Managerial Finance

Studying Two Innovative Business

Models
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Prepared By:

# ID Number Name
1 19222417 Amal Nasr Hussien
2 19221125 Karim Ibrahim Mohamed Abdel Salam
3 19222454 Amr Shabaan
4 19222227 Manar Mohamed
5   Mohamed Elmotaz
6 19221099 Mohsen Mahmoud Ammar
7 19221103 Osama Ali Hassan
8   Abdelmoneam Mostafa
9 19222178 Mohamed Fathy El Fakharany

Under Supervision of:

Prof.Dr. Rehaf Foula

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- Table of Content -
 Section 1 : IKEA 'S business Model

 Part (One) : IKEA Overview

 Part (TWO): Overview of Inter IKEA Group FY-2020

 Part (THREE): Overview of Inter IKEA Group FY-2019

 Part (FOUR) :IKEA'S Financial Indicators for years 2016-2020

 Balance sheet & Common Size analysis for years 2016-2020

 Income Statement & Common Size analysis for years 2016-2020

 Return On Equity for years 2016-2020

 Return On Investment for years 2016-2020

 Net Profit Margin for years 2016 -2020

 Ratio analysis for years 2016- 2020

 List Of References

 Section 2 : Air bnb'S business Model

 Part (One) : Air bnb's business model Overview

 Part (TWO): Air bnb's SWOT analysis

 Part (THREE) : Air bnb's Growth Strategy

 Part (FOUR): Air bnb'S Financial Indicators

 Future Outlook

 Conclusion

 List Of References
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- SECTION ONE -

Part (One) IKEA Overview:

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IKEA is the world’s largest furniture retail chain with 315 stores in 27 countries generating
over $35 billion of revenue. At a time when online shopping is disrupting the traditional
Retail model, the Swedish retail icon has drawn more than 715 million visitors to its stores
in 2014. IKEA has positioned itself in a highly competitive industry as the provider
of affordable, high-quality furniture to the masses.

IKEA is a Swedish multinational conglomerate that designs and sells ready-to-

assemble furniture, kitchen appliances and home accessories, among other useful
 5

goods and occasionally home services. Founded in Sweden in 1943 by 17-year-

old Ingvar Kamprad, IKEA has been the world's largest furniture retailer since
2008. The brand used by the group is an acronym that consists of the founder's
initials (Ingvar Kamprad), and those of Elmtaryd, the family farm where he was
born, and the nearby village Agunnaryd .

The group is known for its modernist designs for various types of appliances and
furniture, and its interior design work is often associated with an eco-
friendly simplicity.In addition, the firm is known for its attention to cost control,
operational details, and continuous product development that has allowed IKEA to
lower its prices by an average of two to three percent.

The IKEA group has a complex corporate structure, which members of the European
Parliament have alleged was designed to avoid over €1 billion in tax payments over
the 2009–2014 period. It is controlled by several foundations based in
the Netherlands and Liechtenstein.

INGKA Holding B.V., based in the Netherlands, owns the IKEA Group which takes

care of the centers, retails, customer fulfillment, and all the other services related
to IKEA products. At the same time, the IKEA brand is owned and managed by Inter
IKEA Systems B.V., based in the Netherlands, owned by Inter IKEA
Holding B.V. Inter IKEA Holding is also in charge of design, manufacturing and
 6

supply of IKEA products. IKEA Group is a franchisee that pays 3% of royalties to Inter

IKEA Systems. For purposes of accounting and taxation, the IKEA Group and the
Inter IKEA Group claim that they are unrelated parties. However, they are both
controlled by the Kamprad family and close associates of the family.

As of June 2019, there are 433 IKEA stores operating in 52 countries and in fiscal

year 2018, €38.8 billion (US$44.6 billion) worth of IKEA goods were sold. All IKEA
stores are operated under franchise from Inter IKEA Systems B.V., most of which are
operated by IKEA Group; some of them are operated by other independent owners.

The IKEA website contains about 12,000 products and there were over 2.1 billion
visitors to IKEA's websites in the year from September 2015 to August 2016. The
group is responsible for approximately 1% of world commercial-product wood
consumption, making it one of the largest users of wood in the retail sector.

Value proposition: Good quality home furnishings at affordable prices achieved by

optimizing the entire supply chain, operations, and inventory management.

Business in brief
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Inter IKEA Holding B.V. is the holding compan'y of the Inter IKEA Group, which consists of
three core businesses: Franchise, Range and Supply. The core businesses work together
with franchisees and suppliers to co-create an even better IKEA offer and franchise
system. Inter IKEA Group aims to provide the best possible conditions for implementing
and operating the IKEA Concept, and to create a strong platform for growth.

Core Business Franchise

 Core Business Franchise consists of Inter IKEA Systems B.V. and its subsidiaries. Inter
IKEA Systems B.V. is the worldwide IKEA franchisor and owner of the IKEA Concept.

 Core Business Franchise continuously develops the IKEA Concept and ensures its
successful implementation in new and existing markets. This enables IKEA to remain
forward-looking in areas such as brand development, sustainability, people and
environment, market potential and expansion.

Core Business Range

 Core Business Range includes IKEA of Sweden AB, IKEA Communications AB and related
businesses.

 Core Business Range is responsible for developing and designing the overall IKEA product
range – including home furnishings and food. Inter IKEA Systems B.V. assigns IKEA of
Sweden AB to develop products, product communication, and packaging solutions.

 IKEA Communications AB is the communication agency that creates and produces IKEA
communication for IKEA organizations.

Core Business Supply

 Core Business Supply includes IKEA Supply AG, IKEA Industry AB and related businesses.
Inter IKEA Systems B.V. assigns IKEA Supply AG to source and distribute IKEA products to
IKEA franchisees. IKEA Industry AB is a strategic IKEA manufacturer owned by Inter IKEA
Group.

Other functions
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 To support the core businesses, Inter IKEA Group includes group functions for People &
Culture, Communication, Digital, Finance and other activities. IKEA Älmhult AB, which owns
and operates the IKEA Hotell and Museum, is also part of Inter IKEA Group.

IKEA Business Model

 IKEA’s business concept is “to provide well designed, functional home furnishings at
prices so low that as many people as possible will be able to afford them.” Traditionally,
people have viewed furniture as a meaningful investment and more of a permanent
product within the household. IKEA has revolutionized the consumer’s way of thinking by
introducing furniture that is well designed, but intended to be used immediately and
disposed of in a shorter time frame

 (i.e. when worn out or when the user has moved on to a different taste level). This is
achieved by producing home furnishing products with a focus on combining function,
quality, design and value. IKEA has successfully capitalized on a differentiated low price
business model by having this vision permeate through every part of the organization,
from design, sourcing, packing and distributing. Low prices require sustainable low cost
and efficient operations at every step along the way. IKEA is a clear “winner” by its
proven ability to consistently offer high quality products at affordable prices through
optimizing its entire supply chain, operations, and inventory management to support a
low price, value oriented product offering for the consumer.
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SWOT (Strengths, Weaknesses, Opportunities, Threats)

Strengths Weaknesses
 Not doing appropriate market research when
branching into a new culture’s market-such
as when IKEA came to America.
 Ratio of sales representatives to consumers
 Flat-pack technology
 IKEA’s self-service ethos, EX. American’s are
 Numerous global suppliers
not used to this type of service.
 Focus on “low price with meaning”
 The company is not communicating with the
 Extra in-store perks: Restraunts,
customers.
shopping carts, pencils, etc.
 Company focus more on cost leadership, this
 Unique store environment
is reason quality sometimes suffer.
 Modern design pieces as well as
 The company has competitors; it is difficult
traditional pieces
for a company to sustain.
 The company is cost conscious.
 Company reputation affects as it faces a
number of accidents.

Opportunities Threats
 Lower prices of general retailers like Target
and Wal-Mart that have the ability to regain
losses on other merchandise.
 Saving money on labor by establishing
supplier relationships with developing
 Finding ways to appeal to a broader public-
countries
Scandinavian design and style is a niche not
 Movement into other countries that do
specifically suited to everyone’s tastes.
not have this type of retailer
Therefore, IKEA must figure out how to do
 Capitalize on good design with
this before someone else does.
reasonable pricing
 The company has to face the decline in
 Capitalize on the unique and appealing
demand as if there is the increase in the
shopping experience
customer’s income, they will prefer more
 The company is growing its demand for
quality product.
the greener products.
 There are chances of emergence of
 The company can raise concerns about
businesses from Asia example, China, India
its quality, so the customers can more
etc.
attract towards the products.
 Due to economic factors, the company can
have issues in pricing strategy.
 Market forces like lower prices or economies
scale could also be a threat for the company.
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Operating Model

 IKEA is able to offer more than 9,500 products at low prices as a result
of strategic supply chain processes, efficient back-end operations, and best-in-class
inventory management techniques. These various functions work together to support
IKEA’s distinctive value proposition.

Design & Packaging

 The value chain begins at the very ideation and design of the product itself. IKEA
excels at designing products that incur low manufacturing costs while meeting strict
requirements for function, quality and efficient distribution. IKEA seeks to use as few
materials as possible to make the furniture, without sacrificing quality, in order to make
packing, handling, and transportation more cost efficient. Based on conscious design
considerations, ready-to-assemble items are then provided to customers in flat-packed
form which results in reduced cost of shipping, storing, construction and assembling.

Supply Chain

 As a high volume, global retailer buying products from more than 1,800 suppliers in
50 countries, IKEA understands the power of strong communications and relationship
management with materials suppliers and manufacturers. This is clearly evidenced by its
43 local trading offices in 33 countries to manage relationships with suppliers and
ultimately ensure more than 95% of inventory will be in stock. Given its size IKEA should
foster competition and leverage its suppliers against each other, right? 

