) associated with urban parking in China? [250-300 words]
2. What is the digitally transformed business model of parking services in China? Describe the scope of DT and systems implemented. [250-300 words]
3. What is the competitive advantage of the new business model? Explain in detail. [250-300 words]
General Rules
– Make sure to comply with the min and max word count for each section. Answers that do not fulfill the wordcount requirements will NOT be graded.
– Mark the question number in your answers, the text not marked for a question will NOT be graded. *****SUBMISSION HAS TO HAVE LESS THAN 10% SIMILARITY ON TURNITIN AI DETECTOR and gptzero.me AND SIMILARITY RATES on turnitin**** if other wise i will have to refund ***** ****please be within the exact word range not a word more not a word less****
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W20947
AIRPARKING: DIGITALIZING SHARED PARKING
Professors Xiao Xiao, Chunmian Ge, Junhui Jiang, and Ning Su solely to provide material for class discussion. The authors do not
intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names
and other identifying information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com. Our goal is to publish
materials of the highest quality; submit any errata to [email protected].
Copyright © 2020, Ivey Business School Foundation
Version: 2020-12-01
On a rainy day in 2015, Zhidong Feng and his pregnant wife had driven to the local hospital for a checkup. They
were both excited and nervous about welcoming a new family member. The couple had arrived at the hospital
only to find that almost all the parking spots had been taken. After spending 20 minutes driving around, they
nearly missed their appointment. Wondering why it was always so difficult to find parking had led Feng to the
idea that later became Yueting Network Technology Company Ltd. (Airparking), a Guangzhou-based online
platform that allowed customers with parking spots to share or rent them to others based on a sharing economy
model. By 2019, Airparking was a relatively mature regional start-up, and Feng and his co-founder were looking
forward to future growth and looking for ways to scale both the Airparking platform and a related asset operation
platform. Their dream was a ¥10 billion1 valuation for each.
URBANIZATION, TRANSPORTATION, AND PARKING IN CHINA
The Structural Insufficiency of Parking Spaces
According to the Ministry of Public Security of China, by June 2019, China had 250 million cars, and about 80
per cent were private cars. In other words, China had 170 cars per 1,000 people. Although China was still far
below the number of cars per 1,000 people in the United States (900) and in Europe (600),2 the density of cars
in China’s urban areas was much higher, and the pace of parking facility construction had not kept up with the
rapid growth in car ownership. In fact, 66 Chinese cities had over one million cars,3 and for some of these cities,
the ratio of parking spaces to the number of cars in use was estimated to be 50 per cent,4 much lower than the
110 per cent required by China’s 2016 Urban Parking Planning and Regulation.5 For example, in Guangdong,
1
¥ = CNY = Chinese yuan renminbi; ¥1 = US$0.1444 as of June 15, 2019. All currency amounts in ¥ unless specified
otherwise.
2
World Bank Group, “Vehicles (per 1,000 People),” World Bank DataBank | WDI Database Archives, accessed June 24, 2020,
https://databank.worldbank.org/reports.aspx?source=1277&series=EN.TRN.NVEH.1K.
3
Jiang Ling Fang, “The Number of Motor Vehicles Nationwide Reach 340 Million in the First Half of this Year,” Ministry of
Public Security of the People’s Republic of China, July 4, 2019, accessed June 24, 2020,
www.mps.gov.cn/n2254098/n4904352/c6568680/content.html.
4
“The Ministry of Commerce and Other Departments Make Efforts to Boost Bulk Consumption and Key Consumption,”
accessed June 24, 2020, China Finance, http://finance.china.com.cn/roll/20160825/3877099.shtm.
5
Ministry of Housing and Urban-Rural Construction of the People’s Republic of China & General Administration of Quality
Supervision, Inspection and Quarantine of the People’s Republic of China. Code for Urban Parking Plan: GB/T51149-2016[S],
Beijing:
China
Architecture&
Building
Press,
2016:
1-39,
accessed
June
24,
2020,
http://download.mohurd.gov.cn/bzgg/gjbz/GBT%2051149-2016%20城市停车规划规范.pdf.
MIS 201
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the Chinese province with the highest gross domestic product, the ratio was 30 per cent in 2015.6
Further, according to the founders of Airparking, this structural issue was also reflected in the
inefficiency of parking space utilization: during the day, many cars flooded into office buildings,
leaving parking spaces in residential areas unoccupied, whereas the situation was reversed at night.
