Internal And External Environmental Analysis Of Airbnb: Opportunities, Threats, And Strategic Recommendations

Internal and External Environmental Analysis

The purpose of this report is to enlighten the reader about the information about the company Airbnb. Airbnb is a privately held global company that deals in the hospitality and peer to peer property rental services. The company is based in San Francisco that operates an online marketplace and hospitality services that is accessible via mobile apps and websites. Further, the report evaluates external and information about the company along with options for growth and strategic solutions for the company. Further, more detail about the report are discussed below:

Political: political factors have deep and a global impact on the hospitality industry worldwide. The political stability of a country always positively affect to the hospitality industry. Stability portrays ease and safety in the environment due to which people prefer going to such places.

Economic: Better the economic factors, higher the tourism rate. In most countries like Spain, Thailand etc. the economy of the country works according to tourism rate. Good economic conditions improve the environmental features of the country that attracts the visitors.

Social: The social factors of a country attract the visitors in the industry. For instance, the culture of India is rich due to which tourism rises during festive seasons. Fewer features in social or cultural background reduces the level of tourism (Zervas, Proserpio and Byers, 2017).

Technological: These factors make services in this industry more efficient. As Airbnb make use of technology to increase the comfortability of visitors that ultimately increases tourism.

Environmental: Sustainability is the key concern in tourism as better the environment condition, better the tourism rate of the industry.

Legal: regulatory obligations hamper the growth of tourism industry as it acts as a barriers for the industry in many cases (Guttentag, 2015).

Bargaining power of buyer: High

There is high bargaining power as the group of visitors can ask the companies to reduce the package of tours. Buyers also exercise their powers while renting rooms in hotel when required in bulk (Ert, Fleischer and Magen, 2016).

Bargaining power of Supplier: Low

The suppliers of the power works according to the requirement of the customers present in the market. They customize the package according the wish of travellers only.

Industry Rivalry: High

There is high degree of industry rivalry because there is low switching cost and low product differentiation cost as well.

Threat of New Entrants: Moderate

There is moderate degree of threat for new entrants as there is high capital cost but good amount of profits as well (Liu and Mattila, 2017).

PESTEL Analysis

Threat of Substitution: Low

As such there is relatively low as there are few replacements present in the industry.

• It should be noted that bargaining power of buyer is most imperative for the Airbnb as it directly affects their work and profit margin (Oskam and Boswijk, 2016).

Opportunities: On the basis of PESTEL, the company gains the opportunity to expand their scope of business in the countries that are rich in heritage and culture. Further, technological factors also support the functions of the company as it helps them to locate the visitors using mobile application.

Threats: On the basis of PESTEL analysis, the threat for the company are legal and political dimensions of the countries. These aspects stagnate the growth of the company in different market. Strict political rules make it difficult for the organization to effectively initiate the business in the external market (McNamara, 2015).

The resource and capabilities of an organization helps them to effectively attain competitive advantage by making use of such capabilities in the company. Technology is the biggest resource of the company that helps them to grow and diversify scope of business in different parts of the world. Technology induced in the application of the company helps the travellers to find out reviews of various restaurants and book a table for them. Further, the company has diversified resources with the help of which they target people from different segments in order to achieve success for them. The channels of the company and their service providers also play a major role in helping the company to meet customer’s expectation in the market (Guttentag and Smith, 2017).

Resources	Valuable	Rare	Imitable	Organization	Advantage
Brand Management	Yes	Some What	Yes	Yes	Temporary
Technological Expertise	Yes	Yes	No	Yes	Permanent
Service Quality	Yes	Yes	No	Yes	Permanent
Diversification	Yes	Yes	No	No	Temporary
Qualified IT Team	Yes	Yes	No	Yes	Permanent
Cost effectiveness	Yes	Yes	Yes	Yes	Permanent
Customer Service	Yes	No	Yes	Yes	Permanent

Valuable – Yes, as the services of the company are highly preferred by the customers in the target market.

Rare – Somewhat, as there are many other organizations present in the market that provide similar services to the customers.

Inimitable – No, as the technology used by the company is efficient that increases their competitive advantage in the target market (Bridges and Vásquez, 2018).