 No. IKEA believes in making long-term business relationships with its suppliers by
signing long-term contracts, thus realizing sustainably low cost of goods sold in a volume
business. For IKEA, the suppliers are not simply an isolated function within the overall
value chain, but instead viewed as a collaborator in which IKEA personnel can work side-
by-side with individual suppliers directly at their factories. As IKEA describes, “With [the
suppliers] help, we’re able to use the most efficient, cost-effective and creative ways to
bring our designs to life. It’s this special spirit of togetherness that allows us to make
advances in smart product design, packaging and distribution.”
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Inventory Management

 At a typical IKEA store customers can browse for items in a comfortable showroom
environment on the first and second floors and then obtain any desired product
themselves from the ground floor pallet location. So why is IKEA different? IKEA is able to
reduce the “cost-per-touch,” the idea that the more hands that touch the product the
more it costs, by operating in a unique physical environment in which the retail store is
also the warehouse itself. This is why IKEA wants as much self-service as possible and
leaves the onus on the customer to obtain the product themselves from the ground floor
location. The key to IKEA’s inventory system is to manage this retail-warehouse
relationship via tightly controlled in-store logistics. 

 IKEA is able to store a large amount of inventory because the products are flat
packed by automated machines which work 24 hours a day, 365 days a year. IKEA
employs in-store logistics personnel (which is relatively rare in retailing) given the large
amount of inventory and necessity of an efficient flow of goods to support high volume
sales. There is an in-store logistics manager responsible for the ordering process and a
store goods manager responsible for material handling logistics at all IKEA stores.  The in-
store logistics managers use an inventory replenishment management process
developed by IKEA called “minimum/maximum settings” to strategically
balance customer demand (minimizing stock outs) and warehousing (inventory/space
management).

Minimum settings: The minimum amount of products available before reordering

Maximum settings: The maximum amount of a particular product to order at one time

A Model of Excellence

 From the maze-layout of the showroom to the revolutionary idea of having your
customer assemble the furniture themselves, IKEA has built a tightly aligned operating
model to support its vision of “providing a range of home furnishing products that are
affordable to the many people, not just the few.” These highlighted strategies, combined
with the many other unique operating intricacies not mentioned here, have made IKEA
the world’s most successful furniture retailer with high product demand and low
operating costs.
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Part (TWO) Overview of Inter IKEA Group FY-2020

A.Inter IKEA Group FY20 year in review

 Many companies, organizations and people shape the IKEA brand. Inter IKEA Group
includes the business operations of the IKEA Franchisor, Range, Supply and certain Industry
activities. Here is a selection of facts and figures that will give you a glimpse into the Inter
IKEA Group Financial year Sep 2019 Aug 2020 (FY20).

 FY20 was a challenging year for the IKEA franchise system. Retail sales were strong until
February. Then the pandemic hit. During the lockdowns, 75% of IKEA stores closed for
seven weeks on average.

FY20 IKEA retail sales development

 Despite the closures, many stores continued to fulfill online orders and introduce new
services. By 31 August IKEA websites had welcomed 4 billion visits, and online sales grew
45%. FY20 e-commerce accounted for more than 16% of total retail sales compared to 10%
in FY19.

 IKEA stores re-opened throughout the spring and summer, and many visitors returned.
In total, IKEA locations welcomed 825 million visits in FY20 compared to 1 billion in FY19.
Online sales remained strong even as stores re-opened.

 In-store customer behavior changed after the lockdowns. In the past many visitors came
to browse. Today people visit IKEA for targeted purchases. Conversion rates and average
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spend have gone up, and impulse sales have

gone down. As a result, IKEA stores sold
relatively more furniture and fewer accessories.

 This resulted in total IKEA retail sales of EUR

39.6 billion in FY20 (including sales of IKEA
products, food and services by IKEA franchisees, compared to EUR 41.3 billion in FY19).

Inter IKEA Group includes the business operations of the IKEA Franchisor, Range, Supply
and certain Industry activities. IKEA
franchisees purchase products from Inter IKEA Group companies and pay a franchisee fee
based on retail sales.

 Inter IKEA Group itself reached total revenues of EUR 23.6 billion (including wholesale
sales to retailers, Franchise fees and the retail sales of the IKEA Delft store) and a net profit
of EUR 1.7 billion in FY20.
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In 2020, the global gross profit of IKEA amounted to about 11.7 billion euros,
down from 12.4 billion recorded a year earlier
IKEA's unique selling proposition
IKEA is an internationally known home furnishing retailer with the vision of
'creating a better everyday life for the many people'. The company's products
are flat-pack, ready to be assembled by the consumer. This allows a
reduction in costs and packaging. Low prices are the cornerstone of
the IKEA business idea and the company always tries to do things as
efficiently and cost-effective as possible. The business’ innovations include
new materials that contribute more to a sustainable environment and are
less costly or using the newest ways of packaging, handling and transporting
materials.
IKEA's brand value
As of 2021, is not only IKEA the most valuable furniture retailer brand in the
world, it is also among the leading retail brands globally, valued at nearly 18
billion U.S. dollars. The business operates 445 stores and is present in the
world's major markets. In 2020, there were more than 800 million customer
visits to IKEA stores, and nearly four billion visits in the company's online
webpage.
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B. FY20 Detailed Financial Results

 Despite the pandemic, Inter IKEA Group achieved a solid financial result in FY20.
When the lockdowns began, Inter IKEA Group revised sales projections and took several
measures to mitigate the negative consequences of the pandemic and reduce
operational costs. Following the fast and strong recovery of retail sales, Inter IKEA Group
delivered better operating income than projected.

 After taxes and financial expenses, net income was EUR 1,731 million. The Inter IKEA
Group consolidated income statement shows a simplified overview of this year’s
financial performance.

 Sales of goods: Sales of goods refers to wholesale sales of IKEA products to IKEA

franchisees. Inter IKEA Group also owns and operates one IKEA store in Delft, the
Netherlands. IKEA Delft’s retail sales are also included in this line item.

 At the height of the pandemic, more than 350 IKEA stores were closed. As a result,
sales of goods dropped significantly for several weeks. Orders were cancelled, and
production at both Inter IKEA Group and IKEA suppliers’ factories stopped.

 After the lockdowns, sales were significantly higher than initial projections. To
meet the new demand, suppliers quickly ramped up production. But the lockdowns
were lifted unevenly across the supply chain, hampering logistics. This affected
product availability on various markets.

 This year Inter IKEA Group launched RÅVAROR a new collection that quickly turns
small spaces into smart spaces with the convenience and comfort of home. And
when it is time to move, it’s simple to pack up, stack the items together and relocate
to your next home.
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 Franchise fees: In a franchise setup, one

company pays another franchise fees  for
the right to use their brand, products and
intellectual property. IKEA franchisees pay
Inter IKEA Group an annual fee of 3% over
their net sales. In return, they are
authorized to market and sell the IKEA
product range and operate IKEA stores and
other sales channels.

As Retail sales decreased in FY20, franchise fee income decreased accordingly.

 Other income: Other income mainly consists of income from selling the IKEA
catalogue and other marketing materials created for IKEA retailers.

 Cost of goods sold: Cost of goods sold describes the total accumulated costs
to purchase, manufacture, and store and distribute products. IKEA Industry, part
of Inter IKEA Group, manufactures about 11% of the IKEA range. Inter IKEA
Group sources the remaining 89% from nearly 1,000 external suppliers. This
includes both home furnishing and food products.

Total costs this year were less than in FY19, mainly as a result of lower purchase
volumes due to the pandemic and lower prices from IKEA suppliers. However, e-
commerce sales continued to create increased costs for packaging and logistics
in FY20.

Decreased raw material prices offset part of the lost sales volume, resulting in a
higher gross margin percentage.

 Operational cost: Operational cost includes staff costs, utilities, rent and
other costs related to day-to-day operations.

Staff costs mainly consist of salaries, benefits, training and social costs. During
FY20, Inter IKEA Group employed 24,771 full-time equivalent co-workers,
compared to 26,227 in FY19. To manage staff costs during the pandemic, several
Inter IKEA Group companies introduced recruitment stops.
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 FY20 full time equivalent coworkers per core business : Inter IKEA Group
also re-financed pension obligations for co-workers at IKEA of Sweden AB, a
subsidiary. This contributed a one-off gain of EUR 113 million to this year’s total
net income. Co-workers’ pension terms and conditions were unaffected.

Operational costs also include expenses to develop new products and solutions.
The costs related to development and innovation portfolios amounted to EUR
267 million in FY20. Charitable donations are also included in operational costs.

 FY20 operational cost per category: In addition, Inter IKEA Group worked
closely with retailers to develop new and different ways to shop the IKEA
product range-online, in remote locations and in city centers.  This included a
wider range of flexible and affordable
services to make shopping more
convenient for IKEA customers. 

 Financial income and expense:

Financial income and expense is revenue
and costs regarding loans, investments and
positions in foreign currencies. Last year
currency developments led to financial
income, while this year they led to
expenses.

 Income taxes: This year the Inter IKEA Group tax charge was EUR 295 million.
This equals 15% of pre-tax income, compared to 17% in FY19. This decrease is
mainly due to a nominal tax rate change in The Netherlands. Inter IKEA Group
operates in several countries, with its main activities in the Netherlands, Sweden
and Switzerland. As a result, most income tax is paid in these countries.

Inter IKEA Group has a strong financial position and therefore did not apply for
pandemic-related government support.

 Inter IKEA Group balance sheet: The Inter IKEA Group financial position
improved during FY20. Inventories and debts went down, and the equity ratio
increased from 39% to 45%. The consolidated balance sheet shows an overview
of Inter IKEA Group’s assets, equity, and what is due to suppliers, partners and
other organization
 19

 Intangible fixed assets: In general terms, fixed assets are business property
intended for long-term use. Intangible fixed assets are assets that lack physical
form like patents, concepts and intellectual property. Intangible fixed assets
form much of Inter IKEA Group overall assets.

Most Inter IKEA Group intangible fixed assets are so-called proprietary rights for
the IKEA trademarks and intellectual property. These rights were acquired for
EUR 11.8 billion. As these rights are expected to provide a positive return over a
long period of time, these costs are spread over a period of 45 years.