The Managerial Inefficiency of Parking Spaces
According to the founders of Airparking managerial inefficiencies added to the structural shortage of parking
spaces, further worsening the problem. The management of parking spaces involved a variety of government
agencies responsible for transportation, traffic management, urban planning, and so on. There was little
consensus as to which department should regulate which aspects of parking spaces across cities. For example, it
could sometimes be difficult to remove illegally parked cars in non-lane areas, as people could not figure out the
appropriate agency to contact to handle this situation. Such lack of clarity in parking governance further reduced
the availability of already insufficient parking spaces and caused operational issues for parking lot management.
This problem was also reflected in the way individual parking lots were managed. Outdated facilities and
a lack of standardized processes created operational inefficiencies and often led to frustrations for
customers, who had to wait a long time to get in and out of the lots.
Finally, from a financial point of view, the rate of return for parking spaces was rather low. According to
Feng, the price of a typical parking spot in downtown Guangzhou ranged from ¥500,000–¥1,000,000, while
the average annual rent was only around ¥4,800. The rate of return for most parking spaces was usually
less than 2 per cent, sometimes even less than 1 per cent.
THE BIRTH OF AIRPARKING
By 2015, Feng had been working in the real estate industry for more than 20 years. He was the deputy
general manager of the asset management department in Yuexiu Group (Yuexiu), a real estate giant in
southern China with annual revenue of more than ¥100 billion. Feng’s struggle to find a parking spot near
the hospital had made him think hard about the problems within the parking industry in China. Inspired to
solve the inefficiencies of the parking industry, and driven by the potential business opportunity and the
desire to start a new adventure, Feng quit his high-paying job. He and Weijie Liang, who had worked in
Yuexiu’s information technology department, left to commit themselves to entrepreneurship and founded
Yueting Network Technology Company Ltd. (Airparking). Years of experience in asset management made
the two realize that the solution to the shortage of parking shortage in Chinese cities lay not just in building
more parking spaces: “We don’t need a hundred parking spaces for a hundred cars,” they said. Instead, they
believed the key to solving the problem was to optimize the utilization of existing, idle resources, which
led them to the concept of the sharing economy.
AIRPARKING: A C2B2C MODEL
Airparking utilized a consumer-to-business-to-consumer (C2B2C) model, rather than the consumer-toconsumer model often adopted by sharing economy businesses such as Uber and Airbnb. Airparking’s
business model involved customers on one side of the business who were looking for parking spaces, while
“Last Year, Guangzhou People Spent 25 Billion on Parking, and There Was a Gap of 1.5 million Parking Spaces, China
Economic Net, July 13, 2017, accessed June 24, 2020, www.sohu.com/a/105450145_120702.
6
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customers on the other side owned parking spaces and were willing to share or rent them out when they
were not being used (see Exhibit 1). However, instead of letting the two customers transact with each other
directly, Airparking stood between as the mediator, and the two parties dealt with the Airparking platform.
This adaptation of the sharing economy model was driven by two considerations. First, sharing a parking
space was rather different from sharing a room or an apartment, as parking spaces were rarely stand-alone
spaces but belonged to parking lots that were managed by property management companies. The property
management companies had entry/exit controls in place to ensure security and handle payments. This
arrangement was especially prevalent in China, as almost every commercial or residential building,
including its parking facilities, was managed by a corresponding property management company.
Therefore, even if the owners were willing to share their idle parking spaces, it would not be possible
without the help or permission of the property management companies. This barrier required intervention
from Airparking. Second, it was also the founders’ belief that a centralized model was better suited to
optimizing the distribution of parking spaces, as the demand and supply of parking spaces followed a certain
pattern and often happened in bulk (e.g., during rush hours).
Under a C2B2C model, the crucial task confronting Airparking was to convince as many parking lots as
possible to join the platform; however, this task had proved to be an uphill battle. Although Feng and Liang
were able to leverage their close ties to the Yuexiu Group, which owned many properties in Guangzhou, to
onboard a large number of parking lots, visits to many of these parking facilities revealed a magnitude of
problems. On the one hand, many of the parking lots were managed in a traditional way, which made the
business impossible to scale. For some parking lots that were exclusive to communities, opening up to new
customer groups also created security and control concerns, given the existing facilities and procedures in
place. On the other hand, inserting itself as a mediator into a traditional value chain also required a
redistribution of revenues. Many property management companies would ask, “Why should I let Airparking
in so that it will take a piece of the pie?”
THE DIGITALIZATION OF URBAN PARKING
Feng and Liang believed that the solution to their problems with the parking lots lay in digitalization. To
this end, they developed a digital solution for these parking lots to streamline their operations and hence
increase their capacities.
