1.

AIRBNB

Airbnb is a two- sided that sought to match people that owned real estate properties with people
interested in renting short term lodgings. The company was founded in 2008 and based in sans
Francisco. Joe Gebbia, Brian Chesky and Nathan Blecharzyk are the founders of Airbnb. Airbnb
enables transactions between hosts and travelers by charging a service fee without directly owning
a rooms by itself. Airbnb has a variety of market offerings in terms of prices, locations, and
experiences, where the guests can choose from. Airbnb is always trying to develop security and
safety systems. Airbnb has more than 20 offices around the world with qualified people that are
responsible for running the operations.

2. STRATEGIC ISSUES

Airbnb had three strategic issues:

a) Security and safety: Airbnb has greatly developed safety and security to prevent crimes but
this issue still constitutes a matter of risk to Airbnb.
b) Regulatory Risk: Airbnb is a global company and each country has different regulations
and legislations that control home accommodation industry.
c) Cultural adaptation: Airbnb has to adapt themselves to the culture of every country and
every city. Some conservative cultures have concerns about sharing accommodations, for
this in order to develop these markets, Airbnb need to continuously develop its services.

2.11 SITUATIONAL ANALYSIS

a) Porters five forces analysis is a framework to analyze level of competition with an industry
and business strategy development.
1) Intensity of rivalry: Medium

Intensity of competition is medium, Airbnb was the first one to establish a business model like
this- an internet based home accommodation industry. Some companies have already imitated
Airbnbs Business model ad started to develop some markets like in China. Also some existing
companies are competing with Airbnb like Booking.com, Tripadvisor and Expedia.
Control: Airbnb can control the risks by continuing to develop new markets, continue
penetrating existing ones, build deals/partnership/alliances with other companies that
provides complimentary services, i.e transportation, tours, etc.

2) Risk of entry by potential competitors: High

It is easy for any startup to start a business model like Airbnb since the initial cost are not high.

Control: Airbnb does not have control over this risk.

3) Risk of substitutes: Medium

The risk of substitutes are medium as guest can substitute it by a hotel experience or by
choosing not to travel at all.

Control: Airbnb can slightly decrease this risk by: increasing customer engagement, attracting
different hosts to ensure variety of its market offerings: price, location, experience etc.

4) The bargaining power of Buyers: High

Buyers are very sensitive to security and safety issues, rumors, instability situations in other
countries.

Control: Airbnb has to continue offering in terms of price, locations, and experiences and
endued different and trending experiences to match with the different wishes of guests: i.e
create programs/wish list if environment lovers, cultural exchange programs for young people

5) The bargaining power of Suppliers: Medium

There are abundance of suppliers (Host) who are renting their own homes. Recently, some
countries are raising new assertive regulations like in San Francisco and New York. These
regulations sometimes do not encourage hosts.

Control: Airbnb does not have bargaining power of suppliers. However, it can encourage more
hosts by creating incentive programs or rewards.
 Conclusion: According to porters five forces analysis, it can be concluded that the internet-
based accommodation industry is attractive. Airbnb has good control over its competition as
its horizontal competition is medium; as well as vertical competition is medium.

b) SWOT analysis

Strengths:

1) Industry leadership: Airbnb is a leader in internet-based home accommodation industry.

2) Price competitiveness: Airbnb has variety of market offerings which makes it able to
provide competitiveness of prices.
3) Customer Engagement: Airbnb has strong customer engagement model: Facebook
connect, wish list and heart icons.
4) Operating Cost: Airbnb has low operating cost since its an internet based company.
5) Expansion: Airbnb has high supply supported with high demand which gives a chance to
expand and develop new markets
6) User Friendly systems: Airbnb website & application are very easy to operate and it is very
quick to be used by both operators and hosts.
7) Business model: Airbnb built its model in such a way that it is generating revenue from
both hosts and supplier.

Weaknesses:

1) Security: Airbnb still has gap in the security system for both the host and the guest.
2) Public relations: Airbnb still need to work on its public relations to be more effective.
3) Customer service/relations: Airbnb needs to develop better customer services/ engagement
and customers relations especially during and after guest/host experience.
4) Lack of control of accommodations: Airbnb has no control over the real conditions of the
accommodations listed this affects the level of experience as well as the guest trust in
Airbnb.

Opportunities:

1) Airbnb still has opportunity to grow while encouraging culture exchange and promoting
it.
 2) Airbnb can utilize the environmental trend and create a wishlist for those who are
environment friendly.
3) Airbnb has a very large market scale.

Threats:

1) Political instability has a negative impact on business of Airbnb as it decreases the demand
by discouraging the desire to travel to the destinations with instable political issues.
2) Culture Conflict: Airbnb might face difficulty in developing some markets due to the
culture conflicts and conservatives.
3) Country regulations: Many countries started to deal in assertiveness with the explosion of
vacation rentals like San Francisco & New York. Some countries have increased taxes on
online accommodation on-sharing services.

Conclusion: Based on the situational analysis, we can conclude that internet-based home
accommodation industry is promising and still growing.

3. STRATEGIC ANALYSIS AND CHOICE

Strategic management tools and resources of the strategic position & action evaluation (SPACE)
matrix to determine what type of strategies Airbnb should pursue.

