Introduction
Airbnb Company is based in San Francisco, California, which was founded on August 2008. It is considered one of the trustworthy companies for people to discover and book accommodation around the world. Airbnb is a part of the Sharing Economy, which includes new technologies and tools that redlines the goods and services that are exchanged by individuals. The following task is a report on the external and internal environment of the company including its selection of the main strategic options for growth and it solution for the company’s ongoing health. The generic strategies that are used by Airbnb are of differentiation. It is also used as cost leadership. It differentiates from the traditional hospitality business models. It helps in gaping of supply and demand. Thus, the strategies that are used by Airbnb are both mixture of cost leadership and differentiation. It has helped in creating an advantage in the field of competition at cheaper level for hotel services (Zervas et al., 2017)
Part1: Analysis of external and internal environment of the company:
Overview
Airbnb Company is one of the online communities for the people to discover, book their accommodations throughout the world through online or through mobile phones to business and individuals. Airbnb focuses on the state of Texas to identify its impact by abusing materialistic changes in the patters in reference to adoption across various city-level markets. It contributes to expanding literature though it is considered small between markets that are online and off-line (Helm and Guzzetta, 2014).
PESTLE ANALYSIS-
Airbnb Company is one of the Leading companies in the shared economy industry. It has emerged widely as a major adversary for the traditional businesses like hotels or lodges. The model of income that Airbnb Company is established for is based upon the amount given by the seller and buyer. This Pestle analysis helps in analyzing how the Airbnb Company is affected politically, economically, socially and legally.
- Political- The sharing economy is based on troublesome model, which consists of two sides where one includes the creative effect and the other is the disturbing effect that has its existence on industry model. Despite its political drawback, the sharing economy has given a new era and so its effects are going to work in order to encounter the politics that are not favorable.
- Economic- It has given opportunities, which never came into existence. Apart from its high range in employment, it has created negative impact in the hotel industry. The more people visit at the properties of Airbnb, there is higher risk of loss (Abdel-Basset et al., 2018).
- Social-Social trend plays an important role in business. Airbnb in prospective of social forces has a positive impact behind its growth. The sharing economy has made use of this effect accurately (Rastogi and Trivedi, 2016).
- Legally- Airbnb has faced many obstacles in law in many cities. Taxes and renting law are main reasons for such effects. Sharing economy has flourished to powers that are new and had made the calculation difficult for the legal authorities. Technology is the main reason behind Airbnb growth (Bull et al., 2016).
The above Pestle Analysis includes the forces that have affected Airbnb Company.
SWOT ANALYSIS
- Strength- Airbnb is considered to be cheap in comparison to other hotels. There is competition in prices depending upon location. The Company is not about saving money only but includes experiences also. The Airbnb is operational all over the world. One of the Strength of Airbnb Company is that its brand is well settled wherever it is working. The Company can easily expand its business globally.
- Weakness- Quickly developing lodging organizations can obtain high obligation levels.Reliance on any one market can prompt defenselessness. Personalization, Airbnb can adequately customize the explorer encounter. Create strategies to customize and advance experiential explorer encounters.
- Opportunities- The Airbnb Company is considered as its own opportunities as a whole. For instance- when people choose a hotel, they look at the price and condition of the hotel. Airbnb company offers those set out that are not expensive with accommodations that are on temporary basis and are considered as their main competition.
- Threats-Threats include lawsuits for Airbnb Company including the fines for the hosts because in many places short term renting is considered illegal. The Company is facing many lawsuits including hosts for hosting hotels illegal under law. The competitors who are entering in the industry having same model are the biggest threat to Airbnb Company (Pugliese, 2016).
VRIO FRAMEWORK
VRIO is a tool that is useful in analyzing the internal resources of the firm and their capabilities which is a great advantage in competitive world.
RESOURCES/COMPETENCIES VALUABLE? RARE? DIFFICULT TO IMITATE? EXPLOITABLE BY ORGANISATIONS?
Employee benefits
YES NO NO NO
Propensity for innovation
YES NO NO –
Modern facilities
YES NO NO YES
Renowned brand
YES NO NO NO
Productive strategic planning process
YES NO YES
Excellent control system
YES NO NO NO
Specific practices and procedures
YES YES YES YES
Airbnb Porter’s Five Forces Analysis: –
- Threat to new entries- The threat to Airbnb Company is malleable and weak. In order to pose for threat, they need to have controls over the capital and good brand fairness in order to seizure the demands and requirements of customers in contrast to Airbnb.
- Negotiating the powers of the customers- Negotiating the powers of customers are very high as they have to choose the location, price and the rates of hosting.
- Bargaining power of suppliers- The suppliers are taken as host for Airbnb Company that offers room to the travelers, as they are main reason of business. They are considered the primary level. Airbnb works with organization to avoid any problems with customers.
- Substitution- Here the switching cost is not available to the individual. As Airbnb is growing, so its competitors are also providing with same concept as Airbnb. It comes under three principles including hotels, hostels and Couch surfing.
