Strategic Management Assignment Sample
Introduction
It is one of the main duties of an organization to develop effective strategies which may help the company to gain competitive advantages in the market. Additionally, the management of Airbnb also needs to focus on developing an effective and innovative strategic management to address the opportunity and threats of the company in the existing market. In this essay, the PESTEL framework, five competitive forces, SWOT analysis and porter value chain analysis of Airbnb will be discussed in detail.
1. Evaluating the PESTEL analysis and five competitive forces analysis of Airbnb to address the opportunity and threats of the company
Airbnb is one of the most famous tour provider organizations which were founded in 2007 by Joe Gabbai and Brian Cheeky, the company is generally known for providing supreme hotel rooms to customers at rents in many locations (Airbnb.com. 2022). In this position, the PESTEL analysis of Airbnb will be described, as the main feature of the PESTEL framework is that it elaborates on the micro business environment of an organization (Pan et al., 2019).
PESTEL analysis
Political
Analyzing the political condition of Airbnb it has been found that the stable political condition of the USA always provides a healthy business environment for the company which plays a crucial role in ensuring the growth of the company in the country. In addition to that, the corruption level of the country is extremely low, for that reason, government policies are impactful in supporting the business of Airbnb.
Economic
According to a report, in March 2022, the unemployment rate of the USA has reduced to 3.6% which denotes that the unemployment rate of the country is low which may be an opportunity for the company (bls.gov. 2022). The USA has one of the most developed economies in the world, as a result, the GDP of the country is extremely high in comparison to most of the countries of the world. According to the World Bank in 2020, the GDP rate of the country was 20.95 trillion dollars which may be considered a business opportunity for Airbnb.
Social
The population of the USA is also increasing day by day and that may create multiple business opportunities for Airbnb, and most of the people of the country are wealthy as well. However, the wealth distribution of the countries is unequal as in 2019 the percentage of middle-income growth of the USA has declined to 51%, on the contrary, the income of the higher class is rising simultaneously (Pewresearch.org. 2022).
Technical
The USA is one of the most technically advanced countries in the world and for that reason, Airbnb may find multiple business opportunities in that country. Moreover, the government of the country also provides good media coverage to the organization of the country and that may help the company to attract more customers. Additionally, the US government also spends a huge amount of money on Research and development (R&D) which is beneficial for the company.
Environmental
The American government also enforced many strong laws against environmental pollution, for that reason Airbnb needs to follow the environmental protection regulations of the country.
Legal
The government of the country mainly follows a progressive tax system and according to this style if a company is generating more income then the organization needs to pay a huge tax amount which may be a threat for Airbnb.
Porter’s Five Forces Framework
The threat of new entrants
It is not easy for a new company to take an entry into the hospitality service industry of the USA, as it may require a huge amount of money and innovativeness to be successful in this industry. Additionally, Airbnb is extremely famous in the country as it has hosted more than 4 million hosts all over the world which indicates that the company is also famous in the international market (Airbnb.com. 2022). Due to huge market penetration cost, a new company may not enter the market, while if a company takes entry then it will not affect the business growth of Airbnb
Threat of substitute
In other responses, there is a threat of substitute services in the hospitality industry of the USA, as there are many companies who provide alternative services which may be considered a threat to Airbnb. Additionally, Airbnb has reduced the booking process of hotels by 30-80% to deal with this threat.
Bargaining power of buyers
It needs to be stated that there are several substitutes for the services which are provided by Airbnb, for that reason the bargaining power of buyers is high in the market. The bargaining power of buyers is mainly influenced by other alternative proposals and services which are existing in the market and that impact the switching cost of buyers (Varelas and Georgopoulos, 2017).
Bargaining power of suppliers
The bargaining power of suppliers may be treated as a threat to the company as the suppliers of the company are not dependent on a single company. Additionally, there are large numbers of hospitality organizations which indicates that the demand for materials is huge in the market. Moreover, if Airbnb wants to change suppliers then the switching cost may be huge which may disrupt the operation of the company.
Competitive rivalry
The competitors of Airbnb such as Bopoking.com, Agoda, and Tripadvisor are the prime throat for the company and the number of competitors is increasing day by day which may reduce the market share of the company in the upcoming years.
2. VIRO framework and porter value chain analysis of Airbnb
VRIO
| Resources | Value | Rare | Imitation | Organized |
| Marketing expertise of Airbnb | The current expertise of Airbnb are trends to be valuable | However, the expertise is not rare as other competitors use this expertise as well | The pricing strategy of Airbnb may be similar to competitors | Short time competitive advantage for the organization |
| Customer community | The customer community framework is valuable for Airbnb | The management of Airbnb is able to create an effective and valuable relationship with customers | It is immensely difficult for the competitors to imitate this model | Creating a strong competitive advantage for Airbnb |
| Talent management of Airbnb | The talented employees are immensely valuable to the organization | The innovative talent management is extremely effective for the growth of the organization | Other competitors may bonnet be able to imitate this | Proving a strong competitiveness to Airbnb |
| Pricing strategy and service portfolio | Both are valuable for the growth of the company | NO | Pricing strategy and the same kind of service may be imitated by other existing companies in the sector | Without innovation, these strategies may not provide a strong competitive advantage to Airbnb |
Table 1: VRIO framework of Airbnb
(Source: Self-created)
The unique platform which is created by Airbnb always provides a strong competitive advantage to the company and it also adds some new value to customers in terms of a familiar travel experience (Iger, 2020). Moreover, the brand image has increased the trust of the customers which ensures the growth of the company in the sector.