Organized to exploit – Yes, as the resources and capabilities are organized in such a way that they deliver successful results to the company in the target market.

Result = Temporary competitive advantage

On the basis of internal analysis, the strength of the company Airbnb is that it efficiently make use of technology in the environment to connect with the customers and deliver them services as well. The weakness of the company is that there is presence of high degree of competition in the industry (Guttentag, et al. 2018).

The company should make use of differentiation strategies in the market. Differentiation strategy will help the company to make use of technology in such a way that they effectively gain competitive advantage. Differentiation will also help them to create pipelines with the premium customers and attract skimmed clients (Mody, Suess and Lehto, 2017).

Porter Five Forces

The company Airbnb is currently at the third level of success where the organization has achieved desired business outcomes because of effective engagement of employees. At this stage the hard work of the employees is helping the company to effectively make use of resources and grow. There is no doubt that the company is successful in the market as it is the most profitable technological company present in this industry. The company is present at the growth stage where they are adequately using the available resources but still have the scope of profitability in the external market (Lehr, 2015).  

Market Development: Under the market development strategy, the company should aim to expand the scope of business in different geographical areas by offering different services to customers in international market. New areas should be considered by the company where they can expand tourism and invite the visitors in the country. This will help the company to develop the market base and increase sales as well (Zervas, Proserpio and Byers, 2015).

Diversification: Under the diversification strategy, the company should aim to grow the market share by diversifying the scope of business using various innovative strategies present in the market. On the basis of this strategy the company should try to develop the market as well as product.

Market Penetration: On the basis of market penetration strategy, the company should aim to penetrate the market in which they are currently present. With the help of this type of strategy, the company should aim to capture the un-captured customers present in the market in which the company already exist.

Product Development: With the help of this type of strategy, the company should aim to diversify the product and service base. The company Airbnb should increase the level of services that they are providing to the customers in the target market so as to successfully increase their satisfaction level.

On the basis of Ansoff Matrix Framework, the company should market use of product development and diversification strategy to expand their scope of business in the target market (Airbnb, 2018).

The company Airbnb is one of those companies that successfully earn their expected targets in the external market. In the previous year 2017, the company had a profitable cash-flow statement of $100 million. The profitability graph of the company has increased with their expansion strategy in the country China. The business model of the company works with minimal regulatory controls due to which the company is able to deliver the services to the customers appropriately. The company charges 9 to 12 % service fee from every guest and they charge 3% service fee from host to cover the cost of processing payments (Bort 2018). Further, it is keen to note that in the year 2017, the company earned a profit of $93 million and $2.6 billion revenue from the international market. Thus, it can be said that the company Airbnb is a highly profitable organization present in the hospitality industry.

Activity	Time Period (in months)	Manager	Growth Objective	Concerned Department
Market Analysis	2	Marketing Head	Collection of authentic information	R&D
Identifying New Market Opportunities	1	R & D Head	Identification of market opportunities	R & D
Defining audience and prioritizing groups	3	Manager	Deciding target groups and people	Marketing
Allocating Resources and technology to meet  client’s expectations	4	R & D Head	Procuring Resources	R & D
Product/ Service Development Strategies	2	Operations Head	Analysing strategies and comparing with the real world situation	Operations
Communication and promotion with potential partners	3	PR Manager	Attracting sponsors and distributors	Public Relations
Development of channels/ hosts	1	Sales Head	Development of platforms to make more effective sales	Sales
Initiation of Sales through different channels	12	Manager	Implementing sales campaign	Management

Opportunities and Threats

According to the above discussed market opportunities and threats, the company should market use of product development and diversification strategy in the market in order to successfully grow and sales. Diversification strategy will help the company to grow in different market and the product development strategy will help the company to increase profitability in the existing market by making use of innovative practices. The strategies and action plan chosen for the company Airbnb will be effective because these actions will not hamper and disturb the business plan instead support the company in its growth plan. These options are feasible and financially viable because they are easily accessible by the company and cost effective as well (Airbnbcitizen, 2017).