 Tangible fixed assets: Tangible fixed assets include real estate and

equipment that you can physically touch and feel. Inter IKEA Group tangible
fixed assets are mainly factories and distribution centres.
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Inter IKEA Group owns several offices and distribution centres, the IKEA Delft
store, the IKEA Hotell and Museum, and around 42 factories. Most of the
factories are located in Europe. The majority produce IKEA furniture, and two
produce components like screws and wooden dowels used to assemble IKEA
furniture. 

This year new owners took over the Inter IKEA Group manufacturing facilities in
Danville, USA and Konstantynow, Poland. The Konstantynow facility continues
to supply IKEA customers with chairs made of solid wood.

 Inventories and receivables: Inventories mostly consist of IKEA products in

warehouses. Inventories reduced dramatically when stores re-opened after the
lockdown. While the supply chain mobilized quickly, it took several weeks to
restart production and address logistics challenges.

 Receivables are money owed to the Inter IKEA Group by business partners.

Most receivables are for franchise fees and products sold and invoiced to IKEA
franchisees.

This year Inter IKEA Group supported franchisees by delaying payment

obligations for goods sold. The company also extended loans to several IKEA
suppliers to ensure they could re-start production after the lockdowns. Money
owed under these agreements are reflected in this year’s receivables.

 Group equity, provisions and liabilities: Equity is the capital invested by

shareholders of the Inter IKEA Group plus accumulated profits over time. Equity
increased with EUR 1.2 billion during FY20.

Of the EUR 1,731 million profit achieved during FY20, EUR 850 million will be
distributed as a dividend to Interogo Holding AG, a holding company that is fully
owned by the Interogo Foundation. The remaining EUR 881 million will be
added to Inter IKEA Group equity.
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Provisions are money set aside for pension commitments, deferred taxes and
claims. Provisions decreased this year as a result of the changed funding for the
IKEA of Sweden AB pension scheme.

 Liabilities are money owed to others. Most Inter IKEA Group non-current

liabilities, which are due over a long period of time, consist  of loans from
Interogo Holding AG (a non-controlling shareholder). As in FY19, Inter IKEA
Group will continue to repay EUR 500 million each year. Current liabilities are
short-term loans, money due  to suppliers and the current portion of long-term
loans from Interogo Holding AG.

Part (THREE) Overview of Inter IKEA Group FY-2019

A. Inter IKEA Group FY19 year in review

This part summarizes Inter IKEA Group’s financial performance for financial year
2019 (FY19). FY19 is the period from 1 September 2018 to 31 August 2019. FY19
has been a successful year for the IKEA franchise system.

 Retail sales grew by 6.5% compared to FY18. Total retail sales, which includes
sales of IKEA products, food and services to IKEA customers, amounted to EUR 41.3
billion.
 12 new IKEA stores opened around the world, and nine markets introduced e-
commerce.
 Around 2.8 billion people visited the IKEA website, and e-commerce sales grew
by 43%.
 In February a new commercial theme began. “Get ready for life” put the
bedroom and bathroom in focus, including lots of new products as well as some old
favorites. The PLATSA open wardrobe system and KUNGSBLOMMA bedroom
textiles were popular new families. “Get ready for life” continues until August 2020.
 Retail sales growth means positive results for Inter IKEA Group, which includes
the IKEA franchisor, range, supply and certain industry activities. Inter IKEA Group
reached total revenues of EUR 25.3 billion and a net profit of EUR 1.5 billion in FY19.
 22

 In FY19 IKEA retailers saw continued growth despite a challenging and changing
retail environment. Strong retail sales mean positive results for Inter IKEA Group.

B. Detailed FY19 financial results

 Inter IKEA Group’s financial performance was stable in FY19. Gross profit was
slightly less than in FY18 due to higher costs for materials, transport and logistics.
Combined with flat operational costs, this resulted in lower operating income. The
decrease was offset by improved financial income and expenses. Income taxes
increased to 17%, resulting in net income
of EUR 1,485 million.

 The Inter IKEA Group consolidated

income statement shows a simplified
overview of this year’s financial
performance.

Sales of goods: Sales of goods refers to

bulk sales of IKEA products to IKEA
franchisees. Inter IKEA Group also owns
and operates one IKEA store in Delft, the
Netherlands. IKEA Delft’s retail sales are
also included in this line item. IKEA
franchisees purchased more than 39.2
million cubic meters of IKEA products from
Inter IKEA Group in FY19, compared to 38.4
 23

million cubic meters in FY18. Together with increased sales prices, this contributed to
increased sales of goods.

 Other income: Other income mainly consists of income from selling the IKEA
catalogue and other marketing materials created for IKEA retailers including the
IKEA Delft store.

 Cost of goods sold: Cost of goods sold

describes the total accumulated costs to
manufacture and distribute products. The
cost of goods sold relates to both wholesale
and Delft store sales. Inter IKEA Group
manufactures about 12% of the IKEA range
and sources the remaining 88% from nearly
1,000 external suppliers. This includes both
home furnishing and food products. E-
commerce sales created increased costs for
packaging and logistics in FY19. Increased
raw material prices, tariffs and import
duties also affected costs, although raw
material prices decreased during the second
half of the year.

 Operational cost: Operational cost includes staff costs, utilities, rent and
other costs related to day-to-day operations. Staff costs mainly consist of
salaries, benefits, training and social costs. As per 31 August 2019 Inter IKEA
Group employed 26,227 full-time equivalent co-workers, compared to 26,504 in
FY18. Changes are mainly due to restructuring and the sales of factories.

 Operational costs also include expenses to develop new products and

solutions. The costs related to our development and innovation portfolios
amounted to EUR 175 million in FY19. Part of this investment went to develop
products that help people live more sustainable lives and reduce the IKEA climate
footprint.

 More than half of the IKEA climate footprint comes from the material in the
products and the production process. To transform into a low carbon business,
 24

IKEA is moving towards recycled and renewable materials and is pushing for
more lightweight construction. In FY19 this required significant
investments to transform the supply chain, sourcing and product
development. Inter IKEA Group also worked closely with retailers to
develop new and different ways to shop the IKEA product range –
online, in remote locations and in city centers (e.g. IKEA La Madeleine
in Paris).

 This includes new locations closer to where people live, work and
socialize.

 It also includes a wider range of flexible and affordable services to make

shopping more convenient for IKEA customers.

 Financial income and expense: Financial income and expense is revenue and
costs regarding loans, investments and positions in foreign currencies. Inter IKEA
Group paid less interest following
repayment of long-term loans in FY19.
Favorable currency developments partly
offset the interest expenses.

 Income taxes: This year the Inter IKEA

Group tax charge was EUR 301 million,
around EUR 45 million more than last
year. This equals 17% of pre-tax income,
compared to 15% in FY18. Inter IKEA
Group operates in several countries, with
its main activities in the Netherlands,
Sweden and Switzerland. As a result most
income tax is paid in these countries.

 Losses from sales of entities: Losses

from sales of entities mainly consists of a
loss connected to the sale of the Inter
IKEA Group production facility in Lure,
France

 Inter IKEA Group balance sheet

 25

 The Inter IKEA Group financial position improved during FY19. Inventories
and debts went down, and the equity ratio increased from 34% to 39%.

 The consolidated balance sheet shows an overview of Inter IKEA Group’s

assets and what is due to shareholders, suppliers, partners and other
organizations.

 Intangible fixed assets: In general terms, fixed assets are business property
intended for long-term use. Intangible fixed assets are assets that lack physical
form like patents, concepts and intellectual property. Intangible fixed assets form
much of Inter IKEA Group overall assets.

 Most Inter IKEA Group intangible fixed assets are so-called proprietary rights
for the IKEA trademarks, intellectual property and catalogue. Inter IKEA Group
purchased these rights for EUR 11.8 billion. As a positive return is expected for a
long period, these costs are spread over a period of 45 years, which started in
2012. This common practice, called amortization,
makes it easier to compare yearly income with
expenses

 Tangible fixed assets: Tangible fixed assets

are things like real estate and equipment that you
can physically touch and feel. Inter IKEA Group
tangible fixed assets are mainly factories and
distribution centres. Inter IKEA Group owns
several offices and distribution centres, the IKEA
Delft store, the IKEA Hotell and Museum, and
around 40 factories. Most of the factories are in
Europe. The majority produce IKEA furniture, and two produce components like
screws and wooden dowels used to assemble IKEA furniture. This year Inter IKEA
Group sold two factories and closed one other. In most cases co-workers have
remained in the same factories under new ownership or moved to new jobs in
other nearby factories with support from the Inter IKEA Group.
 26

 Inventories and receivables: Inventories mostly consist of IKEA products in

warehouses. Last year inventory levels were higher than normal due to lower
than expected sales. Inter IKEA Group took measures this year to lower inventory
levels, reducing their overall value.

 Receivables are money owed to the Inter IKEA Group by business partners.
Most receivables are for franchise fees and products sold and invoiced to IKEA
franchisees.

 Group equity, provisions and liabilities: Equity is the capital invested by

shareholders of the Inter IKEA Group plus accumulated profits over time. Equity
increased with EUR 1 billion during FY19.Of the EUR 1,485 million profit achieved
during FY19, EUR 850 million will be distributed as a dividend to Interogo Holding
AG. The remaining EUR 635 million will be added to Inter IKEA Group
equity.Provisions are money set aside for pension commitments, deferred taxes
and claims. Liabilities are money owed to others. Most Inter IKEA Group non-
current liabilities, which are due over a long period of time, consist of loans from
Interogo Holding AG (a non-controlling shareholder). As in FY19, Inter IKEA
Group will continue to repay EUR 500 million each year. Current liabilities are
short-term loans, money due to suppliers and the current portion of long-term
loans from Interogo Holding AG.
 27

Part (FOUR) IKEA'S Financial Indicators for years 2016-2020:

Balance Sheet & Common size analysis for Years 2016-2020

 28

Income Statement & Common size analysis for years 2016-2020:

 29

A. Return On Equity (ROE)

ROE

22%
20%
18% 18%

6%

2016 2017 2018 2019 2020

 Calculated by dividing net income by shareholders' equity. Because

shareholders' equity is equal to a company’s assets minus its debt.