The value chain
Inbound Logistics
Airbnb follows an online business model which is an integral part of the core service and inbound logistics of the company which indicates that the website of the company plays a crucial role in maintaining the inbound logistics of Airbnb. Moreover, the company also purchases pillows and mugs and bead sheets from suppliers to improve its service of the company.
Operations
Airbnb also maintained a huge operation to provide a superior experience to the customers of the company. In addition to that, the company is focused to improve its operations and customer service by installing Urban Bellhop, a dry cleaning facility, an online platform, temperature controller machines and many more.
Outbound Logistics
Outbound logistics has no importance in the hospitality industry as it is mainly used in the manufacturing industry. Additionally, In Airbnb, service production and consumption are occurring at the same time which means that the concept of outbound logistics is irrelevant in the industry.
Marketing and Sales
On online platforms, the reputation and brand image of Airbnb is increasing day by day which indicates the success of the marketing and sales strategies of the company. Analyzing the review of customers, it has been found that Airbnb may be considered a trusted community marketplace in the existing industry (Zervas et al., 2021).
Services
In the hospitality industry, there is a huge requirement for innovative techniques which play an essential role in managing the quality standard in the industry (Romero and Tejada, 2020). The organization is extremely concerned to improve customer service which provides a strong competitive advantage in this industry.
3. SWOT analysis and Corporate strategies for Airbnb
SWOT analysis
SWOT is one of the most innovative strategic analysis tools which are generally used to identify the strength, opportunities, weaknesses and threats of a company (GURL, 2017).
Strengths
One of the biggest strengths of Airbnb is that the company is well established in the hospitality sector of the USA and provides low price hotel bookings to customers. Additionally, the pricing range of the economy is comparatively low in comparison with other companies in the USA. The company also has a global brand value as in China the company has provided supreme hospitality service at a cheap price which attracts lots of customers to the company (Tang et al., 2020).
Weakness
Many of the customers of the company have reported that the rooms on Airbnb are unsafe and unregulated which has created a negative impact on the brand image of the company. The lack of proper transparency is one of the main issues for the company in recent years as the hosts of the company also do not pay accurate tax which affects the earnings of the company.
Opportunities
The management of Airbnb has planned to shift the company to emerging markets which may provide a good business opportunity for the company. The company may expand that range of service which may attract more people to the company and directly increases the profitability of Airbnb effectively. The company recently launched a mobile application that will help the company to connect with hosts easily.
Threats
The main issue and problem of the industry are that most of the companies in the industries face difficulties to differentiate their services which also have created a negative impact on the services of a company (TAKACS and VADUVA, 2017). The existing competitors of Airbnb need to be treated as one of the biggest threats to the company.
Corporate strategies
- It will be extremely impactful if the management of Airbnb implements a Merger and Acquisitions strategy then the company will be able to gain more opportunities from the market.
- Airbnb needs to follow the approaches of corporate entrepreneurship which may be more beneficial for the company to ensure organizational development.
- Additionally, if the company focuses on strategic alliances with a renowned company in the sector then it will be helpful for Airbnb to increase the business opportunity and reduce the risk factor as well.
4. Cost leadership strategies for Airbnb in the next 5 years
Lower input costs
It will be helpful if Airbnb reduces the input cost during the creation of service as the company needs to be more innovative to ensure a lower input cost for all services. In addition to that, the company needs to spend a huge amount on R & D to become more innovative and ensure lower input costs in the next 5 years.
Economies of scale
The company is already expanding in different parts of the world and the company also has reduced the price of hotels which denotes that Airbnb is already experiencing cost advantages and Economies of scale.
Experience
The company has been operating since 2007 which indicates that the organization has experience of multiple years in the industry. Moreover, the experienced employees are an asset of the company which always provides a cost advantage to the company.
Product/process design
The successful implementation of innovation is really useful in improving the service design of Airbnb. Moreover, Airbnb needs to provide the service to more hosts at an international level by improving the service effectively.
Conclusions
From the above discussions, it may be concluded that Airbnb enjoys lots of opportunities in the existing market as the suitable business environment of the USA always increases the profitability of the company. However, the component needs to resolve its weakness and issues by implementing effective corporate strategies and cost leadership strategies.
References
Airbnb.com. 2022. [online] Available at: <https://news.airbnb.com/about-us/> [Accessed 20 April 2022].
bls.gov. 2022. [online] Available at: <https://www.bls.gov/news.release/pdf/empsit.pdf> [Accessed 20 April 2022].
GURL, E., 2017. SWOT analysis: A theoretical review.
Iger, R., 2020. PRERANA.
Pan, W., Chen, L. and Zhan, W., 2019. PESTEL analysis of construction productivity enhancement strategies: A case study of three economies. Journal of Management in Engineering, 35(1), p.05018013.
Pewresearch.org. 2022. 1. Trends in income and wealth inequality. [online] Available at: <https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/> [Accessed 20 April 2022].
Romero, I. and Tejada, P., 2020. Tourism intermediaries and innovation in the hotel industry. Current Issues in Tourism, 23(5), pp.641-653.
TAKACS, J. and VADUVA, S.A., 2017. A SWOT ANALYSIS OF THE GLOBAL HOSPITALITY INDUSTRY. Revista Economica, 69(6).
Tang, Y., Han, J., Li, Y. and Yu, D., 2020, December. Competitive Strength of P2P Platforms Based on Function and User Analysis. In 2020 Management Science Informatization and Economic Innovation Development Conference (MSIEID) (pp. 479-485). IEEE.
Varelas, S. and Georgopoulos, N., 2017. Porter’s competitive forces in the modern globalized hospitality sector–the case of a Greek tourism destination. J Tour Res, 18, pp.121-131.
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