Strategic Management

BUS2654M

MARIKA PAVLINA BIXHILI

19708752

AIRBNB CASE STUDY

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 PART 1-CONTEXT
“At the heart of our mission is the idea that people are fundamentally good and every
community is a place where you can belong” (Chesky, 2016).

Airbnb is an online market that revealed in 2008 for short-range rentals. Over the years, the
company has been developed and created a successful business with more than two million
listings in more than 200 countries. Airbnb Inc. was firstly introduced in October 2007 from a
struggle between two friends to pay their rent. According to Brian Chesky Reid's interview
with Standford University, the sequence begins as the two co-founders, Joe Gebbia and
himself, realized that their only tool is the empty space in their apartment to overcome their
financial challenges.

The platform encourages many homeowners to become small business owners and reduce
their rental burden. It may also make travelers pay less than hotel prices and have a more
local and authentic experience, exemplified by its slogan “live there.”

As stated in Fundamentals of Strategy, “The PESTEL frameworks provides a comprehensive

list of influences on the possible success or failure of particular strategies (Johnson, Scholes,
& Whittington, 2009, p. 25). Divided into six categories, the following external variables will
allow the companies to consider their success from an even wider perspective: political,
fiscal, social, technical, environmental and legal. The microenvironmental variables of Airbnb
are of great significance given the geographic reach and regulatory insecurity surrounding
short-term rentals. The idea of shared economy in the holiday rental sector is relatively recent.
The city Councils and protests from local groups have put Airbnb under scrutiny because it
has not paid taxes, and it is subject to the usual laws of most hotels as result of the alleged
damaging consequences of the multinational accommodation business brokerage firm on
cities. In spite of the fact that, this in connection with financial variables change by country.
Among the different financial components influencing the transformative travel industry are
as well the common macroeconomic conditions within the region, inflation interest rates,
trade rates and assess rates in connection with unemployment, Work costs and consumer
wages instability which are all significant financial measurements for Airbnb, Still, Airbnb is
a website where cultures and societies from different parts of the world come together when it
comes to social aspects. Their desires and perspectives are presented and respected by both
host and occupant. In this way, the use of internet and generally technology has helped
significantly expanding involvement into society, and start communicating with each other.
Airbnb regarding the use of technology not only helps in connecting people and share
reviews, but makes easier for people the procedure of booking. It uses a messaging
information to ensure visitors' and hosts' personal profiles. Concerning environmental /
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ecological factors, as their shared economy business is focused around the use of existing
resources and traveling in a more friendly and green atmosphere, the natural environment is
one of the main designs of their property and by choosing it, they minimize waste
consumption, electricity and waste.

After the essential microenvironmental factors have been explored, focus will shift to external
market factors Porters Five Forces, which assesses the power base in a business situation. The
most critical force in the hotels industry is the high threat of competitors. The shared Internet
usage model decreases switching costs to a minimum. Tourists and hosts still have increasing
possibilities and the changeover cost are negligible. Related goods may be made available
under separate labels or in certain cases the same property. Price and market contrast is fairly
straightforward. However, the success of Airbnb is high because homeowners who want to
list a rental would visit the site with the most traffic, while users tend to choose the places that
offer them the greatest option in terms of price and form of accommodation as well as
protection. Smaller companies of larger supply power still exist. This is because they are not
only less developed, they rely on suppliers to fill their rental portfolio, because without
rentals, the business would fail. High investment in real estate does not require barriers to
entry. However, a profitable dynamic Internet network can be difficult to scale up and
replicate. Airbnb is developing brand shareholdings, adding creative functions in comparison
to its key rivals. Suppliers already enjoy high negotiation potential in the highest position.
This can be a very different business depending on the market and the season. The business
hosts faced legislative and legal ambiguity and so the extension of the business hosts could be
moderated. In most countries, however, strong demand means high negotiation leverage.