 ROE is considered the return on net assets. ROE is a measure of the

profitability of a corporation in relation to stockholders’ equity.

 Based on this chart, 2017 has been a booming year by which Profitability,
Operating Efficiency, and Financial Leverage was improved.
 30

B. Return On Investment (ROI)

ROI

10%
8%
8%

6%

2%

2016 2017 2018 2019 2020

 Used to evaluate the efficiency or profitability of an investment or compare

the efficiency of a number of different investments.

 Directly measure the amount of return on a particular investment, relative to

the investment’s cost.

 Equals the benefit (or return) of an investment / the cost of the investment.

 Based on this chart, IKEA had an effective uprising Return On Investment

over years.
 31

C. Net Profit Margin

Net Profit Margin

19%

8%
6% 6%
4%

2016 2017 2018 2019 2020

 Equals to how much net income or profit is generated as a percentage of

revenue.

 Is the ratio of net profits to revenues for a company.

 Illustrates how much of each dollar in revenue collected by a company

translates into profit.

 As a result of the booming in 2017, the Value of profits was much higher than
in 2016 but with a lower profit percentage. Moreover, the Net Profit Margin
has improved over time due to improved performance.
 32

D. Ratio Analysis

Current Ratio

1.74

1.52 1.53
1.43
1.36

2016 2017 2018 2019 2020

 Compares line item data from a company's financial statements to reveal

insights regarding profitability, liquidity, operational efficiency, and solvency.

 Marks how a company is performing over time, while comparing a company

to another within the same industry or sector.

 Based on this chart, the Current ratio indicates that IKEA has a good trend
over time as a good current ratio is between 1.2 to 2.

 Means that the business has 2 times more current assets than liabilities to

covers its debts.
 33

References:

1. http://www.ikea.com

2. http://www.bain.com/publications/articles/winning-operating-models-
that-convert-strategy-to-results

3. http://www.ukessays.com/essays/marketing/distribution-of-ikea-
products-marketing-essay

4. http://cmuscm.blogspot.sg/2013/02/ikeas-low-price-strategy

5. http://businesscasestudies.co.uk/ikea/building-a-sustainable-supply-chain

6. http://www.fastcompany.com/3039598/most-innovative-companies-
2015/ikea

7. http://www.therobinreport.com/is-ikea-the-most-influential-retailer-of-
the-past-25-year

8. https://www.tradegecko.com/blog/ikeas-inventory-management-
strategy-ikea

9. http://www.supplytimes.com/inventory-management/ikeas-inventory-
management-strategy-why-it-works

10. https://www.inter.ikea.com/en/performance/download-financial-reports
 34

- SECTION TWO -
 35

Part (One) REVIEW OF AIR BUSINESS'S BUSINESS MODEL

1. Company profile

 Airbnb is more than an online platform used to find accommodation. It

represents a growing community that is shifting the way people feel about
sharing, about travelling and about home. Brian Chesky, CEO and co-founder of
Airbnb used a communication at Airbnb’s blog to state that Airbnb is “creating
a door to an open world—where everyone’s at home and can belong,
anywhere.”

 More than a travel experience for its guests, Airbnb also plays an important
role for its hosts, allowing them to attain a new source of income by opening
their homes and sharing their expertise.

2. History

 Founded in August 2008 by Joe Gebbia, Brian Chesky and Nate Blecharckzy,
Airbnb Inc. represents the emergence of new business models in a nonexistent
market. Airbnb Inc. was first born in October 2007 out of a struggle between
two friends to pay their rent. For this matter they created
airbedandbreakfast.com.

 Here they offered their unutilized space and provided airbeds and breakfast
for the guests. This first trial accommodated just three guests, who paid $80
per night.

 In March 2009, Airbed & Breakfast became Airbnb. By April 2009, the
founders had personally met many of their hosts by being guests at their
homes. This initiative helped combine the creation of trust with the
dissemination of Airbnb’s culture of building a community and fostering a
unique experience. Additionally, the Company received a six hundred-
thousand-dollar investment by Sequioa Capital, which according to Brian
Chesky, allowed Airbnb to grow from a market-fit product to a Company. In
2014 Airbnb was considered the company of the year by Inc Magazine.
 36

 According to Burt Helm, senior contributor writer at Inc., Airbnb was

disruptive, had built well-known brand, offered more accommodation than the
largest hotel chains in the world and most importantly, had affected the
popular culture with the idea of sharing their homes.

 On the 4th of December 2014, Brian Chesky used his twitter2 account to
communicate that Airbnb had achieved its one millionth listing.

 Now, in 2016 Airbnb has already tripled that number, having more than
three million listings and having served over one hundred and fifty million
guests.

 A company that started in 2007 with three airbeds in a living room in San
Francisco, went through three launches and is ten years later, according to
information provided from Airbnb Inc., present in more than 191 countries and
65 000 cities. Airbnb considers itself a trusted community marketplace for
people to live a unique travel experience.

3. Two-sided platform

 Two different consumer perspectives must be acquainted to when discussing

Airbnb. First, the one of the hosts who use Airbnb to rent their spaces or provide
different services. Secondly, the one of the guests who use Airbnb to find a
unique travel experience.

4. Creating a Reputational System

 In the digital era, where face-to-face contact is very scarce, feedback about
consumer experiences play a relevant part. Aware that trust represents one of
the pillars for the Company’s success, Airbnb has created different initiatives to
 37

build and enhance trust within its processes, always ensuring high levels of
transparency.

 To guarantee that both parties, hosts and guests, are able to describe and
classify their experiences, Airbnb provides them a with a review system with
specific guidelines.

 At Airbnb, reviews must be made within 14 days from the end of the service
and are only made public when both parties have responded. This initiative
incites users to give more honest, transparent, based on facts and constructive
reviews, avoiding possible influences. If the reviews violate the company’s
content policy Airbnb possesses the right to remove them.

 Airbnb potentiate trust amongst strangers, the first by providing additional

and relevant information and the second by showing the positive opinion of
other guests, impacting the choice of future guests.

5. Serving Stakeholders
 Airbnb has five stakeholders and is designed with all of them in mind. Along
with employees and shareholders, they serve hosts, guests, and the
communities in which they live. They intend to make long-term decisions
considering all of stakeholders because their collective success is key for Airbnb
business to thrive. Below, we will share more about hosts, guests, communities,
and how they serve them.

Who are Airbnb hosts?

 Airbnb’s hosts are the foundation of our community and business. It is their
individuality that makes Airbnb unique. From schoolteachers to artists, thier
hosts span more than 220 countries and regions and approximately 100,000
cities, and 55% of our hosts are women. As of September 30, 2020, we had over
4 million hosts around the world, with 86% of hosts located outside of the
United States.
 Hosts had 7.4 million available listings of homes and experiences as of
September 30, 2020, of which 5.6 million were active listings. We consider a
listing of a home or an experience to be an “active listing” if it is viewable on
Airbnb and has been previously booked at least once on Airbnb. In 2019, 84% of
our revenue resulted from stays with existing hosts who had completed at least
one guest check-in event (a “check-in”) on or before December 31, 2018.
 38

 Our hosts largely come to us organically with 79% of our hosts coming
directly to our platform to sign up to host in 2019. In 2019, we added more
hosts than any year in our history with 23% of our new hosts first starting out as
guests on Airbnb.

Why do they host?

• Hosts can earn extra income. In a 2019 survey of hosts that we

conducted, half of our hosts told us that the supplemental income they
generated helped them afford to stay in their homes.

• Hosts can connect guests to their communities. In the same survey, of

the hosts who made recommendations, 87% said that they recommend
local restaurants and cafes to their guests, and 82% said they recommend
businesses that are locally owned.

• Hosts can share their skills and passions.  Airbnb Experiences allow our
hosts to not only share their homes with guests, but also their skills and
passions by offering authentic activities in over 1,000 cities around the
world.

What do Airbnb provide their hosts?

 
• Global demand. Because of strong demand from guests around the
world, for active listings in 2019 that were new to their platform, 50%
 
received a booking within 4 days of becoming available, and 75% received
a booking within 16 days of becoming available.
 
• Activation and merchandising. Our product makes it easy for a new host
to create, activate, and merchandise their new listing, and we also
 
provide recommendations and tools for hosts to attract incremental
demand.
 
  • Pricing. While hosts set their own prices, we provide hosts with Smart
 39

Pricing tools that suggest prices for their listings, and we also provide data
insights that include how host occupancy rates compare to other listings
on our platform.
 
• Scheduling. Hosts can easily manage their calendars and accept, track,
 
and manage their upcoming reservations on our website and mobile apps.
 
• Payments. Airbnb facilitate all payments on our platform: collecting
  payments from guests and processing payments to hosts. We also provide
tools to hosts to manage and track their earnings.
 
• Community support. We have a global community support team to help
 
with issues that arise before, during, or after a stay or experience.
 
• Host protections. Airbnb host protections include property damage
protection and liability coverage. In addition, our trust and safety
  initiatives include risk scoring, watchlist and background checks, fraud and
scam prevention, secure messaging, secure payments, and minimum age
requirements.
 
• Reviews and feedback. Airbnb platform builds trust by enabling hosts and
  guests to learn from each other through the reviews they leave following
each stay or experience.
 
• Superhost program. Airbnb Superhost program recognizes our most
active and high-quality hosts. Superhosts typically enjoy higher occupancy
  rates because guests value the hospitality, quality, and reliability they
offer.

Who are Airbnb guests?

 From young people to retirees, our guests come from a range of

cultures and places. They seek everything from budget stays to luxury
accommodations in large cities to remote villages. What they often
have in common is a curiosity about the world and open-mindedness
to other people and cultures.