3.1 Strategic position and action evaluation (SPACE) matrix

SPACE matrix is a strategic management tool that focuses on strategy formulation especially
as related to the competitive position (CP).While the external Dimension includes:
Environment/ stability position (SP) and Industry Position (IP). It is broken down to four
quadrants where each quadrant suggests a different type or nature of strategy: Aggressive,
Conservative, Defensive and competitive. Based on the space matric Airbnb is in Aggressive
Position:
Internal Strategic Position External Strategic Position
Competitive (CA) Industry (IS)
Product Quality -3 Growth Potential 6
Human Capital -1 Profit Potential 6
Customer Loyalty -1 Ease of entry into the market 5
Market Share -2 Resource Utilization 5
Control over Suppliers -4 Financial Stability 5
-2.2 5.4
3.2
Financial (FS) Stability Position
Return on Investment 6 Rate of Inflation -4
Liquidity 6 Price elasticity of demand -3
Cash Flow 6 Competitive pressure -2
Working Capital 5 Barriers to enter the market -3
Leverage 5 Technologic Change -2
5.6 -2.8
2.8

Note: In Financial position (FP) and Industry Position (IP) the rating scale is from 1(worst) to 6
(To best).

In competitive positioning the and environmental stability position the rating scale is from -
6(worst) to -1 (best).

From the analysis, we can conclude that Airbnb is in an aggressive position. The aggressive
quadrant in the SPACE matrix suggests the following strategies:

Strategy Definition
Forward Integration Gaining ownership or increased control over
distributors and retailers
Backward Integration Seeking ownership or increased control over
competitors.
 Horizontal Integration Seeking ownership or increased control over
competition.
Market Penetration Seeking increased market share for present
products or services in present markets
through greater marketing efforts.
Market Development Introducing present products or services in
present markets through greater marketing
efforts
Product Development Seeking increased sales by improving present
products or service or developing new ones
Related diversification Adding new but related products and services
Unrelated Diversification Adding new, unrelated product and services

4. RECOMMENDED STRATEGY

Vision: To be the world leader of internet-based accommodation industry

Mission: We believe in making the whole world a big community that we all belong to. We
connect our guests with unique authentic accommodation experiences provided by our host at
competitive prices anywhere and everywhere, utilizing the power of technology

Values: These are the values we believe in and we use our daily interaction with ourselves, our
guest and our host.

Enjoyment-Competitiveness-Sharing Safety-Hospitality

Goals: This section provides goals for Airbnb based on its vision, mission, strategic issues and
situational analysis as well as industry analysis. Airbnb has to achieve this by the end of 2021 to
make its vision true:

1) To achieve overall 80% market share from the existing markets: USA, west Europe, North
America, South America and China.
2) To diversify related business to be able to develop new markets and penetrate the existing
ones:
 a) Acquire small low cost 3 hotels in the following destinations in order to expand in
Middle east and Africa while adapting to culture difference:
- A hotel in Morocco with estimated cost of 30 million USD
- 2 resorts in Egypt, especially in Hurghada as a low cost destination with estimated
cost 40 Million USD.
3) Make partnership agreement with Tui International and FTI (tour operators), that will help
control the demand in the new hotels also support our goal. These tour operators could help
in arranging flights, transportation, and local tours and excursions for guests.
4) Make partnership with Uber that will help in arranging the internal transportation and local
tours for the guests.
5) To have 10% market share in from Middle East and Africa.

4.1 STRATEGY

A five year aggressive strategy that combines related diversification, Product development,
Market penetration and market development together is recommended.

Strategy Recommended ways to Execute the Strategy

Related 1. Acquire small low cost 3 hotels in the following destinations in order
Diversification to expand in Middle east and Africa while adapting to culture
difference:
- A hotel in Morocco with estimated cost of 30 million USD
- 2 resorts in Egypt, especially in Hurghada as a low cost
destination with estimated cost 40 Million USD.
2. Make partnership agreement with Tui International and FTI (tour
operators),that will help control the demand in the new hotels also
support our goal. These tour operators could help in arranging
flights, transportation, and local tours and excursions for guests.
3. Make partnership with Uber that will help in arranging the internal
transportation and local tours for the guests.
 Product 1. Adding an option From home to home Utilizing its partnership
Development with Uber, and Tour operators. Where guests can choose full
package including flights, internal transportation and local tour &
excursions.
2. Developing the following programs:
- Culture exchange program for young people
- Environmental Awareness program
Market Increase the market shares from the existing markets through greater
Penetration marketing efforts, utilizing social media tools, Investing in Google display
advertising with bannered campaigns including images from actual housing
being offered by Airbnb.
Market The recommended ways with help Airbnb to develop Middle East and
Development Africa & take good share from it.

Objectives:

One year objectives for Airbnb to achieve its goal based on the above recommended strategies.
These objectives need to be achieved by the end of 2017:

1) Finalize partnership agreement with Uber

2) Increase repeater guest to average 50% of total guests using Airbnb services
3) Develop a culture programs for young people
4) Enhance and upgrade Airbnb Customer management program for both host and guest to
increase their satisfaction to 90%
5) Enhance and upgrade Airbnb safety and security program to reduce compensation by 5%
6) Development and implementation policies and guidelines for minimum standards of
service quality and accommodation quality to guarantee its user experience.