At the core of the Airparking solution was the plate recognition system, which included both hardware (the
barrier gate and the camera) and software (see Exhibit 2). The system was designed to automate entry/exit
controls, which were considered to be the bottleneck of parking lot operations. Using this system, staff at
the parking lot no longer needed to manually check to confirm that a given car was authorized to enter or
to issue entry tickets and handle payment. Instead, when a vehicle approached the barrier gate, the camera
would capture the plate number, which would then be compared against existing records in the system.
Similarly, when a vehicle left the parking lot, the camera would scan the plate again to register the exit and,
in certain cases, to trigger the processing of payment. All parking lots that worked with Airparking were
required to install the plate recognition system, as it was integrated with the main parking-sharing platform.
For instance, when a customer reserved a parking space in one of the parking lots using their vehicle plate
number, the number was automatically registered in the parking lot’s plate recognition system. The number
would later be used for entry control and payment processing. The implementation of the plate recognition
system largely reduced the need to guard or staff the entry and exit points. The property management
companies were able to manage their parking lots with fewer personnel but more efficiency.
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In 2018, Airparking further improved the plate recognition system by launching a cloud-based solution.
With this solution, related data was saved both locally and in the cloud, which meant that events such as
power or Internet outages would not disrupt the operation of the parking lots, as the parking lot staff could
use hand-held devices such as smartphones or iPads, which relied on cellular networks, to scan plates and
act as temporary entry and exit controls.
The second element of Airparking’s digital solution was the parking management system, a tool that
digitalized resource management specifically for parking facilities (see Exhibit 3). With the Airparking
system, the property management companies could monitor their operations, obtain overviews of parking
space usage, and receive monthly reports on costs and incomes.
Furthermore, the Airparking team provided support to help the parking lots implement the digital solution
and improve operational efficiency. For instance, the operations department offered both on-site and remote
staff training on using the equipment and the system. It also maintained a hotline in case of emergencies
such as system malfunctions at individual parking lots. Additionally, Airparking provided routine
inspections and maintenance of the equipment.
Finally, the Airparking platform itself provided multiple channels for the parking lots to attract drivers who
needed parking spots. Besides having its own mobile application (app), Airparking was also embedded into
other mega platforms such as Alipay; WeChat Pay; the online banking portals of China Construction Bank,
Ping An Bank, and China Everbright Bank; and the customer portal of Guangqi Toyota. It also worked with
well-known real estate companies to become more accessible.
Of the revenue generated from shared parking, 50 per cent went to the owner of the parking spot, 10–20
per cent went to the property management companies, and the remainder went to Airparking.
Feng and Liang’s vision for Airparking was to provide more than just shared parking; more importantly, it would
be able to transform the traditional parking industry with digital technologies and new business models. The
emphasis on digital solutions and their continuous improvement was indeed the result of this vision.
A SEAMLESS PARKING EXPERIENCE
Together, the digitalization of the parking lots and the utilization of the sharing economy model resulted in
a seamless parking experience for customers (see Exhibit 4). Using the Airparking mobile app, a customer
was able to see an overview of vacant parking spaces near a specified location. The customer could then
reserve a specific parking space up to an hour before arriving, simply by entering a vehicle plate number.
When the customer arrived at the parking lot, the camera at the barrier gate would automatically identify
the plate number and recognize that it was associated with a parking reservation on the lot. The system
would then automatically open the barrier gate for the customer, without any necessary intervention from
the customer. Later, when the customer left the parking area, the camera would scan the number plate,
calculate the parking fee, and open the barrier gate again. The customer could pay the bill at a later,
convenient time, using the embedded mobile payment solutions such as Alipay or WeChat Pay. Feng
explained that the company chose deliberately not to require customers to pay before leaving:
We would like to make it seamless for drivers to park their cars. Parking fees are usually a small
amount of money. We do not believe that the drivers will refuse to pay the fees. Also, they will not
be able to use our service in the future unless they pay the outstanding bills. By not prompting users
to pay as they leave the parking area, we significantly improve the user experience.
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As mentioned above, Airparking had integrated itself with other major platforms to create a multi-channel
Internet parking scheme. This approach increased the accessibility of its services for customers. The company
had also teamed up with a number of merchants that provided parking coupons for their customers.
PIVOTING TOWARD PARKING ASSET MANAGEMENT
At the beginning of 2019, Airparking had grown from an idea into a relatively mature start-up that had
captured most of the market in the greater Guangzhou area. Over the past few years, Airparking had tried
to expand its services to other cities in China, with limited success: on one hand, the parking industry was
very regionalized, and each city had its own structure; on the other hand, Airparking’s business model
required intensive offline efforts when scaling. Realizing the difficulty of expanding the business
nationwide, Feng and Liang started to think about other ways to grow. They had recognized that their
company’s core capabilities were built around digitalized parking management, including operations, sales,
software, hardware, and human resources. To further monetize these capabilities, they could either sell the
capability as a service (which they had been doing, to a certain degree) or sell it as an investment.