It should recommended to the company that they should continuously get in touch with technological innovation to attain success for the company. Innovation and technology are two most important aspects that help Airbnb to continuously grow and attain profitability in the market. The changes recommended above can be maintained overtime because they are easily feasible and approachable by the company. It is sure that these strategies will help the company to earn revenue so the company will definitely make use of such strategies in the future period to be in competence (Zekanovic-Korona and Grzunov, 2014).

Conclusion

Thus, in the limelight of above mentioned events, the fact should be noted that the report evaluated information about the company Airbnb. The report evaluated internal as well as external analysis of the company to attain information about the strength, weakness, opportunities and threats of the company. Further, few strategies along with action plan are recommended to the company to grow and success in their business objectives.

References

Bort, J., (2018) Airbnb made $93 million in profit on $2.6 billion in revenue, but an internal showdown with the CFO has put an IPO on pause [online]. Available from < https://www.businessinsider.in/Airbnb-made-93-million-in-profit-on-2-6-billion-in-revenue-but-an-internal-showdown-with-the-CFO-has-put-an-IPO-on-pause/articleshow/62812434.cms> [Accessed on 18 Dec. 18].

Zervas, G., Proserpio, D. and Byers, J.W., 2017. The rise of the sharing economy: Estimating the impact of Airbnb on the hotel industry. Journal of Marketing Research, 54(5), pp.687-705.

Guttentag, D., 2015. Airbnb: disruptive innovation and the rise of an informal tourism accommodation sector. Current issues in Tourism, 18(12), pp.1192-1217.

Ert, E., Fleischer, A. and Magen, N., 2016. Trust and reputation in the sharing economy: The role of personal photos in Airbnb. Tourism Management, 55, pp.62-73.

Liu, S.Q. and Mattila, A.S., 2017. Airbnb: Online targeted advertising, sense of power, and consumer decisions. International Journal of Hospitality Management, 60, pp.33-41.

Oskam, J. and Boswijk, A., 2016. Airbnb: the future of networked hospitality businesses. Journal of Tourism Futures, 2(1), pp.22-42.

McNamara, B., 2015. Airbnb: A not-so-safe resting place. J. on Telecomm. & High Tech. L., 13, p.149.

Guttentag, D.A. and Smith, S.L., 2017. Assessing Airbnb as a disruptive innovation relative to hotels: Substitution and comparative performance expectations. International Journal of Hospitality Management, 64, pp.1-10.

Bridges, J. and Vásquez, C., 2018. If nearly all Airbnb reviews are positive, does that make them meaningless?. Current Issues in Tourism, 21(18), pp.2057-2075.

Zekanovic-Korona, L. and Grzunov, J., 2014, May. Evaluation of shared digital economy adoption: Case of Airbnb. In Information and Communication Technology, Electronics and Microelectronics (MIPRO), 2014 37th International Convention on (pp. 1574-1579). IEEE.

Guttentag, D., Smith, S., Potwarka, L. and Havitz, M., 2018. Why tourists choose Airbnb: a motivation-based segmentation study. Journal of Travel Research, 57(3), pp.342-359.

Mody, M.A., Suess, C. and Lehto, X., 2017. The accommodation experiencescape: a comparative assessment of hotels and Airbnb. International Journal of Contemporary Hospitality Management, 29(9), pp.2377-2404.

Lehr, D. 2015. An Analysis of the Changing Competitive Landscape in the Hotel Industry Regarding Airbnb. [Online] Available at: https://scholar.dominican.edu/cgi/viewcontent.cgi?referer=https://scholar.google.co.in/&httpsredir=1&article=1189&context=masters-theses. [Accessed on 18^th December 2018]

Airbnb, 2018. Airbnb for Work Expands To Help Companies and Professionals Keep Up With the Changing Ways We Work. [Online] Available at: https://press.airbnb.com/airbnb-for-work-expands-sep-2018/. [Accessed on 18^th December 2018]

Airbnbcitizen, 2017. Airbnb announces Sustainability Advisory Board. [Online] Available at: https://www.airbnbcitizen.com/airbnb-announces-new-sustainability-board/. [Accessed on 18^th December 2018]