Company Description Analysis, Essay Example
Expedia, a standalone company, is an online retail, travel market and a leading global player leading in the world. It being the largest online travel intermediary globally, it has been ranked as the fourth largest in the United States under the category of travel agencies. The full range of services for both business and leisure markets include car bookings, airplane, and hotel, numerous supports for travel services like weather forecasts, insurance, and destination guides (Pasiuk 111). The range of services offered by Expedia include booking all types of product combination like hotels, and car hire; individual flights; flight, car and hotel packages; flight and hotel to hundreds of destinations in the world. Travel insurance and information that includes destination guides and online maps (Horner and Swarbrooke 181). The web site of Expedia helps it pursue its three-point strategy that encompasses an increase in distribution and reach through awareness that raises advertising and development of links with partners together with a travel agency network, which is newly acquired, called Classic Custom Vacations (CCV). Secondly, increase in conversion that turns browsers into buyers through making sites easier and satisfactory in use compared to the traditional methods. In addition, they look into developing deeper relationships with existing customers. Thirdly, increase cross selling by introducing new ancillary products like ground transportation, tickets, and parking (Horner and Swarbrooke 182). As such, Expedia provides tools and information needed for the research, plan, book, and expenditure travel. Back in 1995, the company got its start as part of Microsoft and a year later the travel unit spun off. In 1999 in Washington, Expedia Inc. was formed as a public corporation and the headquarters are in Bellevue (Daniele and Frew 3). Besides operations in localized services in the US, it also operates in Germany, Italy, UK, Netherlands, and France among other offices that approximate to 70 in number. In August 2003, it became a subsidiary of InterActiveCorp (IAC), which was formerly USA Networks, and became wholly owned. IAC and Expedia are two companies with separate entities, but share a common chair, Barry Diller and Dara Khosrowshahi (Expedia’s CEO and former IAC’s CFO).
Porter’s Five Forces
The pressure on prices is a downward movement that has led to deterioration on quality product and suppliers struggle; in reinvesting their diminishing returns in maintenance and or development of the product. Travel agents and tour operators’ distinction are deteriorating for activities of wholesaling by e-mediaries, allowed by dynamic packaging. As a result, their activities are shifting towards tour operations and functions of wholesaling. For example, packages in revenues Expedia accounted for 28% in 2002.
Availability of substitute products is dependent on the prices the customer is willing to pay for products and services. However, in Expedia, there is no real substitute input as is the case of gasoline (Hill and Jones 43). This means that consumers have become insensitive to price since the demand is inelastic in relation to price and thus, Expedia receives not much for switching from American Airlines to Delta. There is an existence of close substitutes, which has provided customers with an opportunity to switch to substitutes; in response to increase in service price since the demand is elastic with respect to price. E-commerce has a new source for substitute competition, but its providence is devastating for a number of businesses established. For example, the on-line reservation systems for the travel agency have been pushed to the brink of ruin.
The pressure of customers on Expedia’s business includes the low costs associated to switching to another service provider. This has given the buyers power to rule the markets because they have the opportunity to choose the company with low travelling costs. It is noted that individuals have no influence on the prices of Expedia and thus a greater struggle to capture customers is evident (Hill and Jones 43). Therefore, the buyer’s power is low, and this is bad for the company because the buyers, consumers, have no power to negotiate the fixed prices for services and products provided by the online travel agency. It is essential to consider the views and opinions of customers when it comes to prices because they can be able to give the range of the price they are comfortable paying. Thereby, negotiating with the company on how they both can benefit from each other without straining another person.
Threat of Substitutes
New technologies available and changes in structure of the online industry are contributing to competition among substitutes means of operations in the travel agency (Buhalis and Zoge 487). The operations include hiring agents and renting facilities, which has raised vacation packages for travel agencies to be able to cater for the expenses incurred. The travel agency work on behalf of Expedia in meeting the needs of customers by ensuring that all they are comfortable with the services provided.
The market segment of the travel agency is currently at 35% and travelling purposes to deal in business like discussions and or meetings. Technological advancements have contributed to online bookings because they are done through video conferencing or chatting. As a result, the real meaning of threat substitution comes into play for Expedia.
Barriers to Entry
Expedia has been able to survive in the industry because it has entered contracts with large-scale suppliers. For Expedia, this has enabled them gain a competitive advantage because they are aware of the existing market trends and new entrants in the market hence, are able to incorporate new technologies to their business. The operations of the travel agency have moved towards satisfying and attracting more and more customers due to the increase attributed to competitors in the same industry. In addition, the capital needed is too high and is a barrier for many potential businesses (Buhalis and Zoge 484). The intensity in capital has led many people to venture in business opportunities that are not in their line of profession with the hope of raising the required capital to venture into other business opportunities that interest them. It is evident that many businesses lack the necessary capital to build the business because of the high intensity levels ascribed to things like raw materials, service providers, office equipment, web launching, and stationery among others.
For any business to prosper, competitors need to be present to be able to fight and keep each other ‘on toes’. For Expedia, the competitors are Priceline.com (PCLN) and Orbitz worldwide, Inc. (OWW) who serve the same customers and compete in terms of technology, prices, customer service, and flight entertainment among others. These travel agencies are in the same line of business, and they want to be profitable in the activities performed through meeting all the needs of their customers (Hill and Jones 44g). In the case of PCLN, they are in the process of expanding their business to the global dimensions in order to reach people from different races and backgrounds. Furthermore, they give customers individual offers for particular services and products at prices set by consumers, and then later communicated to participating suppliers. Thus, are best known for their demand-collection system known as “Name your Own Price”. As such, they have given focus to hotel reservations because they are competent in meeting all the needs of the customers and have the resources that fully satisfy the customers. Orbitz, on the other hand, is a small company compared to Expedia, but has managed to focus on air travel only. The growth of Orbitz is very strong and is now the largest online travel agency in the USA.
Buhalis, Dimitrios, and Zoge Marianna. “The Strategic Impact of the Internet on the Tourism Industry”. Information and Communication Technologies in Tourism (2007): 481-492.
Daniele, Roberto, and Andrew J. Frew. “From Intermediaries to Market-makers: An Analysis of the Evolution of E-mediaries.” Frew AJ (ed.). Information and Communication Technologies in Tourism 2004. Proceedings of the International Conference in Cairo,
Egypt. New York/Wien, Springer-Verlag 557.1 (2004): 546. Print.
Hill, Charles, and Jones R. Gareth. Strategic Management – Theory: An Integrated Approach. New York: Cengage Learning, 2010. Print.
Horner, Susan, and Swarbrooke John. International Cases in Tourism Management. New York: Routledge, 2012. Print.
Pasiuk Laurie. Vault Guide to the Top Internet Industry Employers. Salt Lake City: Vault Inc., 2006. Print.
Time is precious
don’t waste it!