Question

Case Prep – Airbnb

Identify the main generic strategy of Airbnb

Identify the relevant industry wherein Airbnb competes

Complete a Porter's five the industry wherein Airbnb competes

What is the main 'thing' that has led to either the success or failure of Airbnb?

Answer 1

Ans) Airbnb as a company offers an online marketplace where you can search for homestays. It does not own the property, rather it acts as broker.

Strategy

• Narrowed the focus - airbnb didn't try to branch out although it could have done that very easily. It didn't try to rent out offices neither did it try to work with hotels. which concentrated all its focus at one single place.
• Act, perfection will follow- your business need not be perfect at the time of launch. First set a business which provides atleast a satisfactory outcome and then thrive for perfection. This is the strategy adopted by airbnb. At initial stage it launched its services without aggressive planning.
• Ensuring high level of satisfaction- airbnb ensures high level of satisfaction among customers and property owners. Which help maintain long term relationship.
• It actively polices to ensure that both sides are following the rules that are set by them.
• Serve what is promised- airbnb tries to offer what they have promised. For that they survey the property according to their set criterion and also try to apply some innovative and creative ideas.

Competing industry- airbnb competes in hotel industry. Where its rivals are booking.com, homestay, turnkey, flipkey etc. who provide similar kind of services.

Porter's five- this model determines the intensity of competition based on five competitive factors

1. Threat of entry- Threat here ranges from low to high. For indicator like system performance and ease to customer the threat is low, for indicator like customer loyalty the threat is medium and for indicator like access to channel of distribution is high due to technological advancement.
2. Threat of substitute- the threat to replacement is high as there are wide variety of options available to customers.
3. Bargaining power of buyer- here the threat is high as people have wide range of options to choose from in terms of price , location and convenience.
4. Bargaining power of suppliers - here threat is meagre as suppliers can connect with buyers only through airbnb app.
5. Industry rivalry- it is greatest threat due to availability of companies offering similar if not same kinds of services.

main reason for success- the main reason for success of airbnb is that it has been able to solve the problem of both renters who have spare space from which they can make extra money and buyers who search for low budget places to stay.

also unlike hotels there is no restriction for check in and check out time.

Further it has tried to maintain customer trust by providing good amenities and more space in less budget alongwith nice location.