 In 2019, 54 million active bookers worldwide booked 327 million nights and

experiences on our platform, and since our founding, there have been over
 40

825 million guest arrivals on Airbnb.

 Most of our guests discover Airbnb organically, with approximately 91% of all
traffic to Airbnb coming through direct or unpaid channels during the nine
months ended September 30, 2020. Guests are highly engaged and contribute
value for hosts and other guests: over 68% of guests left reviews of their stays in
2019, and collectively, hosts and guests have written more than 430 million
cumulative reviews as of September 30, 2020.
 Many of these guests return to our platform; during 2019, 69% of our
revenue was generated by stays from repeat guests.

Why do guests choose Airbnb?

 
• Guests can be hosted. Whether guests stay with a host or have a home all
  to themselves, they can experience the cities they visit the same way
locals do.
 
• Guests can visit real neighborhoods. From visiting local neighborhood
coffeehouses, shops, grocers, restaurants, bakeries, parks, hikes, and bike
 
paths, guests can feel like part of a local community and discover a world
right outside their door.
 
• Guests can stay in unique spaces. Airbnb believe we offer more unique
  homes than any other platform and that the majority of our listings, from
igloos to treehouses, and castles to boats, are only available on Airbnb.
 
• Guests can feel at home. Spaces on Airbnb have all the amenities of a
 
place you can call home, such as living rooms, kitchens, and backyards.
 
• Guests can find superior value. Based on our survey data, a majority of
guests tell us they choose Airbnb to save money while traveling, as listings
 
on Airbnb often provide greater value through more space and amenities
than options like chain hotels that typically provide only single rooms.
 
• Guests can take any type of trip. From nearby stays to international
vacations, family gatherings to corporate meetings, and weekend
 
getaways to multi-month stays, Airbnb offers a wide range of
accommodations for all types of trips.
 
 41

• Guests can stay anywhere. Our hosts offer listings for guests in

approximately 100,000 cities, many of which are not served by hotels, and
  according to a report that we commissioned in 2018, even in popular
destinations, at least two-thirds of our guest arrivals take place outside of
traditional tourist districts.
• Guests can have authentic experiences. From making handmade pasta in
Rome to studying music history in Havana, Airbnb Experiences offer tens
of thousands of experiences in communities around the world.

• Guests can rely on a trusted platform. Guests can rely on reviews to give

them confidence about what they are booking, community support to
  help with issues arising before, during, or after a stay or experience, as
well as our guest refund policy that Airbnb will rebook or refund a guest if
a listing does not meet our hosting standards.

Our Communities
 In 2007, we began with a single listing on Rausch Street in San Francisco’s
SOMA district. Today, Airbnb operates in approximately 100,000 cities, ranging
from large cities to small towns and rural communities, in more than 220
countries and regions around the world. Our business is intertwined with these
communities, and we are focused on seeing them thrive.
How do we serve the communities in which we operate?
 
• Airbnb create economic stimulus. Between host income and guest
  discretionary spending, we believe the majority of the economic activity
on Airbnb remains in the neighborhoods where guests stay.
 
• Airbnb are committed to being good partners. We have invested in
creating tools to help cities to more effectively enforce their regulations,
  and we have worked with thousands of local regulators, policymakers,
and other local leaders to engage with the communities in which we
operate.
 
• Airbnb offer support in times of crisis. We have created a program
through which hosts offer their spaces to people in need and, to date,
  hosts in 99 countries have housed more than 75,000 people recovering
from natural disasters, international refugees, or more recently, frontline
responders during COVID-19.
 42

6. Airbnb System of Trust

One of our core innovations has been the design of a system that allows
millions
of

strangers to trust one another. The system for trust that we have designed
includes: reviews, secure messaging and account protection, risk scoring,
secure payments, watchlist and background checks, cleanliness standards,
fraud and scam prevention, insurance and protections, age restrictions, an
urgent safety line, a 24/7 neighborhood support line, and our guest refund
policy. We deploy some of these features such as reviews and secure
payments globally, and others such as background checks in specific
countries and regions.
Part (Two) SWOT ANAYSIS

A - Strengths
A globally recognized brand

 Airbnb is recognized globally, and this is one of the most valuable assets of the
platform. Airbnb has even found its way into the vernacular around the world,
wherein it is used as a noun and a verb in some places.
 The popularity of Airbnb is unmatched among travel brands. In fact, Airbnb’s
online search popularity surpasses that of competing travel brands, according to
Google Trends.
 The power of Airbnb’s brand attracts people directly to the platform, and that is
evident through the percentage of organic traffic to the website. Between January
and September 2020, approximately 91% of all Airbnb traffic originated from direct
or unpaid channels.
 43

An engaged guest community

 Airbnb’s guest community is one of the company’s greatest strengths. The

nature of the Airbnb experience, the personal touch of hosts, and the interaction
with them help guests easily engage with the Airbnb community.
 Travelers who have had positive experiences with Airbnb regularly return to the
platform for future travel and book directly, instead of going through
intermediaries.
 The guest community is vital for Airbnb’s business because it generates word of
mouth that drives organic traffic directly to the platform and saves the company a
lot of money in the marketing and advertising department.
 Airbnb has the numbers on its side to prove it. Indicators of guest engagement,
such as the number of travelers that leave a review, (68% left reviews for their
stays in 2019) and the repeat-guest revenue (69% 2019 revenue was generated by
stays from repeat guests, compared to 66% in 2018), are steadily going up.

Global network

 Airbnb’s global network of guests and hosts allows the short-term rental
platform to expand its reach without the need to deploy local operations in each
place it operates.
 Hosts and guests span more than 220 countries and regions, which helps Airbnb
thrive on cross-border travel, and, in turn, helps establish a global brand presence.
 The network grows as new hosts see the opportunities to earn extra income
and guests attracted by the competitive value proposition of Airbnb stays. The
global network is the backbone structure that allowed Airbnb to operate during the
Covid-19 crisis and offer travel spaces closer to home.

Custom-built platform

 Airbnb takes a lot of pride in its platform, and rightly so. The proprietary
technology utilized by the company is designed to serve the unique needs of hosts
and guests. The platform boasts industry-leading features for hosts and guests,
such as pricing recommendations, scheduling, integrated payments, community
support, host protection mechanisms, reviews, feedback, etc.
 Airbnb’s approach to building this online and mobile app ecosystem of hosts
and guests that interact on the platform is unique and adds a ton of safety features
through AI and automation. 
 Airbnb’s payments capabilities have a global reach in the travel industry and are
critical to enabling individual hosts to join the platform.
 44

 Finally, Airbnb demonstrates its global market appetite by making its platform
available in 62 languages and dialects to ensure that its services are localized for
hosts and guests worldwide.

Large host community

 The Airbnb host community is made up of people from around the globe that
offer homes and experiences. The platform currently has more than 4 million hosts
attracted to Airbnb organically or through incentive schemes (programs in which
hosts recruit hosts). Quite often, guests turn hosts after having positive experiences
themselves. In 2019, 23% of Airbnb’s new hosts were guests on the platform first.

B- Weaknesses
Covid-19 infects the financial performance 

 Coronavirus disruptions have impacted Airbnb’s financial fitness and its

business. Airbnb’s actions to attenuate the pandemic will continue to influence the
company’s results of operations.  

Risk related to loss of institutional knowledge and expertise 

 Due to the coronavirus’s adverse effect and the economic challenges brought by
its disruptions, Airbnb had to lay off around 1,800 employees in May 2020. The
workforce’s decrease affected their marketing and design operations, customer
service, transportation, Airbnb Studios, Hotels, and Airbnb Luxe teams. As a result,
the global platform felt a loss of institutional knowledge and expertise in some key
roles. Airbnb has been affected by capacity constraints, which are significant for its
growth, development of innovative products, and to have a competitive advantage.

Risk for net loss and not being able to achieve profitability 

 Airbnb has experienced a net loss of $70.0 million, $16.9 million, $674.3 million,
and $696.9 million for the years ended December 31, 2017, 2018, and 2019 and the
nine months ended September 30, 2020, respectively. As of December 31, 2019,
 45

and September 30, 2020, the company had an accumulated $1.4 billion deficit and
$2.1 billion, respectively. 
 The global short-term rental platform explains this by making investments in
growing their host and guest communities and improving offerings and features, as
well as expanding its operations and hiring new employees over the years. As they
plan to continue making serious investments in the future, this might hurt their
profitability. The company might face difficulties to raise its revenues significantly
and to make up for the high expenses. The endeavor to overcome the challenge
related to higher costs might be more complicated than the company expects. 
 Airbnb expects to experience a significant net loss for 2020 due to the
Coronavirus pandemic. They are spending a high portion of their cash to support
their operations due to the drop in bookings and revenue compared to 2019.  

Increase in size of regions with lower service fees 

 Some of Airbnb’s offerings in certain regions have lower service fees, and the
company has to make high additional investments. This hurts Airbnb’s offerings as
these regions grow in size over time, compared to other areas. For instance, seats
for Airbnb Experiences are booked at lower prices than nights booked for stays. 

Reduce in service fee might have an impact on sustaining profitability

 Airbnb has changed and may decrease their service fees in the future because
of strategic or competitive reasons. However, the risk of failing to raise their
revenue or manage the
 increase in operating expenses could hinder Airbnb from sustaining profitability.