PART 2-SITUATION
The internal forces and resources of Airbnb can be assessed by the upper part of the SWOT
analysis (Appendix 3). Among the Strengths, we can mention the following items:

The power of brand

As the first peer-to-peer company, Airbnb is widely recognized. Being the first company, has
played a vital role in establishing efficient customer awareness and gaining brand value. To
develop and retain trust in the Airbnb community, this step is essential. Before making a
booking, Airbnb built a system to provide access to the ratings offered by previous visitors or
to connect with the host. The sense of trust has helped significantly in the growth of the
company nationally.

Price

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Airbnb is considered as a less expensive option in contrast to different hostels. Prices are
affordable and location-based giving the opportunity to the pick the ideal location for the
budget and preferences. Often Airbnb is cheaper than a hotel room, although in certain areas
Airbnb rentals can be higher due to demand or state and nation taxes.

Marketing/Social Media

The patented programming software of the organization is developed to satisfy the needs of
individual guests. The website provides visitors with leading features in the industry, such as
price advice, arrangements, mobile payments, local assistance, protocols for host security,
reviews and comments. Airbnb's solution is innovative and adds loads of safety measures to
create this web and mobile apps ecosystem for hosts and visitors who are interested.
Moreover, a vast network of travelers and hosts helps Airbnb to maximize its existence
without local activities as a short-term rental platform.

An engaged guest community

Airbnb's guest culture is one amongst the most strengths of the corporate. the character of the
expertise of Airbnb, the private bit of the hosts, and also the interaction with them, encourage
guests to keep up with the Airbnb community. Travelers who have had successful meetings
with Airbnb frequently go back to the potential travel website and book directly instead of
going via intermediaries. Guest culture is vital to Airbnb's business because it generates a
word of mouth that takes organic traffic back to the website and saves the company a lot of
money in the ads and advertising department.

Among Opportunities, we can mention the following items:

Food and Travel services

Additional travel services Development is one of the key targets of Airbnb. Airbnb has
significant potential in this field because the definition is applicable around the globe. Some
reports suggested that Airbnb was considering offering additional amenities, such as personal
chefs and travel options.

Unlimited opportunity

Technological advancement will always give opportunities. Trust in the company will grow
when Airbnb goes mainstream and joins the likes of Facebook, Amazon, Google, eBay and
Netflix. In addition to pushing the acceptance of new visitors and hosts, the willingness of
real estate and hospitality players to welcome the myriad of opportunities provided by the
alternative lodging market and short-term rentals would be a second big implication. To

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further focus on local short-term rental demand and pursue more varied rental platforms
through their portfolios, predict higher demand from landlords to expand their strategies.

PART 3-PROBLEMS
The analysis of the external and the internal forces impacting the company allows identifying
some problems that should be addressed strategically.

Competitiveness

One of the main problems is the growing popularity of the short-term holiday rental industry.
Subsequently, there are various distinct sites providing comparable Airbnb administrations
that often prove to be well established. A growing number of organizations are attempting to
replicate or render templates like Airbnb as the shared economy begins to fill in in scale. An
additional challenge in the form of price wars is created by rising rivalry. It could become
enticing for Airbnb to compete as a cheap alternative as more businesses reach the industry,
but it is a fast race to the bottom and these kinds of price wars can be harmful to a business.

The impact of Airbnb on cities

However, not only does Airbnb's growth impact the lodging industry, it also impacts
residential communities in both positive and negative ways. Rising rents, improvements
in the neighborhood and nuisances are common. Nuisance problems range from guest
noise, such as noisy parties and disorderly activity, to traffic issues, parking and waste
disposal issues, and safety worries as strangers access the area and houses. While it offers
low rates, it is a network that does not have both neighborhood and host protection.
Home-sharing creates numerous risks to those involved, and the host is not sufficiently
protected because of the lack of sufficient insurance.

Government regulations

Another important issue that can affect the potential success of Airbnb is affected by
regulatory concerns. Unquestionably, the growing illegality of Airbnb rentals and the
increasing scrutiny of legislators pose a danger to the long-term development of Airbnb. In
fact, governments might pressure Airbnb to rein in unauthorized rentals in.