This idea later led them to establish Yueting Capital, in August 2018 (see Exhibit 5). A dual strategy was
hence born: Airparking (Yueting Technology) focused on building capabilities around parking
management, an asset-light strategy, while Yueting Capital focused on utilizing these capabilities for asset
management, an asset-heavy strategy. The first project Yueting Capital took on was the parking lot of Rastar
International, located in Guangzhou’s central business district. For a long time, Rastar International had
experienced difficulty in selling its parking spaces, as people who worked in the area mostly took public
transportation or used ride-sharing services. Yueting Capital came up with the idea of selling parking spaces
as investments, with the promise to provide a fixed return to investors. The parking lot would then be run
by Yueting Technology (Airparking), with its up-to-date parking management tools and capabilities, which
would generate revenues based on usage. In less than a month, Yueting Capital had attracted 160 investors
to purchase 160 parking spaces as investments, which would guarantee a 6 per cent annual yield.
It was the founders’ vision that the establishment of Yueting Capital would allow Airparking to expand its
control over idle parking resources by obtaining either ownership or management rights of parking spaces
and acting as an intermediary to better match demand and supply. In this way, Airparking could generate
new revenue streams while improving the efficiency of parking services.
FUTURE PROSPECTS
The success of Airparking so far could be attributed to its focus on the industry and its adherence to optimizing
resource utilization. The adapted sharing economy model was simply the means for transforming how this
traditional industry operated. Exposed to this rapidly changing industry, Airparking needed to continue to
strengthen its capacity, and the team needed to improve. They had gone to great lengths to improve the user
experience while narrowing the development area to the Guangdong–Hong Kong–Macao Greater Bay Area,
rather than the entire country. In the long run, Airparking was committed to building a parking ecosystem that
went beyond simple parking services. For instance, it could use parking spaces as entry points to both upstream
and downstream services such as charging pillars for electric cards and self-service stores.
For Feng and Liang, three years was a complete cycle. Airparking had survived its start-up stage and solved
its cash flow problems over the past three years. The next three years would be about profits, while the
following three years would be about growth. They hoped to realize their dream of doubling a ¥10 billion
valuation in the future—that is, they hoped their Internet operation platform Yueting Technology would
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achieve a ¥10 billion valuation, and they hoped management of the asset operation platform Yueting Capital
would also scale to ¥10 billion.
“In achieving this business goal, we are also doing something meaningful and valuable for society,” they said.
Now, they needed to outline the specifics of the plan that would ensure they could make this dream a reality.
We gratefully acknowledge funding support from the National Natural Science Foundation of China
(Grant 71872065) and Natural Science Foundation of Guangdong Province for Distinguished Young
Scholar (Grant 2019B151502027) and GDUPS (2019).
The Ivey Business School gratefully acknowledges the generous support of Dr. Simon Cua and Dr.
Henry Cheng, through the Ivey Case Centre (Asia), in the development of this case.
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EXHIBIT 1: AIRPARKING’S BUSINESS MODEL
Source: Company documents.
EXHIBIT 2: AIRPARKING’S HARDWARE AND SOFTWARE SOLUTIONS
Source: Company documents.
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EXHIBIT 3: AIRPARKING’S PARKING MANAGEMENT SYSTEM SOFTWARE AND MOBILE APP
Source: Company documents.
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EXHIBIT 4: HOW TO BOOK A PARKING SPOT USING THE AIRPARKING MOBILE APP
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EXHIBIT 4 (CONTINUED)
Source: Company documents.
EXHIBIT 5: MILESTONES IN AIRPARKING’S HISTORY
Timeline
July 2015
September 2015
December 2015
June 2016
September 2016
May 2017
July 2017
November 2017
December 2017
March 2018
August 2018
March 2019
Source: Company documents.
Event
Founding of the company
Release of the Airparking mobile app
Nationwide deployment
First-round fundraising: obtained funding from Yuexiu Group
Relocation to City Development Plaza
Founding of the Qingdao branch
Second-round fundraising
Certification as a high-tech company
Receipt of “Future Unicorn of Guangzhou” award
Receipt of strategic investment from Yuexiu Industrial Fund
Founding of Yueting Capital
Takeover of the operations of Xinghui International and Gangnam Home
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