Airbnb’s Adjusted EBITDA and Free Cash Flow might bring risk to their stock
price

 Airbnb had adjusted its EBITDA (Earnings Before Interest, Taxes, Depreciation,
and Amortization) of $60.0 million, $170.6 million, $253.3 million, and $230.2
million for the years ended December 31, 2017, 2018, and 2019 and for the nine
months ended September 30, 2020, respectively. Their Free Cash Flow was $151.0
million, $504.9 million, $97.3 million, and $520.1 million for the years ended
 46

December 31, 2017, 2018, and 2019 and for the nine months ended September 30,
2020, respectively. 
 Airbnb’s adjusted EBITDA and Free Cash Flow declined in 2019. The company
explains that this drop results from their decision to make 2019 a year in which
they made major investments in new product and growth initiatives, including in
China, and to improve technical infrastructure. 
 In addition to this, Covid-19 has caused a decrease in 2020. Thus, the negative
trend of their adjusted EBITDA and Free Cash Flow might not be changed. If their
future adjusted EBITDA and Free Cash Flow would not meet the investor and
analyst expectations, Airbnb’s stock price might be at risk. 

Slow revenue growth 

 Airbnb’s revenue growth, which has slowed in the past years, is expected to
continue. 
 Their year-over-year growth rate in revenue dropped in 2019 as compared to
2018 and also in 2018 as compared to 2017. In the first nine months of 2020, as a
result of Covid-19, revenue declined significantly compared to the first nine months
of 2019. 

Failure to keep existing hosts and add new ones

 If Airbnb hosts do not have enough listings and the number of nights booked
decreases or the price charged by hosts drops, it will affect Airbnb’s business.
Airbnb might be unable to offer a variety of properties and attract and keep both
hosts and guests, which might be a risk for the growth of its listings. The global
platform would be threatened if professional hosts could not be retained.  

Maintaining brand awareness and reputation

 The most significant Airbnb assets are brand awareness and reputation. These
assets are essential for the platform to continue to build their competitive
advantage. 

Safety perception

 In case Airbnb would face host, guest, or third-party actions that are criminal,
violent or dangerous, or fraudulent activity, this could erode the safety or rather
the perception of the safety of its platform. Importantly, the platform’s measures
to react to such issues might affect its financial performance. 
 47

Failure to provide high-quality service 

 Airbnb’s community support function is crucial to keep both guests and hosts on
its platform.

C- Opportunities
Resilient Categories help recovery from Covid-19

 Domestic travel, short-distance travel, travel outside of our top 20 cities, and
long-term stays are the categories that remained stable despite the overall
negative impact by Covid-19. This shows the soundness of Airbnb’s business model
and its adaptability to new environmental challenges. 

Increase guest community based on changing travelers’ preferences 

 The biggest player in the short-term rental market plans to align its offerings to
the changed travelers’ behavior because of Covid-19. Airbnb sees an opportunity to
bring products based on the behavior of travelers and magnetize more guests.  

Brand investments 

 Airbnb has a strong brand that may be used to build powerful marketing
strategies linked to product launches that introduce new features. The platform has
an opportunity to put its core values at the core of its brand. 

Global expansion

 Airbnb is competing globally, but it still has a chance to increase its host and
guest communities in markets with lower penetration, such as China, Latin
America, Southeast Asia, and some smaller markets. 

Innovation 

 Innovation on the Airbnb platform could make it more appealing both for hosts
and guests. It could also benefit engagement and loyalty from existing and new
communities. 
 48

New offerings 

 Investments in technology and innovation are strongly linked to designing host

and guest interfaces and new products that might bring opportunities for the
global short-term rental platform. 

D- Threats
Decreased travel demand 

 Covid-19 has had and probably will continue to have a tremendous impact on
the travel demand and travelers’ willingness to use Airbnb. This might have
negative implications on Airbnb’s business and its financial condition. 

Legal and regulatory changes 

 The legal and regulatory landscape and changes in the application of existing
laws and regulations or the adoption of new laws and regulations that impact
Airbnb’s business might influence its revenue. New regulatory changes might also
have an impact on hosts and/or guests. The changes might happen in tax
legislation.

Competitive threats 

 Airbnb tries to stand out and attract hosts and guests as a powerful player in a
competitive industry. Hosts can decide to use some of the competitors, and they
often cross-list their offerings. Similarly, guests may decide to prefer another short-
term rental platform. The high rivalry might lead to a decrease in demand for
Airbnb from both hosts and guests. 

Regulations could lead to fines and criminal penalties

 Another possible environmental threat for Airbnb is that complex and changing
laws and regulations might lead to fines and criminal penalties. This could have
harmful consequences on its business. 

Litigation with different stakeholders and possible liability

 The company has been in litigation with diverse stakeholders such as

governments, industry bodies, municipalities, trade associations, etc., which tries
 49

to enforce liability to its platform. Airbnb might become more exposed to the risk
from third-party claims due to regulatory changes.  

Liability for content on Airbnb’s platform

 Due to regulatory shifts in different markets, Airbnb might be confronted with

claims regarding information or content available on the platform created by third
parties, such as hosts. In the US, for example, there is a proposal for legislation that
will hold short-term platforms liable for user-generated content. The guaranteed
liability with the EU’s E-Commerce Directive might be changed by introducing the
Digital Services Act.  

Decrease of acceptance of home-sharing  

 In certain regions, because of cultural considerations, home-sharing might be

less popular. So this might negatively affect Airbnb’s competitiveness. For instance,
a high number of hosts and guests are not prepared to share homes during the
Covid-19 crisis.

Changes in technology and the evolving demands of hosts and guests

 Airbnb has to continue investing in new technology to meet shifting demand.

Tokenization, cryptocurrencies, and new authentication technologies, to name a
few, have to be considered to keep users on its platform. 
 Key takeaways
 If you’re an investor, you’re interested in the facts. Well, the matter of fact is
that Airbnb has never turned a profit. Furthermore, Airbnb’s management made
sure to put a lot of warnings in their IPO prospectus to signal that this may not
change in the foreseeable future.
 Investors are given a heads-up that the company “may not be able to achieve
profitability” and that its “adjusted EBITDA and free cash flow have been
decreasing and that this downward trend could continue.” 
 The shortfall of profits wouldn’t be so alarming if the income growth was stable
and/or increasing. However, Airbnb has warned that its “revenue growth rate has
slowed, and we expect it to continue to slow in the future.”
 The instability of Airbnb’s income growth and growing losses, along with stricter
regulation and intensified competition may challenge Airbnb’s position at the
industry’s forefront.
 50

Canvas Business model

Part (Three) Airbnb Growth Strategy

• Unlock more hosting. In order to have enough selection for guests

booking on our platform, we will continue to invest in growing the size
 
and quality of our host community. We believe that we have just
scratched the surface of the opportunities that hosting can provide.
 
• Grow and engage our guest community. We intend to attract new guests
to Airbnb and convert more of them into brand advocates. We will
 
continue to focus on engaging our existing guests to return to book and to
use Airbnb with more frequency.

 
  • Invest in our brand. We intend to invest more deeply in our brand to
 51

educate new hosts and guests on the benefits of Airbnb and the
uniqueness of our offering.
 
• Expand our global network. We plan to expand our global network in the
countries in which we already have a deep presence, as well as to expand
  into markets where our penetration is lower, such as India, China, Latin
America, Southeast Asia, and tens of thousands of smaller markets and
remote areas around the world.
 
• Innovate on our platform. We will innovate to improve our host and
guest experience, making Airbnb more accessible and appealing for new
 
hosts, guests and driving increased engagement and loyalty with our
existing community.

• Design new products and offerings. We will design new opportunities for
connection. As the world continues to change, we will continue to bring
  together new technologies with our design expertise to expand
possibilities for our hosts and offer new experiences for our guests.

Key Resources / Assets

 The most important asset of the platform business model are its network
effects. It is the resource/asset that needs to be built and nurtured. The data,
the algorithms and the capability to analyse and gain insights are essential.

 Positive network effects can be diminished by negative customer

relationships and need to be maintained and improved as part of the key
activities. 

 Network effects between the participants (hosts and guests) are essential.

For network effects to occur a sufficiently large number of them need to be on
the platform and of course sufficient velocity of transactions (the latter being
worth a call out due to the fact of the less frequent nature of these
transactions):

- 7m+ listings worldwide in 100k+ cities across 220+ countries 

- 400k super hosts 
- 2m+ stays per night 
-
- 50k+ experiences in 1k+ cities
 52

- $41b+ revenue for hosts (last 10 years)

 Data assets: Captured user data and other data (external).

 Algorithms, technologies, analytic capabilities and more (more shortly).
 Skilled engineering & other staff, including local staff.
 Brand: Airbnb’s brand is crucial and what they stand for. You may see
Booking.com, Expedia and TripAdvisor as somewhat interchangeable. But
Airbnb is unique and recognisable. All work that has gone into building the
brand has been geared toward not being seen as an intermediary but the actual
provider of the customer experience.

Customer Segments

 As a multi-sided platform business, Airbnb needs to segment both sides: the

guests as well as the hosts. Depending on the purpose, Airbnb likely uses classic
market segmentation as well as micro segmentation. Identified segments can
be used for a variety of purposes, including marketing, developing new
products and important business growth decisions and more. 

Potential ways to segment guests:

 By geo-demographic
 Behavioral

 Trip type: Business travel; leisure travel; visiting friends/family;

backpacking.
 Rental type: Shared space; private room; entire
home/apartment.
 Accompanying guests: Number & type (spouse, kids, parents,
etc.).

 Motivation-based: primary reasons for using Airbnb (more shortly).

 Interest: Types of activities that travellers engage in (esp leisure),
particularly interesting for Airbnb Experiences / Online Experiences.
 53

 This survey by the Pew Research Center shows three prevailing demographic
factors are (dark red): educational attainment (college grad+); income (>$75k);
age bracket (30-45) correlate particularly high with Airbnb market penetration.
There are some overlaps with Uber and also quite a few differences as you can
see.


Economic Impacts

 Airbnb considers itself a growing community which is changing the way

people feel about traveling and about home. According to Botsman & Capelin
(2016), what differentiates Airbnb from other accommodation platforms such as
Homeaway, VRBO and Wimdu is its emphasis in a community of people. Although
the platform promotes and fosters an online community, all of these initiatives
 54

have the common objective of creating a better offline interaction.