- Inter-firm rivalry- Rivalry among the firms that are existence is a common issue among five competitive forces.
Part2: Selection of main strategic options for growth:
Existing product New product
MARKET PENETRATION
NEW PRODUCT DEVELOPMENT
MARKET DEVELOPMENT
DIVERSIFICATION
New market
Existing
Market
MARKET PENETRATION
1. Increasing market share through social media tools and investing in advertising campaigns where there are popular events and also ad campaigns on Airbnb website.
PRODUCT DEVELOPMENT
1. Developing the environmental awareness agenda for environment familiar.
2. Using the collaboration with tour operators for packages, local sightseeing and excursions.
DIVERFICATION
1.Forming partnership agreement with cab service provider will help in local tours for guest.
2.Forming collaboration agreement with tour contractors will help to be on peak of the industry by supporting our end goals. These tour contractors can help us in scheduling the flights and sightseeing for visitors. (Slideshare.net, 2018)
MARKET DEVELOPMENT1
The above-mentioned strategies will help Airbnb to develop in Africa and to cover good market share.
Ansoff Matrix Company focuses on its potential and present products. Ansoff’s market products says that in order to grow business whether it is new or present depends on it. It has diversity in its business in terms of new products for new market (Yang et al., 2016).
Ansoff firm growth strategies focuses in its growth except diversification. Even the market environment has moderate relationship between the growth of firm and of Ansoff strategies excluding market penetration. Environment of market should be taken into account before penetrating so that it can fulfill the changes and requirements of the customers (Art et al., 2016). It sets out objectives along with other models like- BCG, DPM matrix and Gap analysis.
BCG MATRIX
QUESTION MARKS
Low market share and high market growth
Don’t know what to do with opportunities;
Determine whether to increase investment
STARS
High market share and high market growth
Doing well,Great opportunities
DOGS
Low market share and low market growth
Weak in market,
Difficult to make profit
CASH COWS
High market share and low market growth
Limited opportunities
MARKET GROWTH
MARKET SHARE
BCG MATRIX of Airbnb is Stars which operates in high growth industries and maintain high market share. There is great opportunities and doing well which helps in generating the most cash.
FINANCIAL POSITION
The Airbnb company had exceeded financial projections for 2017, with $93 million in profit on $2.6 billion in revenue. In 2017, the organization posted $100 million in benefit on $2.6 billion in income.
In 2008, it became stable and had a turnover of 7 Sillicon Valley investors from $150,000 to $1.5 million in terms of valuation. The financial health of Airbnb company in contrast to Ansoff Matrix is that it is one of the world largest fastest growing company and is running in profit and has cash flow with $5.5B balance sheet and the growth continues.
Part3: Strategic solution for the company’s ongoing health:
Airbnb Company continues to be growing at an alarming rate. It is considered one of the members of sharing economy that are recognizable. Airbnb Company should be recommended as its business strategies helps in making it successful. Airbnb is well known for its charm activities in business field. As business, travelling can be recognized as an isolating part one can prefer to stay at palace that is similar to home and Airbnb Company looks into that. It is very cheap and affordable for people especially when they are in-group. Its hosts offer essentials, self-check-in and laptop free facilities. It can be located anywhere even in the outskirts of town. Airbnb manages its projects and communicates on business affairs setting out the goals and functions that are needed for planning (Victor, 2017). It also influences new strategies and ideas needed for new markets and their products by using analysis in terms of sound. The company also built a strong bond in relation to stakeholder including policy, operations and products, etc. (Vignali, 2015).
If one looks into the background of the company, it has the ability in resolving the problems that are complex and analyze that information skillfully. It has the ability to cope up speedily in any issues and can tackle those situations with clear vision. Airbnb has an outstanding vision different from others where their strategy is concise including the subject matter.
Following are the solutions to the strategies: –
- One should monitor their communities attentively- Airbnb has found success in this field of renting and properties. Active policy is considered its main reason as it ensures that both the sides are following the rule.
- They make sure that the customer knows what they are exactly getting. In 2009, it has been seen that Airbnb was getting off the ground where the listing of the photos was not up to mark. Therefore, the company decided to be professional in listing themselves as a result, their capital increased.
- Data can sometimes be of new ideas or sometimes giving accurate results and those are put in action in order to see how truly they effect.
- Tackling an archaic industry head-on- Due to the daring approach of Airbnb in terms of lodging, people feel fresh in hotel industries. Airbnb despites its drawback and obstacles is the prevailing one.
Conclusion-
Airbnb Company has developed its growth not only online but also offline. This success has occurred due to the sharing economy, its network. It has also increased its gaining capacity due to its network, and people have more needs to the personal spaces for income. It has broken down all obstacles that have occurred when people come across mutual benefits in reference to sharing their apartments and room. Airbnb Company is considered a suitable example for the changes that have occurred in business.