Control

Regardless of the network business model, Airbnb cannot control the consistency of lodgings,
projects and facilities provided by hosts to Airbnb app users. In the global rental and
experience network, only hosts will be inspired to deliver quality hospitality to travelers.

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Guests can get a low score and negative reviews if travelers fail to provide quality service,
making it difficult for them to receive new guests.

PART 4-SOLUTIONS
The strategic solutions are identified, starting from the problems as described in part 3.

Technology push

To satisfy shifting demand, Airbnb continues to invest in new technologies. To retain

customers on its site and draw more, tokenization, blockchain, and emerging security
technology. Airbnb has a good social media presence, but YouTube might use a stronger
business approach to cohesively portray the company. The business model of the firm is easy
to imitate, and rivals meet the same audience. Airbnb should benefit from long-form videos to
be able to advocate the brand from its customers and staff and more influencers.

Support Hosts

Airbnb may encourage its hosts and visitors to appreciate and impotent these laws and to
strictly obey them. Airbnb has to ensure that they fulfill the requirements of local legislation
and then do what they can lawfully to defend themselves if hosts and visitors do not follow
through. Airbnb should strengthen its authentication procedures to overcome these problems
in order to ensure that people who list properties genuinely list only one property and do not
do so for commercial purposes. As cities transition to the modern paradigm, Airbnb needs to
collaborate proactively with policymakers to form legislation provided. Moreover, Airbnb
should continue expansion to other services, such as it has with enabling people to assist
property owners in their neighborhood to host Airbnb stays, as well as be able to host
“experiences and tours” such as “sumo wrestling, truffle hunting and off-road biking”; this
will help the company to diversify and grow 

“The Airbnb platform has made several positive changes recently, and will probably have
changes and challenges ahead in the process of self-regulation,” said Jan Feitag, analyst with
Smith Travel Research. Ms. Freitag goes on to describe “the legality, licensing, safety and
broader service issues are the core hurdles.

Control

It provides hosts and visitors more knowledge on the way they select who to meet or stay at
Airbnb. Airbnb developed a Checked ID mechanism to gain trust in the Airbnb community.
Airbnb customers have the ability to check their identities by linking their Airbnb accounts to
other social networks, scanning their official ID and verifying their personal information in

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order to secure their listings and providers. With more information about the host, it offers a
sense of protection and forces hosts to receive legislation when the price penalties may vary.

APPENDIX

Appendix 1. PESTEL

PESTEL ANALYSIS

Political  Political stability

 Taxation, trade restrictions and intellectual property protection
 Protests/pressure groups and governance system
Economic  Benefiting hosts and cities
 Inflation/employment/interest/exchange rate
 Labor Cost
Social  Equality and power distance
 Spending patterns and behavior
Technological  Social media marketing
 Increased use of online and mobile technologies

Environmental  Recycling and waste management

 Increased adaptation to green living

Legal  Consumer protection laws

  Intellectual property laws

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Appendix 2. Five Forces

Force Analysis

Threat of new entrants High Competitive pressures

Easy internet access

Buyer Power Medium Economic and political
situation may affect them

Supplier Power Medium High demand, higher revenue

Threat of Substitutes High New competition through

advancement of innovation
Competitive intensity Medium/ High Price and communication

Appendix 3. SWOT Analysis

Strengths Weaknesses
 First mover advantages  Inability to control service quality

 Cost attractiveness for customers

 Legal violations
 Impressive growth rate
 High technology and Social Media  Replicable business model

Opportunities Threats
 unlimited opportunity  More legal issues

 New revenue sources

 Scandals

 Emergence of new competition

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Appendix 4

Source: Airbnb

Available at Women-Hosts-and-Airbnb_Building-a-Global-Community.pdf (airbnbcitizen.com)

Percentage of Hosts Using Their Airbnb Income to Help Afford Their Home by Household
Composition

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BIBLIOGRAPHY

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