 Due to the dimension reached by the Airbnb community, and as a way of

ensuring its well function, the Airbnb Community Compact was released in
November 2015.
 This document lists the specific actions to help home sharing to continue to
potentiate communities.

The actions that constitute the Airbnb Community Compact are the following:

 Treat every city personally and help ensure the Airbnb Community pays its
fair share of hotel and tourist taxes;

 To build an open and transparent community to all;

 Promote responsible home sharing to make the cities stronger.

 All actions intend to create strong relationships between cities and the
Airbnb Community.

 According to Airbnb’s report The Economic Impacts of Home Sharing around

the world (2015) conducted in San Francisco, New York, Paris, Amsterdam,
Athens, Barcelona, Berlin, Boston, Edinburgh, London, Los Angeles, Montreal,
Portland, and Sydney shows the travelers interest in living like locals, that great
part of the expenditures take place in the neighborhoods they are staying in and
also the economic impact that home sharing has on many hosts.

The Economic Impacts of Home Sharing Around the World Airbnb, 2015
 55

 Although for many hosts Airbnb is a way of earning extra income, for others,
hosting has been a way of avoiding eviction or foreclosure. For example, the first
report about Rio de Janeiro and the Brazilian Airbnb Community released in 2016,
shows that in the average income received by host in 2015 was of $2,000 which
helped 21% of hosts avoid eviction or foreclosure. Additionally, host income and
guest expenditure generated $160 million in economic activity for the city.

 Moreover, in Barcelona, Airbnb shows an economic impact of $680 million in

2015 which is approximately six times higher than the impacted presented in
2013.

 Such expenditure, whether from users or suppliers is strengthening local

economies as well as having positive impacts in standards of living, basic
infrastructures and entrepreneurial initiatives.

 Airbnb, as well as other companies belonging to the sharing economy, are

removing or significantly reducing barriers of ownership and inflexible networks.
Creating new opportunities for communities that were unable to participate in
more traditional models.

 Airbnb encourages its users to live as a community, potentiating the creation

of different groups around the world. These groups are coming together online
and offline and are contributing to the community by simply sharing advice or by
gathering strengths to affect public policy.

 Hosts are gaining extra income and are joining a supportive worldwide
community which will allow them to learn from each other and from Airbnb.
 56

Digital evolution

 Airbnb did not create new buildings to ensure housing for its users, they
realigned the market of supply and demand of accommodations through a digital
platform which connects all online and mobile users. Airbnb, as many other
digitally based companies have uncovered supply and demand which always
existed in a unique speed and scale, creating a place for them in the market.

 Individuals having ordered/bought goods or services over the internet for

personal use in the last 12 months.
 57

Airbnb logo evolution

Advantages of Air BNB as an investment Sharing Strategy

 The sharing economy is a commercial or economic model often referred to

as a peer-to-peer economy. This model allows buyers and sellers to conduct their
business more easily by sharing human and physical resources. This includes
the collaborative consumption of goods and services of shared ownership and
value.

 Companies in the sharing economy don't provide individuals directly with

goods and services, but make their money by connecting buyers and sellers. This
model has the potential for continued revenue growth. Both eBay and Craigslist
have taken advantage of the peer-to-peer business model for more than a
decade. Newer companies like Uber, Lyft, and Airbnb have modeled their
companies to meet a variety of consumer demands. 

It may be more lucrative than traditional renting

 A solidly-booked Airbnb rental may be more profitable than renting the same
property to a long-term single tenant. That’s because you’re usually able to
charge more on a nightly basis. In Seattle, for example, the average apartment
rents for about $2,000 per month.1 That represents $24,000 gross income if the
tenant signed a 12-month lease. 
 58

 But what if you went the Airbnb route? According to AirDNA, the average
daily rate for an Airbnb rental in Seattle is about $150, and units are occupied an
average of 270 days out of the year.If you rented out your Airbnb for $150 per
night for a total of 270 nights per year, it’s possible to rake in $40,500 in gross
revenue from the rental. That’s $16,000 more than you’d make through
traditional renting.

You’ll get a Diversified Portfolio of Tenants

 With traditional renting, you are putting your eggs in a single basket with one
tenant. This can work out fine if the tenant is financially reliable and stays for a
long time. But if they ever miss rent payments or simply vanish in the night, your
income takes an immediate hit that’s hard to immediately replace. 

 With an Airbnb rental, you are collecting income from different tenants on a
regular basis. Each renter represents a very small percentage of your total
income, so if any of them cancel at the last minute or otherwise flake on paying, it
may not have much impact. 

 Depending on where you live, your dream of owning and renting an Airbnb
property may never get off the ground. Many jurisdictions have placed
restrictions on Airbnb investment rentals, making it nearly impossible to rent out
a property other than your own residence.
 In San Francisco, for example, you can’t rent out any part of a property
unless it is your primary residence, defined as your staying on the property at
least 275 nights a year. And it is illegal to have more than 90 nights of “un-hosted”
rentals, meaning you aren’t present while guests are there. 

 In many cases, these restrictions were put in place to ensure adequate

housing supply for residents, but they likely cut down the potential earnings for
someone looking to make money through Airbnb.

 Many cities are still deciding whether to regulate short-term rentals. That
uncertainty makes it very risky to purchase a property with Airbnb rentals in
mind.

Airbnb’s Network Could Provide Significant Scale Advantages

 Airbnb’s existing platform of property owners and room listings creates a

true network effect that could provide greater scale advantages. In essence, the
more listings available on the platform, the more consumers will look to Airbnb
 59

first, which will drive more property owners to the platform to reach the largest
audience. As Airbnb states, “guests attract hosts, and hosts attract guests.”

 Airbnb already has the largest platform for room listings of its many
competitors, including significant size advantages over more traditional hotel
room providers. Scale advantages were often a bull argument for investing in tech
startups Uber (UBER) and Lyft (LYFT). However, the benefits were largely
overstated, as the firms offer a largely commoditized service, taxi rides and
delivery, that isn’t unique to either business. Airbnb, on the other hand, truly
benefits from scale, as with each new listing, it becomes easier, and theoretically
cheaper, to attract users, and vice versa.

 Further benefitting Airbnb during the COVID-19 pandemic is the rise in

demand for short-term rentals over hotels when choosing somewhere to stay.
Should the COVID-19 pandemic cause a permanent shift in consumer behavior
(some industry forecasts don’t expect hotel demand to fully return until 2023),
Airbnb could stand to reap the benefits given its larger scale compared to peers.

Airbnb’s Available Listings vs. Competitors

 60

Cost Structure

 On a high-level, Airbnb's cost structure will be straight-forward. The

interesting question will be to see the actual numbers once they start reporting
on it. The below are likely the key cost items:

1. Cost of revenue will include things like insurance premiums, payment

fees, ongoing IT costs.
2. Sales and marketing: Advertising to acquire & retain customers (hosts
& guests). It could include discounts, promotions, (covid and other)
refunds, referral fees, etc.
3. Research & Development: engineering costs, product development,
design, improvement of the platform and other R&D costs.
4. General & Admin: general management, execs, admin employees (e.g.
HR, finance, etc) legal fees, professional services,
5. Depreciation and Amortization: IT, property and some other but
should be low on an overall level. 
6. And other costs, including interest expense. 
 61

Part (Four) Airbnb Financial Indicators

Airbnb Income Statement & Common Size Analysis

 62

ABNB Stock Price & IPO

 An initial public offering (IPO) refers to the process of offering shares of

a private corporation to the public in a new stock issuance. Public share issuance
allows a company to raise capital from public investors. The transition from a
private to a public company can be an important time for private investors to
fully realize gains from their investment as it typically includes share premiums
for current private investors. Meanwhile, it also allows public investors to
participate in the offering.

 Airbnb has filed its prospectus to go public, on Nov. 16, 2020 and debuted on
the Nasdaq under the ticker ABNB on Dec. 10 that same year. The company
priced its initial public offering at $68 a share, up from its original plan of $44 to
$50 per share, giving it a valuation of $47.3 billion on a fully diluted basis.13
Airbnb raised #3.5 in its IPO, up from the $2.5 billion expected.

 i.e. the company had the third biggest IPO of 2020 with a value of $3.5
billion

 Stock Price: $212.75 (+14.55%), as of 12-Feb-2021 4:00 pm EST, Previous

Close: $185.72
 63

Airbnb Income Statement & Revenue Model

USD FY, 2017 FY, 2018 FY, 2019

Revenue 2.6b 3.7b 4.8b
Revenue growth, % 71% 43% 32%
Cost of goods sold 647.7m 864.0m 1.2b
Gross profit 1.9b 2.8b 3.6b
Gross profit Margin,
75% 76% 75%
%
Sales and marketing
871.7m 1.1b 1.6b
expense
R&D expense 400.7m 579.2m 976.7m
General and
administrative 327.2m 479.5m 697.2m
expense
Operating expense
2.0b 2.8b 4.1b
total
EBIT (81.4m) 18.7m (501.5m)
EBIT margin, % (3%) 1% (10%)
Interest expense 16.4m 26.1m 10.0m
Interest income 32.1m 66.8m 85.9m
Pre tax profit (59.1m) 47.0m (411.7m)
Income tax expense 10.9m 63.9m 262.6m
Net Income (70.0m) (16.9m) (674.3m)
EPS (0.3) (0.1) (2.6)
 64

In addition to the above data,

Airbnb Gross profit: 1.1 B
Airbnb Gross profit margin: 83.1%
Airbnb Net income: 219.3 M
Airbnb EBIT: 418.7 M

 Airbnb generates revenue by charging service fees to hosts and guests when
a reservation is confirmed. Hosts are charged a 3% of the reservations’ subtotal
before fees and taxes, while guests’ fees usually vary between 6-12% according
to the reservations subtotal, also before fees and taxes.

 Payment is collected when the host accepts the reservation request

submitted by the guest, however, the amount is only transferred to the host 24
hours after check-in.

 Hosts gain additional income out of their under-utilized spaces and skills and
the Company attains its revenues out of these service fees when services are
booked. For the hosts, according to Airbnb’s report The Economic Impacts of
Home Sharing around the world (2015) 53% said that hosting helped them stay
in their home and 48% of hosts use their income originated from hosting to pay
for regular household expenses. For the guests, 91% state that they want to live
like a local and 42% of their spending is in the neighborhood they stayed.
 65

 Additionally, with the launch of Experiences hosts pay 20% service fee when
an experience is booked. Guests do not pay service fees when booking
experiences.

 Nevertheless, at Airbnb, guests and hosts can search and/or list

accommodations without being charged.

 Free membership has quickly allowed the company to attract a great number
of visitors without forcing them to contribute financially. For Airbnb, users are
charged only when transactions are made, meaning that they will only be
charged when a service is booked.

 By aiming in the direction of creating value for their users, Airbnb

potentiated their brand value and created a culture of reliability and trust that
engages its users. The Company has created this relationship of trust with its
users by investing in features such as customer verification, insurance, reviews
and social connections described in the previous topic.

 The last available number regarding Airbnb’s revenue dates to 2016 with an
amount of $1,600,000,000, an increase of approximately 78% in comparison to
2015. This corresponds to the first year in which the company achieves
profitability.

Income Revenues
Statemen
t
2016 $
1,600,000,000
2015 $ 900,000,000
2014 $ 425,000,000
2013 $ 245,000,000
2012 $ 130,000,000
2011 $ 35,000,000
2010 $ 5,300,000
2009 $ 990,000

Source: PrivCo Airbnb report (2017)

 66

Airbnb Balance Sheet & Market Capital

USD FY, 2017 FY, 2018 FY, 2019

Cash 2.1b 2.0b
Current Assets 5.9b 6.6b
PP&E 309.4m 301.3m
Goodwill 289.9m 652.1m
Total Assets 6.1b 6.6b 8.3b
Accounts Payable 70.6m 151.4m
Short-term debt 38.0m
Current Liabilities 3.7b 5.2b
Long-term debt 381.4m
Total Debt 419.4m
Total Liabilities 3.4b 3.9b 5.9b
Common Stock 26.0k 26.0k 26.0k
Preferred Stock 3.2b 3.2b 3.2b
Additional Paid-in 184.9m 259.5m 617.7m
Capital
Retained Earnings (753.9m) (768.9m) (1.4b)
Total Equity (567.1m) (517.3m) (807.7m)
Debt to Equity Ratio -0.5 x
Debt to Assets Ratio 0.1 x
Financial Leverage -10.7 x -12.8 x -10.3 x

In addition to the above data

Airbnb Cash: 2.7 B
Airbnb EV: 110.5 B
 67

 Airbnb Market Capital $111 B on 03-Feb-2021

 68

Airbnb Cash Flow & Valuation details

USD FY, 2017 FY, 2018 FY, 2019

Net Income (70.0m) (16.9m) (674.3m)
Depreciation and
79.3m 82.4m 114.2m
Amortization
Accounts Payable 11.8m 29.8m 75.7m
Cash From
251.2m 595.6m 222.7m
Operating Activities
Purchases of PP&E (100.2m) (90.6m) (125.5m)
Cash From Investing
(788.9m) (668.2m) (347.2m)
Activities
Cash From Financing
673.0m 140.5m 854.6m
Activities
Net Change in Cash 362.4m (91.0m) 704.9m
Interest Paid 13.8m 21.2m 5.2m
Income Taxes Paid 8.7m 44.6m 28.2m

 In 2009 Airbnb began with a $2,990,000 valuation and seven years later,
most precisely in August 2016 obtained a valuation of $30,000,000,00
 69

Airbnb Ratios

USD FY, 2017

Revenue/Employee 399.5k
Financial Leverage -10.7 x

EFFICIENCY ratios

Revenue per employee -

Income per employee -
Receivables Turnover 45.71
Total Asset Turnover 0.64

Liquidity ratios

Current ratio 1.25

Quick ratio 1.25
Cash ratio 0.59
 70

Airbnb Competitors

Air bnb Home

VRBO Booking.c Trivag Expedia
Away
om o Group
Founding Date 2008 1995 2004 1996 2005 1996
Type Public Subsidiary Subsidiary Subsidiary Public Public
Employees 5,465 N/A 1,846 17,000 1,247 25,400
Valuation ($) 127.1 b N/A N/A N/A 1.2 b 20.7 b
Twitter 732.7 k 30.3 k 62.5 k 44.7 k 112.9 8.1 k
followers k
Number of 87 179 18 3 19 9
tweets (last 30
days)
Average likes 798.4 1.2 0.1 1.7 15.1 16.7
per tweet (last
30 days)
Percentage of 85.06% 36.87% 5.56% 66.67% 100% 100%
tweets with
engagement
(last 30 days)
Alexa Website 474 1315 130878 147 30717 141981
Rank
Employee  4.1 N/A  3.7 N/A  3.7  3.9
Rating
 71

Financial

Revenue (est.) $4.8b (F N/A $446.8m ( N/A €914.8m ( $5.2b (FY

Y, 2019) FY, 2014) FY, 2018) , 2020)
Cost of goods $1.2b (F N/A $67.6m (F N/A €5.4m (FY N/A
Y, 2019) Y, 2014) , 2018)
Gross profit $3.6b (F N/A $379.2m ( N/A €909.4m ( N/A
Y, 2019) FY, 2014) FY, 2018)
Net income ($674.3 N/A $14m (FY, N/A (€21.5m)  ($2.7b) (F
m) (FY, 2014) (FY, 2018) Y, 2020)
2019)
Operating

Alternative N/A N/A N/A N/A 2.3 2.1

Accommodatio m (Q3, m (FY,
n in Database 2019) 2019)
Countries 220 (No N/A 190 (Y, 220 (FY, N/A 200 (FY,
v, 2020) 2016) 2017) 2019)
Gross Bookings $8b (Q3 N/A N/A N/A N/A $107.9b (
, 2020) FY, 2019)
Languages N/A N/A N/A 40 (FY, 33 (Q3, N/A
2017) 2019)
Properties N/A N/A N/A 1.7 N/A 1.6
m (Q1, m (FY,
2018) 2019)
Reported 7.4 N/A N/A 5.7 N/A N/A
Listings m (Q3, m (Apr,
2020) 2019)
Funding

Total funding $ 5.8b N/A $ 515.9m N/A $ 54.7m $ 1.3b

raised

Future Outlook
 72

 The future of Airbnb and for the Collaborative Economy in general is still very
uncertain. The first numbers available for Airbnb date to 2009, and since then
have shown exponential growth, whether in listings, guests or revenue it has
proven its place in the market.

 Airbnb prepared tools to guide its hosts, showed its willingness in working
together with communities and governments and has demonstrated its capacity
to adapt to each city’s needs. As Airbnb works towards an agreement with the
cities it operates in, it also works toward improving the experience they can offer
to their customers.

 Homes, Experiences and Places have already been launched, however, for
the company there is still much to come. Homes will be more than choosing a
place to stay, it will be taken to next level where guests will be able to select
different options, such as grocery delivery or car rental for their stay. Moreover,
the Company also intends to have the options of booking flights through the app.
Airbnb will be Homes, Experiences, Places, Services and Flights.

 Airbnb is going further, leading the platform to a stage that does not only
include homes but includes the whole trip experience- a trip platform in a single
app. Although the future is uncertain, the Company is building and adapting
towards a goal to allow travelling to be magical and easy.

Collaborative Economy

 Collaborative Lifestyles, is where Airbnb is included. This type of

Collaborative Consumption portrays connection between individuals to enable
the sharing of services, avoiding to waste the value of their assets. Airbnb enables
the matching of individuals with underutilized space and skills which they wish to
rent and individuals looking for a place to stay and/or an experience, creating
value from the provided services.
 Companies such as Airbnb are creating a place for themselves in the market
which did not exist before and are achieving success in a short period due to their
ability to match supply and demand at a global scale.

Airbnb’s position in the different dimensions are the following:

 73

 Technology: Tech-enabled - Enabling the connection between hosts and

guests to share under-utilized assets and skills. Offline interaction in also required
in most check-ins and experiences provided for guests;

 Transaction: Market price - The prices of offers are defined by hosts with the
help of suggestions offered by the platform which are based on similar offers;

 Business Approach: Hybrid - The Company was founded as for-profits with a

clear statement to help the communities in which they are present;

 Shared Resources: Optimize Under-utilized Resources - Promoting the use of

underutilized spaces and recently also promoting the use of skills for the
experiences;

 Governance Model: Corporate Structure - Platform is managed and

developed by Airbnb’s Corporate Structure;

 Platform Type: Peer-to-Peer – Transactions are made between users; the

Company does not own the assets exchanged serving as facilitators for the
exchanges. Although Airbnb is enabled by technology, everything they do is
powered by people

Conclusions

 Thirteen years have passed since Airbnb officially launched its business
model, but above all it has been unstoppable in its form of rethinking and
adapting to the market’s needs.

 Furthermore, Airbnb has created an online and offline feeling of trust

through investing in building a community and empowering this community with
different tools and measures. By providing their users with these tools and
measures, the Company is aiming to ensure transparency and feeling of safety to
their users during the whole process. Also, the community designed by Airbnb is
enriched by bringing together individuals from all around the world, allowing
them to share experiences, tips and help.

 The long-term success of companies belonging to the Collaborative Economy

is still uncertain, however, to date, Airbnb has presented remarkable financial
 74

results. The Company has shown to be more than an accommodation platform

by creating experiences for guests and opportunities for hosts. Meanwhile, it is
also designing for trust and enabling the creation of a When Consuming Becomes
Collaborative: Airbnb Case Study 56 global and local community. Global due to its
vast digital connection, but at the same time very local, for encouraging
proximity between members and local governments.

References

1. www.airbnb.com
2. www.craft.co
3. www.wsj.com
4. www.privco.com
5. www.aastocks.com